Motilal Oswal India Valuations Handbook January

*Sectors in order of their
premium/discount to historical
averages
BEST PERFORMERS MoM (%) WORST PERFORMERS MoM (%)
Highlights – January 2022 edition
ONGC 21 -20 Wipro  Markets consolidated in Jan’22; ended
SBI 17 -17 Tech Mah. flat
Maruti 16 -17 HCL Tech
 PSU Banks, Utilities, Oil & Gas,
NTPC 14 -14 Divi's Lab.
Axis Bank 14 -12 Dr Reddy's
Automobiles and Private Banks were the
IOC 12 -10 Shree Cement top performers
Hero Moto 11 -8 Infosys  Technology, Healthcare and Consumer
Coal India 9 -7 Asian Paints
were the top losers
Bajaj Auto 9 -6 Titan Co
Tata Motors 7 -6 Nestle  FIIs were net sellers for four consecutive
months
Research & Quant Team (Deven@MotilalOswal.com) February 2022

Contents
 Strategy: 2022 begins on a cautious note
About the product
 Valuation deep-dive for the month: Healthcare
As the tagline suggests, BULLS & BEARS is a monthly
 Indian equities: Nifty, sectoral performances, and key valuation handbook on valuations in India. It covers:
metrics
 Valuations of Indian market vis-à-vis global markets
 Global equities: Performance and valuation snapshot
 Current valuation of companies in various sectors
 Valuations: Nifty/Midcap companies
 Sectors that are currently valued at a premium/
 Sector highlights: Overview and sector valuations discount to their historical long-period averages
 AUTO
NOTES:
 BANKS/FINANCIALS
 CAPITAL GOODS  Prices as of 31st Jan’22
 CEMENT  BULL icon:
 CONSUMER
Sectors trading at a premium to their historical
 CONSUMER DURABLES
average
 HEALTHCARE
 INFRASTRUCTURE  BEAR icon:
 LOGISTICS Sectors trading at a discount to their historical
 MEDIA average
 METALS
 OIL AND GAS
 Valuations are on a 12-month forward basis, unless
 REAL ESTATE mentioned otherwise
 RETAIL  Sector valuations are based on MOSL coverage
 SPECIALITY CHEMICALS companies
 TECHNOLOGY
 TELECOM  Global equities’ data are sourced from Bloomberg;
Nifty valuations are based on MOFSL estimates
Investors are advised to refer to the important disclosures appended at the end of this report.
BULLS & BEARS | February 2022 2

Strategy: 2022 begins on a cautious note
 Tested by elevated volatility, the market consolidates in Jan’22: The Nifty after recording an impressive 24% YoY gain in CY21 has begun the year
on a cautious note. The month was characterized by extreme volatility, with the benchmark oscillating in a wide range (~1,500 points) and pulling
back significantly to close flat MoM. The increase in volatility was led by weak global cues, with concerns around inflation and potential rate hikes
sparking a risk-off globally, leading to elevated FII outflows from India. FII recorded outflows for the fourth consecutive month and outflows stood at
USD4.8b in Jan’22 – the highest since Mar’20. DIIs saw inflows for the 11th consecutive month and inflows stood at USD2.6b.
 Earnings season broadly in line thus far: As of 2nd Feb’21, 120/34 MOFSL Universe/Nifty companies have announced their 3QFY22 results.
Sales/EBITDA/PBT/PAT for the 34 Nifty companies grew 31%/9%/12%/10% YoY (v/s our estimate of 30%/13%/14%/12% YoY). Around 15 Nifty
companies have beaten our PAT expectations, while nine have missed. On the EBITDA front, eight have surpassed, 11 have missed, and 15 have met
our expectations. For the MOFSL Universe, sales/EBITDA/PBT/PAT growth stands at 30%/9%/15%/13% YoY (v/s our expectation of
33%/13%/17%/15% YoY).
 Budget has focused on improved spending quality: From an equity market perspective, we believe the budget, on balance, has no unpleasant
surprises while there remains some room for further capex/spending push as the government is likely to overshoot its revenue targets. While there
could be some disappointments on the absence of measures to improve consumption, economic recovery in FY23 coupled with vaccination
progress would continue to drive demand recovery ahead. Crude prices around USD90/bbl would present a challenge for inflation ahead and act as
a risk for fiscal maths.
 PSU Banks, Utilities and Oil & Gas top performers in Jan’22: Top gainers in the sectoral space were PSU Banks (+18%), Utilities (+13%), Oil & Gas
(+10%), Automobiles (+7%) and Private Banks (+6%), while Technology (-10%), Healthcare (-7%) and Consumer (-3%) were the biggest losers. ONGC
(+21%), SBI (+17%), Maruti Suzuki (+16%), NTPC (+14%), and Axis Bank (+14%) were the top performers. Wipro (-20%), Tech Mahindra (-17%), HCL
Tech (-17%), Divis Lab (-14%), and Dr Reddy’s (-12%) were the key laggards.
 Major economies ended lower in Jan’22: Barring Brazil (+7%), the UK (+1%) and Indonesia (+1%), Jan’22 saw key global markets such as Korea
(-11%), China (-8%), Japan (-6%), Russia (-6%), the US (-5%), Taiwan (-3%), MSCI EM (-2%), and India (-0%) end lower in local currency terms. In the
last 12 months, MSCI India (+29%) has outperformed MSCI EM (-9%). In the last 10 years, it has outperformed MSCI EM by 181%. In P/E terms, MSCI
India is trading at a 96% premium to MSCI EM, above its historical average of 59%.
 Sentiments improve; volatility to continue: Given the continuity of policy focus and pronouncements, we believe markets will discount the budget
and shift focus to: a) rising interest rate regime globally and consequent higher bond yields and b) corporate earnings growth that has remained
resilient so far in the ongoing 3QFY22 earnings season. The forward earnings estimates for FY22/23/24 have remained stable. The forthcoming RBI
policy meet on 9th Feb’22 assume greater significance now with respect to the future of liquidity and interest rates. Valuations are slightly rich with
Nifty trading at 20x FY23E EPS and thus the corporate earnings delivery becomes highly crucial, more so in a rising rate regime. We prefer BFSI, IT,
Consumer, Telecom, Metals and Cement while we are Underweight on Auto and Energy in our model portfolio.
 Top ideas: Largecaps: ICICI Bank, SBI, L&T, Axis Bank, Reliance Industries, Bharti Airtel, Infosys, HUVR, Titan, and Hindalco.
Midcaps/Smallcaps: Ashok Leyland, Oberoi Realty, Indian Hotels, Devyani International, Zensar Tech, Indigo Paints, ABFRL, Gujarat Gas, Orient
Electric, and VRL Logistics.
Valuation deep-dive for the month: Healthcare
Valuation correction puts healthcare multiple at discount to its 10-year average: Trend in Healthcare one-year forward P/E (x)
Healthcare P/E had moved sharply to 7% premium in Jun’21 from 40% discount to its 10- 40.0 Healthcare P/E (x) 5 Yr Avg (x)
year average in Mar’20. However, since then it is trending downward and is currently at 5% 10 Yr Avg (x) 15 Yr Avg (x)
discount to its 10-year average. There were major COVID-related business opportunities 32.0
25.6 24.9
that led the sector re-rating during Mar’20-Jun’21. However, multiple headwinds in the
24.0
form of increased pricing pressure on finished goods accompanied by rising raw material 23.7
22.6
cost have put a dent on the Healthcare multiple recently. 16.0
Normalization of demand and price hike in NLEM products to drive better DF growth: 8.0
There has been a COVID-related headwind, affecting doctor-patient connectivity in the
Jul-19
May-08
Jul-09
Jul-14
Apr-13
Apr-18
Jan-07
Jan-12
Jan-17
Jan-22
Oct-10
Oct-15
Oct-20
acute therapies in domestic formulation (DF) segment. However, this was offset to some
extent by higher off-take in COVID-related medicines. The reduced level of hospitalization
in the third wave and considerable seasonal change has led to higher consumption of
Trend in Healthcare one-year forward P/B (x)
medicines to treat acute indications. The chronic therapy-related medicines have seen
some slowdown due to inventory build-up in the channel. With all these factors Healthcare P/B (x) 5 Yr Avg (x) 10 Yr Avg (x) 15 Yr Avg (x)
6.5
smoothening out in the near term, we expect DF to be back on growth path tracking 8-10%
YoY growth. The allowance of inflation-linked price hike (to the tune of 10%) in NLEM 5.3
3.9 3.5
products would further bolster the growth prospects of DF companies. 4.0 3.6
Niche launches key for better prospects in the US generics: The ANDA approval run-rate 3.7
2.8
has slowed down over the past few months due to the lack of USFDA inspection. Even the
1.5
filing pace had reduced owing to COVID. This has a dual impact – it not only lowers the
Jul-09
Jul-14
Jul-19
May-08
Apr-13
Oct-15
Apr-18
Jan-07
Jan-12
Jan-17
Jan-22
Oct-10
Oct-20
visibility of future business, but also impacts the near-term profitability with intensified
price erosion in the base business. With COVID subsiding, we expect filing/approval pace to
improve going forward. However, this also increases the inspection-related risk. The niche
product approvals/launches remain the key in not only offsetting the base business Valuation trend v/s Nifty P/E (x)
erosion, but also delivering growth. Healthcare P/E (x) Nifty PE (x)
40.0
Emerging markets on a gradual recovery mode: The emerging markets business was
disrupted by the pandemic. However, it is back on track now with an ease of COVID-related 32.0
restrictions. The branded generics segment remains highly promising in emerging markets, 24.0 23.7
given the superior profitability and growth longevity. 20.4
16.0
Recovery in key markets to revive the sector multiple as well: With outlook improving
8.0
across key markets of developed countries/India/other emerging markets and with
Jul-09
Jul-14
Jul-19
May-08
Apr-13
Apr-18
Jan-07
Jan-12
Jan-17
Jan-22
Oct-10
Oct-15
Oct-20
valuation at comfortable levels, we believe the sector to be well placed for a re-rating from
the current levels.
BULLS & BEARS | February

February2022
2022 4
Indian equities: Market consolidates in Jan’22
 The Nifty after posting a marked 24% YoY gain in CY21 has Nifty MoM change (%) — Consolidates in Jan’22
begun the year on a cautious note. With extreme volatility
in Jan’22, the index oscillated in a range of ~1,500 points
before closing 14 points (0.1% MoM) lower at 17,340.
 Sector-wise, PSU Banks (+18%), Utilities (+13%), Oil & Gas
(+10%), Automobiles (+7%) and Private Banks (+6%) were
top outperformer, while Technology (-10%), Healthcare
(-7%) and Consumer (-3%) were the biggest losers.
 FIIs posted the highest outflows since Mar’20 at -USD4.8b.
Domestic inflows continue for the 11th consecutive month
at USD2.6b in Jan’22.
Institutional flows (USD b) — FIIs recorded the highest outflows since Sectoral MoM change (%) —Technology, Healthcare, Consumer top losers
Mar-20; while DIIs recorded the 11th consecutive month of inflows while PSU Banks, Utilities, Oil & Gas top performer

Indian equities: Breadth positive in Jan’22; 28 Nifty constituents have ended higher
 Best and worst Nifty performers in Jan’22: ONGC (+21%), SBI (+17%), Maruti Suzuki (+16%), NTPC (+14%), and Axis Bank (+14%) were the top
performers. Wipro (-20%), Tech Mahindra (-17%), HCL Tech (-17%), Divis Lab (-14%), and Dr Reddy’s (-12%) led the laggards pack.
 Best and worst Nifty performers in CY21: Tata Motors (+163%), Hindalco (+98%), Wipro (+85%), Bajaj Finserv (+84%), and Tech Mahindra (+84%)
were the top performers. Hero MotoCorp (-21%), Kotak Mahindra Bank (-10%), Bajaj Auto (-6%), Dr. Reddy's Lab. (-6%), HDFC Life (-4%), Maruti
Suzuki (-3%), HUL (-1%), and IndusInd Bank (-1%) were the only laggards.
Best and worst Nifty performers (MoM) in Jan’22 (%) – breadth balanced; 28 Nifty constituents ended higher
Best and worst Nifty performers (YoY) in CY21 (%) – 42 Nifty constituents delivered positive returns

Indian equities: Midcaps have outperformed largecaps during the last 12 months
 During the last 12 months, midcaps have risen 45% (v/s a 27% rise for the Nifty), while in the last five years, they have underperformed by 7%.
 In P/E terms, the Nifty Midcap 100 is trading at a 8% premium to the Nifty.
Midcaps outperformed largecaps over the last 12 months Performance of midcaps v/s largecaps over the last five years
12-month forward P/E (x) Midcaps trade at a 8% premium to largecaps
Source: MOFSL, Bloomberg for midcap valuation

Indian equities: Nifty valuations above historical average
 The Nifty trades at a 12-month forward P/E of 20.4x, at a 6% premium to its LPA. P/B, at 3.2x, is at a 22% premium to its historical average.
 The 12-month trailing P/E for the Nifty, at 24.9x, is at a 19% premium to its LPA of 20.9x. At 3.5x, Nifty’s 12-month trailing P/B is above its historical
average of 2.8x.
12-month forward Nifty P/E (x) 12-month forward Nifty P/B (x)
Trailing Nifty P/E (x) Trailing Nifty P/B (x)

Indian equities: Market capitalization-to-GDP ratio at a record high since CY07
 India’s market capitalization-to-GDP ratio has been volatile, reaching 56% (FY20 GDP) in Mar’20 from 80% in FY19. It has rebounded to 116% at
present (FY22E GDP), above its long-term average of 79%. It is at the highest level since CY07.
 The Nifty is trading at a 12-month forward RoE of 15.6%, above its long-term average.
India’s market capitalization-to-GDP ratio (%) is at the highest level since CY07
12-month forward Nifty RoE (%) Trend in Nifty RoE (%)

Global equities: Major economies have ended lower in Jan’22
 Barring Brazil (+7%), the UK (+1%) and Indonesia (+1%), Jan’22 saw key global markets such as Korea (-11%), China (-8%), Japan (-6%), Russia (-6%),
the US (-5%), Taiwan (-3%), MSCI EM (-2%), and India (-0%) end lower in local currency terms.
 Indian equities are trading at 23.9x FY22E earnings. All key markets continue to trade at a discount to India.
India (Nifty) v/s other markets

Prem / Disc
` MoM Chg (%) PE (x) PB (x) RoE (%)
to India PE (%)
Index Mkt Cap Local CY20 / CY21 / CY20 / CY21 / CY20 / CY21 / CY20 / CY21 /
In USD
Value (USD T) Currency FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22
India 17,340 3.5 0 0 32.0 23.9 3.8 3.5 12.0 14.6
US 4,516 48.9 -5 -5 36.9 20.4 15 -14 4.9 4.1 10.6 22.5
Japan 27,002 6.3 -6 -6 30.9 16.5 -3 -31 2.0 1.7 7.0 11.1
Indonesia 6,631 0.6 1 0 53.1 15.9 66 -33 2.3 2.1 4.5 14.9
Taiwan 17,674 2.2 -3 -3 23.4 13.2 -27 -45 2.4 2.3 10.8 18.6
MSCI EM 1,208 22.6 -2 -2 20.6 12.3 -36 -49 1.8 1.7 9.1 12.7
UK 7,464 3.4 1 0 98.3 12.2 207 -49 2.0 1.8 2.7 10.2
China 3,361 11.8 -8 -8 17.2 10.9 -46 -55 1.6 1.3 9.3 10.7
Korea 2,663 2.0 -11 -12 23.2 10.2 -27 -57 1.0 1.0 4.7 8.6
Brazil 1,12,144 0.8 7 12 29.0 8.3 -9 -65 2.1 1.6 7.4 22.5
Russia 5,500 0.7 -6 -9 20.6 4.2 -36 -82 0.9 0.8 5.0 14.6
Source: Bloomberg/MOFSL

Global equities: MSCI India has outperformed MSCI EM in the last 12 months
 In the last 12 months, MSCI India (+29%) has outperformed MSCI EM (-9%). Over the last 10 years, it has outperformed MSCI EM by 181%.
 In P/E terms, MSCI India is trading at a 96% premium to MSCI EM, above its historical average of 59%.
MSCI EM v/s MSCI India – performance over the last 12 months MSCI India outperformed MSCI EM by 181% over the last 10 years
MSCI India v/s MSCI EM – trailing P/E (x) MSCI India v/s MSCI EM – P/E premium (%)
Source: Bloomberg

Global equities: India’s share in world Mcap highest in 11 years
 India’s share in the world Mcap stands at 3% – highest since Jan-2011.
 In Jan’22, global Mcap has increased 8% (USD8.6t) while India’s Mcap has risen 38%.
Trend in India's contribution to world Mcap (%)
Mcap change in the last 12 months (%)
Source: Bloomberg

50% of Nifty constituents trade at a premium to the historical averages
 Companies trading at a significant premium to their historical averages: HCL Technologies (+69%), Wipro (+53%), Infosys (+53%), TCS (+52%), and
Titan (+52%).
 Companies trading at a significant discount to their historical averages: ONGC (-62%), Tata Steel (-54%), Coal India (-51%), ITC (-38%), and JSW Steel
(-38%).
Valuations of Nifty constituents
PE (x) Relative to Nifty P/E (%) PB (x) Relative to Nifty P/B (%)
Name Sector Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
Bajaj Auto Auto 18.2 17.5 4 -11 -9 3.9 4.6 -15 23 75
Eicher Motors Auto 23.9 29.9 -20 17 55 4.8 6.9 -30 52 166
Hero MotoCorp Auto 17.3 18.2 -5 -15 -5 3.4 5.4 -36 7 105
Mahindra & Mahindra Auto 20.0 18.5 8 -2 -4 2.5 2.7 -6 -21 2
Maruti Suzuki Auto 38.1 28.4 34 87 48 4.6 3.7 24 44 41
Tata Motors Auto NA 14.1 NA NA -27 3.9 1.8 114 24 -30
Axis Bank Banks - Private 14.2 37.8 -62 -30 96 1.9 1.9 -2 -41 -27
HDFC Bank Banks - Private 19.0 20.6 -8 -7 7 3.1 3.4 -9 -3 30
ICICI Bank Banks - Private 20.0 20.5 -3 -2 6 2.9 1.8 58 -9 -30
IndusInd Bank Banks - Private 10.0 19.7 -49 -51 2 1.3 2.6 -51 -60 1
Kotak Mahindra Bank Banks - Private 28.3 26.7 6 39 39 3.5 3.3 6 9 25
State Bank Banks - PSU 10.7 13.7 -22 -47 -29 1.4 1.1 35 -55 -59
Bajaj Finance Banks - NBFC 44.0 25.8 71 116 34 8.3 4.3 93 162 66
HDFC Banks - NBFC 37.1 35.8 4 82 86 3.6 4.1 -13 13 58
HDFC Life Ins Banks - Insurance 88.6 84.5 5 335 339 3.5 4.4 -19 11 67
SBI Life Ins Banks - Insurance 80.1 58.3 37 293 203 2.5 2.4 2 -22 -6
Larsen & Toubro Capital Goods 24.1 21.8 11 18 13 3.1 2.7 15 -3 3
Grasim Inds Cement 15.3 12.0 28 -25 -38 2.4 1.7 39 -24 -33
Shree Cement Cement 37.0 35.8 3 81 86 4.6 5.0 -7 45 91
Ultratech Cement Cement 29.5 30.1 -2 45 56 3.8 3.1 22 20 19
Asian Paints Consumer 66.2 47.7 39 225 148 20.2 12.8 58 536 390
Britannia Inds. Consumer 47.7 38.6 23 134 101 16.9 14.0 21 430 436
Hind. Unilever Consumer 53.4 46.5 15 162 142 11.5 28.6 -60 262 995
ITC Consumer 15.6 25.1 -38 -24 30 4.3 6.4 -33 35 146
Nestle India Consumer 70.4 53.3 32 245 177 89.8 38.2 135 2724 1363
Tata Consumer Consumer 53.5 39.0 37 163 103 4.3 2.5 70 34 -4

50% of Nifty constituents trade at a premium to the historical averages (continued)
Name Sector Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
Cipla Healthcare 23.4 27.8 -16 15 44 3.3 3.3 1 4 25
Divi's Lab. Healthcare 32.3 26.1 24 59 36 8.1 5.7 44 156 117
Dr Reddy’s Labs Healthcare 20.8 26.0 -20 2 35 3.1 3.7 -15 -1 42
Sun Pharma Healthcare 23.8 29.4 -19 17 53 3.4 4.3 -20 7 63
Hindalco Metals 8.7 9.2 -5 -57 -52 1.7 1.2 49 -46 -56
JSW Steel Metals 7.5 12.0 -38 -63 -38 1.9 1.4 33 -40 -44
Tata Steel Metals 5.9 12.8 -54 -71 -34 1.2 1.3 -2 -61 -52
BPCL Oil & Gas 9.3 8.6 9 -54 -56 1.6 1.9 -13 -49 -29
IOCL Oil & Gas 6.9 8.8 -21 -66 -54 0.9 1.1 -16 -72 -59
ONGC Oil & Gas 3.4 8.9 -62 -83 -54 0.8 1.1 -30 -76 -58
Reliance Inds. Oil & Gas 22.3 15.1 47 9 -21 1.9 1.5 30 -40 -44
Titan Co Retail 75.9 50.1 52 272 160 21.9 11.2 96 590 328
HCL Technologies Technology 19.6 11.6 69 -4 -40 4.6 2.7 70 45 4
Infosys Technology 27.0 17.7 53 32 -8 10.0 4.5 122 215 73
TCS Technology 30.7 20.2 52 51 5 14.4 7.6 91 353 190
Tech Mahindra Technology 20.2 13.9 45 -1 -28 4.3 2.9 49 34 10
Wipro Technology 23.9 15.6 53 17 -19 5.7 3.0 87 79 16
Bharti Airtel Telecom NA 36.4 NA NA 89 4.7 2.5 83 47 -2
Coal India Utilities 5.9 12.1 -51 -71 -37 2.1 5.2 -60 -34 101
NTPC Utilities 8.2 11.2 -27 -60 -42 1.0 1.2 -17 -69 -54
Power Grid Corp. Utilities 10.8 10.6 2 -47 -45 1.9 1.6 14 -42 -37
UPL Others 12.0 12.3 -2 -41 -36 1.6 2.5 -34 -49 -5
Nifty 20.4 19.3 6 3.2 2.6 22

Midcaps have underperformed largecaps in Jan’22
 The Nifty Midcap 100 fell 0.6% in Jan’22 as against a 0.1% fall in the Nifty.
 AU Small Finance (+26%), Federal Bank (+21%), Oil India (+21%), RBL Bank (+17%), and Indian Bank (+12%) were the top midcap performers in Jan’22.
PE (x) Relative to Nifty P/E (%) PB (x) Relative to Nifty P/B (%) Price Chg (%)
Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg MoM CY21
AU Small Finance 28.5 31.0 -8 40 61 4.8 4.6 4 51 78 26 22
Federal Bank 9.7 12.2 -20 -52 -37 1.1 1.2 -6 -66 -55 21 24
Oil India 6.1 8.1 -25 -70 -58 0.9 0.9 -6 -72 -64 21 85
RBL Bank 11.1 32.9 -66 -45 71 0.7 2.0 -67 -79 -22 17 -45
Indian Bank 4.2 10.1 -58 -79 -47 0.4 0.6 -21 -86 -79 12 63
Union Bank (I) 4.4 7.0 -38 -79 -64 0.4 0.6 -27 -86 -77 9 38
M & M Fin. Serv. 11.0 15.4 -28 -46 -20 1.2 1.4 -16 -63 -46 8 -15
Natl. Aluminium 7.3 12.7 -42 -64 -34 1.5 1.0 57 -53 -63 8 134
Gujarat Gas 27.2 23.7 15 34 23 6.7 4.8 40 111 83 6 69
Bharat Forge 25.8 36.7 -30 26 91 4.9 4.5 9 53 71 5 33
Container Corpn. 28.8 27.2 6 41 41 3.5 2.8 25 11 9 5 54
Whirlpool India 43.5 41.1 6 113 114 6.7 6.9 -3 109 164 5 -33
Page Industries 86.5 55.5 56 324 188 46.0 25.0 84 1346 858 5 46
Tata Chemicals 21.7 9.2 137 7 -52 1.5 0.7 124 -52 -74 4 87
Coromandel Inter 15.2 16.2 -6 -26 -16 3.3 3.2 3 4 23 4 -7
Mahanagar Gas 9.9 14.8 -33 -51 -23 2.0 3.3 -41 -38 27 -5 -19
Alembic Pharma 18.0 18.3 -2 -11 -5 2.4 4.0 -40 -23 55 -6 -22
Navin Fluo.Intl. 47.6 18.3 161 134 -5 9.1 2.9 215 185 10 -6 60
Laurus Labs 24.1 24.4 -1 18 27 6.5 4.0 63 104 53 -7 53
Glenmark Pharma. 11.5 22.4 -48 -43 16 1.5 3.7 -58 -52 41 -8 7
Mphasis 33.6 15.5 117 65 -20 7.5 2.6 185 137 1 -9 120
ICICI Securities 15.6 14.1 11 -23 -27 8.4 7.4 13 165 185 -9 72
Zee Entertainmen 19.2 30.2 -36 -6 57 2.3 5.2 -55 -27 98 -10 44
Deepak Nitrite 28.3 14.6 95 39 -24 7.6 2.6 192 140 0 -10 164
Tata Comm 19.6 25.6 -23 -4 33 11.2 15.7 -29 252 502 -13 33
The Ramco Cement 30.6 25.0 22 50 30 3.1 2.9 6 -3 12 -13 26
L&T Technology 41.3 22.8 81 103 18 10.6 5.8 83 234 122 -16 139
Mindtree 35.1 17.3 102 72 -10 10.8 4.1 163 240 57 -16 188
Coforge 33.0 17.0 94 62 -12 8.8 3.4 160 175 29 -18 118
Indiamart Inter. 41.6 45.7 -9 104 137 7.1 8.1 -12 123 209 -23 1

Sector valuations: Over two-thirds of the sectors are trading at a premium to historical averages
 Technology sector is trading at a P/E of 27.5x, a 52% premium to its historical average of 18.1x. We remain positive in spite of these high valuations as
recent quarter earnings (lifetime high QoQ growth for a few companies) revalidate the strengthened demand. A good set of results in this seasonally
weak quarter, good traction in cloud transformation and ramped up hiring across industry provide further demand visibility.
 Oil & Gas trades at a P/B of 1.6x and P/E of 12.3x (12%/6% premium to historical average of 1.4x/11.6x). Brent prices in Jan’22 averaged higher at
USD83.8/bbl (+USD9.6 MoM), as the concerns over fresh set of lockdowns (due to Omicron) subsided, with cases in the US and Africa declining sharply in
the past couple of weeks.
 Consumer sector P/E of 41.6x in Jan’21 is at a premium of 10% to its 10-year average of 37.9x. On a P/B basis, it trades at 10.6x, at a premium of 6% with
its 10-year average of 10x. After a strong run up post the festival season, FMCG demand momentum slowed in Jan’22. Rise in COVID cases across the
country led to restrictions and curfews returning, resulting in a decline in consumer mobility and out-of-home consumption.
Snapshot: Sector valuations
Relative to Relative to
PE (x) PB (x)
Sector Nifty P/E (%) Nifty P/B (%)
Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
Auto 25.9 24.6 5.2 27 24 3.6 3.1 14.9 12 18
Banks – Private 18.9 20.3 -6.6 -7 4 2.8 2.5 11.6 -13 -5
Banks – PSU 8.5 10.6 -20.1 -58 -48 1.0 0.8 20.0 -70 -69
NBFC 24.1 20.3 18.8 18 5 3.1 2.7 17.9 -1 2
Capital Goods 29.5 28.2 4.5 45 46 3.4 2.7 26.3 8 4
Cons. Durables 47.1 33.3 41.7 131 69 8.7 5.9 46.7 173 123
Cement 25.2 23.9 5.4 24 25 3.2 2.7 21.2 2 2
Consumer 41.6 37.9 9.9 104 99 10.6 10.0 5.5 233 288
Consumer Ex ITC 55.1 45.6 20.8 170 137 13.5 12.6 6.8 324 384
Healthcare 23.7 24.9 -4.9 16 30 3.6 3.9 -7.8 14 52
Infrastructure 19.5 8.2 136.6 -4 -57 2.4 1.2 111.6 -23 -56
Logistics 31.3 29.0 7.8 54 48 4.8 3.6 34.1 50 35
Media 17.6 25.0 -29.9 -14 31 2.6 4.7 -43.7 -17 82
Metals 7.4 11.0 -33.2 -64 -42 1.5 1.1 33.8 -53 -57
Oil & Gas 12.3 11.6 6.4 -39 -39 1.6 1.4 12.0 -50 -45
Oil & Gas Ex RIL 6.0 9.6 -37.7 -71 -49 1.1 1.3 -18.1 -66 -48
Sp. Chemicals 38.2 15.1 152.5 88 -24 7.7 2.9 167.3 142 6
Real Estate 51.1 34.4 48.4 151 85 2.8 1.2 142.5 -11 -56
Retail 91.9 79.3 15.9 351 308 17.2 8.3 106.0 441 214
Technology 27.5 18.1 52.1 35 -5 9.0 4.9 84.8 182 85
Telecom Loss - - 5.0

Autos: PV/CV demand has sustained; 2W/Tractors demand back-ended
Auto P/E (x) 10 Yr Avg (x) Auto Relative to Nifty PE (%)
 The Auto sector is trading at a P/E of 25.9x, at 5% 78 250
premium to the historical average of 24.6x. 63 190
 PV/CV volumes grew 7%/5% YoY while 48 130
2Ws/Tractors declined 18%/35% YoY. Improved 33 24.6 70
24.0
wholesales in PVs indicate easing of chip 18 25.9 10 27.0
shortages. CV demand recovery is on track but 2W 3 -50
Sep-13
Sep-18
Jul-19
Jan-12
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Sep-13
Sep-18
Jul-19
Jul-14
Jan-12
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
demand is yet to show any sign of recovery.
 Valuations on a P/B basis are at 3.6x, at a 15%
premium to the historical average of 3.1x. Auto P/B (x) 10 Yr Avg (x) Auto Relative to Nifty PB (%)
5 60
 With the easing of chip shortages, PV wholesales
4 3.6
would improve. Improved freight rates and govt’s 30
11.8
push towards infrastructure would help CV 3
18.1
3.1 0
demand momentum. Tractor demand is expected 2
to remain tepid in the near term on cyclicality, 1 -30
while 2W demand recovery remains uncertain
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
Sep-13
Sep-18
Jul-19
Jan-12
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
due to high total cost of ownership.
Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
Amara Raja Batt. 15.6 22.0 -29 -23 14 2.1 4.0 -46 -32 54
Ashok Leyland na 22.2 na na 16 5.3 3.3 60 66 26
Apollo Tyres 12.0 12.5 -4 -41 -35 1.0 1.2 -21 -69 -53
Balkrishna Inds 26.8 15.3 75 31 -20 5.6 3.0 85 75 16
Bajaj Auto 18.2 17.5 4 -11 -9 3.9 4.6 -15 23 75
Bharat Forge 25.8 36.7 -30 26 91 4.9 4.5 9 53 71
Bosch 29.8 36.9 -19 46 92 4.1 5.5 -25 29 109
CEAT 21.9 15.6 40 7 -19 1.3 1.4 -10 -60 -45
Eicher Motors 23.9 29.9 -20 17 55 4.8 6.9 -30 52 166
Endurance Tech. 30.8 31.2 -1 51 62 5.2 5.2 -2 62 101
Escorts 22.2 10.8 105 9 -44 2.5 1.4 74 -21 -45
Exide Inds. 14.3 21.5 -34 -30 12 1.3 2.8 -55 -60 6
Hero MotoCorp 17.3 18.2 -5 -15 -5 3.4 5.4 -36 7 105
Mahindra CIE 12.5 27.8 -55 -38 44 1.4 2.2 -36 -55 -15
Mahindra & Mahindra 20.0 18.5 8 -2 -4 2.5 2.7 -6 -21 2
Maruti Suzuki 38.1 28.4 34 87 48 4.6 3.7 24 44 41
MRF 32.7 17.6 85 60 -8 2.1 2.1 -1 -35 -21
Motherson Sumi 20.6 25.3 -19 1 31 3.7 4.3 -14 15 64
Tata Motors na 14.1 na na -27 3.9 1.8 114 24 -30
TVS Motor 23.4 26.1 -10 15 36 5.0 5.2 -4 58 100

February2022
2022 17
Private Banks: Business momentum gaining traction; asset quality outlook improving
 Private banks are trading at P/B of 2.8x, at a 12% Private Banks P/E (x) 10 Yr Avg (x) Private Banks Relative to Nifty PE (%)
33 40
premium to the historical average of 2.5x.
 Most private banks have demonstrated strong traction in 26 20
20.3 3.7
loan growth led by healthy momentum across segments
19 0
i.e. Retail, SME and Business Banking portfolio while 18.9
growth in corporate book too came in strong. Opex 12 -20 -7.0
though stood elevated across most banks due to 5 -40
continued investments in the business. Overall, large
Sep-13
Sep-18
Jan-12
Jul-19
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Sep-18
Sep-13
Jan-12
Jan-22
Jul-14
Jan-17
Jul-19
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
banks have strong capital positions, robust balance
sheets, and higher PCR on stressed assets.
 On the asset quality front, slippages moderated Private Banks P/B (x) 10 Yr Avg (x) Private Banks Relative to Nifty PB (%)
sequentially which along with healthy upgrades/ 30
4
recoveries supported the asset quality and kept the 10
2.8 -4.8
credit cost controlled. Restructured book witnessed 3
2.5 -10
stable/slightly declining trend with banks continuing to
carry additional provision buffers. 2 -30 -12.5
 Current valuations continue to offer attractive buying 1 -50
opportunities. We prefer large private banks as they
Sep-13
Sep-18
Jul-19
Jul-14
Jan-12
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Sep-18
Sep-13
Jan-12
Jan-22
Jul-14
Jan-17
Jul-19
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
offer relatively safer haven amid the uncertainties. Top
picks: ICICIBC, AXSB and HDFCB.
AU Small Finance 28.5 31.0 -8 40 61 4.8 4.6 4 51 78
Axis Bank 14.2 37.8 -62 -30 96 1.9 1.9 -2 -41 -27
Bandhan Bank 17.8 27.0 -34 -13 40 2.7 4.1 -34 -14 58
DCB Bank 7.0 13.3 -47 -65 -31 0.6 1.3 -53 -80 -48
Equitas Holdings 9.8 50.0 -81 -52 160 1.0 1.6 -39 -69 -39
Federal Bank 9.7 12.2 -20 -52 -37 1.1 1.2 -6 -66 -55
HDFC Bank 19.0 20.6 -8 -7 7 3.1 3.4 -9 -3 30
ICICI Bank 20.0 20.5 -3 -2 6 2.9 1.8 58 -9 -30
IndusInd Bank 10.0 19.7 -49 -51 2 1.3 2.6 -51 -60 1
Kotak Mah. Bank 28.3 26.7 6 39 39 3.5 3.3 6 9 25
RBL Bank 11.1 32.9 -66 -45 71 0.7 2.0 -67 -79 -22

February2022
2022 18
PSU Banks: Growth witnessing a revival; earnings visibility improving; asset quality recovering
 PSU Banks are trading at a P/B of 1.0x, 20% premium to its PSU Banks P/B (x) 10 Yr Avg (x) PSU Banks Relative to Nifty PB (%)
historical averages of 0.8x. 1.3 -40
 Earnings outlook is improving led by decline in credit cost as 1.0 -52
most PSB’s have strengthened their PCRs over the last few 0.8
-69.3
-64 -69.6
years. Most PSB’s carry a PCR in the range of 63-70% while 0.8
BOI has the highest PCR at ~79%. Slippages diminished over -76
3QFY22 which along with moderation in SMA pool augur
0.3 -88
well for incremental slippages to remain controlled.
Jul-19
Jul-14
Jan-12
Jan-17
Jan-22
Oct-15
Oct-20
Apr-13
Apr-18
Jul-14
Jul-19
Jan-12
Jan-17
Jan-22
Oct-15
Oct-20
Apr-13
Apr-18
 Further, many PSB’s have also undergone a capital raise to
prepare themselves for growth opportunities. We saw
growth reviving as CBK reported strong 7% QoQ growth and
we expect other PSB’s to report similar trends.
 Overall, we think that PSB earnings are poised for a strong
rebound (25% CAGR over FY22-24E), which along with
improving asset quality trends will enable healthy CAGR of
13-21% in ABVs over FY21-24E v/s decline for most in prior
years. We estimate PSBs to deliver RoA/RoE of 0.8%/13.2%
for FY24 while valuations remain undemanding. SBIN is our
top pick followed by BoB and CBK.
Bank of Baroda 5.8 11.6 -50 -72 -40 0.6 0.8 -21 -80 -69
Canara Bank 5.3 6.2 -15 -74 -68 0.6 0.6 6 -80 -77
Indian Bank 4.2 10.1 -58 -79 -47 0.4 0.6 -21 -86 -79
Punjab Natl. Bank 7.2 9.8 -26 -65 -49 0.5 0.8 -41 -86 -70
St Bk of India 10.7 13.7 -22 -47 -29 1.4 1.1 35 -55 -59
Union Bank (I) 4.4 7.0 -38 -79 -64 0.4 0.6 -27 -86 -77

February2022
2022 19
NBFCs: Strong demand recovery; RBI guidelines on NPA upgradation have no significant impact
 NBFCs are trading at P/B of 3.1x, above the historical average of NBFC P/E (x) 10 Yr Avg (x) NBFC Relative to Nifty PE (%)
40
2.7x (a 18% premium). 33
 HFCs (including affordable) witnessed strong demand in 3QFY22. 26
20
5.2 18.3
Collection efficiencies continue to improve, bounce rates have 20.3
19 24.1 0
come down. RBI guidelines led to higher reported GNPA but
there was no significant impact on P&L credit costs. 12 -20
 LCR guidelines implemented from Dec’21 onwards have not yet 5 -40
had a major impact on margins since most NBFCs/HFCs were
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-20
May-15
Nov-12
Nov-17
anyways carrying high liquidity on their balance sheets.
 Gold loan demand in 3QFY22 was muted relative to 2Q but NBFCs
continued to gain market share in higher-ticket gold loans given the NBFC P/B (x) 10 Yr Avg (x) NBFC Relative to Nifty PB (%)
4
attractive interest rates offered 30
 Semiconductor chip shortage would persist but is beginning to 3 3.1 20
ease out with better volumes expected in Jan’21. Growth for new 10 2.2
vehicle financiers will continue to remain muted in FY22. 2 2.7 0 -1.0
 NBFCs have reduced their liquidity buffers which would lead to -10
reduction in the negative carry and aid AIM. 2 -20
Sep-13
Sep-18
Jul-14
Jul-19
Jan-12
Jan-17
Jan-22
Mar-21
Mar-16
 With equity markets remaining volatile and limited NFOs, MF
May-15
May-20
Nov-17
Nov-12
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-20
May-15
Nov-12
Nov-17
AUM to remain stable. SIP momentum to drive equity inflows.
 COVID wave will continue to drive demand for Health segment.
Motor segment recovery would depend on auto sales trajectory.
AAVAS Financiers 51.6 42.1 22 153 119 7.2 5.3 36 126 103
Aditya Birla Cap 16.5 24.2 -32 -19 26 1.7 2.1 -18 -46 -20
Bajaj Fin. 44.0 25.8 71 116 34 8.3 4.3 93 162 66
Can Fin Homes 15.3 11.8 29 -25 -39 2.3 2.0 16 -26 -22
Cholaman.Inv.&Fn 22.2 15.4 44 9 -20 3.9 2.5 55 24 -3
HDFC 37.1 35.8 4 82 86 3.6 4.1 -13 13 58
ICICI Securities 15.6 14.1 11 -23 -27 8.4 7.4 13 165 185
IIFL Wealth Mgt 23.2 24.2 -4 14 26 5.3 4.0 33 65 52
IndoStar Capital 14.8 38.8 -62 -28 102 0.8 1.1 -23 -74 -59
L&T Fin.Holdings 10.4 15.6 -33 -49 -19 0.9 1.6 -46 -72 -38
LIC Housing Fin. 8.2 11.0 -25 -60 -43 0.8 1.6 -49 -74 -37
M & M Fin. Serv. 11.0 15.4 -28 -46 -20 1.2 1.4 -16 -63 -46
Manappuram Finance 6.5 8.3 -21 -68 -57 1.3 1.4 -5 -58 -47
MAS Financial 13.4 24.0 -44 -34 25 1.9 3.6 -46 -40 36
Muthoot Finance 12.9 8.8 46 -37 -54 2.7 1.8 49 -16 -31
Piramal Enterprises 18.0 21.1 -15 -12 9 1.5 1.3 14 -52 -49
PNB Housing 7.3 15.1 -52 -64 -21 0.7 1.7 -59 -78 -34
Repco Home Fin 5.1 15.0 -66 -75 -22 0.6 2.3 -72 -80 -12
Shri.City Union. 9.2 13.6 -32 -55 -29 1.2 1.8 -35 -62 -29
Shriram Trans. 9.7 12.2 -20 -52 -37 1.2 1.7 -29 -63 -36

February2022
2022 20
Capital Goods: Execution at full strength, ordering activity gaining momentum
 The Capital Goods sector trades at a one-year forward Capital Goods P/E (x) 10 Yr Avg (x) Capital Goods Relative to Nifty PE (%)
57 190
P/E multiple of 29.5x. This is at ~5% premium v/s its 10-
year average P/E of 28.2x, indicating closer to fair 47 140
valuation given the likely capex up-cycle from hereon. 37 28.2 29.5 90
44.7
 On a P/B basis, the sector trades at 3.4x – at 26% 27 45.7
17 40
premium to its 10-year average multiple of 2.7x.
 The valuation premium relative to the Nifty on a P/B 7 -10
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
basis has widened. It now trades at a premium of 8%
against its 10-year average premium of 3.6%. On a P/E
basis, the premium stands at ~45%, which is near at its Capital Goods P/B (x) 10 Yr Avg (x) Capital Goods Relative to Nifty PB (%)
10-year average. 4 60
3.4
 Valuations have expanded due to: a) Pick up in ordering 2.7
activity; b) project efficiency coming back to normal; c) 3 30
3.6 7.6
green shoots in sectors like metals and cement; d) likely
2 0
strong capex spending by the central government, given
strong tax collections; and e) strong cash flow generation 1 -30
by many companies, thereby improving balance sheets.
Sep-13
Sep-18
Jul-14
Jul-19
Jan-12
Jan-17
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
Sep-13
Sep-18
Jul-19
Jan-12
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
 Any sudden surge in COVID cases and local restrictions
posses some risk. Volatility in commodity prices may
pose risks on margin.
ABB 86.4 74.3 16 324 286 11.3 6.7 70 256 156
BHEL na 31.0 na na 61 0.8 1.1 -32 -76 -56
Bharat Electron 19.3 15.4 25 -5 -20 3.7 2.7 36 17 5
Cummins India 32.7 28.1 17 60 46 5.3 5.3 0 67 104
Engineers India 10.2 18.7 -46 -50 -3 2.6 3.2 -19 -18 23
K E C Intl. 17.3 16.3 6 -15 -15 2.9 2.2 30 -8 -14
Larsen & Toubro 24.1 21.8 11 18 13 3.1 2.7 15 -3 3
Siemens 63.5 55.3 15 212 187 7.4 5.8 27 132 123
Thermax 53.5 38.1 40 163 98 6.2 3.8 62 96 47

February 2022
2022 21
Cement: Demand sustains, price hikes announced in a few markets
 The sector trades at a one-year forward EV/EBITDA of Cement P/E (x) 10 Yr Avg (x) Cement Relative to Nifty PE (%)
43 145
17.7x against the historical average of 15.5x (14%
premium). 33 90
25.2 24.7
 Cement prices declined in the last few days of Dec-21 23 35
23.9 23.8
and we believe that Dec-21 exit-price was ~3% lower 13 -20
than 3QFY22 average price. Companies have
3 -75
announced price hikes (INR10-30/bag) in most of the
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
regions, the absorption of which needs to be seen.
 Coal prices remain volatile and South African coal price
has increased to US$175/t v/s US$120-125/t in Jan-22 Cement P/B (x) 10 Yr Avg (x) Cement Relative to Nifty PB (%)
4 40
beginning. Pet coke price is at US$150-170/t v/s peak
of US$230-240/t in Nov-21. Industry’s average fuel
3 2.5
cost consumption price in 4QFY22 is expected to be 2.7 3.2
-5
at-par or higher than 3QFY22 levels. 2
1.7
1 -50
Sep-13
Sep-18
Jul-14
Jul-19
Jan-12
Jan-17
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
Sep-13
Sep-18
Jul-19
Jan-12
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Relative to Relative to Cement EV/EBDITA (x) 10 Yr Avg (x)
PE (x) PB (x) EV/EBIDTA (x)
Nifty P/E (%) Nifty P/B (%) 23
10 Yr Prem/ 10 Yr 10 Yr Prem/ Prem/
Company Current Current Current Current 10 Yr Avg Current 10 Yr Avg 18
Avg Disc (%) Avg Avg Disc (%) Disc (%)
17.7
ACC 21.9 26.5 -17 8 37 2.8 2.8 -2 -13 8 12 13 -8 13
Ambuja Cem. 31.5 31.8 -1 55 65 3.1 2.6 18 -3 1 20 18 11 15.5
Birla Corpn. 25.1 16.9 49 23 -12 1.7 1.1 56 -46 -57 11 8 27 8
Grasim Inds 15.3 12.0 28 -25 -38 2.4 1.7 39 -24 -33 30 25 21
3
India Cem na 33.6 na na 75 1.2 0.7 68 -62 -73 15 9 56
Sep-13
Sep-18
Jul-19
Jul-14
Jan-12
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
J K Cements 29.3 23.8 24 44 23 5.2 2.5 107 63 -4 16 10 60
JK Lakshmi 17.4 26.5 -34 -15 37 2.5 2.2 13 -21 -14 9 11 -20
Shree Cem 37.0 35.8 3 81 86 4.6 5.0 -7 45 91 22 19 16
Ramco Cem 30.6 25.0 22 50 30 3.1 2.9 6 -3 12 16 14 17
UltraTech 29.5 30.1 -2 45 56 3.8 3.1 22 20 19 15 15 2

February2022
2022 22
Consumer: Demand momentum slowed marginally, input cost pressure continues to hurt margins
 The Consumer sector P/E of 41.6x in Jan’21 is at a premium of Consumer P/E (x) 10 Yr Avg (x) Consumer Relative to Nifty PE (%)
10% to its 10-year average of 37.9x. On a P/B basis, it trades at 55 190
10.6x, at a premium of 6% with its 10-year average of 10x. 45 140
37.9
 After a strong run up post festival season, FMCG demand 41.6 98.5
35 90
momentum slowed in Jan’22. Rise in COVID cases across the 104.2
country led to restrictions and curfews returning, resulting in a 25 40
decline in consumer mobility and out-of-home consumption. 15 -10
 While staples demand continue to do well, discretionary
Sep-13
Sep-18
Jan-12
Jul-19
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Sep-13
Sep-18
Jul-14
Jan-17
Jul-19
Jan-12
Jan-22
Mar-16
Mar-21
May-20
May-15
Nov-12
Nov-17
consumption got impacted sequentially.
 Urban continues to do better than rural and some players have
Consumer P/B (x) 10 Yr Avg (x) Consumer Relative to Nifty PB (%)
reported moderation in rural demand due to high base and low 15 480
income growth than last year . However, rural fundamentals
remain strong in the medium term. 13 380
10.6 287.9
 Commodity inflation continues to remain high putting material 10 280
pressure on gross margins of companies across the sector. 10.0
233.1
8 180
 The rapid spread of Omicron variant remains a potential risk to
be watched out for. The sector fundamentals are optimistic on a 5 80
Sep-18
Sep-13
Jan-12
Jan-17
Jan-22
Jul-14
Jul-19
Mar-16
Mar-21
Sep-13
Sep-18
Jan-17
Jan-12
Jan-22
May-15
Nov-12
Nov-17
May-20
Jul-14
Jul-19
Mar-16
Mar-21
May-20
May-15
Nov-12
Nov-17
medium-term basis.
Asian Paints 66.2 47.7 39 225 148 20.2 12.8 58 536 390
Britannia Inds. 47.7 38.6 23 134 101 16.9 14.0 21 430 436
Colgate-Palm. 35.7 38.8 -8 75 102 33.2 26.1 27 945 901
Dabur India 44.8 39.2 14 120 104 10.7 10.4 3 236 299
Emami 26.2 31.4 -16 29 63 10.6 10.8 -1 234 312
Godrej Consumer 41.8 39.2 7 105 104 8.5 5.4 57 169 108
Hind. Unilever 53.4 46.5 15 162 142 11.5 28.6 -60 262 995
ITC 15.6 25.1 -38 -24 30 4.3 6.4 -33 35 146
Jyothy Lab. 26.4 35.1 -25 29 82 3.9 4.7 -17 22 80
Marico 43.5 38.1 14 113 98 13.1 12.2 7 311 366
Nestle India 70.4 53.3 32 245 177 89.8 38.2 135 2724 1363
P & G Hygiene 54.3 53.0 2 167 175 55.7 27.7 101 1652 960
Page Industries 86.5 55.5 56 324 188 46.0 25.0 84 1346 858
Pidilite Inds. 79.1 44.6 77 288 132 17.3 10.5 64 442 303
Tata Consumer 53.5 39.0 37 163 103 4.3 2.5 70 34 -4
United Breweries 81.0 87.3 -7 298 353 10.5 9.7 8 230 271
United Spirits 61.0 99.7 -39 199 418 11.0 13.4 -18 245 414
Varun Beverages 38.3 43.2 -11 88 124 7.9 5.9 34 148 125

February2022
2022 23
Consumer Durables: High channel inventory; demand environment subdued
 The Consumer Durables sector trades at a one-year forward Consumer Durables P/E (x) 10 Yr Avg (x) Consumer Durables Relative to Nifty PE (%)
P/E multiple of 47.1x, 42% premium to its 10-year average 70 200 10 Yr Avg (x)
P/E of ~33.3x.
50 100
 On a P/B basis, the sector trades at 8.7x – a 47% premium 47.1 131.4
68.8
to its 10-year average multiple of 5.9x. 30 0
 The valuation premium relative to the Nifty on a P/E basis 33.3
has widened. It now trades at a ~131% premium (v/s its 10- 10 -100
Sep-13
Sep-18
Jul-14
Jul-19
Jan-12
Jan-17
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
year average premium of 69%). On a P/B basis, the
Sep-13
Sep-18
Jan-12
Jan-17
Jan-22
Jul-19
Jul-14
Mar-16
Mar-21
Nov-12
May-15
May-20
Nov-17
premium stands healthy at 173%, higher than the 10-year
average (~123%).
Consumer Durables Relative to Nifty PB (%)
 Company valuations have run up, primarily due to: a) strong Consumer Durables P/B (x) 10 Yr Avg (x)
13 10 Yr Avg (x)
demand for electrical and white goods, b) market share 300
gains for large electrical brands at the expense of the 9
8.7 200
unorganized sector , c) market consolidation in the White
122.7 173.2
Goods segment, and d) follow up of a strong pent-up 5 100
5.9
demand.
 On account of Omicorn, there is high inventory in channel 1 0
Sep-13
Sep-18
Jul-14
Jan-12
Jan-17
Jul-19
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-17
Nov-12
Sep-13
Sep-18
Jan-12
Jan-17
Jan-22
Jul-14
Jul-19
Mar-21
Mar-16
Nov-17
Nov-12
May-15
May-20
which should get normalized in Feb’22. Demand also
remained subdued as brands have been forced to take
multiple price hikes due to commodity price inflation,
though still not sufficient. Thus, margins for various
companies are likely to remain under pressure.
Blue Star 38.6 37.1 4 89 93 7.9 6.2 27 148 137
CG Consumer Elect. 38.2 36.3 5 88 89 10.1 11.7 -14 217 349
Havells India 52.5 37.1 41 158 93 11.0 7.1 55 245 172
Orient Electric 37.3 38.6 -3 83 101 10.5 9.6 8 229 270
Voltas 52.9 28.8 84 160 50 6.6 3.7 80 108 40
Whirlpool India 43.5 41.1 6 113 114 6.7 6.9 -3 109 164

February2022
2022 24
Healthcare: Niche launches in the US/recovery in DF to drive re-rating over medium term
 Healthcare sector’s P/E has slipped slightly below the 10-year Healthcare P/E (x) 10 Yr Avg (x) Healthcare Relative to Nifty PE (%)
average of 24.9x. 36 90
 While the pace of ANDA approvals picked during 3QFY22, almost
30 60
40% of the approvals were tentative that dampened the revenue 24.9 30.1
growth expectations in the face of ongoing price erosion over 24 30
23.7
near to medium term. Having said these, companies like DRRD/
18 0 16.3
Cipla having niche launches would be able to tide over this
situation and deliver growth in the US generics market. 12 -30
 There has been slight softening of raw material prices. With
Sep-13
Sep-18
Jan-17
Jan-12
Jul-14
Jul-19
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-12
Nov-17
Sep-13
Sep-18
Jul-14
Jan-17
Jul-19
Jan-12
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
lower COVID-led restrictions, we expect cost pressures to ease
and provide some breather on the overall profitability of
pharmaceutical companies. Healthcare P/B (x) 10 Yr Avg (x) Healthcare Relative to Nifty PB (%)
 The domestic formulations segment has been benefited due to 140
7
sharp rise in COVID cases as well as huge seasonal volatility. We 100
expect Non-COVID therapies growth to be on gradual uptrend 5 52.0
with ease of COVID. 3.9 60
 Based on this, GLAND (based on robust CDMO/injectables 4 3.6 20
opportunity), SUNP (based on strong traction in Specialty
2 14.0
Business/branded formulations), DIVI (Superior execution) , and -20
Sep-13
Sep-18
Jan-12
Jan-17
Jan-22
Jul-19
Jul-14
Mar-16
Mar-21
Nov-12
May-15
Nov-17
May-20
Sep-18
Sep-13
Jul-14
Jul-19
Jan-12
Jan-17
Jan-22
Mar-21
Mar-16
May-15
May-20
Nov-12
Nov-17
DRRD/ERIS (based on potential product pipeline) are expected to
outperform in the sector.
Ajanta Pharma 24.9 20.4 22 22 6 4.8 5.2 -7 51 97
Alembic Pharma 18.0 18.3 -2 -11 -5 2.4 4.0 -40 -23 55
Alkem Lab 22.2 23.1 -4 9 20 4.3 4.1 5 34 56
Aurobindo Pharma 11.2 13.6 -18 -45 -29 1.4 2.8 -51 -57 7
Biocon 35.9 34.9 3 76 81 5.0 3.8 31 56 45
Cadila Health. 17.8 21.1 -16 -13 10 2.2 4.2 -48 -31 62
Cipla 23.4 27.8 -16 15 44 3.3 3.3 1 4 25
Divi's Lab. 32.3 26.1 24 59 36 8.1 5.7 44 156 117
Dr Reddy's Labs 20.8 26.0 -20 2 35 3.1 3.7 -15 -1 42
Glaxosmit Pharma 41.1 53.7 -23 102 179 13.5 12.3 10 326 371
Glenmark Pharma. 11.5 22.4 -48 -43 16 1.5 3.7 -58 -52 41
Granules India 14.0 12.5 11 -31 -35 2.5 2.1 18 -22 -19
Ipca Labs. 20.9 26.9 -23 2 40 4.0 3.5 14 26 34
Jubilant Pharmova 10.5 11.1 -5 -48 -42 1.4 1.5 -10 -57 -42
Laurus Labs 24.1 24.4 -1 18 27 6.5 4.0 63 104 53
Lupin 25.8 31.8 -19 27 65 3.1 4.3 -28 -3 63
Strides Pharma 30.0 68.3 -56 47 255 1.4 3.2 -58 -57 23
Sun Pharma.Inds. 23.8 29.4 -19 17 53 3.4 4.3 -20 7 63
Torrent Pharma. 31.8 25.4 25 56 32 6.3 5.3 19 99 103

February2022
2022 25
Infrastructure: Project awarding slowly picking up
 The Infrastructure sector is trading at a P/B of 2.4x, at Infrastructure P/E (x) 10 Yr Avg (x) Infrastructure Relative to Nifty PE (%)
32 60
a premium of 112% to its long-term historical
average. 24
19.5
20 -4.5
 Ordering momentum has been slow in FY22 YTD due 16 8.2 -20
-56.6
to the second COVID wave. However, order pipeline
8 -60
is strong and awarding pace is expected to pick up in
4Q FY22. Agencies such as NHAI is likely to award 0 -100
Sep-13
Sep-18
Jul-14
Jan-17
Jul-19
Jan-12
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Sep-18
Sep-13
Jan-12
Jul-14
Jul-19
Jan-22
Jan-17
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
projects of ~4,000kms during FY22.
 With the center envisaging massive Infra
development plans with expected investment of Infrastructure P/B (x) 10 Yr Avg (x) Infrastructure Relative to Nifty PB (%)
INR100t by CY24, the next couple of years could lead 3 0
-23.5
to higher construction activity. 2.4 -25
2
 Toll collections normalizing with the easing of travel
1.2 -50
restrictions. 1 -56.3
 We expect strong business opportunity for all players -75
in the sector, which should boost their order books 0 -100
Sep-13
Sep-18
Jan-17
Jan-12
Jan-22
Jul-14
Jul-19
Mar-16
Mar-21
Nov-12
May-20
May-15
Nov-17
Sep-18
Sep-13
Jan-12
Jul-14
Jul-19
Jan-22
Jan-17
Mar-16
Mar-21
and execution rate.
May-15
May-20
Nov-12
Nov-17
Ashoka Buildcon 6.0 11.5 -48 -71 -40 0.8 1.4 -42 -74 -46
IRB Infra. Devl. 25.6 12.3 108 26 -36 1.2 1.1 8 -61 -56
KNR Construct. 17.4 10.4 67 -15 -46 3.3 1.7 91 4 -33

February2022
2022 26
Logistics: Logistic activity slowed in Jan’22; E-way bill generations down 7% MoM
 The Logistics sector P/E of 31.3x is at a premium of Logistics P/E (x) 10 Yr Avg (x) Logistics Relative to Nifty PE (%)
8% to its 10-year historical average of 29x. 60
140
10 Yr Avg (x)
 The tax cuts on diesel prices during start of Nov’21 53.7
40 31.3
saw diesel prices correct by ~10-12% in most states. 29.0 60
48.2
The Freight rates stayed firm since then primarily 20 -20
due to a) increase in spending on discretionary and
wedding season-linked demand for logistics and b) 0 -100
Jul-14
Jul-19
Apr-13
Apr-18
Jan-12
Jan-17
Jan-22
Oct-15
Oct-20
to cover up for the diesel price increase in Oct’21,
Apr-13
Jul-14
Apr-18
Jul-19
Jan-12
Jan-17
Jan-22
Oct-15
Oct-20
which was not passed on to the consumers.
 The logistic activity levels have slowed in Jan’22 post
the very strong improvement in Dec’21. This can be Logistics P/B (x) 10 Yr Avg (x) Logistics Relative to Nifty PB (%)
8 10 Yr Avg (x)
seen from the 7% MoM fall in daily e-way bill 100
49.9
generations so far in Jan’22. 5 34.6
3.6 4.8 50
 The volume momentum is expected to improve in
the coming months of FY22 as economic activity 3
0
picks up. Any restriction due to Covid wave would
0
be a key monitorable. -50
Jul-14
Jul-19
Apr-13
Apr-18
Jan-12
Jan-17
Jan-22
Oct-15
Oct-20
Jul-14
Jul-19
Apr-13
Apr-18
Jan-12
Jan-17
Jan-22
Oct-15
Oct-20
Blue Dart Expres 41.4 83.4 -50 103 333 12.9 17.9 -28 306 586
Container Corpn. 28.8 27.2 6 41 41 3.5 2.8 25 11 9
TCI Express 46.1 30.1 53 126 56 11.2 7.7 46 253 195
Transport Corp. 17.2 13.5 27 -16 -30 3.2 2.0 58 1 -22
VRL Logistics 26.8 31.6 -15 32 64 5.2 4.5 15 64 74
Mahindra Logis. 62.4 68.6 -9 206 256 6.6 6.1 7 108 136

February2022
2022 27
Media: Multiplex recovery deferred by Omicron
 The Media sector P/E of 17.6x is at a discount of Media P/E (x) 10 Yr Avg (x) Media Relative to Nifty PE (%)
30% to its 10-year historical average of 25x. 40
90
 ICRA’s report stated that imminent recovery for 31.1
40
multiplexes has been pushed to FY23 by third wave. 28
-13.8
 While the multiplex business has been impacted, 25.0 17.6
-10
16
the management of PVR expects recovery to be
quick, once the situation normalizes, as releases in 4 -60
Sep-13
Sep-18
Jul-14
Jul-19
Jan-17
Jan-12
Jan-22
Mar-16
Mar-21
May-20
May-15
Nov-12
Nov-17
Sep-18
Sep-13
Jan-12
Jan-17
Jan-22
Jul-14
Jul-19
Feb-Mar’22 have not been postponed.
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Media P/B (x) 10 Yr Avg (x) Media Relative to Nifty PB (%)
270
7
190
6 82.2
110
4 4.7
2 2.6 30 -17.2
1 -50
Sep-13
Sep-18
Jan-17
Jan-12
Jul-14
Jul-19
Jan-22
Sep-18
Mar-16
Mar-21
Jan-12
Sep-13
Jan-17
Jan-22
Jul-14
Jul-19
May-20
May-15
Mar-16
Mar-21
Nov-12
Nov-17
May-15
May-20
Nov-12
Nov-17
PVR na 43.0 na na 123 6.8 4.5 50 112 72
Sun TV Network 11.4 17.8 -36 -44 -8 2.4 4.2 -43 -26 60
Zee Entertainment 19.2 30.2 -36 -6 57 2.3 5.2 -55 -27 98

February2022
2022 28
Metals: Cost pressures on Steel continue , prefer Non-ferrous
 The Metals sector is trading at an EV/EBITDA of 5.0x, Metals P/E (x) 10 Yr Avg (x) Metals Relative to Nifty PE (%)
28 20
below its 10-year historical average of 6.7x.
 Green shoots of revival in domestic demand have 21 -5
appeared with increase in rebar prices (used 14 11.0 -30 -42.4
primarily in construction). Prices for galvanized steel -63.8
7 7.4 -55
has also been raised citing improved demand and
cost push. 0 -80
Sep-13
Sep-18
Jan-12
Jul-19
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
 We expect steel prices to move up in Feb’22 as a
May-15
May-20
Nov-12
Nov-17
Sep-18
Sep-13
Jan-12
Jul-14
Jul-19
Jan-22
Jan-17
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
massive input cost pressure is squeezing margins for
the major steel mills.
Metals P/B (x) 10 Yr Avg (x) Metals Relative to Nifty PB (%)
 Coking coal prices, after correcting from USD438 to 2
USD340 have again climbed to USD464. 10
2
 Non-ferrous continues to outperform ferrous as 1.1 1.5
-20
energy constraints in both China and in Europe 1
-57.4 -52.9
resulted in lower output for Zn/Ali on an MoM basis. 1 -50
Zn/Ali moved up by 3% each in the last month,
0 -80
Nickel hit 11-year high at USD24,320/t as inventory
Sep-13
Sep-18
Jan-12
Jan-17
Jan-22
Jul-19
Jul-14
Mar-16
Mar-21
Nov-12
May-15
Nov-17
May-20
Sep-18
Sep-13
Jan-12
Jul-14
Jul-19
Jan-22
Jan-17
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
depletes at LME and demand remains strong.
Relative to Relative to Metals EV/EBDITA (x) 10 Yr Avg (x)

PE (x) PB (x) EV/EBIDTA (x)
Nifty P/E (%) Nifty P/B (%) 15
10 Yr Prem/ 10 Yr 10 Yr Prem/ 10 Yr 10 Yr Prem/
Company Current Current Current Current Current
Avg Disc (%) Avg Avg Disc (%) Avg Avg Disc (%) 11
Hindalco 8.7 9.2 -5 -57 -52 1.7 1.2 49 -46 -56 5 7 -20 6.7
Hind.Zinc 13.6 10.9 24 -33 -43 4.6 2.6 78 44 -1 7 6 17 7 5.0
Jindal Steel 5.9 10.5 -44 -71 -45 0.8 0.8 8 -73 -70 3 9 -61
3
JSW Steel 7.5 12.0 -38 -63 -38 1.9 1.4 33 -40 -44 6 7 -17
Sep-13
Sep-18
Jul-14
Jan-22
Jan-12
Jan-17
Jul-19
Mar-16
Mar-21
May-15
May-20
Nov-17
Nov-12
Nalco 7.3 12.7 -42 -64 -34 1.5 1.0 57 -53 -63 4 5 -18
NMDC 5.0 8.1 -38 -75 -58 1.1 1.5 -26 -65 -42 4 7 -43
SAIL 5.3 12.7 -59 -74 -34 0.7 0.6 13 -77 -75 4 10 -59
Tata Steel 5.9 12.8 -54 -71 -34 1.2 1.3 -2 -61 -52 5 7 -30
Vedanta 7.1 10.5 -33 -65 -45 1.7 1.4 24 -47 -48 5 5 -4

February2022
2022 29
Oil & Gas: Prices rise sharply with margins declining
 The sector trades at a P/B of 1.6x and P/E of 12.3x Oil & Gas P/E (x) 10 Yr Avg (x) Oil & Gas Relative to Nifty PE (%)
22 -8
(12%/6% premium to historical average of 1.4x/11.6x).
 Brent prices in Jan’22 averaged higher at USD83.8/bbl 18 -23
(+USD9.6 MoM), as concerns over fresh set of lockdowns -38.5 -39.4
14 12.3 -38
(due to Omicron) subsided, with cases in the US and 11.6
Africa declining sharply in the past couple of weeks. 10 -53
 SG GRM in Jan’22 was flat at USD5.9/bbl with
6 -68
improvement in Gasoil (+USD1.7 MoM to USD12.8/bbl)
Sep-13
Sep-18
Jan-12
Jul-19
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Sep-18
Sep-13
Jan-12
Jul-14
Jul-19
Jan-22
Jan-17
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
and ATF (USD1.1 MoM to USD11.6/bbl). Gasoline cracks
also remained flat (at USD12.5/bbl). FO cracks declined
from -USD7.1/bbl in Dec’21 to -USD7.5/bbl in Jan’22
Oil & Gas P/B (x) 10 Yr Avg (x) Oil & Gas Relative to Nifty PB (%)
 Gross marketing margins decline marginally to 0
2
INR5.9/7.8/lit for Petrol/Diesel (v/s INR7.1/8.8/lit in
1.4 1.6
Dec’21), weighed by sharp increase in Brent prices. 2 -25
 Petchem margins also declined in Jan’22, with -45.2
-49.9
PE/PP/PVC down 14%/12%/19% MoM and down 1 -50
14%/32%/12% YoY on the back of high feedstock prices.
 Spot LNG prices increased to USD37.8/mmBtu (+USD3.6 1 -75
MoM) – as demand from China gradually recovers.
Sep-13
Sep-18
Jan-12
Jan-17
Jan-22
Jul-19
Jul-14
Mar-16
Mar-21
Nov-12
May-15
Nov-17
May-20
Sep-18
Sep-13
Jan-12
Jul-14
Jul-19
Jan-22
Jan-17
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Aegis Logistics 16.7 25.7 -35 -18 34 2.8 3.5 -22 -13 36
BPCL 9.3 8.6 9 -54 -56 1.6 1.9 -13 -49 -29
Castrol India 15.4 26.5 -42 -25 38 7.2 18.9 -62 128 626
GAIL (India) 8.8 12.2 -28 -57 -37 1.1 1.4 -24 -66 -45
Gujarat Gas 27.2 23.7 15 34 23 6.7 4.8 40 111 83
Guj.St.Petronet 15.2 12.4 22 -26 -36 1.8 1.6 16 -43 -39
HPCL 7.8 9.7 -20 -62 -50 1.1 1.2 -7 -65 -54
IOCL 6.9 8.8 -21 -66 -54 0.9 1.1 -16 -72 -59
Indraprastha Gas 21.3 18.6 15 5 -4 3.6 3.6 1 14 38
Mahanagar Gas 9.9 14.8 -33 -51 -23 2.0 3.3 -41 -38 27
MRPL 6.0 10.6 -44 -71 -45 0.9 1.4 -38 -73 -47
Oil India 6.1 8.1 -25 -70 -58 0.9 0.9 -6 -72 -64
ONGC 3.4 8.9 -62 -83 -54 0.8 1.1 -30 -76 -58
Petronet LNG 10.0 13.2 -24 -51 -32 2.3 2.7 -14 -27 3
Reliance Inds. 22.3 15.1 47 9 -21 1.9 1.5 30 -40 -44

February2022
2022 30
Sp. Chemicals: Contrasting movements in RM and product prices
 The sector trades at a P/B of 7.7x and P/E of 38.2x. Sp. Chemicals P/E (x) 10 Yr Avg (x) Sp. Chemicals Relative to Nifty PE (%)
 Brent prices in Jan’21 averaged higher at USD8.38/bbl 60 10 Yr Avg (x)
140 87.7
(+USD9.6 MoM), as the concerns over a fresh set of 38.2
40
lockdowns (due to Omicron) subsides with sharp decline 60
in the number of cases in US and Africa region. 20
15.1 -24.0
 The prices of organic raw materials - Propylene, -20
Butadiene and Toluene were +5%/+26%/+10% MoM, 0 -100
Jul-14
Jul-19
Jan-12
Jan-17
Jan-22
Oct-15
Oct-20
Apr-13
Apr-18
while Benzene, Styrene and Methanol prices are
Mar-16
Mar-21
Jan-12
Jul-14
Jan-17
Jul-19
Jan-22
Nov-12
Sep-13
May-15
Nov-17
Sep-18
May-20
+8%/+6%/+4% MoM, led by sharp increase in Brent
prices.
 Key product prices: Acetic acid prices are down 25%
Sp. Chemicals Relative to Nifty PB (%)
MoM. Acetone prices are down 7% MoM, while Phenol Sp. Chemicals P/B (x) 10 Yr Avg (x)
10 Yr Avg (x)
prices were down 5% – amidst lower downstream 10 200 142.0
demand weighed by continued high manufacturing 8 7.7
utilisation rates. Caustic Soda Flakes prices were higher 100
5 2.9 6.0
by 12% MoM in Jan’22 while Caustic Soda Lye prices 0
3
were down 5% MoM.
 Challenges with respect to high raw material prices and 0 -100
Jul-14
Jul-19
Apr-13
Apr-18
Jan-12
Jan-17
Oct-20
Jan-22
Oct-15
May-15
Sep-13
Jul-14
Sep-18
Jul-19
May-20
Nov-12
Nov-17
Jan-12
Mar-16
Jan-17
Mar-21
Jan-22
logistics remain with unavailability of key raw materials
also a concern for the chemical companies which could
hamper growth leading up to the end of FY22.
Alkyl Amines 50.5 15.6 224 148 -19 14.2 4.2 239 345 60
Atul 36.9 17.6 110 81 -9 5.7 2.8 105 80 7
Deepak Nitrite 28.3 14.6 95 39 -24 7.6 2.6 192 140 0
Fine Organic 49.0 38.3 28 141 99 11.6 8.1 44 265 210
Galaxy Surfactants 38.7 25.6 51 90 33 6.7 5.0 35 110 90
Navin Fluorine 47.6 18.3 161 134 -5 9.1 2.9 215 185 10
NOCIL 21.6 13.3 62 6 -31 2.7 1.5 78 -16 -42
Vinati Organics 47.5 23.8 99 133 24 9.7 5.0 95 205 91

February2022
2022 31
Real Estate: Demand momentum continue, prices just inching up
 The Real Estate sector trades at a P/E of 51.1x, Real Estate P/E (x) 10 Yr Avg (x) Real Estate Relative to Nifty PE (%)
at a 48% premium to its 10-year historical 81 260 10 Yr Avg (x)
average of 34.4x. 61 51.1 150.8
34.4 140
84.9
 Strong sales traction continued for organized 41
listed players as operational updates released by 21 20
six listed players indicate an average pre-sales 1 -100
Jul-14
Jul-19
Jan-12
Jan-17
Jan-22
Oct-15
Oct-20
Apr-13
Apr-18
growth of 68% YoY driven largely by successful
Jan-12
Jan-17
Jan-22
Jul-14
Jul-19
Oct-15
Oct-20
Apr-13
Apr-18
launches.
 Mumbai property registration data for Jan’22 Real Estate P/B (x) 10 Yr Avg (x) Real Estate Relative to Nifty PB (%)
4 10 Yr Avg (x)
further indicates continued strong momentum 0
with ~7,500units registered to date and might 3
2.8 -10.7
-30 -55.6
close the month at ~8,500units. 2
1.2
-60
 We also hosted a couple of expert calls this 1
month. Key takeaway: pricing will start to inch up 0 -90
Jan-12
Jan-17
Jan-22
Jul-14
Jul-19
Oct-15
Oct-20
Apr-13
Apr-18
Jan-12
Jan-17
Jan-22
Jul-14
Jul-19
Oct-15
Oct-20
Apr-13
Apr-18
across markets through CY23. Prices in Pune
have increased by 5-7% in January.
DLF 25.8 40.0 -35 27 108 1.8 1.1 64 -44 -59
Godrej Properties na 61.6 na na 220 5.8 5.0 15 83 93
Macrotech Developers 49.9 36.6 36 145 90 4.9 3.8 28 54 46
Oberoi Realty 18.4 22.7 -19 -10 18 2.7 2.0 37 -15 -25

February2022
2022 32
Retail: Expansion plans back on track underpinned by recovery
 The Retail sector trades at a P/E of 91.9x, at a Retail P/E (x) 10 Yr Avg (x) Retail Relative to Nifty PE (%)
404 2450
16% premium to its 10-year historical average
1950
of 79.3x. 304
1450
 In its latest retail business survey, the Retailers 204
950
79.3 91.9
Association of India stated that the retail sales 104
450 308.3
have surpassed the pre-pandemic levels, growing 4 -50 350.9
Sep-18
Sep-13
Jul-14
Jul-19
Jan-12
Jan-22
Jan-17
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Sep-18
Sep-13
Jan-12
Jan-17
Jan-22
Jul-19
Jul-14
7% over December 2019.
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
 Most of the well-capitalized large retailers have
resumed their aggressive plans to boost their Retail P/B (x) 10 Yr Avg (x) Retail Relative to Nifty PB (%)
22 600
store footprint by nearly 15-20%, compensating 17.2 440.7
18 450
for the slow store additions in 1HFY22. 14 214.0
8.3 300
 Sticky RM prices and the expected GST rate 10
150
increase to 12% from 5% for products priced 6
over INR1,000 could add some pressure on 2 0
Sep-13
Sep-18
Sep-18
Jan-17
Sep-13
Jan-12
Jul-14
Jul-19
Jan-22
Jan-12
Jul-14
Jan-17
Jul-19
Jan-22
Mar-16
Mar-21
Mar-16
Mar-21
May-20
May-15
May-15
May-20
Nov-12
Nov-17
Nov-12
Nov-17
pricing of inventory.
Aditya Birla Fashion na 180.1 na na 835 11.9 9.6 25 275 267
Avenue Supermarts 106.4 96.9 10 422 403 16.0 12.0 33 403 361
Jubilant 68.9 73.4 -6 238 281 19.7 13.8 43 520 430
Shoppers Stop na 45.8 na na 138 0.0 7.0 -100 -100 169
Titan 75.9 50.1 52 272 160 21.9 11.2 96 590 328
Trent na 93.0 na na 383 12.5 5.4 130 293 108
V-Mart Retail na 37.1 na na 92 7.1 5.1 38 123 96

February2022
2022 33
Technology: Demand remains rich, attrition to start moderating
 The Technology sector is trading at a P/E of 27.5x, a 52% Technology P/E (x) 10 Yr Avg (x) Technology Relative to Nifty PE (%)
premium to its historical average of 18.1x. 32 60
35.0
 We remain positive despite these high valuations as 27 40
recent quarter earnings (life-time high QoQ growth for a 27.5
22 20
few companies) revalidate the strengthened demand. 18.1 -5.3
17 0
 Good set of results in this seasonally weak quarter, good
traction in cloud transformation and ramped-up hiring 12 -20
across industry provide further demand visibility. 7 -40
Sep-13
Sep-18
Jul-14
Jul-19
Jan-17
Jan-12
Jan-22
Mar-16
Mar-21
May-20
May-15
Nov-12
Nov-17
Sep-13
Sep-18
Jan-12
Jan-17
Jan-22
Jul-14
Jul-19
Mar-21
Mar-16
May-15
Nov-17
May-20
Nov-12
 Deal wins remained strong with higher number of small-
and medium-term deals in the pipeline.
 While LTM attrition remained high, commentary from
Technology P/B (x) 10 Yr Avg (x) Technology Relative to Nifty PB (%)
the companies suggested that attrition is peaking out on 12 250
quarterly annualised basis. 200 181.8
10
 We believe that largecap companies are better placed to 9.0
8 150
absorb the supply pressure given their capabilities on the 84.6
training employees into newer skills. 6 100
4.9
 Among Tier I players, we like INFO/HCLT/TCS as they 4 50
benefit from strong demand environment. From the Tier 2 0
Sep-13
Sep-18
Jan-17
Sep-18
Jan-12
Jul-14
Jul-19
Jan-22
Jan-12
Sep-13
Jan-17
Jan-22
Jul-14
Jul-19
Mar-16
Mar-21
Mar-16
Mar-21
May-20
May-15
Nov-12
Nov-17
Nov-12
Nov-17
May-15
May-20
II pack, we prefer LTTS (industry attractiveness) and ZENT
(valuation comfort).
Coforge 33.0 17.0 94 62 -12 8.8 3.4 160 175 29
Cyient 17.2 15.5 11 -16 -20 3.2 2.5 27 0 -4
HCL Technologies 19.6 11.6 69 -4 -40 4.6 2.7 70 45 4
Infosys 27.0 17.7 53 32 -8 10.0 4.5 122 215 73
L & T Infotech 39.3 20.1 95 93 5 10.8 5.6 95 241 113
L&T Technology 41.3 22.8 81 103 18 10.6 5.8 83 234 122
Mindtree 35.1 17.3 102 72 -10 10.8 4.1 163 240 57
MphasiS 33.6 15.5 117 65 -20 7.5 2.6 185 137 1
Persistent Sys 40.5 19.8 104 99 3 8.9 3.5 155 180 34
TCS 30.7 20.2 52 51 5 14.4 7.6 91 353 190
Tech Mahindra 20.2 13.9 45 -1 -28 4.3 2.9 49 34 10
Wipro 23.9 15.6 53 17 -19 5.7 3.0 87 79 16
Zensar Tech. 20.7 13.0 59 1 -32 3.4 2.1 56 5 -18

February2022
2022 34
Telecom: ARPU improvement aided by tariff hike
 The Telecom sector is trading at an EV/EBITDA of Telecom P/B (x) 10 Yr Avg (x) Telecom Relative to Nifty PB (%)
40 400
7.0x, at a discount of 13% to its 10-year historical
300
average of 8.1x. 30
200
 TRAI’s data released for Nov’21 indicated that gross 20
100 -0.1
subscriber base for the industry grew by 1.2m to 5.0
10 0
1,167m, while active subscribers remained flat at
0 -100
996m (0.1m decline).
Sep-13
Sep-18
Jan-12
Jan-17
Jan-22
Jul-14
Jul-19
Mar-21
Mar-16
Nov-17
Nov-12
May-15
May-20
Sep-13
Sep-18
Jul-19
Jul-14
Jan-12
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
 VIL/RJio witnessed an ARPU improvement of 5.5%
and 5.6% aided by tariff hike undertaken.
 Bharti Airtel announced an investment of USD700m Telecom EV/EBDITA (x) 10 Yr Avg (x)
by Google for 1.3% stake along with additional 18
USD300m toward commercial agreements over the
13
next five years. 8.1 7.0
8
Sep-13
Sep-18
Jul-19
Jan-12
Jul-14
Jan-17
Jan-22
Mar-16
Mar-21
May-15
May-20
Nov-12
Nov-17
Bharti Airtel na 36.4 na na 89 4.7 2.5 83 47 -2
Indus Towers 10.7 20.1 -47 -48 5 3.5 3.6 -2 11 37
Vodafone Idea na 15.6 na na -19 0.0 1.5 -100 -100 -43
Tata Comm 19.6 25.6 -23 -4 33 11.2 15.7 -29 252 502

February2022
2022 35
NOTES

Quant Research & India Strategy Gallery
BULLS & BEARS | February 2022

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*Sectors in order of their

Research & Quant Team (Deven@MotilalOswal.com) February 2022

BULLS & BEARS | February 2022 2

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BULLS & BEARS | February 2022 5

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12-month forward P/E (x) Midcaps trade at a 8% premium to largecaps

Source: MOFSL, Bloomberg for midcap valuation

BULLS & BEARS | February 2022 7

Trailing Nifty P/E (x) Trailing Nifty P/B (x)

BULLS & BEARS | February 2022 8

12-month forward Nifty RoE (%) Trend in Nifty RoE (%)

BULLS & BEARS | February 2022 9

India (Nifty) v/s other markets

BULLS & BEARS | February 2022 10

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Trend in India's contribution to world Mcap (%)

Mcap change in the last 12 months (%)

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Relative to Relative to Metals EV/EBDITA (x) 10 Yr Avg (x)

BULLS & BEARS | February

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listed players as operational updates released by 21 20

six listed players indicate an average pre-sales 1 -100

month. Key takeaway: pricing will start to inch up 0 -90

BULLS & BEARS | February

over INR1,000 could add some pressure on 2 0

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BULLS & BEARS | February 2022 36

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Disclosure of Interest Statement Companies where there is interest

Regional Disclosures (outside India)

For Hong Kong:

BULLS & BEARS | February 2022

BULLS & BEARS | February 2022

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