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Initiation
Neutral
Bajaj Finance Ltd BJFN.NS, BAF IN
Price: Rs4,935.90
Expensive valuations discount franchise strengths.
Price Target: Rs5,500.00
Time to pause & reflect on risks. Initiate with Neutral
Initiate on Bajaj Finance with Neutral, Mar-16 PT of Rs5,500. Post the India
increase in shares (44% YTD and nearly 100% in the past year), we believe Specialty Finance
the price already discounts the known positives around the franchise strengths Saurabh Kumar
AC
in consumer lending, high earnings growth relative to peers, and a scale-up in (91-22) 6157-3590
the earnings profile. Valuations now look challenging especially in the context saurabh.s.kumar@jpmorgan.com
of a relatively high share of unsecured lending (28% of book) against current Bloomberg JPMA KUMAR <GO>
credit costs that are below through cycle averages, in our view. Risk-reward at J.P. Morgan India Private Limited
current levels is no longer one way and we would await a better entry point Gunjan Prithyani
(10% lower, representing FY17E PB / PE of 2.8x / 17x). (91-22) 6157-3593
Expensive valuations discount high growth. Unsecured lending could be BJFN.NS share price (Rs)
NIFTY (rebased)
a source of risk: BAFs valuations are at a marked premium to peers. YTD 1m 3m 12m
Business ROEs, we note, are good but not exceptional. Valuations are thus Abs 41.0% -7.6% -8.4% 84.0%
Rel 44.7% -3.7% -3.9% 86.1%
predicated on BAF sustaining high growth for an extended period of time
over an ever increasing base. Our PT implies FY17E P/B of 3.5x and PE of
21x. Key risks: 1. High share of unsecured financing (28% of book as of
Mar15) exposes the company to potentially higher credit costs loss given
default rates, and 2. Higher competition especially in the SME book driving
down spreads.
See page 35 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
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Bajaj Finance 4,090 3.6 3.1 18.7 17.4 23.3 19.2 19% 21%
Auto Finance
M&M Financial Services 2,559 2.5 2.3 14.2 14.9 18.6 16.0 16% 16%
Shriram Transport 3,412 2.0 1.7 16.1 16.3 13.1 11.3 24% 16%
Sundaram Finance 2,804 5.3 4.7 17.2 18.3 32.5 27.5 11% 18%
Shriram City Union Finance 1,785 2.3 2.0 15.4 16.3 16.0 13.1 20% 22%
Cholamandalam Finance 1,645 3.1 2.6 16.8 18.1 20.3 16.0 21% 27%
Magma Fincorp 346 1.1 0.9 11.4 12.1 10.0 6.5 12% 53%
Housing Finance
HDFC 33,461 6.0 5.3 21.4 22.3 29.3 24.9 16% 17%
Indiabulls Housing Finance 3,646 3.2 2.8 34.5 34.6 9.9 8.7 19% 15%
LIC Housing Finance 3,736 2.4 2.1 19.0 18.5 14.2 12.0 17% 18%
Dewan Housing 1,052 1.2 1.1 15.8 16.6 8.3 6.8 13% 21%
Average 2.3 2.0 17.2 17.6 14.4 12.0 16% 20%
Source: J.P. Morgan estimates, Company data
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Table of Contents
Investment Thesis ....................................................................5
Investment positives................................................................................................5
#1 Multi-product portfolio can drive 27% loan growth over next 2 years ...............5
#2 FY15-17E EPS CAGR of 20% higher than sector average implies premium
valuations can sustain..............................................................................................6
#3 Market leadership in consumer durable / lifestyle lending space ..........................6
#4 Cost ratios have room for improvement driven by better sourcing and higher
technology engagement ...........................................................................................7
#4 Track record of running a high yield book with low NPLs, resulting in better risk-
adjusted returns.......................................................................................................8
#5 Distribution network and point of sale presence and high cross-sell franchise ......8
Investment Risks.....................................................................................................9
#1 Risk on unsecured lending and durable financing book........................................9
#2 Expensive valuations mean limited scope for earnings disappointment ..............10
#3 Increasing competition from other NBFCs in SME / LAP space can moderate
returns in the medium term in the segment.............................................................10
#4 New product line entry can have accidents given limited experience in the past .11
#5 Regulatory risk on Zero EMI financing in digital space .....................................11
Valuations - BAF is one of the most expensive NBFCs, but
also one of the highest growth ones ....................................12
Stock has been a multi-bagger on most timeframes but time for a pause might be
coming now ..........................................................................................................13
Price Target of Rs5,500. Initiate with Neutral ........................................................14
Normalized ROE of 19% - Margin reduction / credit cost rationalization to be offset
by improving cost to asset .....................................................................................14
SWOT Analysis .......................................................................16
Business Overview.................................................................17
Strong loan growth backed by a diversified business streams allowing for growth to
be more balanced ..................................................................................................17
Wide distribution and presence at points of sale.....................................................19
Cross-selling opportunity across 11MM and growing customer base ......................20
Technology /Analytics usage for credit underwriting / cross-sell improvement and
improved pricing...................................................................................................21
Product lines have a balanced mix to ensure profitability and higher ROEs ............21
Strong franchise and early entrant in consumer lending..........................................22
SME Book Mix of LAP and unsecured loans ......................................................23
Fee income drivers are steadily building up ...........................................................24
Competition mostly from Banks in consumer lending and other NBFCs in SME/
LAP; Distribution is a key competitive advantage..................................................24
Unsecured lending is 28% of portfolio. Further consumer durable lending is against
fast depreciating collateral. Higher risk? ................................................................24
Some level of regulatory arbitrage still present in Zero EMI financing schemes......25
Financial Highlights ...............................................................26
Expect 27% loan growth CAGR over next 2 years .................................................26
Margins to downshift given mix change and higher competition in SME lending....26
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Credit costs ticked up in FY15 due to infrastructure book. Consumer lending book
likely running below through cycle averages..........................................................27
Despite a high yield book, GNPLs have been kept under control............................27
Operating cost rationalization to be a key driver of medium term ROA ..................28
Borrowing mix has scope to shift towards lower cost bond borrowings opening up
room to maneuver on spreads ................................................................................28
ROEs likely to be moderate given capital raise and margin reduction .....................29
Financials................................................................................30
Corporate Structure and shareholding pattern.........................................................32
Investment Thesis, Valuation and Risks ..............................33
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Investment Thesis
Investment positives
#1 Multi-product portfolio can drive 27% loan growth over
next 2 years
BAFs unique mix of multiple product lines has allowed it to scale up its loan book
quickly, growing at a 5-year / 3-year CAGR rate of 51% / 35% p.a. Starting with just
2 product lines in 2008, the company now has over 28 product lines spanning various
verticals in consumer / SME segments. It continues to add even more products to its
business. The book thus has a good mix of profitable lines in the consumer business
(high IRR though low value) and scale developers in its SME portfolio. Within each
of its specific credit lines (except 2W/3W financing), the companys market share as
a % of the overall market is low and hence each individual segment has a reasonably
large opportunity for growth.
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Thousands
120
100 CAGR 29%
80
60
40
20
-
FY11 FY12 FY13 FY14 FY15
Figure 7: Cost to Asset ratio Figure 8: Operating cost break up (as of FY15)
% %
7.0%
6.0%
5.0% Recovery
costs
22%
4.0%
3.0% Others
Dealer
50%
incentive
2.0% 22%
1.0%
Marketing
0.0% commissions
FY12 FY13 FY14 FY15 FY16E FY17E 6%
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Figure 9: GNPL and Net NPL Trend Figure 10: Credit Cost to AUM
% %
1.6% 1.6%
1.4%
1.5%
1.2%
1.4%
1.0%
0.8% 1.3%
0.6%
1.2%
0.4%
1.1%
0.2%
0.0% 1.0%
FY12 FY13 FY14 FY15 FY16E FY17E FY12 FY13 FY14 FY15 FY16E FY17E
Source: Company data and J.P. Morgan estimates. Source: Company data and J.P. Morgan estimates.
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Figure 11: Product per customer (Retail) Figure 12: Product per customer (SME)
x x
3 4
2.5 3.5
3
2
2.5
1.5 2
1 1.5
1
0.5
0.5
0 0
Upto 12 months Upto 18 months Upto 24 months Upto 12 months Upto 18 months Upto 24 months
Loan Product Fee Product Loan Product Fee Product
Source: Company data and J.P. Morgan estimates. Source: Company data and J.P. Morgan estimates.
Investment Risks
#1 Risk on unsecured lending and durable financing book
BAFs book both in consumer and SME lending has a high share of unsecured
lending. This exposes the book to potential high losses given the default ratio. We
note that the company has till date managed the loss ratios well by better customer
targeting (mass affluent segment) and taking advantage of advanced analytics /
CIBIL and own ratings. This has been seen in low NPL levels over 2010-15.
However, if lending standards are loosened, this could then pose a risk for future
credit costs. In our channel checks, however, we have not yet found any related
issues as yet.
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Source: Bloomberg
On our estimates, reverse DCF factors in BAFs book growing by almost 3x over the
next 10 years a CAGR growth of 17% from here. Whilst this is lower than current
growth rates of >25%, sustaining this high level of growth over an ever increasing
base amidst increasing competition (driven by higher ROAs of this segment) could
be a challenge.
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Source: Crisil
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Bajaj Finance 4,090 3.6 3.1 18.7 17.4 23.3 19.2 19% 21%
Auto Finance
M&M Financial Services* 2,559 2.5 2.3 14.2 14.9 18.6 16.0 16% 16%
Shriram Transport* 3,412 2.0 1.7 16.1 16.3 13.1 11.3 24% 16%
Sundaram Finance 2,804 5.3 4.7 17.2 18.3 32.5 27.5 11% 18%
Shriram City Union Finance 1,785 2.3 2.0 15.4 16.3 16.0 13.1 20% 22%
Cholamandalam Finance 1,645 3.1 2.6 16.8 18.1 20.3 16.0 21% 27%
Magma Fincorp 346 1.1 0.9 11.4 12.1 10.0 6.5 12% 53%
Housing Finance
HDFC* 33,461 6.0 5.3 21.4 22.3 29.3 24.9 16% 17%
Indiabulls Housing Finance 3,646 3.2 2.8 34.5 34.6 9.9 8.7 19% 15%
LIC Housing Finance* 3,736 2.4 2.1 19.0 18.5 14.2 12.0 17% 18%
Dewan Housing 1,052 1.2 1.1 15.8 16.6 8.3 6.8 13% 21%
Infrastructure
L&T Finance Holding* 1,976 1.6 1.4 12.8 14.2 14.9 11.5 26% 29%
REC 4,548 1.0 0.8 22.5 21.1 4.6 4.2 9% 12%
POWF 5,553 0.9 0.8 19.3 18.8 5.1 4.6 10% 12%
Gold Finance
Manapuram Finance 380 0.8 0.8 11.6 12.2 7.3 6.4 16% 13%
Muthoot Finance 1,295 1.4 1.3 15.4 16.6 9.9 8.3 18% 19%
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Figure 15: Price to Book (Average and 1SD valuations) Figure 16: Price to Earnings (Average and 1SD valuations)
x x
4.0 20.0
3.5 18.0
16.0
3.0 14.0
2.5 12.0
2.0 10.0
8.0
1.5
6.0
1.0 4.0
0.5 2.0
- -
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Source: Company data and J.P. Morgan estimates. Source: Company data and J.P. Morgan estimates.
Figure 18: BAF stock price Figure 19: BAF stock price returns
Rs / Share %
6000 600%
5000
500%
4000
400%
3000
2000
300%
1000 200%
0 100%
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
0%
1 Year 2 Year 3 Year 5 Year
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Implied P to Book
FY16E 4.0
FY17E 3.5
Implied P to Earnings
FY16E 25.8
FY17E 21.3
Source: Company data
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SWOT Analysis
Strengths Weaknesses
1. Franchise in consumer and SME lending both 1. High share of unsecured lending exposing the
high growth areas portfolio to potential high loss given default rates
2. Ability to enter new segments of financing, 2. High operating cost model though we note that
capturing early bird advantage company is taking steps to improve this
3. Ability to run a high yield and low NPL book 3. Banks ability to participate in zero EMI financing
translating into high risk adjusted returns schemes is limited post RBIs directive on the same
4. Multiple segments driving growth. Thus a 4. Target affluent consumers in consumer / SME
slowdown in one specific area does not impact lending are also high value customers for Banks and
overall growth materially hence can face increasing competition given low
growth elsewhere in the system
5. Wide distribution network and point of sale
presence 5. Wholesale financing reliance being an NBFC
Opportunities Threats
1. New lending verticals (furniture /rural financing) 1. Regulatory threat of removal of Zero EMI financing
and fee drivers which are relatively less for NBFCs
penetrated by competition
2. Increased competition thus lower yields in Loan
2. SME book growth driven by LAP as NBFCs are against property segment
starting to disintermediate Banks in this segment
3. High share of unsecured lending and hence prone to
3. Increased cross-sell opportunity within existing high loss in case of defaults
customer base
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Business Overview
Strong loan growth backed by a diversified business
streams allowing for growth to be more balanced
Bajaj Finances diversified lending model spanning consumer / SME / Commercial
portfolios has allowed the company to sustain both high loan growth and return on
equity over the last 5 years.
In FY08 starting with largely a captive 2W financing business, the company now has
over 28 product lines spanning different niche areas of the market. In many of these
segments, BAF has been an early entrant (notably consumer lending) and many are
relatively underserved by the financial industry in India. In some of its key target
segments, the company we note has a leadership financing position.
Below table lists out key lending segments of BAF and target risk adjusted Internal
Rate of Return (IRRs) that management expects to generate on these segments.
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80%
60%
40%
20%
0%
F12 F13 F14 F15
Consumer Finance SME Finance Commercial Finance Rural Finance
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Consumer Finance,
41%
SME Finance, 48%
The company has a wide distribution network and has a demonstrable track record in
collection across a large number of consumers.
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Figure 26: Product per customer (Retail) Figure 27: Product per customer (SME)
x x
3 4
2.5 3.5
3
2
2.5
1.5 2
1 1.5
1
0.5
0.5
0 0
Upto 12 months Upto 18 months Upto 24 months Upto 12 months Upto 18 months Upto 24 months
Loan Product Fee Product Loan Product Fee Product
Source: Company data and J.P. Morgan estimates. Source: Company dta and J.P. Morgan estimates.
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Apart from this the company has a Center of analytics wherein it has developed
tools for marketing and pricing analytics, generation of pre-approved limits and
creating statistical models for assessing behavior and risk over a customer lifecycle.
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These segments, we note, present a large and reasonably attractive opportunity for
loan growth albeit with some risks given most are against consumption and fast
depreciating items thus running the risk of potentially high losses given the default
rates.
Some of the key success criteria in running a successful franchise in this business, we
note, are:
Presence at point of sale (hence distribution) in both small and large retailers
Quick disbursal of loans ( under 5-10 minutes) to capture consumer purchase
Fast and working credit scoring models along with background CIBIL checks to
enable the financing decision
Tie up with manufacturers and schemes especially around festive seasons / new
launches
Analytics and ability to cross sell to customers thus driving up value per customer
Drive penetration of EMI cards to existing customers thereby keeping good
customers within the companys ecosystem
Ability to deal with a large number of customers since average ticket value is
lower and number of customers are very high. Collection efforts also can be high
in this business. Low ticket high velocity collections
BAFs further initiatives on its EMI card allow for higher cross-selling to existing
customers. It has around 3.5million customers under this card scheme, with
buyers having pre-approved eligibility for purchasing durable / lifestyle financing
products.
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Some of the key success factors in running a proper SME business are:
Ability to properly assess SMEs cash flows as data from tax and other
documents may be limited
Loans that are flexible in nature and take into account the SMEs cash flows with
flexibility around prepayments / withdrawals
Fast approval turnaround time vs. other banks
Focus on improving lending to existing good quality customers
Ability to cross-sell products such as Crisil Ratings / Financial fitness reports,
property fitness report etc. These fee based activities tend to be ROE enhancers as
well
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2,000
1,500
1,000
500
-
FY10 FY11 FY12 FY13 FY14 FY15
However, with growth in the system getting constrained in other sectors and retail
credit data improving, and with more analytics coming in other banks/ NBFCs we
think there will likely be higher competition in these segments resulting in some
moderation in spreads going forward. LAP is already now a highly competitive
segment. Consumer durable lending too faces some risk especially given high IRRs/
zero EMI financing and underlying customer profile that is relatively less prone to
default.
We note that the target for most of the consumer lending business portfolio for BAF
is the affluent class, which presumably are not prone to default. Also, with
improved analytics/ CIBIL scoring and point of purchase behavior monitoring
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scoring of retail lending has markedly improved for BAF and has been reflected in
low historical GNPL numbers.
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Financial Highlights
Expect 27% loan growth CAGR over next 2 years
BAFs loan growth over the last 5 years has been 51% (3 year 35%), substantially
outperforming peer group NBFCs. Even with Rs324B AUM, BAFs market share in
individual segments is rather low and hence we think that it can grow substantially
even from here. We expect 27% loan growth CAGR over the next 2 years from the
business. Within the mix, growth in the SME business is likely to be higher than
consumer vertical, in our view.
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0.4%
75%
0.2%
0.0% 70%
FY12 FY13 FY14 FY15 FY16E FY17E
Source: Company data
However, we note that despite this the company has been able to run relatively low
GNPL levels on its book and has been able to manage credit costs at relatively low
levels. We note that this has been under relatively trying economic conditions for
SMEs over the last few years and depressed consumer sentiment. Despite this both
growth and credit cost of the company have held up relatively well.
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Figure 33: Cost to Asset ratio Figure 34: Operating cost break up (as of F15)
% %
7.0%
6.0%
5.0% Recovery
costs
22%
4.0%
3.0% Others
Dealer
50%
incentive
2.0% 22%
1.0%
Marketing
0.0% commissions
FY12 FY13 FY14 FY15 FY16E FY17E 6%
Others, 9%
Subordinated debt
and Tier II, 4%
NCDs and
debentures, 33%
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15.0%
10.0%
5.0%
0.0%
FY12 FY13 FY14 FY15 FY16E FY17E
Capital raise in 1Q16 means growth can be funded over next 3 years
Capital position for BAF, in our view, is comfortable and especially after the recent
secondary offering / warrant issuance (Rs18B total) the company can fund its growth
over the next 3 years and is unlikely to hit the market anytime soon.
10.0%
8.0%
FY12 FY13 FY14 FY15 FY16E FY17E
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Financials
Table 9: P&L Summary
Rs in MM
FY12 FY13 FY14 FY15 FY16E FY17E
Interest income 21,719 31,097 40,744 54,182 69,461 86,166
Interest expense 7,593 12,207 15,732 22,483 29,266 37,317
NII 14,126 18,889 25,011 31,699 40,195 48,849
Total income 14,126 18,889 25,011 31,699 40,195 48,849
Y/Y 38% 34% 32% 27% 27% 22%
Cost
Employees 1,904 2,452 3,408 4,507 5,589 6,819
Opex 4,539 5,904 7,811 9,422 11,939 14,784
Depericiation 118 196 292 356 392 450
Total 6,560 8,551 11,511 14,285 17,920 22,053
Cost to income 46.4% 45.3% 46.0% 45.1% 44.6% 45.1%
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Others, 12.0
MF, 5.8
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Valuations
Our Mar16 PT of Rs5,500 is based on a 3 stage DDM with ROE of 19% ,
intermediate growth of 15% and terminal growth of 6%. Assumed COE is 15%.
Implied P to Book
FY16E 4.0
FY17E 3.5
Implied P to Earnings
FY16E 25.8
FY17E 21.3
Source: Company data
Upside Risks: Continued strong loan growth and better than expected improvement
in operating costs
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Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per
KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
Important Disclosures
Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Bajaj Finance Ltd.
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following
company(ies) as clients, and the services provided were non-investment-banking, securities-related: Bajaj Finance Ltd.
Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from Bajaj Finance Ltd.
Debt position: J.P. Morgan may own a position in the debt securities of Bajaj Finance Ltd.
Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for
compendium reports and all J.P. Morgancovered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406,
or e-mailing research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgans Strategy, Technical, and Quantitative
Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-
0406 or e-mail research.disclosure.inquiries@jpmorgan.com.
9,066
7,555
6,044
Price(Rs)
4,533
3,022
1,511
0
Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May Aug
12 12 13 13 13 13 14 14 14 14 15 15 15
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
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reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research
website, www.jpmorganmarkets.com.
Coverage Universe: Kumar, Saurabh S: Ascendas India Trust (AINT.SI), Ballarpur Industries Ltd. (BILT.BO), CESC Ltd (CESC.NS),
DLF Limited (DLF.BO), Dish TV (DSTV.BO), Godrej Properties (GODR.NS), HT Media Ltd. (HTML.BO), Housing Development and
Infrastructure Ltd. (HDIL) (HDIL.BO), Indiabulls Real Estate (INRL.BO), Indian Hotels (IHTL.BO), L&T Finance Holdings Ltd
(LTFH.NS), LIC Housing Finance (LICHF.BO), Mahindra & Mahindra Financial Services (MMFS.NS), Oberoi Realty (OEBO.BO),
Phoenix Mills (PHOE.BO), Prestige Estate Projects Limited (PREG.BO), Shriram Transport Finance (SRTR.BO), Sobha Developers
(SOBH.BO)
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered
companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst
or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com.
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affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS,
and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public
appearances, and trading securities held by a research analyst account.
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please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf
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