Equity Research

April 21, 2023

ICICI Securities Limited
is the author and India Update
distributor of this report
Contents
Page 2 HCL Technologies (Rs1,038): Inline results and guidance: Low exposure to Hold
Market data as on Apr 20, 2023 troubled BFSI clients leads to better outcome
INDICES
% chg Page 4 Tata Communications (Rs1,231): Confident on delivering sustainable growth Buy
(DoD) Page 6 Prestige Estates Projects (Rs458): Record year, new launches key to Buy
BSE Sensex
S&P CNX Nifty
59632
17624
0.1
0.0 achieving growth ambitions
BSE 100 17896 0.1 Page 7 Oil & Gas: Futures prices imply material upside to CGD margins for FY24E;
BSE 200 7526 0.0
European demand remains a key risk!
OVERSEAS MARKETS# Page 8 Results date reckoner / Recent reports/updates
% chg

Dow Jones 33787

(DoD)
(0.3)
Highlights
Nasdaq Comp. 12060 (0.8) Sector/event Impact
S&P 500 4130 (0.6)
Hang Seng 20240 (0.8) TECHNOLOGY: Inline results and guidance: Low exposure to troubled BFSI clients
Nikkei 28616 (0.2)
HCL leads to better outcome. HCLT’s limited exposure to troubled BFSI clients
ADVANCES/DECLINES (BSE) Technologies – and recent large deal ramp-ups in the BFSI vertical led to strong segmental
Group A B S
Advances 356 597 1833 Q4FY23 Result growth of 6.9% QoQ CC, contrary to weak growth at both TCS and Infosys
Declines 347 522 1670 Review lately. Also, HCLT’s lower exposure to discretionary projects over Infosys
Unchanged 3 17 128
and higher towards run side of the business, led to hardly any major project
FII TURNOVER (BSE+NSE)*
ramp-downs or cancellations. As a result of these two factors, we expect
(Rs mn) HCLT to grow faster than both Infosys and TCS in FY24. We estimate HCLT
Bought Sold Net growth at 7.9% YoY in CC terms for FY24E, close to the top end of the
79680 779890 1700
guidance of 6-8%. As a result, we increase our revenue forecasts over
CURRENCY FY24E-FY26E by up to 2% each year. On EBIT margin, we have lowered
US$1 = Rs82.10
our outer year assumptions due to the company’s higher focus on cost take-
*FII turnover (BSE + NSE) as on out deals in which margins are lower. Due to our higher tax rate assumption,
Apr 19, 2023 we lower our FY24E-FY26E EPS forecasts by 2-5%. We maintain our HOLD
rating on HCLT with a revised 12-month target price of Rs1,065. This implies
3% potential upside wherein the stock may react positively to HCLT’s results
given the management’s better growth guidance than Infosys and no
mention of project cancellations / ramp-downs.

Snippets
ECONOMY
 India’s economic activity is expected to decline and witness a lower growth print in FY24 on the
back of a buoyancy in the services sector, moderation in inflation and the consistency in public
sector capital expenditure, stated a report by Acuité Ratings on Thursday. According to the report,
the growth print has been on a decline with the gradual elimination of the base factor along with the
weakness in the export sector and lack of strength in rural demand. (The Economic Times)
 The centre on Thursday imposed a definitive anti-dumping duty of US$2.05 per square metre on
luxury vinyl tiles imports from China and US$1.44 per square metre on imports from Taiwan based
on the recommendations of the Commerce Ministry. The anti-dumping duty would be valid for five
years, said a notification by the Central Board of Indirect Taxes and Customs (CBIC). The anti-
dumping duty will be on “Vinyl Tiles other than in roll or sheet form” having minimum tile thickness
of 2.5 mm and a maximum tile thickness of 8 mm. (The Economic Times)
Market movement (BSE+NSE) Volumes in Rs mn (BSE and NSE) Advances & Declines ratio (BSE)
BSE NSE (RHS) NSE BSE (RHS) 4.0
61000 17900 650000 50000

17800 600000 3.5

60500 45000
17700 550000 3.0
60000 40000 2.5
17600
500000
59500 17500 35000 2.0
450000
17400 1.5
59000 30000
400000
17300 1.0
58500 25000
17200 350000 0.5
58000 17100 300000 20000 0.0
31-3 2-4 4-4 6-4 8-4 10-4 12-4 14-4 16-4 18-4 20-4 31-3 2-4 4-4 6-4 8-4 10-4 12-4 14-4 16-4 18-4 20-4 31-3 2-4 4-4 6-4 8-4 10-4 12-4 14-4 16-4 18-4 20-4

ICICI Securities Limited, ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai-400 025, India.
Phone: +91 22 2288 2460/70 Fax: +91 22 2298 2448
ICICI Securities Inc, 275 Madison Avenue - Suite 1417, 7th Floor, New York, NY 10017
United States. Tel: 212-388-0677
Equity Research INDIA
April 21, 2023
BSE Sensex: 59632 HCL Technologies HOLD
ICICI Securities Limited Maintain
is the author and Inline results and guidance: Low exposure to troubled
distributor of this report BFSI clients leads to better outcome Rs1,038
HCL Tech (HCLT) reported its Q4FY23 revenues at US$3,235mn, down 0.3% QoQ in
Technology USD and down 1.2% QoQ in CC terms (better than our estimate of -1.9% and
consensus at -1.5%). Revenues in CC terms were up 10.5% YoY in Q4FY23. IT and
Q4FY23 result review and business services (74% of revenues) grew 1.6% QoQ CC, ER&D (16% of revenues)
earnings revision declined 3.8% QoQ CC, due to delay in decision-making in discretionary spending.
HCLT’s software business (~10% of revenues) fell 14.6% QoQ CC due to seasonality.
Target price: Rs1,065 For full year FY23, the company’s services segment grew 15.8% CC, slightly lower
Earnings revision than the annual guidance of 16-16.5%. Q4FY23 EBIT margin came in at 18.2%, lower
(%) FY24E FY25E FY26E
than our estimate of 18.9% and consensus at 18.4%, due to which EBIT of Rs48bn
Sales (US$)  1.5  1.9  1.8 was 4% below our estimate and 2% below Bloomberg consensus. PAT at Rs40bn
EBIT  2.6  1.2  1.4
EPS  1.6  4.7  5.0 was 2% below I-Sec estimates and 3% above Bloomberg consensus.

Target price revision New deal wins’ TCV was soft at US$2,074mn, down 8% YoY. Company won 13 large deals
Rs1,065 from Rs1,122 in Q4FY23 vs 17 in Q3FY23 and 10 in Q4FY22. Headcount at 226K was up 1.7% QoQ
and 8.2% YoY.
Shareholding pattern
Jun Sep Dec Guidance: HCLT has guided for 6-8% CC growth for FY24 and 6.5-8.5% for the services
'22 '22 '22
Promoters 60.7 60.7 60.7 business. This is in line with I-Sec and consensus expectations and compares to the 13.7%
Institutional
investors 33.5 33.6 34.2
CC growth in FY23. On EBIT margin, HCLT has guided for 18-19% for FY24 vs 18.2% in
MFs and others 10.2 10.0 9.0 FY23.
FIs/Bank 0.1 0.7 0.7
Insurance Cos. 5.1 5.6 6.1
FIIs 18.1 17.3 18.4 What to do with the stock:
Others 5.8 5.7 5.1
Source: www.nseindia.com HCLT’s limited exposure to troubled BFSI clients and recent large deal ramp-ups in the
BFSI vertical led to strong segmental growth of 6.9% QoQ CC, contrary to weak growth at
both TCS and Infosys lately. Also, HCLT’s lower exposure to discretionary projects over
ESG disclosure score Infosys and higher towards run side of the business, led to hardly any major project ramp-
Year 2021 2022 Chg
ESG score 56.2 58.4 2.2 downs or cancellations. As a result of these two factors, we expect HCLT to grow faster
Environment 44.3 46.7 2.4 than both Infosys and TCS in FY24. We estimate HCLT growth at 7.9% YoY in CC terms
Social 34.2 38.5 4.3
Governance 89.9 89.9 0.0 for FY24E, close to the top end of the guidance of 6-8%. As a result, we increase our
Note - Score ranges from 0 - 100 with a
higher score indicating higher ESG
revenue forecasts over FY24E-FY26E by up to 2% each year. On EBIT margin, we have
disclosures. lowered our outer year assumptions due to the company’s higher focus on cost take-out
Source: Bloomberg, I-sec research
deals in which margins are lower. Due to our higher tax rate assumption, we lower our
FY24E-FY26E EPS forecasts by 2-5%. We maintain our HOLD rating on HCLT with a
revised 12-month target price of Rs1,065. This implies 3% potential upside wherein the
stock may react positively to HCLT’s results given the management’s better growth
guidance than Infosys and no mention of project cancellations / ramp-downs.

Market Cap Rs2815bn/US$34.3bn Year to March FY23 FY24E FY25E FY26E

Reuters/Bloomberg HCLT.BO/HCLT IN Revenue (Rs mn) 10,14,560 11,26,852 12,68,022 14,27,392
Shares Outstanding (mn) 2,713.7 Net Income (Rs mn) 1,48,480 1,64,455 1,90,693 2,02,083
52-week Range (Rs) 1150/883 EPS (Rs) 54.8 60.7 70.4 74.6
Free Float (%) 39.3 % Chg YoY 10.1 10.7 16.0 6.0
Research Analysts:
FII (%) 18.4 P/E (x) 18.9 17.1 14.7 13.9
Sumeet Jain Daily Volume (US$'000) 40,670 CEPS (Rs) 70.2 77.9 89.8 96.4
sumeet.jain@icicisecurities.com
+91 22 6807 7573 Absolute Return 3m (%) (6.3) EV/E (x) 11.6 10.2 8.7 8.0
Aditi Patil Absolute Return 12m (%) (0.2) Dividend Yield (%) 4.6 4.2 4.8 5.6
aditi.patil@icicisecurities.com Sensex Return 3m (%) (1.5) RoCE (%) 17.5 21.4 24.4 25.1
+91 22 6807 7452
Sensex Return 12m (%) 5.9 RoE (%) 23.3 24.7 27.6 28.4

Please refer to important disclosures at the end of this report

 HCL Technologies, April 21, 2023 ICICI Securities

Key takeaways from earnings call

 Deal pipeline remains near all-time highs with spread across geographies, verticals
and service lines. Large cost take-out deals are in the pipeline, more around the run
side of the business.
 HCLT is not seeing any stress in the run side of the business, but sees delay in
decision-making in discretionary spending.
 Company saw strong growth in the BFSI segment during Q4FY23 with increase of
6.9% QoQ CC (contrary to weakness seen in the case of both TCS and INFY) on
the back of ramp-up of large deals. HCLT has less than 1% revenue exposure to
the overall BFSI vertical (toward smaller regional banks in US), which is the reason
the company is less impacted by the recent crises. It sees good growth outlook for
the BFSI vertical with recent deal wins across geographies including the US, EU
and Latin America.
 ER&D saw weak growth during the quarter due to cuts in discretionary spending,
largely in the hi-tech and telecom verticals.
 HCLT expects attrition to further drop from current level of 19.5% given easing of
demand- and supply-side pressures.
 On pricing, HCLT expects it to remain stable in the current environment with certain
pressures in cost take-out deals. This is one of the reasons for the muted EBIT
margin guidance.
 Company expects tech spend intensity to remain higher than pre-pandemic levels
given the core modernisation initiatives; it also expects the time to recovery in
demand to be short.
Note: Target price methodology – Our 12-month target price of Rs1,065 is based on 16x
FY26E EPS of Rs 75, discounted back by WACC of 12%.
Downside risks: 1) Longer than expected current global macro downcycle extending
beyond CY23E, 2) weakness in the BFSI vertical due to tepid credit demand and
weakness in the retail / manufacturing verticals attributable to persistently high inflation,
3) pricing pressure in large deals (particularly around cost optimisation), 4) INR
appreciation against the USD.
Upside risks: 1) INR depreciation against the USD, 2) P&P business showing stability
and strong growth after a hiatus (which we don’t expect at this stage), 3) global macro
concerns around high interest rates and inflation subsiding sooner than expected, 4)
ER&D business witnessing higher than expected growth owing to increased level of
outsourcing globally in the digital engineering field.
Table 1: Q4FY23 actuals vs estimates
Q4FY23E- vs our
(Rs bn) Q4FY23 Q3FY23 QoQ Q4FY22 YoY Cons vs Cons
ISEC estimates
CC growth -1.2% 5.0% 1.1%
Sales ($ m) 3,235 3,244 -0.3% 2,993 8.1% 3,224 0.3% 3,229 0%
USD/INR 82.2 82.3 -0.1% 75.5 8.9% 82.7 82.7
Sales (Rs bn) 266 267 -0.4% 226 17.7% 267 -0.2% 267 0%
EBIT 48 52 -7.5% 41 18.8% 50 -3.8% 49.2 -2%
EBIT Margin 18.2% 19.6% -141 bps 18.0% 17 bps 18.9% -68 bps 18.4% -24 bps
Reported PAT 40 41 -2.8% 36 10.8% 41 -1.7% 38.7 3%
EPS 14.7 15.1 -2.8% 13.3 10.7% 14.9 -1.7% 14.3 3%
Source: Company data, I-Sec research, Consensus estimates from Bloomberg

2
Equity Research INDIA
April 20, 2023
BSE Sensex: 59632
Tata Communications BUY
ICICI Securities Limited Maintained
is the author and
distributor of this report Confident on delivering sustainable growth Rs1,231
Tata Communications’ (TCom) Q4FY23 data revenue grew 2.2% QoQ / 11.2% YoY
Q4FY23 result review; sustaining double-digit growth. However, data EBITDA margin dipped 240bps
earnings and TP revision QoQ to 24% due to higher employee cost. Company has given strong directional
guidance, which puts it in a significantly better position: 1) TCom will continue to
Telecom invest in people, products and platforms as it sees multiple opportunities, which it
doesn’t want to miss for under-investment; 2) capex requirement may rise for
driving Digital Services to 50% of data revenue; 3) company will not compromise
Target price: Rs1,510 on RoCE at >25%, which implies strong revenue growth. TCom has seen
Earnings revision significant improvement in its orderbook, particularly in large deals (TCV
(%) FY24E FY25E >US$1mn) and it remains confident of continuing to improve on it in FY24/FY25, to
Sales  0.7  0.5 facilitate which it has upfronted investments. We believe strong revenue growth
EBITDA  4.2  4.6
EPS  8.3  8.0 will eventually drive operating leverage and margin improvement.

Target price revision We have cut our EPS estimates by 8% each year for FY24E/FY25E as we factor-in
Rs1,510 from Rs1,640 higher costs while remaining conservative on revenue growth. We have also
increased capex and accordingly cut our target price to Rs1,510 (unchanged P/E
of 20x for FY25E; earlier: Rs1,640). Maintain BUY.
 Data revenue grew 11.2% YoY / 2.2% QoQ to Rs37bn: We are closely tracking net
Shareholding pattern revenue (total revenue minus direct cost), which is more representative of the
Sep Dec Mar
’22 ’22 ’23 underlying performance for TCom. In Q4FY23, net revenue increased 8.8% YoY /
Promoters 58.9 58.9 58.9 2.8% QoQ to Rs26bn. TCom remains positive on its near-term revenue growth
Institutional
investors 30.8 31.2 31.0 prospects in the data business driven by new product launches, ramp-up in
MFs and other 9.6 9.5 9.6
Banks/ FIs 0.0 0.3 0.3
execution and value-addition from the international business. Company is investing
Insurance Cos. 4.1 4.1 4.1 for acceleration of growth in terms of expanding sales & marketing teams in India
FIIs 17.1 17.3 17.0
Others 10.3 9.9 10.1 and the international market, and adding products in Digital Services.
Source: NSE
 Digital Platform & Services revenue grew 15.9% YoY / 2.3% QoQ to Rs11bn.
However, net revenue improved 13.7% YoY and 9.1% QoQ to Rs5.2bn.
ESG disclosure score Collaboration revenue increased 1.7% YoY / declined 3.6% QoQ to Rs4bn, which
Year 2020 2021 Chg has been hurt from global-SIP business under-performance on slippage by one
ESG score 55.9 65.8 (9.9) customer. Collaboration and CPaaS is expected to grow on the back of rise in
Environment 34.1 49.0 (15.0)
Social 37.3 52.2 (14.8) revenue from new-age products like Rapid, InstaCC and Digo, while G-SIP remains
Governance 96.1 96.1 - a drag. Cloud, hosting and security grew 38.6% YoY / 9.9% QoQ to Rs3.6bn. Next-
Note - Score ranges from 0 - 100 with
a higher score indicating higher ESG gen connectivity and media revenues were up 10.3% (+4.6% QoQ) and 19.5% YoY
disclosures. (down 2.1% QoQ on seasonality), respectively. Incubation revenue surged 65.4%
Source: Bloomberg, I-sec research
YoY (9.8% QoQ) to Rs1.3mn. Core connectivity net revenue was up 5.3% YoY /
1.6% QoQ to Rs19.8bn. Transformation business revenue rose 2.4% YoY to
Rs3.4bn.
Market Cap Rs351bn/US$4.3bn Year to Mar FY22 FY23 FY24E FY25E
Reuters/Bloomberg TATA.BO/TCOM IN Revenue (Rs bn) 165.3 176.4 192.2 210.2
Shares Outstanding (mn) 285.0 Net Income (Rs bn) 14.8 17.2 16.5 21.5
52-week Range (Rs) 1417/870 EPS (Rs) 51.8 61.0 58.0 75.3

Research Analysts: Free Float (%) 41.1 % Chg YoY 18.5 21.3 (8.1) 30.0
FII (%) 17.0 P/E (x) 23.8 20.2 21.3 16.4
Sanjesh Jain
sanjesh.jain@icicisecurities.com Daily Volume (US$/'000) 7,264 CEPS (Rs) 117.1 130.2 127.4 147.2
+91 22 6807 7153 Absolute Return 3m (%) (8.4) EV/E (x) 10.4 9.9 9.2 7.8
Akash Kumar Absolute Return 12m (%) (4.1) Dividend Yield (%) 1.7 1.7 1.6 2.0
akash.kumar@icicisecurities.com
Sensex Return 3m (%) (1.5) RoCE (%) 19.2 20.7 22.7 28.6
+91 22 6807 7637
Sensex Return 12m (%) 5.9 RoE (%) 284.1 117.7 61.7 54.4

Please refer to important disclosures at the end of this report

 Tata Communications, April 20, 2023 ICICI Securities
 Orderbook addition healthy, particularly in large deals. TCom saw good
growth in its orderbook during the quarter aided by rise in the project pipeline for
Digital Services and Incubation (40% of orderbook). In FY23, the company’s
orderbook addition reached an all-time high, and it remains confident of continuing
to grow its sales funnel and orderbook in FY24.
 Data EBITDA margin at 24.0%, down 240bps QoQ. Data business EBITDA fell
8.8% YoY (7.0% QoQ) to Rs8.8bn. EBITDA margin was impacted from rise in
operating costs driven by: 1) higher employee cost, which rose 8.6% QoQ and
30.1% YoY on 15% (>1,000) addition in employee count, and rise in employee
cost due to higher attrition in H1FY23 (company believes this will normalise as it
has filled the human resource gap and attrition has normalised); 2) network cost
has increased by 1.4% QoQ and 6.4% YoY on higher energy cost and investment
in new product developments, while other expenses decreased by 2.0% QoQ and
1.4% YoY. Company believes peak of cost inflation is behind, and investment
henceforth will follow revenue growth.
TCom has maintained its EBITDA margin guidance at 23-25% for the consolidated
business and it wishes to invest excess margin back into the business to drive
faster revenue growth. We have factored the rise in cost in our assumptions while
we remain conservative on our revenue estimates for TCom.
 FCF conversion remains healthy. TCom’s capex was Rs5.3bn in Q4FY23, and
Rs17bn for FY23 (9.6% of revenue), which is lower than the guidance of
US$300mn for FY23 – due to supply chain issues and better payment terms. Net
debt decreased by Rs5.6bn QoQ (Rs10bn YoY) to Rs57.1bn in FY23 on good
FCF conversion.
 Switch TV acquisition to complete soon. TCom anticipates approvals for the
merger in Q1FY24 and expects to start integration immediately. It expects Switch
TV to improve TCom’s position in the US market for media services.
 Other highlights. 1) Company has a sharp focus on execution of Digital Services
business, which can drive revenue growth in double digits. This implies Digital
Services revenue has to grow in excess of 20%. TCom has ambition increase
Digital Service revenue (including Incubation) to 50% of data revenue; 2) the large
deals (defined as TCV of >US$1mn) win has significantly improved, and the
company expects it to grow in the coming years. Discussions with customers, both
in India and international, are on positive trajectory; 3) Company did not share
concerns highlighted by Indian IT companies on slowing spend on network or
digital services. These spends help IT companies to improve productivity; and 4)
Company is committed to invest in operating cost and capex, but remains
confident of achieving >25% RoCE. This implies TCom is penning revenue growth
upward of 14-15% over the next three years.
 Risks: 1) Slower than expected execution in Digital Services revenue, and 2)
continued investment in costs keeping pressure on margins.

2
Equity Research
April 20, 2023
INDIA
BSE Sensex: 59632
Prestige Estates Projects BUY
ICICI Securities Limited Maintain
is the author and
distributor of this report Record year, new launches key to achieving
growth ambitions Rs458
Company update Prestige Estates Projects (PEPL) clocked record FY23 gross sales bookings of
Rs129bn (up 25% YoY) and gross collections of Rs98bn (up 31% YoY) led by new
Real Estate residential launches of 16.5msf with the Mumbai market contributing Rs27bn or
21% of FY23 gross sales bookings. With a residential launch pipeline of 65msf
over FY24-25E, the company aspires to 1) double its annual residential sales
Target price Rs530 bookings to Rs250bn by FY26E from ~Rs129bn in FY23 led by expansion in
Mumbai, NCR and Pune markets, 2) incremental rental income of Rs25.5bn from
offices/malls by FY28E which would require Rs159bn of capex, 3) company plans
Shareholding pattern to utilise 40% of its annual residential operating surplus to fund capex and
Jun Sep Dec expects peak net debt to rise to Rs110-120bn by FY28E vs. Rs47bn as of Mar’23E.
Promoters
’22
65.5
’22
65.5
’22
65.5
In our view, while the company’s aspirations to grow its residential and annuity
Institutional business is laudable, the company’s ability to achieve significant pre-leasing in
investors 31.3 31.3 31.6 ongoing/upcoming annuity assets along with strata sales will be the key
MFs and others 5.3 6.0 7.2
Insurance 1.0 0.8 0.9 monitorable in order to keep overall debt levels in check. We retain our BUY rating
FIIs 25.0 24.5 23.5 with an unchanged Mar’23 NAV based target price of Rs530/share. Key risks are a
Others 3.2 3.2 2.9
Source: NSE
residential demand slowdown and weak leasing in annuity projects.
 Targeting to double annual sales bookings to Rs250bn over FY23-26E: The
ESG disclosure score company has achieved FY23 gross sales bookings of Rs129bn on the back of
Year 2020 2021 Chg 16.5msf of new residential launches. Given the strong business development pipeline
ESG score NA NA NA
Environment NA NA NA
and company’s plans to cumulatively launch 65msf of residential projects over FY24-
Social NA NA NA 25E (32msf in FY24E and 30msf in FY25E), the company aspires to double annual
Governance NA NA NA
Note - Score ranges from 0 - 100 with a higher score
residential sales bookings over FY23-26E to Rs250bn annually with Mumbai market
indicating higher ESG disclosures. sales targeted to grow to Rs50bn in FY26E (gross GDV of current Mumbai projects is
Source: Bloomberg, I-sec research
Rs748bn as per company) and new markets of NCR and Pune to grow to Rs30bn and
Rs15bn annually, respectively.
 Incremental capex of Rs180bn over Q4FY23-FY28 is key monitorable: As per
enhanced disclosures provided by the company, as of Dec’22, pending gross capex
across office/malls and hotels is Rs206bn of which Rs180bn is pending and will be
spent over Q4FY23-FY28. Against the balance gross capex of Rs159bn for offices
and malls, the company estimates incremental rental income of Rs25.5bn by FY28
from over 30msf of incremental leasable area becoming operational.
 Balance sheet debt management to go hand in hand with growth aspirations:
The company is cognisant of the large capital requirement to fund capex projects and
intends to utilise 40% of annual residential operating surplus towards capex, with peak
net debt expected to rise to Rs110-120bn in FY27-28E from Rs47bn as of Mar’23E
(co estimates net D/E of 0.5-0.6x between FY23-28E). In our view, the company’s
ability to achieve significant pre-leasing in ongoing/upcoming annuity assets along
with strata sales will be the key monitorable going forward.
Market Cap Rs184bn/US$2.2bn Year to Mar FY21 FY22 FY23E FY24E
Reuters/Bloomberg PREG.BO/PEPL IN Revenue (Rs bn) 72.4 63.9 76.1 80.3
Shares Outstanding (mn) 400.9 Rec. Net Income (Rs bn) 27.8 11.9 7.9 5.1
52-week Range (Rs) 508/386 EPS (Rs) 69.2 29.6 19.7 12.7
Free Float (%) 34.5 % Chg YoY 588.7 (57.2) (33.7) (35.2)
FII (%) 23.5 P/E (x) 6.6 15.5 23.4 36.1
Daily Volume (US$/'000) 2,421 P/B (x) 2.8 2.0 1.9 1.8
Research Analyst: Absolute Return 3m (%) 3.5 EV/E (x) 10.1 14.8 12.5 12.7
Adhidev Chattopadhyay Absolute Return 12m (%) (7.3) Dividend yield (%) 1.2 0.5 0.5 0.5
adhidev.chattopadhyay@icicisecurities.com Sensex Return 3m (%) (1.5) RoCE (%) 13.8 10.7 10.8 10.2
+91 22 6807 7451
Sensex Return 12m (%) 5.9 RoE (%) 46.1 15.1 8.4 5.1

Please refer to important disclosures at the end of this report

Equity Research INDIA
April 21, 2023
BSE Sensex: 59632 Oil & Gas
ICICI Securities Limited
is the author and Futures prices imply material upside to CGD margins for
distributor of this report
FY24E; European demand remains a key risk!
Sector update The combination of the softer domestic gas prices expected over FY24E-FY26E and
the persistent softness in spot LNG prices should be a comfort for margins of the
Oil & Gas and CGDs (city gas distribution companies). Our estimates are building-in (‘spot LNG
price of’) ~US$20/mmbtu over H1FY24E and ~US$30-32/mmbtu average price for
Petrochemicals H2, implying an average price of US$25-26/mmbtu for the full year in our base case
estimates. However, futures prices for JKM LNG imply spot LNG can average a lot
IGL (BUY) lower, at US$15.3/mmbtu. This can add a material Rs3.9-20.6/sh EPS upside (16-
45%) to our base case estimates for FY24E. For the medium term too, prospects for
MGL (BUY) margins appear stronger, with global LNG export capacity to see a 40-50% addition
(vs current) over the next 3-4 years, based on industry projections (see exhibits 5 &
Gujarat Gas (ADD) 6). European demand forecasts for CY23 are the only wrinkle in this tale, with IEA
projecting a demand gap of ~20mtpa for CY23 despite multiple measures taken to
mitigate the Russian supply loss expected in the foreseeable future (see exhibits
13-15). On balance, we remain bullish on demand and margins for CGDs over the
next 12-18 months, reiterating our BUY rating on IGL and MGL.
 Weather, inventory, remain bearish factors for LNG prices: Warmer weather for
Europe (barring a short spike in Dec’22) has meant that, compared to earlier
estimates, gas inventories across Europe have remained well above their 5-year
averages. Estimated storage levels of ~56% as of Apr’23 are ~1,230bps higher than
historical inventory levels at this time of the year, prompting spot LNG prices to fall
by US$10/mmbtu over the past 4 months. Futures prices for JKM LNG (marker
for Asian Spot LNG) indicate FY24E average spot LNG price could be
US$15.3/mmbtu (CY22 average at US$15.5/mmbtu). Applying these prices to our
base case, assuming no change to sales prices, means our EPS estimates have an
upside risk of 16-45% for FY24E vs our base case. Alternatively, this allows for a
price reduction of Rs5-6/kg for CNG for all the 3 CGD companies, further widening
the differential vs petrol/diesel (already at ~35%) and boosting demand prospects.
 Europe still faces material supply risk: Multiple measures on energy efficiency,
lower demand across segments and some supply increases from the US principally
imply that Europe has the means to mitigate an estimated ~22mt of supply shortage
based on NIL Russian supplies in CY23. However, that still leaves ~20mt of
additional demand to be met, unless additional measures are taken to lower demand
or increase supply. This remains a central pillar of our assumption of much stronger
prices over H2FY24E and the reason our base case assumptions remain
unchanged.
 We remain bullish; IGL a top pick: We see near-term prospects of costs improving
due to domestic gas prices and weak spot LNG. We also see medium-term
prospects improving due to higher LNG supplies and improving domestic production.
Research Analysts:
As a result, IGL and MGL should see stronger demand/margins and GGL too should
see the same, albeit to a lower extent. Reiterate BUY on IGL and MGL, and ADD on
Probal Sen GGL.
probal.sen@icicisecurities.com
+91 22 6807 7274  Key upside risks: i) Higher-than-expected decline in LNG prices, ii) resumption of
Hardik Solanki price increase in petrol and diesel, iii) stronger regulatory push for gas conversion.
solanki.hardik@icicisecurities.com  Key downside risks: i) Faster recovery of Chinese demand for oil and gas, ii)
+91 22 6807 7386
sudden reversal of weather patterns in Europe and/or a more aggressive inventory
buildup for CY24.

Please refer to important disclosures at the end of this report

India Update, April 21, 2023 ICICI Securities
Results date reckoner
April 2023
Mon Tue Wed Thu Fri Sat Sun
17 18 19 20 21 22 23
Angel One; ICICI Lombard; Tata com., Cyient, Hindustan Zinc; Macrotech Devel.;
Justdial; HCL Tech., Reliance Industries; Yes Bank;
ICICI Prudential;

24 25 26 27 28 29 30
IndusInd Bank; AU Small Finance, HDFC Life Ins.; ACC; L&T Finance; CDSL;
Mahindra Logistics; Bajaj Auto, Indus Towers; Axis Bank; MMFS; IDFC First Bank;
Persistent Systems; HDFC AMC; L&T Technology; Coforge; Orient Cement; Kotak Mahindra
KPIT Technologi.; Maruti Suzuki; HUL; Star Health Insu; Bank;
Mahindra CIE; Poonawalla Fin; Kewal Kir.Cloth.; Supreme Industries;
Mahindra Holidays SBI Life Insurance; Larsen & Toubro; UltraTech Cement;
& Resorts; UTI AMC; Mindtree;
Mahindra Life.; Voltas; MphasiS
Nestle India; Tech Mahindra;
Nippon Life; Trent;
Tata Consumer Wipro;

May 2023
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6 7
Ambuja Cements; ABB India; 360 ONE; Cams Services
Spandana Sphoort; Cholamandalam Blue Star;
Tata Steel; Investment; Dabur India
Varun Beverages; Sonata Software; HDFC
8 9 10 11 12 13 14
Kansai Nerolac Castrol India Bosch; Asian Paints; Cipla; Navin Fluorine
Paints; JM Financial Dr. Reddy's Lab; Zensar Technolgies; Max Financial
Pidilite Industries; Sanofi India; Services
15 16 17 18 19 20 21
JSW Steel
22 23 24 25 26 27 28
Akzo Nobel India;
TTK Prestige
29 30 31

8
India Update, April 21, 2023 ICICI Securities
ravin

Recent reports/updates
Analyst Company/Sector Date
Sumeet / Aditi HCL Technologies: Inline results and guidance: Low exposure to troubled Apr 21
BFSI clients leads to better outcome
Probal / Hardik Oil & Gas: Futures prices imply material upside to CGD margins for FY24E; Apr 21
European demand remains a key risk!
Sanjesh / Akash Tata Communications: Confident on delivering sustainable growth Apr 20
Adhidev Chattopadhyay Prestige Estates Projects: Record year, new launches key to achieving Apr 20
growth ambitions
Amit / Mohit / Pritish Metals & Mining: Steel: Spot spread rises to an 8-month high Apr 19
Amit / Mohit / Pritish Defence: Standing Committee report: BEL seems best placed Apr 19
Navin / Harsh Cement: Losing the plot... Apr 19
Ansuman / Ravin Angel One: Maintaining good balance between growth and profitability Apr 19
Ansuman / Ravin ICICI Lombard General Insurance: Health continues to grow; motor Apr 19
performance muted
Abhisek / Heenal Just Dial: More clarity emerges on new businesses Apr 19
Vinod / Niraj Strategy: FPIs and MFs add risk factors to their portfolios during the market Apr 18
turbulence in Mar'23
Ashwani / Bharat Titagarh Wagons: Visit note: Riding on Railway Capex Apr 18
Manoj / Aniruddha / Karan Consumer: Paints: High-frequency indicators #10 Apr 17
/ Akshay
Renish / Chintan Microfinance: Credit cost in FY24 to remain lowest since FY17 Apr 17
Basudeb / Vishakha Automobiles: Rural 2Ws on revival mode; PV demand steady. Apr 17
Abhisek / Manoj / Heenal Zomato: Delivery executive strikes: what's happening? Apr 17
Sumeet / Aditi Technology: BFS tech spend growth rate moderating, but large technology Apr 16
transformation programmes continue
Sanjesh / Akash Bharti Airtel: Can Bharti's FCF surprise positively? Apr 16
Chintan / Renish HDFC Bank: 17.4% RoE and 2.1% RoA for FY23; investing into branches Apr 16
for making bank future-ready
Amit / Mohit / Pritish Defence Q4FY23 preview: Steady execution, exciting prospects ahead Apr 16
Sumeet / Aditi Technology: ISG cuts As-A-Services ACV growth outlook modestly, Apr 15
maintains managed services growth forecast
Sumeet / Aditi Infosys: Large discretionary IT spend exposure leading to revenue Apr 14
drawdown, remain BUY
Amit / Mohit / Pritish Metals & mining: Steel: Falling coking coal prices to support spreads Apr 14
Prasenjit Basu Economy: Goldilocks redux: Industrial output accelerates in Jan-Feb'23, Apr 12
inflation recedes in Mar'23
Renish / Chintan AU Small Finance Bank: Top management continuity (3-year extension for Apr 12
MD / CEO) enhances visibility on execution
Sumeet / Aditi Tata Consultancy Services: Right-shifting of demand as near-term negative Apr 12
sentiment takes a back seat
Ashwani / Bharat Capital Goods Preview: Execution to remain upbeat on robust order Apr 11
backlog
Sanjesh / Akash Specialty Chemicals Preview: Excl Chemplast, EBITDA growth is 15% for Apr 11
chemical cos
Amit / Mohit / Pritish Logistics Preview: Expect only limited respite Apr 11
Arun / Sohil Building material Preview: Pipe & ceramic companies’ margins to improve Apr 11
QoQ
Ansuman / Ravin Diversified Financials: FY23 a record year for equity and commodity Apr 11
options; STT hike impact remains to be seen
Amit / Mohit / Pritish Metals & mining Preview: Margins revive Apr 11
Probal / Hardik Oil & Gas: Government notifies new gas pricing regime – mostly positive, Apr 10
but lack of clarity on free pricing a surprise
Ansuman / Ravin InterGlobe Aviation: Expect steady Q4; business momentum remains strong Apr 10
Adhidev Chattopadhyay Phoenix Mills: Strong end to FY23, all eyes on LTL growth for FY24E Apr 10
Basudeb / Vishakha Auto & auto ancillaries: Robust earnings growth across segments Apr 10
Basudeb / Vishakha Auto: Commercial vehicles: Demand drivers intact; freight rate hikes this Apr 10
month awaited
Manoj / Varun / Karan / Consumer: Continuing decent demand print for Jewellery in 4QFY23 Apr 9
Akshay
Amit / Mohit / Pritish Metals & Mining: Steel: HRC back at Rs60,000/te, spot spreads rise Apr 5
Amit / Mohit / Pritish Hindalco Industries: Basic tenets reiterated; Novelis in focus Apr 5
Vinod / Niraj Strategy: ‘Fear of the unknown’ emanating from global markets could force Apr 5
a ‘type-1 error’ in gauging domestic economic activity
Probal / Hardik Oil & Gas Q4FY23 preview: Steady improvement likely, YoY & QoQ Apr 5
Ansuman / Ravin / Vishal Motilal Oswal Financial Services: Attractive valuations Apr 5
Ansuman / Ravin Insurance: Highlights and implications of IRDAI’s expense of management Apr 5
notification, and guidance note on commission
Ansuman / Ravin Star Health and Allied Insurance Co.: Growth levers and operational moats Apr 5
put business at a vantage point

9
 India Update, April 21, 2023 ICICI Securities
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New I-Sec investment ratings (all ratings based on absolute return; All ratings and target price refers to 12-month performance horizon, unless mentioned otherwise)
BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return

ANALYST CERTIFICATION
I/We Sumeet Jain, MBA; Aditi Patil, MBA (Finance); Probal Sen, CA, MBA; Hardik Solanki, CA; Sanjesh Jain, PGDM; Akash Kumar, MBA; Adhidev Chattopadhyay,
MBA (Finance); authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about
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