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Shubh Labh Diwali Picks 2018

Aurobindo Crompton DCB Hindustan

Pharma Greaves Bank Unilever
CE

ICICI PPAP Sundram

Lombard Automotive
GIC Fasteners

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Executive Summary
Indian market has witnessed one of its worst fall during the month of September and at the start of the October seen over a decade. The Nifty, after hitting at all-time high of 11,760,
has cracked by over 1400 points whereas Sensex is down over 4500 points from its all-time high closing. We have been one of the best performing markets for 2018 outperforming all
major emerging markets but have reversed gears as deteriorating macros and volatile inflows have turned ugly. From being +10% outperformer to EM peers, Indian market is now
more or less at par with the other markets including some of the developed ones. The above events are mainly attributed to the following reasons:
Worst performance of Rupee (INR) in recent times - Indian Rupee, in tandem with equities, also happened to be the best performing currency within the emerging market
currencies till recently has been on nightmare breaching at all lows almost on daily basis. The YTD decline however is in line with emerging currencies in fact we have done better
in comparison others.
Rising Bond yields - The status-quo on policy rates by RBI against the expectation of rate hikes has supported the bond market to some extent whereas PSU banker's interest in
buying out the assets of some of the beleaguered NBFCs is also boosting confidence. On a neck-to-neck basis while comparing with US bond yields, we have outperformed after
initial underperformance till Jan 2018.
Steady GST collection - GST collections have been unable to cross the trillion mark. While there has been a steady & predictable collection every month which has provided the
government enough confidence of meeting fiscal deficit, the markets seem to be not so sanguine. Incidently GST collection for Oct-18 crossed Rs.1 trillion mark.
Rising crude prices - Crude prices are now at a 4-year high after hitting a decadal low in its initial struggle to rise. Rising demand, curtailed supply from geopolitically exposed
nations within OPEC group, US sanctions on Iran and Russia, delay in supply resumption from shale oil producers and high speculation are some of the reasons attributable to
higher prices now being seen.
Substantial FII Outflows - The rupee route has caused lots of jitters amongst FIIs which further aggravated post the RBI policy meet causing a single day USD 500 million and USD
+1 billion outflow in just four trading sessions in the first week of Oct 2018. The FIIs have been net seller in domestic equity in 7 out of last 12 months to the tune of USD 1.5 billion
while USD 4.9 billion has been the outflow of the last two months (Sept and Oct).
DIIs on other hand have been net buyers in all months of Oct17-Oct18 investing to the tune of USD 15.6 billion. We believe, given the uncertainty in global markets, threat of
breaching fiscal target and volatile global bond yields; we could continue to see outflows from FIIs.
Improving earnings - Recently concluded result (Q1FY19) season has been fairly good with overall net profit on consolidated basis for all listed company seeing a 15% YoY growth
which has been best in last four quarters. There have been strong topline growths along with 100 bps margin improvement. The higher interest rates due to rise in yields led to
some compression in bottomline. The manufacturing companies witnessed 21% YoY growth in net profit but banks and NBFCs due to high provision and write-offs were the
laggards. Q2FY19 result session so far has been very few negative surprises and there has been improvement in PSU banking numbers thanks to improved asset quality.
Despite these concerns, equity markets should continue to remain an attractive destination for wealth creation. Fewer avenues for the abundant liquidity to make double digit returns
drives it to equities eventually. The market going forward would closely track such data flows as a) rising company earnings, b) recovering credit growth, c) expanding capex, d) solution
to NPA problems, e) easing policy rates cutting through high real effective interest rates, f) mounting tax collections, g) growing infrastructure spending especially on housing, roads,
urban development etc and h) strengthening FDI flows. We expect revival in consumption demand led by steading implementation of GST as well.

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Executive Summary
We are of the view that, for the next two years on a 3Yr rolling basis, we could see amongst strongest growth in Nifty earnings since 2011. Our belief on earnings growth are driven by
many tailwinds a) uptick in rural wage index, b) massive government expenditure program, c) near normal monsoon and hence favourable inflationary outlooks, d) low base effect, e)
hike in MSP to keep rural demand buoyant, f) speedy resolution of NPA problem signalling the end of the worst ever period for PSU banks and many more such boosters.
Therefore, we remain confined and susceptible to market actions dictated by stock specific developments amidst all these data tracking news flows. Hence, right stock selection
backed by strong fundamentals is the need of the hour and our Research provides just that.
We hereby bring you the Muhurat picks on occasion of Diwali 2018 alongside our performance for previous Diwali Picks.

Performance of Muhurat Picks - 2017:

Sr Scrip Name Reco Date Reco Price Target Achieved Days CMP Dividend Return Till
No (Rs) (Rs) Date to Target (Rs) (Rs) Date (%)
1 Bajaj Auto 12-Oct-17 3,156.0 3,750.0 - - 2,598.9 60.0 -15.8
2 Cochin Shipyard 12-Oct-17 568.0 700.0 - - 389.8 12.0 -29.3
3 Gujarat State Petronet 12-Oct-17 197.0 241.0 - - 180.0 1.8 -7.7
4 ION Exchange (India) 12-Oct-17 505.0 616.0 22-Dec-17 71 348.8 3.5 -30.2
5 Kirloskar Oil Engines 12-Oct-17 362.0 442.0 26-Dec-17 75 218.1 5.0 -38.4
6 NBCC (India) 12-Oct-17 121.0 145.5 08-Nov-17 27 58.5 1.1 -50.8
7 Nilkamal 12-Oct-17 1,634.0 1,921.0 30-Aug-18 322 1,583.8 17.0 -2.0
8 Persistent Systems 12-Oct-17 655.0 750.0 10-Sep-18 333 559.2 10.0 -13.1
9 Vijaya Bank 12-Oct-17 55.0 68.0 24-Nov-17 43 42.8 1.2 -20.0
10 Whirlpool of India 12-Oct-17 1,358.0 1,655.0 10-Sep-18 333 1,375.0 4.0 1.5

Note: CMP as on 31st October, 2018

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Our Comparison with Other Brokerages
Our Diwali Picks of 2017 achieved targeted returns for 70% of the stocks as can be seen in the charts below. We have also highlighted our past performance alongside other leading
broking houses. Brokerage 1 had recommended 7 stocks while Brokerage 2 had recommended 9 stocks. Brokerage 3 and Brokerage 4 came up with recommendations for 5 and 10
stocks respectively.

Chart 1: Return of last year's (2017) Diwali Picks…Includes Dividends Chart 2: The average days-to-target and target achievement %

Due to recent macro and global economic events, the equity markets did not perform well because of which the average and mid-average returns have SBICAP Securities' Diwali Picks had 70% achievement ratio with 7 out of 10 stocks hitting targets. While Brokerage 2 having 89% achievement ratio, had
been negative for all the Brokerage stocks. The average returns generated by SBICap Securities' Diwali Picks from 12th Oct 2017 to 31st Oct 2018 8 out of 9 stocks recommended by them hitting targets. Likewise Brokerage 1's achievement was for 5 out of 7 recommendations and Brokerages 3 & 4
was -20.6%. SBICap Securitites' Diwali picks managed to -20.6% amongst the peers with the lowest returns being of Brokerage 3 with -29.1 returns.
achievement was 3 out of 5 and 6 out of 10 recommendations respectively. The average time taken to reach the target was 172 days for SBICAP Securities
Mid-average returns are computed in a similar fashion by excluding the highest return and lowest return stocks. Excluding the highest return (Whirlpool
of India @ 1.5%) and lowest return stocks (NBCC India @ -50.8%), the mid-average returns of SBICAP Securities Diwali Picks too managed to stay due to slow uptick in stocks like Persistent Systems and Whirlpool of India (333 days).
at -19.6% amongst the peers with lowest mid-average returns being -25.5% of Brokerage 4.

Chart 3: Stocks reaching targets within 90 days and after 90 days Chart 4: The offered returns versus actual returns generated (for target hitting stocks only)

SBICAP Securities' Diwali Picks had most of the stocks reaching target within 90 days amongst the peers. It had 4 stocks reaching targets within 90 days The actual average annualized returns for those stocks that hit target is measured as the average of the returns earned on exiting the stock at its target
and 3 stocks reaching targets after 90 days. With Brokerages 2 & 4 having most of the stocks reaching target after 90 days, SBICAP Securities was the third price. The earlier the target gets hit, the higher is the annualized returns. In that respect SBICAP Securities gave 288.2% returns. However, one must note
that 288.2% is computed only for 7 of the recommended 10 stocks even as its other 3 are yet to hit their targets. Likewise Brokerage 4 is for 6 out of 10,
amongst its peers to had stocks reaching target after 90 days. Brokerage 1 is 5 out of 7, Brokerage 2 is 8 out of 9 and Brokerage 3 is 3 out of 5. The offered average returns are the average of all the target returns
prescribed by the brokerages while making their recommendations.

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Shubh Labh Diwali Picks 2018

Aurobindo Pharma Crompton Greaves CE DCB Bank Hindustan Unilever

Target: ` 869 Target: ` 269 Target: ` 190 Target: ` 2008

11% 23% 19% 23%

CMP: ` 781 CMP: ` 218 CMP: ` 159 CMP: ` 1639

ICICI Lombard GIC PPAP Automotive Sundram Fasteners

Target: ` 1059 Target: ` 510 Target: ` 695

26% 26% 31%

CMP: ` 840 CMP: ` 406 CMP: ` 533

Note: CMP as on 2nd November, 2018; Our Institutional Research recommendations may differ from above as they are on a continuous coverage basis.

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About Muhurat Trading
Indians are avid followers of rituals and customs celebrating various festivals over the year. Among them the most revered and spiritual occasion is 'Diwali', one of the
holy 'saadhe tin muhurat' according to Hindu religion. Religious Indians are strong believers of 'Shagun' and 'Muhurat', which means an auspicious occasion. Traditional
business communities in India start their new financial year on the 'Muhurat' with 'Laxmi Puja', praying goddess 'Laxmi' and earning her holy blessings for prosperity
and wealth.
'Samvat', a well heard word in financial markets is a short form of Sanskrit word 'Samvatsar' which means a year. Vikram Samvat is the beginning of Hindu new year
celebrated on 'chaitra shukla pratipada'. The ruler of this samvat is Lord Indra whereas Moon is both, the king and the minister. According to astrologers, 'Plavang' will
be moderately conducive on economic front for the country.
Stock exchanges in India arrange for a special trading session on the eve of 'Diwali'. Traders welcome a new year with a traditional ceremony of 'Laxmi Puja'. Older
books of account are closed and new books are opened with Puja. Customary small trades are placed by traders as 'shagun', a symbolic start of new session on holy
'Muhurat', believing that the whole session will continue to bring prosperity and create wealth for them.
With this context we bring you, Seven muhurat picks for this muhurat trading session.

"With a hope that you attain success and bliss with every light that is lit during the Diwali"

“Wish You a Very Happy Diwali”

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Aurobindo Pharma Ltd.
STOCK DATA Aurobindo Pharma Ltd. is a pharmaceutical manufacturing company incorporated in 26th December 1986 as a private limited company.
BSE Code 524804 The company is engaged in producing generic pharmaceuticals and active pharmaceutical ingredients (API). Its product portfolio
NSE Code AUROPHARMA constitutes of six major therapeutic segments such as neurosciences, cardiovascular, anti-retrovirals, anti-diabetics, gastroenterology
and cephalosporins, among others. The company has over 10 manufacturing units and three research and development centres.
CMP (Rs) 781.4
Target Price 869.2 Key Investment Rationale:
Upside Potential 11.2 Diversified Product Portfolio with Global Marketing network: The Company has diversified in-line portfolio of market leading
products in attractive therapeutic areas. The company operates in various business units such as API, formulations, custom synthesis,
FINANCIAL SNAPSHOT
ARVs/HIVs, peptides, neutraceutical and aurozymes. The company has wide range of Cephalosporins (Oral & Sterile) and anti - virals
Particulars FY17A FY18A FY19E FY20E
in addition to macrolides, anti-ulcerants, quinolones, semi-synthetic penicillins and formulations for domestic and export market. It
Net Sales (Rs Cr) 14909.5 16232.9 18328.1 22019.9
has tremendous global reach marketing its products in over 125 countries having strong foothold in US and EU.
Growth (%) 8.1 8.9 12.9 20.1
EBITDA Margin (%) 23.0 23.2 21.9 22.3 Worthy Strategic Acquisition with Sandoz Inc., USA: Aurobindo Pharma USA Inc., a wholly owned subsidiary of Aurobindo Pharma
Net Profit (Rs Cr) 2301.7 2423.2 2540.5 3033.4 Limited has recently entered into a definitive agreement with Sandoz Inc., USA to acquire its dermatology and oral solids business.
EPS (Rs) 39.3 41.4 43.4 51.8 The acquisition is in line with the company's strategy to strengthen and grow its business and to expand and enhance its product
Growth (%) 14.6 5.2 4.8 19.4 portfolio offerings in key therapeutic areas. This acquisition will catapult Aurobindo into the top league in the US generics market;
PE (x) 19.9 18.9 18.0 15.1 it will become the 2nd largest generic player in the US by number of prescriptions and the 2nd largest dermatology player in terms
EV/EBITDA (x) 14.5 13.2 12.4 10.1 of annual revenue. Importantly, it will add ~300 products including oral solids (70% of revenue) and dermatology (30%) portfolio.
P/BV (x) 4.9 3.9 3.3 2.7
Strong R&D: Innovation and creation backed by strong R&D is an essential success factor for a pharmaceutical company and Aurobindo
Dividend Yield (%) 0.4 0.5 0.4 0.4
aims to achieve it by investing heavily in its R&D efforts for creating high value complex products and drug delivery system. The
ROE (%) 27.6 23.0 19.8 19.8
company has one of the largest R&D in India with three research centres spread over 16000 square metres. It has in-house expertise
Source: Bloomberg / Thomson Reuters / SSL Research
in product development with over 700 scientists employed. It is also associated with UNO for development of ARVs. The company
invests to acquire top notch technologies to strengthen early stage pipeline globally.
Robust Financials: The Company has strong revenue growth with an increasing trend since last 13 years. It generates robust return
CHART
ratios on ROE and ROCE of +10%. In Q1FY19, its revenue from operations increased by 15.5% YoY driven by healthy growth in both
formulations and API. However, the EBITDA margin before Forex and other income decreased by 7.4% YoY. At current price, the
stock is trading at 18.0x and 15.1x of its FY19/20e earning whereas on P/Bv, the same is available at 3.3x and 2.7x respectively.
Key Risks: a) any negative observations reported by USFDA may affect the growth b) inability to generate estimated results from
Sandoz deal

Technical View:
Counter has closed above its falling trend line. Additionally, MACD is showing positive crossover in monthly charts.

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Crompton Greaves Consumer Electricals Ltd.
STOCK DATA Crompton is India's market leader in fans, No. 1 player in residential pumps and has leading market positions in other product categories.
BSE Code 539876 The Company manufactures and market a wide spectrum of consumer products, ranging from fans, lamps and luminaries to pumps
NSE Code CROMPTON and household appliances such as water heaters, mixer grinders and irons. The Company has strong dealer base across the country and
a wide service network offering robust after sales service to its customers. It has been the market leader in fans, domestic pumps and
CMP (Rs) 218.3
street lighting for over 20 years. It has manufacturing locations in Goa, Vadodara, Ahmednagar and Baddi. Crompton products are
Target Price (Rs) 269.4
available in nearly 150,000 retail points across the country.
Upside Potential (%) 23.4
Key Investment Rationale:
FINANCIAL SNAPSHOT
Brand Excellence: Over the past two years, the Company has continuously invested in building its brand through its new campaigns
Particulars FY17A FY18A FY19E FY20E
which have strengthened the positioning of making your home, the best place to hang out. Not only did the Company focus on
Net Sales (Rs Cr) 3975.9 4079.7 4637.6 5306.7
impactful communication that works but also ensured that the right media selection led to high impact and deliveries across the
Growth (%) 119.5 2.6 13.7 14.4
target group. There has been significant improvement in consumer recall and perception towards the brand 'Crompton', especially
EBITDA Margin (%) 12.2 13.0 13.2 13.6
amongst the young target group.
Net Profit (Rs Cr) 283.2 323.8 386.1 477.3
EPS (Rs) 4.6 5.2 6.2 7.6 Improvement in costs: Efficiency improvement remains a key thrust area of their strategy. Execution focus on saving costs in material
Growth (%) 38.1 11.3 19.2 23.6 and overhead spending helped them drive share gain in LED lighting through cost leadership as well as improve margins across
PE (x) 47.0 42.3 35.4 28.7 product categories. These savings provided them with internally generated funds for investment in growth initiatives.
EV/EBITDA (x) 28.2 25.7 22.3 18.9
Strong segmental revenue growth: Revenue growth was led by the Company's Electrical Consumer Durable segment which grew by
P/BV (x) 26.4 17.3 14.2 11.2
15% driven by new innovations (Air 360 fans and Mini Pumps) and continued focus on their Go to Market strengthening. Revenue
Dividend Yield (%) 0.7 0.7 1.1 1.3
for lighting segment, excluding EESL, fell just below 4% due to continued price erosion in the category.
ROE (%) 75.9 49.5 44.1 43.6
Source: Bloomberg / Thomson Reuters / SSL Research
Attractive valuations: As of FY18, the revenue, EBITDA and PAT increased at 4.58%, 9.57% and 13.34% respectively. As of 6MFY19,
the revenue, EBITDA and PAT increased at 11.24%, 16.43% and 19.93% respectively whereas as of Sept 18 TTM, the revenue,
EBITDA and PAT increased at 9.13%, 20.12% and 23.99% respectively. It generates a RoCE and ROE of 29.5% and 43.1% respectively
whereas EBITDA margin stands at 13.29% on its Sept 18 TTM earnings. The Company has a D/E ratio of 0.41x. At current price, the
CHART
stock is trading at 35.4x and 28.7x of its FY19e and FY20e earnings respectively and on P/Bv, the same is available at 14.2x/11.2x
respectively.
Key Risks: a) entry of new players resulting in rise competitive intensityb) adverse commodity cost movement c) adverse cross currency
movement

Technical View:
The stock has taken support of 61.80% retracement around the level of 190 .Drawn from swing low of 125 to all-time high of 291.90
level in monthly chart.

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DCB Bank Ltd.
STOCK DATA DCB Bank Limited is a new generation private sector bank with 328 branches across 19 states and 3 union territories. It is a scheduled
BSE Code 532772 commercial bank which has contemporary technology and infrastructure, including state-of-the-art India's first Aadhaar number &
NSE Code DCBBANK fingerprint based biometric ATMs, and internet banking for personal as well as business banking customers. The Bank's business segments
are Retail, micro-SMEs, SMEs, mid-Corporate, Microfinance Institutions (MFI), Agriculture, Commodities, Government, Public Sector,
CMP (Rs) 159.2
Indian Banks, Cooperative Banks and Non Banking Finance Companies (NBFC). It has more than 600,000 active customers.
Target Price (Rs) 189.7
Upside Potential (%) 19.1 Key Investment Rationale:
Sustained earnings delivery with improving efficiency: As of Q2FY19,the bank earned Net Interest Income of Rs 282 cr as against Rs
FINANCIAL SNAPSHOT
248 cr as compared to last year. Excluding one offs in the previous year, Net Interest Income increased by 17%. Non-Interest Income
Particulars FY17A FY18A FY19E FY20E
stands at Rs 73 cr as against Rs 65 cr for the same period as compared to last year. Core Fee Income grew by 17%. As compared to
NII 797.1 995.4 1219.2 1527.8
PAT 199.7 245.3 328.5 408.6
Q1FY19, Cost Income Ratio has improved by 138 bps and stood at 58.88%. Net Interest Margin for Q2FY19 stands at 3.83% as
Adv. (Rs cr) 15817.6 20336.7 25420.9 31776.1 against 4.22% for Q2FY18 and 3.90% for Q1FY19.
YoY Growth 22.4 28.6 25.0 25.0
Robust advances growth: Net Advances grew to Rs 22,069 cr as on Q2FY19 from Rs 17,395 cr as on Q2FY18 a growth rate of 27%.
Total Ass.(Rs cr) 24046.4 30222.1 37978.3 46971.2
GNPA (%) 1.6 1.8 1.7 1.5 As on Q2FY19, the bank grew deposits by 27% to Rs 26,169 cr. Retail CASA & Retail Term Deposits continued to provide a stable
NNPA (%) 0.8 0.8 0.8 0.7 resource base to the bank. Retail deposits (including Agri and Inclusive Banking) were 75.30% of total deposits. CASA ratio stood at
Cost to Inc. Ratio(%) 60.0 59.8 58.0 58.0 24.30% as on Q2FY19 as against 25.88% as on Q2FY18, Savings Accounts year on year growth rate was 30%. Capital Adequacy Ratio
NIM (%) 3.9 3.8 3.8 3.8
(CAR) was at 15.57% as on Q2FY19 with Tier I at 12.02% and Tier II at 3.55% as per Basel III norms.
EPS 7.0 7.6 10.6 13.2
BVPS 68.3 83.0 95.3 107.4 Healthy asset quality: Gross NPA ratio stood at 1.84% as on Q2FY19 as compared to 1.86% as on Q1FY19. Net NPA ratio dropped to
P/BV (x) 2.3 1.9 1.7 1.5
0.70% as on Q2FY19 as compared to 0.72% as on Q1FY19. The provision coverage for the company stands at 76.82% as on Q2FY19
PE (x) 22.7 20.9 15.0 12.0
Div Yield (%) 0.0 0.4 0.5 0.7
as compared to 76.09% as on Q1FY19.
ROE (%) 10.0 9.8 11.0 12.1 Attractive financials and valuations: The Bank's Profit after Tax grew at 25% from Rs 73 cr in Q2FY19 as against Rs 59 cr in Q2FY18.
ROA (%) 0.9 0.9 1.0 1.0
Profit before Tax was at Rs 114 cr in Q2FY19 a stable growth as against Rs 94 cr in Q2FY18, an increase of 21 %. Operating Profit grew
Source: Bloomberg / Thomson Reuters / SSL Research
at 18% from Rs 146 cr in Q2FY19 over Rs 124 cr for the same period as compared to last year. As of FY18 the Revenue and Net Profit
CHART grew by 22% and 21% respectively. As of Q2FY19, the ROA and ROE for the company stands at 0.92% and 11.13% respectively. At
current price, the stock is trading at 15.0x and 12.0x of its FY19e and FY20e earnings respectively and on P/Bv, the same is available
at 1.7x/1.5x respectively.
Key Risks: a) asset quality deterioration b) liquidity risk c) high competition d) high cost to income ratio

Technical View:
Counter has taken support of 50% retracement around the level of 140.70. Drawn from swing low of 68.40 to all-time high of 213 level
and is trading above 38.2% Fibonacci retracement level in monthly chart.

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Hindustan Unilever Ltd.
STOCK DATA Hindustan Unilever Ltd (HUL), is an 85 year old Fast Moving Consumer Goods (FMCG) giant . Unilever today owns 67.2% of the
BSE Code 500696 company. The Company today is a market leader in the FMCG business comprising Home and Personal Care (HPC) and Foods and
NSE Code HINDUNILVR Refreshments. The Company has manufacturing facilities in 22 locations across the country and Research and Development centres in
Mumbai and Bengaluru and sells primarily in India through independent distributors and modern trade.
CMP (Rs) 1,638.5
Target Price (Rs) 2,008.3 Key Investment Rationale:
Upside Potential (%) 22.6 Wide distribution network & premiumisation: HUL has a strong distribution network comprising of millions of outlets serviced by
over 2,500 stockists and associates who help deliver Company's products. Company supports the distributors by providing a common
FINANCIAL SNAPSHOT
distribution management system which integrates with the Company's system.
Particulars FY17A FY18A FY19E FY20E
Net Sales (Rs Cr) 33162.0 35545.0 39529.7 44630.1 Robust industrial outlook:From a fundamental and medium-term perspective, FMCG markets continue to offer sizeable headroom
Growth (%) 3.0 7.2 11.2 12.9 for growth by increasing penetration as well as consumption. Secular trends of young population, growing affluence, rising urbanisation
EBITDA Margin (%) 19.1 24.9 26.2 26.8 and burgeoning digital connectivity will increase awareness and drive premiumisation. The Company, with its brands, talent and
Net Profit (Rs Cr) 4476.0 5214.0 6224.5 7319.1 investment in capabilities, is well placed to leverage the FMCG opportunity.
EPS (Rs) 20.6 24.1 28.8 33.8
Strong cashflows: The Company has been generating a steady stream of cashflows, both from operations and as free (net of capex)
Growth (%) 8.0 16.8 19.4 17.6
at a CAGR of 9.69% in the case of former and 9.98% in the case of latter over the past 5 years. The pace quickened in FY17 when both
PE (x) 79.5 68.0 57.0 48.5
grew over FY16 by ~24% and ~23% respectively and in FY18 grew over FY17 by 17% and 39% respectively.
EV/EBITDA (x) 53.9 38.7 33.0 28.6
P/BV (x) 54.5 50.0 37.6 27.5
Domestic consumer growth with improved EBITDA margin: As of Q2FY19,Domestic consumer growth was 12% with underlying
Dividend Yield (%) 1.9 1.5 1.4 1.7
volume growth at 10%. Their well-established savings programme and leverage in other expenses has enabled them to mitigate
ROE (%) 70.1 76.9 75.5 65.7
material inflation and drive margin improvement. Earnings before interest, tax, depreciation and amortization (EBITDA) at Rs. 2019
Source: Bloomberg / Thomson Reuters / SSL Research
Crores were up by 20%. EBITDA margin was up 160 bps and Profit after tax at Rs.1522 Crores grew by 23%.
Valuations: As of FY18, the standalone revenue, EBITDA and PAT increased at 8.26%, 20.32% and 24.71% respectively. As of 6MFY19,
the standalone revenue, EBITDA and PAT increased at 11.18%, 20.35% and 24.13% respectively whereas as of Sept 18 TTM, the
CHART standalone revenue, EBITDA and PAT increased at 11.15%, 22.03% and 28.36% respectively. The Company has grown at a CAGR of
3.38% and 7.41% for last 5 years at topline and bottomline level. It generates a RoCE and ROE of 73.8% and 87.2% respectively on its
Sept 18 TTM standalone earnings. The Company enjoys a debt free status. At current price, the stock is trading at 57.0x and 48.5x of
its FY19e and FY20e earnings respectively and on P/Bv, the same is available 37.6x/27.5x respectively.
Key Risks: a) rise in raw material prices may affect the performance b) stiff competition from peer group

Technical View:
Counter is taking support of long term upward sloping trend line which also coincide with support of 9 months simple moving average
in monthly chart.

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ICICI Lombard GIC Ltd.
STOCK DATA ICICI Lombard GIC Ltd. is one of the leading private sector general insurance company in India with a Gross Written Premium (GWP) of
BSE Code 540716 Rs12,600 cr for the year ended March 31, 2018. The company issued over 23.5 mn policies and settled over 1.54 mn claims as on March
31, 2018.
NSE Code ICICIGI
CMP (Rs) 839.5 Key Investment Rationale:
Target Price (Rs) 1,058.7 One of the leading private general insurance company with multi-products & multi-channel distribution networks with pan-India
Upside Potential (%) 26.1 presence: The company is the 4th largest general insurance company in India. ICICI Lombard offers general insurance solutions in
business, personal and project liabilities across rural as well as urban areas. The product portfolio includes travel insurance, vehicle
FINANCIAL SNAPSHOT insurance, health insurance, home insurance, NRI services and rural insurance etc. The company has presence in 638 out of 716
Particulars FY17A FY18A FY19E FY20E districts in India and has 23,200+ individual agents.
Equity Capital 451.2 454.0 454.0 454.0 Robust risk selection and management framework: The company having operated in the industry since fiscal 2001, has accumulated
Net worth 3725.3 4541.2 5590.7 6879.7 a wealth of data pertaining to critical risk parameters that has helped it to identify favourable product & customer segments and
Total Investments 16446.0 15079.0 11563.0 10200.0 sub-segments. The company update such risk parameters based on further loss experience and use these parameters in underwriting
Net Premium Earned 6164.0 6912.0 8163.4 9631.5 and pricing decisions.
PAT 702.0 861.8 1117.6 1357.1 Huge Industry potential: The general insurance has been gaining momentum and is growing at 16% CAGR since last 16 years. The
EPS 15.7 19.0 24.6 29.9 growth has picked up from FY2011 onwards and gross direct premium income (GDPI) for entire industry is now stance at 1.5 lakh
Book Value per share 82.6 100.0 121.8 145.0 crore as on FY18 versus Rs46,900 crore in FY11 (source - IRDA). In spite of robust growth in last 1.6 decades, the non-life insurance
Combined Ratio (%) 103.9 100.2 99.7 99.1 market penetration is grossly underpenetrated at 0.77% of GDP versus USA - 4.3%, South Africa- 2.74%, UK- 2.58%, China-1.8%,
Expense Ratio (%) 22.9 22.6 18.0 17.7 Brazil- 1.76%, Japan- 2.3% etc.
Return on Net worth(%) 18.8 20.9 22.1 21.8 Strong investment returns on a diversified portfolio: Its investment management philosophy is to earn investment returns
PE (x) 53.6 44.2 34.1 28.1 commensurate with the risks undertaken, following the principle of capital preservation and a total income approach. The investments
P/BV 10.2 8.4 6.9 5.8 from time to time include debt, equities, mutual funds, real estate and other alternative investments. As of March 31, 2018, >80%
Source: Bloomberg / Thomson Reuters / SSL Research of debt investment portfolio comprises of AAA rated sovereign paper. The overall, investment book comprises of 47.6% corporate
bond, G-sec-30% and rest in equity whereas realised return is near 10%. The solvency ratio is 2.05x which is well above IRDA
prescribed limit.
CHART
Strong financials and valuation: The growth in net premium collection has been robust growing at double digit whereas net profits
are growing at far higher speed. The company generates +20% RoE, Net margin is 23% for FY18. At current price, the stock is trading
at 34.1x and 28.1x of its FY19/20e earning whereas on P/Bv, the same is available at 6.9x and 5.8x.
Key Risks: a) Catastrophic events, including natural disasters, could materially increase its liabilities for claims by policyholders, result
in losses. b) Changes in the regulatory and compliance environment in financial sector could have a material adverse effect on business

Technical View:
Counter is trading in "Upward slopping pitchfork" and taking support at lower support line in Monthly chart.

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PPAP Automotive Ltd.
STOCK DATA PPAP is India's leading manufacturer of Automotive Sealing Systems, Interior and Exterior Automotive parts. The company's state of
BSE Code 532934 the art manufacturing facilities are located in Noida (UP), Greater Noida (UP), Chennai (Tamil Nadu) and Pathredi (Rajasthan). The
NSE Code PPAP company's core competence is in Polymer Extrusion based Automotive Sealing System and Injection Molded products. Today, the
company manufactures over 500 different products for its customers and continuously targets to achieve zero ppm in Quality and
CMP (Rs) 406.1
Delivery performance for all its customers.
Target Price (Rs) 509.9
Upside Potential (%) 25.6 Key Investment Rationale:
Widening product portfolio with improved quality level & acquiring new clients:The Company continues to secure new business
FINANCIAL SNAPSHOT
from all its customers with each passing quarter. The company is currently developing parts for 23 new models that are expected
Particulars FY17A FY18A FY19E FY20E
to start production within the next 2 years. These parts are being developed for the company's existing customers as well as for
Net Sales (Rs Cr) 345.0 397.6 437.3 485.0
new customers like Hyundai and MG Motors. During Q2FY19, 21% of the part sales were from derived from new vehicle launches.
Growth (%) 8.3 15.2 10.0 10.9
Strong auto-industry growth outlook likely to favourable:The company derives~95% of sales from the passenger vehicle segment
EBITDA Margin (%) 19.3 21.3 21.1 21.8
of the Indian Automotive Industry. The company's automotive sealing products are used in ~70% of total passenger vehicles (PV) in
Net Profit (Rs Cr) 28.0 39.3 43.3 52.1
India. India is expected to become the third largest vehicle producing country in the world. The rapid urbanization, coupled with an
EPS (Rs) 20.0 28.1 30.9 37.2
overwhelming growth in the middle class population and their incomes, has enabled India to become extremely conducive for the
Growth (%) 99.3 40.6 10.1 20.3
automobile industry to flourish which is likely to continue resulting in favourable situations for PPAP.
PE (x) 20.3 14.5 13.1 10.9
EV/EBITDA (x) 9.1 7.1 6.6 5.7 Major portion of sales from top OEMs: Maruti Suzuki including Suzuki Motors Gujarat continues to remain PPAP's top customer
P/BV (x) 2.4 2.1 1.9 1.6 accounting for 46% of the part sales. The company's second biggest customer, Honda has contributed 34% to the company's topline
Dividend Yield (%) 1.3 0.9 1.5 1.5 of Q2FY19 quarter. Nissan, Toyota & Tata are the other sales contributors with total contribution of 15%. It continues to focus on
ROE (%) 12.5 15.5 15.0 15.8 developing strong relationships with its customers in the Indian Automotive Industry.
Source: Bloomberg / Thomson Reuters / SSL Research Robust Financials: For past two years, company has shown a CAGR of 11.7% & 66.5% at the topline and bottomline level respectively
whereas the operating profit has shown a CAGR growth of 28.4%. Company has improved the return ratios for last 3 years
consistentlyalong with debt-equity which stands at<0.2%. Despite the current global turbulences, rise in the petroleum prices, adverse
CHART exchange rates, a non-buoyant market, company has been able to improve the revenues and sustain strong overall performance which
suggests the strong positioning of company and scope for financial performance acceleration in future. At current price, the stock is
trading at 13.1x and 10.9x of its FY19/20e earning whereas on P/Bv, the same is available at 1.9x and 1.6x respectively.
Key risks: a) Weakening economy may slower the growth of auto industry to which company is directly related; b) over-exposure to top
2 clients may be risky c) high raw material prices and pass on to end user happen with lag effect.

Technical View:
Counter has taken support of 61.8% retracement around the level of 344 .Drawn from swing low of 109.30 to all-time high of 723.10
level in monthly chart.

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Sundram Fasteners Ltd.
STOCK DATA Sundram Fasteners Ltd. was incorporated in the year 1966. The company is world leader in manufacturing of critical high precision
BSE Code 500403 components for automotive, infrastructure, windmill and aviation. The products includes fasteners, power train components, sintered
NSE Code SUNDRMFAST metal parts, iron powder, cold extruded parts, radiator caps and wind energy components amongst the other. The quality products
helped Sundram becoming the preferred supplier for global OEMs and aftermarket segment.
CMP (Rs) 532.7
Target Price (Rs) 695.3 Key Investment Rationale:
Upside Potential (%) 30.5 Global leader in Fastener with wide product application: The company is a TVS group fastener maker (promoter holding of 49.5%)
producing high tensile fasteners (~38% of revenues), pump assemblies (~20%; used in engines), engine components and powder
FINANCIAL SNAPSHOT
metal parts that comprise ~80% of its revenues. The company manufactures wide range of high tensile fasteners for precision driven
Particulars FY17A FY18A FY19E FY20E
sectors like Automotive, Wind Energy, Aviation, Aerospace, Defence, Farm Equipment and infrastructure. In auto space, their sales
Net Sales (Rs Cr) 3302.9 3831.2 4628.7 5380.4
are largely for the Commercial Vehicle segment (~55%-60%) while others are for Passenger Car and Two Wheeler segments.
Growth (%) 1.5 16.0 20.8 16.2
EBITDA Margin (%) 17.2 17.8 17.9 18.1 Global Presence, with sticky OEMs as their clients: The company has 100% subsidiaries in Germany (Piener), UK (Cramlington) and
Net Profit (Rs Cr) 337.5 386.6 504.5 615.8 China (Zhejiang). They also have a 74% subsidiary in India which is a 100% Export Unit that manufactures engine valve guides and a
EPS (Rs) 16.1 18.4 24.0 29.3 100% subsidiary called Upasana. The strategic presence help to build strong client relationship with global OEMs across different
Growth (%) 170.6 14.3 30.5 22.1 parts of the world and the quality products help to retain the clients. The company's export is currently 1/3rtd of total sales which
PE (x) 33.1 29.0 22.2 18.2 company intended to ramp-up to 50% going ahead.
EV/EBITDA (x) 20.2 16.9 13.9 11.8
Slow transition to EVs will not materially affect the company: The industry expects the EVs to be reality to its full potential over
P/BV (x) 8.5 7.0 5.6 4.5
next 1-1.5 decades. The slow transition to EVs of its client is not expected to affect materially to Sundram Fasterners. The company
Dividend Yield (%) 1.2 0.8 0.9 0.9
works for most of global OEMs to understand the hybridisation and transition to EVs going ahead. The company has two larger EVs
ROE (%) 28.7 26.6 28.2 27.5
manufacturers as it clients and hence it is prepare to adjust its business operation. The company is likely to spend Rs 350 crore for
Source: Bloomberg / Thomson Reuters / SSL Research
expansion going ahead.
Robust Financials: The Company has strong balance sheet with D/E ratio of <0.5x. The financial numbers of the company in the last
many quarters are robust and there has consistent growth in sales and PAT. The company generates robust return ratios on ROE and
CHART
ROCE of ~25%. The margin at EBITDA level is at 18%+ which has improved by 600 bps since last 3 years. At current price, the stock is
trading at 22.2x and 18.2x of its FY19/20e earning whereas on P/Bv, the same is available at 5.6x and 4.5x respectively.
Key Risks:a) Weakening economy may slower the growth of auto industry to which company is directly related; b) Inability to shift
towards EV may affect performance of company

Technical View:
The counter has closed above its 20 period middle Bollinger band which may act as a crucial support on the monthly chart. The middle
band is a simple moving average that is usually set at 20 periods.

www.sbismart.com 14
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Disclosures & Disclaimers
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