High-conviction Ideas – Mar 24

ADD REDUCE
Ajanta Pharma Clean Science
Ashok Leyland InterGlobe Aviation
Aurobindo Pharma Tata Steel
Bharat Electronics SBI Cards
Bharat Forge
Camlin Fine Sciences
Container Corporation of India
Cyient DLM
Data Patterns (India)
Globus Spirits
HDFC Bank
Mahindra & Mahindra Finance
Maruti Suzuki
Reliance Industries
Shriram Finance
Som Distilleries & Breweries
State Bank of India
Pramod Amthe Tech Mahindra
Head of Research Thermax
+91 22 4880 5167
pramod.amthe@incredcapital.com
Synopsis of ideas

Recent performance (since the start of the series in Sep 2022):

• Big outperformers to Nifty: Data Patterns (ADD), Shriram Finance (ADD) and Bharat Electronics (ADD).
• Underperformers to Nifty: HDFC Bank (ADD), Camlin Fine Sciences (ADD) and Clean Science and Technology (REDUCE).

Addition to the list: Ajanta Pharma (ADD) for the improvement in domestic sales growth and new product gChantix’s launch in early FY25F to drive
US business growth, thereby leading to overall superior profit growth.

Deletion from the list : None

Technical trend favourable ideas –HDFC Bank (ADD), Tech Mahindra (ADD), Maruti Suzuki (ADD) and Reliance Industries (ADD).

12%
8.9%
8% 6.9% 6.9%
6.1% 5.5%
4.6% 4.2%
2.8% 3.2% 3.1% 2.7% 3.1%
4% 1.7% 2.0% 2.0%
1.3% 1.5% 1.5% 0.7% 1.4%

0%
-0.6% -0.5%
-4% -1.8% -1.7% -2.3%

-8%

-12%

State Bank of India

Aurobindo Pharma
Nifty 200

Camlin Fine

Indigo
BCL Industries

Concor

Globus Spirits

KEI Industries

Shriram Finance
Bharat Forge
Nifty 50

Bharat Electronics

Maruti Suzuki

Tata Steel
Data Pattern

HDFC Bank

Tech Mahindra
Clean Science

M&M Financial Services

Reliance Industries

Spandana Sphoorty

Thermax
Cyient DLM
Ashok Leyland

NOTE: RETURNS BASED ON THE COMPOUNDED MONTHLY GROWTH RATE (CMGR) AS OF 1st Mar 2024
GREEN BAR = ADD STOCKS
RED BAR = REDUCE STOCKS

2
 -40%
-20%
100%
120%

0%
20%
40%
60%
80%
Nifty 50

9/22
Nifty 200

9/22
Ashok Leyland

5/23
Aurobindo Pharma

1/24
BCL Industries

01/24
Bharat Forge

12/22
Bharat Electronics
6/23

Camlin Fine

12/22
Clean Science

9/22
Concor
9/22

Cyient DLM
10/23

Data Pattern
11/23

Globus Spirits
7/23

3
HDFC Bank
9/22

Indigo
9/22
Absolute returns from our stock ideas

KEI Industries
8/23

M&M Financial Services

11/23

Maruti Suzuki
2/24

Reliance Industries
11/23

State Bank of India

9/22

Shriram Finance
8/23

Spandana Sphoorty
11/22

Tata Steel
12/23

Tech Mahindra
11/23

Thermax
8/23

RED BAR = REDUCE STOCKS

GREEN BAR = ADD STOCKS
NOTE: ABSOLUTE RETURNS ARE FOR THE EAXCT PERIOD OF STOCKS IN HIGH-CONVICTION LIST
Last six months’ EBITDA consensus change for FY25F vs. six months’ price performance
80.0
FY25E 6 Months
60.0

40.0

20.0

-20.0

-40.0
Indigo

RIL

Som dis
Bharat Electronic

TechM

Clean science

Concor

Camlin
Maruti

Tata Steel

Aurobindo

Data Pattern
Bharat forge

Cyient DLM
Ashok

KEI

Thermax

Globus
Last three months’ changes in our High-Conviction Ideas
Feb-2024 Jan-2024 Dec-2023
ADD SBI Cards (REDUCE) as the Reserve Bank of India Som Distilleries and Breweries (ADD) for market State Bank of India (ADD) will benefit from its strong
increased risk weights on unsecured loans and has share gains in big, high-growth beer market of Karnataka asset quality in personal loans and other retail loans.
increased Tier-1 capital requirement to 18% from 22% in and stock price correction making the risk-reward ratio Shriram Finance (ADD) will benefit from strong loan
2QFY24, which can slow down the growth in credit card favourable. growth coming from cross-selling small-ticket non-vehicle
business. loans & maintaining its dominance in vehicle finance.
Remove KEI Industries (ADD) and Spandana Sphoorty BCL Industries (ADD) removed for likely raw material None.
Financial for poor risk-reward ratio at current levels. cost risk on profitability.

4
Stock ideas valuation table
2-year EPS
Market Market CMP Target CAGR EV/EBITDA Dividend RoE
BLOOMBERG Up/down EPS P/E (x) P/BV (x)
Company Reco. Capital Capital (Rs) Price (FY24F- (x) Yield (%) %
TICKER (%) 25F)
(Rsbn) (US$bn) (Rs)
FY24F FY25F FY24F FY25F FY24F FY25F FY25F FY25F FY25F
Ajanta Pharma AJP IN ADD 278 3.4 2,208 2,400 9% 63.4 74.8 6% 34.8 29.5 7.6 7.0 20.1 2.3% 24.7%
Ashok Leyland AL IN ADD 499 6.0 170 208 22% 8.0 9.5 6% 20.1 17.8 5.1 4.5 8.5 2.9% 26.9%
Aurobindo Pharma ARBP IN ADD 602 7.3 1,028 1,178 15% 54.5 67.1 7% 19.3 15.3 2.0 1.8 8.0 0.7% 12.6%
Bharat Electronics BHE IN ADD 1,499 18.1 205 235 14% 5.3 5.9 3% 38.4 34.7 9.4 8.1 25.5 1.2% 25.2%
Bharat Forge BHFC IN ADD 536 6.5 1,151 1,366 19% 21.2 27.4 9% 54.2 42.0 5.8 5.0 19.4 1.0% 12.8%
Camlin Fine Sciences CFIN IN ADD 19 0.2 115 300 160% 15.1 21.8 13% 7.7 5.3 1.4 1.1 3.9 1.9% 23.3%
Clean Science and Technology CLEAN IN REDUCE 150 1.8 1,413 663 -53% 22.1 25.5 5% 63.9 55.3 13.1 10.8 42.2 0.0% 21.5%
Container Corp of India CCRI IN ADD 596 7.2 977 1,083 11% 22.0 27.9 8% 44.3 35.1 4.9 4.3 22.3 0.0% 13.0%
Cyient DLM CYIENTDL IN ADD 64 0.8 803 1,049 31% 8.6 14.2 18% 93.6 56.6 6.6 5.9 32.7 0.0% 18.6%
Data Patterns (India) DATAPATT IN ADD 139 1.7 2,484 3,000 21% 35.1 51.3 13% 70.8 48.5 10.4 8.8 34.5 0.3% 19.7%
Globus Spirits GBSL IN ADD 23 0.3 782 2,519 222% 46.7 100.8 29% 16.8 7.8 2.2 1.7 5.2 0.5% 25.2%
HDFC Bank HDFCB IN ADD 10,660 128.6 1,403 2,000 43% 83.5 104.6 8% 16.8 13.4 2.3 2.0 30.0 2.1% 16.1%
InterGlobe Aviation INDIGO IN REDUCE 1,218 14.7 3,155 2,000 -37% 96.5 38.9 -26% 32.7 81.0 -47.1 -112.6 12.0 0.0% -82.0%
Mahindra & Mahindra Finance MMFS IN ADD 350 4.2 283 370 31% 14.1 22.7 17% 20.1 12.5 1.9 1.8 9.0 3.2% 14.7%
Maruti Suzuki MSIL IN ADD 3,549 42.8 11,288 12,554 11% 422.6 485.6 5% 27.2 23.2 5.2 3.9 15.2 1.6% 19.0%
Reliance Industries RIL IN ADD 19,768 238.4 2,922 3,369 15% 178.7 NA NA 0.0 NA 0.0 NA NA NA NA
SBI Cards SBICARD IN REDUCE 684 8.3 720 500 -31% 24.6 24.9 0% 29.2 28.9 5.8 4.9 3.8 0.5% 18.4%
Shriram Finance SHFL IN ADD 916 11.1 2,439 2,800 15% 192.6 233.1 7% 12.7 10.5 1.8 1.6 25.0 1.0% 16.3%
Som Distilleries & Breweries SDB IN ADD 21 0.3 274 446 63% 12.3 15.4 8% 22.3 17.8 3.8 3.1 10.9 0.5% 26.1%
State Bank of India SBIN IN ADD 6,677 80.5 748 800 7% 67.1 69.7 1% 12.2 10.7 1.8 1.6 19.2 2.6% 15.9%
Tata Steel TATA IN REDUCE 1,758 21.2 141 82 -42% 5.5 5.4 0% 25.7 26.0 1.6 1.5 9.2 1.4% 6.1%
Tech Mahindra TECHM IN ADD 1,244 15.0 1,274 1,625 28% 29.1 64.2 30% 46.4 19.8 4.3 4.1 11.8 4.0% 21.2%
Thermax TMX IN ADD 433 5.2 3,637 3,675 1% 52.2 70.0 10% 74.3 52.0 9.2 8.0 40.5 0.3% 16.5%

NOTE: PRICES AS ON 01st MAR 2024

5
Stock ideas by market-cap category

Large-Cap Ideas
Name Stock Rating Market Cap (Rs m) Target Price Upside/Downside Analyst Name
Bharat Electronics ADD 13,97,912 170 -11.1% Dipen VAKIL
HDFC Bank ADD 1,10,74,167 2,000 37.4% Jignesh SHIAL
InterGlobe Aviation REDUCE 11,19,680 2,000 -30.9% Rajarshi MAITRA
Maruti Suzuki ADD 31,46,895 12,552 25.6% Pramod AMTHE
Reliance Industries ADD 1,96,30,036 3,369 16.3% Satish KUMAR
Tata Steel REDUCE 16,63,150 82 -39.3% Satish KUMAR
Tech Mahindra ADD 12,85,317 1,625 23.7% Abhishek SHINDADKAR
State Bank of India ADD 55,69,450 750 20.4% Jignesh SHIAL

Mid-Cap Ideas
Name Stock Rating Market Cap (Rs m) Target Price Upside/Downside Analyst Name
Ajanta Pharma Ltd ADD 2,74,655 1,964 -9.8% Praful BOHRA
Ashok Leyland ADD 5,10,910 208 19.9% Pramod AMTHE
Aurobindo Pharma ADD 6,81,394 1,178 1.5% Praful BOHRA
Bharat Forge ADD 5,80,057 1,273 2.4% Pramod AMTHE
Clean Science and Technology REDUCE 1,51,767 663 -53.5% Satish KUMAR
Container Corp of India ADD 5,25,136 1,083 25.9% Rajarshi MAITRA
Data Patterns (India) ADD 1,05,075 3,000 60.1% Dipen VAKIL
Mahindra & Mahindra Finance ADD 3,44,829 370 32.8% Jignesh SHIAL
SBI Cards REDUCE 6,81,536 500 -30.1% Jignesh SHIAL
Thermax ADD 3,70,840 3,275 5.4% Arafat SAIYED

Small-Cap Ideas
Name Stock Rating Market Cap (Rs m) Target Price Upside/Downside Analyst Name
Camlin Fine Sciences ADD 21,590 300 133.1% Satish KUMAR
Cyient DLM ADD 52,721 880 32.6% Vipraw SHRIVASTAVA
Globus Spirits ADD 23,376 2,519 211.2% Nitin AWASTHI
Som Distilleries & Breweries ADD 21,481 446 61.0% Nitin AWASTHI

NOTE: DATA AS ON 3RD JAN 2024

6
Ajanta Pharma
ADD Current price: Rs.2,208 Target price: Rs.2,400 Market cap: Rs.278.2bn Bloomberg code: AJP IN

Key business triggers to watch out for in coming months

• Ajanta Pharma or AJP’s strategy of focusing on niche, first-to-market products gives it an early-mover advantage and has led to its outperformance
in India. The company’s India growth was weak due to the NLEM-linked price cuts in Met XL. The company has reiterated its FY24F guidance of 12-
13% for the India business, implying a strong recovery in 4QFY24F (+15% YoY).
• Ex-India, AJP has around 40% contribution from branded markets (BGx) of Asia and Africa, where market dynamics are broadly similar to India
(branded generics markets, out-of-pocket expenses & field force-driven markets) and have strong RoIs. These markets are growing between 8-10%;
with a focused approach. AJP will continue to grow in low teens in these markets.
• AJP’s US biz sees strong traction, given a benign pricing environment. gChantix launch by early FY25F to make a decent addition to US revenue.
• AJP’s margins have improved by 1,100bp since 3QFY23, and management has upgraded its margin guidance to 27% (a second raise in the last six
months and 200bp higher than its guidance at the start of the year). Historically, AJP’s margins have ranged 30%+, and we expect the company to
reach these levels with a steady growth in its BGx markets.
Bull-case arguments not factored in by street
• We currently build in a relatively slower growth in the US in FY26 assuming higher price erosion. If current US dynamics prevails, in bull case, there
can be upside to US numbers as well as margins. This can lead to a target price of Rs.3,000 in next 2- years at 30x PE.
Valuation
• AJP trades at 25x FY26F EPS, with strong margin profile, a debt-free balance sheet and consistent returns profile (RoE/RoCE of 20-25%). We have
ADD rating on the stock with a target price of Rs.2,400.
Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/E
Revenue (Rsm) 33,410 37,426 42,322 47,515 52,968
42.0 Best P/E ratio Mean SD+1 SD-1
Operating EBITDA (Rsm) 9,294 7,833 11,700 13,667 15,475
Net Profit (Rsm) 7,128 5,880 8,117 9,579 10,917 37.0
Core EPS (Rs) 55.6 45.9 63.4 74.8 85.2
32.0
Core EPS Growth 9.0% (17.5%) 38.0% 18.0% 14.0%
FD Core P/E (x) 39.68 48.10 34.85 29.53 25.91 27.0
DPS (Rs) 6.3 6.7 51.0 50.0 50.0
22.0
Dividend Yield 0.29% 0.30% 2.31% 2.26% 2.26%
EV/EBITDA (x) 30.05 34.99 23.55 20.07 17.56 17.0
P/FCFE (x) 28.47 19.94 45.19 18.81 16.03
12.0
Net Gearing (10.2%) (25.3%) (19.1%) (20.5%) (24.4%)
P/BV (x) 8.66 8.35 7.59 7.02 6.31 7.0
Mar/14

Mar/15

Mar/16

Mar/17

Mar/18

Mar/19

Mar/20

Mar/21

Mar/22

Mar/23

Mar/24
Sep/14

Sep/15

Sep/16

Sep/17

Sep/18

Sep/19

Sep/20

Sep/21

Sep/22

Sep/23
ROE 22.8% 17.7% 22.8% 24.7% 25.7%
% Change In Core EPS Estimates (0.06%) (1.25%)
InCred Research/Consensus EPS
(x)
Ashok Leyland
ADD Current price: Rs.170 Target price: Rs.208 Market cap: Rs.499bn Bloomberg code: AL IN
Key business triggers to watch out for in coming months
• The government of India’s capex and FAME program extend strong growth visibility for tipper trucks and buses, respectively, which form 50% of the
industry. Improving Index of Industrial Production or IIP growth and freight rates give visibility on sustenance of the uptrend for the haulage segment.
We expect the commercial vehicle or CV uptrend to sustain in FY24F-25F and scale a new peak.
• General elections in India’s impact on volume is short-term in nature. No major stress noticed in either NPAs, trucker profitability and freight rates.
• Ashok Leyland or ALL’s CV market share growth seen in the last decade to sustain, as it plans to expand into the high-volume less-than-2t truck
segment. With market leader Tata Motor’s focus on profitability & cutting debt, the likely sustained pricing improvement will drive ALL’s profitability.
• Unveiling of an alternative fuel technology product at the recent Auto Expo provides confidence on its preparation for medium-term technology risks.
Bull-case arguments not factored in by street
• Sustained GoI policy on infra and private capex to drive CV volume. Based on historical cyclicality, the new peak was 70-100% over the previous peak
but with the Dedicated Freight Corridor or DFC risk, we feel the peak cycle volume can spike by 25% over the last peak.
• In a bull-case scenario, if management succeeds to achieve its ambition of a mid-teen EBITDA margin vs. last peak cycle margin of 11%, then the
FY26F EPS can be Rs.12, which is 20% above our current estimate.
Valuation
• We maintain ADD rating on the stock due to sustainability of the commercial vehicle upcycle from the government’s infrastructure spending push,
market share gains in recent quarters and easing ASP discounts in the industry. We have a DCF-based target price of Rs.208 on the stock.
• A bull-case scenario would have visibility of the above discussed positive factors continuing for a longer period, which could lead the stock to trade at
a P/BV of +2SD of 15-year mean. Based on that, with a 5.9x FY26F P/BV, we arrive at a bull-case target price of Rs.250.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/BV
Revenue (Rsm) 216,887 361,442 390,416 453,327 521,681
Operating EBITDA (Rsm) 10,452 29,307 44,658 51,403 56,248
Net Profit (Rsm) 300 13,801 24,859 28,010 30,628
Core EPS (Rs) 0.3 4.4 8.0 9.5 10.4
Core EPS Growth (127.1%) 1,486.9% 80.4% 19.8% 9.3%
FD Core P/E (x) 610.93 38.50 21.34 17.81 16.28
DPS (Rs) 0.8 2.6 4.0 5.0 5.5
Dividend Yield 0.47% 1.53% 2.35% 2.94% 3.24%
EV/EBITDA (x) 45.46 15.66 10.03 8.53 7.62
P/FCFE (x) 108.69 229.14 63.59 35.93 27.91
Net Gearing 33.5% 31.8% 26.4% 21.2% 15.8%
P/BV (x) 6.80 5.92 5.12 4.51 3.98
ROE 1.1% 16.4% 25.7% 26.9% 26.0%
% Change In Core EPS Estimates 1.27% (0.35%) 3.34%
InCred Research/Consensus EPS
(x)

8
Aurobindo Pharma
ADD Current price: Rs.1,027 Target price: Rs.1,178 Market cap: Rs. 602bn Bloomberg code: ARBP IN
Key business triggers to watch out for in coming months
• Commissioning of the Pen-G plant by Apr 2024F should drive better gross margin in its own Betalactum portfolio as well as lead to strong revenue
growth in the API segment as currently, India’s Pen-G requirement is mostly met through imports.
• Strong traction in the US business with a large impending pipeline of injectables to unfold. Filings/approvals of biosimilar products to drive the next
phase of growth.
• Culmination of the CMO deal with MSD to open an altogether new revenue stream.

Bull-case arguments not factored in by street

• Margins have an upside risk in FY25F led by a) full-year contribution from gRevlimid vs. 6M in FY24, b) production-linked incentives as Pen-G plant
gets commissioned, c) gross margin improvement in the Betalactum portfolio, and d) an improvement in the portfolio mix led by higher contribution
from injectables/biosimilars.
• A successful CMO deal with MSD for the biopharma portfolio (Memorandum of Understanding expiring in Mar 2024) to open a huge potential
opportunity, leading to an altogether new revenue stream targeting contract manufacturing of innovator biopharma molecules.

Valuation
• At 12.7x FY26F earnings, Aurobindo Pharma’s valuation is reasonable. Strong earnings optionality from the MSD deal and margin upside should
improve the valuation. Our target price of Rs.1,178 is 15x FY26F EPS. Retain our ADD rating on the stock. We see low risk of an import alert on the
company’s Eugia III plant.
Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F
One-year forward P/E
Revenue (Rsm) 234,555 248,554 285,715 314,716 341,834
Operating EBITDA (Rsm) 43,867 37,582 56,670 68,903 79,036 Best P/E ratio Mean SD+1 SD-1
25.0
Net Profit (Rsm) 26,481 19,275 31,265 39,342 47,286
23.0
Core EPS (Rs) 47.4 32.9 54.5 67.1 80.7
21.0
Core EPS Growth (14.2%) (30.6%) 65.8% 23.1% 20.2% 19.0
FD Core P/E (x) 21.70 31.25 18.85 15.31 12.74 17.0
DPS (Rs) 9.0 7.5 6.0 7.0 8.0 15.0
Dividend Yield 0.88% 0.73% 0.58% 0.68% 0.78% 13.0
EV/EBITDA (x) 13.20 15.56 10.16 7.99 6.88 11.0
P/FCFE (x) 13.35 142.70 (37.40) 21.29 42.76 9.0
Net Gearing (7.0%) (5.2%) (7.7%) (14.6%) (14.8%) 7.0
P/BV (x) 2.45 2.24 2.04 1.82 1.61 5.0
Mar 15

Mar 17

Mar 22

Mar 24
Sep 14

Sep 15

Sep 16

Sep 17

Sep 18

Sep 19

Sep 20

Sep 21

Sep 22

Sep 23
Mar 14

Mar 16

Mar 18

Mar 19

Mar 20

Mar 21

Mar 23
ROE 11.9% 7.5% 11.3% 12.6% 13.4%
% Change In Core EPS Estimates (0.48%) 2.61%
InCred Research/Consensus EPS
(x)

9
Bharat Forge
ADD Current price: Rs.1,151 Target price: Rs1,366 Market cap: Rs.536bn Bloomberg code: BHFC IN
Key business triggers to watch out for in coming months
• US Class-8 truck orders are being maintained in the 20k per month range, except for seasonal blips. The order backlog is healthy, and the
cancellation rate has been comfortable. We expect the peak cycle in FY27F. More than 25% of standalone revenue coming from international
commercial vehicle or CV operations augurs well for Bharat Forge.
• International passenger vehicle or PV business continues to be the growth driver, except for workers’ strike challenge in the US in the short term. New
customer wins have helped. Easing recession fears and new aluminium forgings production to drive the sales growth momentum for next 2-3 years.
• In the defence segment, G2G orders will be focus for Africa exports. Management’s plan to triple defence product sales to Rs24bn by FY26F seems
achievable, considering the Rs.30bn export order book and local orders expected in the coming months. Mid-teen consolidated EBITDA margin likely.
Bull-case arguments not factored in by street
• Conclusion of final trials for artillery guns and the government’s thrust towards its ‘Make in India’ initiative could lead to a pick-up in orders. Improved
order inflow in the defence segment and the traction gained in electric 2W should reduce the consolidated profitability drag from these two segments.
• Ramp-up of aluminium forgings operations in the coming quarters, supported by a good order book, should drive profitability of overseas subsidiaries.
• Management plans to double sales in the next 3-4 years, driven by the industrial division, which can be margin-accretive and less capital-intensive.
Valuation
• With 1-year forward P/E & P/BV valuations near the 10-year mean level, we assign an ADD rating to Bharat Forge with a DCF-based TP of Rs.1,366.
• Considering the industrial division’s acceleration seen in recent quarters and improved visibility on defence, aerospace and construction equipment
orders, an 8% sales CAGR can provide an EPS of Rs41by FY26F in a bull-case scenario, leading to a TP of Rs1,440 at 35x FY26F (mean P/E).

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/BV
Revenue (Rsm) 104,611 129,103 158,535 180,635 202,188
9
Operating EBITDA (Rsm) 20,159 17,675 26,000 28,540 32,957
Net Profit (Rsm) 13,738 4,037 9,883 12,746 15,564 7.5
7.0x
Core EPS (Rs) 22.6 10.5 21.2 27.4 33.4
6
Core EPS Growth 471.9% (53.4%) 101.4% 29.0% 22.1% 5.5x
FD Core P/E (x) 39.01 132.77 54.23 42.05 34.44 4.5
4.1x
DPS (Rs) 5.5 8.0 10.0 11.0 11.0
3
Dividend Yield 0.48% 0.70% 0.87% 0.96% 0.96% 2.7x
EV/EBITDA (x) 27.83 32.18 21.50 19.44 16.65 1.5
P/FCFE (x) 135.72 62.14 124.64 152.78 105.44
0
Net Gearing 76.2% 86.2% 52.8% 41.7% 30.9%

Jun/23
Jun/14

Jun/15

Jun/16

Jun/17

Jun/18

Jun/19

Jun/20

Jun/21

Jun/22
Dec/13

Dec/14

Dec/15

Dec/16

Dec/17

Dec/18

Dec/19

Dec/20

Dec/21

Dec/22

Dec/23
P/BV (x) 8.16 7.99 5.82 5.03 4.31
ROE 17.6% 7.4% 12.4% 12.8% 13.5%
% Change In Core EPS Estimates 1.87% 1.86% 1.29% P/BV Mean P/BV (x) Mean- 1x std deviation
InCred Research/Consensus EPS Mean+ 1x std deviation Mean+ 2x std deviation
(x)

10
Bharat Electronics
ADD Current price: Rs.205 Target price: Rs.235 Market cap: Rs. 1500bn Bloomberg code: BHE IN
Key business triggers to watch out for in coming months
• Bharat Electronics (BEL) projects a topline growth of around 15% in FY24F, driven by its products and platform delivery timeline. The export revenue
is likely to double to US$90-100m in FY24F.
• Strong growth in the non-defence segment is likely in FY24F because general elections in India in May 2024 will drive the demand for electronic
voting machines or EVMs and VVPAT equipment. In FY19, revenue from the non-defence segment grew by over 2x vs. overall revenue growth of
17%.

Bull-case arguments not factored in by street

• Robust new order wins worth more than Rs.270bn so far in FY24F. Significant orders are also in the pipeline. BEL is likely to continue maintaining its
3x order book-to-sales ratio.
• BEL plans to allocate ~Rs7-8bn towards capital expenditure in FY24F, which will be incurred for expanding its existing facilities and constructing new
facilities. These facilities could be commissioned in the next 2-3 years.
• In a bull-case scenario, we see the scope for higher sales of manufactured goods leading to an improved EBITDA margin of ~25% vs. our current
estimate of 22%. This can raise our FY24F/25F EPS estimates to Rs.5.6/Rs.6.5, respectively, which are ~10% above our current estimates.

Valuation
• At 36x one-year forward EPS, BEL’s valuation is in line with our estimate. Strong order-booking in the next 2-3 quarters can further improve the
valuation. We retain our ADD rating on the stock with a target price of Rs.235.
• A bull-case scenario could lead to a higher multiple of 40x Dec 2025F EPS, leading to a higher target price of Rs.270.
Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/E
Revenue (Rsm) 153,138 176,462 204,545 237,812 277,904
40x
Operating EBITDA (Rsm) 33,091 40,476 48,821 56,433 66,932
35x
Net Profit (Rsm) 23,487 30,067 39,026 43,245 50,361
Core EPS (Rs) 3.2 4.1 5.3 5.9 6.9 30x
Core EPS Growth 13.7% 28.0% 29.8% 10.8% 16.5% 25x
FD Core P/E (x) 63.83 49.86 38.42 34.67 29.77 20x
DPS (Rs) 1.4 1.7 2.2 2.4 2.8
15x
Dividend Yield 0.68% 0.83% 1.08% 1.19% 1.39%
EV/EBITDA (x) 43.04 35.06 29.39 25.52 21.63 10x

P/FCFE (x) (212.50) 38.83 5,582.17 120.70 112.38 5x

Nov-23
May-21

Sep-21
Nov-21

May-22

Sep-22
Nov-22

May-23

Sep-23
Jan-21
Mar-21

Jan-22
Mar-22

Jan-23
Mar-23

Jan-24
Jul-21

Jul-22

Jul-23
Net Gearing (62.6%) (59.0%) (40.5%) (31.9%) (24.0%)
P/BV (x) 12.51 11.04 9.45 8.14 7.02
ROE 20.6% 23.5% 26.5% 25.2% 25.3% P/E Average P/E -1 SD (16x)
% Change In Core EPS Estimates +1 SD (26.4x) -2 SD (11x) +2 SD (31.5x)
InCred Research/Consensus EPS
(x)

11
 Camlin Fine Sciences
ADD Current price: Rs.115 Target price: Rs.300 Market cap: Rs19.3bn Bloomberg code: CFIN IN
Key business triggers to watch out for in coming months
• We baked in vanillin benefits in our FY24F estimates to arrive at an EPS of Rs15.1 for FY24F and Rs21.8 for FY25F. We valued the stock at 20x
FY24F EPS to arrive at our higher target price of Rs.300 from Rs.180 earlier.
• As Camlin Fine Sciences (CSFL) will start manufacturing vanillin, it doesn’t have to sell catechol at an average loss of US$1.5/kg. Therefore, on the
likely sales of 3,000t in FY24F, CFSL’s loss on catechol sales can decline by US$5m (CFSL lost US$9.9m on catechol sales in FY23).
• Negolyte sales to Lockheed Martin provides an option value of Rs1.5bn in EBITDA. However, we feel it may not materialize over the next couple of
years.

Bull-case argument not factored in by street

• We are building in 3,000t of vanillin sales in FY24F, and consequently, the loss from catechol sales to decline to US$5m (vs. US$9.9m in FY23) and
lead to an increase in gross profit by Rs3bn.

Valuation
• In the recent past, the stock traded at ~20x on the current year’s earnings and we assign the same multiple i.e., 20x FY24F EPS to arrive at our
higher target price of Rs.300 from Rs.180 earlier. We have an ADD rating on the stock.

Financial Summary Mar-21A Mar-22A Mar-23A Mar-24F Mar-25F One-year forward P/E
Revenue (Rsm) 11,871 14,121 16,549 21,514 25,816
Operating EBITDA (Rsm) 1,819 1,528 2,241 3,933 5,360 P/E Mean +1 SD -1 SD +2 SD -2 SD
Net Profit (Rsm) 654 604 978 2,364 3,418
50
Core EPS (Rs) 5.3 4.2 6.2 15.1 21.8
45
Core EPS Growth 113.6% (19.2%) 46.8% 141.7% 44.6% 40
FD Core P/E (x) 27.69 34.28 23.35 9.66 6.68 35
DPS (Rs) 0.3 0.3 0.5 1.2 1.7 30
Dividend Yield 0.29% 0.26% 0.43% 1.03% 1.50% 25
EV/EBITDA (x) 12.26 16.80 12.72 6.95 4.82 20
15
P/FCFE (x) 1,631.07 (56.79) (21.86) 28.52 12.50
10
Net Gearing 49.3% 62.8% 49.0% 28.1% 13.5%
5
P/BV (x) 2.88 3.05 2.41 1.78 1.39
0
ROE 12.5% 8.7% 11.5% 21.2% 23.3%
% Change In Core EPS Estimates
InCred Research/Consensus EPS (x)

12
Clean Science and Technology
REDUCE Current price: Rs.1,413 Target price: Rs.663 Market cap: Rs150.1bn Bloomberg code: CLEAN IN

Key business triggers to watch out for in coming months

• Clean Science and Technology is facing increased competition in its base products MEHQ and BHA, which is eroding the margins.
• Hindered amine light stabilizer (HALS) is perceived as a panacea for Clean Science and Technology. However, entry barriers in this business are
high. Also, the assumption that it will garner a 10% market share in a highly competitive market is misplaced.
• The company has no sustainable advantage over its rivals as margins are falling and the foray into the competitive TBHQ +PQ space shows growth
avenues are lacking in its current portfolio.

Bear-case arguments not factored in by street

• Market believes that Clean Science and Technology will discover some new chemicals because of its superior chemistry skills. However, its foray
into TBHQ and PBQ points to the contrary.
• The stock is bound to get derated as competition and high raw material costs erode the margins.

Valuation
• Consensus EPS estimates are too high and in a most likely case, FY24F EPS will be 20% below FY23 EPS. We also cut our FY25F and FY26F
EPS estimates to Rs22.1 and Rs25.5, respectively. We retain our REDUCE rating on the stock with a marginally lower 12-month target price of
Rs.663 (from Rs.666 earlier). Upside risk: A sharp recovery in MEHQ prices will lead to an upgrade of our EPS estimates.

Financial Summary Mar-21A Mar-22A Mar-23A Mar-24F Mar-25F

One-year forward P/E
Revenue (Rsm) 5,124 6,849 9,358 7,840 9,040
Operating EBITDA (Rsm) 2,590 2,999 4,021 2,617 3,123 P/E Mean +1 SD -1 SD +2 SD -2 SD
Net Profit (Rsm) 1,984 2,285 2,952 2,350 2,716
50
Core EPS (Rs) 18.7 21.5 27.8 22.1 25.5
45
Core EPS Growth 42.1% 15.2% 29.2% (20.4%) 15.6%
40
FD Core P/E (x) 84.38 73.26 56.71 71.22 61.63 35
DPS (Rs) 0.0 0.0 0.0 0.0 0.0 30
Dividend Yield 0.00% 0.00% 0.00% 0.00% 0.00% 25
EV/EBITDA (x) 63.69 54.93 40.79 57.65 47.64 20
P/FCFE (x) 4,662.84 343.77 14.47 92.78 93.23 15
Net Gearing (45.9%) (34.5%) (33.7%) (144.4%) (134.2%) 10
P/BV (x) 31.02 21.78 16.57 14.61 12.08 5
ROE 45.0% 34.9% 33.2% 21.8% 21.5% 0

% Change In Core EPS Estimates

InCred Research/Consensus EPS (x)

13
Container Corporation of India (Concor)
ADD Current price: Rs.977 Target price: Rs.1,083 Market cap: Rs.596bn Bloomberg code: CCRI IN
Key business triggers to watch out for in coming months
• We expect the proportion of rail container cargo at the three ports (JNPT, Mundra and Pipavav or GPPV) to rise from 25% (FY23) to 36% (FY26F).
Concor is well-placed to benefit as 81% of its FY23 originating EXIM cargo is from JNPT, Mundra and GPPV combined.
• We factor in sales/originating cargo/ EBITDA growth at 51%/ 47%/ 61%, respectively, over FY24F-26F.
• Indian Railways’ EXIM (export-import) container cargo rose by~25% yoy in Aug-Oct 2023 (vs. 3.7% yoy growth in 1QFY24). We believe this is due to
commissioning of the Dadri-to-Rewari stretch of the Indian Railways’ Dedicated Freight Corridor or DFC in May 2023. This augurs well for Concor.

Bull-case argument not factored in by street

• Higher asset sweating to more than double the company’s RoCE: Post DFC commencement, we believe rail wagons will be able to handle 4x volume
vs. now due to double-stacking and quicker speed (vs. ~20kmph currently).

Valuation
• We have an ADD rating on the stock with a target price of Rs.1,083 (18x FY26F EV/EBITDA, in line with last five year’s average).

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward EV/EBITDA – the five-year median is 18.3x
Revenue (Rsm) 77,116 82,438 89,338 103,120 134,663
Operating EBITDA (Rsm) 18,655 18,433 20,255 24,060 32,629 26

Net Profit (Rsm) 10,522 11,715 13,432 16,981 23,774

Core EPS (Rs) 19.1 19.2 22.0 27.9 39.0 22
Core EPS Growth 60.1% 0.7% 14.6% 26.4% 40.0%
FD Core P/E (x) 46.49 46.16 40.26 31.85 22.75 18
DPS (Rs) 9.0 11.0 6.6 0.0 11.7
Dividend Yield 1.01% 1.24% 0.75% 0.00% 1.32% 14
EV/EBITDA (x) 27.44 27.68 24.67 20.06 14.25
P/FCFE (x) 46.36 36.90 37.29 31.33 21.79
10
Net Gearing (26.8%) (27.1%) (33.6%) (41.9%) (48.8%) Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
P/BV (x) 5.02 4.81 4.44 3.90 3.48
ROE 11.1% 10.6% 11.5% 13.0% 16.2% EV/EBITDA Median EV/EBITDA of 18.3x +1 Std Dev -1 Std Dev
% Change In Core EPS Estimates (14.82%) (33.78%)
InCred Research/Consensus EPS
(x)

14
Cyient DLM
ADD Current price: Rs.800 Target price: Rs. 1,049 Market cap: Rs.63bn Bloomberg code: CYIENTDL IN
Key business triggers to watch out for in coming months
• Cyient DLM offers electronics solutions for mission-critical applications with high entry barriers in the regulated sectors like aerospace & defence,
medical technology and industrials. The company currently has US$1bn of orders in the pipeline, which provides healthy revenue visibility.
• The company has an interesting opportunity to gain further wallet share from its existing clients, thereby presenting itself with a huge growth
opportunity in the coming years.
• With a strong order pipeline and an equally strong current order book of ~Rs24bn, the company is expected to register a 40% topline growth over
FY23-26F. With a marked shift in the global geopolitical scenario amid the ongoing Russia-Ukraine and Israel-Hamas war, defence spending is
likely to rise even further, which is a key demand trigger for complex printed circuit board assembly or PCBA and box-build setups used in defence
systems. Honeywell Anthem tie-up for its advanced air mobility business also presents an interesting optionality.

Bull-case arguments
• We expect Cyient DLM’s EBITDA margin to increase from 10.6% in FY23 to 11.5% in FY26F led by improvement in the product mix from Build-2-Print
(B2P) to Build-2-Specification (B2S). Currently, the B2S share is ~5% and the company expects an improvement in the share, which will aid in margin
improvement. Consequently, increase in capacity utilization at the Hyderabad facility will also aid margins due to the playout of operating leverage.

Valuation
Cyient DLM is likely to register a 37% topline growth over FY23-26F with good margins, coupled with ~74% PAT CAGR. We have an ADD rating on
Cyient DLM with a target price of Rs.1,049, valuing the stock at 50x FY26F EPS.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F

Likely EPS trend
Revenue (Rsm) 77,116 82,438 89,338 103,120 134,663 25 1,200
EPS (Rs) Target Price (Rs, RHS) 1,048
Operating EBITDA (Rsm) 18,655 18,433 20,255 24,060 32,629
Net Profit (Rsm) 10,522 11,715 13,432 16,981 23,774 1,000
20 879
Core EPS (Rs) 19.1 19.2 22.0 27.9 39.0 21.0
Core EPS Growth 60.1% 0.7% 14.6% 26.4% 40.0% 710 800
17.6
FD Core P/E (x) 46.49 46.16 40.26 31.85 22.75 15
DPS (Rs) 9.0 11.0 6.6 0.0 11.7 14.2 600
Dividend Yield 1.01% 1.24% 0.75% 0.00% 1.32% 429
10
EV/EBITDA (x) 27.44 27.68 24.67 20.06 14.25 400
251 8.6
P/FCFE (x) 46.36 36.90 37.29 31.33 21.79 200
5
Net Gearing (26.8%) (27.1%) (33.6%) (41.9%) (48.8%) 200
5.0
P/BV (x) 5.02 4.81 4.44 3.90 3.48 4.0
ROE 11.1% 10.6% 11.5% 13.0% 16.2% 0 -
% Change In Core EPS Estimates (14.82%) (33.78%) FY22 FY23 FY24F FY25F Sep-25F FY26F
InCred Research/Consensus EPS
(x)

15
Data Patterns (India)
ADD Current price: Rs.2,483 Target price: Rs.3,000 Market cap: Rs. 139bn Bloomberg code: DATAPATT IN
Key business triggers to watch out for in coming months
• Data Patterns (India) projects a strong topline growth of around 38% CAGR over FY23-26F, driven by the execution of its product contracts (repeat
and large-volume orders). Further, the company also plans to focus more on its in-house design & development and expand its product portfolio. The
higher EBITDA margin is likely to sustain owing to a greater impetus to in-house development and production.
• Data Patterns (India) is strategically focusing on product development for platform-specific products with recurring needs, positioning itself for a
significant growth in radar, electronic warfare & communication systems. It aims to secure orders worth Rs.30bn over the next three-to-four years.
Bull-case arguments not factored in by street
• Data Patterns (India) is actively exploring possibilities in the export market and forging partnerships to supply components to foreign OEMs and win
an annuity-based contract from a leading player in the civilian and defence aerospace industry.
• In-house design & development contracts open new opportunities. The higher share of development contracts in the order book is a positive sign as
these contracts may translate into future production and export orders.
• In a bull-case scenario, we see the scope for higher sales from production contracts, driven by export opportunities, leading to a higher revenue
growth of over 50% vs. our current estimate of ~40%, with a steady EBITDA margin of ~40%. This can raise our FY25F/26F EPS estimates to
Rs.60/Rs.80, respectively, which are ~15% above our current estimates.
Valuation
• Data Patterns (India) currently trades at 49x one-year forward EPS (in line with our estimate). Strong order-booking in the next two-to-three quarters
can improve the valuation. Our target price of Rs.3,000 is 50x Sep 2025F EPS. We retain our ADD rating on the stock.
• A bull-case scenario could lead to a higher EPS and a target multiple of 55x Sep 2025F EPS, which may lead to a target price of Rs.3,850.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F

One-year forward P/E
Revenue (Rs m) 3,108 4,535 6,284 9,094 12,039
65x
Operating EBITDA (Rsm) 1,410 1,718 2,555 3,837 5,085
60x
Net Profit (Rs m) 940 1,240 1,966 2,871 3,793
55x
Core EPS (Rs) 18.1 22.1 35.1 51.3 67.7
50x
Core EPS Growth (72.3%) 22.3% 58.5% 46.0% 32.1% 45x
FD Core P/E (x) 107.29 87.72 55.33 37.89 28.68 40x
DPS (Rs) 3.5 4.5 7.1 10.4 13.8 35x
Dividend Yield 0.16% 0.18% 0.28% 0.41% 0.54% 30x
EV/EBITDA (x) 70.28 59.82 40.13 26.58 19.87 25x
P/FCFE (x) (62.40) (110.00) (626.87) 430.55 217.90 20x

Oct-22
May-22

May-23
Apr-22

Aug-22
Sep-22

Nov-22
Dec-22

Apr-23

Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Feb-22
Mar-22

Feb-23
Mar-23

Feb-24
Jan-22

Jun-22
Jul-22

Jan-23

Jun-23
Jul-23

Jan-24
Net Gearing (29.6%) (46.6%) (38.6%) (32.5%) (27.6%)
P/BV (x) 17.55 9.32 8.16 6.90 5.73
ROE 24.0% 14.2% 15.7% 19.7% 21.8% P/E Average P/E (44.4x) -1 SD (33.2x)
% Change In Core EPS Estimates +1 SD (47.7x) -2 SD (26x) +2 SD (55x)
InCred Research/Consensus EPS (x)

16
Globus Spirits
ADD Current price: Rs.780 Target price: Rs.2,519 Market cap: Rs.23bn Bloomberg code: GBSL IN
Key business triggers to watch out for in coming months
• Expansion in the gross profit margin due to a rise in selling prices of Indian Made Indian Liquor (IMIL) and softening broken rice and energy costs.
• Stabilization of its newly commissioned plant in Jharkhand.
• Completion of expansion projects in Bihar and West Bengal.
• Foray into new markets in the Indian Made Foreign Liquor (IMFL) segment.
• Launch of new products in the IMFL segment.
• Benefits from the higher prices of maize ethanol.

Bull-case argument not factored in by street

• Faster decline in broken rice / maize and domestic energy costs.

Valuation
• Current valuation: 7.8x FY25F P/E, target price of Rs.2,519 with an ADD rating; Bull-case scenario target price – Rs.3,023; Bear-case scenario target
price – Rs.2,016.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/E
Revenue (Rsm) 15,792 21,091 25,861 33,371 39,131
40
Operating EBITDA (Rsm) 3,286 2,456 2,553 4,639 5,962
35
Net Profit (Rsm) 1,873 1,222 1,344 2,902 3,816
Core EPS (Rs) 65.0 42.4 46.7 100.8 132.5 30
Core EPS Growth 30.7% (34.7%) 10.0% 116.0% 31.5% 25
FD Core P/E (x) 12.49 19.14 17.41 8.06 6.13
20
DPS (Rs) 0.0 0.0 0.0 0.0 0.0
Dividend Yield 0.48% 0.31% 0.34% 0.50% 0.65% 15
EV/EBITDA (x) 7.42 10.50 9.82 5.36 3.69 10
P/FCFE (x) 28.18 (17.38) 15.86 66.78 8.56
5
Net Gearing 12.7% 27.1% 16.6% 11.4% (8.2%)
P/BV (x) 3.03 2.64 2.31 1.81 1.41 0
Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23
ROE 27.6% 14.7% 14.1% 25.2% 25.9%
% Change In Core EPS Estimates P/E Mean SD + 1 SD - 1
InCred Research/Consensus EPS
(x)

17
HDFC Bank
ADD Current price: Rs.1,403 Target price: Rs.2,000 Market cap: Rs10,655bn Bloomberg code: HDFCB IN
Key business triggers to watch out for in coming months
• Strong loan growth coming from HDFC merger synergies and new branches opened.
• Aggressive branch expansion done in FY23 and a similar trend in FY24F-25F to improve growth visibility from new branches in rural and semi-urban
regions.

Bull-case arguments not factored in by street

• Better profitability and market share gains due to early branch expansion and breakeven of new branches compared to its peers to drive a rerating.
All this, along with cross-sales to HDFC customers, will improve growth visibility.

Valuation and outlook

• We have an ADD rating on the stock with a target price of Rs.2,000, corresponding to ~2.5x FY25F P/ABV.
• With the merger of HDFC nearing completion and new branches set up in semi-urban and rural areas, the next phase of growth to drive a rerating for
HDFC Bank.
• Bull-case valuation: Assuming a 10% beat to our estimates and a higher multiple of ~2.7x, the target price can be Rs.2,200. Bear- case valuation:
Assuming a 10% miss to our estimates and a lower multiple of ~2.0x, the target price can be Rs.1,600.

One-year forward P/BV discounts the worst-case scenario

P/BV Mean Std+1 Std-1

4.5

4.0

3.5

3.0

2.5

2.0
Feb/16

Feb/17

Feb/18

Feb/19

Feb/20

Feb/21

Feb/22

Feb/23

Feb/24
18
InterGlobe Aviation (Indigo)
REDUCE Current price: Rs.3,155 Target price: Rs.2,000 Market cap: Rs.1,218bn Bloomberg code: INDIGO IN
Key business triggers to watch out for in coming months
• Traffic growth likely to disappoint: Domestic traffic (Sep-Oct 2023) was just 4% above the Sep-Oct 2019 level (pre-Covid). The 21% yoy growth in
Jun-Sep 2023 was due to the low base effect. We expect an 11% yoy rise in domestic RPK in FY25F. International traffic is 1% below Sep-Oct 2019
(pre-Covid level), but global RPK of Indian carriers is 34% higher than in Sep-Oct 2019. We expect an 8% yoy rise in global RPK in FY25F.
• Industry’s operating fleet sufficient to meet demand: While the operating fleet is similar to Sep 2019, seats are 7% higher. The 7% higher seat
utilization is due to (a) a 237bp higher PLF (ASK was 12% higher), and (b) a reduction in idle time from 54.7% to 51.7%. Over Sep-Oct 2019 to 2023,
the gap in idle time between IndiGo and other carriers has risen from 34% to 76%, implying sub-optimal usage of the fleet (ex-IndiGo).
• Tata Group at 80% of IndiGo’s scale; AI/Vistara CASK vs. IndiGo dips: The second-largest player now (Tata Group) is 80% of IndiGo vs. 66% in
FY20 (Air India or AI). For AI and Vistara, the gap in RASK-CASK vs. IndiGo has reduced sharply over FY20-23 and we expect it to reduce further.
• Pricing will be competitive (FY24F-26F): AI is more competitive now. Higher PLF boosts profits as revenue from an incremental passenger goes
straight to profits. Increase in the scale reduces CASK and boosts margin, as a higher market share cuts ownership costs/ASK & overheads/ ASK.
Bear-case arguments not factored in by street
• We believe IndiGo’s incremental groundings in 4QFY24 (35 planes; 5% of industry fleet) would not impact tariff as (a) IndiGo would lease more planes
to meet its capacity target, and (b) competitors are unscathed and their fleet is underutilized. We factor in that IndiGo’s entire fleet will be operational
in FY26F. This will increase the industry capacity by ~14% and dampen tariff. We factor Re0.11 RASK - CASK in FY26F (same as FY17-20 average).
Valuation: We have a REDUCE rating on the stock with a target price of Rs.2,000, valuing it at 8.5x FY26F EV/EBITDAR, vs. median multiple of 8.8x
(Nov 2015 to now, excluding the Covid-19 pandemic period). We believe the slight discount is warranted as (a) the time for resolution of grounded fleet is
uncertain, (b) we expect IndiGo’s ASK to grow in line with the industry vs. higher earlier, and (c) reduction in the gap in RASK-CASK between IndiGo vs.
Air India/Vistara over FY20 till now.
Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F EV/EBITDAR trend – excluding the Covid-19 pandemic period
Revenue (Rsm) 259,309 541,965 625,205 680,848 738,247
15
Operating EBITDA (Rsm) 14,712 91,933 129,936 119,059 117,179
Net Profit (Rsm) (61,710) (3,180) 37,207 15,017 21,058 13
Core EPS (Rs) (141.9) 50.2 96.5 38.9 54.6
Core EPS Growth (19.6%) (135.4%) 92.2% (59.6%) 40.2% 11
FD Core P/E (x) (20.88) 58.98 30.69 76.03 54.22
DPS (Rs) 0.0 0.0 0.0 0.0 0.0 9

Dividend Yield 0.00% 0.00% 0.00% 0.00% 0.00%

EV/EBITDA (x) 90.24 14.75 10.60 11.39 10.52 7

P/FCFE (x) 34.89 28.86 29.52 17.30 20.04

5
Net Gearing (443.4%) (523.8%) (1,478.7%) (3,340.8%) 2,321.5%
Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20 Nov-21 Nov-22 Nov-23
P/BV (x) (18.90) (18.11) (44.21) (105.64) 111.39
ROE 183.2% (31.4%) (83.7%) (82.0%) 0.0%
EV/EBITDAR Median EV/EBITDAR (8.8x) +1 Std Dev -1 Std Dev
% Change In Core EPS Estimates (703.60%) (519.93%)
InCred Research/Consensus EPS
(x)

19
Mahindra & Mahindra Financial Services (MMFS)
ADD Current price: Rs.283 Target price: Rs.370 Market cap: Rs. 350bn Bloomberg code: MMFS IN
Key business triggers to watch out for in coming months
• MMFS has a perception issue amid its long-term track record of reporting volatile earnings due to the volatile trend in asset quality but going ahead,
with improved customer sourcing as well as an efficient collection mechanism, the asset quality to improve, driving granularity in earnings.
• MMFS to deliver a sustainable RoA of +2% in the coming years backed by steady margin (~7.2%-7.3%), balanced operating leverage (cost-to-
average assets of ~2.6-2.8%) and improved credit costs in the range of ~1.5-1.7%.

Bull-case arguments not factored in by street

• With a well-capitalized balance sheet and the ability to raise money (amid strong promoter background), MMFS is capable enough to participate in
the rising credit demand momentum. We are factoring in ~22% CAGR in AUM backed by ~18% CAGR in disbursements over FY23-26F.
• We believe the margins have already bottomed out for the company (like many NBFCs) considering the repricing of new vehicle loans and a
consistent rejig of its portfolio towards better-yield assets. We project steady margins in the range of ~7.5% over FY23-25F.
• In a bull-case scenario, we see superior disbursement growth of ~22% CAGR led by the favourable CV demand cycle resulting in ~25% CAGR in
AUM with the margin at ~7.5% & credit cost below ~1.5%. This raises our FY25F/26F EPS estimates by Rs.4/Rs.6, respectively.

Valuation
• We have valued the standalone MMFS at Rs.370 or ~2.2x P/BV and ~16x P/E based on Mar 2025F. We have added the value of its two arms at
Rs20/share to arrive at our target price of Rs.370 or ~2.3x P/BV & ~16.3x P/E based on Mar 2024F. MMFS remains our high-conviction ADD-rated
stock.
• A bull-case scenario could lead to a higher multiple of ~2.5-2.8x Mar 2025F BV, leading to a higher target price of Rs.425.
Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/BV
Net Interest Income (Rsm) 57,795 63,853 69,537 86,757 104,223
3.8
Total Non-Interest Income (Rsm) 191 941 1,277 1,434 1,607 P/BV Mean Std+1 Std-1
Operating Revenue (Rsm) 57,986 64,794 70,814 88,190 105,830 3.3
Total Provision Charges (Rsm) (23,683) (9,992) (17,490) (16,790) (20,348)
2.8
Net Profit (Rsm) 9,888 19,848 17,413 27,999 34,889
Core EPS (Rs) 8.02 16.07 14.10 22.67 28.25 2.3
Core EPS Growth 195% 100% (12%) 61% 25%
FD Core P/E (x) 35.34 17.63 20.10 12.50 10.03 1.8
DPS (Rs) 3.60 6.00 5.00 9.00 11.00
1.3
Dividend Yield 1.27% 2.12% 1.76% 3.18% 3.88%
BVPS (Rs) 126.7 138.4 147.5 161.1 178.4 0.8
P/BV (x) 2.24 2.05 1.92 1.76 1.59
0.3
ROE 6.5% 12.1% 9.9% 14.7% 16.6%
Feb 16

Feb 17

Feb 18

Feb 19

Feb 20

Feb 21

Feb 22

Feb 23

Feb 24
% Change In Core EPS Estimates
InCred Research/Consensus EPS
(x)

20
 Reliance Industries (RIL)
ADD Current price: Rs.2,922 Target price: Rs.3,369 Market cap: Rs.19,766bn Bloomberg code: RELIANCE IN
Key business triggers to watch out for in coming months
• Our analysis indicates that RIL’s new energy initiatives are value-accretive and can add ~Rs170bn in EV. R-JIO and retail businesses remain strong.
• Uptick in the global refining cycle to hasten deleverage and drive a 35% EPS CAGR over FY22-24F. We factor in US$22/bbl GRM against a spot of
US$13-15/bbl.
• We believe that in the coming decade, GRM can remain structurally higher than in the last decade.

Valuation and analysis

• For the consolidated entity, we forecast an EBITDA CAGR of 33% over FY22-24F and a profit CAGR of 35%. The earnings growth will be mainly
delivered by the refining segment. Net debt reduction is an added advantage as the company will be able to get extra cash flow generated from
refineries.
• We upgrade RIL to a SOTP-based valuation of Rs.3,369 and upgrade its rating to ADD (from REDUCE earlier). The premature collapse of the refining
cycle is the downside risk to our call and target price.

Financial Summary Mar-20A Mar-21A Mar-22A Mar-23A Mar-24F One-year forward P/E
Revenue (Rsm) 5,975,350 4,669,240 7,452,269 7,749,220 8,281,474
Operating EBITDA (Rsm) 836,660 807,370 1,125,221 1,751,870 1,984,949 P/E (x) Mean +1 SD -1 SD +2 SD -2 SD
Net Profit (Rsm) 393,540 491,280 625,008 1,030,143 1,134,305
Core EPS (Rs) 66.4 72.3 100.7 162.2 178.7 30.0
Core EPS Growth (0.6%) 8.9% 39.3% 61.0% 10.1%
FD Core P/E (x) 39.86 32.39 26.27 16.31 14.82 25.0
DPS (Rs) 6.5 7.0 7.5 8.0 8.5
Dividend Yield 0.25% 0.27% 0.29% 0.30% 0.32% 20.0
EV/EBITDA (x) 19.65 19.78 14.31 9.19 7.85
P/FCFE (x) 116.72 (8.10) (28.82) 55.96 20.38 15.0
Net Gearing 42.4% 9.8% 3.5% (0.4%) (6.1%)
P/BV (x) 3.49 2.41 2.17 1.95 1.75 10.0
ROE 9.4% 7.8% 8.8% 12.7% 12.4%
% Change In Core EPS 5.0
Sep-16
Dec-16

Sep-17
Dec-17

Sep-18
Dec-18

Sep-19
Dec-19

Sep-20
Dec-20

Sep-21
Dec-21

Sep-22
Dec-22

Sep-23
Dec-23
Mar-16
Jun-16

Mar-17
Jun-17

Mar-18
Jun-18

Mar-19
Jun-19

Mar-20
Jun-20

Mar-21
Jun-21

Mar-22
Jun-22

Mar-23
Jun-23
Estimates
InCred Research/Consensus
EPS (x)

21
SBI Cards
REDUCE Current price: Rs.721 Target price: Rs.500 Market cap: Rs686 bn Bloomberg code: SBICARD IN
Key business triggers to watch out for in coming months
• The Reserve Bank of India (RBI) has increased risk weights on unsecured loans and has brought Tier-1 capital requirement to 18% from 22% in
2QFY24, which can slow down the growth in the credit card business.
• Rising stress in low-ticket unsecured loans will exert pressure on credit costs due to SBI Cards increasing its sourcing from Tier-2 & Tier-3 low-ticket
customers.
• Rising competition from other smaller banks to exert pressure on profitability.

Bear-case argument not factored in by street

* Lower growth.

Valuation and outlook

• We have a REDUCE rating on the stock with a target price of Rs.500, corresponding to ~3.5x FY25F P/BV.
• Bull-case valuation: Assuming a 10% beat to our estimates and a higher multiple of ~4x, the target price can be Rs.600. Bear- case valuation:
Assuming a 10% miss to our estimates and a lower multiple of ~3x, the target price can be Rs.450.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/BV
Net Interest Income (Rsm) 38,387 45,051 53,028 62,859 75,315

Total Non-Interest Income (Rsm) 64,355 81,327 98,151 112,627 137,123 P/BV Mean Std+1 Std-1

Operating Revenue (Rsm) 102,742 126,378 151,178 175,486 212,437 14

Total Provision Charges (Rsm) (22,558) (21,591) (32,279) (35,715) (42,217) 12
Net Profit (Rsm) 16,161 22,585 23,292 23,578 26,786
10
Core EPS (Rs) 17.14 23.87 24.62 24.92 28.32
8
Core EPS Growth 64% 39% 3% 1% 14%
6
FD Core P/E (x) 41.75 29.96 29.05 28.70 25.26
4
DPS (Rs) 2.50 2.00 3.71 3.76 4.27
2
Dividend Yield 0.35% 0.28% 0.52% 0.52% 0.60%
0
BVPS (Rs) 82.2 103.9 124.8 146.0 170.1

Feb/22

Feb/23

Feb/24
May/21

Nov/21

May/22
Aug/21

Aug/22

Nov/22

May/23

Aug/23

Nov/23
P/BV (x) 8.70 6.88 5.73 4.90 4.21

ROE 23.0% 25.7% 21.5% 18.4% 17.9%

22
Shriram Finance
ADD Current price: Rs.2,466 Target price: Rs.2,800 Market cap: Rs924bn Bloomberg code: SHFL IN
Key business triggers to watch out for in coming months
• Strong loan growth coming from cross-selling small-ticket non-vehicle loans & maintaining its dominance in the vehicle finance business.
• Net interest margin or NIM improving due to a rising share of better-yield products boosting profitability and a rising share of non-CV portfolio reducing
cyclical volatility.

Bull-case arguments not factored in by street

• Better profitability and market share gains led by product availability increasing in Shriram Credit Union Finance or SCUF branches. Also, better
pricing of used vehicles due to Phase II of BSVI norms implementation from Apr 2023.

Valuation and outlook

• We have an ADD rating on the stock with a target price of Rs.2,800, corresponding to 2x FY25F P/BV.
• With HDFC merger completion and cross-selling as well as better pricing, the next phase of growth to drive a rerating of the stock.
• Bull-case valuation: Assuming a 10% beat to our estimates and a higher multiple of ~2.3x, the target price can be Rs.3,000. Bear- case valuation:
Assuming a 10% miss to our estimates and a lower multiple of~1.7x, the target price can be Rs.2,000.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F

One-year forward P/BV
Net Interest Income (Rsm) 95,209 172,264 201,820 247,155 297,118
Total Non-Interest Income (Rsm) 191 307 369 443 531
P/BV Mean Std+1 Std-1
Operating Revenue (Rsm) 95,399 172,571 202,189 247,598 297,649
Total Provision Charges (Rsm) (38,609) (41,592) (46,215) (59,555) (74,562) 3.0
Net Profit (Rsm) 27,079 59,793 72,117 87,283 104,756 2.5
Core EPS (Rs) 100.10 159.69 192.60 233.11 279.77
2.0
Core EPS Growth 2% 60% 21% 21% 20%
FD Core P/E (x) 24.64 15.45 12.81 10.58 8.82 1.5
DPS (Rs) 20.00 15.00 20.00 25.00 30.00
1.0
Dividend Yield 0.81% 0.61% 0.81% 1.01% 1.22%
BVPS (Rs) 958.6 1,156.6 1,329.2 1,537.3 1,787.1
0.5
P/BV (x) 2.57 2.13 1.86 1.60 1.38 0.0

Feb/20
Feb/16

Feb/17

Feb/18

Feb/19

Feb/21

Feb/22

Feb/23

Feb/24
ROE 11.4% 17.3% 15.5% 16.3% 16.8%
% Change In Core EPS Estimates
InCred Research/Consensus EPS
(x)

23
Som Distilleries & Breweries
ADD Current price: Rs.275 Target price: Rs.446 Market cap: Rs.21bn Bloomberg code: SDB IN
Key business triggers to watch out for in coming months
• Som Distilleries and Breweries (SDBL) has secured the required permissions from Karnataka liquor industry regulator, as it progresses towards
ramping up capacity by ~67% at its Karnataka plant.
• SDBL has added markets for seeding going ahead. For the Madhya Pradesh unit, Rajasthan has been added for diversion of sales (from Karnataka
earlier). From the Odisha unit, Jharkhand market is being serviced.
• At a Rs.100 price-point (for a 650ml bottle) in Karnataka, SDBL has launched a new brand ‘Legend’ in the strong beer segment.

Bull-case argument not factored in by street

• Faster market share gains in Karnataka.

Valuation
• Current valuation: 18x FY25F P/E, target price of Rs.446 with an ADD rating; Bull-case scenario target price – Rs.524.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/E
Revenue (Rsm) 3,628 8,067 13,068 17,376 20,861
P/E Mean SD + 1 SD - 1
Operating EBITDA (Rsm) 169 1,021 1,585 2,172 2,608
35
Net Profit (Rsm) (99) 603 960 1,238 1,550
Core EPS (Rs) (1.5) 8.4 12.7 15.5 20.5 30
Core EPS Growth (81.3%) (674.8%) 51.5% 21.8% 32.2%
25
FD Core P/E (x) (189.77) 33.01 21.80 17.89 13.54
DPS (Rs) 0.0 0.0 0.0 1.2 1.5 20
Dividend Yield 0.00% 0.00% 0.45% 0.54% 0.81%
15
EV/EBITDA (x) 120.71 21.75 14.51 11.03 8.44
P/FCFE (x) 209.55 (54.69) (31.67) 346.07 20.13 10
Net Gearing 58.2% 61.2% 37.0% 24.9% 11.8%
5
P/BV (x) 6.69 5.44 3.80 3.17 2.21
ROE (3.4%) 18.1% 20.4% 19.3% 19.6% 0
% Change In Core EPS Estimates
InCred Research/Consensus EPS
(x)

24
State Bank of India (SBI)
ADD Current price: Rs.748 Target price: Rs.800 Market cap: Rs6,744 bn Bloomberg code: SBIN IN
Key business triggers to watch out for in coming months
• Strong asset quality in personal loans and other retail loans, despite the headwinds in small-ticket unsecured personal loans,
• to improve confidence on asset quality.
• Lower CD ratio to support margins in an aggressive competition environment for deposit acquisition.

Bull-case argument not factored in by street

• The standalone SBI, with +1% RoA and an improving asset quality trend, is available at ~0.8x FY25F BV which, we believe, is attractive.

Valuation and outlook

• We have an ADD rating on the stock with a target price of Rs.800, corresponding to ~1.2x FY25F P/BV .
• Bull-case valuation: Assuming a 10% beat to our estimates and a higher multiple of ~1.4x, the target price can be Rs.850. Bear- case valuation:
Assuming a 10% miss to our estimates and a lower multiple of ~1.x, the target price can be Rs.650.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/BV
Net Interest Income (Rsm) 1,107,100 1,207,076 1,448,405 1,598,118 1,809,213
1.9
Total Non-Interest Income (Rsm) 434,966 405,639 366,156 435,512 490,008 P/BV Mean Std+1 Std-1
Operating Revenue (Rsm) 1,542,066 1,612,715 1,814,561 2,033,630 2,299,221
1.7

Total Provision Charges (Rsm) (440,130) (244,521) (165,073) (81,513) (164,502) 1.5

Net Profit (Rsm) 204,107 316,760 502,325 604,861 628,657 1.3

Core EPS (Rs) 22.87 35.49 56.29 67.77 70.44 1.1

Core EPS Growth 26% 82% 35% 20% 4% 0.9

FD Core P/E (x) 28.01 18.05 11.38 9.45 9.09 0.7
DPS (Rs) 4.00 7.10 11.30 16.95 19.38 0.5
Dividend Yield 0.62% 1.11% 1.76% 2.65% 3.03% 0.3
Feb 16

Feb 17

Feb 18

Feb 19

Feb 20

Feb 21

Feb 22

Feb 23

Feb 24
BVPS (Rs) 284.5 313.8 367.1 417.9 469.0

P/BV (x) 2.25 2.04 1.74 1.53 1.37

ROE 8.4% 14.6% 16.5% 17.3% 15.9%

25
Tata Steel
REDUCE Current price: Rs.141 Target price: Rs.82 Market cap: Rs1758bn Bloomberg code: TATA IN
Key business triggers to watch out for in coming months
• We expect a global shortage of coking-coal due to sub-par investment in Australia. Europe must rely on blast furnaces (BFs) as electric arc furnaces
are unviable (even on gross profit or GP) due to higher scrap and electricity prices. On the other hand, BFs will make at least positive gross profit in
Europe.
• Pollution fears are forcing China to become a voracious user of scrap, leading to a scarcity of old scrap (comes from scrapping of old steel items).
Scrap prices are rising, which is a further negative for European steel-makers. Thus, production will shift to BFs, leading to higher coking-coal
prices.
• European power prices will rise again, making the production shift to BFs even more pronounced. An oversupplied steel market, rising costs, and
slowing demand is a recipe to buy steel names at 0.5x book value. Tata Steel is away from that. Its balance sheet will deteriorate (contrary to the
consensus estimate). We retain our high-conviction REDUCE rating on Tata Steel

Bear-case argument not factored in by street

• With high inflation and rising interest rates, the Western world will see steel demand destruction, leading to a massive destocking-led fall in prices.

Valuation
• In the foreseeable future, the steel market may witness sustained downward pressure, resulting in no improvement in steel spreads. We value Tata
Steel at 6.5x EV/EBITDA to arrive at our target price (TP) of Rs.82. The rise in TP is due to a higher P/E multiple (vs. 6x earlier). Retain REDUCE.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F

One-year forward P/BV
Revenue (Rsm) 2,423,269 2,433,527 2,634,001 2,794,365 2,945,160
Operating EBITDA (Rsm) 634,900 323,002 270,231 273,453 283,693 P/BV Mean +1 SD -1 SD +2 SD -2 SD
Net Profit (Rsm) 417,493 80,754 66,881 66,246 65,996
4.0
Core EPS (Rs) 34.3 6.6 5.5 5.4 5.4
Core EPS Growth 376.1% (80.8%) (16.7%) (0.9%) (0.4%) 3.5

FD Core P/E (x) 4.08 21.11 25.49 25.73 25.83 3.0

DPS (Rs) 2.5 2.5 2.0 2.0 2.0 2.5
Dividend Yield 1.79% 1.79% 1.43% 1.43% 1.43% 2.0
EV/EBITDA (x) 3.53 7.45 9.15 9.15 8.79
1.5
P/FCFE (x) 9.33 20.22 65.70 25.96 16.30
1.0
Net Gearing 43.7% 64.6% 68.4% 68.4% 65.2%
P/BV (x) 1.49 1.65 1.59 1.53 1.47 0.5
ROE 44.4% 7.4% 6.4% 6.1% 5.8% 0.0

Oct-21
Apr-08

Oct-09

Apr-11

Oct-12

Apr-14

Oct-15

Apr-17

Oct-18

Apr-20

Apr-23
Jan-15
Jan-09

Jul-10

Jan-12

Jul-13

Jul-16

Jan-18

Jul-19

Jan-21

Jul-22

Jan-24
% Change In Core EPS Estimates

InCred Research/Consensus EPS (x)

26
Tech Mahindra
ADD Current price: Rs.1,276 Target price: Rs.1,625 Market cap: Rs.1,246bn Bloomberg code: TECHM IN
Key business triggers to watch out for in coming months
• The ongoing leadership restructuring could lead to earnings upgrade in the medium term. MD & CEO Mr Mohit Joshi could lean on his first-hand
experience of restructuring at Infosys in 2018.
• The EBIT margin witnessed weakness (down by 730bp over 4QFY23-3QFY24 to 5.4%) due to one-offs and weak revenue performance, but the
company aims to improve its EBIT margin driven by higher offshoring, optimization of sub-contractor costs, higher billability of freshers, focus on
higher-margin business, tailwinds from moderating attrition and synergies from portfolio companies.

Bull-case arguments not factored in by street

• Accelerated deal wins from streamlined organizational structure, in turn, driving focused account mining and hunting.
• Moderation in sub-contractor expenses (11.5% of revenue in 3QFY24 vs. average 15%/15.6% in FY23/FY22, respectively), heightened focus on
higher-margin business and operational efficiency could surprise FY25F margin.

Valuation
• At CMP, Tech Mahindra trades at ~17x FY26F EPS. We value the stock at ~21x FY26F EPS (TP: Rs.1,625) derived from a PE/G multiple of ~1x
(~50% discount to Tata Consultancy Services or TCS’ multiple).
• Bull-case valuation: Assuming a 10% beat to our EPS estimates and a higher multiple of ~23x, the target price can be Rs.1,950.
• Bear-case valuation: Assuming a 10% miss to our EPS estimates and a lower multiple of ~19x, the target price can be Rs.1,318.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F One-year forward P/E
Revenue (Rsm) 446,460 532,902 523,217 548,344 592,462
Operating EBITDA (Rsm) 80,201 80,287 48,764 90,477 106,643 40
Net Profit (Rsm) 55,662 48,312 24,272 56,734 68,129 35
30
Core EPS (Rs) 63.0 57.2 29.1 64.2 77.1
25
Core EPS Growth 23.4% (9.2%) (49.1%) 120.4% 20.1%
20
x
FD Core P/E (x) 20.21 23.35 46.43 19.85 16.53 15
DPS (Rs) 45.0 50.0 47.0 51.3 61.7 10
Dividend Yield 3.51% 3.92% 3.70% 4.03% 4.84% 5
0
EV/EBITDA (x) 13.33 13.53 22.27 11.78 9.79
28/02/2014
31/07/2014
31/12/2014
31/05/2015
31/10/2015
31/03/2016
31/08/2016
31/01/2017
30/06/2017
30/11/2017
30/04/2018
30/09/2018
28/02/2019
31/07/2019
31/12/2019
31/05/2020
31/10/2020
31/03/2021
31/08/2021
31/01/2022
30/06/2022
30/11/2022
30/04/2023
30/09/2023
29/02/2024
P/FCFE (x) 26.00 38.12 31.31 20.07 16.71
Net Gearing (22.3%) (16.4%) (17.2%) (23.4%) (29.9%)
P/BV (x) 4.20 4.04 4.30 4.12 3.93
P/E Avg. P/E Std Dev + 1
ROE 21.5% 18.5% 9.5% 21.2% 24.3%
% Change In Core EPS Estimates Std Dev - 1 Std Dev + 2 Std Dev - 2
InCred Research/Consensus EPS
(x)

27
Thermax
ADD Current price: Rs.3,637 Target price: Rs.3,675 Market cap: Rs.408bn Bloomberg code: TMX IN
Key business triggers to watch out for in coming months
• Thermax is a key beneficiary of the green shoots witnessed in private sector capex in multiple industries. The company has a healthy order book of
Rs107bn with a strong pipeline of small ticket-size orders from the cement, biomass, food and beverage, and sugar/distillery sectors.
• The transition to green energy with offerings in the solar and renewable energy space augurs well. Global opportunities in biomass, waste heat
recovery system (WHRS), and water desalination also remain strong. Thermax has been most successful in green projects, zero liquid discharge, etc.
• Thermax is getting into electrolyser and biomass equipment businesses over the next couple of quarters. The company intends to work on EPC
projects as well.

Bull-case arguments not factored in by street

• We expect higher return ratios in the solutions business, including in green utilities such as solar- and wind-based opex. Solar energy business and
subsidiary Thermax Onsite Energy Solutions (TOESL) have good long-term profit potential with higher margin and return ratios.
• We expect its EBITDA margin to expand from 7.4% in FY23 to 8.8% in FY26F.

Valuation
• Thermax, with its strong execution and technological capabilities in green energy and the wastewater industry, should be able to post strong
performance in the coming years.
• The transition to green energy, with offerings in the solar & renewable energy space, augurs well. We retain ADD rating on Thermax with a bull-case
target price of Rs.4,000, valuing the stock at 50x FY26F EPS.

Financial Summary Mar-22A Mar-23A Mar-24F Mar-25F Mar-26F

One-year forward P/E
Revenue (Rsm) 153,138 176,462 204,545 237,812 277,904
Operating EBITDA (Rsm) 33,091 40,476 48,821 56,433 66,932 P/E Mean 1+SD 1-SD
60
Net Profit (Rsm) 23,487 30,067 39,026 43,245 50,361 55
Core EPS (Rs) 3.2 4.1 5.3 5.9 6.9
50
Core EPS Growth 13.7% 28.0% 29.8% 10.8% 16.5%
45
FD Core P/E (x) 57.08 44.59 34.35 31.00 26.62
40
DPS (Rs) 1.4 1.7 2.2 2.4 2.8
Dividend Yield 0.76% 0.93% 1.20% 1.33% 1.55% 35
EV/EBITDA (x) 38.25 31.14 26.14 22.71 19.26 30
P/FCFE (x) (190.02) 34.72 4,991.56 107.93 100.49 25
Net Gearing (62.6%) (59.0%) (40.5%) (31.9%) (24.0%)
20

Dec-19

Sep-22
Sep-14
Dec-14

Sep-15
Dec-15

Sep-16
Dec-16

Sep-17
Dec-17

Sep-18
Dec-18

Sep-19

Sep-20
Dec-20

Sep-21
Dec-21

Dec-22

Sep-23
Dec-23
Mar-15
Mar-14

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23
Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23
P/BV (x) 11.19 9.87 8.45 7.28 6.28
ROE 20.6% 23.5% 26.5% 25.2% 25.3%
% Change In Core EPS Estimates
InCred Research/Consensus EPS
(x)

28
Technicals
HDFC Bank Tech Mahindra
• HDFC Bank has been in a strong uptrend since the year • The IT index has been one of the most stable and strongest
2000, with consistent formations of higher highs and higher major indices in recent times. The index has been forming
lows. However, after a strong price as well as time correction, higher highs and higher lows on the monthly charts and
it has come near the strong technical levels. The arrows missed making a fresh life-high by a whisker. On similar
shown in the chart depict instances when the prices lines, Tech Mahindra is seen making higher highs and higher
penetrated inside the Ichimoku Cloud monthly. Kumo (Cloud) lows, implying it is in a strong uptrend and that it is ready to
is the last support in Ichimoku studies and a close below this come out of a brief consolidation witnessed after retesting a
signals trend reversal. In the current context, it implies HDFC 15-year breakout on the monthly time frame. The stock is
Bank is near a major support level and in all the instances in expected to make a fresh life-high based on breakout as well
the past, it witnessed a move towards fresh life-high levels in as the Dow Theory, making it one of the most lucrative large-
two years. cap names on a medium- to long-term basis.

29
Technicals
Reliance Industries Maruti Suzuki
• Reliance Industries has been one of the strongest Nifty • Maruti Suzuki has been in a 17-year ascending channel
names, with a consistent outperformance since the last few pattern on the monthly charts. The stock has been in
months. It witnessed a small consolidation after breaking out consolidation since bouncing from the channel support in the
from a multi-month channel pattern on the weekly charts and year 2020. The stock has confirmed a five-year consolidation
recently witnessed a bullish ABC pattern follow-through on breakout on the monthly charts and has entered a fresh
1%x3 setup on the Point-and-Figure charts. The cluster target zone. This breakout can push the stock towards the
of vertical as well as horizontal count is placed around Rs.12,000-level in the coming months. The price is expected
Rs.3,400 levels. Please note that cluster counts have a far to get a strong thrust from the Relative Strength Index or RSI,
higher possibility of getting achieved, as against normal once it gives a move above the 70 level, which will confirm a
vertical or horizontal count. major breakout in the RSI as well.

30
Disclaimer
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INH000011024. Pursuant to a trademark agreement, IRSPL has adopted “Incred Equities” as its trademark for use in this report.
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Unless otherwise specified, this report is based upon reasonable sources. Such sources will, unless otherwise specified, for market data, be market data and prices available from
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generally be based on published statements of the company(ies), information disseminated by regulatory information services, other publicly available information and information
resulting from our research. Whilst every effort is made to ensure that statements of facts made in this report are accurate, all estimates, projections, forecasts, expressions of
opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable as of the date of the document in which they are contained
and must not be construed as a representation that the matters referred to therein will occur. Past performance is not a reliable indicator of future performance. The value of
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The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of IRSPL. Information
barriers and other arrangements have been established, as required, to prevent any conflicts of interests.

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Disclaimer
The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of IRSPL. Information
barriers and other arrangements have been established, as required, to prevent any conflicts of interests.
IRSPL may have issued other reports (based on technical analysis, event specific, short term views etc.) that are inconsistent with and reach different conclusion from
the information presented in this report.
Holding of Analysts/Relatives of Analysts, IRSPL and Associates of IRSPL in the covered securities, as on the date of publishing of this report
Analyst/ Entity/
Relative Associates
any financial interests in the company covered in this report (subject company) and nature of such financial
NO NO
interest
actual/beneficial ownership of 1% or more in securities of the subject company at the end of the month
immediately preceding the date of publication of the research report NO NO
or date of the public appearance;
any other material conflict of interest at the time of publication of the research report
NO NO
or at the time of public appearance
received any compensation from the subject company in the past twelve months
for investment banking or merchant banking or brokerage services or investment advisory or depository or
distribution from the subject company in the last twelve months for products/services other than investment NO NO
banking or merchant banking or broker- age services or investment advisory or depository or distribution from
the subject company in the last twelve months
managed or co-managed public offering of securities for the subject company in the last twelve months NO NO
received any compensation or other benefits from the subject company or third party in connection with the
NO NO
research report
served as an officer, director or employee of the subject company NO NO
been engaged in market making activity for the subject company NO NO

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Disclaimer
Analyst declaration
• The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and
opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously in an unbiased manner.
• No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report or based
any specific investment banking transaction.
• The analyst(s) has(have) not had any serious disciplinary action taken against him/her(them).
• The analyst, strategist, or economist does not have any material conflict of interest at the time of publication of this report.
• The analyst(s) has(have) received compensation based upon various factors, including quality, accuracy and value of research, overall firm performance, client feedback and
competitive factors.

IRSPL and/or its affiliates and/or its Directors/employees may own or have positions in securities of the company(ies) covered in this report or any securities related thereto and
may from time to time add to or dispose of, or may be materially interested in, any such securities.

IRSPL and/or its affiliates and/or its Directors/employees may do and seek to do business with the company(ies) covered in this research report and may from time to time (a)
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and/or (c) may sell them to or buy them from customers on a principal basis and/or (d) may also perform or seek to perform significant investment banking, advisory, underwriting
or placement services for or relating to such company(ies) and/or (e) solicit such investment, advisory or other services from any entity mentioned in thisreport and/or (f) act as a
lender/borrower to such company and may earn brokerage or other compensation. However, Analysts are forbidden to acquire, on their own account or hold securities (physical
or uncertificated, including derivatives) of companies in respect of which they are compiling and producing financial recommendations or in the result of which they play a key part.

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