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WEALTH
MAXIMIZER
LARGE CAP STOCKS
July - 2019
Company Name NSE Symbol Sector
Market Cap
(Rs. Mn)
CMP*
(Rs.)
Target
Price (Rs.)
Upside (%)
Adani Pos & Special
Economic Zone Ltd
ADANIPORTS Infrastructure 859238 415 500 21
Bandhan Bank Ltd BANDHANBNK Banking 662643 555 675 22
Coal India Ltd COALINDIA Energy 1546537 251 304 21
HCL Technologies Ltd HCLTECH Information Technology 1425720 1051 1262 20
Hero MotoCorp Ltd HEROMOTOCO Automobiles 516793 2588 3103 20
Hindustan Zinc Ltd HINDZINC Metals & Mining 1017668 241 280 16
ICICI Bank Ltd ICICIBANK Banking 2812322 436 512 17
Indiabulls Housing Finance Ltd IBULHSGFIN NBFC 295432 691 923 34
ITC Ltd ITC Consumer Staples 3391599 277 345 25
Larsen & Toubro Ltd LT Infrastructure 2213270 1578 1900 20
WEALTH MAXIMIZER
*As on 03 Jul, 2019
Bloomberg Code: ADSEZ IN
ADANI PORTS & SPECIAL
ECONOMIC ZONE LTD
India’s Largest Commercial Pos Operator
Integrated operating model & Acquisitions: APSEZ enjoys a unique &
integrated business model with presence in pos + logistics + SEZ and is
developing fully integrated logistics model for diverse range of cargo. APSEZ
has a successful track record of developing & operating 18 terminals with
47 behs. APSEZ acquired Dhamra in 2014 and has turned around; volumes
grew at 11% CAGR between FY14-FY19. Dhamra is well positioned to emerge
as a hub for Eastern India. Another acquisition, Kaupalli, strategically
located to cater to the regional container cargo demand for southern India,
grew at 107% CAGR between FY16-FY19. APSEZ recently developed another
liquid tank farm of 224,500 kl at Kaupalli to capture potential of liquid cargo
market. The management expects container and cargo volume to grow at
20% & 12% respectively for FY20 &21.
Financial peormance: Delivered a revenue growth of 11.5% over the last
three years (FY17-19) with consistently high EBITDA margin (above 60%).
PAT margin during the last three years has also been higher at 30% and the
number stood at 37% for FY19 vs. 32.6% for FY18. Current Net Debt to EBITDA
stands at 2.9 vs. 3.4x of FY17x. Consensus estimates revenue CAGR of 13%
along with earnings CAGR of ~16% for FY19-21E.
Diversication aiding overall improvement: APSEZ is consistently delivering
growth with gaining market share (14.8% to 21.2% as on FY19). Total cargo
volumes grew by 15.3% for FY19 to 207.7 MMT while all India cargo grew by
4%. APSEZ has been successful in increasing market share sustainably.
Valuation and Risks: Healthy growth of container and cargo volumes coming
in from the expansion plans are the key positives. Stock is currently trading at
15.8x. The consensus values the company at 19x for a target price of Rs. 500,
representing an upside potential of 21%.
RELATIVE PERFORMANCE*
Source: Bloomberg; *Index 100
STOCK PERFORMANCE (%)
1M 3M 6M 12M
Absolute (2) 9 10 14
Relative to Sensex (1) 6 (2) 2
Source: Bloomberg
RECOMMENDATION (RS.)
CMP (as on 03 Jul, 2019) 415
Target Price 500
Upside(%) 21
STOCK INFORMATION
Mkt Cap (Rs.Bn/US$ Mn) 859238 / 12471
52-wk High/Low (Rs.) 431 / 292
3M Avg.daily value (Rs. Mn) 1670.6
Beta (x) 1.4
Sensex/Niy 39839 / 11917
O/S Shares(mn) 2071.0
Face Value (Rs.) 2.0
SHAREHOLDING PATTERN (%)
Promoters 62.3
FIIs 21.7
DIIs 12.5
Others 3.5
KEY FINANCIALS (Rs. Mn)
YE Mar FY17 FY18 FY19 FY20E FY21E
Net Sales 84394 113230 109254 124289 140229
EBITDA 54147 71454 70675 79331 89900
EBITDA Margin (%) 64.2 63.1 64.7 63.8 64.1
Adj. Net Prot 39115 36736 39902 46518 53636
EPS (Rs.) 18.9 17.7 19.3 22.3 25.8
RoE (%) 25.5 19.2 17.6 17.4 17.5
PE (x)* 18.0 20.0 19.6 18.2 15.8
Source: Bloomberg, Karvy Research, *Represents multiples for FY17 - FY19 are based on historic market price
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ADSEZ IN
Sensex
KARVY INVESTMENT STRATEGY REPORT - JULY 2019
3
Company Background
Incorporated as Gujarat Adani Po Ltd on May 26, 1998, Adani Pos and Special Economic Zone (APSEZ)
is India’s largest private multi-po operator, post entering concession agreement with GMB to build,
operate and maintain the po for a period of 30 years till 2031 extendable by another 20 years. The po
is into providing cargo handling services for bulk, crude and container cargo. While the company is also
bidding for other domestic and international po projects, it has also invested in value added services like
logistics suppo, providing container rail services and inland container depots to diversify from its core
po business.
ADANIPORTS: Technical View
The stock has seen a stellar rally from the May 2016 lows of 169.70 odd levels to the high of
452.35 odd levels in the month of January 2018. Thereaer, the stock went into consolidation and
corrected lower towards 300 odd levels where its monthly 50 EMA was placed and found suppo
near the same. Currently, the stock is trading in the range of 390-430 levels from the past few
weeks and nding suppo above its daily 50EMA which is currently placed around 402 levels. On
the weekly chas, the stock is trading above its 50Weekly EMA which indicates buying pressure at
the lower levels. On the price cha, the stock has stuck in the range of 390-430 levels, and once a
breakout comes from this range the stock may pick up momentum on the higher side. On oscillator
front, the 14 period RSI on the daily, weekly and monthly chas is trading well above its 9 Pd EMA
indicating a bullish bias in the medium to long term. Among other observations, the stock is trading
above its weekly 200 EMA and also above its daily 200 EMA which is another suppo point for the
bulls. Going ahead suppo are placed around 390 levels followed by 350 levels in the medium to
long term while resistance is placed around 450 levels followed by 500 levels.
KARVY INVESTMENT STRATEGY REPORT - JULY 2019
4
Bloomberg Code: BANDHAN IN
BANDHAN BANK LTD
Earnings Deliver A Beat on Higher Loan Growth
Liability peormance remains exceptional: Bandhan bank earnings stood at
67% YoY with RoE at 24% with loan book growth at 33% YoY with NII growth
at 45% YoY. Stable NIM with positive delta on non-interest income has
resulted in an overall improvement in asset and retail deposit growth of 37%
YoY along with release of provisions on IL&FS exposure has improved the
liability side.
Micro Finance book has grown by 40% YoY due to volume (customer)
growth of 23% and average ticket size growth of 13% YoY which is just over
the nominal growth in rural incomes and in our view could sta aening.
Non-micro book registered a growth of 36% YoY led by loans to NBFC-MFIs
growing at 62% YoY and retail advances at 34% YoY.
Retail deposits at the bank accounts for 78% of overall deposits with asset
growth of 33%. CASA ratio is at 40.8% with growth at 6.4% YoY with new
addition of 50 branches in FY19 to now at 986.
Gruh Finance acquisition though expensive will benet in allowing housing
nance business to grow faster in coming years.
Valuation and Risks: Bandhan bank is the lowest-cost loan provider in high
yield MFI business in East India in a sho time and our forecast is on high loan
growth in medium term are key positives.
Consensus one year target price for Bandhan Bank of Rs. 675 is based on
three stage dividend discount model implying 4.3x Mar 21 P/BV. Consensus
valuation factors in cost of equity of 12.5%, normalized RoE of 23%, and
terminal growth of 6%. Downside risk will generate from customer base
in micro lending segment from low income group who are subjected to
higher loss given defaults in multiple cycles increasing ticket size of loans.
Geographic concentration in East India has exposures to event risks and
scalability challenges. Growth oppounity in other than MFI segment carries
high competition.
STOCK PERFORMANCE (%)
1M 3M 6M 12M
Absolute (7) 1 4 (1)
Relative to Sensex (6) (1) (7) (12)
Source: Bloomberg
RECOMMENDATION (RS.)
CMP (as on 03 Jul, 2019) 555
Target Price 675
Upside(%) 22
STOCK INFORMATION
Mkt Cap (Rs.Bn/US$ Mn) 662643 / 9618
52-wk High/Low (Rs.) 742 / 368
3M Avg.daily value (Rs. Mn) 517.9
Beta (x) -
Sensex/Niy 39839 / 11917
O/S Shares(mn) 1193.1
Face Value (Rs.) 10.0
SHAREHOLDING PATTERN (%)
Promoters 82.3
FIIs 5.6
DIIs 10.0
Others 2.2
RELATIVE PERFORMANCE*
Source: Bloomberg; *Index 100
KEY FINANCIALS (Rs. Mn)
YE Mar FY17 FY18 FY19 FY20E FY21E
Net Interest Income 24035 30322 44961 78472 105658
Net Prot 11120 13456 19515 28910 36964
EPS (Rs.) 10.15 12.26 16.36 21.11 26.33
BVPS (Rs.) 40.6 78.7 93.9 105.7 131.1
P/E (x)* - 38.3 32.2 26.5 21.3
P/BV (x)* - 6.0 5.6 5.3 4.3
RoE (%) 28.6 19.5 19.0 21.9 21.2
RoA (%) 4.5 3.6 3.9 3.9 3.8
Source: Bloomberg, Karvy Research, *Represents multiples for FY17 - FY19 are based on historic market price
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150
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Jun-19
BANDHAN IN
Sensex
KARVY INVESTMENT STRATEGY REPORT - JULY 2019
5
Company Background
Bandhan Bank Limited is a commercial bank was incorporated on December 23, 2014 at Kolkata, West
Bengal as a public limited company under the Companies Act, 2013, pursuant to ceicate of incorporation
issued by the RoC. The bank oers a variety of asset and liability products and services designed for micro
banking and general banking as well as other banking products and services. Its asset products consist of
retail loans including a substantial pofolio of micro loans as well as micro, small and medium enterprise
(SME) loans and small enterprise loans. Its liability products consist of savings accounts, current accounts
and a variety of xed deposit accounts. The Company also oers debit cards, Internet banking, mobile
banking, electronic data capture-point of sale (EDC- POS) terminals, online bill payment services and the
distribution of third-pay general insurance products and mutual fund products.
BANDHANBNK: Technical View
The stock has found suppo around 385 levels in October 2018 where it ended its down move
from its lifetime high of 731 levels. Thereaer, the stock went into the booming process and aer
forming a double boom paern which is a bullish reversal paern indicating an end to the bearish
bias from the high of 731 levels. Currently, the stock is trading in the range of 520- 600 levels from
the past few weeks and nding suppo around its weekly 50EMA which is currently placed around
523 levels. On the weekly chas, the stock is trading above its 50Weekly EMA which indicates
buying pressure at the lower levels. On the price cha, the stock has stuck in the range of 520-
600 levels, and once a breakout comes from this range, the stock may pick up momentum on
the higher side. On oscillator front, the 14 periods RSI on the daily cha is trading well above its 9
Pd EMA indicating a bullish bias in the near term. Among other observations, the stock is trading
above its weekly 200 EMA and also above its daily 200 EMA which is another suppo point for the
bulls. Going ahead, suppos are placed around 525 levels followed by 460 levels in the medium to
long term while resistance is placed around 627 levels followed by 700 levels.
KARVY INVESTMENT STRATEGY REPORT - JULY 2019
6
Bloomberg Code: COAL IN
COAL INDIA LTD
CILs Strategic Impoance in Meeting India’s Energy
Requirement
Continued near monopoly status along with largest prot making enterprise
in India: Due to India’s abundant coal reserves and non-availability of other
sustainable sources of fuel, coal continues to play a dominant role in meeting
the country’s energy requirement. CIL accounted for 84% of domestic coal
production in scal 2019. CIL possesses 48% of India’s proven reserves in its
command area, and accounts for bulk of domestic coal production.
A drastic reduction in employee benet expenses came down by 35.74%
at Rs. 10,700.79 crore as against Rs. 16,651.20 crore posted in the Q4FY18
accompanied with other operational eciencies backed by higher price
realisations, helped Coal India post a record increase of 362.46% in its net
prot at Rs. 6,024.23 crore for the quaer ended March 31, 2019. Beer
average realization in both coal, Fuel Supply Agreement (FSA) and e-auction
sales coupled with operational cost control propelled the company to its
best ever nancial peormance.
Stepping up its growth, high protability & strong nancial risk prole: In
scal 2019, production grew 7% while dispatches rose 5%, owing to greater
demand especially from power producers. With steady demand from power
sector, volume and protability would improve fuher in 2020 and remain
healthy over medium term.
CIL’s debt levels shrunk making it a safe investment. CIL made outstanding
use of shareholders’ funds with ROE greater than 40%, also making ecient
use of its assets compared to Oil and Gas industry average with ROA of 8%.
Dividend payout remained high at around Rs. 11,200 crore during scal 2019.
All the subsidiaries of Coal India earned very good prot margins.
Valuation and Risks: As per consensus, the stock is valued at a PE of 10.5x of
FY21E EPS for a target price of Rs. 304 which gives a potential upside of 21%.
The company has to rst fulll its obligation of being able to deliver enough
coal to satisfy the growing power needs of the country as coal output has
been constrained by delays in obtaining environmental and forest approvals
& exibility is also restricted by socio political factors.
STOCK PERFORMANCE (%)
1M 3M 6M 12M
Absolute (4) 7 7 (4)
Relative to Sensex (3) 5 (5) (15)
Source: Bloomberg
RECOMMENDATION (RS.)
CMP (as on 03 Jul, 2019) 251
Target Price 304
Upside(%) 21
STOCK INFORMATION
Mkt Cap (Rs.Bn/US$ Mn) 1546537 / 22447
52-wk High/Low (Rs.) 300 / 211
3M Avg.daily value (Rs. Mn) 1934.6
Beta (x) 0.5
Sensex/Niy 39839 / 11917
O/S Shares(mn) 6162.7
Face Value (Rs.) 10.0
SHAREHOLDING PATTERN (%)
Promoters 71.0
FIIs 7.1
DIIs 19.0
Others 3.0
KEY FINANCIALS (Rs. Mn)
YE Mar FY17 FY18 FY19 FY20E FY21E
Net Sales 754591 817000 928961 1028838 1080064
EBITDA 124477 95478 249771 248319 259838
EBITDA Margin (%) 16.0 12.0 27.0 24.0 24.0
Adj. Net Prot 92800 70203 174619 171700 178460
EPS (Rs.) 14.8 11.3 28.1 27.8 28.9
RoE (%) 31.3 31.7 75.4 60.7 58.6
PE (x)* 19.8 25.1 8.4 9.2 8.8
Source: Bloomberg, Karvy Research, *Represents multiples for FY17 - FY19 are based on historic market price
RELATIVE PERFORMANCE*
Source: Bloomberg; *Index 100
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COAL IN
Sensex
KARVY INVESTMENT STRATEGY REPORT - JULY 2019
7
Company Background
Coal India Limited (CIL) is a ‘Maharatna’ company under the Ministry of Coal, Government of India,
headquaered at Kolkata, West Bengal. CIL is the single largest coal producing company in the world and
one of the largest corporate employers with manp