We retain Buy on Karnataka Bank (KBL) with TP at Rs160. Q2'19 results were a mixed bag. While lower than expected margins, higher slippages were a few negatives; we draw greater comfort in strong loan growth with increasing share of high rated portfolio, continued traction in fee income and further reduction in stressed asset portfolio. We remain convinced on the KBL transformation journey and believe that valuations at 0.6x...

Havells is one of the fastest growing fan brands in the Indian market with market share at ~17% while in the switchgear market, it is the market leader in the low voltage segment with ~28% market share. Over the period, Havells has established a network of ~7,500 dealers spread across the four regions servicing ~100,000 retailers/touch points in India. It is highly successful in augmenting market share of existing products along with launching new products, which have received good response driven by high brand visibility. Recently, Havells has acquired the...

Karnataka Bank (KBL) reported 2QFY19 results with the key strategic pointers being: (1) Slippage remained under relative control at Rs3.68bn compared with a past 10-quarter average of Rs9.05bn (2) NII growth YoY lagged loan growth owing to yield pressure (yield stood at 9.34% compared with 10.15% in 2QFY18) but management stated that loan re-pricing has just kicked in. NIM is guided to revert to 3%+ by year-end (3) Relatively recent traction in core fee income growth continued at 31% YoY and in-line with earlier guidance for fee income growth of ~30% for FY19 (4) Opex control remains admirable even adjusted for beneficial one-off. (See comprehensive conference call takeaways on page 2; See Management Meet note see initiating...

Hindustan Unilever's (HUVR) overall performance in 2QFY19 was broadly in line with our expectations. The company reported yet another quarter of strong volume-led growth. Top-line adjusted for fiscal incentive adjustment was in line with our expectations. Operating profit and net earnings grew 20% and 26% YoY, respectively. This was the fifth consecutive quarter of more than 20% growth in EBITDA for HUVR. Domestic consumer growth of 12% was well ahead of 9% market growth. Volume growth adjusted for base saw a 100bps improvement as compared to previous quarter despite challenges of long truckers strike and unprecedented floods in Kerala. The growth was broad-based wherein all the categories continued their double-digit growth,...

There is no doubt that the company's execution is ahead of the market and it is gaining market share but valuations are also lofty with the stock trading at 46x FY20E earnings. To meet the consensus earnings expectations and justify the current valuations the price hikes needed could be much higher. We believe there are material risks to the company meeting estimates as base effect starts receding in the forthcoming quarters while the market growth remain...

We value HUL based on 45x P/E on Sep-20 EPS to arrive at TP of Rs 1,691. HUL was our top pick, but considering rich valuation and limited upside, we downgraded the stock in 1QFY19 to NEUTRAL. HUL reported another quarter of broad-based growth with revenues growing by 12.5% (exp. 13%) with adjustment of 1% fiscal refunds. Volume growth was healthy at 10% (exp. 9%) driven by rural recovery, favorable base (4% in 2QFY18) and market share gain. Robust margin expansion resulted in EBITDA/APAT growth of 20/23% (exp. 18/18%).

DMart's 2QFY19 earnings-report reflects a massive margin disappointment (8% vs 9.1% in 2Q LY and 8.9% for FY18) which is likely to mask the excitement that a 38.9% growth in revenue would otherwise have created. The business has brought down prices across categories to further drive store-throughput; the consequent EBITDA miss of 3.7% vs our forecast, however, means that the incremental revenue garnered through the price-cuts (2QFY19 revenue was 8.7% ahead of our expectation) have not been able to entirely protect the business' profit pool at least not just yet. We reckon it could take a few quarters before operating leverage starts to entirely offset the margin erosion impact, but we are confident...

Cummins is a leader with 40% market share in the diesel engines/gensets industry. Further, it has strong presence in high value and high margin high horse power (HHP) gensets with approximately 62% market share as on FY18 end.

Zee Entertainment Enterprises Ltd. (ZEE) reported better than expected result in Q2FY19. The company delivered strong revenue growth (24.9% yoy) led by growth across segments and an improved operational performance (EBITDA up 37.6% yoy).

Maintain BUY with TP of Rs 2,400, at 24x Sep-20E EPS supported by >60% RoIC and >4% FCF yield TCS strong performance (in-line) was digital-led and driven by momentum in core verticals, robust client metrics and deal signings. Revenue came at USD 5,215mn, 3.7/11.5% QoQ/YoY in CC terms (3.5% QoQ est) which was its fastest growth in three years (in YoY CC terms). EBIT margin was in-line at 26.5%, +148bps QoQ (26.3% est) impacted by INR depreciation. APAT stood at Rs 79.27bn, 7.7% QoQ supported by lower ETR

the quarter, revenue of the home care category grew by 12%, with sustained double-digit volume-led growth across key categories. PBIT margin of the home care category improved by ~200 BPS y-o-y to 16% in Q2FY2019. The personal care category registered revenue growth of 10.4%, with skin care, hair care and personal wash segments registering doubledigit growth. PBIT margin of the personal care...

HUL's volume performance was in line with our estimate (+10%) while the operational performance was a beat. Volume growth was led by (1) improvement in rural growth (1.2-1.25x urban) (2) and increase in sales reach. We believe that the performance was encouraging as in the fourth consecutive quarter the company has delivered double digit volume growth and margin expansion. We expect that the volume growth would reduce to single digit due to unfavorable base; 6%+ volume growth over a medium-term can be taken sanguinely considering the size of the...

Another best-in-class delivery but largely in the price now HUL's 2QFY19 key operating metrics comprising volume growth of 10%, revenue growth of 12% and 160bps expansion in operating margin were undoubtedly strong and commendable but were all bang on expected lines and no more a massive positive surprise as such. We expect the stock to be more range-bound hereonwards. Focus would be more on what the volume delivery for 3QFY19 and thereafter would be, since double-digit volume growth' would be in the base from 3Q onwards. Management remains quite confident and upbeat; key commentaries: 1) Demand outlook is stable. 2) Rural growing ahead of urban....

We maintain Buy on Tata Sponge (TSIL) with a revised TP of Rs1160. Q2 results were weak due to exceptional circumstances which led to high iron ore and maintenance cost. Overall, we expect strong operational performance during FY19-20E led by robust pricing, healthy spreads and increasing volumes as additional EC clearance of 40ktpa is expected soon. Clarity on capex towards the build-up of new steel complex is still elusive but strong cash rich balance sheet...

12 October 2018 to INR92.3b in 2QFY19. Domestic comparable consumer business sales increased 12% YoY, with underlying volume growth of 10% YoY (in-line). EBITDA grew 20% YoY to INR20.2b (our led by RM inflation. However, EBITDA margin expanded 160bp YoY to 21.9%, driven by cost efficiencies and operating leverage. PAT grew 11.2%, 20.3% and 22.2%, respectively. Demand sustained in 2QFY19; expected to be stable in near term. (2) Rural growth continues exceeding urban growth.

TCS's Q2FY19 result was in-line with our forecast as regards reported US$ growth, EBIT and EPS. However, there was a slight miss as regards CC revenue growth which came at 3.7% QoQ (vs. our forecast of +4.5%) and EBIT margin improvement of +150bps to...

12 October 2018 CESCs board of directors has decided to go ahead with the demerger but with some modification. Instead of demerging the power business into generation and distribution, it will be keeping it as a single entity. CESC had all approvals, except from the electricity regulator for a power purchase agreement between to-be demerged power generation and distribution businesses. It will continue to actively seek the PPA and eventually demerge the power generation and distribution businesses. CESC will remain listed and house the power business. There is precedence from early 2000s where the state-owned electricity companies in India were split into generation, distribution and transmission businesses for better accountability. We believe the case of demerger of CESCs power business remains strong but could take time. We have made changes to our SOTP considering the power business now as one. This has increased cost of equity for the distribution business, resulting in ~10% cut in our SOTP value.

12 October 2018 LIC Housing Finance An analysis of the liability structure shows that LICHF still has a meaningful chunk of relatively high-cost liabilities that are set to mature over FY19-20. Assuming refinancing of these NCDs at 9.0%, the impact of overall cost of funds is only 15-20bp each year. Our base case assumption is that the NCDs maturing in FY19/20 as well as the new NCDs issued are at 9.0%. We have done a sensitivity analysis to see impact on PBT due to refinance of maturing NCDs at various interest rates.

HDFC Bank has a balance sheet size of ~INR8.96tn as at June 17. It is amongst the leading private sector banks with a market cap of over INR4.4tn.