*
Auto
Retail
Metals
Oil & Gas
Consumer
Cement
Technology
Healthcare
Infrastructure
Financials
Capital Goods
Utilities
Media
Telecom
* Sectors in order of premium /
discount to historical averages
BEST PERFORMERS MoM (%)
Cipla
Vedanta
Hindalco
Hero Moto
IndusInd Bk
Sun Pharma
Reliance Ind.
Tata Motors
Bajaj Auto
33
32
32
31
30
29
WORST PERFORMERS MoM (%)
39
38
36
-3
Wipro
Highlights of Apr’20 edition
Nifty pulls out of lows after 3 months
of negative return – highest MoM rise
since May’09.
36
-3
SBI
Healthcare, Autos, Oil, Metals and
-3
Tech Mah.
NBFCs big gainers.
M&M
-4
HUL
FII outflows moderate sharply, DII flows
see a reversal.
Research & Quant Team (Deven@MotilalOswal.com); +91 22 6129 1575
May 2020
 Motilal Oswal Financial Services
Contents
Strategy: Markets rebound after carnage; FII flows turn around
NOTES:
Prices as on 30
th
Apr’20
BULL icon:
Sectors trading
at a premium to
historical averages
Valuation deep-dive for the month:
Automobiles
Indian equities:
Nifty, sector performance and key valuation metrics
Global equities:
Performance and valuation snapshot
Valuations:
Nifty/Mid-cap companies
Sector highlights:
Overview and sector valuations
BEAR icon:
Sectors trading
at a discount to historical
averages
AUTO
BANKS / FINANCIALS
CAPITAL GOODS
CEMENT
CONSUMER
HEALTHCARE
INFRASTRUCTURE
MEDIA
METALS
OIL & GAS
RETAIL
TECHNOLOGY
TELECOM
UTILITIES
Valuations are on
12-month forward basis
unless otherwise
mentioned
Sector valuations are
based on MOSL coverage
companies
Global equities data
sourced from Bloomberg;
Nifty valuations based on
MOSL estimates
Investors are advised to refer to important disclosures made at the end of this report.
BULLS & BEARS | May 2020
2
 Motilal Oswal Financial Services
Strategy:
Markets rebound after carnage; FII flows turn around
Sharp bounce-back in Nifty after Mar’20 carnage:
The Nifty made a spectacular comeback, up 15% in Apr’20, the best month since May’09.
Improvement in performance of global markets, intermittent news flow around development of the COVID-19 vaccine, significant moderation in FII
selling and deep value in several sectors provided an encouraging backdrop for Indian markets to recoup some of the losses in Apr’20. Volatility has
declined sharply too with the VIX correcting from 84 to 34 levels in Apr’20. While FII outflows plummeted from USD8.4b in Mar’20 to USD0.03b in
Apr’20, DII flows have seen a reversal. The Nifty Midcap-100 performed in line with the Nifty with 15% return in Apr’20. In the last 12 months,
mid-caps were down 23% as against the Nifty’s decline of 16%. Notably, over the last 5 years, mid-caps have underperformed by 15%. The Nifty
Mid-cap100 P/E ratio stands at 14.4x (v/s 20x in Mar’19), a ~25% discount to large-caps.
COVID-19 halts earnings recovery; slow grind ahead:
In throes of an unprecedented global pandemic, FY21 has begun on a lackluster note with
India as well as several world economies in an extended lockdown. This has impacted the underlying demand/supply dynamics and is expected to
have an adverse impact on the economy and corporate earnings. We estimate MOFSL Universe’s 4QFY20 PBT/PAT to decline 22%/25% YoY with the
laggards being Autos/Oil and Gas/ Metals. Consumer/Private Banks / Healthcare are expected to be the key outperformers in the quarter. Nifty sales
are estimated to decline 10% YoY, while EBITDA/PBT/PAT should decrease 9%/21%/20% YoY in 4QFY20. We have revised our FY21E Nifty EPS
downwards by 28% and now expect another flattish year of earnings.
India best-performing market in Apr‘20:
All key global markets – India-Nifty (+15%), Taiwan (+13%), the US (+13%), Korea (+11%), Brazil (+10%),
MSCI EM (+9%), Japan (+7%), Russia (+6%), the UK (+4%), China (+4%) and Indonesia (+4%) – closed higher in local currency terms in Apr’20. Over
the last 12 months, MSCI EM (-14%) performed in line with MSCI India (-15%). Notably, over the last 10 years, MSCI India has outperformed MSCI
EM by 68%.
All sectors closed higher in Apr’20 – Healthcare, Autos, Oil, Metals top performers:
For Apr’20, Healthcare (+26%), Autos (+24%), Oil (+20%),
Metals (+18%) and NBFCs (+16%) featured among the top gainers. In the Nifty, Cipla (+39%), Vedanta (+38%), Hindalco (+36%), Hero Moto (+36%)
and IndusInd Bank (+33%) were the top performers on MoM basis. HUL (-4%), Tech Mahindra (-3%), SBI (-3%) and Wipro (-3%) were the only
laggards. In this edition, we take a deep-dive into the valuation metrics of the automobile sector.
Volatility and FII selling moderates sharply in Apr’20; 4QFY20 earnings and commentary unveils pain:
Near-term market direction would be a
function of the spread and intensity of COVID-19 cases and incremental government/regulatory actions to restart the economy (comprehensive
fiscal package, more RBI measures to provide relief to banks, NBFCs and the debt markets). After the Nifty’s sharp plunge from 12,000 to 7,500
levels in Mar’20, the Nifty has rebounded ~30% to 9,800 currently; however, it is still down 20% from the high of 12,362 witnessed in Jan’20.
Concurrently, earnings have seen a sharp 28% downward revision and we now expect the Nifty to deliver another year of flattish earnings in FY21.
Early results of 4QFY20 earnings season and management commentaries suggest more volatility and disruption in earnings ahead with several Nifty
companies seeing fresh double-digit EPS cuts for FY21. In MOFSL’s recent model portfolio revision (link), we have increased weightage in
Technology, Pharma and Automobiles while we have reduced it in Capital Goods and Cement.
Top Ideas: Large-caps:
ICICI Bank, Axis Bank, HDFC Ltd, Bharti Airtel, Infosys, Hindustan Unilever, RIL, Eicher Motors, UltraTech, Lupin.
Mid-caps:
Alkem Labs, IPCA, Tata Consumer, ABFRL, L&T Infotech, AU SFB, Trent, PI Industries, Gujarat Gas, Crompton Consumer.
BULLS & BEARS | May 2020
3
 Motilal Oswal Financial Services
Valuation deep-dive for the month: Automobiles
Auto sector has high beta given its cyclical nature, which is reflected in the
re-rating of the sector during an upcycle (24x average over FY15-18 v/s 16x
average over FY09-14). Thus, valuation premium of the auto sector over the
Nifty has widened from ~3.5% to ~17.5% during the same period. Further,
considering the downcycle since 2HFY19, we have seen moderation in
valuations.
Trend in Auto P/E (ex TTMT) – one-year forward
Auto P/E (x)
35.0
25.0
15.0
5.0
24.8
21.1
18.1
20.7
5 Yr Avg (x)
10 Yr Avg (x)
15 Yr Avg (x)
The volume weakness across segments since Jul’18 and increasing
competitive intensity has led to a decline in earnings and correction in the
auto sector’s valuations. While EBITDA margins for the sector contracted
over the last six quarters, earnings have plunged ~19% for TTM (Mar’20). As
the earnings cycle has reversed for the first time in the last five years, auto
sector valuations have corrected and dropped well below the 10-year LPA
on PB basis (considering the downcycle). On PB basis, the Auto sector (excl.
TTMT) is trading at 2.5x currently v/s 10-year LPA of ~4x as RoEs are
expected to moderate to ~12.4% (FY21E) from 10-year LPA RoE of 22%.
Further, near-term challenges exist
in the form of regulatory related cost
inflation (BS6 from Apr’20) and further impact from the Coronavirus. In our
base case, we are expecting ‘U’ shaped demand recovery for 2Ws/PVs from
Sep-Oct’20 led by festive season demand pick-up and estimate FY21E
volumes for 2Ws/PVs/CVs/Tractors to decline 10%/6%/13%/0%. Thus,
demand recovery, competitive landscape and the noise around EVs would
be the key factors driving sector valuations.
Recovery in volumes and earnings would lead to some revival in
valuations from current levels; however, we expect average P/E over the
medium term to be at a discount to the last five years due to changes in
the competitive landscape and increasing risk of electrification.
Aggregate
(ex-TTMT) PAT is expected to grow -9%/31% in FY21E/22E, while RoEs
should decline ~670bp (over FY19) to ~12.4% in FY21E.
…reflecting for weak growth and declining RoEs
Auto Agg (Ex TTMT) PAT Growth (%)
120.0
80.0
40.0
0.0
-40.0
Auto Agg (Ex TTMT) ROE (%) - RHS
38.0
31.0
24.0
17.0
10.0
Trend in Auto P/E relative to Nifty P/E (%)
33.0
23.0
13.0
3.0
Auto P/E (x)
Nifty PE (x)
20.7
19.3
BULLS & BEARS | May 2020
4
 Motilal Oswal Financial Services
Nifty rises from lows after 3 months of negative returns
Indian equities:
Nifty pulls out of lows after 3 months of negative returns
After being battered continuously for the past 3 months, the Nifty recuperated and staged an impressive
comeback (up 14.7% MoM) in Apr’20, the highest MoM rise since May’09.
Sector-wise, Healthcare (+26%), Autos (+24%), Oil (+20%), Metals (+18%) and NBFCs (+16%) featured among
the top gainers in Apr’20.
For CY20 YTD, the Nifty is down 19%; Healthcare (+14%) is the only positive performer. PSU Banks (-43%),
Real Estate (-36%), Metals (-35%). Capital Goods (-28%) and Autos (-28%) are the key laggards in CY20 YTD.
FII outflows have moderated sharply in Apr’20 (v/s Mar’20). Apr’20 saw an outflow of USD0.03b as against
an outflow of USD8.4b in Mar’20. On the other hand, DII flows have seen a reversal.
Stock performance:
Breadth positive in Apr’20; 46 Nifty stocks end higher
Cipla (+39%), Vedanta (+38%), Hindalco (+36%), Hero Moto (+36%) and IndusInd Bank (+33%) were the top
positive performers MoM. HUL (-4%), Tech Mahi. (-3%), SBI (-3%) and Wipro (-3%) were the only laggards.
Global equities:
India best-performing market in Apr’20
All key global markets – India-Nifty (+15%), Taiwan (+13%), the US (+13%), Korea (+11%), Brazil (+10%), MSCI
EM (+9%), Japan (+7%), Russia (+6%), the UK (+4%), China (+4%) and Indonesia (+4%) – closed higher in local
currency terms.
Over the last 12 months, MSCI EM (-14%) performed in line with MSCI India (-15%). Notably, over the last
10 years, MSCI India has outperformed MSCI EM by 68%.
Sector valuations:
Healthcare, Auto, Oil Outperform
Healthcare sector valuations rose sharply in Apr’20 with the discount narrowing to 7% with respect to 10-
year average from 27% in Mar’20. Multiple factors are at play, which could lead to re-rating of the sector
over the past two months. Demand for medicines has increased across geographies due to anxiety
associated with availability of medicines due to the spread of Coronavirus. While the lockdown caused
logistics hiccups initially, the recovery due to improving capacity utilization and smoothening supply chain
has been much faster compared to other sectors.
Oil & Gas sector trades at P/B of 1.4x (~8% discount to its historical average of 1.5x) and P/E of 14.2x (at
~19% premium to the long-term average of 11.9x). Brent prices for April’20 declined to an average of
~USD18/bbl as OPEC+ (record production cut of 9.7mnbopd starting May’20) failed to excite the oil markets
owing to current demand (halt) destruction due to the lockdown (global storage capacity more than 60%
full and expected to run out over May–Jun’20).
About the product
As the tagline suggests,
BULLS & BEARS
is a
handbook on valuations in
India. Every month, it will
cover:
Valuations of Indian
markets vis-à-vis global
markets
Current valuation of
companies in various
sectors
Sectors that are
currently valued at
premium/discount to
their historical long-
period averages
BULLS & BEARS | May 2020
5
 Motilal Oswal Financial Services
Indian equities:
Nifty stages smart comeback after 3 months of negative returns
After being battered continuously for the past 3 months, the
Nifty recuperated and staged an impressive comeback (up
14.7% MoM) in Apr’20, the highest MoM rise since May’09.
Sector-wise, Healthcare (+26%), Autos (+24%), Oil (+20%),
Metals (+18%) and NBFCs (+16%) featured among the top
gainers in Apr’20.
For CY20 YTD, the Nifty is down 19%; Healthcare (+14%) is the
only positive performer.
PSU Banks (-43%), Real Estate (-36%), Metals (-35%), Capital
Goods (-28%) and Autos (-28%) are the key laggards in CY20
YTD.
FII outflows moderated sharply in Apr’20 (v/s Mar’20). Apr’20
saw an outflow of USD0.03b as against an outflow of USD8.4b
in Mar’20. On the contrary, DII flows have seen a reversal.
Nifty MoM change (%) — Impressive comeback after 3 months of decline
Nifty MoM Change (%)
14.7
4.6 3.3 3.4
3.7 1.4
5.8
5.6
4.7
3.0
6.2
6.0
2.9
7.7
4.7
0.10.30.4
4.1
1.1
0.9
5.7
1.11.5
3.5
1.5 0.9
1.7
6.4
23.2
1.0
1.61.3 1.1
3.6
4.9
0.00.2
5.0
6.4
Sectoral performance—absolute and relative to Nifty (%) — Healthcare, Autos,
Oil, Metals and NBFCs top performer
Sector
Healthcare
Auto
Oil
Metal
NBFC
Nifty Midcap100
Banks-Pvt
Cap. Goods
Technology
Cement
Utilities
Real Estate
Consumer
Banks-PSU
Nifty-50
Institutional flows (USD b) — FII outflows moderate sharply ;
DII flows change course
FIIs (USDb)
DIIs (USDb)
Jan Feb Mar Apr MayJune July Aug Sep Oct Nov Dec Jan Feb Mar Apr
2019
2020
MoM Abs. Performance (%) CY20YTD
Jan
Feb Mar Apr
Chg (%)
4
-3
-10
26
14
-2
-14
-31
24
-28
-6
-9
-21
20
-18
-9
-13
-31
18
-35
0
-9
-27
16
-24
5
-7
-30
15
-21
-2
-4
-30
14
-25
3
-12
-29
11
-28
3
-6
-14
11
-8
7
-6
-25
9
-17
-1
-10
-20
8
-23
11
-16
-36
7
-36
2
-6
-6
5
-6
-5
-11
-34
2
-43
-2
-6
-23
15
-19
MoM Relative Perf. (%)
Jan
Feb Mar Apr
6
3
13
12
0
-8
-8
10
-4
-3
3
6
-7
-7
-7
3
1
-3
-4
1
7
0
-7
1
-1
2
-6
-1
5
-5
-5
-4
4
1
9
-4
9
0
-2
-5
0
-3
4
-7
12
-10
-13
-8
4
1
17
-10
-4
-4
-11
-13
CY20YTD
Chg (%)
33
-9
1
-16
-5
-2
-6
-9
11
2
-4
-17
13
-24
BULLS & BEARS | May 2020
6
 Motilal Oswal Financial Services
Indian equities:
Breadth positive in Apr’20; 46 Nifty stocks end higher
Nifty – best and worst performers in Apr’20:
Cipla (+39%), Vedanta (+38%), Hindalco (+36%), Hero Moto (+36%) and IndusInd Bank (+33%) were the
top positive performers on MoM basis. HUL (-4%), Tech Mahindra (-3%), SBI (-3%) and Wipro (-3%) were the only laggards.
Nifty – best and worst performers in CY20 YTD:
Dr Reddy’s (+37%), Cipla (+23%), Nestle (+21%), HUL (+14%) and Bharti Airtel (+13%) were the top
positive performers. IndusInd Bank (-69%), Tata Motors (-50%), Bajaj Finserv (-46%), Zee Entertainment (-45%) and Bajaj Finance (-45%) were the
worst performers.
Best and worst Nifty performers (MoM) in Apr’20 (%) – breadth positive, 92% of Nifty stocks traded higher
39 38 36 36
33 32
32 31
30 29 29 28
26
25 25
24 24
18 18
17
17 17 17
17 16
15
15
13
12
12
12
11 11 11
11
10
9 9 6 6 6
6
5 5 4
3 2
-3 -3 -3
-4
Best and worst Nifty performers (YoY) in CY20 YTD (%) – only seven companies in Nifty trading higher
37
23
21
14 13
7
5
-1 -2 -3 -3 -4 -7
-11
-13
-15 -18
-18
-19
-19 -20
-21
-21 -21-21
-23 -23 -25 -27 -28 -28 -29
-30
-31 -31 -31 -32 -33 -33 -35
-37
-38
-40
-41
-41 -43 -45-45 -46 -50
-69
BULLS & BEARS | May 2020
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 Motilal Oswal Financial Services
Indian equities:
Mid-caps underperform large-caps
In last 12 months, mid-caps were down 23% as against the Nifty’s decline of 16%. Notably, over the last 5 years, mid-caps have underperformed by
15%.
The Nifty Mid-cap100 P/E ratio now trades at 14.4x from 20.2x in Mar’19 while mid-caps are currently trading at 25% discount to large-caps.
Mid-caps underperformed large-caps in the last 12 months
Nifty Rebased
115
100
Nifty Midcap 100 Rebased
Mid-caps performance v/s large-caps in last five years
Nifty Rebased
175
150
Nifty Midcap 100 Rebased
85
70
55
84
125
100
121
106
5 Year CAGR |
Nifty: 3.8% |
Midcap: 1.2%
77
75
12-month forward P/E (x)
33
28
23
Mid-caps v/s large-cap P/E premium/discount (%)
Nifty PE (x)
60
Midcap Vs Nifty PE Prem/(Disc) (%)
Midcap PE (x)
Nifty Avg: 21.2x
Midcap Avg: 20.5x
35
19.3
18
10
-15
-40
Average: -2%
14.4
13
-25
Source: MOFSL, Bloomberg for Midcap valuation.
BULLS & BEARS | May 2020
8
 Motilal Oswal Financial Services
Indian equities:
Nifty forward P/E near LPA, while P/B well below historic averages
The Nifty trades at 12-month forward P/E of 19.3x, at 4% premium to its long-period average of 18.6x. The Nifty’s P/B of 2.2x is below its historical
average of 2.6x (13% discount).
The Nifty’s 12-month trailing P/E of 20.4x is trading at 4% premium to its long-period average of 19.6x. At 2.4x, the Nifty 12-month trailing P/B is well
below the historical average of 2.8x.
12-month forward Nifty P/E (x)
26
22
10 Year Avg: 18.6x
18
14
10
12-month forward Nifty P/B (x)
3.5
3.0
19.3
2.5
10 Year Avg: 2.6x
2.2
2.0
1.5
Trailing Nifty P/E (x)
27
24
20
17
13
Trailing Nifty P/B (x)
3.6
3.2
10 Year Avg: 19.6x
20.4
2.8
2.4
2.0
10 Year Avg: 2.8x
2.4
BULLS & BEARS | May 2020
9
 Motilal Oswal Financial Services
Indian equities:
Market cap-to-GDP ratio corrects sharply, at its lowest since FY06
Market cap-to-GDP ratio has seen a steep decline – from 79% as on FY19 to 54% (FY20E GDP) – much below its long-term average of 75% and
closer to the levels last seen during FY05 and FY09.
The Nifty is trading at 12-month forward RoE of 11.6%, below its long-term average of 14.1%.
Trend in India’s market cap-to-GDP (%) – trading below its long-period averages
103
Average of 75% for the period
95
88
71
64
52
55
82
83
81
79
69
83
79
66
54
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20E
12-month forward Nifty RoE (%)
17.8
16.1
Trend in Nifty RoE (%)
17.0
16.1
16.3
16.2
16.9
10 Year Avg: 14.1%
14.9
15.4
14.9
Average of 14.8%
13.6
13.2
12.9
14.4
12.5
12.7
11.9
11.4
11.6
11.0
Apr-10
Jul-11
Oct-12
Jan-14
Apr-15
Jul-16
Oct-17
Jan-19
Apr-20
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E
BULLS & BEARS | May 2020
10
 Motilal Oswal Financial Services
Global equities:
India best-performing market in Apr’20
In Apr’20, all key global markets – India-Nifty (+15%), Taiwan (+13%), the US (+13%), Korea (+11%), Brazil (+10%), MSCI EM (+9%), Japan (+7%),
Russia (+6%), the UK (+4%), China (+4%) and Indonesia (+4%) – closed higher in local currency terms.
Indian equities are trading at 20.5x FY20E earnings. Major key markets continue to trade at a discount to India.
India (Nifty) v/s other markets
CY20 YTD Chg (%)
Index
Value
India
9,860
Mkt Cap Local
In USD
(USD T) Currency
1.7
-19
-23
PE (x)
CY19 /
FY20
20.5
CY20 /
FY21
19.9
Prem / Disc to India
PE (%)
CY19 /
FY20
CY20 /
FY21
PB (x)
CY19 /
FY20
2.4
CY20 /
FY21
2.3
RoE (%)
India
CY19 /
FY20
11.9
CY20 /
FY21
11.4
Taiwan
US
Korea
Brazil
MSCI EM
9
MoM Chg (%)
15
13
13
11
10
US
Korea
Taiwan
Japan
UK
2,912
1,948
10,992
20,194
5,901
31.0
1.2
1.2
5.4
2.6
-10
-11
-8
-15
-22
-10
-15
-8
-13
-26
19.1
18.6
17.9
17.8
16.8
22.4
13.3
16.5
16.8
16.6
-7
-9
-13
-13
-18
13
-33
-17
-15
-17
3.2
0.8
1.6
1.5
1.4
3.1
0.8
1.7
1.4
1.4
15.7
4.3
9.2
8.7
9.0
15.3
5.2
12.7
8.0
4.3
Japan
Russia
UK
China
4
4
6
7
Brazil
Indonesia
China
MSCI EM
Russia
80,506
4,716
2,860
925
4,638
0.6
0.4
7.4
16.0
0.5
-30
-25
-6
-17
-13
-49
-31
-8
-17
-28
14.8
14.3
13.4
13.0
5.6
14.7
12.7
11.4
13.9
8.3
-28
-30
-35
-36
-73
-26
-36
-43
-30
-59
1.6
1.6
1.4
1.3
0.7
1.3
1.6
1.2
1.3
0.6
11.6
10.7
10.3
10.9
12.1
8.7
15.7
10.3
11.0
10.8
Indonesia
4
Source: Bloomberg/MOFSL
BULLS & BEARS | May 2020
11
 Motilal Oswal Financial Services
Global equities:
MSCI EM performs in line with MSCI India over last 12 months
Over the last 12 months, MSCI EM (-14%) performed in line with MSCI India (-15%). Notably, over the last 10 years, MSCI India has outperformed
MSCI EM by 68%.
MSCI India’s P/E is at a premium of 57% to MSCI EM’s P/E, marginally above its historical average premium of 52%.
MSCI India outperformed MSCI EM by 68% over the last 10 years
MSCI India Rebased
210
10 Year CAGR:
MSCI India: 4.8%
170
MSCI EM: -1.0%
5 Year CAGR:
MSCI India: 2.7%
MSCI EM: -2.5%
MSCI EM v/s MSCI India performance over 12 months
MSCI India Rebased
116
102
88
74
60
MSCI EM Rebased
MSCI EM Rebased
159
91
86
85
130
90
50
MSCI India v/s MSCI EM trailing P/E (x)
33.0
26.0
MSCI India Avg: 20.3x
MSCI India v/s MSCI EM P/E premium (%)
MSCI EM PE (x)
140
105
MSCI India Vs EM PE Premium (%)
MSCI India PE (x)
19.0
12.0
MSCI EM Avg: 13.3x
21.2
13.5
70
35
0
Average of 52%
57
5.0
Source: Bloomberg
BULLS & BEARS | May 2020
12
 Motilal Oswal Financial Services
Global equities:
India’s share in world market cap below its historical average
India’s share in world market cap is at 2.2% – below its historical average of 2.5%.
Over the last 12 months, world market cap has decreased 5.9% (USD4.7t) while India’s market cap is down 22%.
Trend in India's contribution to world market cap (%)
3.5
3.0
Average of 2.5%
2.5
India's Contribution to World Mcap (%)
3.3
2.2
2.0
1.5
1.6
Market cap change in last 12 months (%)
7.4
4
1.2
31.0
5.4
0.5
Mkt cap chg 12M (%)
1.2
1.7
Curr Mcap (USD Tr)
2.6
0.4
0.6
4
-3
-6
-13
-14
-22
-24
-31
-34
Source: Bloomberg
BULLS & BEARS | May 2020
13
 Motilal Oswal Financial Services
Nifty:
40% companies trading at discount to historical averages
Companies trading at a significant premium to their historical averages:
Nestle (+68%), Reliance Industries (+56%), Britannia (+54%), Asian Paints
(+53%) and HUL (+51%).
Companies trading at a significant discount to their historical averages:
Zee (-69%), Bharti Infratel (-51%), NTPC (-51%), ITC (-46%) and IOCL (-43%).
Snapshot: Nifty companies’ valuations
Name
Bajaj Auto
Eicher Motors
Hero MotoCorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
Axis Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Kotak Mahindra Bank
State Bank
Bajaj Finance
HDFC
Larsen & Toubro
Grasim Inds
Shree Cement
Ultratech Cement
Asian Paints
Britannia Inds.
Hind. Unilever
ITC
Nestle India
Sector
Auto
Auto
Auto
Auto
Auto
Auto
Banks - Private
Banks - Private
Banks - Private
Banks - Private
Banks - Private
Banks - PSU
Banks - NBFC
Banks - NBFC
Capital Goods
Cement
Cement
Cement
Consumer
Consumer
Consumer
Consumer
Consumer
Current
15.6
21.1
16.9
10.6
30.8
NA
16.3
17.9
18.0
6.4
26.5
8.3
28.2
36.2
14.1
10.6
58.8
28.8
63.4
53.9
60.5
14.1
77.9
PE (x)
10 Yr Avg Prem/Disc (%)
16.6
-6
25.4
-17
17.9
-5
17.5
-40
22.8
35
12.1
NA
36.8
-56
20.8
-14
20.1
-11
19.3
-67
24.2
9
15.3
-46
18.9
49
34.4
5
22.7
-38
12.6
-16
33.6
75
28.7
0
41.3
53
35.0
54
40.1
51
26.0
-46
46.3
68
Relative to Nifty P/E (%)
Current
10 Yr Avg
-19
-11
9
36
-12
-4
-45
-6
60
22
NA
-35
-16
97
-8
11
-7
8
-67
4
37
30
-57
-18
46
2
87
84
-27
22
-45
-32
205
80
49
54
228
122
179
88
213
115
-27
39
303
148
Current
3.1
3.3
3.1
1.1
3.2
0.7
1.4
2.8
2.0
0.8
3.4
0.7
3.7
3.5
1.7
0.8
5.0
2.4
14.7
16.3
66.2
3.4
83.9
PB (x)
10 Yr Avg Prem/Disc (%)
5.0
-39
6.4
-48
6.4
-52
2.9
-61
3.4
-6
1.8
-64
2.0
-33
3.4
-20
1.8
12
2.8
-71
3.0
11
1.2
-44
3.3
12
4.4
-21
2.9
-42
1.7
-55
4.5
12
2.8
-14
11.4
29
12.4
31
34.6
91
7.0
-52
28.3
197
Relative to Nifty P/B (%)
Current
10 Yr Avg
37
95
48
148
37
147
-51
12
42
32
-70
-29
-39
-22
23
34
-11
-31
-64
9
50
18
-70
-54
63
27
56
72
-25
12
-66
-34
124
75
7
8
555
343
624
381
2844
1243
50
171
3630
995
BULLS & BEARS | May 2020
14
 Motilal Oswal Financial Services
Nifty:
40% companies trading at discount to historical averages
PE (x)
Name
Cipla
Dr Reddy’ s Labs
Sector
Healthcare
Healthcare
Current
22.4
26.0
10 Yr Avg Prem/Disc (%)
27.9
25.2
-20
3
Relative to Nifty P/E (%)
Current
16
35
10 Yr Avg
50
35
Current
2.5
3.7
PB (x)
10 Yr Avg Prem/Disc (%)
3.3
3.8
-23
-5
Relative to Nifty P/B (%)
Current
12
63
10 Yr Avg
27
49
Sun Pharma
Zee Ent.
Hindalco
Healthcare
Media
Metals
21.7
8.1
12.4
29.6
26.5
10.2
-27
-69
21
12
-58
-36
59
42
-45
2.3
1.3
0.7
4.5
5.4
1.3
-50
-76
-42
0
-43
-67
75
110
-51
JSW Steel
Tata Steel
Vedanta
Metals
Metals
Metals
38.4
NA
17.1
15.9
53.8
11.9
141
NA
44
99
NA
-11
-14
189
-36
1.1
0.5
0.6
1.4
1.5
1.9
-18
-62
-68
-50
-76
-72
-46
-43
-25
BPCL
GAIL
IOCL
Oil & Gas
Oil & Gas
Oil & Gas
10.3
9.5
6.2
10.9
14.2
10.9
-5
-33
-43
-47
-51
-68
-42
-24
-42
1.6
0.9
0.6
1.7
1.7
1.1
-8
-49
-43
-29
-61
-72
-33
-33
-56
ONGC
Reliance Inds.
Titan Co
Oil & Gas
Oil & Gas
Retail
6.6
21.2
55.1
10.1
13.6
41.0
-35
56
34
-66
10
185
-46
-27
120
0.4
1.9
12.4
1.3
1.5
10.5
-68
27
18
-81
-15
451
-49
-42
305
HCL Technologies
Infosys
TCS
Technology
Technology
Technology
13.3
19.2
24.1
13.3
13.6
19.5
0
41
23
-31
-1
25
-29
-27
5
2.6
4.2
7.4
3.2
3.2
6.5
-17
30
14
17
87
231
23
25
152
Tech Mahindra
Wipro
Bharti Airtel
Technology
Technology
Telecom
11.3
12.2
NA
12.8
12.8
34.7
-12
-4
NA
-41
-37
NA
-31
-32
86
2.1
1.8
3.3
2.7
2.4
2.2
-20
-26
51
-5
-22
46
3
-8
-16
Bharti Infratel
Coal India
NTPC
Telecom
Utilities
Utilities
11.1
7.8
6.5
22.8
13.6
13.2
-51
-42
-51
-42
-59
-66
22
-27
-29
2.3
2.5
0.7
3.4
5.8
1.4
-33
-58
-48
2
10
-67
33
126
-45
Power Grid Corp.
UPL
Nifty
Utilities
Others
7.3
10.7
19.3
11.7
12.8
18.6
-38
-17
4
-62
-45
-37
-31
1.2
1.7
2.2
1.7
2.6
2.6
-31
-35
-13
-47
-26
-33
-1
BULLS & BEARS | May 2020
15
 Motilal Oswal Financial Services
Mid-caps’ performance in line with large-caps in Apr’20
The Nifty Mid-cap 100 was up 15.4% in Apr’20, as against the Nifty’s rise of 14.7%.
Best mid-cap performers in Apr’20: CESC (+61%), Laurus Labs (+59%), Alembic Pharma (+40%), Strides Pharma (+38%) and Mahindra CIE (+36%).
Company
CESC
Laurus Labs
Alembic Pharma
Strides Pharma
Mahindra CIE
Sun TV Network
Jyothy Lab.
Aegis Logistics
LIC Housing Fin.
Federal Bank
Blue Star
Trident
Emami
M & M Financial
Engineers India
Ajanta Pharma
Team Lease Serv.
Birla Corpn.
India Cements
Phoenix Mills
MCX
Brigade Enterpr.
Persistent Sys
Aditya Birla Fashion
PE (x)
Current 10 Yr Avg Prem/Disc (%)
7.7
10.7
-28
19.2
28.8
-33
19.5
16.9
16
11.7
61.2
-81
24.6
31.0
-21
10.9
19.6
-45
23.6
37.2
-37
15.6
24.4
-36
6.1
11.4
-46
6.7
12.4
-46
33.1
32.0
3
7.5
8.4
-11
15.5
31.6
-51
15.6
19.1
-18
8.9
19.3
-54
24.2
17.3
40
32.6
39.9
-18
7.7
15.7
-51
41.5
27.7
50
30.4
32.0
-5
23.7
31.8
-25
18.9
16.2
17
12.7
14.1
-10
80.4
150.9
-47
Relative to Nifty P/E (%)
Current
10 Yr Avg
-60
-43
-1
55
1
-9
-39
228
27
66
-44
5
22
100
-19
31
-68
-39
-65
-34
71
72
-61
-55
-20
69
-19
2
-54
3
25
-7
69
114
-60
-16
115
48
57
72
23
71
-2
-13
-34
-24
317
709
PB (x)
Current 10 Yr Avg Prem/Disc (%)
0.8
0.8
2
2.7
2.9
-7
3.7
4.2
-11
1.4
3.2
-56
0.7
2.6
-71
2.1
4.8
-56
3.2
4.6
-30
3.2
3.5
-7
0.7
1.8
-62
0.6
1.2
-49
5.1
6.9
-27
0.7
0.9
-20
3.9
10.3
-62
0.9
2.3
-62
1.8
3.6
-50
4.3
4.5
-6
3.8
6.1
-37
0.6
1.1
-45
0.6
0.7
-12
2.1
2.3
-8
3.6
3.7
-2
1.0
1.2
-13
1.5
2.3
-36
5.7
10.4
-45
Relative to Nifty P/B (%)
Current
10 Yr Avg
-64
-69
19
12
67
63
-36
25
-67
1
-7
84
42
76
43
34
-69
-28
-72
-53
126
169
-68
-65
72
299
-62
-11
-19
41
89
75
70
136
-73
-58
-73
-74
-6
-11
62
44
-55
-54
-35
-12
154
301
Price Chg (%)
MoM
CY20YTD
61
-11
59
42
40
31
38
23
36
-43
34
-13
24
-21
21
-13
20
-35
19
-45
16
-37
15
-28
15
-37
13
-49
12
-32
9
52
5
-35
-2
-33
-2
45
-4
-34
-5
-8
-9
-45
-14
-30
-24
-50
BULLS & BEARS | May 2020
16
 Motilal Oswal Financial Services
Sector valuations:
Healthcare, Autos and Oil outperform
Healthcare sector valuations rose sharply in Apr’20 with the discount narrowing to 7% with respect to 10-year average from 27% in Mar’20. Multiple
factors are at play, which could lead to re-rating of the sector over the past two months. Demand for medicines has increased across geographies due
to anxiety associated with availability of medicines due to the spread of Coronavirus. While the lockdown caused logistics hiccups initially, the
recovery due to improving capacity utilization and smoothening supply chain has been much faster compared to other sectors.
Auto sector is trading at P/E of 31.8x on weak FY21E earnings due to the Coronavirus impact. Also, volumes across segments is expected at near zero
due in Apr’20. With uncertainty in demand prevailing across segments due to the effects of COVID-19 along with an impact on the financial health of
companies, stock prices are factoring in potential cut in earnings estimates for FY21E. Considering the discretionary nature of autos, recovery of
stocks would be a function of improving demand visibility from the impact of BS6/COVID-19.
Oil & Gas sector trades at P/B of 1.4x (~8% discount to its historical average of 1.5x) and P/E of 14.2x (at ~19% premium to the long-term average of
11.9x). Brent prices for April’20 declined to an average of ~USD18/bbl as OPEC+ (record production cut of 9.7mnbopd starting May’20) failed to excite
the oil markets owing to current demand (halt) destruction due to the lockdown (global storage capacity more than 60% full and expected to run out
over May–Jun’20).
Snapshot: Sector valuations
Sector
Auto
Banks - Private
Banks - PSU
NBFC
Capital Goods
Cement
Consumer
Healthcare
Infrastructure
Media
Metals
Oil & Gas
Retail
Technology
Telecom
Utilities
Current
31.8
17.4
11.2
20.5
21.3
26.4
39.2
23.0
12.2
11.3
18.6
14.2
75.4
18.9
Loss
7.4
Relative to
Nifty P/E (%)
10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
20.6
54.1
65
6
19.8
-11.8
-10
4
20.3
-44.8
-42
-2
19.7
4.2
6
6
28.7
-25.8
10
53
23.7
11.4
37
25
34.5
13.5
103
87
24.6
-6.6
19
33
14.2
-13.8
-37
-23
25.9
-56.3
-41
42
13.1
42.7
-3
-30
11.9
19.2
-27
-35
50.2
50.3
290
172
17.1
10.4
-2
-7
-
-
12.7
-41.9
-62
-29
PE (x)
Current
2.1
2.3
0.8
2.5
2.0
1.9
10.8
3.1
0.7
1.8
0.7
1.4
9.4
4.2
3.4
1.0
Relative to
Nifty P/B (%)
10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
3.2
-33.3
-6
23
2.5
-8.4
1
-4
1.2
-37.9
-66
-53
3.1
-18.1
11
18
3.2
-38.5
-12
24
2.6
-26.8
-16
0
9.9
8.8
378
286
4.0
-22.3
40
58
1.9
-64.2
-69
-26
4.9
-62.8
-19
91
1.2
-40.1
-68
-54
1.5
-8.1
-39
-42
6.4
47.4
320
147
4.3
-1.7
89
68
2.2
55.0
53
-13
1.9
-47.1
-54
-24
PB (x)
BULLS & BEARS | May 2020
17
 Motilal Oswal Financial Services
Autos:
Lockdown in Apr’20 to result in near-zero sales; expect recovery only in 2HFY21
Auto sector is trading at P/E of 31.8x on weak FY21E
earnings due to the impact of Coronavirus.
Auto P/E (x)
10 Yr Avg (x)
51
39
27
15
3
20.6
31.8
110
70
Auto Relative to Nifty PE (%)
In Apr’20, volumes across segments is expected at
near-zero due to the COVID-19 pandemic.
With uncertainty in demand due to the effects of
COVID-19 along with an impact on the financial
health of companies, stock prices are factoring in the
potential cut in earnings estimates for FY21E.
Considering the discretionary nature of autos,
recovery of stocks would be a function of improving
demand visibility from the impact of BS6/COVID-19.
We expect volume recovery only from Sep’21 for
2Ws /PVs, while CVs would be even more back
ended.
30
-10
64.6
5.9
-50
Auto P/B (x)
5
4
3
2
1
3.2
10 Yr Avg (x)
90
60
30
2.1
Auto Relative to Nifty PB (%)
22.9
-5.6
0
-30
Sector Performance
MoM: 24%
Company
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
CEAT
Eicher Motors
Escorts
Exide Inds.
Hero Motocorp
M&M
Mahindra CIE
Maruti Suzuki
Motherson Sumi
Tata Motors
TVS Motor Co.
Current
16.3
50.0
15.6
23.6
29.8
15.0
21.1
13.9
16.9
16.9
10.6
24.6
30.8
26.5
NA
27.5
PE (x)
10 Yr Avg
19.9
28.3
16.6
25.8
35.0
13.1
25.4
9.9
22.6
17.9
17.5
31.0
22.8
27.9
12.1
23.9
Prem/Disc (%)
-18
77
-6
-9
-15
14
-17
41
-25
-5
-40
-21
35
-5
NA
15
Relative to Nifty P/E (%)
Current
10 Yr Avg
-16
7
159
52
-19
-11
22
38
54
87
-23
-30
9
36
-28
-47
-13
21
-12
-4
-45
-6
27
66
60
22
37
49
NA
-35
42
28
Current
2.3
1.8
3.1
2.4
3.7
1.1
3.3
1.5
1.9
3.1
1.1
0.7
3.2
2.2
0.7
3.8
PB (x)
10 Yr Avg
3.9
2.9
5.0
4.2
5.7
1.3
6.4
1.2
3.1
6.4
2.9
2.6
3.4
4.9
1.8
4.8
Prem/Disc (%)
-41
-35
-39
-44
-34
-19
-48
34
-39
-52
-61
-71
-6
-56
-64
-20
Relative to Nifty P/B (%)
Current
10 Yr Avg
2
50
-18
11
37
95
6
65
66
121
-53
-50
48
148
-31
-55
-15
22
37
147
-51
12
-67
1
42
32
-4
91
-70
-29
69
84
BULLS & BEARS | May 2020
18
 Motilal Oswal Financial Services
Private Banks:
Business environment remains challenging due to COVID-19 outbreak
Private Banks trade at a P/B of 2.3x, below their
historical average of 2.5x.
Over the past few years, muted corporate lending
has resulted in systemic loan growth being largely
driven by the retail segment. However, the
outbreak of COVID-19 would lead to weakening of
credit demand in Consumer Retail, MFI and
SME/Business banking segments. We, thus, expect
loan growth of Private Banks to moderate to ~13%
(v/s ~18 earlier projected) in FY21E.
Further, the impact of COVID-19 would have a
severe impact across segments due to the
contagion effect. We expect potential increase in
delinquencies in the MSME/SME segment,
unsecured retail and MFI business due to
disruptions in the weekly collection model. Thus,
Private Banks are making additional provisions
toward COVID, and thus, we estimate their credit
cost to reflect elevated trends in FY21E.
Among Private Banks, IIB, AXSB and RBL would be
the most vulnerable to asset quality challenges,
and thus, their credit cost should rise significantly.
PE (x)
10 Yr Avg
36.8
16.0
12.4
20.8
20.1
19.3
24.2
Private Banks P/E (x)
33
26
19
12
5
19.8
17.4
10 Yr Avg (x)
Private Banks Relative to Nifty PE (%)
40
20
0
-20
-40
-9.8
4.4
Private Banks P/B (x)
4
10 Yr Avg (x)
30
10
Private Banks Relative to Nifty PB (%)
3
2
1
2.5
-3.9
1.3
2.3
-10
-30
-50
Sector Performance
MoM: 14%
Relative to Nifty P/E (%)
Current
10 Yr Avg
-16
97
-61
-14
-65
-34
-8
11
-7
8
-67
4
37
30
Company
Axis Bank
DCB Bank
Federal Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Kotak Mah. Bank
Current
16.3
7.5
6.7
17.9
18.0
6.4
26.5
Prem/Disc (%)
-56
-53
-46
-14
-11
-67
9
Current
1.4
0.7
0.6
2.8
2.0
0.8
3.4
PB (x)
10 Yr Avg
2.0
1.5
1.2
3.4
1.8
2.8
3.0
Prem/Disc (%)
-33
-54
-49
-20
12
-71
11
Relative to Nifty P/B (%)
Current
10 Yr Avg
-39
-22
-70
-43
-72
-53
23
34
-11
-31
-64
9
50
18
BULLS & BEARS | May 2020
19
 Motilal Oswal Financial Services
PSU Banks: Asset quality to remain under pressure
PSU Banks trade at a P/B of 0.8x, below their historical
average of 1.2x.
The merger in four large PSBs has completed on
Apr’20 . While we see this as a positive move from a long-
term perspective , it should bring challenges in the near
term related to integration, cultural issues and balance
sheet cleansing in weak PSBs.
1
st
The outbreak of COVID-19 has further weakened credit
growth of PSBs. Thus , loan growth is likely to moderate to
~8% for SBIN and to ~7% for BoB over FY21E.
PSBs have relatively higher share of exposure in the SME
segment, and thus, asset quality should remain under
pressure in the near term. We expect credit cost trends
to remain elevated.
On the other hand, liability franchise remains stable with
surplus liquidity being available with banks. PSBs are
expected to be big beneficiaries of the state
government’s deposit outflows from mid-size/smaller
banks post the YES Bank episode.
We do not believe PSBs to be value calls, apart from SBI,
which has a relatively strong balance sheet.
PE (x)
10 Yr Avg
8.9
7.6
15.3
Relative to Nifty P/E (%)
Current
10 Yr Avg
-63
-52
-59
-57
-18
PB (x)
10 Yr Avg
1.0
1.0
1.2
Relative to Nifty P/B (%)
Current
10 Yr Avg
-85
-63
-83
-63
-70
-54
PSU Banks P/B (x)
3
10 Yr Avg (x)
-40
-50
PSU Banks Relative to Nifty PB (%)
-52.5
2
2
1
1
0
1.2
0.8
-60
-70
-80
-66.1
Sector Performance
MoM: 2%
Company
Bank of Baroda
Punjab Natl.Bank
St Bk of India
Current
7.1
NA
8.3
Prem/Disc (%)
-20
-
-46
Current
0.3
0.4
0.7
Prem/Disc (%)
-66
-61
-44
BULLS & BEARS | May 2020
20
 Motilal Oswal Financial Services
NBFCs:
Large NBFCs comfortable on liquidity front in near term
NBFCs trade at a P/B of 2.5x, below their historical
average of 3.1x (18% discount).
The RBI’s recent measures to boost liquidity, such as
OMOs, TLTROs and a special window for banks (lending
to MFs) are steps in the right direction. This is likely to
ease off the yield spikes amidst the risk aversion adopted
by banks and bond market investors. AIFI’s refinance
should aid ailing small and mid-sized NBFCs.
MSME is one of the most impacted segments. While
demand would be high, lenders would be cautious post
the lockdown. Lenders may get comfortable if credit
guarantee support comes from the government. Growth
recovery could take 12-15 months.
VFC: Tractors may do well due to least disruption in rural
cash flows. MHCV segment (dealing in non-essential
commodities) is likely to be impacted the most.
MFIs : Field operations have been on complete hold.
Liquidity cushion on balance sheet should play a crucial
role.
NBFC P/E (x)
29
23
17
11
5
19.7
20.5
10 Yr Avg (x)
NBFC Relative to Nifty PE (%)
40
20
0
-20
-40
6.3
5.7
NBFC P/B (x)
5
4
3
2
3.1
10 Yr Avg (x)
45
30
NBFC Relative to Nifty PB (%)
18.5
11.3
2.5
15
0
-15
Sector Performance
MoM: 16%
Company
Bajaj Finance
Chola. Invst. & Fin.
HDFC
L&T Fin.Holdings
LIC Housing Fin.
M & M Financial
Muthoot Finance
PNB Housing
Shri.City Union.
Shriram Trans.
Current
28.2
10.0
36.2
6.2
6.1
15.6
10.7
3.8
5.4
9.9
PE (x)
10 Yr Avg
18.9
14.5
34.4
15.3
11.4
19.1
8.0
16.2
13.8
12.7
Prem/Disc (%)
49
-31
5
-59
-46
-18
33
-77
-61
-21
Relative to Nifty P/E (%)
Current
10 Yr Avg
46
2
-48
-22
87
84
-68
-18
-68
-39
-19
2
-45
-57
-80
-13
-72
-26
-48
-32
Current
3.7
1.3
3.5
0.8
0.7
0.9
2.5
0.4
0.6
0.9
PB (x)
10 Yr Avg
3.3
2.3
4.4
1.8
1.8
2.3
1.6
2.2
2.0
1.9
Prem/Disc (%)
12
-41
-21
-58
-62
-62
53
-84
-70
-54
Relative to Nifty P/B (%)
Current
10 Yr Avg
63
27
-40
-12
56
72
-65
-28
-69
-28
-62
-11
12
-36
-84
-15
-74
-24
-60
-25
BULLS & BEARS | May 2020
21
 Motilal Oswal Financial Services
Capital Goods:
Working capital to be under stress in FY21
Capital Goods sector trades at 1-year forward P/E multiple
of 21.3x, at 26% discount to its 10-year average of 28.7x.
Even on P/B basis, the sector trades at 39% discount to its
10-year average multiple of 2.0x.
Valuation premium relative to the Nifty on a P/B basis has
narrowed – it now trades at 4% discount v/s its 10-year
average premium of 24%. On a P/E multiple basis, the
premium has narrowed to 22% from its 10-year average
premium of 53%.
Company valuations have been impacted by (a) total
shutdown of businesses due to the COVID -19 issue, (b)
overall slowdown in business activity with 1H being a lean
season, and (c) pressure on the operational performance
due to the prevailing competitive intensity and cost
headwinds (rise in input cost).
Capital Goods P/E (x)
67
47
28.7
27
21.3
7
10 Yr Avg (x)
Capital Goods Relative to Nifty PE (%)
190
140
90
40
-10
10.3
52.6
Capital Goods P/B (x)
7
5
3
1
10 Yr Avg (x)
170
115
Capital Goods Relative to Nifty PB (%)
3.2
60
24.1
-11.8
2.0
5
-50
Sector Performance
MoM: 11%
PE (x)
10 Yr Avg
73.6
26.6
32.0
27.7
19.3
31.1
15.4
22.7
50.5
33.0
25.7
Relative to Nifty P/E (%)
Current
10 Yr Avg
181
295
-40
43
71
72
10
48
-54
3
159
67
-58
-17
-27
22
96
171
25
77
71
38
PB (x)
10 Yr Avg
6.4
1.7
6.9
5.7
3.6
6.4
2.1
2.9
6.0
4.0
3.4
Relative to Nifty P/B (%)
Current
10 Yr Avg
123
146
-89
-33
126
169
1
120
-19
41
200
148
-37
-18
-25
12
82
134
5
55
54
31
Company
ABB
BHEL
Blue Star
Cummins India
Engineers India
Havells India
K E C Intl.
Larsen & Toubro
Siemens
Thermax
Voltas
Current
54.3
11.5
33.1
21.2
8.9
50.0
8.1
14.1
37.9
24.2
32.9
Prem/Disc (%)
-26
-57
3
-23
-54
61
-48
-38
-25
-27
28
Current
5.0
0.2
5.1
2.3
1.8
6.8
1.4
1.7
4.1
2.4
3.5
Prem/Disc (%)
-21
-86
-27
-60
-50
5
-33
-42
-32
-41
3
BULLS & BEARS | May 2020
22
 Motilal Oswal Financial Services
Cement:
Volumes to remain weak in near term, lower cost to support margin
Cement sector trades at 1-yr forward EV/EBITDA of
14.9x, which is in line with its historical average.
Cement P/E (x)
43
33
23
13
3
23.7
26.4
10 Yr Avg (x)
Cement Relative to Nifty PE (%)
145
90
35
-20
-75
24.9
36.5
Cement plants are starting again gradually after being
shut for nearly a month due to the lockdown.
Volumes, however, are expected to be weak in the
near term due to unavailability of construction
workers and logistics providers (drivers), many of
whom have returned to their home towns due to
COVID-19.
Cement prices were strong in the previous quarter and
we expect them to sustain on stronger production
discipline in light of weak industry demand.
Moreover, industry costs have been trending down in
in the past six months led by lower energy costs,
which should provide some support to margins.
Sector Performance
PE (x)
Company
ACC
Ambuja Cem.
Birla Corpn.
Grasim Inds
India Cem.
Shree Cem.
UltraTech
10 Yr
Current
Avg
27.7
27.0
32.6
7.7
10.6
41.5
58.8
28.8
30.5
15.7
12.6
27.7
33.6
28.7
Prem/
Disc (%)
3
7
-51
-16
50
75
0
Cement P/B (x)
4
3
2
10 Yr Avg (x)
30
10
Cement Relative to Nifty PB (%)
2.6
1.9
-10
-30
-50
0.4
-16.2
1
MoM: 9%
Relative to
Nifty P/E (%)
10 Yr
Current
Avg
44
45
69
-60
-45
115
205
49
64
-16
-32
48
80
54
PB (x)
10 Yr
Current
Avg
1.8
2.9
1.5
0.6
0.8
0.6
5.0
2.4
2.6
1.1
1.7
0.7
4.5
2.8
Prem/
Disc (%)
-36
-43
-45
-55
-12
12
-14
Relative to
Nifty P/B (%)
10 Yr
Current
Avg
-19
11
-34
-73
-66
-73
124
7
0
-58
-34
-74
75
8
EV/EBIDTA (x)
Current
8.6
15.6
5.4
22.4
9.7
16.8
11.3
10 Yr
Avg
12.7
16.5
7.8
23.5
8.2
16.4
14.1
Prem/
Disc (%)
-32
-6
-31
-5
18
2
-20
Cement EV/EBDITA (x)
22
17
12
7
10 Yr Avg (x)
14.9
14.9
2
BULLS & BEARS | May 2020
23
 Motilal Oswal Financial Services
Consumer:
Valuations off highs but still superior than long-term average
Consumer sector P/E of 39.2x in Apr’20 (38x in Mar’20) is at a
premium of 14% to its 10-year average of 34.5x. On a P/B
basis, the sector trades at 10.8x, a premium of 9% to its 10-
year average multiple of 9.9x.
From a demand standpoint, 4QFY20 is expected to be a soft
quarter as impact of the COVID-19 lockdown has affected
economic activity in the country. However, some consumer
staple companies may report good earnings growth amid a
surge in demand for essential goods during the lockdown.
It is likely that consumers would have upstocked products
due to the lockdown, leading to subdued secondary off-take
in the Jun’20 quarter. However, impact on earnings of
consumer companies could see a lag of one quarter as they
now replenish the depleted channel inventory.
Consumer discretionary categories could see a higher impact
on earnings as consumers may delay their discretionary
spends due to weak consumer sentiment post the lockdown.
Consumer P/E (x)
55
45
35
25
15
34.5
39.2
10 Yr Avg (x)
190
140
90
40
-10
Consumer Relative to Nifty PE (%)
103.1
86.9
Consumer P/B (x)
15
13
10
8
5
9.9
10 Yr Avg (x)
480
380
Consumer Relative to Nifty PB (%)
378.5
286.1
10.8
280
180
80
Sector Performance
Company
Asian Paints
Britannia Inds.
Colgate-Palm.
Dabur India
Emami
GlaxoSmith C H L
Godrej Consumer
Hind. Unilever
ITC
Jyothy Lab.
Marico
Nestle India
P & G Hygiene
Page Industries
Pidilite Inds.
United Breweries
United Spirits
Current
63.4
53.9
47.0
50.7
15.5
36.5
36.3
60.5
14.1
23.6
35.5
77.9
72.9
54.7
65.0
51.8
43.3
MoM: 5%
PE (x)
10 Yr Avg
41.3
35.0
37.4
35.0
31.6
30.2
36.4
40.1
26.0
37.2
35.4
46.3
50.4
46.5
35.6
73.6
95.5
Prem/Disc (%)
53
54
26
45
-51
21
0
51
-46
-37
0
68
45
18
83
-30
-55
Relative to Nifty P/E (%)
Current
10 Yr Avg
228
122
179
88
143
100
163
88
-20
69
89
62
88
95
213
115
-27
39
22
100
84
90
303
148
277
170
183
150
237
91
168
295
124
412
Current
14.7
16.3
31.3
12.5
3.9
8.6
7.5
66.2
3.4
3.2
8.8
83.9
28.4
21.4
13.2
6.2
8.2
PB (x)
10 Yr Avg
11.4
12.4
25.0
10.3
10.3
7.9
7.6
34.6
7.0
4.6
10.6
28.3
19.8
21.0
8.8
9.5
12.2
Prem/Disc (%)
29
31
26
20
-62
8
-2
91
-52
-30
-17
197
44
2
50
-34
-33
Relative to Nifty P/B (%)
Current
10 Yr Avg
555
343
624
381
1294
867
454
301
72
299
281
207
232
195
2844
1243
50
171
42
76
289
311
3630
995
1164
666
853
714
488
240
177
266
264
373
BULLS & BEARS | May 2020
24
 Motilal Oswal Financial Services
Healthcare:
Sharp surge in valuation led by COVID-19 outbreak
Healthcare sector valuations rose sharply in Apr’20 with the
discount narrowing to 7% with respect to 10-year average from
27% in Mar’20. Multiple factors are at play, which could lead to
re-rating of the sector over the past two months.
Demand for medicines has increased across geographies due to
anxiety associated with availability of medicines due to the
spread of Coronavirus.
While the lockdown caused logistics hiccups initially, the
recovery due to improving capacity utilization and smoothening
supply chain has been much faster compared to other sectors.
Further, resumption of RM supply from China supports lower
prices, thereby improving gross margins.
However, patient/doctors disconnect may impact off-take of
acute medicines over the near term.
The international travel restrictions are expected to keep
inspection on the sidelines over the medium term, thereby
reducing regulatory risk to some extent.
Companies with (a) higher chronic portfolio in domestic
formulations , (b) compliant plant and rich ANDA pipeline for US
generics, (c) differentiated business model, and (d) healthy
financial condition would have better valuation than peers.
Companies like Ajanta, Torrent, Biocon and Divis trade at a
premium to their 10-year average P/E and support our thesis.
Company
Aurobindo Pharma
Ajanta Pharma
Biocon
Cadila Health.
Cipla
Divi's Lab.
Dr Reddy's Labs
Glaxosmit Pharma
Glenmark Pharma.
Ipca Labs.
Jubilant Life
Laurus Labs
Lupin
Sun Pharma.Inds.
Strides Shasun
Torrent Pharma.
Current
12.2
24.2
35.0
18.3
22.4
34.9
26.0
42.4
12.6
22.7
6.9
19.2
23.7
21.7
11.7
29.9
Healthcare P/E (x)
36
30
24
18
12
24.6
10 Yr Avg (x)
90
60
Healthcare Relative to Nifty PE (%)
32.9
23.0
30
0
-30
19.1
Healthcare P/B (x)
7
5
4
2
10 Yr Avg (x)
140
100
Healthcare Relative to Nifty PB (%)
4.0
3.1
60
20
-20
58.1
39.9
Sector Performance
Relative to Nifty P/E (%)
Current
10 Yr Avg
-37
-24
25
-7
81
46
-5
18
16
50
81
23
35
35
119
173
-35
26
17
36
-64
-30
-1
55
23
45
12
59
-39
228
55
15
MoM: 26%
Current
1.9
4.3
5.5
2.6
2.5
6.5
3.7
12.2
1.4
4.5
1.0
2.7
3.3
2.3
1.4
6.3
PE (x)
10 Yr Avg
14.3
17.3
27.2
22.0
27.9
22.9
25.2
50.9
23.6
25.4
13.0
28.8
27.1
29.6
61.2
21.4
Prem/Disc (%)
-14
40
29
-17
-20
53
3
-17
-46
-11
-47
-33
-12
-27
-81
40
PB (x)
10 Yr Avg
2.8
4.5
3.3
4.8
3.3
4.8
3.8
11.1
4.0
3.2
1.6
2.9
4.6
4.5
3.2
4.7
Prem/Disc (%)
-34
-6
67
-45
-23
34
-5
9
-65
39
-40
-7
-28
-50
-56
35
Relative to Nifty P/B (%)
Current
10 Yr Avg
-16
10
89
75
147
29
16
85
12
27
188
87
63
49
441
331
-39
54
100
25
-57
-38
19
12
47
77
0
75
-36
25
181
81
BULLS & BEARS | May 2020
25
 Motilal Oswal Financial Services
Infrastructure:
Toll collection resumes albeit lower traffic
Infrastructure sector trades at a P/B of 0.7x, at a 64%
32
discount to its historical average.
Post muted ordering activity in FY19 (-67% YoY), business
24
momentum has further weakened with suspension in toll
collection due to the COVID-19 issue. This has come at a
16
time when the NHAI ordering activity usually picks up.
8
While the government has drawn out massive
0
infrastructure development plans with expected
investment of INR100t by 2024, FY21 currently looks like
a washout.
We expect strong business opportunities for all players in
the sector, which should boost their balance sheets. This
4
should gradually lead to an improvement in the
operational performance.
2
1
0
Infrastructure P/E (x)
10 Yr Avg (x)
60
20
12.2
Infrastructure Relative to Nifty PE (%)
14.2
-20
-60
-100
-23.0
-36.8
Infrastructure P/B (x)
10 Yr Avg (x)
0
-25
-50
Infrastructure Relative to Nifty PB (%)
-25.9
1.9
0.7
-75
-69.3
-100
Company
Ashoka Buildcon
IRB Infra.Devl.
KNR Construct.
Current
10.3
9.6
13.1
PE (x)
10 Yr Avg
13.7
10.5
9.2
Prem/Disc (%)
-
-9
42
Relative to Nifty P/E (%)
Current
10 Yr Avg
-
-27
-50
-44
-32
-51
Current
0.7
0.3
1.6
PB (x)
10 Yr Avg
1.6
1.5
1.5
Prem/Disc (%)
-57
-77
7
Relative to Nifty P/B (%)
Current
10 Yr Avg
-70
-38
-85
-43
-29
-42
BULLS & BEARS | May 2020
26
 Motilal Oswal Financial Services
Media:
Short-term pain to persist
Media sector P/E of 11.3x is at ~56% discount to its 10-
year historical average of 25.9x.
The lockdown has driven viewership/ratings of all
broadcasters by at least 15-20%; however, ad revenues
are expected to soften on lower consumption spending.
OTT is likely to gain strong momentum with MNC giants
grabbing a large pie.
Movie
exhibitors will be adversely hit due to malls and
cinemas being shut for a longer period and delay in
movie releases.
Media P/E (x)
40
10 Yr Avg (x)
100
50
41.7
Media Relative to Nifty PE (%)
28
16
4
25.9
0
11.3
-50
-41.4
Media P/B (x)
7
6
4.9
10 Yr Avg (x)
200
140
80
20
Media Relative to Nifty PB (%)
91.1
4
2
1
1.8
-40
-18.8
Company
PVR
Sun TV Network
Zee Entertainmen
Current
77.1
10.9
8.1
PE (x)
10 Yr Avg
47.0
19.6
26.5
Prem/Disc (%)
64
-45
-69
Relative to Nifty P/E (%)
Current
10 Yr Avg
299
152
-44
5
-58
42
Current
3.0
2.1
1.3
PB (x)
10 Yr Avg
3.8
4.8
5.4
Prem/Disc (%)
-20
-56
-76
Relative to Nifty P/B (%)
Current
10 Yr Avg
35
47
-7
84
-43
110
BULLS & BEARS | May 2020
27
 Motilal Oswal Financial Services
Metals:
Demand and pricing to take a hit in FY21E
Metals sector trades at a P/B of 0.7x (40% discount to
historical averages) and EV/EBITDA of 7.4x (in line with
historical averages).
All major steel companies are operating at 30-40% of
normal levels and are mostly catering to the export
market. Similarly, aluminum smelters are also operating
at lower capacity utilization. India FoB export prices
declined by ~USD20/t MoM while CNF import prices
from Korea corrected to USD423/t from USD503/t a
month ago. We expect domestic steel prices to correct
by ~INR2,000/t in the near term due to huge inventory
build-ups.
Base metal prices recovered after hitting fresh 3-year
lows during the month. While, aluminum remained flat
at USD1,503/t MoM, zinc recovered 4% MoM to
USD1,943/t.
Volumes are likely to be impacted due to COVID-19
shutdowns by various metal-consuming industries like
autos, white goods, etc.
PE (x)
Company
Hind.Zinc
Hindalco
Jindal Steel
JSW Steel
NALCO
NMDC
SAIL
Tata Steel
Vedanta
Current
12.6
12.4
NA
38.4
59.1
5.6
NA
NA
17.1
10 Yr
Avg
10.6
10.2
16.5
15.9
24.3
10.0
15.6
53.8
11.9
Prem/
Disc (%)
19
21
141
143
-44
NA
44
Relative to
Nifty P/E (%)
Current
-35
-36
99
206
-71
NA
-11
PB (x)
Current
Avg
2.2
1.3
1.2
1.4
1.2
2.1
0.8
1.5
1.9
Prem/
Disc (%)
-16
-42
-77
-18
-43
-62
-57
-62
-68
Metals P/E (x)
25
20
15
13.1
10 Yr Avg (x)
15
-5
-25
-45
-65
Metals Relative to Nifty PE (%)
-3.5
18.6
-30.1
10
5
0
Metals P/B (x)
3
2
1.2
1
0
10 Yr Avg (x)
20
-5
-30
Metals Relative to Nifty PB (%)
0.7
-55
-80
-53.7
-68.0
Relative to
Nifty P/B (%)
Current
-17
-67
-87
-50
-71
-65
-84
-76
-72
10 Yr
Avg
-13
-51
-52
-46
-55
-20
-68
-43
-25
EV/EBIDTA (x)
Current
5.6
5.3
3.6
8.6
8.6
3.4
14.3
9.4
6
10 Yr
Avg
6.3
7.3
10.2
8.1
8.5
6.4
14.9
8.0
5
Prem/
Disc (%)
-10
-28
-65
7
1
-47
-4
17
15
Metals EV/EBDITA (x)
10
8
10 Yr Avg (x)
Sector Performance
Yr
10 Yr
10
MoM: 18%
-43
1.9
-45
-12
-14
30
-46
-16
189
-36
0.7
0.3
1.1
0.7
0.8
0.4
0.5
0.6
Avg
7.5
7.4
5
3
BULLS & BEARS | May 2020
28
 Motilal Oswal Financial Services
Oil & Gas:
Multi-year low crude prices and GRMs – a face of demand destruction
Oil & Gas sector trades at a P/B of 1.3x (~10% discount to
its historical average of 1.5x) and P/E of 14.2x (at ~19%
premium to the long-term average of 11.9x).
Brent prices for the month declined to an average of
~USD18/bbl, as OPEC+ (record production cut of
9.7mnbopd starting May’20) failed to excite the oil
markets owing to current demand (halt) destruction due
to the lockdown (global storage capacity more than 60%
full and expected to run out over May–Jun’20).
Refining margins declined to an average of -USD0.8/bbl
(v/s USD0.4/bbl in Mar’20), primarily due to the steep
decline in product cracks of Gasoline and ATF.
However, the steep decline in product cracks should be
offset by healthy marketing margins (has been very
strong at ~INR18-20/liter in the last couple of weeks).
Petchem margins improved ~5-25% QoQ, led by steep
decline in Naphtha prices against product prices.
Owing to the COVID-19 led lockdown, we expect OMCs
and CGDs to have very little product sales in Apr’20.
Oil & Gas P/E (x)
21
18
15
11.9
10 Yr Avg (x)
-8
-23
14.2
-38
Oil & Gas Relative to Nifty PE (%)
-26.3
-34.6
12
9
6
-53
-68
Oil & Gas P/B (x)
3
2
2
1
1
1.5
10 Yr Avg (x)
0
-25
Oil & Gas Relative to Nifty PB (%)
-42.7
-41.1
1.3
-50
-75
Sector Performance
Company
Aegis Logistics
BPCL
GAIL (India)
Guj.St.Petronet
HPCL
IOCL
Indraprastha Gas
MRPL
ONGC
Petronet LNG
Reliance Inds.
Current
15.6
10.3
9.5
12.0
5.8
6.2
28.5
5.7
6.6
12.6
21.2
MoM: 20%
PE (x)
10 Yr Avg
24.4
10.9
14.2
11.7
17.9
10.9
16.3
11.8
10.1
12.6
13.6
Prem/Disc (%)
-36
-5
-33
2
-68
-43
75
-51
-35
-1
56
Relative to Nifty P/E (%)
Current
10 Yr Avg
-19
31
-47
-42
-51
-24
-38
-37
-70
-4
-68
-42
48
-13
-70
-37
-66
-46
-35
-32
10
-27
Current
3.2
1.6
0.9
1.5
1.0
0.6
5.5
0.6
0.4
3.1
1.9
PB (x)
10 Yr Avg
3.5
1.7
1.7
1.7
1.2
1.1
3.4
1.5
1.3
2.7
1.5
Prem/Disc (%)
-7
-8
-49
-10
-22
-43
61
-60
-68
14
27
Relative to Nifty P/B (%)
Current
10 Yr Avg
43
34
-29
-33
-61
-33
-32
-34
-58
-53
-72
-56
144
32
-73
-41
-81
-49
36
4
-15
-42
BULLS & BEARS | May 2020
29
 Motilal Oswal Financial Services
Retail:
Expect subdued year of business
Retail sector trades at a P/E of 75.4x, at ~50% premium
to its 10-year historical average.
Retail P/E (x)
114
10 Yr Avg (x)
Retail Relative to Nifty PE (%)
590
The nation-wide shutdown has led to closure of all retail
stores (excluding essential grocery items).
This has led to nil revenues along with high fixed costs for
store operations. Retailers have taken measures to reduce
their opex and post lifting of the lockdown are likely to
witness a year of (a) lower footfalls and ticket size, and (b)
changes in customer buying pattern.
The industry has requested for relief on rentals and taxes,
which would be a huge relief for the retail industry.
92
70
48
26
4
430
75.4
270
290.3
172.4
50.2
110
-50
Retail P/B (x)
14
10
6.4
6
2
10 Yr Avg (x)
450
Retail Relative to Nifty PB (%)
319.8
300
9.4
150
0
147.4
Company
Aditya Birla Fashion
Avenue Supermarts
Future Retail
Jubilant
Shoppers Stop
Titan
Trent
V-Mart Retail
Current
80.4
91.9
20.7
63.3
253.2
55.1
167.0
48.2
PE (x)
10 Yr Avg
150.9
76.9
37.7
64.1
126.4
41.0
111.5
32.3
Prem/Disc (%)
-47
19
-45
-1
100
34
50
49
Relative to Nifty P/E (%)
Current
10 Yr Avg
317
709
376
313
7
102
228
244
1211
578
185
120
765
498
150
73
Current
5.7
17.0
0.6
13.1
1.7
12.4
6.0
5.6
PB (x)
10 Yr Avg
10.4
13.8
4.5
12.3
5.2
10.5
4.0
5.1
Prem/Disc (%)
-45
24
-85
7
-67
18
51
9
Relative to Nifty P/B (%)
Current
10 Yr Avg
154
301
658
433
-71
73
485
377
-23
103
451
305
166
53
148
99
BULLS & BEARS | May 2020
30
 Motilal Oswal Financial Services
Technology:
Demand and pricing uncertainties continue in near term
Technology sector is trading at a P/E of 18.9x, at 10%
premium to its historical average of 17.1x.
Given the seriousness of the COVID-19 situation in key
markets like the US, France, Germany, the UK and India (key
offshore delivery centers), negative news flow around the
sector is likely to continue.
Onsite / offshore operations continue in the business
continuity mode and in some cases, only the most critical
businesses are being delivered.
Reduced travel costs and currency depreciation should help
partially offset headwinds from reduced utilization, delayed
deal ramps and postponement of discretionary spends.
The pandemic is expected to pose continued near-term
challenges on demand, supply, pricing and working capital
fronts. Also, a supply-demand mismatch would be seen in
certain IT companies due to hiring done with different
expectations. Recovery is expected only in 2HFY21.
Travel, Hospitality, Retail, Oil and Gas are the most
impacted verticals in the near term.
We remain positive on INFO, TCS and HCLT in Tier 1. In mid-
caps, we remain positive on LTI and MTCL.
Technology P/E (x)
23
19
15
11
7
17.1
18.9
10 Yr Avg (x)
Technology Relative to Nifty PE (%)
40
20
0
-6.6
-2.0
-20
-40
Technology P/B (x)
6
5
4
3
2
4.3
10 Yr Avg (x)
150
100
Technology Relative to Nifty PB (%)
89.0
67.9
50
0
4.2
Sector Performance
Company
Cyient
HCL Technologies
Hexaware Tech.
Infosys
MphasiS
NIIT Tech.
TCS
Tech Mahindra
Wipro
Zensar Tech.
MoM: 11%
Current
6.8
13.3
14.9
19.2
13.9
16.3
24.1
11.3
12.2
9.2
PE (x)
10 Yr Avg
12.5
13.3
13.9
13.6
13.0
11.5
19.5
12.8
12.8
11.3
Prem/Disc (%)
-45
0
7
41
7
42
23
-12
-4
-18
Relative to Nifty P/E (%)
Current
10 Yr Avg
-65
-33
-31
-29
-23
-25
-1
-27
-28
-30
-16
-39
25
5
-41
-31
-37
-32
-52
-39
Current
0.8
2.6
2.7
4.2
2.4
2.8
7.4
2.1
1.8
0.8
PB (x)
10 Yr Avg
2.1
3.2
3.4
3.2
2.3
1.9
6.5
2.7
2.4
1.9
Prem/Disc (%)
-59
-17
-22
30
4
47
14
-20
-26
-57
Relative to Nifty P/B (%)
Current
10 Yr Avg
-62
-20
17
23
18
32
87
25
5
-12
27
-25
231
152
-5
3
-22
-8
-64
-26
BULLS & BEARS | May 2020
31
 Motilal Oswal Financial Services
Telecom:
Minimum impact from lockdown
Telecom sector is trading at an EV/EBITDA of 7.8x, at ~4%
discount to its 10-year historical average.
Telecom P/B (x)
5
4
3
2
1
2.2
3.4
10 Yr Avg (x)
70
35
0
-35
-70
-12.8
Telecom Relative to Nifty PB (%)
53.3
Due to the lockdown owing to the COVID-19 outbreak,
there is a surge in mobile data usage of up to ~50% in
India.
Work from home and entertainment would drive
network usage higher; telecom being part of essential
services is set to see limited impact from the lockdown.
Starved of cash, the Vodafone group has infused
USD200m into VIL as part of immediate relief to run its
operations.
On the other hand, Facebook Inc. has acquired ~10%
stake in JPL (RJio), which is expected to lower debt and
drive the digital strategy of RJio.
Telecom EV/EBDITA (x)
15
13
10 Yr Avg (x)
10
8
5
8.1
7.8
Company
Bharti Airtel
Idea Cellular
Tata Comm
Current
NA
NA
16.3
PE (x)
10 Yr Avg
34.7
16.8
18.5
Prem/Disc (%)
NA
-
-12
Relative to Nifty P/E (%)
Current
10 Yr Avg
NA
86
-
-10
-16
-1
Current
3.3
0.0
12.8
PB (x)
10 Yr Avg
2.2
1.3
8.2
Prem/Disc (%)
51
-100
55
Relative to Nifty P/B (%)
Current
10 Yr Avg
46
-16
-100
-50
468
219
BULLS & BEARS | May 2020
32
 Motilal Oswal Financial Services
Utilities:
Electricity generation declines 7% YoY in Mar’20
Utilities trade at a P/B of 1.0x, at 47.1% discount to its
historical average.
Utilities P/E (x)
19
10 Yr Avg (x)
Utilities Relative to Nifty PE (%)
10
-15
All stocks under our coverage are trading at a discount to
their historical average P/B.
Short-term power prices were 16% lower MoM at
INR2.46/kWh in Mar’20.
Electricity generation has decreased 7% YoY in Mar’20.
16
13
10
7
4
12.7
-40
-28.6
-61.7
7.4
-65
Utilities P/B (x)
3
2
2
1
1
10 Yr Avg (x)
35
10
-15
-40
Utilities Relative to Nifty PB (%)
1.9
-23.6
-54.1
1.0
-65
Sector Performance
MoM: 8%
Company
CESC
Coal India
JSW Energy
NHPC
NTPC
Power Grid Corpn
Torrent Power
Tata Power
Current
7.7
7.8
12.0
7.2
6.5
7.3
12.6
7.7
PE (x)
10 Yr Avg
10.7
13.6
16.2
10.3
13.2
11.7
16.4
24.9
Prem/Disc (%)
-28
-42
-26
-30
-51
-38
-23
-69
Relative to Nifty P/E (%)
Current
10 Yr Avg
-60
-43
-59
-27
-38
-13
-63
-45
-66
-29
-62
-37
-35
-12
-60
33
Current
0.8
2.5
0.6
0.6
0.7
1.2
1.5
0.5
PB (x)
10 Yr Avg
0.8
5.8
1.4
0.9
1.4
1.7
1.4
1.7
Prem/Disc (%)
2
-58
-59
-29
-48
-31
4
-73
Relative to Nifty P/B (%)
Current
10 Yr Avg
-64
-69
10
126
-74
-45
-73
-67
-67
-45
-47
-33
-35
-46
-79
-32
BULLS & BEARS | May 2020
33
 Motilal Oswal Financial Services
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Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
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exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document
(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those
involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness
or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed
in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates,
their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or
other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before
interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in
part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of
investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct
or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or
employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free
and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance
Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal
Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt.
Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the
returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench.
 Motilal Oswal Financial Services
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