Model Portfolio update

March 15, 2018

Latest Model–Portfolio
Deal Team At Your Service
Large cap Midcap
Name of the company Weightage(%)
Name of the company Weightage(%)
Auto 17.0
Auto 6.0
Tata Motor DVR 3.0
Bharat Forge 6.0
Maruti 6.0
BFSI 20.0
EICHER Motors 4.0
Bajaj Finserve 8.0
Mahindra & Mahindra (M&M) 4.0
J&K Bank 6.0
BFSI 37.0
Indian Bank 6.0
HDFC Bank 10.0
Capital Goods 12.0
Axis Bank 6.0
Bharat Electronics 6.0
HDFC 9.0
Kalpataru Power transmission 6. 0
Bajaj Finance 6.0
Cement 6.0
SBI 6.0
Ramco Cement 6.0
Capital Goods 6.0
Consumer 30.0
L&T 6.0
Symphony 6.0
Cement 4.0
Kansai Nerolac 6.0
UltraTech Cement 4.0
Pidilite 6.0
FMCG/Consumer 19.0
Tata Chemicals 6.0
Dabur 5.0
Bata 6.0
Marico 4.0
Metals 6.0
ITC 6.0
Graphite India 6.0
Nestle 4.0
Infrastructure 8.0
IT 6.0
NBCC 8.0
TCS 6.0
Logistics 6.0
Metals 6.0
Container Corporation of India 6.0
Hindustan Zinc 6.0
Textile 6.0
Oil and Gas 5.0
Arvind 6.0
GAIL Ltd. 5.0
Total 100.0
Total 100.0
• Exclusion – Zee Entertainment, Asian Paints and reduced weight in Tata • Exclusion – Supreme Industries
Motors DVR • Inclusion – Kalpataru Power Transmission
• Inclusion – ITC and increased weight in Eicher, Maruti and L&T

Source: Bloomberg, ICICIdirect.com Research

*Diversified portfolio - Combination of 70% large cap and 30% midcap portfolio
Outperformance
Deal Team – Atcontinues across all portfolios…
Your Service
• Our indicative large cap equity model portfolio has continued to deliver an • We continue to maintain our high allocation towards the BFSI space with
impressive return (inclusive of dividends) of 117.1% since its inception total weightage of 37% in the large cap portfolio and 20% in midcap
(June 21, 2011) vis-à-vis the index return of 97.7% during the same portfolio. Apart from this, we continue to remain positive on consumption
period, an outperformance of 19%. This validates our thesis of selecting theme with allocation of 19% and 30% in large cap and midcap portfolio,
companies with sound business fundamentals that form the core theme of respectively
our portfolio. Our midcap portfolio has outperformed the benchmark by
• Over the last quarter, companies continue to witness pressure on gross
2.3x (since June 2011), posting returns of 350%
margins on account of a rise in commodity prices, which remains low in
• Our consistent outperformance demonstrates our superior stock picking our portfolio pecking order. Our preferred picks are companies with
ability over these years aligned to our view of favourable risk-reward, higher capacity utilisation along with improved operating leverage
good franchisee vs. reward-at-any-risk businesses. Some key performers
• A revival in the capex cycle coupled with a lower interest rate scenario
of our portfolio are Bajaj Finance, HDFC Bank and HDFC in the large cap
would benefit the BFSI and construction space (SBI, UltraTech, L&T, HDFC
portfolio while Natco Pharma, Kansai Nerolac and Bajaj Finserv have
and HDFC Bank)
delivered stupendous returns in the midcap portfolio. We continue to
advocate the SIP mode of investment as the preferred mode of
deployment given the rich valuations that some pockets of the market House view on Index
have reached. We highlight that the SIP return of our portfolio has • We maintain our index targets (Sensex at 37,600 & Nifty at 11,725) with
consistently outperformed indices. This affirms our belief in the staggered revised Sensex earnings, implying ~17x P/E on FY20E EPS, which is in
and systematic approach of investment amid market volatility tandem with the long period average. The earnings growth at the index
• Quarterly results are encouraging thereby depicting upbeat domestic level will be led by the index heavy (~40% weight) banking & NBFC space
economic sentiments (also depicted by November-December 2017 IIP primarily tracking bottoming of asset quality pressure and resolution of
numbers) thereby reinforcing our view of a smart earnings recovery being big ticket stressed assets through NCLT mechanism. In the consumer
under way. Sensex companies (ex-banks) posted a robust Q3FY18 space, the earnings growth will be led by the auto space
performance partly due to the low base due to demonetisation in base
quarter i.e. Q3FY17 and adapting of trading channel to the new GST Strategy 2018 - Sensex & Nifty Target
regime. On the sectoral front, in Q3FY18, the auto space continued the 2400 30.0%
positive momentum with overall 16% volume growth on a YoY basis. The 2200 26.3%
key surprise was upbeat M&HCV sales (up 37% YoY) 2000
1800
• Given the outperformance, we have increased the allocation to the auto 1600 20.0%
sector by 100 bps to 17% (vs. earlier 16%). The portfolio ideology 1400 17.2%
remains receptive to newer opportunities available in the market. (|) 1200
Subsequently, we have made several changes to the portfolio. The new 1000
800 10.0%
additions in our large cap portfolio is ITC. Moreover, in addition to the
600 5.5%
auto sector, we have increased allocated weights in L&T. In our midcap 400
portfolio, we have added Kalpataru Power. Considering the near term 200 14032.0% 1480 1869 2190
challenges in the business profile, we have reduced our weightage in Tata 0 0.0%
Motors. We have exited Zee Entertainment from the large cap portfolio. FY17 FY18E FY19E FY20E
Moreover, given the strengthening crude prices we have also excluded Sensex EPS Growth (%)
Supreme Industries
Performance
Deal Team –soAtfar* … Service
Your
Portfolio performance since inception Portfolio performance since last update (August 2017)
18
400 15.4
350.1 16
14
300 12
10 8.1
200 165.4

%
150.4 8
%

6.1 5.8
117.1 111.7 5.0 4.8
97.7 6
100
4
2
0
0
Large Cap Midcap Diversified
Large Cap Midcap Diversified
Portfolio Benchmark
Portfolio Benchmark

• The large cap equity model portfolio continued its outperformance vis-à- • Since the last update (August 2017), our large cap portfolio has slightly
vis the index with 117.1% return since its inception (June 21, 2011) vis-à- outperformed the benchmark index performance generating a return of
vis index return of 97.7% in the same period. Our sustained preference for 5% compared to benchmark return of 4.8%. The index outperformance
high quality names has aided this outperformance on a consistent basis. was mainly on the back of performance in Gail and Maruti. Our large cap
We continue to be rewarded for our meticulous approach towards stock portfolio was impacted by the underperformance of Tata Motors and
selection while we endeavour to emulate the broader index Eicher Motors
• On the other hand, given the astute selection in the midcap portfolio, the • Our conservative stock selection in the midcap portfolio continues to
outperformance in the same continues, with a return of 350.1% compared exhibit strong outperformance vs. the broader indices. The portfolio
to the midcap index return of 150.4% outperformed with a return of 15.4% compared to index return of 6.1%.
• Given the overall outperformance in both (large & midcap) portfolios, the Strong performance in Graphite India and Symphony resulted in the
diversified portfolio (combination of 70/30 ratio) has outperformed its outperformance. However, the portfolio performance was impacted by
benchmark indices J&K Bank and Bharat Electronics

Source: Bloomberg, ICICIdirect.com Research

Top
Dealmovers*
Team –soAtfar…
Your Service
Large cap Midcap Diversified

400 Gainers
Gainers 500 Gainers
300 350
250 400 300

200 250
300

(%)
200

(%)
(%)

150
200 150
100
100
100
50 50
0 0 0
Bajaj HDFC Bank HDFC TCS Axis Bank Natco Kansai Bajaj Ramco IndusInd Natco Kansai Bajaj HDFC Bank Bajaj
Finance Pharma* Nerolac* Finserve* Cements Bank Pharma* Nerolac* Finance Finserve*

Large cap Midcap Diversified

Draggers Draggers Draggers
0 0 0
-5
-5
-10 -8
-10
-15
-15
-20 -16
(%)

-20
-25
(%)

(%)
-30 -25
Castrol India -24

CARE
Indigo

Exide Industries Ltd

United Spirits
Aurobindo Pharma

Coal India
Bharti Airtel

Biocon
Tata Steel

-32

-40
Castrol Exide CARE Coal India Biocon
India Industries
Ltd

Source: Bloomberg, ICICIdirect.com Research , *Starred stocks have been included in the portfolio since the last rejig in July 2012/May, August ,December 2013/ April, June, December 2014/ May 2015/July
2015/October 2015. Rest all are since inception in June 2011
Performance*
Deal Team – so
At far in SIP
Your mode …
Service

16,000,000

24,219,262
14,000,000

8,300,000

8,300,000

8,300,000
12,000,000
10,000,000

13,388,398

13,052,600
12,514,565
8,000,000

11,951,854
11,768,760
| 6,000,000
4,000,000
2,000,000
0
Largecap Midcap Divesified

Investment Value of Investment in Portfolio Value if invested in Benchmark

• Systematic investments at regular intervals in all our three portfolios have outperformed their respective benchmarks, acting as a perfect shield to the
volatility that the market encountered last year
• Assuming | 1,00,000 invested as SIP at the end of every month
• Start date of SIP is June 30, 2011

Source: Bloomberg, ICICIdirect.com Research

What’s in, what’s
Deal Team out? Service
– At Your
What's in?

Name Portfolio Weight

ITC Largecap 6%
L&T Largecap Increased from 4% to 6%
Maruti Largecap Increased from 5% to 6%
Eicher Motors Largecap Increased from 3% to 4%
Kalpataru Power Midcap 6%

What's out ?

Name Portfolio Weight

Zee Entertainment Largecap 4%
Asian Paints Largecap 5%
Tata Motors DVR Largecap Reduced from 4% to 3%
Supreme Industries Midcap 6%

Source: ICICIdirect.com Research

The
Dealstory
Teamof the
– Atstocks…
Your Service
Kalpataru Power (KALPOW) ITC (ITC)
• Kalpataru Power is a leading power T&D EPC player with well diversified • ITC is a leading player in the Indian cigarettes industry with a market
operations in both domestic and international markets. The company has share of over 80%. Apart from cigarettes, it has a diversified presence in
also emerged as a leading EPC player in the railways and oil & gas the hotels, agri, paperboards & packaging and FMCG industry. ITC has
pipeline infrastructure successfully built the FMCG brands, which have recorded strong sales
• As of 9MFY18, KPTL commands a strong order backlog of | 10532 crore growth over a short span of time, e.g. Aashirvaad (~| 3500 crore),
which renders comfortable revenue visibility till FY20E. Till 9MFY18, the Sunfeast (~| 3000 crore) and Bingo (more than | 1000 crore)
company has won significant orders to the tune of | 8440 crore. Going
ahead, opportunities in the power T&D space (international markets),
railways and pipeline segment will add to order wins. Hence, we build in • Additionally, it is foraying into new segments like dairy (Aashirvaad
order inflow of | 10500 crore and | 12000 crore in FY19E and FY20E, Svasti ghee), premium chocolates (Flabelle), juices (B Naturals) and
respectively Coffee (Sunbean), which bodes well for the company’s long term
revenue target of | 1 lakh crore by FY30. Post GST implementation, ITC
• With robust wins in the infrastructure segment (railways and pipeline), would be the key beneficiary of a) demand revival, b) shift in
overall revenues are likely to witness revenue CAGR of 15.9% during consumption pattern (from unorganised to organised) and c) supply
FY18E-20E. EBITDA margins are likely to be in the 11-11.8% range, which chain benefits
is expected to result in PAT CAGR of 21.9%
• JMC’s improved performance and robust outlook in the core EPC
business and lower capex intensity in BOT assets may further aid the • We value the cigarettes business at | 223 (P/E multiple of 25x FY20E
consolidated performance while the logistics subsidiary that is likely to EPS), FMCG at | 61 (5x MCap/sales FY20E), paperboards at | 9 (6x FY20E
turn around at PBT level by FY19E may further aid the performance EV/EBITDA), agri-business at | 6 (3x P/BV FY19E) and hotels at | 8 (2x
EV/room FY20E) and also added the cash per share of | 13. We believe
• Scalability of new business segments, operating leverage gains supported revenue growth and profitability of FMCG business would be the key
by consistent growth in base business may drastically improve return driven catalyst for the growth over the long term period. We maintain
ratios of the company from 11.4% in FY17 to 13.2 in FY20E. We believe our BUY rating on the stock price with a target price of | 320 per share
KPTL is on a very strong footing and will get rerated. We value the
company on a SoTP basis and arrive at a fair value of | 600/share
(| Crore) FY17 FY18E FY19E FY20E
(| Crore) FY17 FY18E FY19E FY20E
Revenue (| crore) 39,641.9 39,114.9 44,534.9 48,688.1
Net Sales 4,894.1 5,508.8 6,483.5 7,399.4 EBITDA (| crore) 14,578.0 14,478.7 16,908.0 18,598.1
EBITDA 546.3 621.4 745.2 864.5 Net Profit (| crore) 10,200.9 10,590.2 11,987.4 13,155.3
PAT 284.7 322.2 398.9 478.6 EPS (|) 8.4 8.7 9.9 10.8
EPS (|) 18.5 21.0 26.0 31.2 P/E (x) 32.4 31.2 27.6 25.1
P/E (x) 24.8 21.9 17.7 14.7 P/BV (x) 7.3 6.7 6.6 6.4
RoE (%) 11.2 11.4 12.5 13.2 ROE (%) 22.5 21.0 23.8 25.4
RoCE (%) 15.5 16.1 17.5 18.4 ROCE (%) 32.9 29.9 34.3 36.7

Source: Bloomberg ICICIdirect.com Research

Large cap portfolio
Deal Team – At Your Service
Earlier Now

Name of the company Weightage(%) Name of the company Weightage(%)

Auto 16.0 Auto 17.0
Tata Motor DVR 4.0 Tata Motor DVR 3.0
Maruti 5.0
Maruti 6.0
EICHER Motors 3.0
EICHER Motors 4.0
Mahindra & Mahindra (M&M) 4.0
Mahindra & Mahindra (M&M) 4.0
BFSI 37.0
BFSI 37.0
HDFC Bank 10.0
HDFC Bank 10.0
Axis Bank 6.0
Axis Bank 6.0
HDFC 9.0
HDFC 9.0
Bajaj Finance 6.0
Bajaj Finance 6.0
SBI 6.0
Capital Goods 4.0 SBI 6.0
L&T 4.0 Capital Goods 6.0
Cement 4.0 L&T 6.0
UltraTech Cement 4.0 Cement 4.0
FMCG/Consumer 18.0 UltraTech Cement 4.0
Dabur 5.0 FMCG/Consumer 19.0
Marico 4.0 Dabur 5.0
Asian Paints 5.0 Marico 4.0
Nestle 4.0 ITC 6.0
IT 6.0 Nestle 4.0
TCS 6.0 IT 6.0
Media 4.0 TCS 6.0
Zee Entertainment 4.0 Metals 6.0
Metals 6.0 Hindustan Zinc 6.0
Hindustan Zinc 6.0 Oil and Gas 5.0
Oil and Gas 5.0 GAIL Ltd. 5.0
GAIL Ltd. 5.0 Total 100.0
Total 100.0

Source: Bloomberg, ICICIdirect.com Research

Midcap portfolio
Deal Team – At Your Service
Earlier Now

Name of the company Weightage(%) Name of the company Weightage(%)

Auto 6.0 Auto 6.0
Bharat Forge 6.0 Bharat Forge 6.0
BFSI 20.0 BFSI 20.0
Bajaj Finserve 8.0 Bajaj Finserve 8.0
J&K Bank 6.0 J&K Bank 6.0
Indian Bank 6.0 Indian Bank 6.0
Capital Goods 6.0 Capital Goods 12.0
Bharat Electronics 6.0 Bharat Electronics 6.0
Cement 6.0
Kalpataru Power transmission 6. 0
Ramco Cement 6.0
Cement 6.0
Consumer 36.0
Ramco Cement 6.0
Symphony 6.0
Consumer 30.0
Supreme Ind 6.0
Symphony 6.0
Kansai Nerolac 6.0
Kansai Nerolac 6.0
Pidilite 6.0
Pidilite 6.0
Tata Chemicals 6.0
Tata Chemicals 6.0
Bata 6.0
Metals 6.0
Bata 6.0
Graphite India 6.0 Metals 6.0
Infrastructure 8.0 Graphite India 6.0
NBCC 8.0 Infrastructure 8.0
Logistics 6.0 NBCC 8.0
Container Corporation of India 6.0 Logistics 6.0
Textile 6.0 Container Corporation of India 6.0
Arvind 6.0 Textile 6.0
Total 100.0 Arvind 6.0
Total 100.0

Source: Bloomberg, ICICIdirect.com Research

Diversified
Deal Teamportfolio (1/2)Service
– At Your
Earlier Now
Name of the company Weightage(%) Name of the company Weightage(%)
Auto 13.0 Auto 13.7
Tata Motor DVR 2.8 Tata Motor DVR 2. 1
Maruti 3.5 Maruti 4. 2
Eicher Motors 2.1 Eicher Motors 2. 8
Bharat Forge 1.8 Bharat Forge 1.8
Mahindra & Mahindra (M&M) 2.8 0 2.8
Consumer Discretionary 16.1 Consumer Discretionary 15.0
Symphony 1.8 Symphony 1.8
Supreme Ind 1.8 Kansai Nerolac 1.8
Kansai Nerolac 1.8 Pidilite 1.8
Pidilite 1.8 ITC 4. 2
Asian Paints 3.5 Arvind 1.8
Arvind 1.8 Container Corporation of India 1.8
Tata Chemicals 1.8 Textile 1.8
Bata 1.8 BFSI 31.9
BFSI 31.9 HDFC Bank 7.0
HDFC Bank 7.0 Axis Bank 4.2
Axis Bank 4.2 SBI 4.2
SBI 4.2 HDFC 6.3
HDFC 6.3 Bajaj Finance 4.2
Bajaj Finance 4.2 Bajaj Finserve 2.4
Bajaj Finserve 2.4 J&K Bank 1.8
J&K Bank 1.8
Indian Bank 1.8
Indian Bank 1.8
Power, Infrastructure & Cement 16.6
Power, Infrastructure & Cement 13.4
L & T 4. 2
L&T 2.8
Kalpataru Power transmission 1. 8
UltraTech Cement 2.8
UltraTech Cement 2.8
Ramco Cement 1.8
Ramco Cement 1.8
NBCC 2.4
NBCC 2.4
Bharat Electronics 1.8
Bharat Electronics 1.8
Container Corporation of India 1.8
Container Corporation of India 1.8

Source: Bloomberg, ICICIdirect.com Research

Diversified
Deal Teamportfolio (2/2)Service
– At Your
Earlier Now

Name of the company Weightage(%) Name of the company Weightage(%)

FMCG 9.1 FMCG 9.1
Nestle 2.8 Nestle 2.8
Marico 2.8 Marico 2.8
Dabur 3.5 Dabur 3.5
Metals 6.0 Metals 6.0
Hindustan Zinc 4.2 Hindustan Zinc 4.2
Graphite India 1.8 Graphite India 1.8
IT 4.2 IT 4.2
TCS 4.2 TCS 4.2
Media 2.8 Oil and Gas 3.5
Zee Entertainment 2.8
GAIL Ltd. 3.5
Oil and Gas 3.5
Total 100.0
GAIL Ltd. 3.5
Total 100.0

Source: Bloomberg, ICICIdirect.com Research

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC
Andheri (East)
Mumbai – 400 093
[email protected]

13
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We /I, Pankaj Pandey, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the
subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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