We maintain our cautious stance on most large caps, given rich valuations. Remain constructive on Birla Corp and Sanghi Industries. Cement prices are largely flattish YoY, and declines are seasonal in nature. However, continued sand shortages in states which contribute ~20% of cement demand may weigh on the volumes of cement companies in 2QFY18. Any delay in restoration of pet-coke supplies from US Gulf Coast would weigh on cement stocks.

MRCO expects 79% volume growth in the coming quarters, despite nearterm disruptioninCSDandwholesalechannels.ThecompanyhascutpricesinHairoilby 5% and Saffola by 3% to pass on lower tax incidence post GST. MRCO is likely to reduce costs led by 1520% lower warehouses and efficiencies in distribution post GST;however,thesegainswouldstartaccruingafteracoupleofquarters.MRCOis unlikely to increase Parachute prices immediately as volume growth and channel stabilisation is a priority; this could impact margins in the near term. Bangladesh (45% of IBD) is likely to achieve doubledigit sales growth led by higher Parachute...

Given continued pricing pressure in the US generics business due to increased competitive intensity & customer consolidation and delay in Halol plant resolution restricting new launches, we change our rating to SELL' from BUY' with a revised target price of Rs 413 based on 20x FY19E PE. Slump in US sales dragged overall consolidated revenue by 25% YoY Sun Pharma Ltd reported 25% YoY decline in net revenue in Q1FY18 owing to 42% YoY decline in US sales owing to high competitive intensity in the generic drugs market. Moreover, high base last year also impacted the performance. Sales in Q1FY17 were higher due to benefits of 180-day...

2H BFS Strength Unlikely; Digital-Lack Of Articulation Not The Problem Three weeks after the departure of Dr. Vishal Sikka, interim CEO Mr. Pravin Rao addressed an investor event last week. While any announcements on a change of strategy or guidance will have to wait until 2QFY18 results, the meet did throw up possible risks to guidance. While over 4QFY17 and 1QFY18 analyst calls, Infosys had indicated that large BFS clients in US had not started spending in a material way, it had expressed hope that the same will happen by 2HFY18 (see US BFS Pick-up And Mediocre Large Deal TCV Are Pain Points). Mr Rao's statements at the meet indicate our doubts surrounding the same will likely come true. Revenue guidance of 6.5%8.5% in constant currency terms (7.1%-9.1% in USD terms) translates into a CQGR range of 2.0%3.25% for the next three quarters. We believe Infosys was hoping on some uptick in US BFS to...

D'Mart AGM reassured us on the management focus on brick and mortar retailing,calibratedapproachinstoreexpansionandstickingtoitscorestrategy. Although D'Mart is experimenting with online model (D'Mart Ready) and FMCG privatelabels,itisunlikelytosignificantlyincreaseresourceallocation.Webelieve intent to acquire more land bank in downturn for store expansion (Rs2.05bn in FY16 and Rs2.6bn in FY17) can impact return ratios in the near term. Although D'Martisindicating2025%storesinemergingclusters,alongtailwith14storesin 7newstatesin4yearscancurtailmarginexpansion(est40bpsoverFY1720)given...

In a recent notice (link), the Central Drugs Standard Control Organization (CDSCO) has directed various state drug controllers to ensure that the necessary BA (Bioavailability) and BE (Bioequivalence) studies are made available for any future non-patented drugs, which are to be approved for sale in the Indian market. The norms are not new, but what has been missing is the will to enforce the same, especially at the local/state FDA levels. What the CDSCO release intends is to ensure enforcement of the existing rules. The New Pharma Policy (see our note titled Draft Pharma Policy: Devil in the details dated Aug 17, 2017) highlights one of the key goals as harmonization of drug quality in...

Service delivery is moving towards as-a-service model less than 5% of the work includes traditional custom apps development; Worries on core processes being outsourced: is leading to insourcing and localization of tasks by clients

Nilekani's Second Innings Is A Positive But Raises Questions Too On 24 August 2017, one of the founders and ex-CEOs (2002-07), Mr. Nandan Nilekani, rejoined the Infosys board as a non-executive chairman (see Exhibit 1). While Infosys is better off from 18 August 2017 when its then CEO, Dr. Vishal Sikka, resigned amidst an ugly spat between the then board and Mr. Narayana Murthy, the largest founder -shareholder, it is not certainly better off from the time before that. We view the return of Mr. Nilekani as incrementally positive and thus remove the 5% discount on the target P/E multiple that we had accorded to the stock a week ago (see our report Sell Into Buyback Strength; Long-term Relevance In Question). However,...

NEST India analyst meet highlighted sustained focus to drive volume led double digit sales growth on the back of new innovations, distribution gains, increasing penetration and consumption frequency. NEST believes that most of its 43 innovations and renovations of past15months havebeen a success and account for 2.8% of sales (0.2% in 1H16). NEST is playing an urban centric niche product strategywhereithasarighttowin,giventhemarginfocusofthecompany.We notethatNEST'sgrowthisdrivenbyMaggiandchocolateswhileithaslostsharein mostothersegments.MilkProductsandnutrition(46%ofsales)willremainadrag...

4% CQGR In The Rest Of FY18 Looks Ambitious Mindtree's analyst meet of 21 August 2017 has not changed our negative view on the company. The meet gave perspectives on Mindtree 3.0 and the reasons that drove its recent big customer wins in both digital and traditional services. Most of what we heard on strategy at the meet is quite similar to what we have been hearing from other players in the market and therefore the approach is not differentiated enough (see our recent initiating coverage report Not Too Late To Sell: Market Is Giving It The Benefit Of Doubt). We continue to believe that its high single-digit revenue growth guidance in FY18...

Sell Into Buyback Strength; Long-term Relevance In Question The key question long-term investors need to ask about Infosys is whether Dr. Vishal Sikka's resignation is a setback to its plan to become a next generation IT services company which is so critical to creating value. We believe it is. We therefore maintain our Sell rating and cut our March 2018 target price on Infosys from Rs846 to Rs794 with downside risks. Downside risks will arise if there is loss of long-term relevance to customers. Global IT services industry has examples of leading players becoming either also-rans or disappearing completely as they could not make the relevant transition EDS, CSC, HP Global Services, etc. We believe the...

ICICI Securities Ltd | Retail Equity Research TTK Prestige announced the launch of leading UK brand JUDGE' kitchen appliances in India. The range of Judge appliances will offer affordable kitchen solutions across Tier 3, 4 and 5 cities in India. Products will be manufactured at the existing factories in India and be retailed at all retail formats, including traditional outlets, leading modern retail formats and ecommerce platforms. The brand would address the lower price point products, which would cater to a new segment of unorganised kitchen appliance market, which is estimated to be worth | 5000 crore....

Vinati Organics' (VOL) 1QFY18 net sales grew 13% to Rs1,844mn (our estimate Rs1,916mn) mainly on account of higher realisation. The slightly below par sales can mainly be attributed to low offtake of IBB (one among key products) by one of VOL's main clients. The client's plant was shut down for de-bottlenecking its capacity and it took more days than expected. Gross margin declined from 55.4% to 46.6%. The decline in margins can mainly be attributed to the change in product mix and increase in raw material costs because of the rise in crude oil prices. VOL's synthetic product for its US/Japan-based clients was launched in 1QFY17 on campaign basis. Sales of...

Cipla posted poor set of numbers for 1QFY2018. Sales came in at `3,432cr (`3,789cr expected) v/s. `3,566cr in 1QFY2017, a yoy de-growth of 3.5%, mainly driven by the dip in Indian formulation sales. Indian formulation sales registered (`1,271cr) a yoy dip of 12.9%, mainly on the back of GST implementation. On operating front, the EBITDA m..

Cadila Healthcare posted poor set of numbers for 1QFY2018. Sales came in at `2,136cr (`2,216cr expected) v/s. `2,500cr in 1QFY2017, a yoy de-growth of 3.6%, mainly driven by the dip in sales of Indian formulations. Indian formulation sales registered (`637cr) a yoy dip of 18.9%. Its key market USA registered (`965cr), 13.8% yoy growth. On..

SIL posted 7.4% YoY rise in Q1FY18 standalone revenue (increased post 6 consecutive quarters of de-growth) to `15.1bn (in line with estimates) primarily due to better execution in Power and Urban segments. EBITDA margin down 25bps YoY to 11.4% (in line with estimates), due to rise in construction cost which was partly offset by reduction in employee cost. PAT grew 67.0% YoY to `287mn (62.5% above estimates) due to lower tax rate of 21.1% in Q1FY18 vs. 37.7% in Q4FY17. We maintain Sell on the stock...

to Rs 631 mn due to higher depreciation and interest expenses and rupee appreciation impact of Rs 40mn to 50mn. Overall volumes in the specialty chemical segment grew at lower pace by 3% YoY in Q1FY18; Underlying this was the impact of a periodical shutdown in company's acid production facility Sector Outlook...

Q1FY18 standalone net sales came in at Rs 3.5 bn, up 3% YoY, (below estimate of 10% YoY) on destocking in the primary trade channel on transition to GST. TTK indicated sales in April and May cumulatively grew 12.5% YoY, while it de-grew in June by 11% YoY.

We believe that the stock has run ahead of fundamentals while outperforming its global peers. Further, the current stock price doesn't capture LME price risk, and also the overall cost is likely to head northwards. However, persistent and widening deficit in global markets (ex-China) on the back of strong demand growth and limited new supplies continues to deplete inventories and could aid a rally in aluminium prices thus posing a risk to our call. At CMP, the stock trades at 8xFY19E EV/EBITDA. We maintain our REDUCE recommendation on the stock with an...

Weak FSA and Eauction realisations drove the miss in overall realisations: Total volumes rose 3% YoY to 152m (PLe:152m) tonnes (t). FSA volumes fell 0.5%YoYat107m(PLe:104m)twhileEauctionvolumesrose33%YoYat27m (PLe:29m)t.Marredbysharpgradeslippage,FSArealisationsfell3%YoY(9% QoQ)atRs1,201(PLe:Rs1,310)negatingthetwopricehikesundertakeninlast oneyear.Eauctionrose1%YoY(2%QoQ)atRs1,586(PLe:Rs1,660).Washed coalrealisationsrose43%YoY(7%QoQ)toRs3,649(PLe:Rs3,900)ontheback of price hike in BCCL/CCL in Jan'17. Marred by lower than expected FSA/E...