Market Outlook

January 29, 2018

Market Cues

Domestic Indices

Chg (%)

(Pts)

(Close)

Indian markets are likely to open flat tracking global indices and SGX Nifty.

BSE Sensex

(0.3)

(111)

36,050

U.S. stocks markets on Friday showed slight gains, but were off their best levels,

Nifty

(0.1)

(16)

11,070

after a first reading of U.S. economic growth came in a touch softer than forecast.

Mid Cap

(0.7)

(135)

17,841

The European markets ended Friday's session with modest gains. The markets

Small Cap

(0.7)

(133)

19,342

climbed in early trade, but settled into a sideways pattern for the bulk of the session.

Bankex

(0.1)

(36)

31,082

Positive study results from AstraZeneca provided a boost to drug stocks, while strong

results from LVMH drove shares of luxury goods companies higher.

Global Indices

Chg (%)

(Pts)

(Close)

Indian markets remain closed on Friday on account of Republic Day.

Dow Jones

0.9

224

26,617

Nasdaq

1.3

7,506

News Analysis

FTSE

0.7

7,666

Review: Dr Reddy’s Lab, Indoco Remedies

Nikkei

(1.1)

(271)

23,669

Preview: Tech Mahindra

Hang Seng

(0.9)

(304)

32,654

Detailed analysis on Pg2

Shanghai Com

(0.3)

(11)

3,548

Investor’s Ready Reckoner

Key Domestic & Global Indicators

Advances / Declines

BSE

NSE

Advances

1,137

542

Stock Watch: Latest investment recommendations on 150+ stocks

Refer Pg5 onwards

Declines

1,741

1,249

Unchanged

157

Top Picks

CMP

Target

Upside

Company

Sector

Rating

(`)

(%)

Volumes (` Cr)

Blue Star

Capital Goods Accumulate

760

867

14.1

BSE

6,102

Dewan Housing Finance

Financials

Buy

596

712

19.5

NSE

45,560

Asian Granito

Other

Accumulate

576

651

13.0

Navkar Corporation

Other

Buy

191

265

38.9

KEI Industries

Capital Goods Accumulate

400

436

9.0

Net Inflows (` Cr)

Net

Mtd

Ytd

More Top Picks on Pg4

FII

2,481

10,349

*MFs

(141)

4,665

Key Upcoming Events

Consensus

Date

Region

Event Description

Reading

Expectations

Top Gainers

Price (`)

Chg (%)

Jan30

Euro Zone Euro-Zone GDP s.a. (QoQ)

0.70

Jan30

Euro Zone Euro-Zone Consumer Confidence

1.30

Ltts

1,337

9.9

Jan30

Consumer Confidence

122.10

123.10

Niittech

915

6.2

Jan31

Germany Unemployment change (000's)

(29.00)

Adanient

214

4.4

Jan31

China

PMI Manufacturing

51.60

51.50

More Events on Pg7

Ucobank

4.3

Greavescot

142

3.9

Top Losers

Price (`)

Chg (%)

Jindalsaw

155

(8.0)

Pnb

181

(7.1)

Syndibank

(6.9)

Upl

769

(6.5)

Indianb

378

(6.3)

As on January 25, 2018

www.angelbroking.com

Market Outlook

January 29, 2018

News Analysis

Result Review

Dr Reddy’s Lab (CMP: `2,562 / TP: `2,052/ Downside: -18.1%)

Dr Reddy’s Lab (DRL), for 3QFY2018 posted better than expected results. In rupee

terms, revenues came in at `3,806cr V/s `3,600cr expected V/s `3,707cr in

3QFY2017, up 3.0% yoy. PSAI segment (with sales of `544cr, posted 1% yoy) was

the main driver, while Global generics (with sales of `3,010cr), posted a de-

growth of 2.0%. In terms, of the geography the USA posted a yoy de-growth of

3.0%, Europe posted a 7% yoy de-growth & India posted a 3.0% growth during the

quarter. Normalizing GST impact, the India business posted a yoy growth of 11%.

On QoQ basis, the company posted a 7% qoq growth, with Global Generics

posted a 5% qoq, while PSAI posted a decline of 4% qoq.

On EBITDA front, the company posted an EBITDA of 21.2% V/s 18.2% expected

V/s 23.0% in 3QFY2017. Margin improvement, came in at on back of gross

margin expansion, which came in at 56.3% V/s 53.3% expected. R&D expenses

during the quarter was 12.3% of sales V/s 13.4% of sales in 3QFY2017.

Consequently, the PAT came in at `3,344cr V/s `3,250cr expected V/s `4,701cr in

3QFY2017, de-growth of 29% yoy.

We maintain our Sell rating on the stock, with a price target of `2,052.

Y/E

Sales OPM

PAT

EPS ROE P/E P/BV EV/EBITDA EV/Sales

March

(` cr)

(%)

(` cr)

(`)

(%)

(x)

FY2018E

13,734

17.7

1,158

69.9

9.2

35.8

3.2

18.4

3.2

FY2019E

15,548

20.2

1,691

102.0

12.4

24.5

2.9

14.3

2.9

Indoco Remedies (CMP: `294 /`136 TP: / Downside: -53.7%)

Indoco Remedies, posted numbers in line with expectations. In rupee terms,

consolidated revenues came in at `274cr V/s `280cr expectations V/s `272cr in

3QFY2017, up 0.7% yoy. On profitability front, the company posted an gross

margins of 67.0% V/s 63.9% in 3QFY2017, leading to the OPM coming in at

14.3% V/s

12.4% in 3QFY2017; little lower than expectations of

14.9%.

Consequently, the Adj. PAT came in at `22.7cr V/s `23.9cr expected V/s `17.6cr

in 3QFY2017, growth of 28.8% yoy. During the quarter, the R&D expenditure

came in at 5.2% of sales in 3QFY2018 V/s 5.1% of sales in 3QFY2017.

We maintain our Sell rating on the stock, with a price target of `136.

Y/E

Sales OPM

PAT

EPS ROE P/E P/BV EV/EBITDA EV/Sales

March

(` cr)

(%)

(` cr)

(`)

(%)

(x)

FY2018E

1,114

9.9

51.3

5.6

7.7

52.8

4.0

27.0

2.7

FY2019E

1,297

13.9

104.6

11.4

14.5

25.9

3.5

16.3

2.3

www.angelbroking.com

Market Outlook

January 29, 2018

Result Preview

Tech Mahindra (CMP: `599 /`526 TP: / Downside: -12.2%)

Tech Mahindra expected to post its 3QFY2018 results today. In US$ terms, the

sales is expected to come in at US$1,203mn V/s US$1,179mn., a qoq growth

of 2.0%. In rupee terms, consolidated revenues are expected to come in at

`7,789cr V/s `7,606cr in 2QFY2018, up 2.4% qoq. On profitability front, the

company will post an EBIT of 11.5% V/s 11.0% in 2QFY2018, a qoq 40bps

expansion. The expansion in the EBIT margins is on back of completion of

rationalization in LCC & better operational efficiencies. Consequently, the

Adj. PAT is expected to come in at `882cr V/s `836cr in 2QFY2018, qoq

growth of 5.1%.

We maintain our reduce rating on the stock, with a price target of `526.

Y/E

Sales OPM

PAT

EPS ROE P/E P/BV EV/EBITDA EV/Sales

March

(` cr)

(%)

(` cr)

(`)

(%)

(x)

FY2018E

30,545

15.0

3,062

35.2

16.8

17.0

2.9

12.3

1.8

FY2019E

32,988

15.0

3,272

37.6

16.2

15.9

2.6

11.3

1.7

Economic and Political News

 Export Import Bank raises $10 billion in London Stock Exchange bond

 Budget 2018: Govt to keep FY19 fiscal deficit target at 3.2%, says Nomura

 Budget 2018: Solar sector seeks relief from proposed safeguard duty of 70%

Corporate News

 Reliance Industries' KG-D6 oilfields' Q3 production plunges to 4.9 mmscmd

 Shorter wait for Maruti cars soon as Guj plant to supply 250k units in FY19

 JSW may double its bid to Rs 300 bn for debt-laden Bhushan Steel: Sources

www.angelbroking.com

Market Outlook

January 29, 2018

Top Picks

Market Cap

CMP

Target

Upside

Company

Rationale

(` Cr)

(`)

(%)

Strong growth in domestic business due to its

leade`hip in acute therapeutic segment. Alkem expects

Alkem Laboratories

26,542

2,220

2,441

10.0

to launch more products in USA, which bodes for its

international business.

We expect the company would report strong

Asian Granito

1,734

576

651

13.0

profitability owing to better product mix, higher B2C

sales and amalgamation synergy.

Favorable outlook for the AC industry to augur well for

Cooling products business which is out pacing the

Blue Star

7,292

760

867

14.1

market growth. EMPPAC division's profitability to

improve once operating environment turns around.

With a focus on the low and medium income (LMI)

consumer segment, the company has increased its

Dewan Housing Finance

18,688

596

712

19.5

presence in tier-II & III cities where the growth

opportunity is immense.

Loan growth is likely to pick up after a sluggish FY17.

Lower credit cost will help in strong bottom-line

Karur Vysya Bank

8,115

112

160

43.2

growth. Increasing share of CASA will help in NIM

improvement.

High order book execution in EPC segment, rising B2C

KEI Industries

3,135

400

436

9.0

sales and higher exports to boost the revenues and

profitability

Expected to benefit from the lower capex requirement

Music Broadcast

2,198

385

475

23.3

and 15 year long radio broadcast licensing.

Massive capacity expansion along with rail advantage

Navkar Corporation

2,873

191

265

38.9

at ICD as well CFS augur well for the company

Strong brands and distribution network would boost

Siyaram Silk Mills

3,367

718

851

18.4

growth going ahead. Stock currently trades at an

inexpensive valuation.

Market leadership in Hindi news genre and no.

viewership ranking in English news genre, exit from the

TV Today Network

2,678

449

500

11.4

radio business, and anticipated growth in ad spends

by corporate to benefit the stock.

After GST, the company is expected to see higher

volumes along with improving product mix. The

Maruti Suzuki

2,80,246

9,277

10,619

14.5

Gujarat plant will also enable higher operating

leverage which will be margin accretive.

We expect loan book to grow at 24.3% over next two

GIC Housing

2,393

444

655

47.4

year; change in borrowing mix will help in NIM

improvement

We expect CPIL to report net Revenue/PAT CAGR of

~17%/16% over FY2017-20E mainly due to healthy

7,532

339

400

18.0

growth in plywood & lamination business, forayed into

Century Plyboards India

MDF & Particle boards on back of strong brand &

distribution network.

We expect sales/PAT to grow at 13.5%/20% over next

LT Foods

2,869

128

42.7

two years on the back of strong distribution network &

addition of new products in portfolio.

We expect sales/PAT to grow at 13%/16% over next

two years on the back of strong healthy demand in

Ruchira Papers

434

194

244

26.1

writing & printing paper and Kraft paper. Further,

China had banned making paper from waste pulp

which would benefit Indian paper companies.

We expect financialisation of savings and increasing

Aditya Birla Capital

38658

176

230

30.6

penetration in Insurance & Mutual fund would ensure

steady growth.

Source: Company, Angel Research

www.angelbroking.com

Market Outlook

January 29, 2018

Fundamental Call

Market Cap

CMP

Target

Upside

Company

Rationale

(` Cr)

(`)

(%)

CCL is likely to maintain the strong growth trajectory

CCL Products

3,886

292

360

23.2

over FY18-20 backed by capacity expansion and new

geographical foray

We forecast Nilkamal to report top-line CAGR of ~9%

to `2,635cr over FY17-20E on the back of healthy

Nilkamal

2,915

1,954

2,178

11.5

demand growth in plastic division. On the bottom-line

front, we estimate ~10% CAGR to `162cr owing to

improvement in volumes.

We expect sales/PAT to grow at 9%/14% over next two

years on the back of healthy demand growth in

Shreyans Industries

259

188

247

31.7

printing. Further, China had banned making paper

from waste pulp which would benefit Indian paper

companies.

The prism has diversified exposure in the different

segment such as Cement, Tile & ready mix concrete.

Prism Cement

6,773

135

160

18.9

Thus we believe, PCL is in the right place to capture

ongoing government spending on affordable housing

and infrastructure projects.

Source: Company, Angel Research