[PDF] Market snapshot Today’s top research idea

SANTE SERVICE DAX

fragiles Depuis 2017, SANTE SERVICE DAX réalise les pres- tations de soins dans le cadre du SSIAD et a conventionné avec quatre partenaires de Services d'Aide A Domicile (SAAD) VITAME service 40, CIAS MACS, CIAS Pays d'Orthe et d'Ar- rigans, ADMR 40 L'Hospitalisation A Domicile, I'HAD comme nous l'appelons,

Liste des Services d Aide et d Accompagnement à Domicile

Services prestataires d’Aide à Domicile non habilités Aide Sociale et à tarification libre (l’aide à domicile est salarié du service) : APR Services 05 58 91 16 16 10 avenue de la Liberté 40 990 SAINT PAUL LES DAX VITAME Services 05 58 58 08 74 430, route de Oeyreluy 40180 SEYRESSE

FTSE100 DAX 6,096 9,513 14% 18% -23% 19% -37% -114%

Biuro Analiz DMBH Biuletyn Dzienny 29 lutego 2016 6 stron Informacje ze Spółek Analityk 3,14 ha w Krakowie za 40,8 mln PLN 4Q15 EBIT Rafał Materka

We add value as one company - BASF

BASF Capital Market Story March 2015 1 150 years 150 years We add value as one company Wayne T Smith Member of the Board of Executive Directors

Adding value through growth and innovation

Change in –9 6 –32 6 –60 4 –30 8 138 1 372 4 381 2 298 7 –18 3 –10 4 2 Milestones 4 Letter from the Chairman of the Board of Executive Directors 6 Board of Executive Directors

Market snapshot Today’s top research idea

Nifty-M 100 20,098 0 1 40 0 S&P 500 2,627 1 0 17 3 Nasdaq 6,912 0 5 28 4 FTSE 100 7,461 1 0 4 4 DAX 13,060 0 5 13 7 clouded by the goods and services

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Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

29 November 2017

Research Team (Gautam.Duggad@MotilalOswal.com)

Equities - India Close Chg .% YTD.%

Sensex 33,619 - 0.3 26.3

Nifty-50 10,370 -0.3 26. 7

Nifty-M 100 20,098 0.1 40.0

Equities-Global Close Chg .% YTD.%

S&P 500

2,627 1.0 17.3

Nasdaq 6,912 0. 5 28.4

FTSE 100 7,461 1.0 4.4

DAX 13,060 0. 5 13.7

Hang Seng 11,706 -0. 6 24.6

Nikkei 225 22,486 0.0 17.6

Commodities Close Chg .% YTD.%

Brent (US$/Bbl) 63 - 0.7 13.8

Gold ($/OZ) 1,293 -0.1 11.5

Cu (US$/MT) 6,776 -2. 0 22.7

Almn (US$/MT) 2,088 -1. 5 22.5

Currency Close Chg .% YTD.%

USD/INR 64.4 - 0.2 -5.1

USD/EUR 1.2 - 0.5 12.7

USD/JPY 111.3 0.0 -4.9

YIELD (%) Close 1MChg YTDchg

10 Yrs G-Sec 7.0 0.0 0.5

10 Yrs AAA Corp 7.8 0.0 0.2

Flows (USD b) 28-Nov MTD YTD

FIIs 0.0 3. 0 8.5

DIIs -0.1 1.0 12.4

Volumes (INRb) 28-Nov MTD* YTD*

Cash

369 385 306

F&O 6,526 6, 607 5,627

Note: YTD is calendar year, *Avg

Today"s top research

idea Market snapshot

Cos/Sector Key Highlights

Alkem Laboratories Uniquely positioned; Fundamentals strong

Crompton Greaves Consumer

Electricals (Corner Office) Banking on innovation to drive growth Siemens 4QFY17 Results Better-than-expected margin leads to in-line operating performance

Alkem Laboratories

- Uniquely positioned; Fundamentals strong

Valuations reasonable

Domestic business set to grow at >20% over next three quarters

Lower tax rate from FY19 to boost PAT by ~10%

Opportunity for margin improvement in medium term

Chronic - low base and efficiency improvement to drive growth Strong presence in Acute (~90% of domestic sales) to provide stability

OTC business - a new growth avenue

Indechemie, Cachet a drag on margins, but scope of recovery visible US business: Two thirds of pending portfolio to be approved in next 24 months Arguing for a multiple re-rating: We have upgraded ALKEM to Buy from Neutral, with a target price of INR2,500 @24x December 2019E PER (v/s INR1,950@

1HFY20E PER. We argue for a multiple re-rating, given the company's superior

earnings growth profile (>25% EPS CAGR over FY18-20E), improving return ratios (RoIC to improve to ~30% by FY20E from ~20% in FY18E), net cash balance sheet,

and high exposure to the domestic business which accounts for ~90% of its profits. High growth in 2HFY18 on back of lower base

Research covered

Chart of the Day:

Alkem Laboratories - Uniquely positioned; Fundamentals strong;

valuations reasonable Global firms line up for India"s largest convention centre; Rs 26,000-cr project may

create 5L jobs Nearly 15 global players including Samsung Construction and China Construction are competing with home-grown companies such as L&T and

Reliance Infrastructure for baggin

g the contract for...

Piping hot news

29 November 2017 2

GST may cloud GDP data for

September quarter

The September quarter GDP

growth data, which will be released on Thursday, is expected to show an acceleration in economic growth from 5.7% in the

June quarter, the slowest in three

years, but the data may be clouded by the goods and services tax (GST) rollout... Maggi fails lab test in UP, Nestle India imposed fine of Rs45 lakh

The district

administration of Shahjahanpur, Uttar Pradesh, has slapped a fine on Nestle India and its distributors after its popular noodles brand Maggi allegedly failed to pass the lab test, even as the FMCG major maintained that "it's a case of application of incorr ect standards". The district administration has imposed a fine of Rs45 lakh on Nestle, Rs15 lakh on its three distributors and Rs11 lakh on its two sellers. According to the district authorities, it had collected the samples in November 2016 and sent them for lab test. The lab test found ash content above the permissible limits of human consumption...

Second round of auction of

DSFs likely by January

-end

The government plans to launch

by January-end the second round of auction of discovered small fields (DSF) in which, drawing lessons from the first round, fields will be grouped in bigger contract areas and deepwater fields will be left out. A total of 61 fiel ds with reserve of about 180 million tonnes of oil and oil equivalent will be offered in this round,...

Dharmendra Pradhan pitches

for GST on natural gas

Oil minister Dharmendra Pradhan

on Tuesday made a strong case for inclusion of natural gas in the goods and services tax (GST) regime, saying that if polluting coal can be included, then the environment-friendly fuel certainly deserves a place in the new regime...

RCom to sell DTH arm Reliance

BIG TV to Pantel, Veecon

Media

Anil Ambani-led Reliance

Communications (RCom) on

Tuesday said that it will sell its

direct-to-home (DTH) subsidiary

Reliance BIG TV Ltd to Pantel

Technologies Pvt. Ltd and Veecon

Media and Television Ltd.Pantel

Technologies is an information

technology and communication devices company with operations in India, South-east Asia, Gulf

Cooperation Council and Africa.

Veecon Media and Television Ltd

is a New-Delhi based company with interests in production, distribution and sale of television content

Coal India to raise executive

salaries at a cost of Rs 800 crore

Coal India Ltd, the world's largest

coal miner, will pay its executives about Rs 800 crore ($124.08 million) in salary rises retroactive from January this year, interim chairman Gopal Singh told

Reuters. The pay increase, which

was approved by the board last week,...

With the new bankruptcy law,

the lender-borrower experience is set to change

Soon after becoming finance

minister in 2014, Arun Jaitley, in an interaction with bankers, asked what is the one thing that he could do to make their lives better. There was near unanimity in the answer: Give us a bankruptcy law...

Kindly click on

textbox for the detailed news link

In the news today

2 5 6 7 4 1 3

29 November 2017 3

Uniquely positioned

Fundamentals strong; valuations reasonable

Domestic business set to grow at >20% over next three quarters: Alkem Laboratories (ALKEM) has guided for GST-adjusted (impact of ~7%) growth of mid-teens in the domestic market in FY18. This would translate into >20% growth in 2HFY18 (growth will be >25% if we normalize it for GST). Also, in

1QFY19, we expect similar growth levels due to a low base effect (had lost

almost one month of sales in 1QFY18 due to GST-related channel destocking). We expect strong growth over the next three quarters, given 1) a low base of

2HFY17 (impacted by demonetization) and 1QFY18 (impacted by GST) and 2)

likely recovery of 8-10 days of sales in 3QFY18 due to channel restocking post GST. Also, the domestic business EBITDA margin has historically been >21% (>25% in Acute). Thus, high growth in the domestic business will lead to ~20% EBITDA margin over the next three quarters, as against a normalized EBITDA margin of ~17-17.5% for the company. Lower tax rate from FY19 to boost PAT by ~10%: Tax rate for ALKEM has shot up to ~23% in FY18, as two of its three plants have come out of the tax haven status. However, given that the new Sikkim plant has become operational and will enjoy full tax benefits, the tax rate is expected to come down significantly to ~15-16% in FY19. Besides this, ALKEM is planning to shift production of profitable products to the new Sikkim plant, which will ensure tax savings. Opportunity for margin improvement in medium term: Acute business (ex Indchemie and Cachet), which accounts for ~52-53% of its total sales, makes an EBITDA margin of >25%. However, the consolidated EBITDA margin for ALKEM was significantly low at ~17% in FY17 and 17.5% in 1HFY18E, primarily because all the other business verticals (~48% of revenue) make sub-par EBITDA margin of ~7%. Indchemie, Cachet and Chronic businesses make EBITDA margin of 5-9% in the domestic market, ~5-7% in the US and 11-12% in ROW. The US and domestic chronic businesses have been delivering lower margins, as these verticals were in the investment phase and achieved breakeven only 12-18 months back. There is scope for improvement though, in our view - if only the US and Chronic business EBITDA margins improve to ~20%, the consolidated EBITDA margin can improve by ~400bp to ~21%. Chronic - low base and efficiency improvement to drive growth: Chronic has delivered top-line growth of ~21% over the last four years. We expect this segment to continue delivering robust growth, led by the low base effect, the focus on high-growth therapies (cardio, derma, anti-diabetic, etc.) and the contribution from its specialized sales team of ~1,700 people. We expect salesforce productivity in Chronic to improve considerably (currently at ~INR3m v/s company average of INR6.5m), led by deeper therapy penetration, insignificant addition to the team and investment in brand building. This will help fuel growth and drive profitability due to better operating leverage.

Update

| Sector: Healthcare

Alkem Laboratories

CMP: INR1,968 TP: INR2,500(+27%) Upgrade to Buy

BSE Sensex S&P CNX

33,619 10,370

Stock Info

Bloomberg ALKEM IN

Equity Shares (m) 119.6

52-

Week Range (INR) 2238 / 1535

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

M.Cap. (INR b) 231.5

M.Cap. (USD b) 3.6

Avg Val, INRm 87.3

Free float (%) 33.0

Financial Snapshot

(INR b)

Y/E Mar 2017 2018E 2019E

Sales 58.5 61. 8 72.5

EBITDA 10.0 11.6 13.8

NP 8.9 8. 1 10.7

EPS (INR) 74.6 68.0 89.5

EPS Gr. (%) 6.0 -8. 9 31.7

BV/Sh. (INR) 373.7 426.4 495.7

RoE (%) 21.9 17.0 19.4

RoCE (%) 20.1 16.0 21.5

P/E (x) 26.5 29.0 22.1

P/BV (x) 5.3 4.6 4.0

Shareholding pattern

As On Sep-17 Jun-17 Sep-16

Promoter

67 67 66.9

DII 2.3 2. 4 3.3

FII 4.1 4. 2 3.7

Others 26.6 26.4 26.1

FII Includes depository

receipts

Stock Performance (1

-year)

29 November 2017 4

Strong presence in Acute (~90% of domestic sales) to provide stability: We expect ALKEM to continue outperforming industry growth of ~10% in the Acute segment. This will be driven by its leadership status in key therapies (anti- infectives, GI, Pain/ analgesics and Vitamin), bridging of gaps in the product portfolio, and strong relationships with specialists (prescription coverage of>70%). OTC business - a new growth avenue: ALKEM has been investing over the last

12 months to establish presence in the INR145b OTC segment. Currently, OTC

sales for ALKEM stand at ~INR700-800m. Tiger Balm is the main product in this segment, with secondary sales of INR600-700m. According to Emami investor presentation, the pain relief balm market is ~INR9b, with Zandu Balm holding ~56% market share. In FY17, ALKEM entered into an alliance with Haw Par Healthcare to exclusively market Tiger Balm. Given that 90% of balm sales happen through chemists, the company is gearing up to gain a market share in this segment. The company has also roped in Bollywood celebrities to promote its condom brand ‘Playguard" (market size: ~INR4-5b) and pregnancy detection kit ‘Pregakem" (market size: ~INR2.5-3b). Indechemie, Cachet a drag on margins, but scope of recovery visible: Indchemie and Cachet subsidiaries account for ~9-10% of the company's revenue. Although Indchemie (6% contribution to revenue) has a higher gross margin (~68%), its EBITDA margin stands at only ~9%. Cachet (5% contribution) has a very low gross margin (~46%) and EBITDA margin (1%). Given that Indchemie enjoys a better gross margin, cost efficiencies can help improve EBITDA margin for this subsidiary. We believe that margin improvement for Cachet may take time, as this would require a change in the product line, along with cost efficiencies. US business: Two thirds of pending portfolio to be approved in next 24 months: ALKEM's US business has already crossed breakeven point in 1HFY16. Its own front-end presence, coupled with ramp-up of existing products and new launches, will help drive profitability, in our view. The US business margin will continue improving led by operating leverage, as ~30 ANDA approvals are expected for ALKEM over the next 24 months. Arguing for a multiple re-rating: We have upgraded ALKEM to Buy from Neutral, with a target price of INR2,500 @24x December 2019E PER (v/s INR1,950 @ 1HFY20E PER. We argue for a multiple re-rating, given the company"s superior earnings growth profile (>25% EPS CAGR over FY18-20E), improving return ratios (RoIC to improve to ~30% by FY20E from ~20% in FY18E), net cash balance sheet, and high exposure to the domestic business which accounts for ~90% of its profits.

29 November 2017 5

Banking on innovation to drive growth

Focus shifts to coolers and water heaters within appliances We met Mr Shantanu Khosla, Managing Director of Crompton Greaves Consumer Electricals (CROMPTON) to get an update on its business and understand its strategy. Our key takeaways: Focus on meaningful innovation rather than incremental changes; targeting to be among the top two across categories Instead of multiple small changes, CROMPTON will focus on a few big changes/products with meaningful innovation for the customer. An example of a big change is anti-dust fans, which have done very well for the company. CROMPTON is targeting at least one big change each year. Within fans, it would be launching 2-3 new innovations in the upcoming summer season. CROMPTON does not want to be in multiple categories, but number-1 or number-2 in select categories. Made key changes in organization over two years to make it sustainable and agile In the last two years, the priority was to have a sustainable company and address gaps - use capabilities present in-house effectively or source from competition. The company has implemented a centralized product supply, which was absent earlier. It has appointed a national sales manager to run nationwide programs - earlier, the focus was mor e region-specific. To ramp up presence in the B2C LED lighting segment, the company has recruited a

Lighting Head from a key competitor.

CROMPTON has substantial quality focus and has hired a Quality Head. Demand planning: Earlier, CROMPTON depended on sales feedback for planning. It now has a software tool for demand projection and analysis. Design: CROMPTON has increased focus on design and has recruited a Design Head for fans. The company has hired a new Head for West India to increase share in this market.

Geographical and product diversification

- aim is to get deeper; targeting semi-urban and top end of rural households

CROMPTON is considering a new category/acquisition that is profitable, is a strategic fit for the company, and it

can add value to the acquired asset. It has looked at Kenstar, as it wants to be number-2 in the profitable coolers segment. In LED lighting (B2C), CROMPTON had a meaningless presence two years ago and is now number-3.

In terms of geography, CROMPTON is well diversified. By category, in fans, while it has 27% pan-India share, it

has 40% share in South India. It is aiming at deeper penetration and is targeting semi-urban and top end of rural households.

Crompton Greaves

Consumer

Electricals

Mr Shantanu Khosla

Managing Director

Mr Khosla has been with

CROMPTON since August

2015. He has been roped in

from P&G, where he spent

30 years, of which 13 years

were as CEO & MD of P&G

India. Under his leadership,

P&G India's revenue grew

15 -fold to USD1.8b, making it one of the fastest growing consumer companies in

India. Revenue growth at

P&G was driven by

expansion of product portfolio and distribution reach.

28 November 2017

CornerOffice

Interaction with the CEO

the

29 November 2017 6

Fans - share increased to 27% from 23% two years ago

Majority of users are economy users. CROMPTON aims to sell more of premium fans by launching innovative

products (like anti-dust fans) that address customer needs. Within fans, the aim is to grow faster than the market by consistently taking share. Lighting - significantly increased share in B2C LED lighting

Two years ago, CROMPTON identified the need to significantly scale up presence in LED lighting. Price was the

biggest factor stopping consumers from switching to LED bulbs, which retailed at INR300-400 against INR60 for

CFL bulbs. CROMPTON has reduced prices to bring LED bulbs in parity with CFL bulbs.

It has designed bulbs to have more lumens per watt - this has reduced prices, as there is less need for wires,

casing, etc, which lowers costs.

The company is working on the next set of product innovations in lighting - 50% of B2C lighting is LED bulbs, but

the balance is batons and tube lights, where CROMPTON is reducing prices to increase customer adoption.

Key drivers for the lighting segment are (a) higher rural electrification, (b) infrastructure development, and (c)

switch from CFL bulbs to LED bulbs.

Consumer appliances

- focus on coolers and water heaters

Focus is on coolers and water heaters. Once CROMPTON achieves success in these two categories, it will look at

home/kitchen appliances.

Within coolers and water heaters, the aim is to (a) identify customer needs, (b) develop innovative products to

address these needs, (c) strengthen channel distribution, (d) increase penetration within the channels, and (e)

correct prices. CROMPTON is working with third parties for the designs of coolers and water heaters. Pumps

CROMPTON is the market leader in residential pumps, but has not been as successful in agricultural pumps.

It is trying to identify better products in agricultural pumps. It is also putting in place a better and bigger distribution channel for agricultural pumps. Adopting direct distribution model for all categories

CROMPTON began direct distribution to the retailer in the South with Lighting. It has been quite successful and

the model is now being rolled out for fans.

Along with direct distribution, the company is implementing sales force automation, which would help in this

regard.

To resolve channel conflict, CROMPTON has tried to implement uniform pricing across distribution channels. It

has reduced the gap between MRP and MOP. (The biggest conflict is usually between the distributor and the

wholesaler, as the wholesaler tries to undercut the distributor).

GST has helped reduce channel conflict, as (a) pricing is uniform due to similar taxes, and (b) the tax structure

enables better location of warehouses. Online retailers not a threat; exploring tie-ups for certain product categories

CROMPTON believes in-house brands and online players will be unable to disrupt the market in the categories it

operates in.

Since categories like fans and pumps need installation and regular servicing, online players will not be able to

make a dent. CROMPTON has 500 service centers, which the online retailers cannot match. Only in categories where there is a "plug and play" model can online retailers can make a dent. CROMPTON has tied up with a few online players for sale of its air purifiers.

29 November 2017 7

BSE SENSEX S&P CNX

CMP: INR1,215 TP: INR1,313(+7%) Neutral

33,619 10,370

Bloomberg SIEM IN

Equity Shares (m) 356.1

M.Cap.(INRb)/(USDb) 435.2/6.6

52-Week Range (INR) 1470 / 1045

1, 6, 12 Rel. Per (%) -6/-19/-15

Avg Val, INRm 273

Free float (%) 25.0

Financials & Valuations (INR b)

Y/E Sep 2018E 2019E 2020E

Net Sales 141.7 146.1 162.2

EBITDA 15.0 17.0 18.6

PAT 11.0 12.6 14.1

EPS (INR) 31.0 35.4 39.6

Gr. (%) 56.9 14.3 11.8

BV/Sh (INR) 236.2 258.9 284.2

RoE (%) 13.1 13.7 13.9

RoCE (%) 19.0 19.8 14.6

P/E (x) 38.2 33.4 29.9

P/BV (x) 5.0 4.6 4.2

Estimate change

TP change

Rating change

Better-than-expected margin leads to in-line operating performance

4QFY17 operating performance in-line: On a reported basis, revenue

increased 1.7% YoY to INR31.4b (est. of INR39.4b). Muted revenue growth can be attributed to a weak performance in the power & gas (-14% YoY), mobility (-25% YoY) and building & technologies (-7.6% YoY) segments. EBIDTA improved 15% YoY to INR3.2b, with the margin at 10.1% (+120bp

YoY; est. of

8.3%). Adjusted net profit from operations declined 8.6% YoY to

INR2.0b, below our estimate of INR2.7b.

Gross margin expanded 20bp YoY to 32.2% in 4QFY17. EBITDA margin of

10.1% came in ahead of our estimate of 8.3%. EBIT margin expanded 100bp

YoY to 8.4% on account of margin improvement across segments, barring digital factory. Power & gas segment improved margin by 800bp YoY, led by a better revenue mix and one-off settlement from a customer. Order inflow up 10% YoY; book-to-bill at 1.1x: Order intake for the quarter stood at INR27.0b (+10% YoY; INR24.5b in 4QFY16), driven by finalization of base orders. The company"s book-to-bill stood at 1.1x, with an order book position of INR122.6b. Valuation view: We cut our FY18 and FY19 estimates by 7% each to factor in lower margins in the Process Industries & Drives (primarily serving the renewables industry) and Power & Gas segments. SIEM trades at

38.2/33.4/29.9x its FY18/19/FY20E EPS of INR31/35.4/39.6. Given expensive

valuations, we maintain

Neutral with a TP of INR1,313, based on 35x

Mar"20E EPS.

Quarterly Performance (Standalone) (INR Million)

Y/E September

FY16 FY17

FY16 FY17

MOSLe

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

Total Revenues 23,142 27,836 26,204 30,906 22,933 29,288 26,508 31,418 108,094 110,148 39,414 -20.3% Change (%) -12.8 4.9 10.3 -6.3 -0.9 5.2 1.2 1.7 1.4 4.8 27.5 EBITDA 1,888 3,218 2,303 2,761 2,337 2,786 2,255 3,172 10,203 10,512 3,271 -3.0% As % of Revenues 8.2 11.6 8. 8 8.9 10.2 9.5 8. 5 10.1 9.4 9.5 8.3quotesdbs_dbs8.pdfusesText_14