Downside risks: delay in resolution of Dahej (OAI) and Indrad (WL), slower growth in India and launch delays in the US. We resume coverage on Torrent Pharma (TRP) with a Buy. Torrent has re-rated substantially in the past three years on the back of strong execution particularly in branded markets. Despite rich valuation, we recommend Buy as TRP offers a solid India franchise, robust earnings growth and superior return profile which justifies the premium over peers. TRP would generate Rs56bn of FCF over FY19-22E. Our TP of Rs 2,250 is based on 15x FY22 EV/EBIDTA implying a target PE of 28x.

We re-iterate our Buy on Indigo as (1) The carrier will benefit from improving industry dynamics in the medium term. Air India has once again been put up for divestment by the GoI (2) Crude prices remain benign which will allow for better cost management. Efficiency gains from the Neo fleet will further benefit (3) Valuations at current levels (6.7/4.9x FY21/22E EV/EBITDAR) are undemanding. Any resolution of the ongoing dispute amongst the two promoters will lead to a re-rating of the stock. IndiGos 3QFY20 results were ahead of expectations - the demand environment improved in Nov-Dec, post a soft October, which led to the earnings beat. The revenues grew ~25% YoY due to an improvement in yields (+10 QoQ) and higher ancillary revenues (+29% YoY). We roll forward and set a Dec-21 TP of Rs 1,750 (@6x EV/EBITDAR). Maintain BUY.

PEPL is going all out (1) On building lease assets & (2) Increasing Non-South exposure with JV/JD tie ups. It's banking on the consolidation theme and picking up distressed projects in non-south markets. Large capex outlays on new lease assets will be cash flow dilutive over next 3-4yrs and requires timely funding from existing lease assets monetization and deployment of capital in cash flow dilutive under construction projects. Office assets under construction/upcoming launches of 15/25mn sqft are aggressive with overall office portfolio expected to increase from 10mn sqft to 50mn sqft over next 5-6yrs. We retain NEU with increased (new leases addition) TP of Rs 358/sh. We maintain NEU on PEPL with SOTP of Rs 358/sh (vs. Rs 348/sh earlier). We have increased our FY20/21E EPS estimates by 35%/18.9% to factor in better than expected deliveries in residential projects. PEPL posted strong 3QFY20 results.

HDFC reported strong profitability higher than market estimates with stable loan growth and improvement in margins sequentially. PAT grew 3x YoY (1x QoQ) led by treasury gain on stake sale in Gruh. The Non-Individual book growth improved a bit to 6% vs 4% (Q2FY20), while Individual book grew ~16%. Despite the challenges in its core housing finance business, HDFC is able to garner its individual book and maintain asset quality at decent levels. We expect the same trend to continue and return ratios to improve once normalcy returns within the sector. Hence, we give ACCUMULATE rating on the stock with a SOTP based TP of Rs2,625 valuing parent business at Rs1,409 (3.1x...

Sonata's platformation strategy to provide IT services around IPs is yielding results. Growth in IP-led revenues is improving employee productivity and aiding margin expansion. Sonata is expanding Microsoft D365 platform and IP-led related services to new clients across verticals and geographies, which will drive growth. We like Sonata's IP-focussed business model, high RoE (~35%) and dividend yield of ~5%. The stock trades at a P/E of 11.0x FY21E, which is at 20% discount to Tier-2 IT median valuations. We expect IITS' USD revenue to grow 11.8/11.5% with margin of 23.3/23.7% in FY21/22E. Risks include deceleration in top-account, delay in collections and slowdown in US/Europe. We maintain BUY on Sonata based on strong performance in 3QFY20. IP-led strategy, strong Microsoft partnership and expansion of Microsoft D365 offerings is driving growth and aiding margin expansion in IT services business. DPS growth momentum will continue led by Microsoft and there is scope for margin expansion. We upgrade our FY22E Rev/EPS estimate by 6.1/5.1%. Our TP of Rs 422 is based on 12x (~4% premium to 5Y avg.) Dec-21E EPS.

Our estimates remain largely unchanged, even after DCBB's soft performance over 3QFY20. We model a considerable improvement in credit growth and operating efficiency beyond FY20E. These reflect our confidence in the bank's calibrated approach to growth. We expect oplev to be the biggest driver of return ratio improvement. DCBB stands to gain from an uptick in economic activity and a sustained downturn will pose a significant risk to our estimates. DCBB reported an in-line qtr and overall performance was lackluster (asset quality deterioration and slowing growth). Better cost control and a slight margin uptick were positives. MAINTAIN BUY with a TP of Rs 249.

Favourable structural changes at ICICIBC continue (better quality corporate underwriting, balance sheet retailisation and P&L fortification). While the pace of asset quality improvement may slow in the near term, as with some of its peers, the broader trajectory remains unchanged. Improving asset quality, moderating LLPs and better growth trends underpin our stance. A sustained improvement could trigger further re-rating. ICICBC reported an inline qtr across all parameters. PAT jumped on a/c of lower provisions. Reported asset quality improved slightly, as a result of higher recoveries, even as slippages saw a rise. The 8% QoQ rise in exposure to BB and below rated a/cs was not too surprising. Maintain BUY with an SoTP of Rs 587 (2.2x Dec-21E core ABV of Rs 202 and sub-value of Rs 142).

27 January 2020 Torrent Pharma (TRP) has exhibited a robust 23% CAGR (FY14-19) in domestic formulation (DF) sales, executing well both organically and inorganically. However, this benefit is getting offset to some extent by the ongoing regulatory issues at its Dahej/Indrad sites for the US generics business. We maintain our EPS estimate for FY20/21/22 to factor in better operating leverage in DF and increased market share in US generics. Maintain Neutral given the limited upside from current levels. India business (INR8.7b) grew by a moderate 4.3% (partly due to a high base of past year). Adjusting for one-offs due to the integration of TRP and Unichems stockists, India business growth stands at 8.5% YoY. Brazil business was up 12.5% YoY at INR1.9b. US business was down 22% YoY to INR3.

HDFC reported another quarter of consistent performance with healthy AUM growth of ~14% YoY, stable spreads of ~2.3% and largely flat GS3% of 1.6%. While NII grew 11% YoY, lower assignment income (INR1.7b v/s INR2.6b YoY), higher opex (+14% YoY) and provisions led to flat core PBT. We expect core RoAA of 1.9% and RoE Note that retail lending growth has remained healthy at 16- 18% with stable individual spreads of ~1.9% since the IL&FS; crisis. Over the past four quarters, HDFC has maintained steady retail loan growth of 16-17% YoY while curtailing wholesale disbursements the share of wholesale loans in overall AUM is down 200bp to 24%. We expect the company to largely maintain spreads as the cuts in home loan rates are offset by declining cost of funds and opportunistic non-individual loan growth. HDFC will continue to effectively We keep our earnings estimates largely unchanged and expect the company to report core PBT CAGR of ~10% over FY20-23.

27 January 2020 The renewed strategy in the US, the enhanced focus on branded generics in emerging markets and the cost-control initiatives are promising steps that bolster DRRDs earnings prospects. We raise our EPS estimate by 7.3%/8.2%/9.2% for FY20/21/22 to factor in the better outlook in India/Russia, the higher gross margin and the scope of enhancing operating leverage. 3QFY20, driven by all business segments (except the US which grew moderately by 8% YoY to INR16b 36% of sales). Pharmaceutical Services and Active Ingredients (PSAI) segment (16% of sales) grew at 16% YoY to INR6.9b. India business (17% of sales) was up 13% YoY at INR7.6b, while Europe business (7% of sales) grew by 52% YoY. Emerging markets (21% of sales) was up 19% YoY to INR9.2b, led by CIS (+26% YoY) and Russia (+20% YoY). Gross margin expanded 20bp YoY (+260bp QoQ) to 54.1% on an improved product mix.

Demand recovery expected; FY21E to witness healthy pullback While demand for 9MFY20 has been subdued, increase in the launch of residential new projects, re-awarding of orders in Andhra Pradesh and green shoots in demand in certain key states suggest demand picking up pace. Furthermore, announcement of the NIP and focus on roads, housing, irrigation projects, etc, should augur well for cement demand in coming years. UltraTech is well placed to leverage upon the additional demand owing to its pan-India presence. While FY20E is expected to end with...

APL Apollo Tubes (APL) results were broadly in line with our expectations. Net sales increased 25.8% YoY to Rs20 bn mainly led by strong volume growth (+52.6% YoY to 0.5 mn tonnes) partially offset by lower realization (-17.5% YoY to Rs42,489/tonne) due to lower steel prices. EBITDA jumped 171% YoY to Rs1.6 bn as EBITDA/ tonne improved 77.6% YoY to Rs3,342. Net profit jumped nearly 4.7x YoY to Rs742 mn. The company...

After a disappointing H1FY20, particularly on margins front, Supreme Industries Ltd.'s (SIL) Q3FY20 result was a positive surprise. The company's reported Net sales was in line with our estimate, however, EBITDA and PAT were substantially above led by higher share of value added products in total sales. Though NSR for piping and consumer products is still a laggard compared to Q2FY20 as well as Q3FY19, packaging and industrial products segments have done phenomenally well. SIL reported Net sales at Rs13.7bn (+8.1% QoQ/-2.6% YoY). Raw material prices softened in Q3 and aided EBITDA, which came in at Rs2.2bn (+27.85 QoQ/ +25.8% YoY). PAT stood at Rs1.2bn (4.6% QoQ/ +52.4% YoY). The management has revised its EBITDA margin guidance...

Driven by lower fuel cost, UltraTech (UTCEM) adjusted EBITDA came 8% higher than our estimate. Adjusted EBITDA/t of Rs1053 was largely flat QoQ, despite challenging environment on demand and prices in Q3FY20. We expect improvement in EBITDA/t in Q4FY20 as UTCEM has seen improvement in demand, uptick in cement prices in Jan 2020 and fuel costs remained benign. Balance sheet deleveraging has continued with reduction in net debt by Rs20bn QoQ in Q3FY20 to Rs186bn (net DER at 0.5x and net Debt/EBITDA at 1.9x). For further reduction in debt, UTCEM has appointed merchant bankers for the sale of non-core assets in China. Divestment of the European asset is also progressing well and the deal is expected to close by June this year. UTCEM has...

ICICI Bank (IBL) reported its 3QFY20 results with the key pointers being: (1) Domestic credit growth remains healthy (2) Majority of corporate slippages from two accounts (3) Retail slippages inch up due to KCC; CV looking stressed (4) FY20 credit costs to be higher due to lack of recoveries (5) NIM on a structural uptrend (See comprehensive conference call takeaways on page 3 for significant incremental colour). Per se, on the key P&L; items, IBL posted NII growth of 24% YoY at Rs85,453mn, PPOP growth of 23% YoY at Rs75,486mn and PAT growth of 158% YoY at Rs41,465mn. We have revised our estimates for FY20/FY21/FY22 and retained Buy rating on IBL, revising our target price to Rs625 (from Rs605 earlier), valuing the stock at 2.1xH1FY22E...

We reiterate BUY on UTCEM with a higher TP of Rs 5,600 (15x its Sep-21E EBITDA, implying EV of USD 220/MT). In our view, UTCEM deserves premium valuations for its capacity & cost leadership and balance sheet discipline. The stock currently trades at 13.3x/11.9x FY21/22E consol EBITDA and at an EV of USD 192/179 per MT. We reiterate BUY on UTCEM with a TP of Rs 5,600 (15x its Sep-21E EBITDA, implying EV of USD 220/MT).

Loan growth in chosen business segments (Retail, Business Banking & SME) remained buoyant, while deposits growth moderated in the quarter. Slippages adjusted for the two corporate accounts were on track, while retail slippages rose due to seasonal weakness in agri segment. We expect the operating performance to remain healthy, while high PCR and limited exposure to stress names will keep credit cost under control. Maintain Buy. PAT increased 158% YoY to INR41.5b (5% beat), led by strong NII and lower provisions. NII was up 24% YoY to INR85.5b (3% beat), led by ~13% YoY loan growth and 13bp QoQ margin expansion (10bp benefit due to interest recoveries from steel account). Other income was up 18% YoY, led by core fee income growth of ~17% YoY YoY at INR5.3b. Opex increased 21% YoY to INR55.7b (in-line), resulting in PPoP growth of 23% YoY to INR75.5b (6% beat). Core PPoP was up 24% YoY.

ICICI Bank's (ICICIBC) Q3FY20 PAT at Rs 41bn was driven by 24% YoY growth in NII and lower provisions.

During FY17-19, Radico enjoyed an earnings upcycle which has moderated in 9MFY20. However, co's focus on investing in new launches, driving premiumisation and deleveraging B/S has kept the growth momentum steady. Robust cash flow generation over the last 2 years (Rs 5bn cumulative FCF) was redeployed to repay debt (Rs 3.6bn in Dec-19 as compared to Rs 7.9bn in Mar-17). We expect deleveraging to sustain, making the co debt free by FY22. Healthy cash flow and deleveraging will re-rate the stock. Radico Khaitan saw a blockbuster performance in 3Q with P&A; saw 21% volume growth (beating estimates). Liquor industry facing multiple headwinds (slowdown, flooding, liquidity stress and policy changes) in 9MFY20, despite, Radico posted 16% P&A; volume growth to 5.5mn cases. Ease in RM inflation and sustaining healthy volume should re-rate the stock. We value Radico at 22x (45% discount to UNSP) on Dec-21 EPS, arriving at a TP of Rs 527. Maintain BUY.

We are concerned about the loss of investor confidence which debt schemes face given significant write-downs/offs on exposures to stressed corporates. While we are hopeful of the market share re-gain, we believe the recovery will take longer than street expectations. Lastly despite our positive bias towards Nippon Life as sole promoter, increased credibility to raise HNI/institutional capital, and valuation discount (26.8% on FY21E P/E) to HDFCAMC, we retain NEUTRAL with an unchanged TP of Rs 321 (30x Dec-21E NOLPAT + cash). NAM printed a broadly in-line 3QFY20, with core operating profits of Rs 1.36bn (+24.7/0.2% YoY/QoQ, 2.3% miss). Higher other income (79.7% beat!) drove profitability to Rs 1.49bn (+36.3/21.7% YoY/QoQ, 13.8% beat).