INSTITUTIONAL EQUITY RESEARCH Agri...

INSTITUTIONAL EQUITY RESEARCH

Agri Inputs Lower rain to cast a shadow on H1 numbers INDIA | AGRI INPUTS | Monthly Update

8 October 2015

Monsoon gazing ends: India’s cumulative rainfall in June‐September 2015 was 14% lower than LPA — 15%/14%/15% in north west/central India/south Peninsula and 6% in north and east India. About 64% of the met sub‐division has received excess/normal monsoon and rest deficient/scanty. Current water table is 75% of last year and 77% of normal storage (10‐year average). Around 97% of the normal area (105mn hectares) under kharif crops have been sown — 2% below last year. Rice sowing is lagging marginally (‐3% yoy) while pulses/soybean has improved by 6%/3%. Improved MSPs for oilseeds/coarse cereals have led to their acreage rising this season. Cotton/maize sowings fell by 11%/3%. Experts believe adequate rain over the last two weeks has improved soil moisture — positive for the agri‐inputs sector in H2FY16.

Fertiliser industry dispatches improve: Fertiliser dispatches improved by 7% in Q2FY16 to 16.14mmt, mainly led by urea dispatches rising 9% to 8.5mmt. Current phosphoric‐acid availability constraint led to NPK imports rising 17% while production fell 2%. Zuari Group’s production continues to improve (both urea/NPK); Coromandel and Tata Chem’s production is improving too. Fertiliser imports (especially P&K) increased by 17% to 3mmt. DAP spreads contracted by Rs 200/mt qoq, mainly due to a weakening rupee. Cut in domestic gas prices and repo cut to lead to savings in interest outgo: In Q3, domestic gas prices have been cut by 22% qoq to US$ 3.82/mmbtu (from US$ 4.66) — this will lower working capital needs (until cut‐off) and improve margins (above cut‐off) for the urea sector; combined with the 50bps cut in repo, interest outgo for the heavily subsidy‐dependent fertiliser sector will reduce. Key beneficiaries — CHMB IN, TTCH IN, ZUAC IN, GSFC IN, RCF IN, CRIN IN. We estimate annualised EPS impact of 2‐6% for our coverage universe. Q2FY16 agri inputs earnings preview: Going by high base, fall in acreage, weak sentiment, and intense competitive pressure, we estimate our agri‐coverage universe to report 5‐6% fall in EBITDA/PAT yoy. Fertilisers: P&K inventories have normalised, but due to INR weakening, qoq margins are down 10%. Higher share of low‐margin imports and lower production of high‐margin DAP will tame expectations. In FY16, we see urea companies producing beyond rated capacity (Chambal, Tata Chemicals), which should support overall earnings. Chambal Fertilisers and Tata Chem should report flat earnings due to last year’s high base. Coromandel is likely to disappoint given poor offtake of non‐subsidy products and weak spreads. Crop Chemicals: Fall in acreage and intense competitive pressure has forced the industry to offer price discounts and extend credit. While crop‐chems may report topline growth, it would be at the cost of margins. PI should report growth due to a low base, while Rallis’ earnings could continue to disappoint. Seeds: Expect industry earnings to fall following high base, fall in acreage of cotton/maize/rice sowings.

Read inside • Key crop sowings

• Agri valuation metrics

• Key commodity price trends

• Q2FY16E earnings estimates

• Fertiliser industry sales volume

• Global fertiliser price outlook

• Key management takes: Insecticides

India, UPL, KRBL, The Waterbase

Gauri Anand (+ 9122 66679943) [email protected]

Agri inputs comparative valuation metrics: Attractive dividend yield limits investment downside CMP __Adj. EPS (Rs) __ CAGR ___PER (x) ___ ‐‐‐‐PBR(x)‐‐‐‐ EV/EBITDA(x) Div Yield Rs FY16E FY17E FY015‐17E FY16E FY17E FY16E FY17E FY16E FY15 (%) RatingChambal Fertilizer 60 8.6 9.0 18.6 7.0 6.7 1.1 1.0 9.9 3.3 BuyCoromandel Fert. 163 17.1 22.4 26.8 9.5 7.3 2.2 2.0 18.1 2.8 BuyDeepak Fertilizer 130 15.0 25.0 ‐2.3 8.7 5.2 0.8 0.7 5.4 5.0 BuyKaveri Seeds 475 31.3 44.3 0.6 15.2 10.7 4.3 3.0 25.5 1.6 BuyMonsanto India 2656 69.4 85.4 17.6 38.2 31.1 12.2 11.5 38.5 1.4 BuyPI Industries 647 21.0 26.6 21.6 30.8 24.3 10.0 7.9 18.1 0.4 NeutralRallis India 217 8.6 10.7 15.2 25.3 20.2 5.3 4.9 15.6 1.2 SellTata Chemicals 406 34.9 37.6 9.5 11.6 10.8 1.7 1.5 5.3 2.5 BuyUPL 445 32.2 35.0 12.8 13.8 12.7 3.3 2.7 3.9 1.1 BuyZuari Industries 160 17.4 NA NA 9.2 NA 0.8 0.7 10.3 1.3 BuyAverage 13.4 16.9 14.3 4.2 3.6 15.1 2.0

Source: Bloomberg, PhillipCapital India Research Estimates

AGRI INPUTS MONTHLY UPDATE

Key crop sowings in Kharif: Oilseeds/cereals/cotton and maize acreage picks up mn hect FY16 FY15 yoy% Normal deviation%Rice 38.4 39.7 (3.3) 38.8 (1.2)Oil seeds 18.6 18.3 1.7 18.5 0.7Soyabean 11.4 11.1 2.8 10.4 9.6Cotton 11.7 13.1 (10.6) 11.5 1.8Pulses 10.3 9.8 5.7 10.9 (5.1)Maize 7.3 7.5 (2.6) 7.3 0.6Bajra 7.3 7.1 2.9 8.5 (13.6)Sugarcane 4.9 5.1 (4.4) 4.8 2.1Total 102.9 105.1 (2.1) 105.9 (2.8)*data as on 23rd Sept. Source Ministry of Agriculture

Key highlights of meetings with various managements Insecticides India ‐ Confident about the future • Management expects a topline growth of 10‐12% in FY16, but remains confident

of 20‐25% growth over the medium term. • Dahej utilisation to gradually improve margins from 11.5% in FY15. • Profits to rise at a faster clip following (1) capex completion, which would aid

margins and help deleverage, and (2) improved traction in new product launches (Diafenthiuron ‐ Rs 600mn, Microraja ‐ Rs 200mn) for which good acceptance was seen in FY15

• Hopeful of 2‐3 novel molecule launches from existing partners’ stable (Nissan, Japan, and AMVAC, US) by next year

• To be free cash positive from FY17. • No set purpose for the use of its QIP proceeds (Rs 837mn, 13% dilution @ Rs

510/share) • On fully diluted earnings, the stock trades 9x FY17 EPS and 2x PBR UPL – Real, credit downgrade, and Brazil’s demand environment • The Brazilian real to the INR has fallen 10% qoq — this would impact UPL’s

results in Q2FY16. Revenues from Brazil form roughly 15% of UPL’s overall topline — while revenues are Q3 and Q4 heavy, some channel placement happens in Q2. As per UPL, it earns 55‐60% of its total Brazil revenues from north Brazil where revenues and costs of goods sold are linked to the dollar, suggesting a limited impact. However, revenues from south Brazil are pegged to the real, and its weakening would lead to some translation loss in Q2.

• Credit downgrade would increase cost of operations (interest and hedging) — UPL indicated it is mitigating this risk by qualifying for a priority‐sector credit, packaging credit (lower interest), and narrowing credit days overall. On the risk of defaults (debtors), it sees limited threat due to discontinuation of business by all leading companies with the defaulters/distributors.

• The company expects its key launches and down‐trading to provide an opportunity to grow in an otherwise sluggish demand environment. UPL retains its guidance of 15% topline growth and 60‐100bps expansion in margins.

• The key reason for UPL’s outperformance appears to be aggression in new product introductions and new market penetration — its product registrations have shot up by 50% over FY11‐15, and the innovation index (defined as the % of revenues from products launched in the last four years) doubled in FY15 to 5%. Management expects to sustain above‐industry growth underpinned by continued new launches and its apparent cost advantage over competition due to its India manufacturing base and world‐scale capacities for some important products.

• The stock has been under pressure due to very high FII ownership (49% at the end of June 2015), monsoon concerns, and the Brazil credit downgrade. The stock trades at 12.7x FY17 PER and 2.7x PBR. Reiterate Buy.


KRBL – The rise of rice • KRBL is India’s largest exporter of branded basmati rice and owns the largest rice

milling capacities (195mt per hour) in the country. KRBL has a 25% market share in exports and 30% share in the domestic branded rice category. Demand for basmati rice at home and overseas has compounded at 20% in the past five years on increased brand acceptance, rising incomes, and a changing palate — we expect this trend to continue. The quality of Indian basmati rice is seen as superior to Pakistan’s. Preference for basmati rice in the export markets is on the rise.

• KRBL is an integrated player engaged in seed development and multiplication (basmati seed revenues are Rs 400mn). It sells value‐added by‐products such as bran oil (Rs 400mn) and de‐oiled cakes. It uses rice husks for its captive power plant 18WM). Its three‐year revenue/EBITDA CAGRs are 25%/31%. RoCE/RoE in FY15 was 19%/27%. KRBL expects revenues of Rs 63bn and EPS of Rs 30 in FY19, an implied CAGR of 18%/22% and RoCE of 24%.

• It has a huge marketing network of 690,000 retail outlets. Few of its brands — India Gate, Taj Mahal, Doon, Nur Jahan— command 18‐25% pricing premium in domestic and overseas markets. KRBL has an extended storage capacity, which allows it procure paddy when prices are really low. The pricing premium and low‐cost inventory helps it to post ahead‐of‐industry EBITDA margins (KBRL margins at 17% vs. industry average of 11%), which the company expects to sustain.

• Its strategy of targeting customers across all price segments has helped it to garner a higher market share. The company has registered a strong growth of 30%+ in the domestic rice market in the past three years.

• It operates at 60% capacity utilisation and does not foresee any capex requirement in the short term. We concur with the management’s view that KRBL can sustain growth of 16‐18% over the next few years.

• Risks – The Middle East is the biggest export market for Indian basmati rice and accounts for over 35% of KRBL’s revenues; KRBL mostly exports to Saudi Arabia, UAE, Iraq, and Kuwait. Any political turmoil in this region may adversely impact exports.

The Waterbase Ltd – A secular B2C play • Part of the Karam Chand Thapar Group, third largest organised player in the

shrimp feed industry in India. • Manufacturing at Nellore, AP with an installed capacity of 35,000mt (CP and

Avanti have capacities of 350,000mt and 300,000mt respectively). The industry capacity is 1.3mmt vs. demand of 0.7mmt. Waterbase’s popular shrimp feed brands are Bay White, Tiger Bay, and Magnum and its processed shrimp brands include Tiger Craze and Price Catch. Topline/EBITDA/PAT have compounded at 57%/73%/131%in FY11‐15.However, in FY06‐10, the company incurred severe losses.

• The industry is very dependent on acreage – i.e., the area under shrimp, fish, and crab farming, depends on relative economics and attractiveness. Due to a long coastline and favourable weather conditions, India has emerged as one of the leading seafood suppliers in the world. Exports of marine products have grown three‐fold between FY03‐15. Frozen shrimp (high unit value) contribute 34% of marine export volumes, but represents nearly 67% of value. In 2014‐15, shrimp exports were valued at US$3.7bn (overall seafood exports were US$ 5.5bn), a 16% increase over 2013‐14 — in volume terms they were 357,505MT vs. 301,435MT. USA is the largest market (112,702MT) for frozen shrimps exports followed by European Union (81,952MT), South East Asia (69,068MT), and Japan (30,434MT).

• Waterbase today has 10% total market share and is working on raising this to 15% in the next three years. It couldn’t expand organically due to funding issues. However, to expand feed operations in India, the company board has approved


amalgamating Pinnae Feeds Limited into itself (PFL) in an all‐stock deal (7% equity dilution).

• PFL is a promoter’s company and has a state‐of‐the‐art plant (75,000MT) near Nellore, AP. After the merger, Waterbase’s feed‐manufacturing capacity is expected to rise 110,000MTPA from 35,000MTPA. The company expects PFL’s capacity utilisation to steadily rise. It is confident that the deal would be earnings accretive from FY17.

• The company is forward integrating into hatcheries – this is a high‐margin, cash‐and‐carry business. The board has recently approved setting up a Rs 400mn shrimp‐seed hatchery in two phases of two modules. The first module is expected to commission in FY16. Payback will be in two years (expects revenues of Rs 160mn per annum); maximum capex is Rs 100‐120mn.

• Waterbase plans to restart exports of processed shrimps. It will gradually scale up exports in the coming years. The company is well‐known for its quality products in the international market.


Fertiliser sector continued to underperform due to Hybrid Seeds: Early onset of monsoon helped lack of material positive catalysts continue outperformance

Source: Bloomberg, PhillipCapital India Research Estimates

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Rebounding industrial sentiment: Caprolactum‐Benzene Methanol prices decline by 21% qoq spread declines 18% qoq

Spot soda ash prices moderate by just US$ 2/mt or 7% qoq Henry hub gas prices slightly improves

DAP spreads contract about 10% in Q2FY16

Q4FY15 Q1FY16 Q2FY16 QoQ%Ammonia $/mt 501 460 450 ‐2.2Rock Phosphate $/mt 128 129 133 3.1Phos Acid $/mt 805 805 810 0.6DAP $/mt 488 470 465 ‐1.1Urea $/mt 321 294 280 ‐4.8Exch Rate ($/INR) 62 63 64 1.6

Cost of Material N $/mt 113 104 101 ‐2.2P $/mt 370 370 373 0.6Total raw material cost $/mt 483 474 474 0.0Total costs $/mt 557 546 546 ‐0.1Cost of Prodn Rs/mt 34,556 34,407 34,913 1.5

Subsidy Rs/mt 12,350 12,350 12,350 0.0Revenue Rs/mt 35,950 36,250 36,550 0.8Margins Rs/mt 1,394 1,843 1,637 (11)

Glyphosate prices continue to reel under pressure (‐10% qoq) due to excess supply and poor offtake

Source: Bloomberg, PhillipCapital India Research

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Key commodity prices overview: Cotton/sugarcane/soya prices declines, whilst corn improves

Source: Bloomberg, PhillipCapital India Research

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Chambal: improving Aframax freight rates to positively buoy Chambal’s earnings


Sectoral outlook Sector Key observation/ outlook Earnings plays Agri Inputs Seeds: High base (recall delayed season last year) and fall in

acreage leads the decline in seed revenues (‐) Monsanto India; (‐) Kaveri Seeds

Fertilisers: Higher share of low margin P&K traded fertilisers, Urea vol's lower, profitability to led by marginal savings in interest outgo

(+) Chambal Fert; (+) Tata Chemicals

Cropchemicals: Weak sentiments, pricing discounts and higher credit to cost margins

(+) PI Ind, CSM business to aid growth

Outliers for the quarter PI Industries, Deepak Fertilisers (‐) Monsanto India; (‐) Kaveri Seeds Q2FY16E earnings estimates (Rs mn) Sep‐15E Jun‐15 qoq (%) Sep‐14 yoy (%) Result Update highlights Chambal Fertiliser Revenues 27,525 24,402 12.8% 25,082 9.7% ‐ Urea volumes lower; however, improved shipping freight and fertiliser

trade to support topline growth ‐ Shipping freight revival to support margins somewhat ‐ Lower interest outgo arrest earnings fall

EBITDA 2,397 2,138 12.1% 2,479 ‐3.3%EBITDA margin (%) 8.7 8.8 9.9PAT 1,147 1,463 ‐21.6% 1,148 ‐0.1%EPS (Rs) 2.8 3.5 ‐21.6% 2.8 ‐0.6%Coromandel Intl. Revenues 33,343 21,812 52.9% 34,660 ‐3.8% ‐ Soft commodity and flat manufactured volumes, lower trading

‐ pressure led by weak INR and poor offtake of non‐subsidy products ‐ Lower interest outgo to arrest further fall in PAT

EBITDA 2,551 924 176.2% 3,463 ‐26.3%EBITDA margin (%) 7.7 4.2 10.0PAT 1,337 145 823.9% 1,795 ‐25.5%EPS (Rs) 4.7 0.5 842.5% 6.3 ‐25.4%Deepak Fertilisers Revenues 10,500 10,722 ‐2.1% 10,205 2.9% ‐ Chemical realisations and volume growth to support earnings EBITDA 894 933 ‐4.2% 609 46.7%EBITDA margin (%) 8.5 8.7 6.0PAT 312 453 ‐31.2% 100 211.4%EPS (Rs) 3.5 5.1 ‐31.2% 1.1 211.4%Kaveri Seeds Revenues 1,162 6,641 ‐82.5% 2,037 ‐43.0% ‐ High base, fall in acreage to adversely impact

‐ margins to hold last year’s levels EBITDA 186 2,258 ‐91.8% 328 ‐43.3%EBITDA margin (%) 16.0 34.0 16.1PAT 185 2,184 ‐91.5% 335 ‐44.8%EPS (Rs) 2.7 31.7 ‐91.5% 4.9 ‐44.8%Rallis India Revenues 5,777 4,683 23.4% 6,419 ‐10.0% ‐ Lower chemicals offtake, weak seeds

‐ change in revenue mix (lower seed revenues to impact margins) EBITDA 953 565 68.8% 1,219 ‐21.8%EBITDA margin (%) 16.5 12.1 19.0PAT 549 331 65.9% 729 ‐24.7%EPS (Rs) 2.8 1.7 65.9% 3.7 ‐24.7%PI Industries Revenues 4,831 5,548 ‐12.9% 4,266 13.3% ‐ Rev mix of agri/CSM to be at 60:40

‐ Higher share of low margin agri to be offset by weak INR EBITDA 821 1,358 ‐39.5% 726 13.1%EBITDA margin (%) 17.0 24.5 17.0PAT 523 844 ‐38.1% 463 13.0%EPS (Rs) 3.8 6.2 ‐38.1% 3.4 13.0%United Phosphorus Revenues 27,422 30,690 ‐10.6% 26,623 3.0% ‐ Cross currency effects to weigh on revenue growth

‐ Price discounts and currency hedges to cost margins ‐ Lower other income

EBITDA 4,662 5,922 ‐21.3% 4,805 ‐3.0%EBITDA margin (%) 17.0 19.3 18.0PAT 1,799 2,798 ‐35.7% 1,779 1.1%EPS (Rs) 4.2 6.8 ‐38.0% 4.1 1.2%Tata Chemicals Revenues 43,819 40,669 7.7% 48,032 ‐8.8% ‐ Lower freight costs and lower fertiliser revenues to pull revenues down

‐ Absence of loss‐making units, reversion to the mean ‐ Lower interest outgo further supports

EBITDA 6,414 4,911 30.6% 6,531 ‐1.8%EBITDA margin (%) 14.6 12.1 13.6PAT 2,520 1,530 64.7% 2,561 ‐1.6%EPS (Rs) 9.9 6.0 64.7% 10 ‐1.6%


(Rs mn) Sep‐15E Jun‐15 qoq (%) Sep‐14 yoy (%) Result Update highlights Zuari Agrochemicals Revenues 14,598 15,553 ‐6.1% 15,316 ‐4.7% ‐ Volumes to contract, soft prices to pull revenues down

‐ Operating deleverage and lower profit margins on fertilisers ‐ Lower other income to pull earnings down

EBITDA 658 536 22.9% 813 ‐19.0% EBITDA margin (%) 4.5 3.4 5.3 PAT 111 20 446.5% 220 ‐49.2% EPS (Rs) 2.6 0.5 446.0% 5.2 ‐49.3% Monsanto Revenues 859 2,633 ‐67.4% 904 ‐5.0% ‐ Pricing pressure on glyphosate, high base to pull down revenue growth

‐ lower other income

EBITDA (13) 712 ‐101.8% (21) ‐39.5% EBITDA margin (%) (1.5) 27.0 (2.4) PAT 4 628 ‐99.4% (48) ‐108.4% EPS (Rs) 0.2 36.4 ‐99.4% (2.8) ‐108.4%

Source: Company, PhillipCapital India Research


Fertiliser industry dispatches (in mt) Q1FY15 Q1FY16 YoY% FY15Coromandel Fert DAP Imports 71,932 116,217 62 180,881DAP manufactured 29,426 23,117 (21) 265,714MOP Imports 64,615 39,650 (39) 154,044Complex Fertiliser Manufactured 719,546 734,861 2 2,176,061Complex Fertiliser Imports 1,211 1,027 (15) 3,305SSP 41,385 26,013 (37) 117,494SSP ‐ Liberty 159,707 160,811 1 442,311Urea 205,438 81,013 (61) 1,024,102Manufactured Vol's 950,064 944,802 (1) 3,001,580Total Vol's (excl Urea) 1,087,822 1,101,696 1 3,339,810Chambal Fert

DAP Imports 176,473 319,571 81 634,627NPK Imports 0 8,263MOP Imports 74,993 50,759 (32) 199,086SSP 54,211 55,277 2 187,717Urea 560,175 523,356 (7) 1,948,737GSFC DAP manufactured 99,290 108,998 10 302,666DAP Imports 24,709 63,214 156 52,954Complex Fertiliser Manufactured 93,187 89,195 (4) 348,823Ammonium Sulphate 92,534 83,877 (9) 315,912Urea 84,633 91,075 8 353,066Tata Chemicals DAP Imports 100,159 117,451 17 330,487DAP manufactured 2 2 0 82,848MOP Imports 23,184 27,666 19 123,206Complex Fertiliser Manufactured 132,717 112,941 (15) 509,384SSP 46,425 44,331 (5) 197,055Urea 340,489 338,413 (1) 1,243,157Zuari Industries DAP Imports 84,099 82,051 (2) 206,114DAP manufactured 79,190 11,857 (85) 157,448MOP Imports 63,836 52,976 (17) 224,016Complex Fertiliser Manufactured 105,865 109,509 3 487,049Complex Fertiliser (imports) 97 0SSP 1,344 7,329 445 5,580Urea 63,925 130,342 104 360,562Industry NPK imports 139,512 196,754 41 327,838DAP Imports 1,525,992 2,078,561 36 4,040,178MOP Imports 981,831 811,663 (17) 2,784,095NPK Mfg 2,443,784 2,621,332 7 8,340,026DAP Mfg 1,052,119 744,787 (29) 3,549,096SSP 1,217,303 1,229,339 1 4,197,108Urea 7,748,020 8,459,264 9 31,907,280Total 15,108,561 16,141,700 7 55145621Manufactured P&K Vol's 4,713,206 4,595,458 (2) 16,086,230Traded P&K Vol's 2,647,335 3,086,978 17 7,152,111

Source: Department of Fertilisers, PhillipCapital India Research

Chambal: 0.5mmt urea volume run‐rate continues in Q2FY16

Coromandel: Although production volumes continue to suffer due to lower availability of phosphoric acid, the run‐rate has improved qoq

Zuari: Improved phosphoric acid availability, uninterrupted urea production, and commissioning of SSP plants support volume growth. However, weakening P&K spreads and delayed subsidy reimbursements will weigh on overall profits

Industry: Urea growth continues to be robust. P&K manufacturing should improve with higher phosphoric acid availability, but higher trading remains a cause of concern


Global fertiliser price outlook timid following balanced supply: IFA reports indicate global urea market has entered an era of oversupply after 2015, led by unprecedented expansion in low‐cost ME, Africa (MEA) and US, Brazil and India. Competition among traditional exporters in the MEA, China, and FSU will intensify, resulting in price pressure. Also, Morocco, China, and Saudi Arabia are expected to see large capacity addition in phosphoric acid — as a result, prices could remain under pressure. World phosphoric acid potential supply/demand balance (in mmt) 2013 2014 2015 2016E 2017ESupply Capacity 54.6 57.2 58.7 60.3 63.7Potential Supply 45.5 46.9 48.5 50.2 52Demand Fertiliser Demand 36.1 37.1 38.1 39 39.8Non‐fertiliser Use 5.2 5.4 5.5 5.7 5.8Distribution Losses 0.8 0.8 0.9 0.9 0.9Total Demand 42.1 43.3 44.5 45.5 46.5Potential Balance 3.5 3.6 4 4.7 5.5% of Supply 8% 8% 8% 9% 10%Source: Industry, PhillipCapital India Research

World urea (potential supply/demand balance) (in mmt) 2013 2014 2015 2016E 2017ESupply Capacity 198.4 207 214.6 221.3 236.3Potential Supply 182.1 188.6 195.3 202.3 207.4Demand Fertiliser Demand 143.2 147.6 151.4 154.4 157.4Non‐fertiliser Use 28.6 30.5 33.6 36.1 37.7Total Demand 171.8 178.1 184.9 190.6 195.2Potential Balance 10.3 10.5 10.4 11.7 12.2% of Supply 5.7% 5.6% 5.3% 5.8% 5.9%Source: Industry, PhillipCapital India Research


Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL ‐15% > to < +15% Target price is less than +15% but more than ‐15%

SELL <= ‐15% Target price is less than or equal to ‐15%.

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Jakarta 10220, Indonesia Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809

www.phillip.co.id

CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd. No 550 Yan An East Road, Ocean Tower Unit 2318

Shanghai 200 001 Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940

www.phillip.com.cn

THAILAND: Phillip Securities (Thailand) Public Co. Ltd. 15th Floor, Vorawat Building, 849 Silom Road,

Silom, Bangrak, Bangkok 10500 Thailand Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921

www.phillip.co.th

FRANCE: King & Shaxson Capital Ltd. 3rd Floor, 35 Rue de la Bienfaisance

75008 Paris France Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017

www.kingandshaxson.com

UNITED KINGDOM: King & Shaxson Ltd. 6th Floor, Candlewick House, 120 Cannon Street

London, EC4N 6AS Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835

www.kingandshaxson.com

UNITED STATES: Phillip Futures Inc. 141 W Jackson Blvd Ste 3050

The Chicago Board of Trade Building Chicago, IL 60604 USA

Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA: PhillipCapital Australia Level 37, 530 Collins Street

Melbourne, Victoria 3000, Australia Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309

www.phillipcapital.com.au

SRI LANKA: Asha Phillip Securities Limited Level 4, Millennium House, 46/58 Navam Mawatha,

Colombo 2, Sri Lanka Tel: (94) 11 2429 100 Fax: (94) 11 2429 199

www.ashaphillip.net/home.htm

INDIA: PhillipCapital (India) Private Limited No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

Management(91 22) 2300 2999

Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6667 9946(91 22) 6667 9735

Research Engineering, Capital Goods Midcap

Dhawal Doshi (9122) 6667 9769 Jonas Bhutta (9122) 6667 9759 Amol Rao (9122) 6667 9952Nitesh Sharma, CFA (9122) 6667 9965 Hrishikesh Bhagat (9122) 6667 9986

Portfolio StrategyAgri Inputs Infrastructure & IT Services Anindya Bhowmik (9122) 6667 9764Gauri Anand (9122) 6667 9943 Vibhor Singhal (9122) 6667 9949

Deepan Kapadia (9122) 6667 9992 TechnicalsBanking, NBFCs Subodh Gupta, CMT (9122) 6667 9762Manish Agarwalla (9122) 6667 9962 Logistics, Transportation & MidcapPradeep Agrawal (9122) 6667 9953 Vikram Suryavanshi (9122) 6667 9951 Production ManagerParesh Jain (9122) 6667 9948 Ganesh Deorukhkar (9122) 6667 9966

MetalsConsumer, Media, Telecom Dhawal Doshi (9122) 6667 9769 Database ManagerNaveen Kulkarni, CFA, FRM (9122) 6667 9947 Yash Doshi (9122) 6667 9987 Deepak Agarwal (9122) 6667 9944Jubil Jain (9122) 6667 9766Manoj Behera (9122) 6667 9973 Oil & Gas Editor

Sabri Hazarika (9122) 6667 9756 Roshan Sony 98199 72726CementVaibhav Agarwal (9122) 6667 9967 Pharma Sr. Manager – Equities Support

Surya Patra (9122) 6667 9768 Rosie Ferns (9122) 6667 9971Economics Mehul Sheth (9122) 6667 9996Anjali Verma (9122) 6667 9969

Sales & Distribution Ashvin Patil (9122) 6667 9991 Sales Trader Zarine Damania (9122) 6667 9976Shubhangi Agrawal (9122) 6667 9964 Dilesh Doshi (9122) 6667 9747 Kishor Binwal (9122) 6667 9989 Suniil Pandit (9122) 6667 9745Sidharth Agrawal (9122) 6667 9934 ExecutionBhavin Shah (9122) 6667 9974 Mayur Shah (9122) 6667 9945

Corporate Communications

Vineet Bhatnagar (Managing Director)

Jignesh Shah (Head – Equity Derivatives)

Automobiles


Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in

this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co‐managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report: Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of thecompany(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No4 PCIL or its affiliates have managed or co‐managed in the previous twelve months a private or public offering of securities for the

company(ies) covered in the Research report No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.


Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. The recipient should carefully consider whether trading/investment is appropriate for the recipient in light of the recipient’s experience, objectives, financial resources and other relevant circumstances. PCIPL and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by the recipient. The recipient is further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek trading/investment advice before investing. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PCIPL and any of its employees, directors, associates, group entities, affiliates are not inducing the recipient for trading/investing in the financial market(s). Trading/Investment decision is the sole responsibility of the recipient.

For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.‐regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.

This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by the U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated, and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor.

In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Marco Polo Securities Inc. ("Marco Polo"). Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

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