NiveshDaily. From Research Desk. September 2, IndiaNivesh Research. News Updates. Monthly Auto Numbers. Management Meet Update

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1 NiveshDaily September 2, 2015 Daljeet S. Kohli Head of Research Tel: From Research Desk News Updates Coal India: Strong off take in the month of August, maintain BUY with target price of Rs 467 Coal India has produced million tonnes (MT) of coal in August which is slightly below the targeted output of MT for the month. However Off take stood at MT vs targeted output of MT. The coal production grew by 9.4 % and off take grew by 8.3% during the five month in FY16. Monthly Auto Numbers Monthly Auto Numbers August 2015 TVS Motor Company Ltd.: Total sales increased by 1% YoY, maintain SELL with target price of Rs. 173 due to stretched valuation; Hero Motocorp Ltd.: Total Sales was down 14% YoY, Maintain HOLD with target price of Rs 2715; Maruti Suzuki India Ltd.: Total sales grew by 6% YoY, maintain HOLD with target price of Rs. 4304; Tata Motors: M&HCV sales up 31% YoY, Maintain BUY with Target Price of Rs 496; M&M Ltd: Total sales (including tractors) down by 6% YoY, maintain HOLD with target price of Rs. 1280; Eicher Motors Ltd: M&HCV sales up 19% YoY, Royal Enfield sales jumped 59% YoY, NOT RATED; Atul Auto Ltd: Total sales increased 15% YoY, NOT RATED; Ashok Leyland Ltd.: Total sales jumped by 39% YoY, NOT RATED & Escorts Ltd.: Total sales Slid by 34% YoY, NOT RATED. Management Meet Update LIC Housing Finance Stable performance to continue maintain buy with target price of Rs 550 We met management of LIC Housing Finance (LICHSG) to get an update on business and outlook for next year. Global Markets Outlook 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 Coal India: Strong off take in the month of August, maintain BUY with target price of Rs 467 Coal India has produced million tonnes (MT) of coal in August which is slightly below the targeted output of MT for the month. However Off take stood at MT vs targeted output of MT. The coal production grew by 9.4 % and off take grew by 8.3% during the five month 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. At CMP of Rs 355, stock is trading at 12X of its FY17E EPS. We maintain BUY rating on the stock with target price of Rs 467.

3 Daljeet S. Kohli Head of Research Tel: Abhishek Jain Research Analyst Tel: Aman Vij Research Analyst Tel: Monthly Auto Numbers August 2015 TVS Motor Company Ltd.: Total sales increased by 1% YoY, maintain SELL with target price of Rs. 173 due to stretched valuation 2 Wheeler 216, ,044 4% 215,244 1% 1,032, ,720 5% Scooter 72,865 69,626 5% 65,544 11% 307, ,570 9% Motorcycle 87,044 77,397 12% 82,320 6% 419, ,008 8% Mopeds 56,872 61,021 7% 67,380 16% 305, ,142 1% 3 Wheeler 10,872 10,277 6% 9,820 11% 51,378 43,767 17% Total Sales 227, ,321 4% 225,064 1% 1,084,089 1,023,487 6% Domestic Sales 185, ,644 5% 189,990 3% 879, ,025 3% Export 42,570 42,677 0% 35,074 21% 204, ,462 23% TVS Motor s total volume increased by 1% YoY (up 4% MoM) to 2,27,653 units in Aug 15. Domestic volumes decreased by 3% YoY while export volumes have gone up by 21% YoY. Company s three wheeler sales were up by 11% YoY to 10,872 units. The Company s motorcycle sales were up 6% YoY to units and scooter volume increased by 11% YoY to units. Moped sales decreased by 16% YoY to units. Valuation: At CMP of Rs. 219, stock is trading at 23.2x FY16E and 18.9x 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 15x FY17E EPS(20 to 30% discount from its peers). We maintain sell rating on the stock with target price of Rs. 173 (valuing at 15xFY17E earnings) Hero Motocorp Ltd.: Total Sales was down 14% YoY, Maintain HOLD with target price of Rs Wheelers 480, ,780 1% 558,609 14% 2,613,860 2,803,600 7% Hero Motocorp sales volume was down 14% YoY (down 1% MoM) to 4,80,537 units in the month of Aug Hero Motocorp is beginning its aggressive scooter strategy and will be launching two new scooter models followed by new bikes. We expect new launches would drive the volume growth in FY16. The company believes that the demand should pick up with upcoming festive season and expects second half of the year to be better than the first two quarters. Valuation: Given the likely dominance of first time buyers in incremental demand going forward, we see Hero Motocorp would emerge as a leader as it commands all the relevant attributes that buyers will look for such as trusted brand (high recall), high mileage, economical, and large distribution reach. However the effect of slowdown in rural demand needs to be keenly monitored. At CMP of Rs 2385 the stock is trading at PE multiple of 15.8x FY17E EPS, we value Hero Motocorp Rs (18x FY17E EPS) and maintain hold.

4 (contd...) Maruti Suzuki India Ltd.: Total sales grew by 6% YoY, maintain HOLD with target price of Rs PVs 86,454 91,602 6% 82,823 4% 434, ,150 14% Mini Segment % 34,686 9% 180, ,174 8% Compact Segment % 48,087 7% 229, ,541 7% Midsize & Executive Segment 4,156 2,099 98% % 24,645 2, % Uvs + Vans 20,327 18,803 8% 15,481 31% 88,816 76,890 16% Total Sales 117, ,712 3% 110,776 6% 580, ,050 13% Domestic Sales 106, ,405 3% 98,304 9% 522, ,040 14% Export 11,083 11,307 2% 12,472 11% 58,025 53,010 9% Maruti Suzuki s total sales jumped by 6% YoY (down 3% MoM) to 1,17,864 units in the month of Aug 2015 led by strong growth in Midsize and Executive Segment. Company s compact segment (Swift,Ritz,Dzire,Celerio) sales degrew by 14% YoY (high base) to units. Uvs + Vans sales increased by 31% YoY to units. Exports volume degrew 11% YoY and was down 2% MoM to 11,083 vehicles. Valuation: We remain impressed with company s business, given their key strengths such as proven product portfolio, strong network and rural presence. We believe strong volume growth in short to medium term led by new launches, higher AMT capacity and rising preference for petrol variant cars due to narrowing gap between petrol and diesel prices. So far, Maruti has struggled to be as successful in big cars segment as it is in small cars in spite of having created a customer base of 15 million built in the three decades of its operations. With the setting up of new retail outlets (Nexa), the company intends to offer a differentiated buying experience to the customers who are looking to upgrade to bigger cars. The renewed focus on premium segment could mean much higher realization in the coming years. At CMP Rs 4058 the stock is trading at PE multiple of 18.8x FY17E EPS. We maintain our Hold rating on the stock with target price of Rs (based on 20xFY17e EPS). Tata Motors: M&HCV sales up 31% YoY, Maintain BUY with Target Price of Rs 496 M&HCVs 12,017 11,808 2% % 56,242 46,331 21% LCVs 12,267 12,879 5% % 64,080 80,391 20% PVs 11,194 10,389 8% 10,975 2% 53,232 44,724 19% Total Sales 40,680 40,154 1% 40,883 0% 197, ,516 4% Domestic Sales 35,478 35,076 1% 36,403 3% 173, ,446 1% Export 5,202 5,078 2% 4,480 16% 23,791 19,070 25% Tata Motors total sales were flat YoY (up 1% MoM) to 40,680 units. Increase in sales of PV and M&HCV was offset by weak performance in LCV. Sales of LCV segment fell by 25% YoY to units while M&HCV segment jumped by 31% YoY to 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).

5 (contd...) Sales of passenger vehicles increased 2% YoY to 11,194 units. Recently launched Zest (compact sedan) and Bolt has received encouraging response after launch. Exports increased by 16% YoY (up 2% MoM) to 5202 units. Valuation: WE believe going forward TTMT would benefit from a) recovery in CV business, b) strong product pipeline in JLR c) capacity expansion in JLR and d) commissioning of China JV and engine plant. At CMP of 330 stock is trading at 8.9X of its FY17E EPS. We maintain BUY on the stock with SOTP based target price of Rs M&M Ltd: Total sales(including tractors) down by 6% YoY, maintain HOLD with target price of Rs UVs,Cars & Vans % % 82,133 87,685 6% LCVs % % 58,982 60,419 2% MHCV % % 1,662 1,768 6% 3 wheeler % % 21,550 22,383 4% Export % % 15,526 11,115 40% Sales Excl. Tractors 35,634 34,652 3% 35,180 1% 179, ,370 2% Tractors % % 89, ,968 16% Total Sales 47,333 50,112 6% 50,186 6% 269, ,338 7% Mahindra & Mahindra sales growth (without tractors) slightly up 1% YoY (up 3% MoM) Total sales (Automotive +tractor) down by 6% YoY (down 6% MoM) to 47,333 vehicles dragged by tractor segment. Passenger Vehicles (UVs, Cars and Vans) degrew by 7% YoY (down 2% MoM) to vehicles but LCV segment grew by 5% YoY (up 7% MoM) to vehicles. Export volume increased by 73% YoY (down 1% MoM) to 3512 vehicles. 3 wheelers segment was down by 10% YoY (up 9% MoM) to 4901 vehicles. Tractor sales slid by 22% YoY (down 24% MoM) to 11,699 units. Valuation: M&M appears to be faced with a challenging near term environment in its key segments, UVs as well as tractors. We expect the automotive segment to gradually gather momentum on the back of new launches. In a bid to regain its fading glory in the utility vehicle market, the company has lined up three models for launch over the coming festival months: TUV300, S101 and an upgraded Quanto, codenamed U215. At CMP of Rs. 1177, stock is trading at 19.6x FY17e standalone earning. 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). Eicher Motors Ltd: M&HCV sales up 19% YoY, Royal Enfield sales jumped 59% YoY, NOT RATED M&HCVs Aug 15 Jul 15 Change MoM Aug 14 Change YoY YTD CY15 YTD CY14 Change YoY Total Sales 3,611 3,652 1% 3,027 19% 29,889 27,488 9% Domestic 3,009 3,050 1% % 26,479 23,547 12% Exports % % 3,410 3,941 13% Royal Enfield(2W) Aug 15 Jul 15 Change MoM Aug 14 Change YoY YTD CY15 YTD CY14 Change YoY Total Sales 42,360 40,760 4% 26,643 59% 282, ,356 47% Domestic 41,600 40,016 4% 26,121 59% 276, ,943 47% Exports % % 6,278 4,413 42% Eicher Motors sales of branded trucks and buses volume was up by 19% YoY (down 10% MoM) in Aug 2015 to 3,652 units. Company s 2W sales jumped by 59% YoY and 4% MoM to 42,360 units in Aug 2015.

6 (contd...) Valuation: At CMP of Rs the stock is trading at 27.2x of its consolidated CY17E EPS as per Bloomberg estimates. We don t have any formal rating on the stock. Atul Auto Ltd: Total sales increased 15% YoY, NOT RATED Total Sales 3,906 3,717 5% % 16,461 15,372 7% Total 3w sales of the company increased 15% YoY (up 5% MoM) at 3,906 units. Valuation: At CMP of Rs 421, Atul Auto trades at 14.7x FY17E Bloomberg EPS estimate. We don t have any rating on the stock. Ashok Leyland Ltd.: Total sales jumped by 39% YoY, NOT RATED Segment Aug 15 Jul 15 Change MoM Aug 14 Change YoY YTD CY15 YTD CY14 Change YoY Total sales 11,544 11,022 5% 8,333 39% 50,752 36,134 40% M&HCV 8,903 8,803 1% 5,832 53% 39,191 26,490 48% LCV 2,641 2,219 19% 2,501 6% 11,561 9,644 20% Total sales of the company jumped 39% YoY (up 5% MoM) to 11,544 units. M&HCV segment sales jumped by 53% YoY to 8903 units, while, sales of LCV increased by 6% YoY to 2641 units. Valuation: High financial leverage remains a concern for the stock. However, improvement in infrastructural and industrial activity in the recent time is turning positive for the company. At CMP of Rs 88, it trades at a PE of 22.6x FY17e Bloomberg EPS. We don t have any rating on the stock Escorts Ltd.: Total sales Slid by 34% YoY, NOT RATED Total Sales 2,402 3,430 30% 3,624 34% 20,707 25,790 20% Domestic 2,355 3,362 30% 3,147 25% 20,266 24,562 17% Exports % % 441 1,228 64% Total tractor sales of the company Slid by 34% YoY (down 30% MoM) to 2,402 units. Domestic sales decreased by 25% YoY to 2355 units while export sales slid by 90% YoY to 47 units. Valuation: At CMP of Rs 165 Escorts trades at 9.2x FY17E Bloomberg EPS. We don t have any rating on the stock.

7 Daljeet S. Kohli Head of Research Tel: Yogesh Hotwani Research Analyst Tel: Management Meet Update LIC Housing Finance Stable performance to continue maintain buy with target price of Rs 550 We met management of LIC Housing Finance (LICHSG) to get an update on business and outlook for next year. Following are the key takeaways from management meet Loan growth to remain healthy, individual loans continues to do well: LIC housing finance has emerged as one of the fastest growing NBFC in housing finance space delivering strong 23% CAGR in loan book in FY This strong performance is led by healthy CAGR of 25% in individual loan segment while project loan segment declined by 8% CAGR due to problem in segment. In Q1FY16, Loan growth continues to remain healthy at 18% yoy led by individual loan growth while project loan grew by 8% yoy. Management specified growth remains healthy in LAP and individual loan segment while project loan has also picked up compared to last year. Management has guided for loan growth of 17 18% for FY16E. Trend in Loan Book (Rs mn) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Loan Book Individual Loans % of total Project Loans % of total major surprise in Asset quality, however recovery of NPAs from project loans likely to yield results in FY16: Asset quality for LICHSG remains stable with no major surprise. However the recovery of NPAs in developer segment could surprise positively in Q3FY16 or Q4FY16. Further there is no problem in LAP portfolio as it is at lower LTV of 25 30% and given to self occupied residential property. Further 70% of loans in LAP is given to salaried individuals and remaining 30% to business class. However historically asset quality indicates pressure in Q1 of the fiscal mainly because Q1 is slowest of 4 quarters and chunk of the recoveries comes in Q4 of the fiscal which shows Q1 Gross and Net NPAs numbers higher when compared on qoq basis. Trend in Asset Quality FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Q1FY16 Gross NPA Individual loan Project loan Net NPA Gross NPA (%) Net NPA (%) PCR (%) NIMs to remain stable, cost of funds has come down: Management sounded confident of maintaining its NIMs at current level of 2.4% as cost of funds of market borrowings have come down. Further recent decline in base rate by HDFC bank which is likely to be followed by other banks will lead to decline in LICHSG s cost of funds. Currently 73.2% of LICHSG s borrowings constitute NCDs and 16.8% are bank borrowings. We expect NIMs of 2.3% for LICHSG both for FY16E and FY17E. Our NIMs assumption has upside risk as 1) ~Rs 60 bn liabilities are likely to be reprised in rest of the fiscal year which will be at lower rate compared to last year and 2) Rs 160 bn of fixed rate loans are likely to be reprised at floating rates where the interest rates differentials are in the range of bps.

8 Trend in Yields/Cost/NIM (%) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E Yields Cost NIM plans for raising capital: The company has no plans for raising capital in near term as its capital adequacy continues to remain higher than regulatory requirement at 16.4% with tier I capital of 11.8%. Valuation and recommendation: We continue to remain positive on LIC housing in HFC space on back of reasonable loan growth, stable margins, robust asset quality, stable return profile and decent valuations compared to industry. We are factoring in loan growth of 18% CAGR over FY15 17E majorly driven by individual loan book and 17% earnings growth over the same period. At CMP of Rs 425, the stock is trading at P/ABV of 2.4x and 2.1x for FY16E and FY17E respectively. We continue to prefer LIC housing over other HFCs and maintain buy with target price of Rs 550. Income Statement (Rs mn) FY14 FY15 FY16E FY17E Interest Income Interest Expense Net Interest Income Other Income Net Income Total Income Total Expenses Pre Provision Profit Provisions Profit Before Tax Tax Profit After Tax Balance Sheet (Rs Mn) FY14 FY15 FY16E FY17E Liabilities Equity Reserves and Surplus Net Worth Borrowings Other Liabilities & Provisions Total Liabilities Assets Net Block Loans & advances Investments & Other Assets Total Assets Valuation Ratios FY14 FY15 FY16E FY17E Earning Per Share (Rs) Book Value Per Share (Rs) Adj Book Value Per Share (Rs) Dividend Per Share (Rs) P/E (x) P/BV (x) P/ABV (x) Growth Y o Y (%) Loan Borrowing Balance sheet Net Interest Income Other Income Net Profit Return Ratios (%) ROA ROE Yield / Margin (%) Yield on Funds Cost of Funds Interest Spread Net Interest Margin Net Profit Margin Dividend Yield Other Ratios (%) Cost / Income CAR Tier I Gross NPA Net NPA Provision Coverage Ratio

9 Dharmesh Kant VP Equity and Derivatives Strategist Tel: Global Markets Outlook US Markets: U.S. stocks suffered their third worst loss of the year on Tuesday as part of a global rout sparked by a new round of weak Chinese economic data. China s official manufacturing purchasing managers index fell to a three year low, triggering a wide selloff in stocks across Asia and Europe that then spread to the U.S. Tuesday marked the third biggest daily drop of the year for the S&P 500 and the Dow, while for the Nasdaq, it is the third worst by percentage decline. On Monday, Goldman Sachs forecast China s economic data will remain pressuredin August, as Beijing planned to curtail construction and production from Aug. 20 through this Friday to improve air quality. The Institute for Supply Management said its manufacturing index dropped to 51.1% last month from 52.7% in July, falling short of the 52.2% forecast of economists. Meanwhile, outlays for U.S. construction projects rose 0.7% in July to a seasonally adjusted annual rate of $1.08 trillion, the highest level since May 2008, the Commerce Department reported Tuesday. Day s Performance: The S&P 500 sank points, or 3%, to 1,913, with all of its 10 sectors in the red. The Dow Jones Industrial Average lost points, or 2.8%, to 16, All 30 of its components closed lower. The Nasdaq Composite slumped points, or 2.9%, to 4,636.10, falling into negative territory for the year. Set ups on S&P 500, Dow Industrial Average and Nasdaq 100 are in pull back phase. We expect volatility to be trading flavor in near term. Emerging markets: Most of Asian indices continue to trade in red this morning on muted global cues and concern over the effect of Chinese slowdown on the world economy. China's official manufacturing purchasing managers index fell to 49.7 in August from 50.0 a month ago, the China Federation of Logistics and Purchasing, which issues the data with the National Bureau of Statistics, said in a statement Tuesday. A PMI reading above 50 indicates an expansion in manufacturing activity, while a reading below points to a contraction. The subindex measuring new orders dropped to 49.7 from 49.9 in July, while the production subindex improved/decreased to 51.7 from 52.4, the statement said. China's official nonmanufacturing PMI, also released on Tuesday, fell to 53.4 from 53.9 in July. China has set an economic growth target of about 7% for this year, and policy makers have vowed to ensure the expansion reaches that level. The economy has so far maintained that pace, but a full year expansion at 7% would still be the worst performance in more than two decades. So far China has slashed interest rates five times since vember and made repeated moves to let banks lend more of their deposits. It has also offered tax breaks for businesses and accelerated approvals for infrastructure projects. But weak demand at home and abroad have confounded Beijing's efforts. Exports slumped 8.3% in July and were down nearly 1% for the first seven months of the year compared with last year. Imports slid 8.1% in July and have dropped for nine consecutive months, partly due to a fall in demand at home. Last month, China's central bank devalued the yuan by 2%, and it has let the currency slip further since. It hopes the weaker currency will give the nation's exports a bit of a boost by making Chinese goods a little bit cheaper in foreign markets. The Shanghai stock market will be closed Thursday and Friday as China commemorates the 70th anniversary of the end of World War II. Bullions & Commodities: Gold is trading at $1137 per troy ounce this morning down (0.25%) from previous close. WTI Crude future is trading at $44.61 per barrel while Brent Crude future is trading at $48.89 per barrel. Currencies: The U.S. Dollar Index tracking the U.S. currency against a basket of six others currencies trading at this morning up 0.30% from previous close. Long term set up on Dollar Index remain strong, a break above 100 on a weekly closing basis will initiate a new up move for a target of 120. The dollar and U.S. stocks often trade on opposite paths, with a weak dollar seen as providing investors with cheap funding to buy stocks. Plus the dollar s drop generally helps U.S. companies overseas sales. Source: Bloomberg

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(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: