Budget 2014-15
Content
July 2014
Budget 2014 -15
Growth
Deficit
Inflation
Monsoon
Against all odds!
Research Team ([email protected]) / Dipankar Mitra ([email protected])
Union Budget FY14-15
Contents
Page No.
Against all odds! ...................................................................................... 3-9
Govt. sticks to fiscal prudence ........................................................... 10-13
Budget at a glance ................................................................................... 14
Sectoral impact .................................................................................. 15-37
1.
Automobiles ............................................................................... 16
2.
Capital Goods ....................................................................... 17-18
3.
Cement ....................................................................................... 19
4.
Consumer ............................................................................. 20-21
5.
Financials ............................................................................. 22-23
6.
Healthcare .................................................................................. 24
7.
Media ......................................................................................... 25
8.
Metals .................................................................................. 26-27
9.
Oil & Gas .............................................................................. 28-30
10.
Real Estate ............................................................................ 31-32
11.
Technology ........................................................................... 33-34
12.
Telecom ...................................................................................... 35
13.
Utilities/ Infrastructure ........................................................ 36-37
Annual performance/Valuations - MOSL Universe.................................. 38
Valuation matrix (Sector-wise) .......................................................... 39-42
July 2014
2
Union Budget FY14-15
Union Budget FY14-15: Against all odds!
Reform and fiscal consolidation on track; Yet makes headroom for growth
Budget 2014 was a keenly awaited event, post the decisive mandate in May
2014 for the BJP led government. With sub-5% growth for two consecutive
years, high inflation and collapse of investment cycle, the Finance Minister had
a tight rope to tread to achieve the fiscal deficit target of 4.1% set-up in
Interim Budget 2014.
However, the Finance Minister, Arun Jaitley has taken up the challenge and
has kept a target to reduce the fiscal deficit to 4.1% for FY15, 3.6% by FY16 and
3% by FY17.
With big sector reforms on banking, housing, infrastructure and defence,
commitment towards GST, FDI in critical sectors like defence and insurance
and rationalizing the tax provisions, Budget 2014 has done a good job of
managing expectations and has the intent to put India on the growth
trajectory.
We are positive on the key announcements of the Budget and expect the
economic recovery to gain pace from 2HFY15 onwards. GDP growth should
average 5.5% in FY15, and accelerate to 6.5% in FY16. Inflation moderation in
2H will create space for RBI to consider easing of rates. Beginning of these
measures will further help the overall revenues, inturn driving down the
deficits. Corporate earnings cycle has begin to move from a growth range of 810% to now 14-16%. Valuations of Indian equities, despite the run-up in last 12
months, remain at long term averages; creating a very favorable backdrop for
making strong returns over the coming 12-18 months. Within this, our
preference for domestic cyclical remains high: Financials, Cement, Autos,
Capital Goods and Energy.
Government plans to contain fiscal deficit at 4.1% even in a challenging environment
FY13 FY14BE FY14RE FY15BE (I)
Receipts
Revenue receipts
Net tax revenue
Non-tax Revenue
Capital receipts (net)
Net market borrowings
Gross market borrowings
Di s i nves tment of equi ty hol di ng i n PSUs
Expenditure
Non-plan expenditure
Subs i di es outgo
Plan expenditure
Gross fiscal deficit
Fiscal deficit as % of GDP
14,104
8,792
7,419
1,374
5,822
4,674
5,580
259
14,104
9,967
2,571
4,136
4,902
4.8
16,653
10,563
8,841
1,723
6,090
4,840
5,790
558
16,653
11,100
2,311
5,553
5,425
4.8
15,904
10,293
8,360
1,932
5,462
4,539
5,639
258
15,904
11,149
2,555
4,755
5,245
4.6
17,632
11,671
9,864
1,807
5,961
4,573
5,970
569
17,632
12,079
2,557
5,553
5,286
4.1
FY15BE
17,949
11,898
9,773
2,125
5,880
4,612
6,000
634
17,949
12,199
2,607
5,750
5,312
4.1
YoY %
(as % of GDP)
FY13 Vs FY14RE FY15BE(I) FY15BE vs
FY14RE FY15BE
FY12 Vs FY13 vs FY14RE FY14RE
8
13
11
13
14.0
13.9
17
17
13
16
9.1
9.2
18
13
18
17
7.4
7.6
13
41
-6
10
1.7
1.7
2
-6
9
8
4.8
4.6
7
-3
1
2
4.0
3.6
9
1
6
6
5.0
4.7
43
0
120
145
0.2
0.5
8
13
11
13
14.0
13.9
12
12
8
9
9.8
9.5
18
-1
0
2
2.3
2.0
0
15
17
21
4.2
4.5
-5
7
1
1
4.6
4.1
Source: Government, MOSL
10 July 2014
3
Union Budget FY14-15
Getting the right arithmetic
Finance Minister appears realistic in holding the fiscal deficit of FY15 to 4.1% set
by his predecessor Mr P. Chidambaram.
The final budget for FY15 is aimed at enhancing expenditure as well as
improving its quality to aid the growth recovery process. This has been financed
by higher recourse to non-tax revenue, non-debt creating capital receipts and
some increased borrowing while at the same time providing some relief to the
individual tax payers.
Despite addressing the expenditure with regards to all items including fertilizer
subsidy of INR730b and petroleum subsidy of INR634b, the government also
introduced fresh allocation towards key projects such as for roadways of
INR379b and other infrastructure projects.
The increase in revenues will be driven by increase in indirect tax revenues of
INR75b which partially mitigated the INR222b loss on account of various direct
tax measures.
GST – A new taxation era
With a view to submerge all indirect taxes at the state and the Central level,
Goods & Services Tax (GST) would be implemented to bring a single indirect tax
regime. GST will create a single, unified Indian market to make the economy
stronger.
The Finance Minister in his Budget speech acknowledged that states are
apprehensive about: (i) surrendering their taxation jurisdiction and (ii)
compensation loss which will arise in lieu of GST or prevailing CST. However, he
mentioned that the government is confident of finding a solution during the
course of the year and approve the legislative scheme which enables the
introduction of GST.
GST, if implemented, will streamline the tax administration, avoid harassment of
the business and result in higher revenue collection both for the Centre and the
States.
Minimal changes in taxation
Budget 2014 has addressed measures to rationalize tax provisions to reduce
litigation and address the problem of inverted duty structure in certain areas.
Further, the provisions also provide tax reliefs to individual tax payers.
Direct tax
REITS and Infrastructure Investment Trusts: Conducive tax regime
Removal of tax arbitrage: Rate of tax on long term capital gains increased from
10% to 20% on transfer of units of Mutual Funds, other than equity oriented
funds.
Increase in DDT: Dividend distribution tax (DDT) by a domestic company and
income distributed by the mutual fund to its investors will now be taxed on
gross basis instead of being taxed on net basis. Thus, effective DDT rate will now
be ~20% from 17% earlier (including surcharge and education cess).
10 July 2014
4
Union Budget FY14-15
Tax holiday extended: 10 year tax holiday will be extended to the undertakings
which undertake generation, distribution and transmission of power by March
31, 2017.
Roll back in Advance Pricing Agreement: Introduction of a “Roll Back” provision
in the Advanced Pricing Agreement (APA) scheme so that an APA entered into
for future transactions is also applicable to international transactions
undertaken in previous four years in specified circumstances.
DTC: Government to review DTC in its current form.
Investment allowance of 15%: For any investments made in new plant and
machinery, investment allowance of 15% will be allowed for any investment
made above INR250m. This benefit will be available for three years i.e. for
investments upto March 31, 2017.
Income tax exemption limits hiked: Income-tax exemption limit being raised by
INR50,000 to INR0.25m for all individuals (except citizens above 60 years) and
/HUFs/association of persons or other juridical person. Further, exemption limit
of senior-citizens was enhanced from INR0.25m to INR0.3m.
Higher investment limit: Investment limit under section 80C (providing for
higher investment) raised from INR0.1m to INR0.15m.
Interest on loan on house property increased: Deduction limit on account of
interest on loan in respect of self-occupied house property has been raised from
INR0.15m to INR0.2m.
Indirect tax
Basic custom duty has been reduced on many items including chemicals and
petrochemicals sector, solar and wind energy generation, pre-forms of precious
and semi-precious stones.
Specific rates of excise duty increased on cigarettes in the range of 11% to 72%.
Clean Energy Cess increased from 0.50/tonne to 0.10/tonne
Reduction in the excise duty from 12% to 6% on footwear of retail price
Scheme of Advance Ruling in indirect taxes is to be expanded to cover resident
private limited companies. The scope of Settlement Commission will be
enlarged to facilitate quick dispute resolution.
Debt Mutual Funds: Adverse proposal can hit hard
Brief on backdrop of Mutual Fund industry
The Budget has precipitated a long-feared setback for the mutual fund industry.
Fixed Income oriented Mutual Funds have always received special treatment on
taxation as compared to other avenues of fixed income investment like bank
deposits, bonds, debentures etc.
The Mutual Fund industry got a major fillip after dividends from all types of
mutual funds including fixed income funds was exempt from income tax in the
late 1990s. This was in addition to the fact that mutual fund units in the
cumulative option qualified for capital gains as opposed to the interest income
received from the very instruments which these funds bought for investors as
opposed to investors buying them directly.
10 July 2014
5
Union Budget FY14-15
Since then, from a standing start mutual funds have garnered a total of
INR7,015b (USD117b) in fixed income funds alone. This is a full 72% of the asset
base of mutual funds as at June 30, 2014.
Budget recommendations
Banks have faced competition from Mutual funds to an extent. The real
competition came from fixed maturity plans (FMPs) which is a mutual fund copy
of term deposits of banks where money is locked for one to three years and
qualified for concessional capital gains tax rate at 10% + surcharges v/s 30% +
surcharges on other instruments.
The Budget proposal now removes this arbitrage because it says that the
definition of short term will stand modified as 36 months instead of the current
12 months.
Further, on completion of this period (earlier 12 months; now 36 months), the
capital gains tax rate which was applicable at 10% + surcharge stands modified
to 20% + surcharge. Whether indexation will be allowed or not is not yet clear
but it is feared that it is a flat 20%.
As of June 30, 2014, of USD117b, almost USD36b is in liquid and money market
or ultra-short term funds which is typically under one year time horizon and the
balance is invested by investors in schemes operating with investors’ time
horizon planned between one to three years. Fixed Maturity Plans alone are
valued at USD31b and the balance USD50b is in income and gilt funds.
Our view
This proposal is going to create a significant impact on the debt assets of the
Mutual fund industry, and will need clarification, as it impacts a large amount of
assets and business.
Going forward one needs to watch for developments in the fixed income mutual
fund space and possibly also its implications on the bond markets.
REITs: A definite step towards propelling significant value unlocking
REIT could be tremendous game changer since it could add significant value to
all stake-holders viz.
Developers (Strong financing option)
Small-scale investors (Opportunity to invest in completed and rent yielding
properties and regular return potential with lesser uncertainties like in
under construction assets)
RE fund (Attractive exit option)
Commercial tenants (Better maintenance support from property manager)
REITs will enable a new source of funding to developers by channelizing retail
money through a regulated network. It also improves institutional credibility
and transparency of the sector.
New avenue of funding should (a) reduce dependency on banking system, (b)
aid the opportunity to unlock value of rent-yielding portfolio by lowering cap
rate, and (c) ability to bring down leverage efficiently.
We expect betterment in tax regime would be the key to bolstering the
attractiveness of REIT for developers with holding of strong annuity assets.
10 July 2014
6
Union Budget FY14-15
Proposed tax regime
The listed units of REIT would attract same levy of securities transaction tax
(STT), and would have exemption of long term capital gains and 15% on short
term capital gains.
Capital gains arising at the time of exchange of shares in SPVs with units of the
business trust, the taxation of gains shall be deferred and taxed at the time of
disposal of units by the sponsor.
The income by way of interest received by the business trust from SPV is
accorded pass through treatment i.e., there is no taxation of such interest
income in the hands of the trust and no withholding tax at the level of SPV. Trust
shall deduct withholding tax at the rate of 5%/10% in case of payment of
interest component of income distributed to non-residents/residents.
The dividend received by the trust shall be subject to DDT at the level of SPV but
will be exempted in the hands of the trust, and unit holders.
The income by way of capital gains on disposal of assets by the trust shall be
taxable in the hands of the trust at the applicable rate. However, if such capital
gains are distributed, then the component of distributed income attributable to
capital gains would be exempted in the hands of the unit holders. Any other
income of the trust shall be taxable at the maximum marginal rate.
Our view
Union Budget’s attempt to provide thrust to Real Estate Investment trust (REIT)
with pass through taxation status is a progressing step for this much awaited
framework. However in current taxation form, the incentives are not enticing
enough.
Both marginal tax and dividend distribution tax (DDT) are applicable at SPV level,
although the dividend income from SPV is exempted from DDT at the level of
Trust and unit holders. This makes effective tax regime similar to existing
dynamics.
What to play
Key developers with large portfolio of completed commercial assets are DLF
(28.5msf of completed commercial assets), Phoenix (7.5msf of retail assets),
Prestige (~10msf by FY14 under management), Raheja (not listed 20msf+
assets), Embassy (not listed) etc, who could be major beneficiaries.
Big sector reforms – Infrastructure, Banking, Housing lead the show
We saw big sectoral reforms in some sectors which would shape the long-term
prospects of Indian growth revival, along with private sector investment. Some of
the sectors which saw important policy initiatives are:
Banking
Focus on funding of large infrastructure projects: This will benefit banks with
large infra exposure as negative carry on account of maintaining CRR, SLR and
PSL will reduce.
Preferred stocks: IDFC
10 July 2014
7
Union Budget FY14-15
Clarification is required whether the provision will be on prospective basis or on
retrospective basis.
Insurance Foreign investment limit increased to 49% from 26%,
Preferred stocks: MAX India, RCAP, ABNL, HDFC, and ICICIBC.
Lower cost of funds for banking system: In the case of Mutual Funds, other
than equity oriented funds, the capital gains arising on transfer of units held
raised to 20% v/s 10% earlier and holding period extended from 1 year to 3 year.
Flow of funds to banking sector will happen at a relatively lower cost as
intermediary cost will go away.
Preferred stocks: Large banks such as SBI, ICICIBC, HDFCB, etc.
Infrastructure
Distribution reforms: A new scheme targeting feeder separate for DISCOMs.
Initial budget for the scheme earmarked at INR5b.
Focus on Infrastructure sector is clearly evident given: 1) 16 new port project
award targeted in FY15, 2) Augmenting Inland waterways, 3) 8,500kms of road
project completion and investment proposal of INR378b for NH and State
highway projects, 4) Focus on developing Airports in Tier 2 & 3 cities, 5)
Developing 100 smart cities and evaluation of Metro for cities with 2m+
population, etc.
Proposal for Infrastructure REIT is positive as it would help monetize project,
takeout financing for developers.
Constitution of 3P India to resolve/support PPP project with initial corpus of
INR5b is encouraging. The institution could be a facilitating body to expedite
project award, execution, recommending changes in framework, etc.
Preferred stocks: L&T and BHEL.
Housing
Easing off FDI restriction: Minimum built-up area for FDI reduced from 50,000
sq mt to 20,000 sq mt; Min. Capital condition for FDI reduced from US$10m to
US$5m; above minimum limit are exempted if 30% of project cost committed to
low cost affordable housing. It should moderately improve the private equity
inflow, and higher focus towards low cost housing.
Strong focus on developing new cities by modernizing existing mid-sized cities
(provision of INR70.6b in FY15) should improve investors’ demand in tier II
Cities.
INR40b allocation to National Hosing Bank (NHB) for cheaper credit access to
low cost affordable housing
Preferred stocks: Prestige, Phoenix, DLF, Brigade
Ind AS to be mandatory from FY17
10 July 2014
The Finance Minister, Mr Arun Jaitley, has proposed the adoption of the new
Indian Accounting Standards (Ind AS) (IFRS converged Indian accounting
standards) by all Indian companies mandatorily (except Banks, Insurance
companies, etc.) from FY2016-17. The companies can also adopt these
standards voluntarily from FY2015-16.
8
Union Budget FY14-15
The date of implementation of AS Ind for Banks and Insurance companies will be
separately notified.
The standards for computation of tax would be notified separately.
Our view
These standards may have significant implications for certain sectors due to
difference in accounting treatments and accordingly may impact company
valuations.
10 July 2014
9
Union Budget FY14-15
Govt. sticks to fiscal prudence but manages to provide a
growth filip
Tax relief paid through higher non-tax-non-debt revenues
10 July 2014
Best tax collection effort during post crisis period: The net tax revenue
collection for FY15 final budget has been pegged at 7.6% of GDP, barely lower
than 7.7% in Interim budget. This however, remained the best tax collection
effort during the post crisis period since FY09.
A relief in personal taxes: As expected, some relief was granted on the personal
income tax front including raising the tax exemption limit, standard deduction
on investments, housing loan interest, PPF etc. This would come as a much
needed relief to the common man reeling under static income and high inflation
for the last five years now. As a result, target for Income tax receipt was scaled
down to 18% from 27% of Interim budget (both over FY14BE).
Share of direct tax still higher than indirect tax: The corporate tax rates were
nearly unchanged (15% growth over FY14RE as in the Interim budget). Taking
everything into account, the direct tax proposals resulted in a revenue loss of
INR222b. This however, brought down the share of direct tax in total tax
collection only marginally to 54% (from 55% during Interim budget). Notably
while the share of direct taxes remained below the high of 60% during FY10, it
was still much improved from 34% during FY00 and remained higher than the
collections under indirect taxes. The budget speech also indicated a revival of
DTC, though proposals under this would be reviewed by the present
government.
Indirect tax rationalization aimed towards GST: Finance Minister gave clear
indication of implementation of GST with a timeline of the current financial year
for the passage of the Constitutional Amendment. The focus of indirect tax
proposals was mainly aimed at i) rationalization to facilitate transition to GST, ii)
incentivizing select sectors, and iii) augmentation of revenue. The combined
proposals are expected to garner an additional resource of INR 75b. As a result
of changes in indirect taxes, targets have been tweaked in the final budget from
the interim budget for excise tax (to 15% YoY over FY14RE from 12% in interim
budget) while custom and services tax were left unchanged at 15% YoY and 31%
YoY respectively.
Tax shortfall financed through other revenue sources: As the government’s
gross tax collection has fallen short from the Interim budget by INR 147b, it has
sought to make room for both cutting corners (lower devolution to states by
INR55b) and addional resource mobilization through higher non-tax revenue
(INR318b comprising of INR130b higher accruals from ‘dividends and profits’
and INR188b of other non-tax revenue (mainly telecom spectrum revenue). All
these measures has resulted in revenue receipts exceeding Interim budget
estimates by INR226b. An additional INR65b is expected to be garnered through
disinvestment thus taking the overall revenue and non-debt creating capital
receipts exceeding Interim budget estimates by a combined amount of INR291b.
Spectrum and disinvestment targets appear realistic: The government has
enhanced the estimates of proceeds out of spectrum sale from INR390b (200
10
Union Budget FY14-15
recurring + 190 fresh auction) to INR455b (200 recurring + 255 spectrum
auction). The enhanced revenue target under auction appears realistic in view of
the fact i) availability of additional CDMA 800MHz band spectrum, ii) compulsion
of incumbents to renew license and iii) competitive market conditions. Similarly
higher disinvestment target is expected to sail through as i) market sentiments
has improved, ii) primary market has revived as demonstrated by the smooth
sailing of a few QIPs and iii) stake sale alone is expected to garner INR150b.
Best tax effort during the post crisis phase as yet with net tax nearing 8% of GDP
Net Tax Revenues (INRb)
7.6
9,773
FY15BE
6,298
FY12
7.7
FY15BE… 9,864
5,699
FY11
8,360
4,565
FY10
7.4
FY14RE
4,433
FY09
7.3
7,419
4,395
7.0
FY08
7.3
3,512
7.0
FY07
2,703
FY06
2,248
FY05
1,585
FY03
1,870
1,335
FY02
6.6
FY04
1,367
FY01
5.7
6.3
1,283
6.3
FY00
6.3
6.9
7.9
7.3
FY13
8.2
Net Tax Revenue as a % of GDP
8.8
Source: Government, MOSL
The share of direct taxes has remained steady despite relief on personal income tax
55
54
55
55
54
FY15BE (I)
FY15BE
FY09
56
FY14RE
FY08
60
FY13
53
FY12
50
FY11
46
Share of Direct Tax (%) - RHS
FY10
43
FY07
FY05
FY02
41
FY04
36
38
43
FY03
34
37
FY01
12,500
FY00
15,000
Indirect Tax (INRb)
FY06
Direct Tax (INRb)
10,000
7,500
5,000
2,500
0
Source: Government, MOSL
Government raises expenditure to revive the economy
10 July 2014
Expenditure rises by INR317b from Interim budget estimates: The government
has sought to raise expenditure (both plan and non-plan) to provide a boost to
the economy. While non-plan expenditure has been raised by INR120b, plan
expenditure has been enhanced by INR197b. Within non-plan both subsidies
and defence expenditure were enhanced by INR50b each. The increase in Plan
expenditure was largely due to hike in central plan both on the revenue and
capital expenditure front.
Quality of expenditure improved somewhat: A marginal improvement was
observed in the quality of fiscal spend as share of plan expenditure in overall
expenditure inched up to 32% from 31% of Interim budget. This was also the
highest level in more than a decade.
11
Union Budget FY14-15
Subsidies aimed at 2% of GDP after three failed attempts: FY14 was the third
consecutive failed attempt to keep subsidies within the announced 2% of GDP
limit. This is again aimed to be achieved in FY15 as intended also in the Interim
budget. However, this time the government have the benefit of completion of
the process of phased deregulation of the diesel prices. This has provided an
opportunity to clear backlog of subsidy payment in the oil sector. Additionally,
somewhat higher GDP estimate provided headroom to pay an additional INR50b
to fertilizer companies even while keeping the overall subsidy bill within 2% of
GDP.
Improving expenditure mix key for restraining overall expenditure
FY15BE
12,199
5,750
5,553
12,079
4,136
4,755
FY15BE (I)
8,920
FY12
9,967
8,183
FY11
FY13
7,211
32
31
30
11,149
29
4,124
3,790
32
FY14RE
32
FY10
3,034
30
6,087
2,752
31
FY09
2,051
29
5,076
1,699
FY07 4,135
Plan expenditure (INRb)
FY08
1,406
FY06 3,651
FY05 3,660 1,323
FY04 3,489 1,223
FY03 3,018 1,115
FY02 2,611 1,012
FY01 2,429 827
25
28
Non-plan expenditure (INRb)
Share of Plan Expenditure (%)
29
28
27
27
26
Source: Government, MOSL
Subsidy is attempted to be restrained at 2% of GDP in FY15 after three failed attempts
Petroleum
Total (% of GDP)
Interest
FY15BE
FY15BE (I)
FY14RE
FY13
FY12
0
FY11
0
FY10
1
FY09
600
FY08
2
FY07
1,200
FY06
3
FY05
1,800
FY04
4
FY03
2,400
FY02
5
Subsidy (as % of GDP)
Fertiliser
Total subsidy
3,000
FY01
Subsidy in INRb
Food
Others
Source: Government, MOSL
Fiscal consolidation strictly on track
10 July 2014
Higher revenue growth than expenditure: Continued higher growth for the
revenue receipts over expenditure has left room for fiscal consolidation.
Moreover, India has brought the fiscal deficit from the post crisis high of 6.5% in
FY10 to 4.6% in FY14, i.e., a correction of 1.8% within four years even after an in
between year of fiscal booster dose in FY12.
Fiscal consolidation legacy carried forward: Government has kept the FY15
fiscal deficit unchanged at the challenging target of 4.1% of GDP of the Interim
12
Union Budget FY14-15
budget. Moreover, it reiterated its resolve to keep the deficit target within the
limits of medium term fiscal consolidation target, viz., 3.6% by FY16 and 3% by
FY17. Thus it is now established that India is firmly on a part of fiscal
consolidation path which is not subject to change in the government. This would
act as a confidence booster for the market as well as rating agencies.
Marginal increase in market borrowing for FY15: The net market borrowing for
FY15 has been placed at INR4.6t, marginally higher than the Interim budget
estimate by INR39b. The growth borrowing would stand at INR6t. With large
capital flows, the borrowing programme is unlikely to cause any stress unless
RBI embarks on monetary tightening unwieldy.
A growth enhancing budget: The tweaking in figures in the final budget is aimed
enhancing expenditure as well improving and its quality to aid the growth
recovery process. This has been financed by higher recourse to non-tax revenue,
non-debt creating capital receipts and some increased borrowing while at the
same time providing some relief to the individual tax payers. While the
government has primarily responded to the exigencies of the day, a beginning
has also been made for implementing the long term big bang projects as
promised in the Manifesto.
Higher revenue growth than expenditure leave room for fiscal consolidation
Revenue Reciepts Growth (%)
Expenditure Growth (%)
38
5
8
6
1
16
13
11
13
FY11
FY10
-5
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
13
FY15BE
6
0
FY00
17
17
17
9
14 14
6
16
22
15
FY15BE (I)
14
FY14RE
15
11
24
FY13
9
16 13
FY12
7
25
26
21
Source: Government, MOSL
Near static fiscal deficit results in sharp drop in deficit as % of GDP
Fiscal Deficit (INRb)
6.0
6.0
5.7
4.6
4.1
4.1
1,410
1,451
1,233
1,258
1,478
1,426
1,270
3,370
4,185
3,736
5,160
4,902
5,245
5,286
5,312
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14RE
FY15BE (I)
FY15BE
2.5
FY02
3.3
4.8
1,190
4.0
5.7
FY01
3.9
4.8
1,046
4.3
6.5
FY00
5.2
5.5
Fiscal Deficit % to GDP
Source: Government, MOSL
10 July 2014
13
Union Budget FY14-15
Annexure: Union Budget key numbers
Source: Government, MOSL
10 July 2014
14
Union Budget FY14-15
Sectoral Imapct
Automobiles
Sector
Budget Impact
Positive
Page
16
Capital Goods
Positive
17-18
Cement
Positive
19
Consumer
Negative
20-21
Financials
Positive
22-23
Healthcare
Neutral
24
Media
Neutral
25
Metals
Positive
26-27
Oil & Gas
Positive
28-30
Real Estate
Positive
31-32
Technology
Neutral
33-34
Telecom
Neutral
35
Utilities/Infrastructure
Positive
36-37
10 July 2014
15
Union Budget FY14-15
Automobiles
Budget Impact: Positive
Flashback
At a glance
Major proposals
FDI cap in defense proposed to be hiked from current 26% to 49% with
full Indian management and control through the FIPB route
Impact
Positive
Excise duty concessions granted in Interim Budget 2014 were extended
till Dec 2014.
Additional investment allowance of 15% for capex during FY14/15
announced in Union Budget 2013 continued for FY15
Increase in holding period (from 12m to 36m) for long term classification
and hike in tax rate (from 10% to 20%) for debt mutual fund investments to
impact treasury income of cash rich companies
Dividend distribution tax (DDT) will now be taxed on gross basis. Thus,
effective rate will be ~20% (~17% earlier)
Positive
Positive
Negative
Negative
Budget Proposals (2013 and Interim 2014)
Reduction in excise duty on small
cars, motorcycles, scooters and CVs
from 12% to 8%; SUVs from 30% to
24%; and large and mid-segment cars
from 27%/24% to 24%/20%
Reduction in excise duty on auto
components (under Chapter 84 and
Chapter 85) from 12% to 10%
Additional investment allowance of
15% for capex during FY14/FY15
Overall budget impact, Sector outlook and Recos
Proposal to increase FDI cap in insurance from current 26% to 49% is positive for EXID.
MM, BHFC, AL and TTMT could benefit from proposed hike in FDI investments in defense from current 26% to
49%.
Increase in holding period (from 12m to 36m) for long term classification and hike in tax rate (from 10% to
20%) for investments in debt mutual fund to impact treasury income of cash rich auto companies. Our
preliminary estimates suggest an EPS of impact of ~5.5% for HMCL, ~8% for BJAUT and MSIL and ~6% for EIM.
Our top picks are MSIL and TTMT in large-caps. In mid-caps, we like TVSL and AL
Comparative Valuation
Sector / Companies
Amara Raja Batt.
Ashok Leyland
Bharat Forge
Bajaj Auto
Eicher Motors
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
CMP Reco
(INR)
467 Buy
33 Buy
634 Buy
2,152 Buy
8,128 Buy
151 Neutral
2,436 Buy
1,165 Buy
2,533 Buy
453 Buy
158 Buy
EPS (INR)
FY15E FY16E FY17E
24.1 30.1 36.2
-0.1
1.8
3.5
22.5 32.3 38.9
127.2 146.1 166.3
222.1 330.7 425.9
7.6
9.8 10.6
144.4 176.9 203.6
76.9 101.3 109.9
132.5 172.6 222.8
50.9 68.3 86.8
10.1 13.7 16.4
PE (x)
FY15E FY16E FY17E
19.4 15.5 12.9
-523.4 18.0
9.3
28.2 19.6 16.3
16.9 14.7 12.9
36.6 24.6 19.1
19.9 15.4 14.2
16.9 13.8 12.0
15.2 11.5 10.6
19.1 14.7 11.4
8.9
6.6
5.2
15.7 11.6
9.7
14.0 10.6
8.6
Jinesh Gandhi ([email protected]); +91 22 3982 5416
Chirag Jain ([email protected]); +91 22 3982 5418
EV/EBITDA (x)
FY15E FY16E FY17E
11.6
9.0
7.3
12.4
6.4
4.0
13.2 10.1
8.3
11.1
9.3
7.7
20.0 12.6
9.1
10.0
7.6
7.2
12.4
9.6
7.6
5.7
4.6
4.6
9.6
7.2
5.3
3.8
2.8
2.1
9.8
7.1
5.7
6.1
4.7
3.7
RoE (%)
FY15E FY16E FY17E
27.1 27.5 26.9
-0.4
9.9 17.1
18.2 22.4 22.6
35.0 33.7 32.0
26.9 32.3 31.7
15.4 17.3 18.7
46.3 46.3 43.0
17.5 18.6 18.5
16.1 17.8 19.2
22.3 23.8 23.9
29.9 31.6 29.5
21.1 22.8 22.8
Source: Company, MOSL
Union Budget FY14-15
Capital Goods
Budget Impact: Positive
Flashback
At a glance
Major proposals
FDI cap in defense being raised to 49% with full Indian management and
control through the FIPB route.
Comprehensive policy to promote Indian ship building industry to be
announced.
Solar UMPP projects in Rajasthan, Gujarat, TN and Laddakh; excise /
customs duty incentives encouraging domestic production of solar / wind
power generation equipment.
Plan outlay in CPSUs at INR3.2t (stable YoY); excluding overseas
acquisitions by ONGC Videsh / Oil India, plan outlay up by 9.2%.
Budgetary provision of INR71b towards development of 100 smart cities,
relaxation of FDI norms, etc.
Attempt to boost infra spend through flagship projects like river
interlinking, industrial corridors, metro projects, ports, airports, inland
waterways, gas pipelines, etc.
Investment allowance of 15% for investments upto INR250m in plant and
machinery till FY17.
Impact
Positive
Positive
Positive
Positive
Positive
Positive
Positive
Budget proposals (2013)
Investment allowance of 15% for
investments of INR1b+ in plant and
machinery during FY14 and FY15. This
will be in addition to the depreciation
benefits.
Attempt to address the contentious
issues impacting new investments /
project progress in key sectors like
roads, power, oil and gas, coal, etc.
Ships and vessels exempted from
excise duty.
Support waste-to-energy projects
through instruments such as viability
gap funding, repayable grant and low
cost capital.
Overall budget impact, sector outlook and recommendations
Raising FDI cap in defense to 49% is important in terms of promoting domestic manufacturing. Budget highlighted strong
intent to improve indigenous procurement in defense. L&T is a key beneficiary, given the INR40b capex in Kattupalli
shipyard cum port. Also, attempts have been made to boost heavy equipment manufacturing in segments like renewables
(solar / wind), ship building, etc. Incentive to renewables is positive for BHEL, which is planning large investments in solar
PV manufacturing.
Attempt to boost infra spend through flagship projects like river interlinking, industrial corridors, metro projects, ports,
airports, inland waterways, gas pipelines, etc, is an important highlight. Increased focus on smart cities provides
interesting possibilities for companies like Siemens, ABB, etc.
Investment allowance of 15% for investments upto INR250m in plant and machinery till FY17. Thus, the scope has been
extended to cover medium scale enterprises.
Comparative valuation
Sector / Companies
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Voltas
Sector Aggregate
CMP Reco
(INR)
1,065 Neutral
243 Buy
191 Buy
649 Buy
1,211 Neutral
1,655 Buy
885 Sell
911 Buy
202 Buy
EPS (INR)
FY15E FY16E FY17E
13.4 20.0 30.3
10.0 15.2 19.8
7.3 12.4 17.1
24.6 30.8 38.3
48.3 56.0 68.2
48.2 66.1 89.3
14.6 19.3 26.5
28.0 38.5 58.3
8.5 10.6 13.0
PE (x)
FY15E FY16E FY17E
79.6 53.3 35.2
24.2 15.9 12.3
26.2 15.4 11.1
26.4 21.1 16.9
25.1 21.6 17.7
34.3 25.0 18.5
60.6 45.9 33.4
32.6 23.7 15.6
23.7 19.1 15.5
32.7 23.4 17.6
EV/EBITDA (x)
FY15E FY16E FY17E
36.5 27.5 15.8
12.3
7.5
5.3
14.7 10.5
8.1
21.9 17.0 13.2
15.7 13.0 10.8
20.6 16.3 12.0
28.7 22.8 18.2
19.1 13.9
9.2
15.9 12.7 10.0
19.1 14.3 10.5
Satyam Agarwal ([email protected]); +91 22 3982 5410
Amit Shah ([email protected]) / Nirav Vasa ([email protected])
RoE (%)
FY15E FY16E FY17E
10.3 14.4 19.6
7.3 10.4 12.5
12.4 19.6 22.8
25.1 28.5 31.4
29.6 28.6 29.1
14.1 15.8 17.8
11.9 14.7 18.5
15.5 19.0 24.5
14.0 15.4 16.8
11.0 13.9 16.4
Source: MOSL
Union Budget FY14-15
Key budget proposals & impact
Focus on kick-starting flagship projects, setting up of infrastructure investment trusts, allowing lenders to provide
long-term loans to infrastructure without restrictions on CRR / SLR, etc, have been constructive steps for a revival in
the investment climate. Also, attempt has been made to boost the manufacturing sector. The budget also reiterates
the intent of channelizing funding through PPP route.
Boost to heavy equipment manufacturing
Impact: Positive
The FDI cap in defense has been raised to 49% and the attempt is to improve indigenization
in defense procurement. The budget speech also mentioned that a comprehensive policy
to promote Indian shipbuilding will be announced shortly. Solar energy generation received
a boost, with announcement to set up Solar UMPP projects in Rajasthan, Gujarat, TN and
Laddakh; and a provision of INR5b has been made. Excise / customs duty incentives have
been provided to encourage domestic manufacturing of solar / wind power equipment.
Plan outlay by CPSUs up 9.2% YoY (excluding overseas acquisitions in FY14)
Impact: Positive
Plan outlay in CPSUs at INR3.2t (stable YoY). Adjusted for overseas acquisitions in
Mozambique by ONGC Videsh / Oil India, plan outlay in FY15 is up by 9.2%.
CPSU Plan Outlay
INR b
FY14 (RE)
FY15 (BE)
% YoY
Nuclear Power Corp
54
74
38%
Neyveli Lignite
25
30
19%
NHPC
31
32
5%
NTPC
202
224
11%
PGCIL
200
200
0%
Coal India
50
52
4%
Singareni Colleries
29
39
33%
BPCL
36
53
45%
GAIL
55
31
-43%
IOC
118
114
-4%
ONGC
350
360
3%
ONGC Videsh
361
148
-59%
Oil India
104
36
-65%
Power
Mining
Hydrocarbons
Others
BHEL
9
10
15%
NHAI
196
240
22%
Indian Railways
583
639
10%
NMDC
27
43
60%
SAIL
115
90
-22%
Total
3,271
3,243
Source: Company, MOSL
10 July 2014
18
Union Budget FY14-15
Cement
Budget Impact: Positive
Flashback
At a glance
Major proposals
Excise maintained at 8% of MRP plus INR6/bag less 30% abatement
Impact
Neutral
Focus on infrastructure development (by increasing allocation and
addressing funding issues) and housing (increased allocation for rural
housing and higher tax deduction on housing loans)
Increase in clean energy cess on coal from INR50/ton to
INR100/ton to marginally increase energy cost
Positive
Increase in tax rate (from 10% to 20%) on long-term capital gains and
holding period to quality as long-term gain (from 12 months to 36
months) for investments in debt mutual funds to impact treasury
investments of cash-rich companies
Negative
Marginally
Negative
Budget proposals (2013)
Excise duty cut by 4% in interim
budget (February 2014), after being
maintained at 12% of MRP plus
INR6/bag less 30% abatement in
February 2013 budget.
Continued focus on infrastructure
development with higher allocation
and focus on availability of funding
Customs duty and CVD of 2% levied
on imported steam coal
Overall budget impact, sector outlook and recommendations
Excise duty maintained at 8% of MRP plus INR6/bag less 30% abatement.
Focus on infrastructure, with higher allocation towards roads (~INR379b allocation for NHAI and target of completion of
~8,500km), development of new airports in tier-1 and tier-2 cities, 16 new ports and planning for metro rail projects in
cities with over 2m population (~14 cities).
Boost to housing by increasing incentive for housing loans (increase in interest deduction limit by INR50k to ~INR0.2m
and increase in limit u/s 80C by INR50k to ~INR0.15m for loan repayment), increasing allocation for Rural Housing Fund,
promoting low cost housing, etc.
Development of industrial corridors, with smart cities linked to transport connectivity. Also, the government is
committed to reviving SEZs.
Committed to development of Andhra Pradesh and Telangana; would help faster recovery of cement demand from
erstwhile Andhra Pradesh.
Domestic coal prices to increase due to increase in Clean Energy Cess on coal from INR50/ton to INR100/ton, resulting in
less than 1% increase in cost or ~0.5% EPS impact.
Increase in tax rate and holding period for investments in debt mutual fund would impact treasury investments of cash
rich companies like ACC, ACEM, GRASIM, SRCM. We estimate impact of up to ~5% on FY16E EPS.
Our top picks are ACC, UTCEM and SRCM in large caps, and DBEL, JKCE, JKLC and PRSC in midcaps.
Comparative valuation
Sector / Companies
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
Jaiprakash Associates
Shree Cement
Ultratech Cement
Dalmia Bharat
J K Cements
JK Lakshmi Cem.
Ramco Cements
Prism Cement
Sector Aggregate
CMP Reco
(INR)
1,458 Buy
219 Neutral
387 Buy
3,303 Buy
104 Neutral
65 Buy
7,151 Buy
2,512 Buy
446 Buy
394 Buy
231 Buy
290 Buy
72 Buy
EPS (INR)
FY15E FY16E FY17E
54.4 84.1 119.9
7.0
9.0 12.3
28.7 51.4 77.6
254.7 370.0 586.0
2.9 10.6 19.0
1.5
4.1
5.7
280.2 431.1 610.3
91.3 133.0 189.0
-12.3 24.4 82.2
22.6 45.3 76.2
10.5 17.1 34.3
9.0 15.1 24.1
0.4
6.2 11.2
PE (x)
FY15E FY16E FY17E
26.8 17.3 12.2
31.5 24.3 17.8
13.5
7.5
5.0
13.0
8.9
5.6
36.6
9.9
5.5
43.1 16.0 11.3
25.5 16.6 11.7
27.5 18.9 13.3
-36.1 18.3
5.4
17.4
8.7
5.2
21.9 13.5
6.7
32.0 19.2 12.0
176.2 11.6
6.5
25.3 15.7 10.4
Jinesh Gandhi ([email protected]); Tel: +91 22 3982 5416
Sandipan Pal ([email protected]); +91 22 3982 5436
EV/EBITDA (x)
FY15E FY16E FY17E
17.8 10.9
7.0
21.2 15.3 11.2
7.1
3.8
2.1
5.4
3.6
2.4
9.4
6.1
4.1
10.1
8.4
7.5
12.9
8.6
5.7
15.6 10.7
7.4
14.5
7.8
4.7
8.5
5.5
3.4
10.3
6.2
3.9
13.6
9.7
6.9
12.6
6.0
3.9
11.8
8.1
5.7
RoE (%)
FY15E FY16E FY17E
12.8 18.5 23.5
14.0 16.8 20.5
8.3 13.3 17.2
9.9 12.6 16.8
2.7
8.2 13.2
2.4
6.3
8.4
19.5 24.5 27.2
13.8 17.4 20.7
-3.3
6.5 19.2
8.7 15.8 22.5
9.2 13.8 23.8
8.4 12.9 18.1
2.0 26.8 35.6
9.7 14.0 18.1
Source: MOSL
Union Budget FY14-15
Consumer
Budget Impact: Negative
Flashback
At a glance
Major proposals
Increase in excise duty in Filter Cigarettes from 11-72%, with highest
increase for 64mm segment. Weighted average of 22.5% increase in
excise duty for Cigarettes for ITC.
Impact
Negative for ITC
as it will
necessitate price
hikes, impacting
volumes
No change in import duty on Gold
Negative for
Jewellery
companies
Cut in custom duty on palm fatty acid crude palm stearin (raw Positive for
HUL, GCPL
materials for soaps) from 7.5% to 0%.
Increase in income tax exemption, increase in sec 80 C limit, increase in Positive for sector
exemption limit for interest on housing loan.
Excise duty reduced from 12% to 6% for footwear in price range of Positive for BATA,
INR500 to INR1000. Footwear below INR500 is exempt from excise. EBITDA margins
Footwear over INR1000 will continue to attract 12% Excise duty.
can expand by
50bp to 60bp
Budget Proposals (2013)
Excise duty on cigarette increased by
18%
Tax rate on royalty increased from
10% to 25%
Increase in tax surcharge
Overall budget impact, Sector outlook and Recos
We have tweaked our FY15 volume and pricing assumptions for ITC.
We expect 3.3% volume decline in Cigarettes v/s our earlier expectation of 2% volume growth.
However, we expect ITC to implement a weighted average 16% price hike to pass on the excise duty hike and
maintain its 15% EBIT growth in Cigarettes for FY15.
Increase in exemption limits for interest on housing loans, income tax slab and sec 80C deductions should put
more money in the hands of consumers and thus augurs well from consumer sector viewpoint.
Sector outlook remains cautious given rich valuations for most of our universe. We look for earnings visibility
and special catalysts like distribution expansion, aggressive new launch pipeline as sector volume growth
remains subdued, despite an improvement in consumer sentiment post elections.
Our top picks are ITC, Emami and Britannia in FMCG and Titan & Jubilant in Retail.
Comparative Valuation
Sector / Companies
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Marico
Nestle
Pidilite Inds.
Radico Khaitan
United Spirits
Sector Aggregate
CMP
(INR)
586
997
1,540
194
515
806
4,698
632
343
240
4,972
329
104
2,350
Reco
Neutral
Buy
Neutral
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Neutral
Buy
Neutral
EPS (INR)
FY15E FY16E FY17E
15.5 18.7 22.8
38.5 45.6 53.6
43.6 51.0 59.7
6.4
7.5
8.8
19.2 22.8 26.1
27.3 33.4 40.0
138.6 164.7 192.0
18.1 20.1 22.3
12.9 14.9 17.2
8.4
9.9 11.3
128.2 151.5 174.5
10.8 13.0 15.4
8.0
9.2 10.9
42.6 56.0 72.7
PE (x)
FY15E FY16E FY17E
37.7 31.3 25.7
25.9 21.8 18.6
35.3 30.2 25.8
30.2 25.9 21.9
26.9 22.6 19.7
29.5 24.2 20.2
33.9 28.5 24.5
34.9 31.5 28.3
26.6 22.9 19.9
28.6 24.2 21.2
38.8 32.8 28.5
30.5 25.3 21.4
13.1 11.3
9.6
55.2 42.0 32.3
31.2 26.7 23.1
Gautam Duggad ([email protected]); +91 22 3982 5404
Manish Poddar ([email protected]); +91 22 3027 8029
EV/EBITDA (x)
FY15E FY16E FY17E
24.6 20.3 16.2
18.0 14.6 11.6
24.3 19.4 16.4
23.8 20.4 17.1
22.1 18.2 15.7
20.3 16.9 14.3
30.0 24.6 19.9
25.6 22.4 19.5
18.1 15.6 13.5
17.7 14.9 12.6
22.4 19.3 16.5
19.2 15.8 12.9
8.6
7.5
6.6
29.8 24.8 20.5
21.3 18.1 15.4
RoE (%)
FY15E FY16E FY17E
31.7 32.4 33.1
42.1 41.3 40.3
96.3 99.6 102.6
34.8 33.7 33.2
45.2 46.4 45.1
22.9 23.7 23.6
30.6 30.7 30.3
107.3 110.2 114.7
40.6 43.4 45.8
25.1 24.3 23.1
50.1 54.5 57.3
23.3 23.5 23.2
11.9 12.5 13.3
7.2
8.9 10.8
36.6 38.2 39.4
Source: Company, MOSL
Union Budget FY14-15
Key budget proposals & impact
The budget was positive for the FMCG sector but negative for cigarette industry as excise duty was hiked 22.5% for
ITC. However, given the heightened pitch by Health Minister to increase the Cig Excise per stick to INR3.5, we believe
the 22.5% excise duty increase is better than our worst case assumptions.
Excise duty increased by 11-72% for Cigarettes
Impact: Negative
Weighted average 22.5% increase in excise duty for ITC. 72% increase in 64mm segment is
a negative from Cig volume growth perspective as this segment acted as a recruiter of new
consumer post 40% excise duty increase in Cig over FY12-14. However, we draw comfort
from ITC’s track record of successful up-trading consumers to RSFT segment. In FY09, post
3x-5x increase in excise duties in non-filter segment, ITC exited the non-filter portfolio
which used to contribute 20% of its then Cig volumes and still arrested the volume decline
to 2.9%. Also, we believe other players, especially VST, will suffer more as 64mm
contributed upwards of 50% of its volumes. We have revised our Cig volume assumption to
3.3% decline v/s earlier expectations of 2% growth, while increasing our pricing estimate to
16% v/s earlier 10%. We believe this budget removes a key overhang for the stock,
especially after Health Minister’s demand for disproportionate increase in Cig excise duty.
No change in Gold import duty
Impact: Negative
Gold import duty has been kept unchanged at 10% v/s expectations of a cut. Cut in import
duty could have spurred jewellery volumes at the margin, post gold price correction.
Cut in customs duty for Fatty acids, crude palm stearin from 7.5% to nil
Impact: Positive
Minor positive for Soap players like HUL and GCPL. We expect companies to pass on the
benefits to drive volume growth. Category volumes have stagnated in the past few
quarters.
Hike in exemption limits for income tax, Sec 80C and interest on housing loan
Impact: Positive
Government has increased the a) income tax exemption limit by INR50,000, b) Sec 80C
deduction limit by INR50,000 and c) interest exemption on housing loan has been hiked by
INR50,000. These measures will increase the disposable income in the hands of consumers,
thus driving discretionary consumption at the margin.
Excise duty reduced from 12% to 6% for footwear in price range of INR500 to INR1000. Footwear
below INR500 continues to be exempt from Excise. Footwear over INR1000 will continue to
attract 12% Excise duty.
Impact: Positive
10 July 2014
Bata derives ~15% of its revenues from footwear priced between INR500 and INR1000.
Consequently it pays an aggregate excise duty amounting to 1.6% of revenues. Cut in
excise duty from 12% to 6% in our view can expand margins by the tune of 50bp to 60bp.
We maintain our positive view on the stock.
Further, we expect Bata to move some products which are currently priced less than
INR500 and facing margin pressure to higher price points, thus resulting in margin
accretion. Additionally, Bata could move some products priced above INR1000 currently to
less than INR1000 so as to drive volume growth and save excise duty. We maintain our
positive view on the stock
21
Union Budget FY14-15
Financials
Budget Impact: Positive
Flashback
At a glance
Major proposals
Relaxation in regulatory cost (CRR, SLR and PSL) on infrastructure bonds,
though exact details are awaited. Expect RBI to unveil detailed guidelines
soon
Withdrawal of regulatory arbitrage between deposits and debt mutual
funds
Proposal to increase foreign investments in insurance sector from 26% to
49%
Increase in tax exemption limit on housing loans for principal repayment
to INR0.15m (via 80C) and interest repayment to INR0.2m from
INR0.15m (U/S 24)
New banking licences to be issued in FY15 for small and differentiated
banks
PSU banks to see capital infusion of INR112b; however, significant
reforms in the space yet to bear fruits
Impact
Positive
for banks with
higher
infra
lending and IDFC
Positive for
banks, negative
for AMCs
Positive
Budget Proposals (2013)
FY13 fiscal deficit of INR5.2t - 5.2% of
GDP, for FY14 expected to be INR5.4t
- 4.8% of GDP
PSU banks capitalization - to infuse
INR140b in FY14 v/s INR125b (13
banks) in FY13. To start exclusive
women PSU bank
Housing finance - additional tax
rebate on interest of INR100,000 for
the first home loan under INR2.5m
Positive,
especially for
HFCs
Positive for
industry
Neutral
Overall budget impact, Sector outlook and Recos
Focus on funding large infrastructure projects: Benefit for banks with large infrastructure exposure as
negative carry on account of maintaining CRR, SLR and PSL will reduce. Major beneficiary would be IDFC as a
large part of the borrowings is to fund infrastructure loans and when the liabilities related to those loans come
up for re-pricing, it would be replaced by infrastructure bonds, which may be exempt from regulatory cost.
Clarification needed whether it is on prospective basis or retrospective basis.
Insurance foreign investment limit increased to 49% from 26%: Viewed positive for MAX India, RCAP, ABNL,
HDFC and ICICIBC.
Lower cost of funds for banking system: In case of mutual funds, other than equity-oriented funds, capital
gains arising on transfer of units held raised to 20% v/s 10% earlier and the holding period is extended from a
year to three years. Flow of funds to the banking sector will happen at a relatively lower cost as the
intermediary cost will cease to exist.
Budget allocation of INR112b for PSU banks, but silent on bank holding company or GOI shareholding: Based
on the budget speech, it seems that large PSU banks’ issuances will be in the offing. As the requirement of
capital is significantly higher than the amount allocated, PSU banks are expected to come up with FPOs or QIPs
in FY15.
Consolidation: Comments on consideration of PSU banks’ consolidation and providing greater autonomy while
making them accountable is a positive.
Under the Interest Subvention Scheme for short term crop loans, banks are extending loans to farmers at a
concessional rate of 7%. Farmers get a further incentive of 3% for timely repayment, which would continue in
FY15.
Housing Finance: Increase in limit for principal repayment to INR0.15m (via 80C) and interest repayment limit
increased to INR0.2m from INR0.15m (U/S 24). Companies with higher ticket sizes like HDFC, LICHF and IHFL
will be the bigger beneficiaries.
Higher allocation to NHB – marginally positive: Allocation of INR80b to NHB for rural housing (allocation made
under the Rural Housing Fund) and allocation of INR40b to NHB to incentivize development of low cost
affordable housing in urban areas.
Others: Higher allocation of INR378b to NHAI, impetus on infra development, possibility of 5/25 structure for
infra lending, reforms in power sector etc will be indirect benefits from growth and asset quality perspective.
Our top picks are ICICIBC, SBIN, AXSB, PNB, OBC, LICHF and SHTF.
Alpesh Mehta ([email protected]); Tel: +91 22 3982 5415
Sunesh Khanna ([email protected]); Tel: +91 22 3982 5521
Union Budget FY14-15
Financials: Valuation Matrix
60.02 Rating
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
VYSB
FB
J&KBK
SIB
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
CRPBK
ANDB
IDBI
DBNK
Public Aggregate
HDFC*
LICHF
DEWH
IDFC
RECL
POWF
SHTF
MMFS
BAF
NBFC Aggregate
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
CMP
(INR)
1,391
825
1,860
867
529
537
638
119
1,593
33
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Neutral
Neutral
2,548
915
280
826
414
199
287
169
376
90
96
77
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
1,023
325
405
152
368
302
905
256
2,202
Mcap
(USDb)
26.8
33.0
14.6
11.1
3.2
4.7
2.0
0.3
1.3
0.7
97.7
31.7
5.5
3.0
5.9
3.2
2.1
1.4
1.3
1.1
0.9
2.6
0.7
60.5
26.6
2.7
0.9
3.8
6.1
6.6
3.4
2.4
1.8
54.4
EPS (INR)
FY15
99
44
145
39
51
34
40
11
258
4.2
FY16
120
56
174
47
59
43
48
12
280
4.9
259
119
53
118
60
28
45
29
45
11
8
13
344
158
67
149
83
34
55
36
62
13
10
16
33
28
54
13
57
51
68
19
171
39
33
65
13
66
60
83
21
199
P/E (x)
FY15
11.6
18.5
12.8
22.0
10.3
15.8
15.8
11.2
6.2
7.9
15.2
9.4
7.7
5.2
7.0
6.9
7.1
6.4
5.8
8.3
8.3
11.7
5.9
9.3
22.9
11.5
7.5
11.9
6.4
5.9
13.2
13.7
12.9
13.1
FY16
9.4
14.8
10.7
18.6
9.0
12.5
13.4
9.6
5.7
6.8
12.6
7.1
5.8
4.2
5.5
5.0
5.8
5.2
4.6
6.1
7.0
9.2
4.9
7.1
17.7
9.8
6.3
11.5
5.6
5.0
10.9
12.1
11.1
11.2
BV (INR)
FY15
580
215
932
275
238
193
402
89
1,372
27
FY16
668
258
1,080
318
285
228
439
99
1,576
31
2,097
1,056
437
859
562
291
460
270
638
156
143
128
2,378
1,196
496
974
626
319
502
298
687
165
151
141
143
172
335
99
248
252
434
104
939
165
199
390
109
299
297
506
119
1,106
P/BV (x)
FY15
1.99
3.83
1.99
3.16
2.22
2.79
1.59
1.33
1.16
1.22
2.48
1.16
0.87
0.64
0.96
0.74
0.68
0.62
0.63
0.59
0.58
0.67
0.60
0.93
5.21
1.89
1.21
1.28
1.48
1.20
2.08
2.47
2.34
2.45
RoA (%)
RoE (%)
Dividend
FY16 FY15 FY16 FY15 FY16 Yield (%) #
1.69 1.8 1.8 15.7 16.6
1.7
3.19 2.0 2.0 22.4 23.6
0.8
1.72 1.7 1.7 16.6 17.2
1.1
2.73 1.9 1.9 13.9 14.4
0.1
1.86 1.6 1.5 23.5 22.6
1.5
2.36 1.9 1.9 19.0 20.4
0.7
1.45 1.2 1.2 10.4 11.3
0.9
1.20 1.1 1.1 12.5 13.2
1.7
1.01 1.5 1.4 20.2 19.0
3.1
1.07 1.0 1.0 16.4 16.8
2.4
2.15
1.02 0.8 0.9 12.7 15.6
1.2
0.76 0.7 0.8 11.8 14.0
1.1
0.56 0.6 0.6 12.9 14.3
1.8
0.85 0.7 0.8 14.5 16.3
2.6
0.66 0.5 0.6 11.2 14.0
2.7
0.62 0.5 0.5 10.0 11.3
2.0
0.57 0.6 0.6 10.0 11.4
2.6
0.57 0.7 0.7 11.2 12.8
2.8
0.55 0.3 0.4
7.3 9.3
1.2
0.54 0.4 0.4
7.1 8.0
1.2
0.64 0.4 0.4
5.9 7.1
1.0
0.54 0.5 0.6 10.6 11.6
2.7
0.85
4.18 2.4 2.5 25.5 24.2
1.4
1.64 1.5 1.4 17.6 17.8
1.4
1.04 1.5 1.5 17.3 17.8
1.7
1.12 2.8 3.0 12.8 11.9
1.7
1.23 3.5 3.4 25.3 24.1
2.6
1.02 3.3 3.2 21.8 21.9
3.0
1.79 2.2 2.4 16.2 17.0
0.8
2.15 3.0 2.9 19.3 19.0
1.5
1.99 3.1 2.9 19.7 19.4
1.3
2.13
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
# Div Yield based on FY13 decleared dividend; UR: Under Review
10 July 2014
23
Union Budget FY14-15
Healthcare
Budget Impact: Neutral
Flashback
At a glance
Major proposals
Exemption introduced from excise duty on types of drugs and diagnostic
equipment required for the National AIDS Control Programme funded by
the Global Fund to Fight AIDS, TB and Malaria.
Exemption from service tax has been withdrawn on technical testing or
analysis of newly developed drugs on human participants by a clinical
research organization.
Impact
Positive
for Cipla but
likely to be
passed on to the
consumer
Marginally
negative for
companies
focused on NCE
research
Budget Proposals (2013)
Increase in surcharge on income tax
from 5% to 10%
Overall budget impact, Sector outlook and Recos
Budget continues to remain a non-event for the healthcare sector: Industry demands continue to remain
unmet on: (1) infrastructure status for the healthcare industry along with tax benefits, (2) significant increase
in healthcare expenditure, (3) boost to R&D activity by increasing weighted deduction on indigenous product
development and (4) revival of clinical trial industry in the country.
Outlook for the sector continues to remain positive: We expect strong earnings growth over the next two to
three years led by increasing contribution from the US, India and select emerging markets. Investments in
therapy areas like onclology, biosimilars and respiratory are important long term drivers for the sector. Strong
earnings growth will lead to continuous improvement in balance sheet and return ratios for the sector.
Post budget, we have not revised our earnings forecast for FY15 and FY16.
Our top picks are Lupin, Cadila Healthcare, Alembic Pharma, Divi’s Labs and Sanofi India.
Comparative Valuation
Sector / Companies
Alembic Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’s Labs
Glenmark Pharma
GSK Pharma
IPCA Labs.
Lupin
Ranbaxy Labs
Sanofi India
Sun Pharma
Torrent Pharma
Sector Aggregate
CMP
(INR)
306
493
1,123
435
1,472
2,652
563
2,486
859
1,041
543
3,252
725
677
Reco
Buy
Sell
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
EPS (INR)
FY15E FY16E FY17E
16.3 21.7 26.5
23.0 26.8 31.8
46.4 56.8 64.3
17.4 23.4 28.5
65.4 78.8 92.1
127.1 146.4 169.2
26.8 33.7 42.0
61.9 84.8 98.0
48.8 59.6 72.7
41.2 53.0 61.5
9.4 18.1 28.1
125.0 152.8 177.5
26.6 31.1 35.3
36.4 43.1 55.7
PE (x)
FY15E FY16E FY17E
18.8 14.1 11.6
21.4 18.4 15.5
24.2 19.8 17.5
25.0 18.6 15.2
22.5 18.7 16.0
20.9 18.1 15.7
21.0 16.7 13.4
40.1 29.3 25.4
17.6 14.4 11.8
25.3 19.6 16.9
57.8 30.0 19.4
26.0 21.3 18.3
27.2 23.3 20.5
18.6 15.7 12.2
25.4 20.6 17.4
Alok Dalal ([email protected]); Tel: +91 22 3982 5584
Hardick Bora ([email protected]); +91 22 3982 5423
EV/EBITDA (x)
FY15E FY16E FY17E
13.1
9.9
7.9
13.3 11.1
9.4
17.3 12.4 10.7
14.5 11.1
9.1
16.0 13.3 11.3
13.5 11.5
9.8
12.3 10.3
7.9
32.9 22.2 18.8
12.1
9.9
8.0
14.7 11.9
9.9
11.4 17.5 12.7
15.6 12.8 10.6
17.9 15.9 14.2
10.2
9.5
7.9
15.3 13.2 11.1
RoE (%)
FY15E FY16E FY17E
38.9 38.3 35.2
13.7 14.4 15.2
25.2 30.1 27.4
12.4 14.6 15.3
27.1 28.2 28.6
19.9 19.2 18.6
19.8 20.0 19.7
26.3 34.6 37.6
27.7 26.8 26.1
23.8 24.7 23.4
34.2 16.6 21.4
19.5 21.4 22.4
25.7 23.7 21.8
28.1 27.2 29.1
20.1 20.6 20.4
Source: Company, MOSL
Union Budget FY14-15
Media
Budget Impact: Neutral
Flashback
At a glance
Major proposals
Color picture tubes for cathode ray TVs exempted from basic
customs duty. Reduced basic customs duty on LCD and LED
panels of below 19 inches from 10% to NIL
Service tax imposed for online and mobile advertising
Change in tax treatment for debt mutual funds
Increase in effective dividend distribution tax from ~17% to
~19.9%
Impact
Moderately positive; to
support TV penetration
growth
Moderately negative;
these segments contribute
only marginally to
universe revenue
To negatively impact other
income
Marginal negative for
companies with high
dividend pay-out
Budget Proposals (2013)
Customs duty increase on set-top
boxes from 5% to 10%
Overall budget impact, Sector outlook and Recos
Customs duty exemption for cathode ray tube televisions used by lower income groups and reduction in basic
customs duty for LCD and LED panels below 19 inches is positive as it will support television affordability and
penetration into lower income groups.
Service tax imposition for online and mobile advertising to impact digital media segments of print as well as
broadcast companies. However no significant impact as digital media contribution to overall revenue of our
coverage universe is very marginal currently.
Change in tax treatment for debt mutual funds. The government announced increase in long-term capital gain
tax on debt mutual fund investments from 10% to 20% and holding period for long-term capital gain eligibility
from 12 months to 36 months. These measures will likely impact yield on cash and investments for companies
with high exposure to debt funds/FMP like Jagran Prakashan (~INR1.9b as per FY13 balance sheet), HT Media
(~INR6b) and HMVL (~INR2.7b). Potential decline in yield on investments by ~300bp would impact earnings by
2-3% for JAGP, ~9% for HT Media and ~6% for HMVL on FY15 basis.
Increase in effective dividend tax is a marginal negative for high pay-out companies (50%+) like SUNTV, DB
Corp, and Jagran Prakashan.
Our top picks are DISHTV and DBCL.
Comparative Valuation
Sector / Companies
Dish TV
D B Corp
Hindustan Media
HT Media
Jagran Prakashan
PVR
Sun TV
Zee Entertainment
Sector Aggregate
CMP Reco
(INR)
58 Buy
320 Buy
160 Buy
118 Neutral
124 Buy
652 Buy
455 Buy
286 Neutral
EPS (INR)
FY15E FY16E FY17E
-1.1
0.7
3.5
19.2 22.7 26.3
17.4 19.8 22.6
8.8 10.0 11.4
7.9
9.4 10.9
17.5 28.8 41.1
20.9 25.5 30.5
10.2 13.0 16.5
PE (x)
FY15E FY16E FY17E
-53.9 79.9 16.8
16.7 14.1 12.1
9.2
8.1
7.1
13.5 11.8 10.4
15.7 13.2 11.4
37.3 22.6 15.8
21.8 17.8 14.9
28.2 22.0 17.3
25.4 19.2 14.9
Shobhit Khare ([email protected]); +91 22 3982 5428
EV/EBITDA (x)
FY15E FY16E FY17E
11.2
8.3
5.7
9.7
8.2
7.0
4.2
3.1
2.1
4.8
3.8
2.8
9.5
8.0
6.9
11.5
8.5
6.5
10.1
8.6
7.4
18.0 14.3 11.3
11.8
9.6
7.8
RoE (%)
FY15E FY16E FY17E
NA
NA
NA
28.6 29.5 29.8
19.0 17.9 17.2
10.0 10.3 10.4
24.2 25.8 26.0
16.7 23.2 26.5
24.0 27.0 29.2
31.5 31.4 30.6
22.4 24.9 26.5
Source: Company, MOSL
Union Budget FY14-15
Metals
Budget Impact: Positive
Flashback
At a glance
Major proposals
Import duty on all types of coal has been rationalized to 2.5% (v/s 2% for
steam coal, nil for coking coal and coke). As a result, cost of steel making
will increase by USD1.5/ton for Indian steel mills.
Import duty on iron bearing steel inputs rationalized to uniform 2.5% (v/s
2.5% for steel scrap & iron ore and 5% for ship breaking). This is unlikely
to affect scrap pricing in India but may boost ship breaking.
Clean energy cess on coal consumption is increased by INR50/ton to
INR100/ton. This will increase cost of captive power generation by
INR0.05/kwh or INR25/ton of steel for integrated steel plants or
INR700/ton for aluminum smelter.
Export duty on bauxite raised to 20% (v/s 10%). This may marginally
discourage exports and improve local availability depending on logistics.
Impact
Negative for
steel
Import duty on steel grade limestone and dolomite cut from 5% to 2.5%.
Duty on coal tar pitch cut from 10% to 5%.
Marginally
positive
Import duty on stainless flat rolled steel raised to 7.5% (v/s 5%). This will
improve the pricing power in domestic market.
Positive for Jindal
Stainless
Neutral for steel
sector
Budget proposals (2013)
Investment allowance of 15% on
equipment in FY14 and FY15
4% excise duty on silver refining in
zinc-lead smelting
10% export duty on bauxite imposed
Marginally
negative for
aluminum
smelters
Marginally
positive for SSLT
Overall budget impact, sector outlook and recommendations
Although rationalization of duties and hike in clean energy cess has a negative impact on cost of production, we believe
steps taken to boost demand are a big positive.
Stress on addressing issues in mining and unlocking of dead investment in power generation will have positive impact on
the business outlook for metal companies.
USD48b capex has been incurred by just seven large listed metal companies (SSLT, Hindalco, Tata, SAIL, JSPL, Nalco, and
NMDC). There are many near complete idle power, aluminum and steel capacities. Our calculations suggest that these
investments would unlock equity value of USD30b for these seven companies.
We summarize that the budget is positive for Metals.
Our top picks are Hindalco, Tata Steel and JSW Steel.
Comparative valuation
Sector / Companies
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Sesa Sterlite
Tata Steel
Sector Aggregate
Mkt Cap CMP RECO
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
(USD B) (INR)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
6.2
176
Buy
10.9 12.9 19.8 16.2 13.6
8.9
5.9
5.2
5.0
9.2 10.1 13.8
11.7
162
Buy
18.3 18.1 18.7
8.9
9.0
8.7
4.9
4.1
3.3 19.1 16.5 15.1
4.7
301
Buy
26.7 35.1 40.3 11.3
8.6
7.5
8.4
7.4
6.5 10.3 12.2 12.6
5.0
1,201
Buy
120.0 115.6 140.1 10.0 10.4
8.6
6.5
6.2
5.5 12.4 10.6 11.5
2.5
57
Buy
3.2
4.1
4.1 17.6 13.6 13.7
7.0
4.9
4.2
6.7
8.2
7.8
11.8
174
Buy
17.9 18.3 19.6
9.7
9.5
8.8
5.7
5.5
5.1 21.5 21.2 20.6
6.2
87 Neutral
7.7
7.6
7.2 11.3 11.5 12.1
8.2
7.6
7.1
7.2
6.8
6.1
14.9
294
Buy
21.7 24.1 20.4 13.6 12.2 14.4
4.7
4.2
4.0
8.5
8.8
7.1
8.7
522
Buy
54.1 64.2 69.2
9.6
8.1
7.5
6.4
6.1
5.5 19.3 18.1 16.8
71.6
11.0 10.2
9.6
6.0
5.5
5.1 10.9 10.8 10.6
Source: MOSL
Sanjay Jain ([email protected]); +91 22 3982 5412
Union Budget FY14-15
Key budget proposals & impact
The budget has taken certain steps to boost demand, address issues in iron ore & coal mining, unlock dead
investment, rationalize custom duties, hike effective dividend distribution tax and long term capital gains on debt
mutual funds.
Focus on restarting of investment cycle
Impact: Positive
The budget has taken steps to boost demand and provide employment e.g. INR379b
investment in 8,500kms new roads, REITs, higher housing loan tax benefits, INR71b for 100
smart cities, etc. The real impact of these initiatives will be seen in 2HFY15 and thereafter.
Stress on addressing issues in iron ore mining
Impact: Positive
The budget also spoke of addressing issues in iron ore mining and amending MMDR Act,
1957 if necessary. If iron ore availability improves, non-integrated steel mills e.g. JSW Steel,
JSPL, Bhushan steel, Monnet Ispat, etc should benefit, with lower cost of iron ore. NMDC
may be adversely affected.
Unlocking dead investment in power generation
Impact: Positive
Impasse in coal mining will be resolved and adequate quantity of coal will be provided to
power plants commissioned on or before 31 March 2015 to unlock dead investments. Coal
linkages too will be rationalized, which will optimize transport of coal and reduce cost of
power generation. JSPL’s 2400MW Tamnar-II & 1350MW CPP, SSLT’s 2400MW power
plant, Nalco’s 240MW CPP expansion, Hindalco’s Aditya CPP can now hope to get coal
linkages. These power plants are already complete, near idle, and located in coal-rich belt.
Rationalized customs duties
Impact: Negative
Customs duties have been rationalized on all types of steel imports to 7.5% and steel
inputs to 2.5% with the intention to simplify port operations and provide level playing field.
This is a welcome step, as the additional cost due to disputes at ports will be avoided.
However, there is a marginal negative impact on margins of steel mills, ceteris paribus. We
believe that steel demand acceleration will mostly offset this impact in due course.
Long-term capital gains tax raised on debt mutual fund investments
Impact: Negative
10 July 2014
Long-term capital gains tax has been raised from 10% to 20%. Further, such investments up
to three years will not qualify for long-term capital gains. This will negatively impact the
post-tax yield on surplus cash invested in debt mutual funds by private sector companies,
e.g. SSLT, HZL, CAIRN and Hindalco.
27
Union Budget FY14-15
Oil and Gas
Budget Impact: Positive
Flashback
At a glance
Major proposals
Budgeted FY15 government subsidy to OMCs at INR635b. Excluding
INR350b payable for FY14 and LPG/kerosene/DBT provision,
available subsidy for FY15 at INR223b. No clarity on FY15 subsidy
sharing.
To double domestic gas pipeline infrastructure from 15,000km to
30,000km
Impact
Neutral for oil PSUs,
as any shortfall is
made up in revised
numbers
Long-term positive
for GAIL, GSPL
Reduced basic customs duty on reformate from 10% to 2.5% and
on ethane, propane, ethylene, propylene, butadiene and orthoxylene from 5% to 2.5%
Proposed to remove tax arbitrage between direct bank deposits
and non-equity mutual funds by increasing holding period to
qualify for long-term capital gains tax from 12 to 36 months, and
increasing long-term capital gains tax rate from 10% to 20%.
Positive for
downstream
petchem producers
Marginally Negative
for RIL and Cairn
Budget proposals (2013)
Cabinet Committee on Investment
(CCI) to clear stalled NELP blocks
Announced government plan to (a)
review PSC’s to shift from profit to
revenue sharing, (b) shale gas policy
to be announced, and (c) review
natural gas pricing policy
Income tax surcharge increased from
5% to 10% for FY14
Overall budget impact, sector outlook and recommendations
Status quo v/s interim budget on FY15 subsidy sharing to OMCs at INR635b. Excluding subsidy of INR350b payable for
FY14 and LPG/kerosene/DBT provision, available subsidy for FY15 is at INR223b. We estimate that FY15 provision of
INR223b is short by INR89b. However, based on (a) assessment of exchange rate and crude prices, and (b) deregulation of
diesel and rationalization of LPG subsidy, government expects it to be sufficient.
We model (a) monthly diesel price hikes, and (b) no change in LPG/kerosene prices, leading to ~46% cut in gross underrecoveries from INR1.4t in FY14 to INR750b by FY16. For FY15, we conservatively model upstream sharing at 64% (v/s 48%
in FY14), OMCs’ share flat at 2%, and lower government’s share 34% (v/s 51% in FY14), as we expect the government to
take maximum benefit of lower subsidy.
To remove tax arbitrage opportunity due to lower tax levied on income from non-equity mutual funds (@10%), as
compared to direct investments in bank deposits, government has proposed to increase the tax rate on long-term capital
gains from 10% to 20%, and to increase the period of holding to qualify for long-term capital gains from 12 to 36 months.
This will be negative for high cash balance companies like RIL and Cairn India.
With likely gas price hike and continued diesel reforms leading to lower subsidy, our top picks are ONGC/OINL in
upstream and BPCL in OMCs.
Comparative valuation
Sector / Companies
BPCL
Cairn India
Chennai Petroleum
GAIL
Gujarat State Petronet
HPCL
Indraprastha Gas
IOC
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Sector Aggregate
Ex RMS
Mkt Cap CMP
(USD B) (INR)
7.2
581
11.5
353
0.2
91
10.1
466
0.8
88
2.3
397
0.9
360
14.2
342
2.0
68
6.0
582
59.1
404
2.3
177
55.1
998
171.8
13
148.1
10
RECO
Buy
Neutral
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
33.3 45.3 48.1 17.4 12.8 12.1
8.8
7.4
6.5 12.0 14.9 14.4
55.8 52.1 40.4
6.3
6.8
8.8
3.4
3.4
3.3 17.2 14.4 10.2
10.5 14.9 15.7
8.7
6.1
5.8
7.1
6.1
5.6
8.8 11.6 11.3
30.7 32.9 36.5 15.2 14.2 12.8 10.4
8.8
7.9 13.7 13.4 13.6
8.8 10.0
9.9 10.0
8.8
8.9
5.8
5.3
5.4 14.2 14.1 12.4
28.3 34.7 40.2 14.0 11.4
9.9
9.1
7.6
6.9
6.3
7.4
8.2
28.2 30.9 35.3 12.8 11.7 10.2
5.9
5.1
4.1 20.6 19.5 19.3
32.4 37.9 41.5 10.5
9.0
8.2
7.5
6.6
5.5 11.2 12.1 12.0
5.1
7.3
7.5 13.3
9.3
9.0
6.7
5.4
4.9 12.1 15.5 14.2
64.6 71.7 75.2
9.0
8.1
7.7
6.5
5.5
5.1 17.9 18.0 17.1
35.9 42.5 44.7 11.3
9.5
9.0
5.0
4.3
4.2 17.1 18.1 17.0
10.4 12.7 16.2 17.1 13.9 10.9
8.2
7.1
5.5 14.6 15.9 17.8
79.0 87.1 108.9 12.6 11.5
9.2 10.5
9.5
6.7 11.2 11.2 12.8
11.7 10.3
9.5
6.9
6.0
5.3 13.2 13.5 13.2
11.6 10.4
9.5
6.7
5.9
5.2 13.8 13.8 13.6
Source:
Harshad Borawake ([email protected]); Tel: +91 22 3982 5432
Nitish Rathi ([email protected]); +91 22 3982 5558
Union Budget FY14-15
Key budget proposals & impact
The budget was largely positive for the Oil & Gas sector.
Accelerate production from CBM reserves
Impact: Positive
While there were no concrete proposals in the direction, the budget speech highlighted
intention to hasten production and exploitation of CBM reserves with the help of modern
technology.
Natural gas infrastructure boost
Impact: Positive
The government has announced its desire to double domestic gas pipeline network from
15,000km to 30,000km. The current gas transporters, Gail India and GSPL will be
beneficiaries, as they are likely to contribute meaningfully in this expansion. However, the
key thing to watch will be future policy decisions to increase the gas availability in the
country. Many of GAIL’s new pipelines are underutilized and GSPL’s three new trunk
pipelines are already delayed due to lack of visibility on the incremental gas volumes.
Subsidy sharing
Impact: Neutral
For FY15, the government has provided INR573b for Oil & Gas subsidy to OMCs (headline
number of INR635b, which includes budgetary support for kerosene/LPG and DBT).
Of the INR573b, INR350b pertains to 4QFY14, indicating a provision of INR223b for FY15.
Our current FY15 gross under-recovery estimate is INR918b (Brent @USD108/bbl and Fx
rate of INR59/USD) and we model government sharing at INR312b, indicating a shortfall of
INR89b. Our FY15 government sharing assumption is at 34% v/s 51% in FY14.
The subsidy allocation typically gets revised in the revised budget numbers next year.
Government budgets subsidy of INR635b for FY15, implying net provisioning of INR223b for FY15, adjusting for INR350b
payable for 4QFY14
Source: Company, MOSL
10 July 2014
29
Union Budget FY14-15
Under-recoveries and sharing
Source: Company, MOSL
10 July 2014
30
Union Budget FY14-15
Real Estate
Budget Impact: Positive
Flashback
At a glance
Major proposals
Tax pass-through status for Real Estate Investment Trust (REIT)
Minimum built-up area for FDI reduced from 50k square meters to 20k
square meters; minimum capital condition for FDI reduced from USD10m
to USD5m; above minimum limit exempted if 30% of project cost
committed to low cost affordable housing
Tax exemption limit on interest paid increased for self-occupied property
from INR0.15m to INR0.2m
Strong focus on developing new cities by modernizing existing mid-sized
cities (provision of INR70.6b in FY15)
INR40b allocation to National Housing Bank (NHB) for making available
cheaper credit to low cost affordable housing
Impact
Positive for
commercial and
retail players
Positive
Positive
Positive
Budget proposals (2013)
Additional tax deduction of INR0.1m
(with carry forward option if not
exhausted in the same year), for
housing Loan <= INR2.5m
Reduction of abatement rate from
75% to 70% for luxury homes and
flats (ticket size of >=INR10m, or
carpet area of >=2,000sf)
1% TDS on transfer of immovable
properties of value exceeding INR5m
(exempted agricultural land)
Positive
Overall budget impact, sector outlook and recommendations
Tax pass-through status for Real Estate Investment Trust (REIT): The government has attempted to provide
thrust to Real Estate Investment Trust (REIT) with pass-through taxation status. In the current form, the
incentives are not enticing enough. Both marginal tax and dividend distribution tax (DDT) are applicable at SPV
level, although the dividend income from SPV is exempted from DDT at the level of Trust and unit holders. This
makes effective tax regime similar to existing dynamics.
Easing off of FDI restriction: Minimum built-up area for FDI reduced from 50,000 square meters to 20,000
square meters; minimum capital condition for FDI reduced from USD10m to USD5m; above minimum limit
exempted if 30% of project cost committed to low cost affordable housing. This should improve the private
equity inflow, and attract higher focus towards low cost housing.
Tax exemption on home loan interest: Rise in tax exemption limit for home loan interest on self-occupied
property from INR0.15m to INR0.2m should raise savings and affordability, triggering demand.
Strong focus on developing new cities by modernizing existing mid-sized cities (provision of INR70.6b in FY15)
should improve investor demand in tier-II cities.
Our preferred picks are Prestige, Phoenix, DLF, Brigade
Comparative Valuation
Sector / Companies
DLF
Godrej Properties
Indiabulls Real Estate
Jaypee Infratech
Mahindra Lifespace
Oberoi Realty
Phoenix Mills
Prestige Estates
Sobha Developers
Sector Aggregate
CMP Reco
(INR)
223 Buy
227 Neutral
88 Buy
32 Buy
539 Buy
246 Buy
343 Buy
252 Buy
469 Buy
EPS (INR)
FY15E FY16E FY17E
3.7
5.9 10.3
8.7 11.7 17.0
9.7 12.0 16.6
2.6
3.2
4.2
25.9 30.8 36.1
13.2 21.2 33.3
7.6 17.4 22.1
11.2 16.0 21.3
26.9 34.8 40.5
PE (x)
FY15E FY16E FY17E
60.6 38.0 21.7
26.1 19.4 13.4
9.0
7.3
5.3
12.3
9.8
7.6
20.8 17.5 14.9
18.6 11.6
7.4
45.3 19.7 15.6
22.5 15.7 11.9
17.4 13.5 11.6
28.1 19.3 13.2
Sandipan Pal ([email protected]); +91 22 3982 5436
EV/EBITDA (x)
FY15E FY16E FY17E
21.0 17.7 13.3
18.3 14.1 10.0
12.0
9.1
6.4
8.3
7.5
6.7
16.2 12.3 10.2
12.8
7.9
5.0
11.6
8.5
6.9
13.1 10.0
7.5
9.1
7.6
6.5
14.8 11.8
9.0
RoE (%)
FY15E FY16E FY17E
2.2
3.5
5.9
9.3 11.3 14.6
5.5
6.5
8.6
5.8
7.0
8.6
7.8
8.5
9.1
9.5 13.7 18.6
6.1 12.5 14.0
11.8 14.7 16.6
11.1 13.2 13.9
4.9
6.8
9.3
Source: Company, MOSL
Union Budget FY14-15
Key budget proposals & impact
The budget was positive for the Real Estate industry.
Tax pass-through status for Real Estate Investment Trust (REIT)
Impact: Positive
Tax pass-through for REITs could be a game changer and add significant value to all
stakeholders. Developers would have access to a new source of funding, with retail funds
channelized through a regulated network. Institutional credibility and transparency of the
sector would improve. New avenue of funding should (a) reduce dependency on banking
system, (b) aid opportunity to unlock value of rent-yielding portfolio by lowering cap rate,
and (c) help bring down leverage efficiently. A better tax regime would be the key to
bolstering the attractiveness of REITs for developers holding strong annuity assets. Key
developers with large portfolio of completed commercial assets are DLF (28.5msf of
completed commercial assets), Phoenix (7.5msf of retail assets), Prestige (~10msf by FY14),
Raheja (not listed; 20msf+ assets), Embassy (not listed), etc.
In the current form, the incentives are not enticing enough. Both marginal tax and dividend
distribution tax (DDT) are applicable at SPV level, although the dividend income from SPV is
exempted from DDT at the level of Trust and unit holders. This makes effective tax regime
similar to existing dynamics.
Easing off of FDI restriction
Impact: Positive
10 July 2014
Minimum built-up area for FDI reduced from 50,000 square meters to 20,000 square
meters; minimum capital condition for FDI reduced from USD10m to USD5m; above
minimum limit exempted if 30% of project cost committed to low cost affordable housing.
This should moderately improve private equity inflow, and attract higher focus towards
low cost housing.
32
Union Budget FY14-15
Technology
Budget Impact: Neutral
Flashback
At a glance
Major proposals
Increase in long-term capital gains tax on non-equity mutual funds to
20% from 10%; increase in period of holding in such units from 12
months to 36 months to classify as long-term capital gain
Proposal to launch pan-India program of Digital India – invest towards
creating smart cities, enabling broadband and internet connectivity in
villages, focusing on start-up software product companies
Integrate the services of all Central Government Departments and
Ministries with the eBiz platform on priority by 31 December this year
Impact
Marginally
negative
Marginally
positive
Marginally
positive
Budget proposals (2013)
Mention of Rangachary Committee to
look into tax matters
INR5.32b provision for IT-driven
modernization of post offices
Increase in surcharge from 5% to 10%
for companies with annual PAT of
over INR100m
Overall budget impact, sector outlook and recommendations
Overall budget impact: The budget remained silent on any direct incentives for the sector. Increase in long-term capital
gains tax on non-equity mutual funds from 10% to 20% has only marginal implications on interest income for IT
companies. Proposal to launch a pan-India program of Digital India should boost both the IT and e-commerce sectors. The
e-governance initiative would yield significant domestic revenue for the IT industry.
Sector outlook: With strengthening demand in the US and large deals traction in traditional services in Europe, industry
growth in FY15 should be better than FY14. We see better risk-reward in Tier-I v/s Tier-II. Currency is a key risk to
valuations, and Tier-II has higher sensitivity to currency movements than Tier-I.
Our top picks are TECHM, INFO, HCLT.
Comparative valuation
Companies
Mkt Cap
(USD B)
HCL Technologies
17.8
Hexaware Tech.
0.8
Infosys
32.3
KPIT Tech.
0.6
Mindtree
1.3
MphasiS
1.5
Persistent Systems
0.8
TCS
78.6
Tech Mahindra
8.0
Wipro
23.0
Sector Aggregate
164.6
CMP
(INR)
1,471
152
3,293
173
889
419
1,200
2,348
2,020
545
RECO
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
99.6 111.7 122.5 14.8 13.2 12.0 10.0
8.6
7.4 36.0
31.6
27.9
11.7 13.2 13.4 13.0 11.6 11.4
8.5
8.0
7.7 28.1
28.7
26.6
204.6 227.6 243.5 16.1 14.5 13.5 10.5
9.0
8.1 24.7
23.8
22.3
14.7 18.2 20.5 11.8
9.5
8.4
6.4
4.8
3.7 20.5
20.7
19.1
62.2 73.2 80.0 14.3 12.1 11.1 10.1
8.2
7.1 28.3
26.9
24.3
35.0 39.7 42.4 12.0 10.6
9.9
9.1
8.3
7.9 14.1
15.2
15.4
74.7 94.6 113.2 16.1 12.7 10.6
8.7
6.8
5.4 22.4
24.0
24.0
111.9 128.2 141.0 21.0 18.3 16.7 15.1 13.2 11.9 36.4
34.4
30.8
138.5 157.4 180.6 14.6 12.8 11.2
9.2
7.6
6.9 28.7
25.7
23.8
34.9 39.3 42.5 15.6 13.9 12.8 10.8
9.6
8.1 22.9
22.0
20.4
17.6 15.6 14.3 12.2 10.6
9.4 26.1
24.8
22.8
Source: MOSL
Ashish Chopra ([email protected]); Tel: +91 22 3982 5424
Siddharth Vora ([email protected]); +91 22 3982 5585
Union Budget FY14-15
Key budget proposals & impact
The budget was neutral for the Technology industry. There were no major direct incentives. However, dometic IT
spending may create significant revenue opportunity, with programs such as Digital India and eBiz. Increase in longterm capital gains tax in non-equity MFs is unlikely to have significant impact on the earnings of top-tier IT.
No major incentives for the IT/ITeS industry
Impact: Neutral
The budget remained silent on any direct incentives for the sector. Minimum alternate tax
(MAT) of 18.5% continues to apply to SEZs.
Increase in long-term capital gains tax on non-equity mutual funds
Impact: Negative
The FM proposed an increase in long-term capital gains tax on non-equity MFs to 20% from
10%, and also increased the period of holding in such units from 12 months to 36 months
to classify as long-term capital gain. Cash-rich treasuries of Indian IT firms have been
among the catchment sources of this pool.
The impact is minimal for INFO, given that less than 10% of its cash & investments is in
liquid mutual funds and FMPs. A large share of that is in current investments, which
should be taxed at the marginal rate.
Even for TCS, cash and bank balances amount to INR144b. Current investments in MFs,
debentures and bonds are ~INR11.6b, and long-term debentures and bonds are only
INR22b.
WPRO’s non-current investments are all in equity instruments. Current Investments in
money market mutual funds and debentures amount to INR18b.
Digital India
Impact: Positive
Proposal to launch pan-India program of Digital India entails:
Broadband connectivity at village level
Improved access to services through IT-enabled platforms
Special focus on supporting software product start-ups
Over time, this should be a boost for both the IT and the e-commerce sectors
eBiz platform
Impact: Positive
10 July 2014
All Central Government Departments and Ministries will integrate their services with the
eBiz platform on priority by 31 December this year. The e-governance program to inter-link
all Ministries and Departments is another step in the right direction. While details are yet
unavailable, this initiative is likely to yield significant domestic revenue to the IT industry.
34
Union Budget FY14-15
Telecom
Budget Impact: Neutral
Flashback
At a glance
Major proposals
Imposition of basic customs duty at 10 percent on specified
telecommunications products outside the purview of IT act
Increase in the FY15 estimate for revenue from ‘other communication
services’ from INR390b to INR455b. After deducting the ‘recurring’
revenue sharing licence fee and spectrum charges, one time revenue
from spectrum sale likely estimated at ~INR255b
Pan India programme ‘Digital India’ to ensure broadband connectivity at
village level with FY15 outlay of INR5b
Impact
Potential
increase in
equipment
capex
Neutral
Positive
for data market
growth
and
penetration
Budget Proposals (2013)
Duty on mobile phones was increased
from 1% to 6% for all categories in
the interim budget. Step taken to
encourage domestic production
Interim budget incorporated revenue
of
INR390b
from
‘other
communication services’, implying
estimated revenue from spectrum
sale proceeds at ~INR390b
Overall budget impact, Sector outlook and Recos
Imposition of 10% basic customs duty on specified telecom equipment has been done to boost domestic
production but will likely lead to some increase in equipment capex for telecom operators. Earlier, the
previous government had increased the basic customs duty on mobile phones prices above INR2,000 from 1%
to 6% in the budget 2013-14 and for all mobile phones (including below INR2,000) in the interim budget 201415. Given continued increase in import value of telecom equipment including handsets, government might
take further steps in the future to support domestic manufacturing.
Spectrum sale revenue estimate of ~INR255b is broadly in line. The government is expected to auction
spectrum in 800MHz, 900MHz, and 2100 MHz bands during FY15. We estimate total value of the spectrum
expected to be auctioned at ~INR720b based on most recent spectrum price. Out of this ~INR720b, at least
INR190b (25% for 900MHz/800MHz spectrum and 33% for 1,800MHz spectrum) will be collected upfront
immediately post the auction.
No major impact from budget likely for the telecom sector. We maintain our positive view on the sector.
Our top picks are BHARTI, BHIN.
Comparative Valuation
Sector / Companies
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Comm
Sector Aggregate
CMP Reco
(INR)
335 Buy
253 Buy
134 Buy
126 Neutral
EPS (INR)
FY15E FY16E FY17E
13.1 16.3 20.6
9.5 11.7 14.6
8.2
7.4
7.6
4.4 11.3 17.9
PE (x)
FY15E FY16E FY17E
25.5 20.6 16.3
26.5 21.7 17.3
16.2 18.0 17.5
28.9 11.2
7.0
23.1 18.1 14.1
Shobhit Khare ([email protected]); +91 22 3982 5428
EV/EBITDA (x)
FY15E FY16E FY17E
6.3
5.4
4.6
10.0
8.7
7.5
6.3
6.6
5.4
6.6
5.2
3.9
6.7
5.9
4.9
RoE (%)
FY15E FY16E FY17E
7.8
8.9 10.3
9.8 11.7 14.1
15.0 11.0 10.3
3.4
7.6 11.1
7.9
9.3 10.8
Source: Company, MOSL
Union Budget FY14-15
Utilities & Infra
Budget Impact: Positive
Flashback
At a glance
Major proposals
Sunset clause of sec80IA tax holiday to be extended till March 2017
Impact
Positive
New scheme proposed to drive feeder separation for state-owned
distribution companies (DISCOMs) with budget of INR5b
Positive
Customs duty on steam coal increased to 2.5% from 2%; 2% CVD
retained. Clean cess on coal higher by INR50/ton.
Focus on road project award of INR378b, targeting 8,500km of road
project completion; select expressways parallel to industrial corridors
Institution to provide support to mainstreaming PPPs called 3P India will
be set up with a corpus of INR5b; Infrastructure REITs proposed
Neutral
Positive
Positive
Budget proposals (2013)
Sunset clause of sec80IA tax holiday
to be extended till March 2014
2% customs duty and 2% CVD to be
levied on steam (thermal) coal and
bituminous coal
Concessional tax rate of 15% to be
continued on the dividend received
by an Indian company from its foreign
subsidiary
To devise PPP policy to increase coal
production
Overall budget impact, sector outlook and recommendations
Extending tax holiday for power projects commissioning till FY17 would cover entire 12th plan. Earlier, the benefit
was extended by a year till 31 March 2015 in last year’s budget. This provides visibility of tax exemption for projects
under construction.
Distribution reforms find mention in the budget, with a new scheme targeting feeder separately for DISCOMs. In
our recent meeting with the Ministry, this was cited as top priority and announcement of the scheme was in line
with our interaction. Initial budget for the scheme earmarked at INR5b.
Focus on Infrastructure sector is evident given: (1) 16 new port project awards targeted in FY15, (2) augmenting
inland waterways, (3) 8,500km of road project completion and investment proposal of INR378b for national and
state highway projects, (4) focus on developing airports in tier 2 & 3 cities, (5) developing 100 smart cities and
evaluating metro rail project for cities with 2m+ population, etc. Proposal for infrastructure REIT is positive, as it
would help monetize project, takeout financing for developers.
Constitution of 3P India to resolve/support PPP projects with initial corpus of INR5b is encouraging. The institution
could be a facilitating body to expedite project award, execution, recommending changes in framework, etc.
Reforms like FRP for DISCOMs, imported coal cost pass-through, brownfield expansion for coal, tariff review have
already been taken towards reviving the Power sector in India. Improvement of demand, distribution reforms, and
improving availability of domestic fuel are the next leg of reforms. While recovery would be gradual and developers’
return may be elusive/lower; lenders would be better placed, with improved visibility on cash flows. We continue to
like incumbents with sound growth visibility, strong financial position (low DER, high cash flows). Reiterate NTPC
and CESC as top-picks.
Comparative valuation
Sector / Companies
CESC
Coal India
Jaiprakash Power
JSW Energy
NHPC
NTPC
Power Grid Corp.
PTC India
Reliance Infrastructure
Tata Power
Sector Aggregate
CMP
(INR)
691
371
20
77
25
151
138
89
764
106
Reco
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
EPS (INR)
FY15E FY16E FY17E
56.8 61.9 66.9
27.7 30.2 33.3
1.3
2.9
4.2
6.5
5.8
5.4
2.3
2.8
2.9
11.8 13.7 15.8
9.4 11.5 13.4
9.5 13.1 15.2
54.4 60.7 63.1
5.8
6.5
7.9
PE (x)
FY15E FY16E FY17E
12.2 11.2 10.3
13.4 12.3 11.1
15.2
6.8
4.8
11.9 13.2 14.2
10.8
8.9
8.5
12.8 11.1
9.6
14.6 12.0 10.3
9.3
6.8
5.8
14.0 12.6 12.1
18.3 16.3 13.4
13.3 11.8 10.5
Nalin Bhatt ([email protected]); +91 22 3982 5429
EV/EBITDA (x)
FY15E FY16E FY17E
7.2
6.6
6.0
9.7
8.4
7.2
9.7
5.6
5.0
6.6
6.7
6.8
8.7
8.2
7.6
9.7
8.8
7.6
10.9
9.8
8.9
9.2
4.9
3.6
7.6
6.8
6.8
13.4 12.3 11.5
9.8
8.6
7.7
RoE (%)
FY15E FY16E FY17E
11.6 11.4 11.1
25.2 24.2 23.4
6.3 13.9 17.1
15.2 12.4 10.6
8.5
8.6
8.6
11.0 12.0 13.0
13.7 15.2 16.0
7.0 10.2 11.1
6.5
6.9
6.7
7.4
7.5
7.7
15.0 15.6 16.1
Source: Company, MOSL
Union Budget FY14-15
Key budget proposals and impact
The budget was positive for the Utilities and Infrastructure sector. Focus on distribution reforms and accelerating
investment in infrastructure verticals like Roads, Ports, and Airports is the key highlight, in our view. While the exact
framework and details may follow, the intent to revive the Utilities & Infrastructure sector is evident.
Focus on distribution reforms in Utilities sector
Impact: Positive
Distribution losses remain the key overhang in sustained revival of state-owned
distribution companies (DISCOMs). All-India Aggregate Technical and Commercial (AT&C)
losses remain high at 27%, flat since FY08. Union Budget 2014-15 enunciated scheme to
lower losses through feeder separation, with initial budget allocation of INR5b. In our
recent meeting with the Ministry of Power too, distribution reforms have been highlighted
as the key focus area. While the benefit of the same would take some time to flow in, the
efforts are in the right direction.
Extension of tax holiday
Impact: Positive
Tax holiday under section 80-IA for the Utilities sector has been extended for one year in
the last few budgets. The current budget has extended the benefit to March 2017,
removing uncertainty. While not a large part of projects are commissioning for our
coverage universe, it is pass-through for regulated utilities like NTPC, NHPC, and Powergrid.
To that extent, while this is not positive for the companies directly, it would reduce cost of
power for consumers.
Focus on infrastructure evident
Impact: Positive
Union Budget 2014-15 highlighted significant impetus from the government to revive the
investment cycle for infrastructure verticals like Roads, Ports, and Airports. The budget
speech highlight proposed investment of INR378b towards building national and state
highway projects, with a proposed target to complete 8,500km of roads in FY15. Similarly,
there is a proposal to award 16 new port projects in FY15 and building airports in tier-2 & 3
cities. This, along with focus on urban infrastructure building, with 100 smart cities,
evaluation of metro rail projects for cities with 2m+ population bodes well for pick-up in
infrastructure investment. Constitution of 3P India to support PPP project is also a
testimony to this. Proposal for Infrastructure REIT is also positive, as it would help
monetize projects and takeout financing for developers.
Revision in customs duty on steam coal, higher clean cess
Impact: Neutral
10 July 2014
Customs duty on steam coal has been enhanced from 2% to 2.5%, keeping CVD intact at
2%. This is only a marginal negative for players like JSW Energy with open capacity and
dependence on imported coal. For developers with PPA, either under regulated
mechanism or competitively bid projects, it is a pass-through and would not impact project
economics. Similarly, increase of clean cess from INR50/ton to INR100/ton will be a passthrough and unlikely to dent project returns.
37
Union Budget FY14-15
Annual performance - MOSL universe (INR Billion)
Sector
Sales
Change YoY (%)
EBITDA
Change YoY (%)
PAT
Change YoY (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
Auto (11)
4,968 5,937 6,624 13.6 19.5 11.6 738 916 1,080 16.9 24.1 17.9 342 452 555 19.0 32.1 22.7
Capital Goods (9)
1,547 1,815 2,151 2.8 17.3 18.5 157 199 256 3.3 26.7 28.7 101 141 188 0.7 39.8 33.3
Cement (13)
1,278 1,508 1,763 14.4 18.0 16.9 224 317 422 23.4 41.7 33.2 93 149 226 30.5 60.6 51.0
Consumer (14)
1,521 1,750 2,020 14.2 15.0 15.4 322 374 435 15.4 16.2 16.2 227 264 306 15.7 16.6 16.0
Financials (32)
2,902 3,446 4,135 15.6 18.7 20.0 2,252 2,701 3,291 15.0 19.9 21.9 1,097 1,357 1,676 20.9 23.7 23.4
Private Banks (10) 750 898 1,108 16.6 19.8 23.4 651 786 976 17.0 20.8 24.1 392 476 587 18.3 21.3 23.3
PSU Banks (12)
1,707 2,027 2,416 14.7 18.7 19.1 1,168 1,409 1,723 12.9 20.6 22.3 428 558 709 26.4 30.2 27.1
NBFC (10)
445 521 612 17.5 17.0 17.5 432 505 592 18.2 16.9 17.2 276 323 379 16.6 17.1 17.3
Healthcare (14)
1,066 1,212 1,383 11.2 13.6 14.1 275 310 360 18.0 12.8 15.8 167 206 243 12.5 23.4 18.3
Media (8)
188 216 245 11.9 15.1 13.4 56
66
79 16.3 19.3 18.4 27
35
46 16.3 32.0 29.3
Metals (9)
4,832 5,207 5,543 5.1 7.8 6.5 1,011 1,098 1,163 17.7 8.6
6.0 381 412 437 27.0 8.0 6.0
Oil & Gas (13)
17,726 17,846 17,686 -0.8 0.7 -0.9 1,623 1,830 2,014 10.6 12.8 10.0 861 973 1,060 4.3 13.0 9.0
Excl. RMs (10)
8,495 8,577 8,658 4.6 1.0 0.9 1,310 1,489 1,636 12.6 13.7
9.8 748 836 911 7.2 11.8 9.0
Real Estate (9)
249 283 338 12.1 13.6 19.4 83
104 133 15.1 25.3 28.1 29
42
62 19.1 45.3 47.0
Retail (3)
179 213 255 16.9 19.2 19.7 18
22
26 23.3 24.0 21.0 11
14
17 18.7 23.6 23.0
Technology (10)
2,703 3,039 3,363 10.2 12.4 10.7 707 790 855 9.2 11.7
8.1 546 618 676 11.4 13.3 9.3
Telecom (4)
1,581 1,737 1,889 9.1 9.9 8.7 544 617 682 13.8 13.5 10.4 111 142 182 58.2 27.7 28.2
Utilities (10)
2,314 2,551 2,764 9.4 10.3 8.3 684 784 882 9.6 14.7 12.4 405 457 515 9.1 12.9 12.7
Others (13)
505 589 685 16.9 16.7 16.3 84
102 121 24.6 21.3 18.3 45
57
71 35.2 27.2 23.5
MOSL (172)
43,558 47,348 50,845 5.6 8.7 7.4 8,776 10,232 11,798 13.8 16.6 15.3 4,441 5,319 6,258 15.2 19.8 17.6
Excl. RMs (169)
34,327 38,079 41,817 8.9 10.9 9.8 8,464 9,890 11,420 14.3 16.9 15.5 4,329 5,183 6,108 16.1 19.7 17.9
Sensex (30)
11,580 12,862 13,978 7.2 11.1 8.7 2,586 3,032 3,546 13.0 17.3 16.9 1,352 1,629 1,943 14.7 20.5 19.2
Nifty (50)
13,260 14,712 15,988 7.2 10.9 8.7 2,959 3,477 4,070 12.2 17.5 17.1 1,553 1,872 2,230 13.8 20.5 19.1
For Banks : Sales = Net Interest Income, EBITDA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.
Valuations - MOSL universe
Sector
Auto (11)
Capital Goods (9)
Cement (13)
Consumer (14)
Financials (32)
Private Banks (10)
PSU Banks (12)
NBFC (10)
Healthcare (14)
Media (8)
Metals (9)
Oil & Gas (13)
Excl. RMs (10)
Real Estate (9)
Retail (3)
Technology (10)
Telecom (4)
Utilities (10)
Others (13)
MOSL (172)
MOSL Excl. RMs (169)
Sensex (30)
Nifty (50)
N.M. : Not Meaningful.
July 2014
PE (x)
EV / EBIDTA (x)
P/BV (x)
RoE (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E
14.0
10.6
8.6
6.1
4.7
3.7
3.0
2.4
2.0
21.1
22.8
32.7
23.4
17.6
19.1
14.3
10.5
3.6
3.2
2.9
11.0
13.9
25.3
15.7
10.4
11.8
8.1
5.7
2.5
2.2
1.9
9.7
14.0
31.2
26.7
23.1
21.3
18.1
15.4
11.4
10.2
9.1
36.6
38.2
11.7
9.5
7.7
N.M
N.M
N.M
1.8
1.6
1.4
15.1
16.5
15.1
12.5
10.1
N.M
N.M
N.M
2.7
2.3
2.0
17.6
18.5
8.2
6.3
4.9
N.M
N.M
N.M
0.9
0.9
0.8
11.6
13.6
12.3
10.5
8.9
N.M
N.M
N.M
2.5
2.2
1.9
20.5
20.8
25.4
20.6
17.4
15.3
13.2
11.1
5.1
4.3
3.5
20.1
20.6
25.4
19.2
14.9
11.8
9.6
7.8
5.7
4.8
3.9
22.4
24.9
11.0
10.2
9.6
6.0
5.5
5.1
1.2
1.1
1.0
10.9
10.8
11.7
10.3
9.5
6.9
6.0
5.3
1.5
1.4
1.3
13.2
13.5
11.6
10.4
9.5
6.7
5.9
5.2
1.6
1.4
1.3
13.8
13.8
28.1
19.3
13.2
14.8
11.8
9.0
1.4
1.3
1.2
4.9
6.8
36.9
29.9
24.3
23.4
18.6
15.0
8.9
7.3
5.9
24.1
24.3
17.6
15.6
14.3
12.2
10.6
9.4
4.6
3.9
3.3
26.1
24.8
23.1
18.1
14.1
6.7
5.9
4.9
1.8
1.7
1.5
7.9
9.3
13.3
11.8
10.5
9.8
8.6
7.7
2.0
1.8
1.7
15.0
15.6
19.3
15.1
12.3
11.6
9.4
7.6
4.0
3.3
2.7
20.6
21.9
15.6
13.0
11.1
N.M
N.M
N.M
2.4
2.1
1.9
15.1
16.1
15.7
13.1
11.1
N.M
N.M
N.M
2.4
2.1
1.9
15.3
16.3
16.6
13.8
11.6
N.M
N.M
N.M
2.7
2.4
2.1
16.1
17.1
16.5
13.7
11.5
N.M
N.M
N.M
2.6
2.3
2.0
15.8
16.9
FY17E
22.8
16.4
18.1
39.4
18.3
20.0
16.0
21.1
20.4
26.5
10.6
13.2
13.6
9.3
24.4
22.8
10.8
16.1
22.4
16.8
17.0
17.9
17.6
Div Yield (%)
FY14
1.3
1.1
1.0
1.6
2.0
1.4
2.3
2.7
0.7
1.4
2.6
2.4
2.2
1.4
0.7
1.6
0.6
6.4
1.1
2.0
2.0
1.7
1.7
38
Union Budget FY14-15
Valuations Matrix
Sector / Companies
Automobiles
Amara Raja Batt.
Ashok Leyland
Bharat Forge
Bajaj Auto
Eicher Motors
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
Capital Goods
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Voltas
Sector Aggregate
Cement
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
Jaiprakash Associates
Shree Cement
Ultratech Cement
Dalmia Bharat
J K Cements
JK Lakshmi Cem.
Ramco Cements
Prism Cement
Sector Aggregate
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Marico
Nestle
Pidilite Inds.
Radico Khaitan
United Spirits
Sector Aggregate
10 July 2014
CMP
(INR)
Reco
EPS (INR)
FY15E FY16E FY17E
PE (x)
FY15E FY16E FY17E
EV/EBITDA (x)
FY15E FY16E FY17E
RoE (%)
FY15E FY16E FY17E
467 Buy
33 Buy
634 Buy
2,152 Buy
8,128 Buy
151 Neutral
2,436 Buy
1,165 Buy
2,533 Buy
453 Buy
158 Buy
24.1
-0.1
22.5
127.2
222.1
7.6
144.4
76.9
132.5
50.9
10.1
30.1
1.8
32.3
146.1
330.7
9.8
176.9
101.3
172.6
68.3
13.7
36.2
3.5
38.9
166.3
425.9
10.6
203.6
109.9
222.8
86.8
16.4
19.4
-523.4
28.2
16.9
36.6
19.9
16.9
15.2
19.1
8.9
15.7
14.0
15.5
18.0
19.6
14.7
24.6
15.4
13.8
11.5
14.7
6.6
11.6
10.6
12.9
9.3
16.3
12.9
19.1
14.2
12.0
10.6
11.4
5.2
9.7
8.6
11.6
12.4
13.2
11.1
20.0
10.0
12.4
5.7
9.6
3.8
9.8
6.1
9.0
6.4
10.1
9.3
12.6
7.6
9.6
4.6
7.2
2.8
7.1
4.7
7.3
4.0
8.3
7.7
9.1
7.2
7.6
4.6
5.3
2.1
5.7
3.7
27.1
-0.4
18.2
35.0
26.9
15.4
46.3
17.5
16.1
22.3
29.9
21.1
27.5
9.9
22.4
33.7
32.3
17.3
46.3
18.6
17.8
23.8
31.6
22.8
26.9
17.1
22.6
32.0
31.7
18.7
43.0
18.5
19.2
23.9
29.5
22.8
1,065 Neutral
243 Buy
191 Buy
649 Buy
1,211 Neutral
1,655 Buy
885 Sell
911 Buy
202 Buy
13.4
10.0
7.3
24.6
48.3
48.2
14.6
28.0
8.5
20.0
15.2
12.4
30.8
56.0
66.1
19.3
38.5
10.6
30.3
19.8
17.1
38.3
68.2
89.3
26.5
58.3
13.0
79.6
24.2
26.2
26.4
25.1
34.3
60.6
32.6
23.7
32.7
53.3
15.9
15.4
21.1
21.6
25.0
45.9
23.7
19.1
23.4
35.2
12.3
11.1
16.9
17.7
18.5
33.4
15.6
15.5
17.6
36.5
12.3
14.7
21.9
15.7
20.6
28.7
19.1
15.9
19.1
27.5
7.5
10.5
17.0
13.0
16.3
22.8
13.9
12.7
14.3
15.8
5.3
8.1
13.2
10.8
12.0
18.2
9.2
10.0
10.5
10.3
7.3
12.4
25.1
29.6
14.1
11.9
15.5
14.0
11.0
14.4
10.4
19.6
28.5
28.6
15.8
14.7
19.0
15.4
13.9
19.6
12.5
22.8
31.4
29.1
17.8
18.5
24.5
16.8
16.4
1,458 Buy
219 Neutral
387 Buy
3,303 Buy
104 Neutral
65 Buy
7,151 Buy
2,512 Buy
446 Buy
394 Buy
231 Buy
290 Buy
72 Buy
54.4 84.1 119.9
7.0
9.0 12.3
28.7 51.4 77.6
254.7 370.0 586.0
2.9 10.6 19.0
1.5
4.1
5.7
280.2 431.1 610.3
91.3 133.0 189.0
-12.3 24.4 82.2
22.6 45.3 76.2
10.5 17.1 34.3
9.0 15.1 24.1
0.4
6.2 11.2
26.8
31.5
13.5
13.0
36.6
43.1
25.5
27.5
-36.1
17.4
21.9
32.0
176.2
25.3
17.3
24.3
7.5
8.9
9.9
16.0
16.6
18.9
18.3
8.7
13.5
19.2
11.6
15.7
12.2
17.8
5.0
5.6
5.5
11.3
11.7
13.3
5.4
5.2
6.7
12.0
6.5
10.4
17.8
21.2
7.1
5.4
9.4
10.1
12.9
15.6
14.5
8.5
10.3
13.6
12.6
11.8
10.9
15.3
3.8
3.6
6.1
8.4
8.6
10.7
7.8
5.5
6.2
9.7
6.0
8.1
7.0
11.2
2.1
2.4
4.1
7.5
5.7
7.4
4.7
3.4
3.9
6.9
3.9
5.7
12.8
14.0
8.3
9.9
2.7
2.4
19.5
13.8
-3.3
8.7
9.2
8.4
2.0
9.7
18.5
16.8
13.3
12.6
8.2
6.3
24.5
17.4
6.5
15.8
13.8
12.9
26.8
14.0
23.5
20.5
17.2
16.8
13.2
8.4
27.2
20.7
19.2
22.5
23.8
18.1
35.6
18.1
586
997
1,540
194
515
806
4,698
632
343
240
4,972
329
104
2,350
15.5 18.7 22.8
38.5 45.6 53.6
43.6 51.0 59.7
6.4
7.5
8.8
19.2 22.8 26.1
27.3 33.4 40.0
138.6 164.7 192.0
18.1 20.1 22.3
12.9 14.9 17.2
8.4
9.9 11.3
128.2 151.5 174.5
10.8 13.0 15.4
8.0
9.2 10.9
42.6 56.0 72.7
37.7
25.9
35.3
30.2
26.9
29.5
33.9
34.9
26.6
28.6
38.8
30.5
13.1
55.2
31.2
31.3
21.8
30.2
25.9
22.6
24.2
28.5
31.5
22.9
24.2
32.8
25.3
11.3
42.0
26.7
25.7
18.6
25.8
21.9
19.7
20.2
24.5
28.3
19.9
21.2
28.5
21.4
9.6
32.3
23.1
24.6
18.0
24.3
23.8
22.1
20.3
30.0
25.6
18.1
17.7
22.4
19.2
8.6
29.8
21.3
20.3
14.6
19.4
20.4
18.2
16.9
24.6
22.4
15.6
14.9
19.3
15.8
7.5
24.8
18.1
16.2
11.6
16.4
17.1
15.7
14.3
19.9
19.5
13.5
12.6
16.5
12.9
6.6
20.5
15.4
Neutral
Buy
Neutral
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Neutral
Buy
Neutral
31.7 32.4 33.1
42.1 41.3 40.3
96.3 99.6 102.6
34.8 33.7 33.2
45.2 46.4 45.1
22.9 23.7 23.6
30.6 30.7 30.3
107.3 110.2 114.7
40.6 43.4 45.8
25.1 24.3 23.1
50.1 54.5 57.3
23.3 23.5 23.2
11.9 12.5 13.3
7.2
8.9 10.8
36.6 38.2 39.4
39
Union Budget FY14-15
Ready reckoner: valuations
Sector / Companies
CMP
(INR)
Reco
Healthcare
Alembic Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’s Labs
Glenmark Pharma
GSK Pharma
IPCA Labs.
Lupin
Ranbaxy Labs
Sanofi India
Sun Pharma
Torrent Pharma
Sector Aggregate
306 Buy
493 Sell
1,123 Buy
435 Neutral
1,472 Buy
2,652 Buy
563 Buy
2,486 Neutral
859 Buy
1,041 Buy
543 Buy
3,252 Buy
725 Buy
677 Neutral
Media
Dish TV
D B Corp
Hindustan Media
HT Media
Jagran Prakashan
PVR
Sun TV
Zee Entertainment
Sector Aggregate
58 Buy
320 Buy
160 Buy
118 Neutral
124 Buy
652 Buy
455 Buy
286 Neutral
EPS (INR)
FY15E FY16E FY17E
16.3 21.7 26.5
23.0 26.8 31.8
46.4 56.8 64.3
17.4 23.4 28.5
65.4 78.8 92.1
127.1 146.4 169.2
26.8 33.7 42.0
61.9 84.8 98.0
48.8 59.6 72.7
41.2 53.0 61.5
9.4 18.1 28.1
125.0 152.8 177.5
26.6 31.1 35.3
36.4 43.1 55.7
-1.1
19.2
17.4
8.8
7.9
17.5
20.9
10.2
0.7
22.7
19.8
10.0
9.4
28.8
25.5
13.0
PE (x)
FY15E FY16E FY17E
EV/EBITDA (x)
FY15E FY16E FY17E
RoE (%)
FY15E FY16E FY17E
18.8
21.4
24.2
25.0
22.5
20.9
21.0
40.1
17.6
25.3
57.8
26.0
27.2
18.6
25.4
14.1
18.4
19.8
18.6
18.7
18.1
16.7
29.3
14.4
19.6
30.0
21.3
23.3
15.7
20.6
11.6
15.5
17.5
15.2
16.0
15.7
13.4
25.4
11.8
16.9
19.4
18.3
20.5
12.2
17.4
13.1
13.3
17.3
14.5
16.0
13.5
12.3
32.9
12.1
14.7
11.4
15.6
17.9
10.2
15.3
9.9
11.1
12.4
11.1
13.3
11.5
10.3
22.2
9.9
11.9
17.5
12.8
15.9
9.5
13.2
7.9
9.4
10.7
9.1
11.3
9.8
7.9
18.8
8.0
9.9
12.7
10.6
14.2
7.9
11.1
38.9
13.7
25.2
12.4
27.1
19.9
19.8
26.3
27.7
23.8
34.2
19.5
25.7
28.1
20.1
38.3
14.4
30.1
14.6
28.2
19.2
20.0
34.6
26.8
24.7
16.6
21.4
23.7
27.2
20.6
35.2
15.2
27.4
15.3
28.6
18.6
19.7
37.6
26.1
23.4
21.4
22.4
21.8
29.1
20.4
3.5
26.3
22.6
11.4
10.9
41.1
30.5
16.5
-53.9
16.7
9.2
13.5
15.7
37.3
21.8
28.2
25.4
79.9
14.1
8.1
11.8
13.2
22.6
17.8
22.0
19.2
16.8
12.1
7.1
10.4
11.4
15.8
14.9
17.3
14.9
11.2
9.7
4.2
4.8
9.5
11.5
10.1
18.0
11.8
8.3
8.2
3.1
3.8
8.0
8.5
8.6
14.3
9.6
5.7
7.0
2.1
2.8
6.9
6.5
7.4
11.3
7.8
NA
28.6
19.0
10.0
24.2
16.7
24.0
31.5
22.4
NA
29.5
17.9
10.3
25.8
23.2
27.0
31.4
24.9
NA
29.8
17.2
10.4
26.0
26.5
29.2
30.6
26.5
Metals
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Sesa Sterlite
Tata Steel
Sector Aggregate
176 Buy
162 Buy
301 Buy
1,201 Buy
57 Buy
174 Buy
87 Neutral
294 Buy
522 Buy
10.9 12.9 19.8
18.3 18.1 18.7
26.7 35.1 40.3
120.0 115.6 140.1
3.2
4.1
4.1
17.9 18.3 19.6
7.7
7.6
7.2
21.7 24.1 20.4
54.1 64.2 69.2
16.2
8.9
11.3
10.0
17.6
9.7
11.3
13.6
9.6
11.0
13.6
9.0
8.6
10.4
13.6
9.5
11.5
12.2
8.1
10.2
8.9
8.7
7.5
8.6
13.7
8.8
12.1
14.4
7.5
9.6
5.9
4.9
8.4
6.5
7.0
5.7
8.2
4.7
6.4
6.0
5.2
4.1
7.4
6.2
4.9
5.5
7.6
4.2
6.1
5.5
5.0
3.3
6.5
5.5
4.2
5.1
7.1
4.0
5.5
5.1
9.2
19.1
10.3
12.4
6.7
21.5
7.2
8.5
19.3
10.9
10.1
16.5
12.2
10.6
8.2
21.2
6.8
8.8
18.1
10.8
13.8
15.1
12.6
11.5
7.8
20.6
6.1
7.1
16.8
10.6
Others
Arvind
Bajaj Electrical
Jain Irrigation
Monsanto India
Bata India
Castrol India
Gujarat Pipavav
Just Dial
Kaveri Seed
Sintex Inds.
Symphony
UPL
V-Guard Inds
Sector Aggregate
213 Buy
343 Buy
116 Buy
2,027 Buy
1,283 Buy
330 Neutral
127 Buy
1,534 Buy
749 Buy
88 Buy
1,083 Buy
321 Buy
652 Buy
18.2 23.6 31.3
18.6 23.0 27.5
6.0 10.6 15.0
106.3 136.6 169.6
37.4 47.1 56.2
10.6 11.9 13.5
5.9
7.5
7.4
22.0 29.5 37.7
42.4 58.1 75.0
12.8 17.2 21.8
38.8 50.4 64.4
29.0 33.5 39.2
31.1 41.0 53.0
11.7
18.5
19.3
19.1
34.3
31.2
21.5
69.7
17.7
6.9
27.9
11.1
21.0
19.3
9.0
14.9
10.9
14.8
27.2
27.8
16.9
52.1
12.9
5.1
21.5
9.6
15.9
15.1
6.8
12.5
7.7
12.0
22.8
24.5
17.1
40.7
10.0
4.0
16.8
8.2
12.3
12.3
7.4
9.7
9.2
17.3
20.8
21.9
16.0
55.4
16.4
7.0
22.2
6.6
12.6
11.6
6.1
7.8
7.3
12.9
16.4
18.9
13.3
40.2
11.5
5.1
16.6
5.6
9.8
9.4
5.0
6.4
5.9
9.7
13.6
16.5
10.8
30.5
8.2
4.0
12.5
4.7
7.8
7.6
16.9
23.8
12.1
45.2
25.9
70.4
18.9
25.9
45.0
11.1
42.5
21.5
26.3
20.6
19.0
24.7
18.6
42.5
26.8
79.4
21.1
28.1
41.7
13.1
42.8
20.7
28.2
21.9
21.3
24.7
21.7
38.6
26.1
97.9
18.3
28.7
37.5
14.4
41.5
20.2
29.1
22.4
10 July 2014
40
Union Budget FY14-15
Ready reckoner: valuations
Sector / Companies
Oil & Gas
BPCL
Cairn India
Chennai Petroleum
GAIL
Gujarat State Petronet
HPCL
Indraprastha Gas
IOC
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Sector Aggregate
Ex RMS
CMP
(INR)
EPS (INR)
FY15E FY16E FY17E
PE (x)
FY15E FY16E FY17E
EV/EBITDA (x)
FY15E FY16E FY17E
RoE (%)
FY15E FY16E FY17E
Buy
Neutral
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
33.3
55.8
10.5
30.7
8.8
28.3
28.2
32.4
5.1
64.6
35.9
10.4
79.0
45.3 48.1
52.1 40.4
14.9 15.7
32.9 36.5
10.0
9.9
34.7 40.2
30.9 35.3
37.9 41.5
7.3
7.5
71.7 75.2
42.5 44.7
12.7 16.2
87.1 108.9
17.4
6.3
8.7
15.2
10.0
14.0
12.8
10.5
13.3
9.0
11.3
17.1
12.6
11.7
11.6
12.8
6.8
6.1
14.2
8.8
11.4
11.7
9.0
9.3
8.1
9.5
13.9
11.5
10.3
10.4
12.1
8.8
5.8
12.8
8.9
9.9
10.2
8.2
9.0
7.7
9.0
10.9
9.2
9.5
9.5
8.8
3.4
7.1
10.4
5.8
9.1
5.9
7.5
6.7
6.5
5.0
8.2
10.5
6.9
6.7
7.4
3.4
6.1
8.8
5.3
7.6
5.1
6.6
5.4
5.5
4.3
7.1
9.5
6.0
5.9
6.5
3.3
5.6
7.9
5.4
6.9
4.1
5.5
4.9
5.1
4.2
5.5
6.7
5.3
5.2
12.0
17.2
8.8
13.7
14.2
6.3
20.6
11.2
12.1
17.9
17.1
14.6
11.2
13.2
13.8
14.9
14.4
11.6
13.4
14.1
7.4
19.5
12.1
15.5
18.0
18.1
15.9
11.2
13.5
13.8
14.4
10.2
11.3
13.6
12.4
8.2
19.3
12.0
14.2
17.1
17.0
17.8
12.8
13.2
13.6
223 Buy
227 Neutral
88 Buy
32 Buy
539 Buy
246 Buy
343 Buy
252 Buy
469 Buy
3.7
8.7
9.7
2.6
25.9
13.2
7.6
11.2
26.9
5.9
11.7
12.0
3.2
30.8
21.2
17.4
16.0
34.8
10.3
17.0
16.6
4.2
36.1
33.3
22.1
21.3
40.5
60.6
26.1
9.0
12.3
20.8
18.6
45.3
22.5
17.4
28.1
38.0
19.4
7.3
9.8
17.5
11.6
19.7
15.7
13.5
19.3
21.7
13.4
5.3
7.6
14.9
7.4
15.6
11.9
11.6
13.2
21.0
18.3
12.0
8.3
16.2
12.8
11.6
13.1
9.1
14.8
17.7
14.1
9.1
7.5
12.3
7.9
8.5
10.0
7.6
11.8
13.3
10.0
6.4
6.7
10.2
5.0
6.9
7.5
6.5
9.0
2.2
9.3
5.5
5.8
7.8
9.5
6.1
11.8
11.1
4.9
3.5
11.3
6.5
7.0
8.5
13.7
12.5
14.7
13.2
6.8
5.9
14.6
8.6
8.6
9.1
18.6
14.0
16.6
13.9
9.3
Retail
Jubilant Foodworks
Shopper's Stop
Titan Company
Sector Aggregate
1,295 Buy
390 Neutral
328 Buy
25.3
7.8
9.8
35.1
10.0
11.9
47.3
12.4
14.3
51.1
49.8
33.3
36.9
36.9
39.0
27.6
29.9
27.4
31.6
23.0
24.3
23.9
16.2
24.5
23.4
17.2
13.5
19.9
18.6
12.6
11.2
16.5
15.0
22.6
8.3
28.4
24.1
23.8
9.9
27.6
24.3
24.3
11.1
0.0
24.4
Technology
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
Mindtree
MphasiS
Persistent Systems
TCS
Tech Mahindra
Wipro
Sector Aggregate
1,471
152
3,293
173
889
419
1,200
2,348
2,020
545
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
99.6
11.7
204.6
14.7
62.2
35.0
74.7
111.9
138.5
34.9
111.7
13.2
227.6
18.2
73.2
39.7
94.6
128.2
157.4
39.3
122.5
13.4
243.5
20.5
80.0
42.4
113.2
141.0
180.6
42.5
14.8
13.0
16.1
11.8
14.3
12.0
16.1
21.0
14.6
15.6
17.6
13.2
11.6
14.5
9.5
12.1
10.6
12.7
18.3
12.8
13.9
15.6
12.0
11.4
13.5
8.4
11.1
9.9
10.6
16.7
11.2
12.8
14.3
10.0
8.5
10.5
6.4
10.1
9.1
8.7
15.1
9.2
10.8
12.2
8.6
8.0
9.0
4.8
8.2
8.3
6.8
13.2
7.6
9.6
10.6
7.4
7.7
8.1
3.7
7.1
7.9
5.4
11.9
6.9
8.1
9.4
36.0
28.1
24.7
20.5
28.3
14.1
22.4
36.4
28.7
22.9
26.1
31.6
28.7
23.8
20.7
26.9
15.2
24.0
34.4
25.7
22.0
24.8
27.9
26.6
22.3
19.1
24.3
15.4
24.0
30.8
23.8
20.4
22.8
335 Buy
253 Buy
134 Buy
126 Neutral
13.1
9.5
8.2
4.4
16.3
11.7
7.4
11.3
20.6
14.6
7.6
17.9
25.5
26.5
16.2
28.9
23.1
20.6
21.7
18.0
11.2
18.1
16.3
17.3
17.5
7.0
14.1
6.3
10.0
6.3
6.6
6.7
5.4
8.7
6.6
5.2
5.9
4.6
7.5
5.4
3.9
4.9
7.8
9.8
15.0
3.4
7.9
8.9
11.7
11.0
7.6
9.3
10.3
14.1
10.3
11.1
10.8
Real Estate
DLF
Godrej Properties
Indiabulls Real Estate
Jaypee Infratech
Mahindra Lifespace
Oberoi Realty
Phoenix Mills
Prestige Estates
Sobha Developers
Sector Aggregate
Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Comm
Sector Aggregate
10 July 2014
581
353
91
466
88
397
360
342
68
582
404
177
998
Reco
41
Union Budget FY14-15
Ready reckoner: valuations
Sector / Companies
Utilities
CESC
Coal India
Jaiprakash Power
JSW Energy
NHPC
NTPC
Power Grid Corp.
PTC India
Reliance Infrastructure
Tata Power
Sector Aggregate
Sector / Companies
CMP
(INR)
691
371
20
77
25
151
138
89
764
106
Reco
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
CMP
(INR)
Banks-Private
Axis Bank
1,860
Federal Bank
119
HDFC Bank
825
ICICI Bank
1,391
IndusInd Bank
537
ING Vysya Bank
638
J&K Bank
1,593
Kotak Mahindra Bank
867
South Indian Bank
33
Yes Bank
529
Private Bank Aggregate
Banks-PSU
Andhra Bank
90
Bank of Baroda
826
Bank of India
280
Canara Bank
414
Corporation Bank
376
Dena Bank
77
IDBI Bank
96
Indian Bank
169
Oriental Bank
287
Punjab National Bank
915
State Bank
2,548
Union Bank
199
PSU Bank Aggregate
NBFC
Bajaj Finance
2,202
Dewan Housing
405
HDFC
1,023
IDFC
152
Indiabulls Housing
372
LIC Housing Fin
325
M & M Financial
256
Power Finance Corp
302
Rural Electric. Corp.
368
Shriram Transport Fin.
905
NBFC Aggregate
Financials Sector Aggregate
10 July 2014
Reco
EPS (INR)
FY15E FY16E FY17E
56.8
27.7
1.3
6.5
2.3
11.8
9.4
9.5
54.4
5.8
61.9
30.2
2.9
5.8
2.8
13.7
11.5
13.1
60.7
6.5
66.9
33.3
4.2
5.4
2.9
15.8
13.4
15.2
63.1
7.9
EPS (INR)
FY15E FY16E FY17E
PE (x)
FY15E FY16E FY17E
12.2
13.4
15.2
11.9
10.8
12.8
14.6
9.3
14.0
18.3
13.3
11.2
12.3
6.8
13.2
8.9
11.1
12.0
6.8
12.6
16.3
11.8
10.3
11.1
4.8
14.2
8.5
9.6
10.3
5.8
12.1
13.4
10.5
PE (x)
FY15E FY16E FY17E
EV/EBITDA (x)
FY15E FY16E FY17E
7.2
9.7
9.7
6.6
8.7
9.7
10.9
9.2
7.6
13.4
9.8
6.6
8.4
5.6
6.7
8.2
8.8
9.8
4.9
6.8
12.3
8.6
6.0
7.2
5.0
6.8
7.6
7.6
8.9
3.6
6.8
11.5
7.7
PB (x)
FY15E FY16E FY17E
RoE (%)
FY15E FY16E FY17E
11.6
25.2
6.3
15.2
8.5
11.0
13.7
7.0
6.5
7.4
15.0
11.4
24.2
13.9
12.4
8.6
12.0
15.2
10.2
6.9
7.5
15.6
11.1
23.4
17.1
10.6
8.6
13.0
16.0
11.1
6.7
7.7
16.1
RoE (%)
FY15E FY16E FY17E
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
145.3 173.7 212.2
10.6 12.5 15.2
44.5 55.9 70.0
99.1 119.9 148.7
33.4 42.3 54.2
40.3 47.6 56.5
258.4 279.5 305.0
39.4 46.5 56.0
4.2
4.9
5.8
51.1 60.5 75.4
12.8
11.2
18.5
14.0
16.1
15.8
6.2
22.0
7.9
10.4
15.1
10.7
9.6
14.8
11.6
12.7
13.4
5.7
18.6
6.8
8.7
12.5
8.8
7.8
11.8
9.4
9.9
11.3
5.2
15.5
5.8
7.0
10.1
2.0
1.3
3.8
2.0
2.7
1.6
1.2
3.2
1.2
1.9
2.7
1.7
1.2
3.2
1.8
2.3
1.5
1.0
2.7
1.1
1.6
2.3
1.5
1.1
2.6
1.6
2.0
1.3
0.9
2.3
0.9
1.3
2.0
16.6
12.5
22.4
15.7
18.4
10.4
20.2
15.4
16.4
22.4
17.6
17.2
13.2
23.6
16.6
19.9
11.3
19.0
15.7
16.8
19.6
18.5
18.1
14.5
24.5
17.9
21.4
12.2
18.1
16.2
17.3
20.8
20.0
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
10.8 12.8 13.4
118.2 149.2 184.6
53.4 66.9 87.2
60.3 82.9 107.8
45.3 61.9 74.2
13.0 15.6 18.9
8.2 10.4 12.4
29.0 36.5 44.2
44.5 54.7 72.5
118.9 157.9 185.3
259.4 344.3 454.4
28.0 34.3 39.2
8.3
7.0
5.2
6.9
8.3
5.9
11.7
5.8
6.4
7.7
9.8
7.1
8.2
7.0
5.5
4.2
5.0
6.1
4.9
9.2
4.6
5.2
5.8
7.4
5.8
6.3
6.7
4.5
3.2
3.8
5.1
4.1
7.8
3.8
4.0
4.9
5.6
5.1
4.9
0.6
1.0
0.6
0.7
0.6
0.6
0.7
0.6
0.6
0.9
1.2
0.7
0.9
0.5
0.8
0.6
0.7
0.5
0.5
0.6
0.6
0.6
0.8
1.1
0.6
0.9
0.5
0.7
0.5
0.6
0.5
0.5
0.6
0.5
0.5
0.7
0.9
0.6
0.8
7.1
14.5
12.9
11.2
7.3
10.6
5.9
11.2
10.0
11.8
13.3
10.0
11.6
8.0
16.3
14.3
14.0
9.3
11.6
7.1
12.8
11.4
14.0
15.6
11.3
13.6
7.9
17.7
16.3
16.2
10.4
12.8
8.0
14.0
13.7
14.5
17.9
11.7
16.0
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
171.4 198.9 234.2
54.0 64.5 78.5
38.5 45.8 54.0
12.7 13.1 13.5
55.6 66.4 80.3
28.3 33.1 39.6
18.7 21.2 24.8
50.9 60.1 69.8
57.2 66.0 78.4
68.4 82.8 94.6
12.9
7.5
26.6
11.9
6.7
11.5
13.7
5.9
6.4
13.2
12.3
11.7
11.1
6.3
22.3
11.5
5.6
9.8
12.1
5.0
5.6
10.9
10.5
9.5
9.4
5.2
18.9
11.2
4.6
8.2
10.3
4.3
4.7
9.6
8.9
7.7
2.3
1.2
5.2
1.4
1.9
1.9
2.5
1.2
1.5
2.1
2.5
1.8
2.0
1.0
4.7
1.3
1.7
1.6
2.1
1.0
1.2
1.8
2.2
1.6
1.7
0.9
4.2
1.2
1.5
1.4
1.9
0.9
1.0
1.5
1.9
1.4
19.7
17.3
25.5
12.2
31.0
17.6
19.3
21.8
25.3
16.2
20.5
15.1
19.4
17.8
24.2
11.6
32.4
17.8
19.0
21.9
24.1
17.0
20.8
16.5
19.5
18.5
25.3
10.9
33.7
18.4
19.4
21.6
23.8
17.9
21.1
18.3
42
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Indian Budget Gallery
Indian Strategy Gallery
Indian Politics Gallery
Budget 2014 -15
Growth
Deficit
Inflation
Monsoon
Against all odds!
Research Team ([email protected]) / Dipankar Mitra ([email protected])
Union Budget FY14-15
Contents
Page No.
Against all odds! ...................................................................................... 3-9
Govt. sticks to fiscal prudence ........................................................... 10-13
Budget at a glance ................................................................................... 14
Sectoral impact .................................................................................. 15-37
1.
Automobiles ............................................................................... 16
2.
Capital Goods ....................................................................... 17-18
3.
Cement ....................................................................................... 19
4.
Consumer ............................................................................. 20-21
5.
Financials ............................................................................. 22-23
6.
Healthcare .................................................................................. 24
7.
Media ......................................................................................... 25
8.
Metals .................................................................................. 26-27
9.
Oil & Gas .............................................................................. 28-30
10.
Real Estate ............................................................................ 31-32
11.
Technology ........................................................................... 33-34
12.
Telecom ...................................................................................... 35
13.
Utilities/ Infrastructure ........................................................ 36-37
Annual performance/Valuations - MOSL Universe.................................. 38
Valuation matrix (Sector-wise) .......................................................... 39-42
July 2014
2
Union Budget FY14-15
Union Budget FY14-15: Against all odds!
Reform and fiscal consolidation on track; Yet makes headroom for growth
Budget 2014 was a keenly awaited event, post the decisive mandate in May
2014 for the BJP led government. With sub-5% growth for two consecutive
years, high inflation and collapse of investment cycle, the Finance Minister had
a tight rope to tread to achieve the fiscal deficit target of 4.1% set-up in
Interim Budget 2014.
However, the Finance Minister, Arun Jaitley has taken up the challenge and
has kept a target to reduce the fiscal deficit to 4.1% for FY15, 3.6% by FY16 and
3% by FY17.
With big sector reforms on banking, housing, infrastructure and defence,
commitment towards GST, FDI in critical sectors like defence and insurance
and rationalizing the tax provisions, Budget 2014 has done a good job of
managing expectations and has the intent to put India on the growth
trajectory.
We are positive on the key announcements of the Budget and expect the
economic recovery to gain pace from 2HFY15 onwards. GDP growth should
average 5.5% in FY15, and accelerate to 6.5% in FY16. Inflation moderation in
2H will create space for RBI to consider easing of rates. Beginning of these
measures will further help the overall revenues, inturn driving down the
deficits. Corporate earnings cycle has begin to move from a growth range of 810% to now 14-16%. Valuations of Indian equities, despite the run-up in last 12
months, remain at long term averages; creating a very favorable backdrop for
making strong returns over the coming 12-18 months. Within this, our
preference for domestic cyclical remains high: Financials, Cement, Autos,
Capital Goods and Energy.
Government plans to contain fiscal deficit at 4.1% even in a challenging environment
FY13 FY14BE FY14RE FY15BE (I)
Receipts
Revenue receipts
Net tax revenue
Non-tax Revenue
Capital receipts (net)
Net market borrowings
Gross market borrowings
Di s i nves tment of equi ty hol di ng i n PSUs
Expenditure
Non-plan expenditure
Subs i di es outgo
Plan expenditure
Gross fiscal deficit
Fiscal deficit as % of GDP
14,104
8,792
7,419
1,374
5,822
4,674
5,580
259
14,104
9,967
2,571
4,136
4,902
4.8
16,653
10,563
8,841
1,723
6,090
4,840
5,790
558
16,653
11,100
2,311
5,553
5,425
4.8
15,904
10,293
8,360
1,932
5,462
4,539
5,639
258
15,904
11,149
2,555
4,755
5,245
4.6
17,632
11,671
9,864
1,807
5,961
4,573
5,970
569
17,632
12,079
2,557
5,553
5,286
4.1
FY15BE
17,949
11,898
9,773
2,125
5,880
4,612
6,000
634
17,949
12,199
2,607
5,750
5,312
4.1
YoY %
(as % of GDP)
FY13 Vs FY14RE FY15BE(I) FY15BE vs
FY14RE FY15BE
FY12 Vs FY13 vs FY14RE FY14RE
8
13
11
13
14.0
13.9
17
17
13
16
9.1
9.2
18
13
18
17
7.4
7.6
13
41
-6
10
1.7
1.7
2
-6
9
8
4.8
4.6
7
-3
1
2
4.0
3.6
9
1
6
6
5.0
4.7
43
0
120
145
0.2
0.5
8
13
11
13
14.0
13.9
12
12
8
9
9.8
9.5
18
-1
0
2
2.3
2.0
0
15
17
21
4.2
4.5
-5
7
1
1
4.6
4.1
Source: Government, MOSL
10 July 2014
3
Union Budget FY14-15
Getting the right arithmetic
Finance Minister appears realistic in holding the fiscal deficit of FY15 to 4.1% set
by his predecessor Mr P. Chidambaram.
The final budget for FY15 is aimed at enhancing expenditure as well as
improving its quality to aid the growth recovery process. This has been financed
by higher recourse to non-tax revenue, non-debt creating capital receipts and
some increased borrowing while at the same time providing some relief to the
individual tax payers.
Despite addressing the expenditure with regards to all items including fertilizer
subsidy of INR730b and petroleum subsidy of INR634b, the government also
introduced fresh allocation towards key projects such as for roadways of
INR379b and other infrastructure projects.
The increase in revenues will be driven by increase in indirect tax revenues of
INR75b which partially mitigated the INR222b loss on account of various direct
tax measures.
GST – A new taxation era
With a view to submerge all indirect taxes at the state and the Central level,
Goods & Services Tax (GST) would be implemented to bring a single indirect tax
regime. GST will create a single, unified Indian market to make the economy
stronger.
The Finance Minister in his Budget speech acknowledged that states are
apprehensive about: (i) surrendering their taxation jurisdiction and (ii)
compensation loss which will arise in lieu of GST or prevailing CST. However, he
mentioned that the government is confident of finding a solution during the
course of the year and approve the legislative scheme which enables the
introduction of GST.
GST, if implemented, will streamline the tax administration, avoid harassment of
the business and result in higher revenue collection both for the Centre and the
States.
Minimal changes in taxation
Budget 2014 has addressed measures to rationalize tax provisions to reduce
litigation and address the problem of inverted duty structure in certain areas.
Further, the provisions also provide tax reliefs to individual tax payers.
Direct tax
REITS and Infrastructure Investment Trusts: Conducive tax regime
Removal of tax arbitrage: Rate of tax on long term capital gains increased from
10% to 20% on transfer of units of Mutual Funds, other than equity oriented
funds.
Increase in DDT: Dividend distribution tax (DDT) by a domestic company and
income distributed by the mutual fund to its investors will now be taxed on
gross basis instead of being taxed on net basis. Thus, effective DDT rate will now
be ~20% from 17% earlier (including surcharge and education cess).
10 July 2014
4
Union Budget FY14-15
Tax holiday extended: 10 year tax holiday will be extended to the undertakings
which undertake generation, distribution and transmission of power by March
31, 2017.
Roll back in Advance Pricing Agreement: Introduction of a “Roll Back” provision
in the Advanced Pricing Agreement (APA) scheme so that an APA entered into
for future transactions is also applicable to international transactions
undertaken in previous four years in specified circumstances.
DTC: Government to review DTC in its current form.
Investment allowance of 15%: For any investments made in new plant and
machinery, investment allowance of 15% will be allowed for any investment
made above INR250m. This benefit will be available for three years i.e. for
investments upto March 31, 2017.
Income tax exemption limits hiked: Income-tax exemption limit being raised by
INR50,000 to INR0.25m for all individuals (except citizens above 60 years) and
/HUFs/association of persons or other juridical person. Further, exemption limit
of senior-citizens was enhanced from INR0.25m to INR0.3m.
Higher investment limit: Investment limit under section 80C (providing for
higher investment) raised from INR0.1m to INR0.15m.
Interest on loan on house property increased: Deduction limit on account of
interest on loan in respect of self-occupied house property has been raised from
INR0.15m to INR0.2m.
Indirect tax
Basic custom duty has been reduced on many items including chemicals and
petrochemicals sector, solar and wind energy generation, pre-forms of precious
and semi-precious stones.
Specific rates of excise duty increased on cigarettes in the range of 11% to 72%.
Clean Energy Cess increased from 0.50/tonne to 0.10/tonne
Reduction in the excise duty from 12% to 6% on footwear of retail price
Scheme of Advance Ruling in indirect taxes is to be expanded to cover resident
private limited companies. The scope of Settlement Commission will be
enlarged to facilitate quick dispute resolution.
Debt Mutual Funds: Adverse proposal can hit hard
Brief on backdrop of Mutual Fund industry
The Budget has precipitated a long-feared setback for the mutual fund industry.
Fixed Income oriented Mutual Funds have always received special treatment on
taxation as compared to other avenues of fixed income investment like bank
deposits, bonds, debentures etc.
The Mutual Fund industry got a major fillip after dividends from all types of
mutual funds including fixed income funds was exempt from income tax in the
late 1990s. This was in addition to the fact that mutual fund units in the
cumulative option qualified for capital gains as opposed to the interest income
received from the very instruments which these funds bought for investors as
opposed to investors buying them directly.
10 July 2014
5
Union Budget FY14-15
Since then, from a standing start mutual funds have garnered a total of
INR7,015b (USD117b) in fixed income funds alone. This is a full 72% of the asset
base of mutual funds as at June 30, 2014.
Budget recommendations
Banks have faced competition from Mutual funds to an extent. The real
competition came from fixed maturity plans (FMPs) which is a mutual fund copy
of term deposits of banks where money is locked for one to three years and
qualified for concessional capital gains tax rate at 10% + surcharges v/s 30% +
surcharges on other instruments.
The Budget proposal now removes this arbitrage because it says that the
definition of short term will stand modified as 36 months instead of the current
12 months.
Further, on completion of this period (earlier 12 months; now 36 months), the
capital gains tax rate which was applicable at 10% + surcharge stands modified
to 20% + surcharge. Whether indexation will be allowed or not is not yet clear
but it is feared that it is a flat 20%.
As of June 30, 2014, of USD117b, almost USD36b is in liquid and money market
or ultra-short term funds which is typically under one year time horizon and the
balance is invested by investors in schemes operating with investors’ time
horizon planned between one to three years. Fixed Maturity Plans alone are
valued at USD31b and the balance USD50b is in income and gilt funds.
Our view
This proposal is going to create a significant impact on the debt assets of the
Mutual fund industry, and will need clarification, as it impacts a large amount of
assets and business.
Going forward one needs to watch for developments in the fixed income mutual
fund space and possibly also its implications on the bond markets.
REITs: A definite step towards propelling significant value unlocking
REIT could be tremendous game changer since it could add significant value to
all stake-holders viz.
Developers (Strong financing option)
Small-scale investors (Opportunity to invest in completed and rent yielding
properties and regular return potential with lesser uncertainties like in
under construction assets)
RE fund (Attractive exit option)
Commercial tenants (Better maintenance support from property manager)
REITs will enable a new source of funding to developers by channelizing retail
money through a regulated network. It also improves institutional credibility
and transparency of the sector.
New avenue of funding should (a) reduce dependency on banking system, (b)
aid the opportunity to unlock value of rent-yielding portfolio by lowering cap
rate, and (c) ability to bring down leverage efficiently.
We expect betterment in tax regime would be the key to bolstering the
attractiveness of REIT for developers with holding of strong annuity assets.
10 July 2014
6
Union Budget FY14-15
Proposed tax regime
The listed units of REIT would attract same levy of securities transaction tax
(STT), and would have exemption of long term capital gains and 15% on short
term capital gains.
Capital gains arising at the time of exchange of shares in SPVs with units of the
business trust, the taxation of gains shall be deferred and taxed at the time of
disposal of units by the sponsor.
The income by way of interest received by the business trust from SPV is
accorded pass through treatment i.e., there is no taxation of such interest
income in the hands of the trust and no withholding tax at the level of SPV. Trust
shall deduct withholding tax at the rate of 5%/10% in case of payment of
interest component of income distributed to non-residents/residents.
The dividend received by the trust shall be subject to DDT at the level of SPV but
will be exempted in the hands of the trust, and unit holders.
The income by way of capital gains on disposal of assets by the trust shall be
taxable in the hands of the trust at the applicable rate. However, if such capital
gains are distributed, then the component of distributed income attributable to
capital gains would be exempted in the hands of the unit holders. Any other
income of the trust shall be taxable at the maximum marginal rate.
Our view
Union Budget’s attempt to provide thrust to Real Estate Investment trust (REIT)
with pass through taxation status is a progressing step for this much awaited
framework. However in current taxation form, the incentives are not enticing
enough.
Both marginal tax and dividend distribution tax (DDT) are applicable at SPV level,
although the dividend income from SPV is exempted from DDT at the level of
Trust and unit holders. This makes effective tax regime similar to existing
dynamics.
What to play
Key developers with large portfolio of completed commercial assets are DLF
(28.5msf of completed commercial assets), Phoenix (7.5msf of retail assets),
Prestige (~10msf by FY14 under management), Raheja (not listed 20msf+
assets), Embassy (not listed) etc, who could be major beneficiaries.
Big sector reforms – Infrastructure, Banking, Housing lead the show
We saw big sectoral reforms in some sectors which would shape the long-term
prospects of Indian growth revival, along with private sector investment. Some of
the sectors which saw important policy initiatives are:
Banking
Focus on funding of large infrastructure projects: This will benefit banks with
large infra exposure as negative carry on account of maintaining CRR, SLR and
PSL will reduce.
Preferred stocks: IDFC
10 July 2014
7
Union Budget FY14-15
Clarification is required whether the provision will be on prospective basis or on
retrospective basis.
Insurance Foreign investment limit increased to 49% from 26%,
Preferred stocks: MAX India, RCAP, ABNL, HDFC, and ICICIBC.
Lower cost of funds for banking system: In the case of Mutual Funds, other
than equity oriented funds, the capital gains arising on transfer of units held
raised to 20% v/s 10% earlier and holding period extended from 1 year to 3 year.
Flow of funds to banking sector will happen at a relatively lower cost as
intermediary cost will go away.
Preferred stocks: Large banks such as SBI, ICICIBC, HDFCB, etc.
Infrastructure
Distribution reforms: A new scheme targeting feeder separate for DISCOMs.
Initial budget for the scheme earmarked at INR5b.
Focus on Infrastructure sector is clearly evident given: 1) 16 new port project
award targeted in FY15, 2) Augmenting Inland waterways, 3) 8,500kms of road
project completion and investment proposal of INR378b for NH and State
highway projects, 4) Focus on developing Airports in Tier 2 & 3 cities, 5)
Developing 100 smart cities and evaluation of Metro for cities with 2m+
population, etc.
Proposal for Infrastructure REIT is positive as it would help monetize project,
takeout financing for developers.
Constitution of 3P India to resolve/support PPP project with initial corpus of
INR5b is encouraging. The institution could be a facilitating body to expedite
project award, execution, recommending changes in framework, etc.
Preferred stocks: L&T and BHEL.
Housing
Easing off FDI restriction: Minimum built-up area for FDI reduced from 50,000
sq mt to 20,000 sq mt; Min. Capital condition for FDI reduced from US$10m to
US$5m; above minimum limit are exempted if 30% of project cost committed to
low cost affordable housing. It should moderately improve the private equity
inflow, and higher focus towards low cost housing.
Strong focus on developing new cities by modernizing existing mid-sized cities
(provision of INR70.6b in FY15) should improve investors’ demand in tier II
Cities.
INR40b allocation to National Hosing Bank (NHB) for cheaper credit access to
low cost affordable housing
Preferred stocks: Prestige, Phoenix, DLF, Brigade
Ind AS to be mandatory from FY17
10 July 2014
The Finance Minister, Mr Arun Jaitley, has proposed the adoption of the new
Indian Accounting Standards (Ind AS) (IFRS converged Indian accounting
standards) by all Indian companies mandatorily (except Banks, Insurance
companies, etc.) from FY2016-17. The companies can also adopt these
standards voluntarily from FY2015-16.
8
Union Budget FY14-15
The date of implementation of AS Ind for Banks and Insurance companies will be
separately notified.
The standards for computation of tax would be notified separately.
Our view
These standards may have significant implications for certain sectors due to
difference in accounting treatments and accordingly may impact company
valuations.
10 July 2014
9
Union Budget FY14-15
Govt. sticks to fiscal prudence but manages to provide a
growth filip
Tax relief paid through higher non-tax-non-debt revenues
10 July 2014
Best tax collection effort during post crisis period: The net tax revenue
collection for FY15 final budget has been pegged at 7.6% of GDP, barely lower
than 7.7% in Interim budget. This however, remained the best tax collection
effort during the post crisis period since FY09.
A relief in personal taxes: As expected, some relief was granted on the personal
income tax front including raising the tax exemption limit, standard deduction
on investments, housing loan interest, PPF etc. This would come as a much
needed relief to the common man reeling under static income and high inflation
for the last five years now. As a result, target for Income tax receipt was scaled
down to 18% from 27% of Interim budget (both over FY14BE).
Share of direct tax still higher than indirect tax: The corporate tax rates were
nearly unchanged (15% growth over FY14RE as in the Interim budget). Taking
everything into account, the direct tax proposals resulted in a revenue loss of
INR222b. This however, brought down the share of direct tax in total tax
collection only marginally to 54% (from 55% during Interim budget). Notably
while the share of direct taxes remained below the high of 60% during FY10, it
was still much improved from 34% during FY00 and remained higher than the
collections under indirect taxes. The budget speech also indicated a revival of
DTC, though proposals under this would be reviewed by the present
government.
Indirect tax rationalization aimed towards GST: Finance Minister gave clear
indication of implementation of GST with a timeline of the current financial year
for the passage of the Constitutional Amendment. The focus of indirect tax
proposals was mainly aimed at i) rationalization to facilitate transition to GST, ii)
incentivizing select sectors, and iii) augmentation of revenue. The combined
proposals are expected to garner an additional resource of INR 75b. As a result
of changes in indirect taxes, targets have been tweaked in the final budget from
the interim budget for excise tax (to 15% YoY over FY14RE from 12% in interim
budget) while custom and services tax were left unchanged at 15% YoY and 31%
YoY respectively.
Tax shortfall financed through other revenue sources: As the government’s
gross tax collection has fallen short from the Interim budget by INR 147b, it has
sought to make room for both cutting corners (lower devolution to states by
INR55b) and addional resource mobilization through higher non-tax revenue
(INR318b comprising of INR130b higher accruals from ‘dividends and profits’
and INR188b of other non-tax revenue (mainly telecom spectrum revenue). All
these measures has resulted in revenue receipts exceeding Interim budget
estimates by INR226b. An additional INR65b is expected to be garnered through
disinvestment thus taking the overall revenue and non-debt creating capital
receipts exceeding Interim budget estimates by a combined amount of INR291b.
Spectrum and disinvestment targets appear realistic: The government has
enhanced the estimates of proceeds out of spectrum sale from INR390b (200
10
Union Budget FY14-15
recurring + 190 fresh auction) to INR455b (200 recurring + 255 spectrum
auction). The enhanced revenue target under auction appears realistic in view of
the fact i) availability of additional CDMA 800MHz band spectrum, ii) compulsion
of incumbents to renew license and iii) competitive market conditions. Similarly
higher disinvestment target is expected to sail through as i) market sentiments
has improved, ii) primary market has revived as demonstrated by the smooth
sailing of a few QIPs and iii) stake sale alone is expected to garner INR150b.
Best tax effort during the post crisis phase as yet with net tax nearing 8% of GDP
Net Tax Revenues (INRb)
7.6
9,773
FY15BE
6,298
FY12
7.7
FY15BE… 9,864
5,699
FY11
8,360
4,565
FY10
7.4
FY14RE
4,433
FY09
7.3
7,419
4,395
7.0
FY08
7.3
3,512
7.0
FY07
2,703
FY06
2,248
FY05
1,585
FY03
1,870
1,335
FY02
6.6
FY04
1,367
FY01
5.7
6.3
1,283
6.3
FY00
6.3
6.9
7.9
7.3
FY13
8.2
Net Tax Revenue as a % of GDP
8.8
Source: Government, MOSL
The share of direct taxes has remained steady despite relief on personal income tax
55
54
55
55
54
FY15BE (I)
FY15BE
FY09
56
FY14RE
FY08
60
FY13
53
FY12
50
FY11
46
Share of Direct Tax (%) - RHS
FY10
43
FY07
FY05
FY02
41
FY04
36
38
43
FY03
34
37
FY01
12,500
FY00
15,000
Indirect Tax (INRb)
FY06
Direct Tax (INRb)
10,000
7,500
5,000
2,500
0
Source: Government, MOSL
Government raises expenditure to revive the economy
10 July 2014
Expenditure rises by INR317b from Interim budget estimates: The government
has sought to raise expenditure (both plan and non-plan) to provide a boost to
the economy. While non-plan expenditure has been raised by INR120b, plan
expenditure has been enhanced by INR197b. Within non-plan both subsidies
and defence expenditure were enhanced by INR50b each. The increase in Plan
expenditure was largely due to hike in central plan both on the revenue and
capital expenditure front.
Quality of expenditure improved somewhat: A marginal improvement was
observed in the quality of fiscal spend as share of plan expenditure in overall
expenditure inched up to 32% from 31% of Interim budget. This was also the
highest level in more than a decade.
11
Union Budget FY14-15
Subsidies aimed at 2% of GDP after three failed attempts: FY14 was the third
consecutive failed attempt to keep subsidies within the announced 2% of GDP
limit. This is again aimed to be achieved in FY15 as intended also in the Interim
budget. However, this time the government have the benefit of completion of
the process of phased deregulation of the diesel prices. This has provided an
opportunity to clear backlog of subsidy payment in the oil sector. Additionally,
somewhat higher GDP estimate provided headroom to pay an additional INR50b
to fertilizer companies even while keeping the overall subsidy bill within 2% of
GDP.
Improving expenditure mix key for restraining overall expenditure
FY15BE
12,199
5,750
5,553
12,079
4,136
4,755
FY15BE (I)
8,920
FY12
9,967
8,183
FY11
FY13
7,211
32
31
30
11,149
29
4,124
3,790
32
FY14RE
32
FY10
3,034
30
6,087
2,752
31
FY09
2,051
29
5,076
1,699
FY07 4,135
Plan expenditure (INRb)
FY08
1,406
FY06 3,651
FY05 3,660 1,323
FY04 3,489 1,223
FY03 3,018 1,115
FY02 2,611 1,012
FY01 2,429 827
25
28
Non-plan expenditure (INRb)
Share of Plan Expenditure (%)
29
28
27
27
26
Source: Government, MOSL
Subsidy is attempted to be restrained at 2% of GDP in FY15 after three failed attempts
Petroleum
Total (% of GDP)
Interest
FY15BE
FY15BE (I)
FY14RE
FY13
FY12
0
FY11
0
FY10
1
FY09
600
FY08
2
FY07
1,200
FY06
3
FY05
1,800
FY04
4
FY03
2,400
FY02
5
Subsidy (as % of GDP)
Fertiliser
Total subsidy
3,000
FY01
Subsidy in INRb
Food
Others
Source: Government, MOSL
Fiscal consolidation strictly on track
10 July 2014
Higher revenue growth than expenditure: Continued higher growth for the
revenue receipts over expenditure has left room for fiscal consolidation.
Moreover, India has brought the fiscal deficit from the post crisis high of 6.5% in
FY10 to 4.6% in FY14, i.e., a correction of 1.8% within four years even after an in
between year of fiscal booster dose in FY12.
Fiscal consolidation legacy carried forward: Government has kept the FY15
fiscal deficit unchanged at the challenging target of 4.1% of GDP of the Interim
12
Union Budget FY14-15
budget. Moreover, it reiterated its resolve to keep the deficit target within the
limits of medium term fiscal consolidation target, viz., 3.6% by FY16 and 3% by
FY17. Thus it is now established that India is firmly on a part of fiscal
consolidation path which is not subject to change in the government. This would
act as a confidence booster for the market as well as rating agencies.
Marginal increase in market borrowing for FY15: The net market borrowing for
FY15 has been placed at INR4.6t, marginally higher than the Interim budget
estimate by INR39b. The growth borrowing would stand at INR6t. With large
capital flows, the borrowing programme is unlikely to cause any stress unless
RBI embarks on monetary tightening unwieldy.
A growth enhancing budget: The tweaking in figures in the final budget is aimed
enhancing expenditure as well improving and its quality to aid the growth
recovery process. This has been financed by higher recourse to non-tax revenue,
non-debt creating capital receipts and some increased borrowing while at the
same time providing some relief to the individual tax payers. While the
government has primarily responded to the exigencies of the day, a beginning
has also been made for implementing the long term big bang projects as
promised in the Manifesto.
Higher revenue growth than expenditure leave room for fiscal consolidation
Revenue Reciepts Growth (%)
Expenditure Growth (%)
38
5
8
6
1
16
13
11
13
FY11
FY10
-5
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
13
FY15BE
6
0
FY00
17
17
17
9
14 14
6
16
22
15
FY15BE (I)
14
FY14RE
15
11
24
FY13
9
16 13
FY12
7
25
26
21
Source: Government, MOSL
Near static fiscal deficit results in sharp drop in deficit as % of GDP
Fiscal Deficit (INRb)
6.0
6.0
5.7
4.6
4.1
4.1
1,410
1,451
1,233
1,258
1,478
1,426
1,270
3,370
4,185
3,736
5,160
4,902
5,245
5,286
5,312
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14RE
FY15BE (I)
FY15BE
2.5
FY02
3.3
4.8
1,190
4.0
5.7
FY01
3.9
4.8
1,046
4.3
6.5
FY00
5.2
5.5
Fiscal Deficit % to GDP
Source: Government, MOSL
10 July 2014
13
Union Budget FY14-15
Annexure: Union Budget key numbers
Source: Government, MOSL
10 July 2014
14
Union Budget FY14-15
Sectoral Imapct
Automobiles
Sector
Budget Impact
Positive
Page
16
Capital Goods
Positive
17-18
Cement
Positive
19
Consumer
Negative
20-21
Financials
Positive
22-23
Healthcare
Neutral
24
Media
Neutral
25
Metals
Positive
26-27
Oil & Gas
Positive
28-30
Real Estate
Positive
31-32
Technology
Neutral
33-34
Telecom
Neutral
35
Utilities/Infrastructure
Positive
36-37
10 July 2014
15
Union Budget FY14-15
Automobiles
Budget Impact: Positive
Flashback
At a glance
Major proposals
FDI cap in defense proposed to be hiked from current 26% to 49% with
full Indian management and control through the FIPB route
Impact
Positive
Excise duty concessions granted in Interim Budget 2014 were extended
till Dec 2014.
Additional investment allowance of 15% for capex during FY14/15
announced in Union Budget 2013 continued for FY15
Increase in holding period (from 12m to 36m) for long term classification
and hike in tax rate (from 10% to 20%) for debt mutual fund investments to
impact treasury income of cash rich companies
Dividend distribution tax (DDT) will now be taxed on gross basis. Thus,
effective rate will be ~20% (~17% earlier)
Positive
Positive
Negative
Negative
Budget Proposals (2013 and Interim 2014)
Reduction in excise duty on small
cars, motorcycles, scooters and CVs
from 12% to 8%; SUVs from 30% to
24%; and large and mid-segment cars
from 27%/24% to 24%/20%
Reduction in excise duty on auto
components (under Chapter 84 and
Chapter 85) from 12% to 10%
Additional investment allowance of
15% for capex during FY14/FY15
Overall budget impact, Sector outlook and Recos
Proposal to increase FDI cap in insurance from current 26% to 49% is positive for EXID.
MM, BHFC, AL and TTMT could benefit from proposed hike in FDI investments in defense from current 26% to
49%.
Increase in holding period (from 12m to 36m) for long term classification and hike in tax rate (from 10% to
20%) for investments in debt mutual fund to impact treasury income of cash rich auto companies. Our
preliminary estimates suggest an EPS of impact of ~5.5% for HMCL, ~8% for BJAUT and MSIL and ~6% for EIM.
Our top picks are MSIL and TTMT in large-caps. In mid-caps, we like TVSL and AL
Comparative Valuation
Sector / Companies
Amara Raja Batt.
Ashok Leyland
Bharat Forge
Bajaj Auto
Eicher Motors
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
CMP Reco
(INR)
467 Buy
33 Buy
634 Buy
2,152 Buy
8,128 Buy
151 Neutral
2,436 Buy
1,165 Buy
2,533 Buy
453 Buy
158 Buy
EPS (INR)
FY15E FY16E FY17E
24.1 30.1 36.2
-0.1
1.8
3.5
22.5 32.3 38.9
127.2 146.1 166.3
222.1 330.7 425.9
7.6
9.8 10.6
144.4 176.9 203.6
76.9 101.3 109.9
132.5 172.6 222.8
50.9 68.3 86.8
10.1 13.7 16.4
PE (x)
FY15E FY16E FY17E
19.4 15.5 12.9
-523.4 18.0
9.3
28.2 19.6 16.3
16.9 14.7 12.9
36.6 24.6 19.1
19.9 15.4 14.2
16.9 13.8 12.0
15.2 11.5 10.6
19.1 14.7 11.4
8.9
6.6
5.2
15.7 11.6
9.7
14.0 10.6
8.6
Jinesh Gandhi ([email protected]); +91 22 3982 5416
Chirag Jain ([email protected]); +91 22 3982 5418
EV/EBITDA (x)
FY15E FY16E FY17E
11.6
9.0
7.3
12.4
6.4
4.0
13.2 10.1
8.3
11.1
9.3
7.7
20.0 12.6
9.1
10.0
7.6
7.2
12.4
9.6
7.6
5.7
4.6
4.6
9.6
7.2
5.3
3.8
2.8
2.1
9.8
7.1
5.7
6.1
4.7
3.7
RoE (%)
FY15E FY16E FY17E
27.1 27.5 26.9
-0.4
9.9 17.1
18.2 22.4 22.6
35.0 33.7 32.0
26.9 32.3 31.7
15.4 17.3 18.7
46.3 46.3 43.0
17.5 18.6 18.5
16.1 17.8 19.2
22.3 23.8 23.9
29.9 31.6 29.5
21.1 22.8 22.8
Source: Company, MOSL
Union Budget FY14-15
Capital Goods
Budget Impact: Positive
Flashback
At a glance
Major proposals
FDI cap in defense being raised to 49% with full Indian management and
control through the FIPB route.
Comprehensive policy to promote Indian ship building industry to be
announced.
Solar UMPP projects in Rajasthan, Gujarat, TN and Laddakh; excise /
customs duty incentives encouraging domestic production of solar / wind
power generation equipment.
Plan outlay in CPSUs at INR3.2t (stable YoY); excluding overseas
acquisitions by ONGC Videsh / Oil India, plan outlay up by 9.2%.
Budgetary provision of INR71b towards development of 100 smart cities,
relaxation of FDI norms, etc.
Attempt to boost infra spend through flagship projects like river
interlinking, industrial corridors, metro projects, ports, airports, inland
waterways, gas pipelines, etc.
Investment allowance of 15% for investments upto INR250m in plant and
machinery till FY17.
Impact
Positive
Positive
Positive
Positive
Positive
Positive
Positive
Budget proposals (2013)
Investment allowance of 15% for
investments of INR1b+ in plant and
machinery during FY14 and FY15. This
will be in addition to the depreciation
benefits.
Attempt to address the contentious
issues impacting new investments /
project progress in key sectors like
roads, power, oil and gas, coal, etc.
Ships and vessels exempted from
excise duty.
Support waste-to-energy projects
through instruments such as viability
gap funding, repayable grant and low
cost capital.
Overall budget impact, sector outlook and recommendations
Raising FDI cap in defense to 49% is important in terms of promoting domestic manufacturing. Budget highlighted strong
intent to improve indigenous procurement in defense. L&T is a key beneficiary, given the INR40b capex in Kattupalli
shipyard cum port. Also, attempts have been made to boost heavy equipment manufacturing in segments like renewables
(solar / wind), ship building, etc. Incentive to renewables is positive for BHEL, which is planning large investments in solar
PV manufacturing.
Attempt to boost infra spend through flagship projects like river interlinking, industrial corridors, metro projects, ports,
airports, inland waterways, gas pipelines, etc, is an important highlight. Increased focus on smart cities provides
interesting possibilities for companies like Siemens, ABB, etc.
Investment allowance of 15% for investments upto INR250m in plant and machinery till FY17. Thus, the scope has been
extended to cover medium scale enterprises.
Comparative valuation
Sector / Companies
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Voltas
Sector Aggregate
CMP Reco
(INR)
1,065 Neutral
243 Buy
191 Buy
649 Buy
1,211 Neutral
1,655 Buy
885 Sell
911 Buy
202 Buy
EPS (INR)
FY15E FY16E FY17E
13.4 20.0 30.3
10.0 15.2 19.8
7.3 12.4 17.1
24.6 30.8 38.3
48.3 56.0 68.2
48.2 66.1 89.3
14.6 19.3 26.5
28.0 38.5 58.3
8.5 10.6 13.0
PE (x)
FY15E FY16E FY17E
79.6 53.3 35.2
24.2 15.9 12.3
26.2 15.4 11.1
26.4 21.1 16.9
25.1 21.6 17.7
34.3 25.0 18.5
60.6 45.9 33.4
32.6 23.7 15.6
23.7 19.1 15.5
32.7 23.4 17.6
EV/EBITDA (x)
FY15E FY16E FY17E
36.5 27.5 15.8
12.3
7.5
5.3
14.7 10.5
8.1
21.9 17.0 13.2
15.7 13.0 10.8
20.6 16.3 12.0
28.7 22.8 18.2
19.1 13.9
9.2
15.9 12.7 10.0
19.1 14.3 10.5
Satyam Agarwal ([email protected]); +91 22 3982 5410
Amit Shah ([email protected]) / Nirav Vasa ([email protected])
RoE (%)
FY15E FY16E FY17E
10.3 14.4 19.6
7.3 10.4 12.5
12.4 19.6 22.8
25.1 28.5 31.4
29.6 28.6 29.1
14.1 15.8 17.8
11.9 14.7 18.5
15.5 19.0 24.5
14.0 15.4 16.8
11.0 13.9 16.4
Source: MOSL
Union Budget FY14-15
Key budget proposals & impact
Focus on kick-starting flagship projects, setting up of infrastructure investment trusts, allowing lenders to provide
long-term loans to infrastructure without restrictions on CRR / SLR, etc, have been constructive steps for a revival in
the investment climate. Also, attempt has been made to boost the manufacturing sector. The budget also reiterates
the intent of channelizing funding through PPP route.
Boost to heavy equipment manufacturing
Impact: Positive
The FDI cap in defense has been raised to 49% and the attempt is to improve indigenization
in defense procurement. The budget speech also mentioned that a comprehensive policy
to promote Indian shipbuilding will be announced shortly. Solar energy generation received
a boost, with announcement to set up Solar UMPP projects in Rajasthan, Gujarat, TN and
Laddakh; and a provision of INR5b has been made. Excise / customs duty incentives have
been provided to encourage domestic manufacturing of solar / wind power equipment.
Plan outlay by CPSUs up 9.2% YoY (excluding overseas acquisitions in FY14)
Impact: Positive
Plan outlay in CPSUs at INR3.2t (stable YoY). Adjusted for overseas acquisitions in
Mozambique by ONGC Videsh / Oil India, plan outlay in FY15 is up by 9.2%.
CPSU Plan Outlay
INR b
FY14 (RE)
FY15 (BE)
% YoY
Nuclear Power Corp
54
74
38%
Neyveli Lignite
25
30
19%
NHPC
31
32
5%
NTPC
202
224
11%
PGCIL
200
200
0%
Coal India
50
52
4%
Singareni Colleries
29
39
33%
BPCL
36
53
45%
GAIL
55
31
-43%
IOC
118
114
-4%
ONGC
350
360
3%
ONGC Videsh
361
148
-59%
Oil India
104
36
-65%
Power
Mining
Hydrocarbons
Others
BHEL
9
10
15%
NHAI
196
240
22%
Indian Railways
583
639
10%
NMDC
27
43
60%
SAIL
115
90
-22%
Total
3,271
3,243
Source: Company, MOSL
10 July 2014
18
Union Budget FY14-15
Cement
Budget Impact: Positive
Flashback
At a glance
Major proposals
Excise maintained at 8% of MRP plus INR6/bag less 30% abatement
Impact
Neutral
Focus on infrastructure development (by increasing allocation and
addressing funding issues) and housing (increased allocation for rural
housing and higher tax deduction on housing loans)
Increase in clean energy cess on coal from INR50/ton to
INR100/ton to marginally increase energy cost
Positive
Increase in tax rate (from 10% to 20%) on long-term capital gains and
holding period to quality as long-term gain (from 12 months to 36
months) for investments in debt mutual funds to impact treasury
investments of cash-rich companies
Negative
Marginally
Negative
Budget proposals (2013)
Excise duty cut by 4% in interim
budget (February 2014), after being
maintained at 12% of MRP plus
INR6/bag less 30% abatement in
February 2013 budget.
Continued focus on infrastructure
development with higher allocation
and focus on availability of funding
Customs duty and CVD of 2% levied
on imported steam coal
Overall budget impact, sector outlook and recommendations
Excise duty maintained at 8% of MRP plus INR6/bag less 30% abatement.
Focus on infrastructure, with higher allocation towards roads (~INR379b allocation for NHAI and target of completion of
~8,500km), development of new airports in tier-1 and tier-2 cities, 16 new ports and planning for metro rail projects in
cities with over 2m population (~14 cities).
Boost to housing by increasing incentive for housing loans (increase in interest deduction limit by INR50k to ~INR0.2m
and increase in limit u/s 80C by INR50k to ~INR0.15m for loan repayment), increasing allocation for Rural Housing Fund,
promoting low cost housing, etc.
Development of industrial corridors, with smart cities linked to transport connectivity. Also, the government is
committed to reviving SEZs.
Committed to development of Andhra Pradesh and Telangana; would help faster recovery of cement demand from
erstwhile Andhra Pradesh.
Domestic coal prices to increase due to increase in Clean Energy Cess on coal from INR50/ton to INR100/ton, resulting in
less than 1% increase in cost or ~0.5% EPS impact.
Increase in tax rate and holding period for investments in debt mutual fund would impact treasury investments of cash
rich companies like ACC, ACEM, GRASIM, SRCM. We estimate impact of up to ~5% on FY16E EPS.
Our top picks are ACC, UTCEM and SRCM in large caps, and DBEL, JKCE, JKLC and PRSC in midcaps.
Comparative valuation
Sector / Companies
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
Jaiprakash Associates
Shree Cement
Ultratech Cement
Dalmia Bharat
J K Cements
JK Lakshmi Cem.
Ramco Cements
Prism Cement
Sector Aggregate
CMP Reco
(INR)
1,458 Buy
219 Neutral
387 Buy
3,303 Buy
104 Neutral
65 Buy
7,151 Buy
2,512 Buy
446 Buy
394 Buy
231 Buy
290 Buy
72 Buy
EPS (INR)
FY15E FY16E FY17E
54.4 84.1 119.9
7.0
9.0 12.3
28.7 51.4 77.6
254.7 370.0 586.0
2.9 10.6 19.0
1.5
4.1
5.7
280.2 431.1 610.3
91.3 133.0 189.0
-12.3 24.4 82.2
22.6 45.3 76.2
10.5 17.1 34.3
9.0 15.1 24.1
0.4
6.2 11.2
PE (x)
FY15E FY16E FY17E
26.8 17.3 12.2
31.5 24.3 17.8
13.5
7.5
5.0
13.0
8.9
5.6
36.6
9.9
5.5
43.1 16.0 11.3
25.5 16.6 11.7
27.5 18.9 13.3
-36.1 18.3
5.4
17.4
8.7
5.2
21.9 13.5
6.7
32.0 19.2 12.0
176.2 11.6
6.5
25.3 15.7 10.4
Jinesh Gandhi ([email protected]); Tel: +91 22 3982 5416
Sandipan Pal ([email protected]); +91 22 3982 5436
EV/EBITDA (x)
FY15E FY16E FY17E
17.8 10.9
7.0
21.2 15.3 11.2
7.1
3.8
2.1
5.4
3.6
2.4
9.4
6.1
4.1
10.1
8.4
7.5
12.9
8.6
5.7
15.6 10.7
7.4
14.5
7.8
4.7
8.5
5.5
3.4
10.3
6.2
3.9
13.6
9.7
6.9
12.6
6.0
3.9
11.8
8.1
5.7
RoE (%)
FY15E FY16E FY17E
12.8 18.5 23.5
14.0 16.8 20.5
8.3 13.3 17.2
9.9 12.6 16.8
2.7
8.2 13.2
2.4
6.3
8.4
19.5 24.5 27.2
13.8 17.4 20.7
-3.3
6.5 19.2
8.7 15.8 22.5
9.2 13.8 23.8
8.4 12.9 18.1
2.0 26.8 35.6
9.7 14.0 18.1
Source: MOSL
Union Budget FY14-15
Consumer
Budget Impact: Negative
Flashback
At a glance
Major proposals
Increase in excise duty in Filter Cigarettes from 11-72%, with highest
increase for 64mm segment. Weighted average of 22.5% increase in
excise duty for Cigarettes for ITC.
Impact
Negative for ITC
as it will
necessitate price
hikes, impacting
volumes
No change in import duty on Gold
Negative for
Jewellery
companies
Cut in custom duty on palm fatty acid crude palm stearin (raw Positive for
HUL, GCPL
materials for soaps) from 7.5% to 0%.
Increase in income tax exemption, increase in sec 80 C limit, increase in Positive for sector
exemption limit for interest on housing loan.
Excise duty reduced from 12% to 6% for footwear in price range of Positive for BATA,
INR500 to INR1000. Footwear below INR500 is exempt from excise. EBITDA margins
Footwear over INR1000 will continue to attract 12% Excise duty.
can expand by
50bp to 60bp
Budget Proposals (2013)
Excise duty on cigarette increased by
18%
Tax rate on royalty increased from
10% to 25%
Increase in tax surcharge
Overall budget impact, Sector outlook and Recos
We have tweaked our FY15 volume and pricing assumptions for ITC.
We expect 3.3% volume decline in Cigarettes v/s our earlier expectation of 2% volume growth.
However, we expect ITC to implement a weighted average 16% price hike to pass on the excise duty hike and
maintain its 15% EBIT growth in Cigarettes for FY15.
Increase in exemption limits for interest on housing loans, income tax slab and sec 80C deductions should put
more money in the hands of consumers and thus augurs well from consumer sector viewpoint.
Sector outlook remains cautious given rich valuations for most of our universe. We look for earnings visibility
and special catalysts like distribution expansion, aggressive new launch pipeline as sector volume growth
remains subdued, despite an improvement in consumer sentiment post elections.
Our top picks are ITC, Emami and Britannia in FMCG and Titan & Jubilant in Retail.
Comparative Valuation
Sector / Companies
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Marico
Nestle
Pidilite Inds.
Radico Khaitan
United Spirits
Sector Aggregate
CMP
(INR)
586
997
1,540
194
515
806
4,698
632
343
240
4,972
329
104
2,350
Reco
Neutral
Buy
Neutral
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Neutral
Buy
Neutral
EPS (INR)
FY15E FY16E FY17E
15.5 18.7 22.8
38.5 45.6 53.6
43.6 51.0 59.7
6.4
7.5
8.8
19.2 22.8 26.1
27.3 33.4 40.0
138.6 164.7 192.0
18.1 20.1 22.3
12.9 14.9 17.2
8.4
9.9 11.3
128.2 151.5 174.5
10.8 13.0 15.4
8.0
9.2 10.9
42.6 56.0 72.7
PE (x)
FY15E FY16E FY17E
37.7 31.3 25.7
25.9 21.8 18.6
35.3 30.2 25.8
30.2 25.9 21.9
26.9 22.6 19.7
29.5 24.2 20.2
33.9 28.5 24.5
34.9 31.5 28.3
26.6 22.9 19.9
28.6 24.2 21.2
38.8 32.8 28.5
30.5 25.3 21.4
13.1 11.3
9.6
55.2 42.0 32.3
31.2 26.7 23.1
Gautam Duggad ([email protected]); +91 22 3982 5404
Manish Poddar ([email protected]); +91 22 3027 8029
EV/EBITDA (x)
FY15E FY16E FY17E
24.6 20.3 16.2
18.0 14.6 11.6
24.3 19.4 16.4
23.8 20.4 17.1
22.1 18.2 15.7
20.3 16.9 14.3
30.0 24.6 19.9
25.6 22.4 19.5
18.1 15.6 13.5
17.7 14.9 12.6
22.4 19.3 16.5
19.2 15.8 12.9
8.6
7.5
6.6
29.8 24.8 20.5
21.3 18.1 15.4
RoE (%)
FY15E FY16E FY17E
31.7 32.4 33.1
42.1 41.3 40.3
96.3 99.6 102.6
34.8 33.7 33.2
45.2 46.4 45.1
22.9 23.7 23.6
30.6 30.7 30.3
107.3 110.2 114.7
40.6 43.4 45.8
25.1 24.3 23.1
50.1 54.5 57.3
23.3 23.5 23.2
11.9 12.5 13.3
7.2
8.9 10.8
36.6 38.2 39.4
Source: Company, MOSL
Union Budget FY14-15
Key budget proposals & impact
The budget was positive for the FMCG sector but negative for cigarette industry as excise duty was hiked 22.5% for
ITC. However, given the heightened pitch by Health Minister to increase the Cig Excise per stick to INR3.5, we believe
the 22.5% excise duty increase is better than our worst case assumptions.
Excise duty increased by 11-72% for Cigarettes
Impact: Negative
Weighted average 22.5% increase in excise duty for ITC. 72% increase in 64mm segment is
a negative from Cig volume growth perspective as this segment acted as a recruiter of new
consumer post 40% excise duty increase in Cig over FY12-14. However, we draw comfort
from ITC’s track record of successful up-trading consumers to RSFT segment. In FY09, post
3x-5x increase in excise duties in non-filter segment, ITC exited the non-filter portfolio
which used to contribute 20% of its then Cig volumes and still arrested the volume decline
to 2.9%. Also, we believe other players, especially VST, will suffer more as 64mm
contributed upwards of 50% of its volumes. We have revised our Cig volume assumption to
3.3% decline v/s earlier expectations of 2% growth, while increasing our pricing estimate to
16% v/s earlier 10%. We believe this budget removes a key overhang for the stock,
especially after Health Minister’s demand for disproportionate increase in Cig excise duty.
No change in Gold import duty
Impact: Negative
Gold import duty has been kept unchanged at 10% v/s expectations of a cut. Cut in import
duty could have spurred jewellery volumes at the margin, post gold price correction.
Cut in customs duty for Fatty acids, crude palm stearin from 7.5% to nil
Impact: Positive
Minor positive for Soap players like HUL and GCPL. We expect companies to pass on the
benefits to drive volume growth. Category volumes have stagnated in the past few
quarters.
Hike in exemption limits for income tax, Sec 80C and interest on housing loan
Impact: Positive
Government has increased the a) income tax exemption limit by INR50,000, b) Sec 80C
deduction limit by INR50,000 and c) interest exemption on housing loan has been hiked by
INR50,000. These measures will increase the disposable income in the hands of consumers,
thus driving discretionary consumption at the margin.
Excise duty reduced from 12% to 6% for footwear in price range of INR500 to INR1000. Footwear
below INR500 continues to be exempt from Excise. Footwear over INR1000 will continue to
attract 12% Excise duty.
Impact: Positive
10 July 2014
Bata derives ~15% of its revenues from footwear priced between INR500 and INR1000.
Consequently it pays an aggregate excise duty amounting to 1.6% of revenues. Cut in
excise duty from 12% to 6% in our view can expand margins by the tune of 50bp to 60bp.
We maintain our positive view on the stock.
Further, we expect Bata to move some products which are currently priced less than
INR500 and facing margin pressure to higher price points, thus resulting in margin
accretion. Additionally, Bata could move some products priced above INR1000 currently to
less than INR1000 so as to drive volume growth and save excise duty. We maintain our
positive view on the stock
21
Union Budget FY14-15
Financials
Budget Impact: Positive
Flashback
At a glance
Major proposals
Relaxation in regulatory cost (CRR, SLR and PSL) on infrastructure bonds,
though exact details are awaited. Expect RBI to unveil detailed guidelines
soon
Withdrawal of regulatory arbitrage between deposits and debt mutual
funds
Proposal to increase foreign investments in insurance sector from 26% to
49%
Increase in tax exemption limit on housing loans for principal repayment
to INR0.15m (via 80C) and interest repayment to INR0.2m from
INR0.15m (U/S 24)
New banking licences to be issued in FY15 for small and differentiated
banks
PSU banks to see capital infusion of INR112b; however, significant
reforms in the space yet to bear fruits
Impact
Positive
for banks with
higher
infra
lending and IDFC
Positive for
banks, negative
for AMCs
Positive
Budget Proposals (2013)
FY13 fiscal deficit of INR5.2t - 5.2% of
GDP, for FY14 expected to be INR5.4t
- 4.8% of GDP
PSU banks capitalization - to infuse
INR140b in FY14 v/s INR125b (13
banks) in FY13. To start exclusive
women PSU bank
Housing finance - additional tax
rebate on interest of INR100,000 for
the first home loan under INR2.5m
Positive,
especially for
HFCs
Positive for
industry
Neutral
Overall budget impact, Sector outlook and Recos
Focus on funding large infrastructure projects: Benefit for banks with large infrastructure exposure as
negative carry on account of maintaining CRR, SLR and PSL will reduce. Major beneficiary would be IDFC as a
large part of the borrowings is to fund infrastructure loans and when the liabilities related to those loans come
up for re-pricing, it would be replaced by infrastructure bonds, which may be exempt from regulatory cost.
Clarification needed whether it is on prospective basis or retrospective basis.
Insurance foreign investment limit increased to 49% from 26%: Viewed positive for MAX India, RCAP, ABNL,
HDFC and ICICIBC.
Lower cost of funds for banking system: In case of mutual funds, other than equity-oriented funds, capital
gains arising on transfer of units held raised to 20% v/s 10% earlier and the holding period is extended from a
year to three years. Flow of funds to the banking sector will happen at a relatively lower cost as the
intermediary cost will cease to exist.
Budget allocation of INR112b for PSU banks, but silent on bank holding company or GOI shareholding: Based
on the budget speech, it seems that large PSU banks’ issuances will be in the offing. As the requirement of
capital is significantly higher than the amount allocated, PSU banks are expected to come up with FPOs or QIPs
in FY15.
Consolidation: Comments on consideration of PSU banks’ consolidation and providing greater autonomy while
making them accountable is a positive.
Under the Interest Subvention Scheme for short term crop loans, banks are extending loans to farmers at a
concessional rate of 7%. Farmers get a further incentive of 3% for timely repayment, which would continue in
FY15.
Housing Finance: Increase in limit for principal repayment to INR0.15m (via 80C) and interest repayment limit
increased to INR0.2m from INR0.15m (U/S 24). Companies with higher ticket sizes like HDFC, LICHF and IHFL
will be the bigger beneficiaries.
Higher allocation to NHB – marginally positive: Allocation of INR80b to NHB for rural housing (allocation made
under the Rural Housing Fund) and allocation of INR40b to NHB to incentivize development of low cost
affordable housing in urban areas.
Others: Higher allocation of INR378b to NHAI, impetus on infra development, possibility of 5/25 structure for
infra lending, reforms in power sector etc will be indirect benefits from growth and asset quality perspective.
Our top picks are ICICIBC, SBIN, AXSB, PNB, OBC, LICHF and SHTF.
Alpesh Mehta ([email protected]); Tel: +91 22 3982 5415
Sunesh Khanna ([email protected]); Tel: +91 22 3982 5521
Union Budget FY14-15
Financials: Valuation Matrix
60.02 Rating
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
VYSB
FB
J&KBK
SIB
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
CRPBK
ANDB
IDBI
DBNK
Public Aggregate
HDFC*
LICHF
DEWH
IDFC
RECL
POWF
SHTF
MMFS
BAF
NBFC Aggregate
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
CMP
(INR)
1,391
825
1,860
867
529
537
638
119
1,593
33
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Neutral
Neutral
2,548
915
280
826
414
199
287
169
376
90
96
77
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
1,023
325
405
152
368
302
905
256
2,202
Mcap
(USDb)
26.8
33.0
14.6
11.1
3.2
4.7
2.0
0.3
1.3
0.7
97.7
31.7
5.5
3.0
5.9
3.2
2.1
1.4
1.3
1.1
0.9
2.6
0.7
60.5
26.6
2.7
0.9
3.8
6.1
6.6
3.4
2.4
1.8
54.4
EPS (INR)
FY15
99
44
145
39
51
34
40
11
258
4.2
FY16
120
56
174
47
59
43
48
12
280
4.9
259
119
53
118
60
28
45
29
45
11
8
13
344
158
67
149
83
34
55
36
62
13
10
16
33
28
54
13
57
51
68
19
171
39
33
65
13
66
60
83
21
199
P/E (x)
FY15
11.6
18.5
12.8
22.0
10.3
15.8
15.8
11.2
6.2
7.9
15.2
9.4
7.7
5.2
7.0
6.9
7.1
6.4
5.8
8.3
8.3
11.7
5.9
9.3
22.9
11.5
7.5
11.9
6.4
5.9
13.2
13.7
12.9
13.1
FY16
9.4
14.8
10.7
18.6
9.0
12.5
13.4
9.6
5.7
6.8
12.6
7.1
5.8
4.2
5.5
5.0
5.8
5.2
4.6
6.1
7.0
9.2
4.9
7.1
17.7
9.8
6.3
11.5
5.6
5.0
10.9
12.1
11.1
11.2
BV (INR)
FY15
580
215
932
275
238
193
402
89
1,372
27
FY16
668
258
1,080
318
285
228
439
99
1,576
31
2,097
1,056
437
859
562
291
460
270
638
156
143
128
2,378
1,196
496
974
626
319
502
298
687
165
151
141
143
172
335
99
248
252
434
104
939
165
199
390
109
299
297
506
119
1,106
P/BV (x)
FY15
1.99
3.83
1.99
3.16
2.22
2.79
1.59
1.33
1.16
1.22
2.48
1.16
0.87
0.64
0.96
0.74
0.68
0.62
0.63
0.59
0.58
0.67
0.60
0.93
5.21
1.89
1.21
1.28
1.48
1.20
2.08
2.47
2.34
2.45
RoA (%)
RoE (%)
Dividend
FY16 FY15 FY16 FY15 FY16 Yield (%) #
1.69 1.8 1.8 15.7 16.6
1.7
3.19 2.0 2.0 22.4 23.6
0.8
1.72 1.7 1.7 16.6 17.2
1.1
2.73 1.9 1.9 13.9 14.4
0.1
1.86 1.6 1.5 23.5 22.6
1.5
2.36 1.9 1.9 19.0 20.4
0.7
1.45 1.2 1.2 10.4 11.3
0.9
1.20 1.1 1.1 12.5 13.2
1.7
1.01 1.5 1.4 20.2 19.0
3.1
1.07 1.0 1.0 16.4 16.8
2.4
2.15
1.02 0.8 0.9 12.7 15.6
1.2
0.76 0.7 0.8 11.8 14.0
1.1
0.56 0.6 0.6 12.9 14.3
1.8
0.85 0.7 0.8 14.5 16.3
2.6
0.66 0.5 0.6 11.2 14.0
2.7
0.62 0.5 0.5 10.0 11.3
2.0
0.57 0.6 0.6 10.0 11.4
2.6
0.57 0.7 0.7 11.2 12.8
2.8
0.55 0.3 0.4
7.3 9.3
1.2
0.54 0.4 0.4
7.1 8.0
1.2
0.64 0.4 0.4
5.9 7.1
1.0
0.54 0.5 0.6 10.6 11.6
2.7
0.85
4.18 2.4 2.5 25.5 24.2
1.4
1.64 1.5 1.4 17.6 17.8
1.4
1.04 1.5 1.5 17.3 17.8
1.7
1.12 2.8 3.0 12.8 11.9
1.7
1.23 3.5 3.4 25.3 24.1
2.6
1.02 3.3 3.2 21.8 21.9
3.0
1.79 2.2 2.4 16.2 17.0
0.8
2.15 3.0 2.9 19.3 19.0
1.5
1.99 3.1 2.9 19.7 19.4
1.3
2.13
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
# Div Yield based on FY13 decleared dividend; UR: Under Review
10 July 2014
23
Union Budget FY14-15
Healthcare
Budget Impact: Neutral
Flashback
At a glance
Major proposals
Exemption introduced from excise duty on types of drugs and diagnostic
equipment required for the National AIDS Control Programme funded by
the Global Fund to Fight AIDS, TB and Malaria.
Exemption from service tax has been withdrawn on technical testing or
analysis of newly developed drugs on human participants by a clinical
research organization.
Impact
Positive
for Cipla but
likely to be
passed on to the
consumer
Marginally
negative for
companies
focused on NCE
research
Budget Proposals (2013)
Increase in surcharge on income tax
from 5% to 10%
Overall budget impact, Sector outlook and Recos
Budget continues to remain a non-event for the healthcare sector: Industry demands continue to remain
unmet on: (1) infrastructure status for the healthcare industry along with tax benefits, (2) significant increase
in healthcare expenditure, (3) boost to R&D activity by increasing weighted deduction on indigenous product
development and (4) revival of clinical trial industry in the country.
Outlook for the sector continues to remain positive: We expect strong earnings growth over the next two to
three years led by increasing contribution from the US, India and select emerging markets. Investments in
therapy areas like onclology, biosimilars and respiratory are important long term drivers for the sector. Strong
earnings growth will lead to continuous improvement in balance sheet and return ratios for the sector.
Post budget, we have not revised our earnings forecast for FY15 and FY16.
Our top picks are Lupin, Cadila Healthcare, Alembic Pharma, Divi’s Labs and Sanofi India.
Comparative Valuation
Sector / Companies
Alembic Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’s Labs
Glenmark Pharma
GSK Pharma
IPCA Labs.
Lupin
Ranbaxy Labs
Sanofi India
Sun Pharma
Torrent Pharma
Sector Aggregate
CMP
(INR)
306
493
1,123
435
1,472
2,652
563
2,486
859
1,041
543
3,252
725
677
Reco
Buy
Sell
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
EPS (INR)
FY15E FY16E FY17E
16.3 21.7 26.5
23.0 26.8 31.8
46.4 56.8 64.3
17.4 23.4 28.5
65.4 78.8 92.1
127.1 146.4 169.2
26.8 33.7 42.0
61.9 84.8 98.0
48.8 59.6 72.7
41.2 53.0 61.5
9.4 18.1 28.1
125.0 152.8 177.5
26.6 31.1 35.3
36.4 43.1 55.7
PE (x)
FY15E FY16E FY17E
18.8 14.1 11.6
21.4 18.4 15.5
24.2 19.8 17.5
25.0 18.6 15.2
22.5 18.7 16.0
20.9 18.1 15.7
21.0 16.7 13.4
40.1 29.3 25.4
17.6 14.4 11.8
25.3 19.6 16.9
57.8 30.0 19.4
26.0 21.3 18.3
27.2 23.3 20.5
18.6 15.7 12.2
25.4 20.6 17.4
Alok Dalal ([email protected]); Tel: +91 22 3982 5584
Hardick Bora ([email protected]); +91 22 3982 5423
EV/EBITDA (x)
FY15E FY16E FY17E
13.1
9.9
7.9
13.3 11.1
9.4
17.3 12.4 10.7
14.5 11.1
9.1
16.0 13.3 11.3
13.5 11.5
9.8
12.3 10.3
7.9
32.9 22.2 18.8
12.1
9.9
8.0
14.7 11.9
9.9
11.4 17.5 12.7
15.6 12.8 10.6
17.9 15.9 14.2
10.2
9.5
7.9
15.3 13.2 11.1
RoE (%)
FY15E FY16E FY17E
38.9 38.3 35.2
13.7 14.4 15.2
25.2 30.1 27.4
12.4 14.6 15.3
27.1 28.2 28.6
19.9 19.2 18.6
19.8 20.0 19.7
26.3 34.6 37.6
27.7 26.8 26.1
23.8 24.7 23.4
34.2 16.6 21.4
19.5 21.4 22.4
25.7 23.7 21.8
28.1 27.2 29.1
20.1 20.6 20.4
Source: Company, MOSL
Union Budget FY14-15
Media
Budget Impact: Neutral
Flashback
At a glance
Major proposals
Color picture tubes for cathode ray TVs exempted from basic
customs duty. Reduced basic customs duty on LCD and LED
panels of below 19 inches from 10% to NIL
Service tax imposed for online and mobile advertising
Change in tax treatment for debt mutual funds
Increase in effective dividend distribution tax from ~17% to
~19.9%
Impact
Moderately positive; to
support TV penetration
growth
Moderately negative;
these segments contribute
only marginally to
universe revenue
To negatively impact other
income
Marginal negative for
companies with high
dividend pay-out
Budget Proposals (2013)
Customs duty increase on set-top
boxes from 5% to 10%
Overall budget impact, Sector outlook and Recos
Customs duty exemption for cathode ray tube televisions used by lower income groups and reduction in basic
customs duty for LCD and LED panels below 19 inches is positive as it will support television affordability and
penetration into lower income groups.
Service tax imposition for online and mobile advertising to impact digital media segments of print as well as
broadcast companies. However no significant impact as digital media contribution to overall revenue of our
coverage universe is very marginal currently.
Change in tax treatment for debt mutual funds. The government announced increase in long-term capital gain
tax on debt mutual fund investments from 10% to 20% and holding period for long-term capital gain eligibility
from 12 months to 36 months. These measures will likely impact yield on cash and investments for companies
with high exposure to debt funds/FMP like Jagran Prakashan (~INR1.9b as per FY13 balance sheet), HT Media
(~INR6b) and HMVL (~INR2.7b). Potential decline in yield on investments by ~300bp would impact earnings by
2-3% for JAGP, ~9% for HT Media and ~6% for HMVL on FY15 basis.
Increase in effective dividend tax is a marginal negative for high pay-out companies (50%+) like SUNTV, DB
Corp, and Jagran Prakashan.
Our top picks are DISHTV and DBCL.
Comparative Valuation
Sector / Companies
Dish TV
D B Corp
Hindustan Media
HT Media
Jagran Prakashan
PVR
Sun TV
Zee Entertainment
Sector Aggregate
CMP Reco
(INR)
58 Buy
320 Buy
160 Buy
118 Neutral
124 Buy
652 Buy
455 Buy
286 Neutral
EPS (INR)
FY15E FY16E FY17E
-1.1
0.7
3.5
19.2 22.7 26.3
17.4 19.8 22.6
8.8 10.0 11.4
7.9
9.4 10.9
17.5 28.8 41.1
20.9 25.5 30.5
10.2 13.0 16.5
PE (x)
FY15E FY16E FY17E
-53.9 79.9 16.8
16.7 14.1 12.1
9.2
8.1
7.1
13.5 11.8 10.4
15.7 13.2 11.4
37.3 22.6 15.8
21.8 17.8 14.9
28.2 22.0 17.3
25.4 19.2 14.9
Shobhit Khare ([email protected]); +91 22 3982 5428
EV/EBITDA (x)
FY15E FY16E FY17E
11.2
8.3
5.7
9.7
8.2
7.0
4.2
3.1
2.1
4.8
3.8
2.8
9.5
8.0
6.9
11.5
8.5
6.5
10.1
8.6
7.4
18.0 14.3 11.3
11.8
9.6
7.8
RoE (%)
FY15E FY16E FY17E
NA
NA
NA
28.6 29.5 29.8
19.0 17.9 17.2
10.0 10.3 10.4
24.2 25.8 26.0
16.7 23.2 26.5
24.0 27.0 29.2
31.5 31.4 30.6
22.4 24.9 26.5
Source: Company, MOSL
Union Budget FY14-15
Metals
Budget Impact: Positive
Flashback
At a glance
Major proposals
Import duty on all types of coal has been rationalized to 2.5% (v/s 2% for
steam coal, nil for coking coal and coke). As a result, cost of steel making
will increase by USD1.5/ton for Indian steel mills.
Import duty on iron bearing steel inputs rationalized to uniform 2.5% (v/s
2.5% for steel scrap & iron ore and 5% for ship breaking). This is unlikely
to affect scrap pricing in India but may boost ship breaking.
Clean energy cess on coal consumption is increased by INR50/ton to
INR100/ton. This will increase cost of captive power generation by
INR0.05/kwh or INR25/ton of steel for integrated steel plants or
INR700/ton for aluminum smelter.
Export duty on bauxite raised to 20% (v/s 10%). This may marginally
discourage exports and improve local availability depending on logistics.
Impact
Negative for
steel
Import duty on steel grade limestone and dolomite cut from 5% to 2.5%.
Duty on coal tar pitch cut from 10% to 5%.
Marginally
positive
Import duty on stainless flat rolled steel raised to 7.5% (v/s 5%). This will
improve the pricing power in domestic market.
Positive for Jindal
Stainless
Neutral for steel
sector
Budget proposals (2013)
Investment allowance of 15% on
equipment in FY14 and FY15
4% excise duty on silver refining in
zinc-lead smelting
10% export duty on bauxite imposed
Marginally
negative for
aluminum
smelters
Marginally
positive for SSLT
Overall budget impact, sector outlook and recommendations
Although rationalization of duties and hike in clean energy cess has a negative impact on cost of production, we believe
steps taken to boost demand are a big positive.
Stress on addressing issues in mining and unlocking of dead investment in power generation will have positive impact on
the business outlook for metal companies.
USD48b capex has been incurred by just seven large listed metal companies (SSLT, Hindalco, Tata, SAIL, JSPL, Nalco, and
NMDC). There are many near complete idle power, aluminum and steel capacities. Our calculations suggest that these
investments would unlock equity value of USD30b for these seven companies.
We summarize that the budget is positive for Metals.
Our top picks are Hindalco, Tata Steel and JSW Steel.
Comparative valuation
Sector / Companies
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Sesa Sterlite
Tata Steel
Sector Aggregate
Mkt Cap CMP RECO
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
(USD B) (INR)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
6.2
176
Buy
10.9 12.9 19.8 16.2 13.6
8.9
5.9
5.2
5.0
9.2 10.1 13.8
11.7
162
Buy
18.3 18.1 18.7
8.9
9.0
8.7
4.9
4.1
3.3 19.1 16.5 15.1
4.7
301
Buy
26.7 35.1 40.3 11.3
8.6
7.5
8.4
7.4
6.5 10.3 12.2 12.6
5.0
1,201
Buy
120.0 115.6 140.1 10.0 10.4
8.6
6.5
6.2
5.5 12.4 10.6 11.5
2.5
57
Buy
3.2
4.1
4.1 17.6 13.6 13.7
7.0
4.9
4.2
6.7
8.2
7.8
11.8
174
Buy
17.9 18.3 19.6
9.7
9.5
8.8
5.7
5.5
5.1 21.5 21.2 20.6
6.2
87 Neutral
7.7
7.6
7.2 11.3 11.5 12.1
8.2
7.6
7.1
7.2
6.8
6.1
14.9
294
Buy
21.7 24.1 20.4 13.6 12.2 14.4
4.7
4.2
4.0
8.5
8.8
7.1
8.7
522
Buy
54.1 64.2 69.2
9.6
8.1
7.5
6.4
6.1
5.5 19.3 18.1 16.8
71.6
11.0 10.2
9.6
6.0
5.5
5.1 10.9 10.8 10.6
Source: MOSL
Sanjay Jain ([email protected]); +91 22 3982 5412
Union Budget FY14-15
Key budget proposals & impact
The budget has taken certain steps to boost demand, address issues in iron ore & coal mining, unlock dead
investment, rationalize custom duties, hike effective dividend distribution tax and long term capital gains on debt
mutual funds.
Focus on restarting of investment cycle
Impact: Positive
The budget has taken steps to boost demand and provide employment e.g. INR379b
investment in 8,500kms new roads, REITs, higher housing loan tax benefits, INR71b for 100
smart cities, etc. The real impact of these initiatives will be seen in 2HFY15 and thereafter.
Stress on addressing issues in iron ore mining
Impact: Positive
The budget also spoke of addressing issues in iron ore mining and amending MMDR Act,
1957 if necessary. If iron ore availability improves, non-integrated steel mills e.g. JSW Steel,
JSPL, Bhushan steel, Monnet Ispat, etc should benefit, with lower cost of iron ore. NMDC
may be adversely affected.
Unlocking dead investment in power generation
Impact: Positive
Impasse in coal mining will be resolved and adequate quantity of coal will be provided to
power plants commissioned on or before 31 March 2015 to unlock dead investments. Coal
linkages too will be rationalized, which will optimize transport of coal and reduce cost of
power generation. JSPL’s 2400MW Tamnar-II & 1350MW CPP, SSLT’s 2400MW power
plant, Nalco’s 240MW CPP expansion, Hindalco’s Aditya CPP can now hope to get coal
linkages. These power plants are already complete, near idle, and located in coal-rich belt.
Rationalized customs duties
Impact: Negative
Customs duties have been rationalized on all types of steel imports to 7.5% and steel
inputs to 2.5% with the intention to simplify port operations and provide level playing field.
This is a welcome step, as the additional cost due to disputes at ports will be avoided.
However, there is a marginal negative impact on margins of steel mills, ceteris paribus. We
believe that steel demand acceleration will mostly offset this impact in due course.
Long-term capital gains tax raised on debt mutual fund investments
Impact: Negative
10 July 2014
Long-term capital gains tax has been raised from 10% to 20%. Further, such investments up
to three years will not qualify for long-term capital gains. This will negatively impact the
post-tax yield on surplus cash invested in debt mutual funds by private sector companies,
e.g. SSLT, HZL, CAIRN and Hindalco.
27
Union Budget FY14-15
Oil and Gas
Budget Impact: Positive
Flashback
At a glance
Major proposals
Budgeted FY15 government subsidy to OMCs at INR635b. Excluding
INR350b payable for FY14 and LPG/kerosene/DBT provision,
available subsidy for FY15 at INR223b. No clarity on FY15 subsidy
sharing.
To double domestic gas pipeline infrastructure from 15,000km to
30,000km
Impact
Neutral for oil PSUs,
as any shortfall is
made up in revised
numbers
Long-term positive
for GAIL, GSPL
Reduced basic customs duty on reformate from 10% to 2.5% and
on ethane, propane, ethylene, propylene, butadiene and orthoxylene from 5% to 2.5%
Proposed to remove tax arbitrage between direct bank deposits
and non-equity mutual funds by increasing holding period to
qualify for long-term capital gains tax from 12 to 36 months, and
increasing long-term capital gains tax rate from 10% to 20%.
Positive for
downstream
petchem producers
Marginally Negative
for RIL and Cairn
Budget proposals (2013)
Cabinet Committee on Investment
(CCI) to clear stalled NELP blocks
Announced government plan to (a)
review PSC’s to shift from profit to
revenue sharing, (b) shale gas policy
to be announced, and (c) review
natural gas pricing policy
Income tax surcharge increased from
5% to 10% for FY14
Overall budget impact, sector outlook and recommendations
Status quo v/s interim budget on FY15 subsidy sharing to OMCs at INR635b. Excluding subsidy of INR350b payable for
FY14 and LPG/kerosene/DBT provision, available subsidy for FY15 is at INR223b. We estimate that FY15 provision of
INR223b is short by INR89b. However, based on (a) assessment of exchange rate and crude prices, and (b) deregulation of
diesel and rationalization of LPG subsidy, government expects it to be sufficient.
We model (a) monthly diesel price hikes, and (b) no change in LPG/kerosene prices, leading to ~46% cut in gross underrecoveries from INR1.4t in FY14 to INR750b by FY16. For FY15, we conservatively model upstream sharing at 64% (v/s 48%
in FY14), OMCs’ share flat at 2%, and lower government’s share 34% (v/s 51% in FY14), as we expect the government to
take maximum benefit of lower subsidy.
To remove tax arbitrage opportunity due to lower tax levied on income from non-equity mutual funds (@10%), as
compared to direct investments in bank deposits, government has proposed to increase the tax rate on long-term capital
gains from 10% to 20%, and to increase the period of holding to qualify for long-term capital gains from 12 to 36 months.
This will be negative for high cash balance companies like RIL and Cairn India.
With likely gas price hike and continued diesel reforms leading to lower subsidy, our top picks are ONGC/OINL in
upstream and BPCL in OMCs.
Comparative valuation
Sector / Companies
BPCL
Cairn India
Chennai Petroleum
GAIL
Gujarat State Petronet
HPCL
Indraprastha Gas
IOC
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Sector Aggregate
Ex RMS
Mkt Cap CMP
(USD B) (INR)
7.2
581
11.5
353
0.2
91
10.1
466
0.8
88
2.3
397
0.9
360
14.2
342
2.0
68
6.0
582
59.1
404
2.3
177
55.1
998
171.8
13
148.1
10
RECO
Buy
Neutral
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
33.3 45.3 48.1 17.4 12.8 12.1
8.8
7.4
6.5 12.0 14.9 14.4
55.8 52.1 40.4
6.3
6.8
8.8
3.4
3.4
3.3 17.2 14.4 10.2
10.5 14.9 15.7
8.7
6.1
5.8
7.1
6.1
5.6
8.8 11.6 11.3
30.7 32.9 36.5 15.2 14.2 12.8 10.4
8.8
7.9 13.7 13.4 13.6
8.8 10.0
9.9 10.0
8.8
8.9
5.8
5.3
5.4 14.2 14.1 12.4
28.3 34.7 40.2 14.0 11.4
9.9
9.1
7.6
6.9
6.3
7.4
8.2
28.2 30.9 35.3 12.8 11.7 10.2
5.9
5.1
4.1 20.6 19.5 19.3
32.4 37.9 41.5 10.5
9.0
8.2
7.5
6.6
5.5 11.2 12.1 12.0
5.1
7.3
7.5 13.3
9.3
9.0
6.7
5.4
4.9 12.1 15.5 14.2
64.6 71.7 75.2
9.0
8.1
7.7
6.5
5.5
5.1 17.9 18.0 17.1
35.9 42.5 44.7 11.3
9.5
9.0
5.0
4.3
4.2 17.1 18.1 17.0
10.4 12.7 16.2 17.1 13.9 10.9
8.2
7.1
5.5 14.6 15.9 17.8
79.0 87.1 108.9 12.6 11.5
9.2 10.5
9.5
6.7 11.2 11.2 12.8
11.7 10.3
9.5
6.9
6.0
5.3 13.2 13.5 13.2
11.6 10.4
9.5
6.7
5.9
5.2 13.8 13.8 13.6
Source:
Harshad Borawake ([email protected]); Tel: +91 22 3982 5432
Nitish Rathi ([email protected]); +91 22 3982 5558
Union Budget FY14-15
Key budget proposals & impact
The budget was largely positive for the Oil & Gas sector.
Accelerate production from CBM reserves
Impact: Positive
While there were no concrete proposals in the direction, the budget speech highlighted
intention to hasten production and exploitation of CBM reserves with the help of modern
technology.
Natural gas infrastructure boost
Impact: Positive
The government has announced its desire to double domestic gas pipeline network from
15,000km to 30,000km. The current gas transporters, Gail India and GSPL will be
beneficiaries, as they are likely to contribute meaningfully in this expansion. However, the
key thing to watch will be future policy decisions to increase the gas availability in the
country. Many of GAIL’s new pipelines are underutilized and GSPL’s three new trunk
pipelines are already delayed due to lack of visibility on the incremental gas volumes.
Subsidy sharing
Impact: Neutral
For FY15, the government has provided INR573b for Oil & Gas subsidy to OMCs (headline
number of INR635b, which includes budgetary support for kerosene/LPG and DBT).
Of the INR573b, INR350b pertains to 4QFY14, indicating a provision of INR223b for FY15.
Our current FY15 gross under-recovery estimate is INR918b (Brent @USD108/bbl and Fx
rate of INR59/USD) and we model government sharing at INR312b, indicating a shortfall of
INR89b. Our FY15 government sharing assumption is at 34% v/s 51% in FY14.
The subsidy allocation typically gets revised in the revised budget numbers next year.
Government budgets subsidy of INR635b for FY15, implying net provisioning of INR223b for FY15, adjusting for INR350b
payable for 4QFY14
Source: Company, MOSL
10 July 2014
29
Union Budget FY14-15
Under-recoveries and sharing
Source: Company, MOSL
10 July 2014
30
Union Budget FY14-15
Real Estate
Budget Impact: Positive
Flashback
At a glance
Major proposals
Tax pass-through status for Real Estate Investment Trust (REIT)
Minimum built-up area for FDI reduced from 50k square meters to 20k
square meters; minimum capital condition for FDI reduced from USD10m
to USD5m; above minimum limit exempted if 30% of project cost
committed to low cost affordable housing
Tax exemption limit on interest paid increased for self-occupied property
from INR0.15m to INR0.2m
Strong focus on developing new cities by modernizing existing mid-sized
cities (provision of INR70.6b in FY15)
INR40b allocation to National Housing Bank (NHB) for making available
cheaper credit to low cost affordable housing
Impact
Positive for
commercial and
retail players
Positive
Positive
Positive
Budget proposals (2013)
Additional tax deduction of INR0.1m
(with carry forward option if not
exhausted in the same year), for
housing Loan <= INR2.5m
Reduction of abatement rate from
75% to 70% for luxury homes and
flats (ticket size of >=INR10m, or
carpet area of >=2,000sf)
1% TDS on transfer of immovable
properties of value exceeding INR5m
(exempted agricultural land)
Positive
Overall budget impact, sector outlook and recommendations
Tax pass-through status for Real Estate Investment Trust (REIT): The government has attempted to provide
thrust to Real Estate Investment Trust (REIT) with pass-through taxation status. In the current form, the
incentives are not enticing enough. Both marginal tax and dividend distribution tax (DDT) are applicable at SPV
level, although the dividend income from SPV is exempted from DDT at the level of Trust and unit holders. This
makes effective tax regime similar to existing dynamics.
Easing off of FDI restriction: Minimum built-up area for FDI reduced from 50,000 square meters to 20,000
square meters; minimum capital condition for FDI reduced from USD10m to USD5m; above minimum limit
exempted if 30% of project cost committed to low cost affordable housing. This should improve the private
equity inflow, and attract higher focus towards low cost housing.
Tax exemption on home loan interest: Rise in tax exemption limit for home loan interest on self-occupied
property from INR0.15m to INR0.2m should raise savings and affordability, triggering demand.
Strong focus on developing new cities by modernizing existing mid-sized cities (provision of INR70.6b in FY15)
should improve investor demand in tier-II cities.
Our preferred picks are Prestige, Phoenix, DLF, Brigade
Comparative Valuation
Sector / Companies
DLF
Godrej Properties
Indiabulls Real Estate
Jaypee Infratech
Mahindra Lifespace
Oberoi Realty
Phoenix Mills
Prestige Estates
Sobha Developers
Sector Aggregate
CMP Reco
(INR)
223 Buy
227 Neutral
88 Buy
32 Buy
539 Buy
246 Buy
343 Buy
252 Buy
469 Buy
EPS (INR)
FY15E FY16E FY17E
3.7
5.9 10.3
8.7 11.7 17.0
9.7 12.0 16.6
2.6
3.2
4.2
25.9 30.8 36.1
13.2 21.2 33.3
7.6 17.4 22.1
11.2 16.0 21.3
26.9 34.8 40.5
PE (x)
FY15E FY16E FY17E
60.6 38.0 21.7
26.1 19.4 13.4
9.0
7.3
5.3
12.3
9.8
7.6
20.8 17.5 14.9
18.6 11.6
7.4
45.3 19.7 15.6
22.5 15.7 11.9
17.4 13.5 11.6
28.1 19.3 13.2
Sandipan Pal ([email protected]); +91 22 3982 5436
EV/EBITDA (x)
FY15E FY16E FY17E
21.0 17.7 13.3
18.3 14.1 10.0
12.0
9.1
6.4
8.3
7.5
6.7
16.2 12.3 10.2
12.8
7.9
5.0
11.6
8.5
6.9
13.1 10.0
7.5
9.1
7.6
6.5
14.8 11.8
9.0
RoE (%)
FY15E FY16E FY17E
2.2
3.5
5.9
9.3 11.3 14.6
5.5
6.5
8.6
5.8
7.0
8.6
7.8
8.5
9.1
9.5 13.7 18.6
6.1 12.5 14.0
11.8 14.7 16.6
11.1 13.2 13.9
4.9
6.8
9.3
Source: Company, MOSL
Union Budget FY14-15
Key budget proposals & impact
The budget was positive for the Real Estate industry.
Tax pass-through status for Real Estate Investment Trust (REIT)
Impact: Positive
Tax pass-through for REITs could be a game changer and add significant value to all
stakeholders. Developers would have access to a new source of funding, with retail funds
channelized through a regulated network. Institutional credibility and transparency of the
sector would improve. New avenue of funding should (a) reduce dependency on banking
system, (b) aid opportunity to unlock value of rent-yielding portfolio by lowering cap rate,
and (c) help bring down leverage efficiently. A better tax regime would be the key to
bolstering the attractiveness of REITs for developers holding strong annuity assets. Key
developers with large portfolio of completed commercial assets are DLF (28.5msf of
completed commercial assets), Phoenix (7.5msf of retail assets), Prestige (~10msf by FY14),
Raheja (not listed; 20msf+ assets), Embassy (not listed), etc.
In the current form, the incentives are not enticing enough. Both marginal tax and dividend
distribution tax (DDT) are applicable at SPV level, although the dividend income from SPV is
exempted from DDT at the level of Trust and unit holders. This makes effective tax regime
similar to existing dynamics.
Easing off of FDI restriction
Impact: Positive
10 July 2014
Minimum built-up area for FDI reduced from 50,000 square meters to 20,000 square
meters; minimum capital condition for FDI reduced from USD10m to USD5m; above
minimum limit exempted if 30% of project cost committed to low cost affordable housing.
This should moderately improve private equity inflow, and attract higher focus towards
low cost housing.
32
Union Budget FY14-15
Technology
Budget Impact: Neutral
Flashback
At a glance
Major proposals
Increase in long-term capital gains tax on non-equity mutual funds to
20% from 10%; increase in period of holding in such units from 12
months to 36 months to classify as long-term capital gain
Proposal to launch pan-India program of Digital India – invest towards
creating smart cities, enabling broadband and internet connectivity in
villages, focusing on start-up software product companies
Integrate the services of all Central Government Departments and
Ministries with the eBiz platform on priority by 31 December this year
Impact
Marginally
negative
Marginally
positive
Marginally
positive
Budget proposals (2013)
Mention of Rangachary Committee to
look into tax matters
INR5.32b provision for IT-driven
modernization of post offices
Increase in surcharge from 5% to 10%
for companies with annual PAT of
over INR100m
Overall budget impact, sector outlook and recommendations
Overall budget impact: The budget remained silent on any direct incentives for the sector. Increase in long-term capital
gains tax on non-equity mutual funds from 10% to 20% has only marginal implications on interest income for IT
companies. Proposal to launch a pan-India program of Digital India should boost both the IT and e-commerce sectors. The
e-governance initiative would yield significant domestic revenue for the IT industry.
Sector outlook: With strengthening demand in the US and large deals traction in traditional services in Europe, industry
growth in FY15 should be better than FY14. We see better risk-reward in Tier-I v/s Tier-II. Currency is a key risk to
valuations, and Tier-II has higher sensitivity to currency movements than Tier-I.
Our top picks are TECHM, INFO, HCLT.
Comparative valuation
Companies
Mkt Cap
(USD B)
HCL Technologies
17.8
Hexaware Tech.
0.8
Infosys
32.3
KPIT Tech.
0.6
Mindtree
1.3
MphasiS
1.5
Persistent Systems
0.8
TCS
78.6
Tech Mahindra
8.0
Wipro
23.0
Sector Aggregate
164.6
CMP
(INR)
1,471
152
3,293
173
889
419
1,200
2,348
2,020
545
RECO
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
99.6 111.7 122.5 14.8 13.2 12.0 10.0
8.6
7.4 36.0
31.6
27.9
11.7 13.2 13.4 13.0 11.6 11.4
8.5
8.0
7.7 28.1
28.7
26.6
204.6 227.6 243.5 16.1 14.5 13.5 10.5
9.0
8.1 24.7
23.8
22.3
14.7 18.2 20.5 11.8
9.5
8.4
6.4
4.8
3.7 20.5
20.7
19.1
62.2 73.2 80.0 14.3 12.1 11.1 10.1
8.2
7.1 28.3
26.9
24.3
35.0 39.7 42.4 12.0 10.6
9.9
9.1
8.3
7.9 14.1
15.2
15.4
74.7 94.6 113.2 16.1 12.7 10.6
8.7
6.8
5.4 22.4
24.0
24.0
111.9 128.2 141.0 21.0 18.3 16.7 15.1 13.2 11.9 36.4
34.4
30.8
138.5 157.4 180.6 14.6 12.8 11.2
9.2
7.6
6.9 28.7
25.7
23.8
34.9 39.3 42.5 15.6 13.9 12.8 10.8
9.6
8.1 22.9
22.0
20.4
17.6 15.6 14.3 12.2 10.6
9.4 26.1
24.8
22.8
Source: MOSL
Ashish Chopra ([email protected]); Tel: +91 22 3982 5424
Siddharth Vora ([email protected]); +91 22 3982 5585
Union Budget FY14-15
Key budget proposals & impact
The budget was neutral for the Technology industry. There were no major direct incentives. However, dometic IT
spending may create significant revenue opportunity, with programs such as Digital India and eBiz. Increase in longterm capital gains tax in non-equity MFs is unlikely to have significant impact on the earnings of top-tier IT.
No major incentives for the IT/ITeS industry
Impact: Neutral
The budget remained silent on any direct incentives for the sector. Minimum alternate tax
(MAT) of 18.5% continues to apply to SEZs.
Increase in long-term capital gains tax on non-equity mutual funds
Impact: Negative
The FM proposed an increase in long-term capital gains tax on non-equity MFs to 20% from
10%, and also increased the period of holding in such units from 12 months to 36 months
to classify as long-term capital gain. Cash-rich treasuries of Indian IT firms have been
among the catchment sources of this pool.
The impact is minimal for INFO, given that less than 10% of its cash & investments is in
liquid mutual funds and FMPs. A large share of that is in current investments, which
should be taxed at the marginal rate.
Even for TCS, cash and bank balances amount to INR144b. Current investments in MFs,
debentures and bonds are ~INR11.6b, and long-term debentures and bonds are only
INR22b.
WPRO’s non-current investments are all in equity instruments. Current Investments in
money market mutual funds and debentures amount to INR18b.
Digital India
Impact: Positive
Proposal to launch pan-India program of Digital India entails:
Broadband connectivity at village level
Improved access to services through IT-enabled platforms
Special focus on supporting software product start-ups
Over time, this should be a boost for both the IT and the e-commerce sectors
eBiz platform
Impact: Positive
10 July 2014
All Central Government Departments and Ministries will integrate their services with the
eBiz platform on priority by 31 December this year. The e-governance program to inter-link
all Ministries and Departments is another step in the right direction. While details are yet
unavailable, this initiative is likely to yield significant domestic revenue to the IT industry.
34
Union Budget FY14-15
Telecom
Budget Impact: Neutral
Flashback
At a glance
Major proposals
Imposition of basic customs duty at 10 percent on specified
telecommunications products outside the purview of IT act
Increase in the FY15 estimate for revenue from ‘other communication
services’ from INR390b to INR455b. After deducting the ‘recurring’
revenue sharing licence fee and spectrum charges, one time revenue
from spectrum sale likely estimated at ~INR255b
Pan India programme ‘Digital India’ to ensure broadband connectivity at
village level with FY15 outlay of INR5b
Impact
Potential
increase in
equipment
capex
Neutral
Positive
for data market
growth
and
penetration
Budget Proposals (2013)
Duty on mobile phones was increased
from 1% to 6% for all categories in
the interim budget. Step taken to
encourage domestic production
Interim budget incorporated revenue
of
INR390b
from
‘other
communication services’, implying
estimated revenue from spectrum
sale proceeds at ~INR390b
Overall budget impact, Sector outlook and Recos
Imposition of 10% basic customs duty on specified telecom equipment has been done to boost domestic
production but will likely lead to some increase in equipment capex for telecom operators. Earlier, the
previous government had increased the basic customs duty on mobile phones prices above INR2,000 from 1%
to 6% in the budget 2013-14 and for all mobile phones (including below INR2,000) in the interim budget 201415. Given continued increase in import value of telecom equipment including handsets, government might
take further steps in the future to support domestic manufacturing.
Spectrum sale revenue estimate of ~INR255b is broadly in line. The government is expected to auction
spectrum in 800MHz, 900MHz, and 2100 MHz bands during FY15. We estimate total value of the spectrum
expected to be auctioned at ~INR720b based on most recent spectrum price. Out of this ~INR720b, at least
INR190b (25% for 900MHz/800MHz spectrum and 33% for 1,800MHz spectrum) will be collected upfront
immediately post the auction.
No major impact from budget likely for the telecom sector. We maintain our positive view on the sector.
Our top picks are BHARTI, BHIN.
Comparative Valuation
Sector / Companies
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Comm
Sector Aggregate
CMP Reco
(INR)
335 Buy
253 Buy
134 Buy
126 Neutral
EPS (INR)
FY15E FY16E FY17E
13.1 16.3 20.6
9.5 11.7 14.6
8.2
7.4
7.6
4.4 11.3 17.9
PE (x)
FY15E FY16E FY17E
25.5 20.6 16.3
26.5 21.7 17.3
16.2 18.0 17.5
28.9 11.2
7.0
23.1 18.1 14.1
Shobhit Khare ([email protected]); +91 22 3982 5428
EV/EBITDA (x)
FY15E FY16E FY17E
6.3
5.4
4.6
10.0
8.7
7.5
6.3
6.6
5.4
6.6
5.2
3.9
6.7
5.9
4.9
RoE (%)
FY15E FY16E FY17E
7.8
8.9 10.3
9.8 11.7 14.1
15.0 11.0 10.3
3.4
7.6 11.1
7.9
9.3 10.8
Source: Company, MOSL
Union Budget FY14-15
Utilities & Infra
Budget Impact: Positive
Flashback
At a glance
Major proposals
Sunset clause of sec80IA tax holiday to be extended till March 2017
Impact
Positive
New scheme proposed to drive feeder separation for state-owned
distribution companies (DISCOMs) with budget of INR5b
Positive
Customs duty on steam coal increased to 2.5% from 2%; 2% CVD
retained. Clean cess on coal higher by INR50/ton.
Focus on road project award of INR378b, targeting 8,500km of road
project completion; select expressways parallel to industrial corridors
Institution to provide support to mainstreaming PPPs called 3P India will
be set up with a corpus of INR5b; Infrastructure REITs proposed
Neutral
Positive
Positive
Budget proposals (2013)
Sunset clause of sec80IA tax holiday
to be extended till March 2014
2% customs duty and 2% CVD to be
levied on steam (thermal) coal and
bituminous coal
Concessional tax rate of 15% to be
continued on the dividend received
by an Indian company from its foreign
subsidiary
To devise PPP policy to increase coal
production
Overall budget impact, sector outlook and recommendations
Extending tax holiday for power projects commissioning till FY17 would cover entire 12th plan. Earlier, the benefit
was extended by a year till 31 March 2015 in last year’s budget. This provides visibility of tax exemption for projects
under construction.
Distribution reforms find mention in the budget, with a new scheme targeting feeder separately for DISCOMs. In
our recent meeting with the Ministry, this was cited as top priority and announcement of the scheme was in line
with our interaction. Initial budget for the scheme earmarked at INR5b.
Focus on Infrastructure sector is evident given: (1) 16 new port project awards targeted in FY15, (2) augmenting
inland waterways, (3) 8,500km of road project completion and investment proposal of INR378b for national and
state highway projects, (4) focus on developing airports in tier 2 & 3 cities, (5) developing 100 smart cities and
evaluating metro rail project for cities with 2m+ population, etc. Proposal for infrastructure REIT is positive, as it
would help monetize project, takeout financing for developers.
Constitution of 3P India to resolve/support PPP projects with initial corpus of INR5b is encouraging. The institution
could be a facilitating body to expedite project award, execution, recommending changes in framework, etc.
Reforms like FRP for DISCOMs, imported coal cost pass-through, brownfield expansion for coal, tariff review have
already been taken towards reviving the Power sector in India. Improvement of demand, distribution reforms, and
improving availability of domestic fuel are the next leg of reforms. While recovery would be gradual and developers’
return may be elusive/lower; lenders would be better placed, with improved visibility on cash flows. We continue to
like incumbents with sound growth visibility, strong financial position (low DER, high cash flows). Reiterate NTPC
and CESC as top-picks.
Comparative valuation
Sector / Companies
CESC
Coal India
Jaiprakash Power
JSW Energy
NHPC
NTPC
Power Grid Corp.
PTC India
Reliance Infrastructure
Tata Power
Sector Aggregate
CMP
(INR)
691
371
20
77
25
151
138
89
764
106
Reco
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
EPS (INR)
FY15E FY16E FY17E
56.8 61.9 66.9
27.7 30.2 33.3
1.3
2.9
4.2
6.5
5.8
5.4
2.3
2.8
2.9
11.8 13.7 15.8
9.4 11.5 13.4
9.5 13.1 15.2
54.4 60.7 63.1
5.8
6.5
7.9
PE (x)
FY15E FY16E FY17E
12.2 11.2 10.3
13.4 12.3 11.1
15.2
6.8
4.8
11.9 13.2 14.2
10.8
8.9
8.5
12.8 11.1
9.6
14.6 12.0 10.3
9.3
6.8
5.8
14.0 12.6 12.1
18.3 16.3 13.4
13.3 11.8 10.5
Nalin Bhatt ([email protected]); +91 22 3982 5429
EV/EBITDA (x)
FY15E FY16E FY17E
7.2
6.6
6.0
9.7
8.4
7.2
9.7
5.6
5.0
6.6
6.7
6.8
8.7
8.2
7.6
9.7
8.8
7.6
10.9
9.8
8.9
9.2
4.9
3.6
7.6
6.8
6.8
13.4 12.3 11.5
9.8
8.6
7.7
RoE (%)
FY15E FY16E FY17E
11.6 11.4 11.1
25.2 24.2 23.4
6.3 13.9 17.1
15.2 12.4 10.6
8.5
8.6
8.6
11.0 12.0 13.0
13.7 15.2 16.0
7.0 10.2 11.1
6.5
6.9
6.7
7.4
7.5
7.7
15.0 15.6 16.1
Source: Company, MOSL
Union Budget FY14-15
Key budget proposals and impact
The budget was positive for the Utilities and Infrastructure sector. Focus on distribution reforms and accelerating
investment in infrastructure verticals like Roads, Ports, and Airports is the key highlight, in our view. While the exact
framework and details may follow, the intent to revive the Utilities & Infrastructure sector is evident.
Focus on distribution reforms in Utilities sector
Impact: Positive
Distribution losses remain the key overhang in sustained revival of state-owned
distribution companies (DISCOMs). All-India Aggregate Technical and Commercial (AT&C)
losses remain high at 27%, flat since FY08. Union Budget 2014-15 enunciated scheme to
lower losses through feeder separation, with initial budget allocation of INR5b. In our
recent meeting with the Ministry of Power too, distribution reforms have been highlighted
as the key focus area. While the benefit of the same would take some time to flow in, the
efforts are in the right direction.
Extension of tax holiday
Impact: Positive
Tax holiday under section 80-IA for the Utilities sector has been extended for one year in
the last few budgets. The current budget has extended the benefit to March 2017,
removing uncertainty. While not a large part of projects are commissioning for our
coverage universe, it is pass-through for regulated utilities like NTPC, NHPC, and Powergrid.
To that extent, while this is not positive for the companies directly, it would reduce cost of
power for consumers.
Focus on infrastructure evident
Impact: Positive
Union Budget 2014-15 highlighted significant impetus from the government to revive the
investment cycle for infrastructure verticals like Roads, Ports, and Airports. The budget
speech highlight proposed investment of INR378b towards building national and state
highway projects, with a proposed target to complete 8,500km of roads in FY15. Similarly,
there is a proposal to award 16 new port projects in FY15 and building airports in tier-2 & 3
cities. This, along with focus on urban infrastructure building, with 100 smart cities,
evaluation of metro rail projects for cities with 2m+ population bodes well for pick-up in
infrastructure investment. Constitution of 3P India to support PPP project is also a
testimony to this. Proposal for Infrastructure REIT is also positive, as it would help
monetize projects and takeout financing for developers.
Revision in customs duty on steam coal, higher clean cess
Impact: Neutral
10 July 2014
Customs duty on steam coal has been enhanced from 2% to 2.5%, keeping CVD intact at
2%. This is only a marginal negative for players like JSW Energy with open capacity and
dependence on imported coal. For developers with PPA, either under regulated
mechanism or competitively bid projects, it is a pass-through and would not impact project
economics. Similarly, increase of clean cess from INR50/ton to INR100/ton will be a passthrough and unlikely to dent project returns.
37
Union Budget FY14-15
Annual performance - MOSL universe (INR Billion)
Sector
Sales
Change YoY (%)
EBITDA
Change YoY (%)
PAT
Change YoY (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
Auto (11)
4,968 5,937 6,624 13.6 19.5 11.6 738 916 1,080 16.9 24.1 17.9 342 452 555 19.0 32.1 22.7
Capital Goods (9)
1,547 1,815 2,151 2.8 17.3 18.5 157 199 256 3.3 26.7 28.7 101 141 188 0.7 39.8 33.3
Cement (13)
1,278 1,508 1,763 14.4 18.0 16.9 224 317 422 23.4 41.7 33.2 93 149 226 30.5 60.6 51.0
Consumer (14)
1,521 1,750 2,020 14.2 15.0 15.4 322 374 435 15.4 16.2 16.2 227 264 306 15.7 16.6 16.0
Financials (32)
2,902 3,446 4,135 15.6 18.7 20.0 2,252 2,701 3,291 15.0 19.9 21.9 1,097 1,357 1,676 20.9 23.7 23.4
Private Banks (10) 750 898 1,108 16.6 19.8 23.4 651 786 976 17.0 20.8 24.1 392 476 587 18.3 21.3 23.3
PSU Banks (12)
1,707 2,027 2,416 14.7 18.7 19.1 1,168 1,409 1,723 12.9 20.6 22.3 428 558 709 26.4 30.2 27.1
NBFC (10)
445 521 612 17.5 17.0 17.5 432 505 592 18.2 16.9 17.2 276 323 379 16.6 17.1 17.3
Healthcare (14)
1,066 1,212 1,383 11.2 13.6 14.1 275 310 360 18.0 12.8 15.8 167 206 243 12.5 23.4 18.3
Media (8)
188 216 245 11.9 15.1 13.4 56
66
79 16.3 19.3 18.4 27
35
46 16.3 32.0 29.3
Metals (9)
4,832 5,207 5,543 5.1 7.8 6.5 1,011 1,098 1,163 17.7 8.6
6.0 381 412 437 27.0 8.0 6.0
Oil & Gas (13)
17,726 17,846 17,686 -0.8 0.7 -0.9 1,623 1,830 2,014 10.6 12.8 10.0 861 973 1,060 4.3 13.0 9.0
Excl. RMs (10)
8,495 8,577 8,658 4.6 1.0 0.9 1,310 1,489 1,636 12.6 13.7
9.8 748 836 911 7.2 11.8 9.0
Real Estate (9)
249 283 338 12.1 13.6 19.4 83
104 133 15.1 25.3 28.1 29
42
62 19.1 45.3 47.0
Retail (3)
179 213 255 16.9 19.2 19.7 18
22
26 23.3 24.0 21.0 11
14
17 18.7 23.6 23.0
Technology (10)
2,703 3,039 3,363 10.2 12.4 10.7 707 790 855 9.2 11.7
8.1 546 618 676 11.4 13.3 9.3
Telecom (4)
1,581 1,737 1,889 9.1 9.9 8.7 544 617 682 13.8 13.5 10.4 111 142 182 58.2 27.7 28.2
Utilities (10)
2,314 2,551 2,764 9.4 10.3 8.3 684 784 882 9.6 14.7 12.4 405 457 515 9.1 12.9 12.7
Others (13)
505 589 685 16.9 16.7 16.3 84
102 121 24.6 21.3 18.3 45
57
71 35.2 27.2 23.5
MOSL (172)
43,558 47,348 50,845 5.6 8.7 7.4 8,776 10,232 11,798 13.8 16.6 15.3 4,441 5,319 6,258 15.2 19.8 17.6
Excl. RMs (169)
34,327 38,079 41,817 8.9 10.9 9.8 8,464 9,890 11,420 14.3 16.9 15.5 4,329 5,183 6,108 16.1 19.7 17.9
Sensex (30)
11,580 12,862 13,978 7.2 11.1 8.7 2,586 3,032 3,546 13.0 17.3 16.9 1,352 1,629 1,943 14.7 20.5 19.2
Nifty (50)
13,260 14,712 15,988 7.2 10.9 8.7 2,959 3,477 4,070 12.2 17.5 17.1 1,553 1,872 2,230 13.8 20.5 19.1
For Banks : Sales = Net Interest Income, EBITDA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.
Valuations - MOSL universe
Sector
Auto (11)
Capital Goods (9)
Cement (13)
Consumer (14)
Financials (32)
Private Banks (10)
PSU Banks (12)
NBFC (10)
Healthcare (14)
Media (8)
Metals (9)
Oil & Gas (13)
Excl. RMs (10)
Real Estate (9)
Retail (3)
Technology (10)
Telecom (4)
Utilities (10)
Others (13)
MOSL (172)
MOSL Excl. RMs (169)
Sensex (30)
Nifty (50)
N.M. : Not Meaningful.
July 2014
PE (x)
EV / EBIDTA (x)
P/BV (x)
RoE (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E
14.0
10.6
8.6
6.1
4.7
3.7
3.0
2.4
2.0
21.1
22.8
32.7
23.4
17.6
19.1
14.3
10.5
3.6
3.2
2.9
11.0
13.9
25.3
15.7
10.4
11.8
8.1
5.7
2.5
2.2
1.9
9.7
14.0
31.2
26.7
23.1
21.3
18.1
15.4
11.4
10.2
9.1
36.6
38.2
11.7
9.5
7.7
N.M
N.M
N.M
1.8
1.6
1.4
15.1
16.5
15.1
12.5
10.1
N.M
N.M
N.M
2.7
2.3
2.0
17.6
18.5
8.2
6.3
4.9
N.M
N.M
N.M
0.9
0.9
0.8
11.6
13.6
12.3
10.5
8.9
N.M
N.M
N.M
2.5
2.2
1.9
20.5
20.8
25.4
20.6
17.4
15.3
13.2
11.1
5.1
4.3
3.5
20.1
20.6
25.4
19.2
14.9
11.8
9.6
7.8
5.7
4.8
3.9
22.4
24.9
11.0
10.2
9.6
6.0
5.5
5.1
1.2
1.1
1.0
10.9
10.8
11.7
10.3
9.5
6.9
6.0
5.3
1.5
1.4
1.3
13.2
13.5
11.6
10.4
9.5
6.7
5.9
5.2
1.6
1.4
1.3
13.8
13.8
28.1
19.3
13.2
14.8
11.8
9.0
1.4
1.3
1.2
4.9
6.8
36.9
29.9
24.3
23.4
18.6
15.0
8.9
7.3
5.9
24.1
24.3
17.6
15.6
14.3
12.2
10.6
9.4
4.6
3.9
3.3
26.1
24.8
23.1
18.1
14.1
6.7
5.9
4.9
1.8
1.7
1.5
7.9
9.3
13.3
11.8
10.5
9.8
8.6
7.7
2.0
1.8
1.7
15.0
15.6
19.3
15.1
12.3
11.6
9.4
7.6
4.0
3.3
2.7
20.6
21.9
15.6
13.0
11.1
N.M
N.M
N.M
2.4
2.1
1.9
15.1
16.1
15.7
13.1
11.1
N.M
N.M
N.M
2.4
2.1
1.9
15.3
16.3
16.6
13.8
11.6
N.M
N.M
N.M
2.7
2.4
2.1
16.1
17.1
16.5
13.7
11.5
N.M
N.M
N.M
2.6
2.3
2.0
15.8
16.9
FY17E
22.8
16.4
18.1
39.4
18.3
20.0
16.0
21.1
20.4
26.5
10.6
13.2
13.6
9.3
24.4
22.8
10.8
16.1
22.4
16.8
17.0
17.9
17.6
Div Yield (%)
FY14
1.3
1.1
1.0
1.6
2.0
1.4
2.3
2.7
0.7
1.4
2.6
2.4
2.2
1.4
0.7
1.6
0.6
6.4
1.1
2.0
2.0
1.7
1.7
38
Union Budget FY14-15
Valuations Matrix
Sector / Companies
Automobiles
Amara Raja Batt.
Ashok Leyland
Bharat Forge
Bajaj Auto
Eicher Motors
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
Capital Goods
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Voltas
Sector Aggregate
Cement
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
Jaiprakash Associates
Shree Cement
Ultratech Cement
Dalmia Bharat
J K Cements
JK Lakshmi Cem.
Ramco Cements
Prism Cement
Sector Aggregate
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Marico
Nestle
Pidilite Inds.
Radico Khaitan
United Spirits
Sector Aggregate
10 July 2014
CMP
(INR)
Reco
EPS (INR)
FY15E FY16E FY17E
PE (x)
FY15E FY16E FY17E
EV/EBITDA (x)
FY15E FY16E FY17E
RoE (%)
FY15E FY16E FY17E
467 Buy
33 Buy
634 Buy
2,152 Buy
8,128 Buy
151 Neutral
2,436 Buy
1,165 Buy
2,533 Buy
453 Buy
158 Buy
24.1
-0.1
22.5
127.2
222.1
7.6
144.4
76.9
132.5
50.9
10.1
30.1
1.8
32.3
146.1
330.7
9.8
176.9
101.3
172.6
68.3
13.7
36.2
3.5
38.9
166.3
425.9
10.6
203.6
109.9
222.8
86.8
16.4
19.4
-523.4
28.2
16.9
36.6
19.9
16.9
15.2
19.1
8.9
15.7
14.0
15.5
18.0
19.6
14.7
24.6
15.4
13.8
11.5
14.7
6.6
11.6
10.6
12.9
9.3
16.3
12.9
19.1
14.2
12.0
10.6
11.4
5.2
9.7
8.6
11.6
12.4
13.2
11.1
20.0
10.0
12.4
5.7
9.6
3.8
9.8
6.1
9.0
6.4
10.1
9.3
12.6
7.6
9.6
4.6
7.2
2.8
7.1
4.7
7.3
4.0
8.3
7.7
9.1
7.2
7.6
4.6
5.3
2.1
5.7
3.7
27.1
-0.4
18.2
35.0
26.9
15.4
46.3
17.5
16.1
22.3
29.9
21.1
27.5
9.9
22.4
33.7
32.3
17.3
46.3
18.6
17.8
23.8
31.6
22.8
26.9
17.1
22.6
32.0
31.7
18.7
43.0
18.5
19.2
23.9
29.5
22.8
1,065 Neutral
243 Buy
191 Buy
649 Buy
1,211 Neutral
1,655 Buy
885 Sell
911 Buy
202 Buy
13.4
10.0
7.3
24.6
48.3
48.2
14.6
28.0
8.5
20.0
15.2
12.4
30.8
56.0
66.1
19.3
38.5
10.6
30.3
19.8
17.1
38.3
68.2
89.3
26.5
58.3
13.0
79.6
24.2
26.2
26.4
25.1
34.3
60.6
32.6
23.7
32.7
53.3
15.9
15.4
21.1
21.6
25.0
45.9
23.7
19.1
23.4
35.2
12.3
11.1
16.9
17.7
18.5
33.4
15.6
15.5
17.6
36.5
12.3
14.7
21.9
15.7
20.6
28.7
19.1
15.9
19.1
27.5
7.5
10.5
17.0
13.0
16.3
22.8
13.9
12.7
14.3
15.8
5.3
8.1
13.2
10.8
12.0
18.2
9.2
10.0
10.5
10.3
7.3
12.4
25.1
29.6
14.1
11.9
15.5
14.0
11.0
14.4
10.4
19.6
28.5
28.6
15.8
14.7
19.0
15.4
13.9
19.6
12.5
22.8
31.4
29.1
17.8
18.5
24.5
16.8
16.4
1,458 Buy
219 Neutral
387 Buy
3,303 Buy
104 Neutral
65 Buy
7,151 Buy
2,512 Buy
446 Buy
394 Buy
231 Buy
290 Buy
72 Buy
54.4 84.1 119.9
7.0
9.0 12.3
28.7 51.4 77.6
254.7 370.0 586.0
2.9 10.6 19.0
1.5
4.1
5.7
280.2 431.1 610.3
91.3 133.0 189.0
-12.3 24.4 82.2
22.6 45.3 76.2
10.5 17.1 34.3
9.0 15.1 24.1
0.4
6.2 11.2
26.8
31.5
13.5
13.0
36.6
43.1
25.5
27.5
-36.1
17.4
21.9
32.0
176.2
25.3
17.3
24.3
7.5
8.9
9.9
16.0
16.6
18.9
18.3
8.7
13.5
19.2
11.6
15.7
12.2
17.8
5.0
5.6
5.5
11.3
11.7
13.3
5.4
5.2
6.7
12.0
6.5
10.4
17.8
21.2
7.1
5.4
9.4
10.1
12.9
15.6
14.5
8.5
10.3
13.6
12.6
11.8
10.9
15.3
3.8
3.6
6.1
8.4
8.6
10.7
7.8
5.5
6.2
9.7
6.0
8.1
7.0
11.2
2.1
2.4
4.1
7.5
5.7
7.4
4.7
3.4
3.9
6.9
3.9
5.7
12.8
14.0
8.3
9.9
2.7
2.4
19.5
13.8
-3.3
8.7
9.2
8.4
2.0
9.7
18.5
16.8
13.3
12.6
8.2
6.3
24.5
17.4
6.5
15.8
13.8
12.9
26.8
14.0
23.5
20.5
17.2
16.8
13.2
8.4
27.2
20.7
19.2
22.5
23.8
18.1
35.6
18.1
586
997
1,540
194
515
806
4,698
632
343
240
4,972
329
104
2,350
15.5 18.7 22.8
38.5 45.6 53.6
43.6 51.0 59.7
6.4
7.5
8.8
19.2 22.8 26.1
27.3 33.4 40.0
138.6 164.7 192.0
18.1 20.1 22.3
12.9 14.9 17.2
8.4
9.9 11.3
128.2 151.5 174.5
10.8 13.0 15.4
8.0
9.2 10.9
42.6 56.0 72.7
37.7
25.9
35.3
30.2
26.9
29.5
33.9
34.9
26.6
28.6
38.8
30.5
13.1
55.2
31.2
31.3
21.8
30.2
25.9
22.6
24.2
28.5
31.5
22.9
24.2
32.8
25.3
11.3
42.0
26.7
25.7
18.6
25.8
21.9
19.7
20.2
24.5
28.3
19.9
21.2
28.5
21.4
9.6
32.3
23.1
24.6
18.0
24.3
23.8
22.1
20.3
30.0
25.6
18.1
17.7
22.4
19.2
8.6
29.8
21.3
20.3
14.6
19.4
20.4
18.2
16.9
24.6
22.4
15.6
14.9
19.3
15.8
7.5
24.8
18.1
16.2
11.6
16.4
17.1
15.7
14.3
19.9
19.5
13.5
12.6
16.5
12.9
6.6
20.5
15.4
Neutral
Buy
Neutral
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Neutral
Buy
Neutral
31.7 32.4 33.1
42.1 41.3 40.3
96.3 99.6 102.6
34.8 33.7 33.2
45.2 46.4 45.1
22.9 23.7 23.6
30.6 30.7 30.3
107.3 110.2 114.7
40.6 43.4 45.8
25.1 24.3 23.1
50.1 54.5 57.3
23.3 23.5 23.2
11.9 12.5 13.3
7.2
8.9 10.8
36.6 38.2 39.4
39
Union Budget FY14-15
Ready reckoner: valuations
Sector / Companies
CMP
(INR)
Reco
Healthcare
Alembic Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’s Labs
Glenmark Pharma
GSK Pharma
IPCA Labs.
Lupin
Ranbaxy Labs
Sanofi India
Sun Pharma
Torrent Pharma
Sector Aggregate
306 Buy
493 Sell
1,123 Buy
435 Neutral
1,472 Buy
2,652 Buy
563 Buy
2,486 Neutral
859 Buy
1,041 Buy
543 Buy
3,252 Buy
725 Buy
677 Neutral
Media
Dish TV
D B Corp
Hindustan Media
HT Media
Jagran Prakashan
PVR
Sun TV
Zee Entertainment
Sector Aggregate
58 Buy
320 Buy
160 Buy
118 Neutral
124 Buy
652 Buy
455 Buy
286 Neutral
EPS (INR)
FY15E FY16E FY17E
16.3 21.7 26.5
23.0 26.8 31.8
46.4 56.8 64.3
17.4 23.4 28.5
65.4 78.8 92.1
127.1 146.4 169.2
26.8 33.7 42.0
61.9 84.8 98.0
48.8 59.6 72.7
41.2 53.0 61.5
9.4 18.1 28.1
125.0 152.8 177.5
26.6 31.1 35.3
36.4 43.1 55.7
-1.1
19.2
17.4
8.8
7.9
17.5
20.9
10.2
0.7
22.7
19.8
10.0
9.4
28.8
25.5
13.0
PE (x)
FY15E FY16E FY17E
EV/EBITDA (x)
FY15E FY16E FY17E
RoE (%)
FY15E FY16E FY17E
18.8
21.4
24.2
25.0
22.5
20.9
21.0
40.1
17.6
25.3
57.8
26.0
27.2
18.6
25.4
14.1
18.4
19.8
18.6
18.7
18.1
16.7
29.3
14.4
19.6
30.0
21.3
23.3
15.7
20.6
11.6
15.5
17.5
15.2
16.0
15.7
13.4
25.4
11.8
16.9
19.4
18.3
20.5
12.2
17.4
13.1
13.3
17.3
14.5
16.0
13.5
12.3
32.9
12.1
14.7
11.4
15.6
17.9
10.2
15.3
9.9
11.1
12.4
11.1
13.3
11.5
10.3
22.2
9.9
11.9
17.5
12.8
15.9
9.5
13.2
7.9
9.4
10.7
9.1
11.3
9.8
7.9
18.8
8.0
9.9
12.7
10.6
14.2
7.9
11.1
38.9
13.7
25.2
12.4
27.1
19.9
19.8
26.3
27.7
23.8
34.2
19.5
25.7
28.1
20.1
38.3
14.4
30.1
14.6
28.2
19.2
20.0
34.6
26.8
24.7
16.6
21.4
23.7
27.2
20.6
35.2
15.2
27.4
15.3
28.6
18.6
19.7
37.6
26.1
23.4
21.4
22.4
21.8
29.1
20.4
3.5
26.3
22.6
11.4
10.9
41.1
30.5
16.5
-53.9
16.7
9.2
13.5
15.7
37.3
21.8
28.2
25.4
79.9
14.1
8.1
11.8
13.2
22.6
17.8
22.0
19.2
16.8
12.1
7.1
10.4
11.4
15.8
14.9
17.3
14.9
11.2
9.7
4.2
4.8
9.5
11.5
10.1
18.0
11.8
8.3
8.2
3.1
3.8
8.0
8.5
8.6
14.3
9.6
5.7
7.0
2.1
2.8
6.9
6.5
7.4
11.3
7.8
NA
28.6
19.0
10.0
24.2
16.7
24.0
31.5
22.4
NA
29.5
17.9
10.3
25.8
23.2
27.0
31.4
24.9
NA
29.8
17.2
10.4
26.0
26.5
29.2
30.6
26.5
Metals
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Sesa Sterlite
Tata Steel
Sector Aggregate
176 Buy
162 Buy
301 Buy
1,201 Buy
57 Buy
174 Buy
87 Neutral
294 Buy
522 Buy
10.9 12.9 19.8
18.3 18.1 18.7
26.7 35.1 40.3
120.0 115.6 140.1
3.2
4.1
4.1
17.9 18.3 19.6
7.7
7.6
7.2
21.7 24.1 20.4
54.1 64.2 69.2
16.2
8.9
11.3
10.0
17.6
9.7
11.3
13.6
9.6
11.0
13.6
9.0
8.6
10.4
13.6
9.5
11.5
12.2
8.1
10.2
8.9
8.7
7.5
8.6
13.7
8.8
12.1
14.4
7.5
9.6
5.9
4.9
8.4
6.5
7.0
5.7
8.2
4.7
6.4
6.0
5.2
4.1
7.4
6.2
4.9
5.5
7.6
4.2
6.1
5.5
5.0
3.3
6.5
5.5
4.2
5.1
7.1
4.0
5.5
5.1
9.2
19.1
10.3
12.4
6.7
21.5
7.2
8.5
19.3
10.9
10.1
16.5
12.2
10.6
8.2
21.2
6.8
8.8
18.1
10.8
13.8
15.1
12.6
11.5
7.8
20.6
6.1
7.1
16.8
10.6
Others
Arvind
Bajaj Electrical
Jain Irrigation
Monsanto India
Bata India
Castrol India
Gujarat Pipavav
Just Dial
Kaveri Seed
Sintex Inds.
Symphony
UPL
V-Guard Inds
Sector Aggregate
213 Buy
343 Buy
116 Buy
2,027 Buy
1,283 Buy
330 Neutral
127 Buy
1,534 Buy
749 Buy
88 Buy
1,083 Buy
321 Buy
652 Buy
18.2 23.6 31.3
18.6 23.0 27.5
6.0 10.6 15.0
106.3 136.6 169.6
37.4 47.1 56.2
10.6 11.9 13.5
5.9
7.5
7.4
22.0 29.5 37.7
42.4 58.1 75.0
12.8 17.2 21.8
38.8 50.4 64.4
29.0 33.5 39.2
31.1 41.0 53.0
11.7
18.5
19.3
19.1
34.3
31.2
21.5
69.7
17.7
6.9
27.9
11.1
21.0
19.3
9.0
14.9
10.9
14.8
27.2
27.8
16.9
52.1
12.9
5.1
21.5
9.6
15.9
15.1
6.8
12.5
7.7
12.0
22.8
24.5
17.1
40.7
10.0
4.0
16.8
8.2
12.3
12.3
7.4
9.7
9.2
17.3
20.8
21.9
16.0
55.4
16.4
7.0
22.2
6.6
12.6
11.6
6.1
7.8
7.3
12.9
16.4
18.9
13.3
40.2
11.5
5.1
16.6
5.6
9.8
9.4
5.0
6.4
5.9
9.7
13.6
16.5
10.8
30.5
8.2
4.0
12.5
4.7
7.8
7.6
16.9
23.8
12.1
45.2
25.9
70.4
18.9
25.9
45.0
11.1
42.5
21.5
26.3
20.6
19.0
24.7
18.6
42.5
26.8
79.4
21.1
28.1
41.7
13.1
42.8
20.7
28.2
21.9
21.3
24.7
21.7
38.6
26.1
97.9
18.3
28.7
37.5
14.4
41.5
20.2
29.1
22.4
10 July 2014
40
Union Budget FY14-15
Ready reckoner: valuations
Sector / Companies
Oil & Gas
BPCL
Cairn India
Chennai Petroleum
GAIL
Gujarat State Petronet
HPCL
Indraprastha Gas
IOC
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Sector Aggregate
Ex RMS
CMP
(INR)
EPS (INR)
FY15E FY16E FY17E
PE (x)
FY15E FY16E FY17E
EV/EBITDA (x)
FY15E FY16E FY17E
RoE (%)
FY15E FY16E FY17E
Buy
Neutral
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
33.3
55.8
10.5
30.7
8.8
28.3
28.2
32.4
5.1
64.6
35.9
10.4
79.0
45.3 48.1
52.1 40.4
14.9 15.7
32.9 36.5
10.0
9.9
34.7 40.2
30.9 35.3
37.9 41.5
7.3
7.5
71.7 75.2
42.5 44.7
12.7 16.2
87.1 108.9
17.4
6.3
8.7
15.2
10.0
14.0
12.8
10.5
13.3
9.0
11.3
17.1
12.6
11.7
11.6
12.8
6.8
6.1
14.2
8.8
11.4
11.7
9.0
9.3
8.1
9.5
13.9
11.5
10.3
10.4
12.1
8.8
5.8
12.8
8.9
9.9
10.2
8.2
9.0
7.7
9.0
10.9
9.2
9.5
9.5
8.8
3.4
7.1
10.4
5.8
9.1
5.9
7.5
6.7
6.5
5.0
8.2
10.5
6.9
6.7
7.4
3.4
6.1
8.8
5.3
7.6
5.1
6.6
5.4
5.5
4.3
7.1
9.5
6.0
5.9
6.5
3.3
5.6
7.9
5.4
6.9
4.1
5.5
4.9
5.1
4.2
5.5
6.7
5.3
5.2
12.0
17.2
8.8
13.7
14.2
6.3
20.6
11.2
12.1
17.9
17.1
14.6
11.2
13.2
13.8
14.9
14.4
11.6
13.4
14.1
7.4
19.5
12.1
15.5
18.0
18.1
15.9
11.2
13.5
13.8
14.4
10.2
11.3
13.6
12.4
8.2
19.3
12.0
14.2
17.1
17.0
17.8
12.8
13.2
13.6
223 Buy
227 Neutral
88 Buy
32 Buy
539 Buy
246 Buy
343 Buy
252 Buy
469 Buy
3.7
8.7
9.7
2.6
25.9
13.2
7.6
11.2
26.9
5.9
11.7
12.0
3.2
30.8
21.2
17.4
16.0
34.8
10.3
17.0
16.6
4.2
36.1
33.3
22.1
21.3
40.5
60.6
26.1
9.0
12.3
20.8
18.6
45.3
22.5
17.4
28.1
38.0
19.4
7.3
9.8
17.5
11.6
19.7
15.7
13.5
19.3
21.7
13.4
5.3
7.6
14.9
7.4
15.6
11.9
11.6
13.2
21.0
18.3
12.0
8.3
16.2
12.8
11.6
13.1
9.1
14.8
17.7
14.1
9.1
7.5
12.3
7.9
8.5
10.0
7.6
11.8
13.3
10.0
6.4
6.7
10.2
5.0
6.9
7.5
6.5
9.0
2.2
9.3
5.5
5.8
7.8
9.5
6.1
11.8
11.1
4.9
3.5
11.3
6.5
7.0
8.5
13.7
12.5
14.7
13.2
6.8
5.9
14.6
8.6
8.6
9.1
18.6
14.0
16.6
13.9
9.3
Retail
Jubilant Foodworks
Shopper's Stop
Titan Company
Sector Aggregate
1,295 Buy
390 Neutral
328 Buy
25.3
7.8
9.8
35.1
10.0
11.9
47.3
12.4
14.3
51.1
49.8
33.3
36.9
36.9
39.0
27.6
29.9
27.4
31.6
23.0
24.3
23.9
16.2
24.5
23.4
17.2
13.5
19.9
18.6
12.6
11.2
16.5
15.0
22.6
8.3
28.4
24.1
23.8
9.9
27.6
24.3
24.3
11.1
0.0
24.4
Technology
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
Mindtree
MphasiS
Persistent Systems
TCS
Tech Mahindra
Wipro
Sector Aggregate
1,471
152
3,293
173
889
419
1,200
2,348
2,020
545
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
99.6
11.7
204.6
14.7
62.2
35.0
74.7
111.9
138.5
34.9
111.7
13.2
227.6
18.2
73.2
39.7
94.6
128.2
157.4
39.3
122.5
13.4
243.5
20.5
80.0
42.4
113.2
141.0
180.6
42.5
14.8
13.0
16.1
11.8
14.3
12.0
16.1
21.0
14.6
15.6
17.6
13.2
11.6
14.5
9.5
12.1
10.6
12.7
18.3
12.8
13.9
15.6
12.0
11.4
13.5
8.4
11.1
9.9
10.6
16.7
11.2
12.8
14.3
10.0
8.5
10.5
6.4
10.1
9.1
8.7
15.1
9.2
10.8
12.2
8.6
8.0
9.0
4.8
8.2
8.3
6.8
13.2
7.6
9.6
10.6
7.4
7.7
8.1
3.7
7.1
7.9
5.4
11.9
6.9
8.1
9.4
36.0
28.1
24.7
20.5
28.3
14.1
22.4
36.4
28.7
22.9
26.1
31.6
28.7
23.8
20.7
26.9
15.2
24.0
34.4
25.7
22.0
24.8
27.9
26.6
22.3
19.1
24.3
15.4
24.0
30.8
23.8
20.4
22.8
335 Buy
253 Buy
134 Buy
126 Neutral
13.1
9.5
8.2
4.4
16.3
11.7
7.4
11.3
20.6
14.6
7.6
17.9
25.5
26.5
16.2
28.9
23.1
20.6
21.7
18.0
11.2
18.1
16.3
17.3
17.5
7.0
14.1
6.3
10.0
6.3
6.6
6.7
5.4
8.7
6.6
5.2
5.9
4.6
7.5
5.4
3.9
4.9
7.8
9.8
15.0
3.4
7.9
8.9
11.7
11.0
7.6
9.3
10.3
14.1
10.3
11.1
10.8
Real Estate
DLF
Godrej Properties
Indiabulls Real Estate
Jaypee Infratech
Mahindra Lifespace
Oberoi Realty
Phoenix Mills
Prestige Estates
Sobha Developers
Sector Aggregate
Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Comm
Sector Aggregate
10 July 2014
581
353
91
466
88
397
360
342
68
582
404
177
998
Reco
41
Union Budget FY14-15
Ready reckoner: valuations
Sector / Companies
Utilities
CESC
Coal India
Jaiprakash Power
JSW Energy
NHPC
NTPC
Power Grid Corp.
PTC India
Reliance Infrastructure
Tata Power
Sector Aggregate
Sector / Companies
CMP
(INR)
691
371
20
77
25
151
138
89
764
106
Reco
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
CMP
(INR)
Banks-Private
Axis Bank
1,860
Federal Bank
119
HDFC Bank
825
ICICI Bank
1,391
IndusInd Bank
537
ING Vysya Bank
638
J&K Bank
1,593
Kotak Mahindra Bank
867
South Indian Bank
33
Yes Bank
529
Private Bank Aggregate
Banks-PSU
Andhra Bank
90
Bank of Baroda
826
Bank of India
280
Canara Bank
414
Corporation Bank
376
Dena Bank
77
IDBI Bank
96
Indian Bank
169
Oriental Bank
287
Punjab National Bank
915
State Bank
2,548
Union Bank
199
PSU Bank Aggregate
NBFC
Bajaj Finance
2,202
Dewan Housing
405
HDFC
1,023
IDFC
152
Indiabulls Housing
372
LIC Housing Fin
325
M & M Financial
256
Power Finance Corp
302
Rural Electric. Corp.
368
Shriram Transport Fin.
905
NBFC Aggregate
Financials Sector Aggregate
10 July 2014
Reco
EPS (INR)
FY15E FY16E FY17E
56.8
27.7
1.3
6.5
2.3
11.8
9.4
9.5
54.4
5.8
61.9
30.2
2.9
5.8
2.8
13.7
11.5
13.1
60.7
6.5
66.9
33.3
4.2
5.4
2.9
15.8
13.4
15.2
63.1
7.9
EPS (INR)
FY15E FY16E FY17E
PE (x)
FY15E FY16E FY17E
12.2
13.4
15.2
11.9
10.8
12.8
14.6
9.3
14.0
18.3
13.3
11.2
12.3
6.8
13.2
8.9
11.1
12.0
6.8
12.6
16.3
11.8
10.3
11.1
4.8
14.2
8.5
9.6
10.3
5.8
12.1
13.4
10.5
PE (x)
FY15E FY16E FY17E
EV/EBITDA (x)
FY15E FY16E FY17E
7.2
9.7
9.7
6.6
8.7
9.7
10.9
9.2
7.6
13.4
9.8
6.6
8.4
5.6
6.7
8.2
8.8
9.8
4.9
6.8
12.3
8.6
6.0
7.2
5.0
6.8
7.6
7.6
8.9
3.6
6.8
11.5
7.7
PB (x)
FY15E FY16E FY17E
RoE (%)
FY15E FY16E FY17E
11.6
25.2
6.3
15.2
8.5
11.0
13.7
7.0
6.5
7.4
15.0
11.4
24.2
13.9
12.4
8.6
12.0
15.2
10.2
6.9
7.5
15.6
11.1
23.4
17.1
10.6
8.6
13.0
16.0
11.1
6.7
7.7
16.1
RoE (%)
FY15E FY16E FY17E
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
145.3 173.7 212.2
10.6 12.5 15.2
44.5 55.9 70.0
99.1 119.9 148.7
33.4 42.3 54.2
40.3 47.6 56.5
258.4 279.5 305.0
39.4 46.5 56.0
4.2
4.9
5.8
51.1 60.5 75.4
12.8
11.2
18.5
14.0
16.1
15.8
6.2
22.0
7.9
10.4
15.1
10.7
9.6
14.8
11.6
12.7
13.4
5.7
18.6
6.8
8.7
12.5
8.8
7.8
11.8
9.4
9.9
11.3
5.2
15.5
5.8
7.0
10.1
2.0
1.3
3.8
2.0
2.7
1.6
1.2
3.2
1.2
1.9
2.7
1.7
1.2
3.2
1.8
2.3
1.5
1.0
2.7
1.1
1.6
2.3
1.5
1.1
2.6
1.6
2.0
1.3
0.9
2.3
0.9
1.3
2.0
16.6
12.5
22.4
15.7
18.4
10.4
20.2
15.4
16.4
22.4
17.6
17.2
13.2
23.6
16.6
19.9
11.3
19.0
15.7
16.8
19.6
18.5
18.1
14.5
24.5
17.9
21.4
12.2
18.1
16.2
17.3
20.8
20.0
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
10.8 12.8 13.4
118.2 149.2 184.6
53.4 66.9 87.2
60.3 82.9 107.8
45.3 61.9 74.2
13.0 15.6 18.9
8.2 10.4 12.4
29.0 36.5 44.2
44.5 54.7 72.5
118.9 157.9 185.3
259.4 344.3 454.4
28.0 34.3 39.2
8.3
7.0
5.2
6.9
8.3
5.9
11.7
5.8
6.4
7.7
9.8
7.1
8.2
7.0
5.5
4.2
5.0
6.1
4.9
9.2
4.6
5.2
5.8
7.4
5.8
6.3
6.7
4.5
3.2
3.8
5.1
4.1
7.8
3.8
4.0
4.9
5.6
5.1
4.9
0.6
1.0
0.6
0.7
0.6
0.6
0.7
0.6
0.6
0.9
1.2
0.7
0.9
0.5
0.8
0.6
0.7
0.5
0.5
0.6
0.6
0.6
0.8
1.1
0.6
0.9
0.5
0.7
0.5
0.6
0.5
0.5
0.6
0.5
0.5
0.7
0.9
0.6
0.8
7.1
14.5
12.9
11.2
7.3
10.6
5.9
11.2
10.0
11.8
13.3
10.0
11.6
8.0
16.3
14.3
14.0
9.3
11.6
7.1
12.8
11.4
14.0
15.6
11.3
13.6
7.9
17.7
16.3
16.2
10.4
12.8
8.0
14.0
13.7
14.5
17.9
11.7
16.0
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
171.4 198.9 234.2
54.0 64.5 78.5
38.5 45.8 54.0
12.7 13.1 13.5
55.6 66.4 80.3
28.3 33.1 39.6
18.7 21.2 24.8
50.9 60.1 69.8
57.2 66.0 78.4
68.4 82.8 94.6
12.9
7.5
26.6
11.9
6.7
11.5
13.7
5.9
6.4
13.2
12.3
11.7
11.1
6.3
22.3
11.5
5.6
9.8
12.1
5.0
5.6
10.9
10.5
9.5
9.4
5.2
18.9
11.2
4.6
8.2
10.3
4.3
4.7
9.6
8.9
7.7
2.3
1.2
5.2
1.4
1.9
1.9
2.5
1.2
1.5
2.1
2.5
1.8
2.0
1.0
4.7
1.3
1.7
1.6
2.1
1.0
1.2
1.8
2.2
1.6
1.7
0.9
4.2
1.2
1.5
1.4
1.9
0.9
1.0
1.5
1.9
1.4
19.7
17.3
25.5
12.2
31.0
17.6
19.3
21.8
25.3
16.2
20.5
15.1
19.4
17.8
24.2
11.6
32.4
17.8
19.0
21.9
24.1
17.0
20.8
16.5
19.5
18.5
25.3
10.9
33.7
18.4
19.4
21.6
23.8
17.9
21.1
18.3
42
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