Diwali

Picks
2022
Sharekhan Diwali Picks - Consistent track record 0

Return (%)
Year Diwali Picks vs. Diwali Picks vs.
Diwali Picks Nifty CNX Midcap
Nifty CNX Midcap
2015 18 8.2 20.1

2016 38 14.7 15.8

2017 4 3 -11

2018 8 10 -5.7

2019 6.5 2.9 8.4

2020 72.7 56.5 85.5

2021 3.6 -6.5 -2.3

- Outperformance
- Underperformance
 Sharekhan Diwali Picks 2022 (Samvat 2079) 0

Samvat 2078 has not been kind to investors and it seems like a roller-coaster ride. So, it’s no surprise that it has been one of the
toughest and most volatile on record. There are many factors that have attributed to the volatility, such as a higher global inflationary
environment, geopolitical tensions, liquidity tightening by central banks and the consequent slowing down in all major economies
globally.
In that context, our Diwali Picks 2021 basket, which was a mix of both large-caps and mid-caps, once again convincingly outperformed
the CNX Nifty index and CNX Midcap index with a 3.6% return versus a -6.5% return in the Nifty and -2.3% return in the midcap index.
Over the past seven years, our Diwali Picks have outperformed the Nifty for six out of the seven years, which is quite a feat.
Stepping into Samvat 2079, there is certainly the potential for more volatility in the near term given global uncertainties. Nevertheless,
Indian equities offer an attractive opportunity for investors on the back of growing conviction on a multi-year economic upcycle in India.
Corporate earnings are also likely to sustain the healthy momentum seen in the past eight consecutive quarters. Despite the potential
global slowdown, Nifty earnings are estimated to clock a decent 15% CAGR over FY22-FY24E, while an over 20% earnings growth is
expected in BSE 200 over the same period.
This year, we have handpicked a balanced portfolio of 15 high-quality stocks largely based on the theme of leveraging on domestic
upcycle and consumption play.
We remain constructive on equity as an asset class and more so on the India growth story. We advise investors use the market volatility
to construct a quality portfolio for long-term wealth creation.
Successful investing is all about time, discipline and patience – Warren Buffet
Wish you a Very Happy Diwali and a Prosperous New Year!
APL Apollo Bajaj Bank of
Coforge
Tubes Finance Diwali 2022 Baroda
Samvat 2079

Devyani Eicher Greaves Hindustan ICICI

International Motors Cotton Aeronautics Bank

Kirloskar Mahindra Sun

ITC L&T Titan
Oil CIE Pharma
 Sharekhan Diwali Picks 2022 (Samvat 2079) 0

EPS/BV (Rs.) PER/PBV (x) RoE(%)

Company CMP (Rs.)
FY23E FY24E FY23E FY24E FY23E FY24E
APL Apollo 1,099 37.5 24.8 35.9 28.7 29.7 29.1
Bajaj Finance 7,223 885.0 1,087.0 8.2 6.6 22.6 23.0
Bank of Baroda 133 167.0 188.0 0.8 0.7 11.1 11.4
Coforge 3,600 132.0 162.7 27.3 22.1 26.4 27.3
Devyani International 193 3.0 4.0 64.1 48.2 40.4 36.6
Eicher Motors 3,456 104.4 135.1 33.1 25.6 20.6 22.0
Greaves Cotton 151 3.3 6.6 45.3 22.8 5.8 11.2
Hindustan Aeronautics 2,360 121.9 136.3 19.4 17.3 19.7 19.3
ICICI Bank 868 284.0 331.0 2.4 2.0 14.7 15.4
ITC 330 14.6 16.8 22.6 19.6 28.3 30.8
Kirloskar Oil 284 14.1 17.4 20.1 16.3 9.7 10.9
L&T 1,911 74.5 92.5 25.7 20.7 12.5 14.7
Mahindra CIE 304 17.9 22.9 17.0 13.3 12.0 13.5
Sun Pharma 956 36.0 42.7 26.6 22.4 15.4 15.6
Titan 2,619 35.9 45.3 73.0 57.8 30.0 29.4
Note – BV and PV figures are for banks and financial services companies CMP is as on October 12, 2022
Source: Sharekhan Estimates
 APL Apollo Tubes Industry: Building Materials
CMP: Rs. 1,099
0
• APL Apollo Tubes (APL) is India’s largest structural tubes manufacturer with a 55% market share. The company has 11
manufacturing plants with a capacity of 2.6 million tonnes, distribution network of 800 and 1,00,000 retailers & fabricators. 3R MATRIX
• APL is well-placed to further gain market share led by capacity expansion to 4 mtpa in phases, increase in penetration with
innovative product launches (for hospitals & hotels) and volume shift to primary structured steel market from the secondary + = -
market. This would help sustain high-volume growth, and we expect a 28% volume CAGR over FY22-FY25E. New capacity RS 
would improve VAP mix to 70-75%.
RQ 
• Merger of Apollo Tricoat would be margin, earnings and RoE accretive for APL and would improve quality of earnings with an
increase in share of value-added products (to drive margin expansion) and provides synergies across cost, products, and RV 
branding.
• Robust growth outlook (expect PAT to register 33% CAGR over FY22-FY25E), high RoE of 30-31%, strong balance sheet and Stock data
superior business model (high market share and launch of innovative products) makes us constructive on APL.
Market Cap (Rs. cr) 27,501
Key risks: Lower demand from construction and infrastructure projects and a substantial rise in steel prices could hurt earnings
outlook. Any rise in competition could affect volume growth. 52-wk High-Low (Rs.) 1,177/750

NSE Volumes 4.49 lakh

Valuation summary Rs. crore
BSE code: 533758
Particulars FY21 FY22 FY23E FY24E
Revenue 8,500 13,063 16,093 19,242 NSE code: APLAPOLLO
EBITDA margin (%) 8.0 7.2 8.0 8.2
Promoter’s share (%) 34.5
Adjusted PAT 360 557 766 956
Adjusted EPS (Rs.) 40.7 54.7 37.5 24.8
P/E (x) 76.3 49.3 35.9 28.7
Stock Performance
P/B (x) 16.2 12.1 9.5 7.5 (%) 6M 12M
EV/EBIDTA (x) 40.6 29.3 21.5 17.0
Absolute 4 29
RoNW (%) 23.6 28.2 29.7 29.1
RoCE (%) 25.4 30.8 34.5 36.3 Relative to Sensex 5 34
Source: Sharekhan Estimates
 Industry: NBFC
Bajaj Finance CMP: Rs. 7,223
0
• Bajaj Finance (BAF) has entered FY2023 on a strong note as seen in its Q1FY23 numbers. A large franchise of 60.3 million
3R MATRIX
customers, healthy momentum in customer acquisition and strong cross-selling ability (34.7 million) would support business
growth. BAF expects to double its AUM by FY2025
+ = -
• Asset quality is among best in industry with GNPA of 1.25%, NNPA of 0.6% and gross stage-2 assets at 1.8% (>60-90 days RS 
overdue). Pandemic-led stress has mostly been factored into credit costs. BAF continues to hold contingent provisions, which
RQ 
account for 0.5% of AUM.
RV 
• We believe the company is poised to deliver superior profitability with a PAT CAGR of 40% over FY22-24E and sector-leading
ROA/ ROE of 4.8%/ 23% in FY24E. Its omni channel strategy and diverse product offerings would lead to strong AUM growth
and superior asset quality with robust risk framework in turn lower credit cost is likely to bode well for earnings compounding Stock data
ahead. Market Cap (Rs. cr) 4,37,302
• Key risks: Economic slowdown led by slower AUM growth and higher-than-anticipated credit cost could affect earnings. 52-wk High-Low (Rs.) 8,044/5,236

NSE Volumes 12.97 lakh

Valuation summary Rs. crore
BSE code: 500034
Particulars FY21 FY22 FY23E FY24E
NII 13,889 17,522 22,847 28,155 NSE code: BAJFINANCE
PAT 4,420.0 7,028.0 11,015.0 13,835.0 Promoter’s share (%) 55.9
% y-o-y growth -16.3 59.0 61.9 18.8
EPS (Rs.) 72.9 115.6 181.2 227.6
P/E (x) 99.1 62.5 38.6 32.5
Stock Performance
P/B (x) 12.0 10.1 8.2 6.6 (%) 6M 12M
BVPS (Rs/share) 604 714 885 1,087
Absolute (1.6) (7.6)
RoAE (%) 12.8 17.4 22.6 23.0
RoAA (%) 2.6 3.7 4.7 4.8 Relative to Sensex 0.7 (3.4)
Source: Sharekhan Estimates
 Bank of Baroda (BoB) Industry: Banks
CMP: Rs. 133
0
• We believe valuations are reasonable for BoB compared to return ratio, as Bank is likely to deliver strong earnings growth and
higher ROA led by margin improvement & lower credit cost (RoA from 0.6% in FY22 to 0.8%/0.9% inFY23E/34E).
3R MATRIX

• Lower slippages are expected to sustain over the medium term because of improvement in corporate credit cycle. Moreover, + = -
trailing loan growth in riskier segments was muted due to the pandemic.
RS 
• Thus, NPA formation should moderate further. NNPA at 1.58%, a multi-year low.
RQ 
• A combination of the above factors, along with improving loan growth and margin trajectory, should bode well for good RV 
compounding in earnings going ahead.
• Key risks: Economic slowdown due to which slower loan growth and higher-than-anticipated credit cost, especially from Stock data
corporate and SME book, could affect earnings.
Market Cap (Rs. cr) 68,753

52-wk High-Low (Rs.) 143/77

Valuation summary Rs. crore
NSE Volumes 269.5 lakh
Particulars FY21 FY22 FY23E FY24E
BSE code: 532132
NII 28,809 32,621 38,713 43,126
PAT 829 7,272 10,177 11,710 NSE code: BANKBARODA
% y-o-y growth 35.6 777.3 39.9 15.1 Promoter’s share (%) 64.0
EPS (Rs.) 1.8 14.1 19.7 22.6
P/E (x) 74.7 9.5 6.8 5.9 Stock Performance
P/B (x) 1.1 0.9 0.8 0.7
BVPS (Rs/share) 117 148 167 188 (%) 6M 12M
RoAE (%) 1.1 8.9 11.1 11.4 Absolute 10.8 51.1
RoAA (%) 0.1 0.6 0.8 0.8
Relative to Sensex 13.1 55.3
Source: Sharekhan Estimates
 Industry: IT & ITeS
Coforge Ltd CMP: Rs. 3,600
0
• Coforge (earlier known as NIIT Technologies) is one of the leading mid-sized Indian IT services companies, engaged in
providing services in Cloud, managed services, data & analytics, automation, application development & maintenance and 3R MATRIX
Business Process Management.
• Coforge’s deep-domain expertise in select industry verticals and sub-verticals with heavy investments on technology, + = -
proprietary products and resources, position it to participate in customers’ transformation journey. RS 
• The company was able to win large deals in each quarter over the past five quarters. The company won two large deals RQ 
(including a $50 mn+ deal from the BFS vertical and another one from the travel vertical) during the quarter, given its
continued focus on driving the velocity of large deals. RV 
• Coforge is well-poised to achieve its strong revenue growth guidance in FY2023E on the back strong order intake, recovery in
travel industry, continued growth momentum in BFS vertical, new logo addition, investments in leadership team and strong Stock data
execution
Market Cap (Rs. cr) 21,924
Key risks: Rupee appreciation and/or adverse cross-currency movements and/or constraint in local talent supply in the US would
affect earnings. Further, macro headwinds and possible recession in the US are likely to moderate the pace of technology spending. 52-wk High-Low (Rs.) 6,133/3,210

NSE Volumes 4.3 lakh

Valuation summary Rs. crore
Particulars FY21 FY22 FY23E FY24E BSE code: 532541
Revenue 4,662.8 6,432.0 7,936.9 9,126.8 NSE code: COFORGE
EBITDA Margin (%) 16.9 17.3 17.6 17.9
Promoter’s share (%) 40
Adjusted PAT 473.5 661.7 801.7 989.6
Adjusted EPS (Rs.) 74.7 109.0 132.0 162.7
P/E (x) 50.0 34.2 27.3 22.1 Stock Performance
P/B (x) 9.2 8.3 6.8 5.8 (%) 6M 12M
EV/EBIDTA (x) 27.8 20.4 16 13.3
Absolute -13.5 -32.6
RoNW (%) 19.5 25.5 26.4 27.3
RoCE (%) 22.7 27.3 26.9 27.6 Relative to Sensex -11.5 -26.6
Source: Sharekhan Estimates
 Devyani International Industry: Consumer Discretionary
CMP: Rs. 193
0
• Devyani International (DIL) is multi-dimensional quick service restaurant (QSR) player with a strong portfolio of global brands
(including KFC, Pizza Hut and Costa Coffee). Improving footfalls, a large shift to branded products, strong expansion plan of 3R MATRIX
250-300 stores per annum and expansion of digital reach will help revenues clock a 43.1% CAGR over FY2022-24.
• Exit from loss-making stores, improving unit-level profitability, cross-branding and a rise in transactions through value
+ = -
proposition will help DIL consistently improve EBIDTA margins that are likely to increase to ~24% by FY24 from ~17% in FY20. RS 
• DIL repaid Rs. 305 crore of debt on books through IPO proceeds and strengthened its balance sheet. Strong operational show RQ 
and efficient capital allocation with reduction in store size for core brands would help company to generate strong free cash RV
flows in the coming years (cumulative FCF of Rs. 350 crore over FY21-24). ROCE of the company is expected to improve to 
27.4% in FY2024 from 3.9% in FY2021.
Stock data
• Stock trades at 30.1x/21.9x its FY2023E/24E EV/EBITDA. Riding on strong brand equity and a wide presence, DIL hopes to
outpace the industry in the medium to long run.
Market Cap (Rs. cr) 23,300
Key risks: Any slowdown in store additions, heightened completion from close peers or sustained high inflation would act as a
risk to revenues and profitability in the medium term. 52-wk High-Low (Rs.) 215/112

Valuation summary Rs. crore NSE Volumes 30.8 lakh

BSE code: 543330

Particulars FY21 FY22 FY23E FY24E
Revenue 1,135 2,084 3,269 4,267 NSE code: DEVYANI
EBITDA margin (%) 20.0 22.8 23.4 24.0
Promoter’s share (%) 62.8
Adjusted PAT -90 172 348 463
Adjusted EPS (Rs.) -0.8 1.5 3.0 4.0
P/E (x) - - 64.1 48.2 Stock Performance
P/B (x) 19.6 3.4 2.3 1.6 (%) 6M 12M
EV/EBIDTA (x) 99.2 49.2 30.1 21.9
Absolute 14.5 69.8
RoNW (%) - 43.1 40.4 36.6
RoCE (%) 3.9 15.4 24.0 27.4 Relative to Sensex 16.3 74.2
Source: Sharekhan Estimates
 Eicher Motors Ltd (EML) Industry: Automobiles
CMP: Rs. 3,456
0
• Promising launch of Hunter 350, focus on core brands through refreshed launches, better customisation, robust export
opportunities and expected recovery in premiumisation trend in two-wheeler industry would widen Eicher Motor Ltd’s 3R MATRIX
(EML’s) addressable market and boost performance going forward.
• EML would also benefit from a multi-year upcycle in the CV industry by targeting niche markets, strong product portfolio and + = -
increasing role of digitalisation and technology for fleet owners.
RS 
• Standalone Q2FY23 results are expected to remain firm and EBITDA to growth by 8.8% q-o-q, led by 11% volume growth,
RQ 
operating leverage benefits, partially offset by unfavorable mix (higher share of Hunter 350 and lower share of exports). PAT is
expected at RV 
Rs. 636 crore, implicating a growth of 9.7% q-o-q and 85.4% y-o-y.
• Consolidated earnings would clock a robust 48.3% CAGR over FY22-24E, driven by a 28.7% domestic revenue CAGR, 32%
export revenue CAGR and a 410 bps rise in EBITDA margins from 21.1% in FY2022 to 25.2% in FY2024E. We remain positive on
Stock data
the EML’s growth prospects and reiterate our Buy rating. Stock trades at 25.6x P/E and 22.4x EV/EBITDA its FY24E estimates.
Market Cap (Rs. cr) 94,497
Key risks: Failure of new launches due to competition may drag down Royal Enfield’s market share and adversely affect our
future projections. Aggravation of chip shortage can also affect our estimates. 52-wk High-Low (Rs.) 3,800/2,110

NSE Volumes 8.26 lakh

Valuation summary Rs. crore
BSE code: 505200
Particulars FY21 FY22 FY23E FY24E
Revenue 8,720 10,298 14,068 16,582 NSE code: EICHERMOT
EBITDA margin (%) 20.4 21.1 24.6 25.2
Promoter’s share (%) 49.2
Adjusted PAT 1,347 1,677 2,850 3,689
Adjusted EPS (Rs.) 49.3 61.4 104.4 135.1
P/E (x) 70.0 56.3 33.1 25.6
Stock Performance
P/B (x) 8.2 7.5 6.3 5.1 (%) 6M 12M
EV/EBIDTA (x) 52.5 43.0 27.0 22.4
Absolute 37.2 19.0
RoNW (%) 13.7 13.9 20.6 22.0
RoCE (%) 13.8 14.1 20.7 22.1 Relative to Sensex 39.0 23.4
Source: Sharekhan Estimates
 Industry: Automobiles
Greaves Cotton CMP: Rs. 151
0
• Greaves Cotton (Greaves) is set to be a great beneficiary of faster EV adoption in India, led by its timely investments in the EV
segment, compassionate investors and capabilities to increase market share in a highly competitive market. 3R MATRIX
• Investment of $150 million in the company’s electric vehicle (EV) arm, GEML, by Abdul Latif Jameel, would provide the
necessary funds to expand business and brand value at the right time, when the EV industry is at the verge of an inflection + = -
point for growth. The company has consolidated net cash of Rs 1,350 crore (Rs 56/share), which will be utilised for new RS
product and technology (~35%), new opportunities (~25%), capacity expansion (~20%) and brand building (10%). 
RQ 
• Under its refocus strategy, the company has transformed businesses to expand its markets from three-wheeler diesel engines
to last-mile mobility, move beyond one product/application/fuel with a focus on clean technology, increase value to RV 
customers through B2C, expand products to solutions, and leverage the company’s brand and penetration. This has led to
profitable growth-led business model.
Stock data
• Greaves is expected to deliver a 22.3% revenue CAGR during FY2021-FY2024E and see a sharp rise in margins, leading to an
earnings CAGR of 113.8%. Stock trades at a valuation of P/E multiple of 22.8x and EV/EBITDA multiple of 10.4x its FY2024E Market Cap (Rs. cr) 3,491
estimates
Key risks: Significant rise in competition in EV space could impact on profitability and may lead to longer payback period. 52-wk High-Low (Rs.) 259/129

Valuation summary Rs. crore NSE Volumes 22.5 lakh

Particulars FY21 FY22 FY23E FY24E BSE code: 501455

Revenue 1,500 1,710 2,223 2,745 NSE code: GREAVESCOT
EBITDA margin (%) 5.3 1.6 6.5 9.1
Promoter’s share (%) 55.5
Adjusted PAT 16 -32 77 153
Adjusted EPS (Rs.) 0.7 -1.5 3.3 6.6
P/E (x) 222.7 - 45.3 22.8 Stock Performance
P/B (x) 5.6 5.9 2.6 2.6
(%) 6M 12M
EV/EBIDTA (x) 41.1 120.2 18.1 10.4
Absolute -25.0 4.5
RoNW (%) 2.5 - 5.8 11.2
RoCE (%) 3.8 - 7.6 14.2 Relative to Sensex -23.2 8.9
Source: Sharekhan Estimates
 Hindustan Aeronautics Ltd (HAL) Industry: Capital Goods
CMP: Rs. 2,360
0
• We have a positive view on Hindustan Aeronautics Limited (HAL) as we believe it’s a good bet on India’s defence reforms, given its
robust order book of Rs 84,800 crore and order pipeline of over Rs. 1 lakh crore in the next 3-4 years. 3R MATRIX

• HAL would hold the key in structural transformation of India’s defence sector that eyes a production target of $25 billion by 2025 + = -
through indigenization and higher exports under ‘Make in India’. RS 
• HAL’s execution would ramp up, once large orders like LCA (Mk1A) kick in. Similarly, better operational efficiencies would drive RQ 
OPM. Further, HAL is focused on growing exports to diversify its revenue base. RV 
• HAL has strong government support, proven execution capabilities, capacity expansion, improving working capital cycle and healthy
cash balance of ~Rs. 14,000 crore. It trades at ~17x FY24E EPS, lower than listed peers. Stock data
Key risks: Fluctuations in raw material prices and delay in availability of key components could impact execution. Opening up of Market Cap (Rs. cr) 78,916
defence sector to private players may intensify competition going forward.
52-wk High-Low (Rs.) 2,638/1,181

NSE Volumes 10.6 lakh

Valuation summary Rs. crore
FY21 FY22 FY23E FY24E BSE code: 513375
Particulars
Revenue 22,882 24,620 26,574 28,779 NSE code: HAL
EBITDA margin (%) 23.4 22.0 22.9 23.5 Promoter’s share (%) 75.2
Adjusted PAT 3,245 3,325 4,076 4,558
Adjusted EPS (Rs.) 97.0 99.4 121.9 136.3
P/E (x) 24.3 23.7 19.4 17.3
Stock Performance
P/B (x) 5.1 4.1 3.6 3.1 (%) 6M 12M
EV/EBIDTA (x) 12.4 9.9 9.0 7.7
Absolute 41.2 94.7
RoNW (%) 22.6 19.1 19.7 19.3
RoCE (%) 29.5 27.4 25.1 24.8 Relative to Sensex 42.9 99.1
Source: Sharekhan Estimates
 ICICI Bank Industry: Banks
CMP: Rs. 868
0
• ICICI Bank is likely to deliver sustainable earnings growth over the medium term driven by strong loan growth, margin
3R MATRIX
expansion, credit cost moderation and healthy operating profitability aided by its strong liability franchise, higher capital
ratios, better asset quality metrics and healthy provision buffers.
+ = -
• We believe that the bank is best-placed to ride the next credit cycle with its best-in-class digital capabilities, a well-diversified
RS 
product/customer franchise and focus to grow business with calibrated risk and in granular manner.
RQ 
• The bank’s restructuring pool continue to see decline to 0.8% of the loans versus 1.0% in Q4FY22. Its contingent provision
RV 
buffer stands at ~0.95% of loans.
• The bank holds adequate contingent provisions and higher coverage on impaired loans, thereby indicating lower credit costs
Stock data
going forward.
Key risks: Economic slowdown due to which slower loan growth and higher-than-anticipated credit cost especially from BB and Market Cap (Rs. cr) 6,04,680
below-rated corporate portfolio and unsecured retail book could affect earnings. 52-wk High-Low (Rs.) 936/642

NSE Volumes 143 lakh

Valuation summary Rs. crore
Particulars FY21 FY22 FY23E FY24E BSE code: 532174
NII 38,989 47,466 57,014 68,441 NSE code: ICICIBANK
PAT 16,193 23,339 27,093 33,016
Promoter’s share (%) NIL
% y-o-y growth 104.2 44.1 16.1 21.9
EPS (Rs.) 23.7 33.0 39.0 47.5
P/E (x) 28.5 20.4 17.3 14.2 Stock Performance
P/B (x) 3.2 2.7 2.4 2.0 (%) 6M 12M
BVPS (Rs/share) 213 245 284 331
Absolute 14.2 21.7
RoAE (%) 12.3 14.7 14.7 15.4
RoAA (%) 1.4 1.8 1.8 1.9 Relative to Sensex 16.5 25.9
Source: Sharekhan Estimates
 ITC Industry: Consumer Goods
CMP: Rs. 330
0
• ITC’s ‘ITC-Next’ strategy seeks to leverage on strengths of power brands, create a future-ready portfolio, purposeful & agile
science-based innovation, accelerated investments in digitalisation & sustainability & value-accretive M&A will help ITC’s non- 3R MATRIX
cigarette FMCG business clock a CAGR of 17% over FY22-24. Increase in contribution of high margin products, premiumisation
and supply/operating efficiencies would help business OPM consistently improve from 9% currently.
+ = -
• Core cigarette sales volumes are expected to grow in low double digits. Improving mobility and no tax rate hike on cigarettes
in GST Council meet will help cigarette sales volume to grow at good pace. RS 
• It has a strong cash generation ability and has generated cumulative FCF of over Rs. 50,000 crore in the last five years. The RQ 
company had invested large part of these cash flows in improving the growth prospects of non-cigarette FMCG and hotel RV 
businesses. Further, the strong cash flow is also utilised for a health dividend payout which stood at 94% in FY2022 (dividend
yield of 3.5%).
• Stock trades at 22.6x and 19.6x its FY23 and FY24 EPS, a stark discount to some large consumer goods stocks. Consistent Stock data
earnings growth, strong dividend payout and sustained ESG rating besides potential value-unlocking in hotel/IT business will
reduce valuation gap going ahead. Market Cap (Rs. cr) 4,07,337
Key risks: Any hike in tax on cigarettes or government implementing policies to curb tobacco products consumption or any 52-wk High-Low (Rs.) 350/207
disruption in consumer demand due to frequent lockdowns would act as a key risk to our earnings estimates.
NSE Volumes 156.4 lakh
Valuation summary Rs. crore
BSE code: 500875
Particulars FY21 FY22 FY23E FY24E
NSE code: ITC
Revenues 48,525 59,746 69,125 76,128
OPM (%) 32.0 31.7 33.8 34.8 Promoter’s share (%) 0
Adjusted PAT 13,032 15,058 17,838 20,560
Adjusted EPS (Rs.) 10.7 12.3 14.6 16.8
P/E (x) 30.9 26.7 22.6 19.6
Stock Performance
P/B (x) 6.9 6.6 6.3 5.9 (%) 6M 12M
EV/EBIDTA (x) 24.5 20.1 16.1 14.2
RoNW (%) 21.2 25.0 28.3 30.8 Absolute 24.8 32.4
RoCE (%) 21.5 27.1 32.7 35.4 Relative to Sensex 26.6 36.8
Source: Sharekhan Estimates
 Kirloskar Oil Engines (KOEL) Industry: Capital Goods
CMP: Rs. 284
0
• KOEL has a robust demand outlook in power generation segment (demand from real estate and data centre) where the
company commands 30% market share, industrial, water management, and electric pumps. The company aims to gain market
3R MATRIX
share in all the product categories through new launches and deeper penetration into markets.
+ = -
• In addition, scaling up of farm mechanisation, expansion of product range (above 1500 KVA), implementation of CPCB IV+
norms, ramp up in exports, and growth in after sales services would fuel revenue growth and augment margin expansion. RS 
RQ 
• KOEL is well-poised to benefit from sector tailwinds such as PLI schemes, infrastructure spending by the government, and
power deficit. Hence, strong growth levers in the core business as well as subsidiaries give us confidence about its long-term RV 
prospects.
• Despite the recent run, the stock trades at a P/E of ~16x its FY2024E earnings, which is at a discount to its historical valuations Stock data
and peers. We have a Positive view on KOEL given multiple growth catalysts supported by stability at the top management.
Market Cap (Rs. cr) 4,107
Key risks: Slowdown in domestic and overseas macro environment can adversely affect business outlook and earnings growth.
Weak demand in global markets poses key downside risk to exports. 52-wk High-Low (Rs.) 291/124

Valuation summary Rs. crore NSE Volumes 4.7 lakh

Particulars FY21 FY22 FY23E FY24E BSE code: 533293

Revenues 2,694 3,300 3,814 4,339 NSE code: KIRLOSENG
OPM (%) 10.5 8.2 9.1 9.6
Promoter’s share (%) 59.4
Adjusted PAT 177 156 204 251
Adjusted EPS (Rs.) 12.3 10.8 14.1 17.4
P/E (x) 23.1 26.4 20.1 16.3 Stock Performance
P/B (x) 2.1 2.0 1.8 1.4
(%) 6M 12M
EV/EBIDTA (x) 14.3 14.8 11.3 9.4
RoNW (%) 9.4 7.9 9.7 10.9 Absolute 77.4 53.3
RoCE (%) 11.5 9.7 12.2 13.8 Relative to Sensex 79.0 57.7
Source: Sharekhan Estimates
 Industry: Capital Goods
Larsen & Toubro (L&T) CMP: Rs. 1,911
0
• The engineering conglomerate L&T is at the forefront to reap benefits from infrastructure spends by the government,
3R MATRIX
incentives for domestic manufacturing through PLI schemes and pick up in private capex. Middle East region’s hydrocarbon
and infrastructure capex spends too have increased due to a rise in crude oil prices.
+ = -
• Company has order prospects of ~Rs 8.53 trillion in the coming years. It has guided for order intake growth guidance of 12- RS 
15% for FY23E, OPM in projects to be at 9.5% and working capital at 20-22% of FY23E sales.
RQ 
• The company has chalked out a detailed five-year strategic plan ‘Lakshya 2026’ for pursuing profitable growth in its traditional
RV 
businesses of EPC projects and manufacturing, while expanding its IT&TS portfolio. Further, unlocking of its current
investments in few non-core areas would be pursued aggressively. The company aims to grow order inflows/revenue at
14%/15% CAGR and achieve core RoE at over 18% during FY21-FY26E. Stock data

• We are bullish on L&T given robust order book of Rs. 3.6 lakh crore (2.2x TTM revenue) and a promising long-term outlook. Market Cap (Rs. cr) 2,68,505
Key risks: Slowdown in the domestic macro-economic environment and geopolitical conflicts can affect order prospects. 52-wk High-Low (Rs.) 2,079/1,456

NSE Volumes 20.5 lakh

Valuation summary Rs. crore
Particulars FY21 FY22 FY23E FY24E BSE code: 500510
Revenues 1,35,979 1,56,521 1,80,607 2,05,892 NSE code: LT
OPM (%) 11.5 11.6 11.7 12.0
Promoter’s share (%) 0.0
Adjusted PAT 6,901 8,573 10,440 12,971
Adjusted EPS (Rs.) 49.2 61.2 74.5 92.5
P/E (x) 38.8 31.2 25.7 20.7 Stock Performance
P/B (x) 3.5 3.3 3.0 2.7 (%) 6M 12M
EV/EBIDTA (x) 18.1 16.2 13.3 11.1
Absolute 9.4 0.8
RoNW (%) 18.1 13.2 12.5 14.7
RoCE (%) 7.3 7.9 9.2 10.7 Relative to Sensex 11.0 5.3
Source: Sharekhan Estimates
 Industry: Automobiles
Mahindra CIE Automotive CMP: Rs. 304
0
• Mahindra CIE Automotive (MCIE) is expected to benefit from diversifying revenues in India and cost optimisation of Indian and
European businesses. Revenues are also well-spread globally with India fetching ~49% of revenues, while Europe fetches
3R MATRIX
~51%. Client concentration is also balanced, with the top five clients contributing to 22-30% of revenues.
+ = -
• The company’s focus on targeting new acquisitions to fill gaps in strategic technologies and expansion in global markets, and
its demonstrated ability to achieve profitable growth through mergers and acquisitions is a key differentiating factor. RS 
RQ 
• MCIE enjoys strategic importance in CIE’s (parent company’s) global operations as the auto component division for South
Asian and South-East Asian markets. The company is expected to benefit from the parent’s strong technological expertise and RV 
established relationships with the global OEMs. .
• MCIE’s earnings to clock a robust 48.6% CAGR during CY2021-CY2023E, driven by a 15.7% revenue CAGR and a 25.9% EBITDA Stock data
CAGR, driven by improvement in product mix, product, cost optimization and operating leverage benefits. Stock trades at
attractive valuations with a P/E multiple of 13.3x and EV/EBITDA multiple of 8.1x its CY2023E estimates. Market Cap (Rs. cr) 11,523

Key risks: The company has significant revenue exposure from Europe and thus is at the risk of regional economic situations. 52-wk High-Low (Rs.) 326/164

Valuation summary Rs. crore NSE Volumes 9.4 lakh

Particulars CY20 CY21 CY22E CY23E BSE code: 532756

Revenue 6,050 8,387 10,483 11,217 NSE code: MAHINDCIE
EBITDA margin (%) 8.3 12.0 12.6 14.2
Promoter’s share (%) 74.9
Adjusted PAT 107 393 678 868
Adjusted EPS (Rs.) 2.8 10.4 17.9 22.9
P/E (x) 108.1 29.3 17.0 13.3 Stock Performance
P/B (x) 2.3 2.2 1.9 1.7
(%) 6M 12M
EV/EBIDTA (x) 25.8 12.9 9.8 8.1
RoNW (%) 2.2 7.7 12.0 13.5 Absolute 56.6 22.1
RoCE (%) 2.3 6.5 10.1 12.1
Relative to Sensex 58.4 26.5
Source: Sharekhan Estimates
 Sun Pharma Industry: Pharmaceuticals
CMP: Rs. 956
0
• Sun Pharma’s US business is on the path to improvement, largely backed by marked growth in the specialty portfolio (30% US
biz revenues) due to growth in existing geographies as well as tapping new geographies and product portfolio 3R MATRIX
expansion/launches. The specialty revenue growth has been impressive at an average of ~ 30.0% YoY over the last four
quarters. + = -
• Strong product pipeline with further improve the growth prospects in the coming years. The company’s generic pipeline RS 
comprises of 89 ANDAs and 13 NDAs, awaiting approval as of Q1FY23. The company has four molecules in the specialty
RQ 
pipeline.
• Domestic formulations are on a strong footing as the chronic portfolio has reported healthy growth. The acute therapies
RV 
portfolio has also gathered traction and is expected to sustain the strong growth traction.
• Overall, Sun Pharma’s revenues/EBIDTA/PAT is expected to grow at CAGR of 12%/13%/14% over FY2022-24E. The stock Stock data
currently trades at decent valuations of 26.6x/22.4x its FY2023/24E.
Market Cap (Rs. cr) 2,26,383
Key Risks: 1) Regulatory compliance risks including delay in product approvals; 2) currency risks; and 3) delay in resolution of
USFDA observations at the Halol plant. 52-wk High-Low (Rs.) 968/734

NSE Volumes 30.2 lakh

Valuation summary Rs. crore
Particulars FY2021 FY2022 FY2023E FY2024E BSE code: 524715
Revenue 33,498 38,655 42,741 47,928 NSE code: SUNPHARMA
EBITDA Margin (%) 25.4 26.9 27.5 28.5
Promoter’s share (%) 54.5
Adj. PAT 6,801 7,840 8,629 10,249
Adj. EPS (Rs) 28.3 32.7 36.0 42.7
PER (x) 33.7 29.3 26.6 22.4 Stock Performance
P/BV (x) 4.9 4.8 4.1 3.5
(%) 6M 12M
EV/Ebidta (x) 26.8 21.7 17.3 14.1
RONW (%) 14.6 16.3 15.4 15.6 Absolute 2.1 13.4
ROCE (%) 12.7 17.3 16.6 17.1 Relative to Sensex 3.9 17.8
Source: Sharekhan Estimates
 Industry: Consumer Discretionary
Titan Company CMP: Rs. 2,619
0
• Titan is one of the top retailers with 2,178 stores across 2.8 mn sq.ft of retail space in discretionary categories such as jewellery,
watches and eyewear. The company has outlined ambitious growth outlook for the next five years with an aim of achieving 3R MATRIX
consistent double-digit growth (@CAGR of 20%) by strengthening core businesses and scaling-up new ventures with efficient capital
allocation.
+ = -
• Management aims to grow jewellery business by 2.5x by FY27, watches to reach Rs. 10,000 crore business by FY26, scale-up in
eyecare business while some of new ventures such as ethnic wear, bags and international business to cross Rs. 1,000 crore of RS 
revenues by FY27. RQ 
• Revenue mix in core jewellery business, improving profitability of eyecare business and scaling-up of some of the new high margin
ventures such as Taneira, women’s accessories and wearables would help in consistent improvement in margins in the coming years. RV 
• Company has strong cash kitty of over Rs. 2,000+crore. Internal accruals are sufficient of organic growth of 15-20% (75% of cashflows
will be invested in growth business, while 25% will be distributed to shareholders in the form of dividend). This will help the Stock data
company to maintain healthy return profile with RoE and RoCE are expected to improve to 29% and 37% by FY2024 from pre-COVID
levels of 23.8% and 30.6%, respectively. Market Cap (Rs. cr) 2,32,467
Key risks: Any disruption in recovery of the jewellery business due to spike in COVID-19 cases followed by frequent lockdowns would
act as a key risk to earnings estimates. 52-wk High-Low (Rs.) 2,768/1,827

NSE Volumes 14.6 lakh

Valuation summary Rs. crore
BSE code: 500114
Particulars FY21 FY22 FY23E FY24E
Revenue 21,644 28,799 38,375 44,193 NSE code: TITAN
EBITDA Margin (%) 8.0 11.6 12.4 13.4
Promoter’s share (%) 52.9
Adjusted PAT 984 2,238 3,183 4,023
Adjusted EPS (Rs.) 11.0 25.2 35.9 45.3
P/E (x) - - 73.0 57.8 Stock Performance
P/B (x) 31.0 25.0 19.4 15.1 (%) 6M 12M
EV/EBIDTA (x) - 69.8 49.1 39.3
Absolute 5.2 5.0
RoNW (%) 13.8 26.6 30.0 29.4
RoCE (%) 17.2 30.5 35.9 37.3 Relative to Sensex 7.0 9.4
Source: Sharekhan Estimates
The 3R Research Philosophy 0
Understanding the Sharekhan 3R Matrix
Right Sector
Strong industry fundamentals (favorable demand-supply scenario, consistent industry growth), increasing investments, higher entry barrier, and favorable
Positive
government policies

Neutral Stagnancy in the industry growth due to macro factors and lower incremental investments by Government/private companies

Unable to recover from low in the stable economic environment, adverse government policies affecting the business fundamentals and global challenges (currency
Negative
headwinds and unfavorable policies implemented by global industrial institutions) and any significant increase in commodity prices affecting profitability.
Right Quality
Sector leader, Strong management bandwidth, Strong financial track-record, Healthy Balance sheet/cash flows, differentiated product/service portfolio and Good
Positive
corporate governance.
Macro slowdown affecting near term growth profile, Untoward events such as natural calamities resulting in near term uncertainty, Company specific events such
Neutral
as factory shutdown, lack of positive triggers/events in near term, raw material price movement turning unfavourable
Weakening growth trend led by led by external/internal factors, reshuffling of key management personal, questionable corporate governance, high commodity
Negative
prices/weak realisation environment resulting in margin pressure and deteriorating balance sheet
Right Valuation
Strong earnings growth expectation and improving return ratios but valuations are trading at discount to industry leaders/historical average multiples, Expansion in
Positive
valuation multiple due to expected outperformance amongst its peers and Industry up-cycle with conducive business environment.

Neutral Trading at par to historical valuations and having limited scope of expansion in valuation multiples.

Trading at premium valuations but earnings outlook are weak; Emergence of roadblocks such as corporate governance issue, adverse government policies and bleak
Negative
global macro environment etc warranting for lower than historical valuation multiples.
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