NiveshDaily. From Research Desk. January 4, IndiaNivesh Research. News Updates. Company Updates. Monthly Auto Numbers December 2015

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1 NiveshDaily January 4, 2016 Daljeet S. Kohli Head of Research Tel: From Research Desk News Updates Ministry of Power released draft guidelines for awarding imported coal based UMPPs. Company Updates Coal India: Coal India's production and offtake rises by over 9% during April December 15, maintain buy with target price of Rs. 467 Monthly Auto Numbers December 2015 IndiaNivesh Research IndiaNivesh Securities Limited Research Analyst SEBI Registration. INH & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai Tel: (022) IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.

2 Daljeet S. Kohli Head of Research Tel: Abhishek Jain Research Analyst Tel: News Updates Ministry of Power released draft guidelines for awarding imported coalbased UMPPs. To revive the private sector s interest in power generation projects, the Ministry of Power released draft guidelines for awarding imported coal based Ultra Mega Power Projects (UMPPs). These norms are an amendment to norms published in To protect buyers from fluctuating coal prices, the draft bid document suggests blending domestic with imported coal. For this purpose, the central government would facilitate coal supply for five years. Like in the previous norms, the current norm also allows pass through of fuel cost subject to PPA provisions. However, the current norms have allowed for blending of domestic coal with imported coal subject to maximum of 30 percent. The domestic coal however will be arranged by discoms. The blending will happen in case of variation between domestic and imported coal is 10%. The UMPPs would be awarded under the plug and play model ; the government would facilitate land, environment clearances and evacuation. The discoms are required to obtain necessary clearances before the project is bid out. The discoms shall have two SPV s namely Infrastructure SPV for acquisition of land for power plant to be eased to successful bidder and Operation SPV to develop the project. The new norms have allowed projects to be bid out under BOO (Built, Own and Operate) model as against earlier norms that required projects to be bid out under DBFOT (Design, Built, Finance, Operate and Transfer).The developer would set up the project, arrange imported coal and sell power (build own operate). Like the previous norms, the BTG for the plant will be acquired from companies with domestic manufacturing capacity. All power companies are Open for comments till January 15 Our take To some extent current norms would address the concerns of developers and lenders pertaining to fuel risk as blending would help to reduce the cost( now power plants can blend domestic coal in case of imported coal cost goes up). Further it also helps to company in land acquisition to build the plant. Also BOO has ensured clarity on ownership to lenders. We believe these norms would be beneficial for power sector as a whole. However current issue related to Mundra UMPP of Tata Power and Adani power (facing issue of underrecovery due to increase in fuel cost and demanding tariff hike) need to be resolved on priority basis. Among power space we maintain Buy rating on Rpower, Tata Power, PGCIL and NTPC.

3 Daljeet S. Kohli Head of Research Tel: Abhishek Jain Research Analyst Tel: Company Updates Coal India: Coal India's production and offtake rises by over 9% during April December 15, maintain buy with target price of Rs. 467 Coal India has produced million tonnes (MT) of coal in December 2015 which is above the targeted output of MT. Off take stood at MT slightly above targeted output of MT. The coal production grew by 9.1 % and off take grew by 9.8% during the Nine month (April December 2015) in FY16. Our take The company has guided 12% off take volume growth to 550 MT and 11% production volume growth to 550 MT in FY16. However, we forecast FY16 production at 529 MT (+7% YoY); off take 523 MT (+7%). We believe that company is likely to show strong performance in medium to long term (expect CAGR production growth of 7% in next five years) due to strong domestic coal demand and monopoly in coal production in India. However in near term we may see pressure on stock prices as cabinet has approved for 10% stake sale of the coal India. At CMP of Rs 334, stock is trading at 10.8X of its FY17E EPS. We maintain buy rating on the stock with target price of Rs 467

4 Daljeet S. Kohli, Head of Research Tel: Abhishek Jain, Research Analyst Tel: Aman Vij, Research Analyst Tel: Monthly Auto Numbers December 2015 Atul Auto Ltd: Total sales increased 8% YoY, Maintain HOLD With target price of Rs. 486 Total Sales 4,005 3,708 8% 4,005 0% 33,372 31,338 6% Total 3 wheeler sales of the company increased 8% YoY to 4005 units. Valuation: We believe with further capacity addition and new petrol product launch, Atul can efficiently tap export markets along with urban markets in India and, thereby, continue the strong growth momentum. The entry into petrol segment, increasing capacity and overseas footprint could lead to faster growth in market share in the coming years. At CMP of Rs 565 the stock is trading at PE multiple of 20.9x FY17E EPS. We maintain HOLD rating on the stock with target price of Rs. 486 (18x FY17E EPS). Hero Motocorp Ltd.: Total Sales down 5% YoY, Maintain HOLD with target price of Rs Wheelers 499, ,097 5% 550,731 9% 4,910,802 5,056,218 3% Hero Motocorp sales were down 5% YoY to 499,665 units in the month of Dec Hero, which is the market leader in motorcycles by some distance, was way behind Honda in the scooter segment. But the gap seems to be narrowing as three of Hero s scooters Hero Maestro, Hero Pleasure and newly launched Duet which debuted in October were in the top ten selling scooters. The strong October and vember sales had resulted in company increasing its market share from 13% to 20% for the two months but it s still below Honda s market share of close to 50%. Hero Motocorp s current scooter capacity is over one million units, and with the introduction of the two new scooter models in the portfolio, the company will be aggressively targeting to gain market share in the category from the likes of Honda Activa, TVS Jupiter and Suzuki Access. Valuation: At CMP of Rs 2682 the stock is trading at PE multiple of 16.4x FY17E EPS, we value Hero Motocorp at Rs (18x FY17E EPS) and maintain HOLD rating on the stock. M&M Ltd: Total sales (including tractors) up 4% YoY, maintain HOLD with target price of Rs PVs 18,197 17,980 1% 19,662 7% 163, ,395 0% LCVs 11,937 12,065 1% 14,347 17% 117, ,547 4% M&HCV % % 3,736 2,284 64% 3 wheeler 4,177 4,112 2% 4,920 15% 42,345 43,274 2% Export 3,076 1,868 65% 2,207 39% 26,532 20,180 31% Sales Excl. Tractors 37,915 36,328 4% 41,590 9% 353, ,680 3% Tractors 12,868 12,474 3% 21,717 41% 170, ,421 13% Total Sales 50,783 48,802 4% 63,307 20% 523, ,101 2% Total sales (Automotive +tractor) up by 4% YoY to 50,783 vehicles. Mahindra & Mahindra sales (without tractors) up 4% YoY to 37,915 vehicles. Passenger Vehicles (UVs, Cars and Vans) grew by 1% YoY to 18,197 vehicles LCV segment degrew 1% YoY to 11,937 vehicles. Export volume increased by 65% YoY to 3076 vehicles. 3 wheelers volume were up 2% YoY to 4177 vehicles. Tractor sales were up 3% YoY to 12,868 units due to 4% increase in YoY domestic sales.

5 Valuation: M&M appears to be facing challenging near term environment in its key segments, UVs as well as tractors. The unveiling of KUV100 comes at the right time after the recent order of Supreme Court to ban Diesel Vehicles over 2000cc in NCR region had most impact on the likes of M&M as almost all its cars have engine capacity above 2000cc. It will help company de risk its dependency on diesel engines. We expect the automotive segment to gradually gather momentum on the back of new launches. We maintain HOLD rating on the stock with SOTP based target price of Rs (valuing standalone business Rs. 900 per share (15xFY17e earnings) and Rs. 380 for other subsidiaries). Maruti Suzuki India Ltd.: Total sales grew 9% YoY, maintain HOLD with target price of Rs PVs 91,043 81,564 12% 89,479 2% 800, ,056 13% Mini Segment 37,234 34,625 8% 35,981 3% 326, ,845 5% Compact Segment 50,968 43,208 18% 47,989 6% 430, ,093 14% Mid Size 2,841 3,731 24% 5,509 48% 43,176 19, % Uvs + Vans 20,290 16,545 23% 21,120 4% 171, ,476 18% Total Sales 119, ,791 9% 120,824 1% 1,068, ,703 13% Domestic Sales 111,333 98,109 13% 110,599 1% 971, ,532 14% Export 7,816 11,682 33% 10,225 24% 96,888 92,171 5% Maruti Suzuki s total sales jumped by 9% YoY to 119,149 units in the month of Dec 2015 led by strong growth in Compact Segment. Company s compact segment (Swift, Ritz, Dzire, Baleno, Celerio) sales grew by 18% YoY to units. Uvs + Vans sales increased by 23% YoY to 20,290 units mainly on account of good demand of S cross. Mini segment (Alto, WagonR) grew by 8% YoY to 37,234 units. Exports volume fell 33% YoY to 7816 vehicles. Valuation: At CMP Rs 4635 the stock is trading at PE multiple of 21.5x FY17E EPS. We maintain HOLD rating on the stock with target price of Rs (based on 20xFY17e EPS). Tata Motors Ltd.: Commercial Vehicle sales up 6% YoY, Maintain BUY with target price of Rs 496 M&HCVs 11,686 10,998 6% 11,524 1% 108,858 88,880 22% LCVs 14,674 13,198 11% 13,304 10% 118, ,346 18% PVs 8,069 12,040 33% 10,517 23% 96,390 92,227 5% Total Sales 39,973 41,734 4% 38,918 3% 364, ,871 1% Domestic Sales 35,416 37,776 6% 35,345 0% 324, ,243 1% Export 4,557 3,958 15% 3,573 28% 40,901 36,628 12% Tata Motors total sales were down 4% YoY to 39,973 units. Sales of LCV segment was up by 11% YoY to 14,674 units while M&HCV segment jumped 6% YoY to 11,686 units. Decline in diesel prices have eased pressure on fleet operators viability, helping kick start M&HCV replacement demand. Over the next few months, we expect LCV slowdown to halt and demand to stabilise as demand for LCV has a direct relationship with demand of MHCV with a lag effect(because of hub and spoke system). Sales of passenger vehicles decreased 33% YoY to 8069 units on account of 44% decline in UV sales. The fall is also due to high base effect as last year, in the anticipation of increase in excise, effective 1st of January 2015, the sales in December 2014 had increased unusually. Exports increased by 15% YoY to 4557 units.

6 Valuation: At CMP of Rs 402 the stock is trading at PE multiple of 10.8x FY17e EPS. We maintain BUY rating on the stock with SOTP based target price of Rs TVS Motor Company Ltd.: Total sales increased by 4% YoY, maintain SELL with target price of Rs. 235 due to stretched valuation 2 Wheeler 194, ,474 5% 217,706 11% 1,929,597 1,834,752 5% Scooter 65,090 53,613 21% 76,043 14% 615, ,970 15% Motorcycle 71,435 70,573 1% 82,163 13% 769, ,411 6% Mopeds 57,541 60,288 5% 59,500 3% 544, ,371 5% 3 Wheeler 8,020 10,007 20% 7,695 4% 89,376 81,057 10% Total Sales 202, ,481 4% 225,401 10% 2,018,973 1,915,809 5% Domestic Sales 168, ,918 5% 191,780 12% 1,664,016 1,617,174 3% Export 32,771 32,969 1% 33,621 3% 353, ,041 19% TVS Motor s total volume up by 4% YoY to 202,086 units in Dec 15. Domestic volumes increased 5% YoY while export volumes were marginally down 1% YoY. Company s three wheeler sales were down 20% YoY to 8020 units. The Company s motorcycle sales were up 1% YoY to 71,435 units and scooter volume increased by 21% YoY to 65,090 units. Moped sales decreased by 5% YoY to 57,541 units. Valuation: At CMP of Rs. 286, stock is trading 21.9x FY17E EPS; which looks quite expensive. Among its peers like Bajaj Auto and Hero Motocorp maintains EBITDA margin in the range of 14 19% compared to 6% margin of TVS Motors, thus we value TVS Motors 18x FY17E EPS. We maintain SELL rating on the stock with target price of Rs. 235 Ashok Leyland Ltd.: Total sales jumped by 31% YoY, NOT RATED Segment Dec 15 Dec 14 Change YoY v 15 Change MoM YTD CY15 YTD CY14 Change YoY Total Sales 12,209 9,290 31% 8,971 36% 96,507 70,743 36% M&HCV 9,758 7,210 35% 6,297 55% 74,557 51,394 45% LCV 2,451 2,080 18% 2,674 8% 21,950 19,349 13% Total sales of the company jumped 31% YoY to units. M&HCV segment sales increased 35% YoY to 9758 units, while sales of LCV increased 18% YoY to 2451 units. Most of the high growth in H1FY16 was on account of the new safety legislation that come into effect from 1 October which made features such as anti lock braking system (ABS) and a speed control device mandatory for trucks. While the legislation allows selling trucks without such features till 31 March 2016, it prohibits production of such models from October. To beat the deadline, a number of firms had increased production leading up to October. Valuation: Improvement in infrastructural and industrial activity in the recent time is turning positive for the company. At CMP of Rs 89, it trades at a PE of 17.2x FY17e Bloomberg EPS. We don t have any rating on the stock.

7 Eicher Motors Ltd: M&HCV sales up 46% YoY, Royal Enfield sales jumped 41% YoY, NOT RATED M&HCVs Dec 15 Dec 14 Change YoY v 15 Change MoM YTD CY15 YTD CY14 Change YoY Total Sales 4,951 3,398 46% 3,534 40% 46,275 39,892 16% Domestic 4,114 3,013 37% 2,905 42% 40,416 34,068 19% Exports % % 5,859 5,824 1% Royal Enfield(2W) Dec 15 Dec 14 Change YoY v 15 Change MoM YTD CY15 YTD CY14 Change YoY Total Sales 40,453 28,634 41% 40,769 1% 452, ,591 50% Domestic 40,037 28,179 42% 40,312 1% 444, ,370 50% Exports % 457 9% 8,285 6,221 33% Eicher Motors sales of branded trucks and buses volume was up by 46% YoY in Dec 2015 to 4951 units. Royal Enfield sales jumped by 41% YoY to 40,453 units in Dec Eicher has recently entered Thailand Market. The company seems to be on track to produce up to 900,000 motorcycles by end of 2018 Valuation: At CMP of Rs the stock is trading at 27.1x of its consolidated CY17E EPS as per Bloomberg estimates. We don t have any rating on the stock. Escorts Ltd.: Total sales down 9% YoY, NOT RATED Total Sales 2,751 3,021 9% 4,706 42% 39,632 48,743 19% Domestic 2,727 2,871 5% 4,691 42% 39,092 46,861 17% Exports % 15 60% 540 1,882 71% Total tractor sales of the company down 9% YoY to 2751 units. Domestic sales down 5% YoY to 2727 units while export sales slid by 84% YoY to 24 units. Valuation: At CMP of Rs 171 Escorts trades at 9.9x FY17E Bloomberg EPS. We don t have any rating on the stock. SML Isuzu Ltd.: Total sales down 18% YoY, NOT RATED Total Sales 877 1,073 18% % 9,196 8,255 11% Total sales of the company down 18% YoY to 877 units. Most of the high growth in last few months has been on account of good demand in Good carrier segment. The company has been consistently gaining market share in LCV goods carrier segment with Cosmo, Sartaj and Prestige all doing very well. In M&HCV segment Supreme series is able to help company grow in 7.5 Tonne 10 Tonne segment. Valuation: SML Isuzu is a net debt free company and the improvement in infrastructural and industrial activity is helping to turn the fortune of the goods carrier segment of the company. At CMP of Rs 1233, the stock is trading at a PE of 17.8x FY17e Bloomberg EPS estimates. We don t have any rating on the stock.

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We expect this stock to deliver < 15% returns over the next 12 months. Our target prices are on a 12 month horizon basis. Other definitions NR = t Rated. The investment rating and target price, if any, have been arrived at due to certain circumstances not in control of INSL CS = Coverage Suspended. INSL has suspended coverage of this company. UR=Under Review. Such e invest review happens when any developments have already occurred or likely to occur in target company & INSL analyst is waiting for some more information to draw conclusion on rating/target. NA = t Available or t Applicable. The information is not available for display or is not applicable. NM = t Meaningful. The information is not meaningful and is therefore excluded. Research Analyst has not served as an officer, director or employee of Subject Company One year Price history of the daily closing price of the securities covered in this note is available at and quotes. (Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart) IndiaNivesh Securities Limited Research Analyst SEBI Registration. INH & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai Tel: (022) / Fax: (022) e mail: research@indianivesh.in Website: