INSTITUTIONAL EQUITY RESEARCH Cummins India (KKC IN) …

INSTITUTIONAL EQUITY RESEARCH

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

Please see penultimate page for additional important disclosures. PhillipCapital (India) Private Limited. (“PHILLIPCAP”) is a foreign broker-dealer unregistered in the USA. PHILLIPCAP research is prepared by research analysts who are not registered in the USA. PHILLIPCAP research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt

Securities Inc, an SEC registered and FINRA-member broker-dealer. Powered by EQUITEC

10 September 2021

BUY (Maintain) CMP RS 1,044 TARGET RS 1,180 (+13%)

SEBI CATEGORY: MID CAP

COMPANY DATA O/S SHARES (MN) : 277 MARKET CAP (RSBN) : 289 MARKET CAP (USDBN) : 3.9 52 - WK HI/LO (RS) : 1,065 / 425 LIQUIDITY 3M (USDMN) : 18 PAR VALUE (RS) : 2

SHARE HOLDING PATTERN, % Jun 21 Mar 21 Dec 20

PROMOTERS: 51.0 51.0 51.0

DII : 24.6 26.5 27.5

FII: 11.7 10.9 9.0

OTHERS: 12.7 11.6 12.5

PRICE PERFORMANCE, %

1MTH 3MTH 1YR

ABS 10.5 24.3 121.9

REL TO BSE 3.6 12.9 71.8

PRICE VS SENSEX

KEY FINANCIALS

Rs mn FY22E FY23E FY24E

Net Sales 54,093 61,542 67,686

EBITDA 7,971 9,615 10,989

Net Profit 8,904 8,914 10,094

EPS, Rs 28 32 36

PER, x 34.4 30.3 26.8

EV/EBITDA, x 32.3 26.6 23.0

PBV, x 5.6 5.3 4.9

ROE, % 19.3 18.0 19.0

Jonas Bhutta, Research Analyst +91-98192 22287 [email protected]

Sandesh Shetty, Research Associate (+9189833 86423) [email protected]

Cummins India (KKC IN) Takeaways from management interaction

INDIA | CAPITAL GOODS | Company Update We recently interacted with the management of Cummins India (KKC) and below are the highlights from our discussion.

Management is witnessing sequential improvement in demand both in the domestic and export markets.

Commentary on domestic markets

Enquires from the real estate sector have been strong for the past three quarters. The second wave did not deter optimism amongst developers. However, deliveries are yet to see a meaningful pick up. Segments such as data centres and healthcare continue to drive demand in the powergen segment.

Construction and mining end markets lead the growth in Industrial segment. Company has witnessed clients changing their preference to higher horse power dumper trucks in the mining vertical. Upside from increased pull through from global construction equipment (CE) OEM’s should be gradual and visible in the medium term.

Export markets

Demand from commodity linked countries is picking up and is supported by stable demand from South East Asia for nodes wherein KKC is the feeder factory for the group.

New product launches

New product launches in FY22 were across multiple segments such as rental and fire fighting in exports, data centres, railways, marine and agri in the domestic.

Most of the new product launches in the past four years were to address specific client need in segments which were catered to by standard solutions. So, while this did not expand KKC’s opportunity pie but helped increase share in end markets with customised solutions.

QSK-60 G-23 engine was localised specifically to meet the growing demand from the data centre market. The manufacturing line for this product rests in CTIL (unlisted group entity). However, with localisation KKC has increased its share of value in the product.

Supply chain related

Supply chain disruptions caused by covid have seen week on week improvement and has reached to 85% of full potential in most regions versus 75%-80% in 1QFY22.

Challenges due on semiconductor shortage remain. However, being part of the global supply chain of Cummins Inc allows KKC to secure allocation better than a standalone entity. Management expects unavailability of containers to persist for remainder of FY22.

Margin related

Cost reduction programmes do not yield immediate gains when commodity prices rise sharply as any change at a component level in an engine triggers a testing protocol. Hence KKC is addressing the issue of higher commodity costs through tactical price increases.

Management could not make a definite assessment to our query on whether cost absorptions by engine manufacturers on account of sharp increase in cost of gensets on adoption of CPCB 4+ norms will offset any gains from lower fixed costs and operating leverage in FY23E.

Our take Management commentary was largely in sync with that post 1QFY22 results. Though incrementally confidence on demand has only improved. We believe KKC has the potential to surprise on the upside even beyond the recovery phase. Positive management commentary aside the market dynamics of global consolidation, robust tailwinds to finally grow exports beyond the FY15 peak and multiple margin levers should lead to a 18% CAGR in FY20-24 core earnings. While we acknowledge that valuations (19% in 6M) price in the recovery thesis and should now only react to meaningful earnings surprise, which we believe should start showing up from 2HFY22. We maintain BUY with a Rs 1180 target price.

20

50

80

110

140

170

Sep-18 Sep-19 Sep-20 Sep-21

KKC IN BSE Sensex


CUMMINS INDIA COMPANY UPDATE

Our thesis in charts and tables Cummins is good recovery play with high correlation to IIP… … and industry wide capacity utilization

Source: PhillipCapital India Research, Bloomberg, Company Source: PhillipCapital India Research, Bloomberg, Company

Commercial and…

Source: PhillipCapital India Research, Knight Frank

…Residential real estate market still should progressively revive

Source: PhillipCapital India Research, Knight Frank

Despite weakness in real estate sales of high HP engines has held up…

Source: PhillipCapital India Research, Company

…aided by growing demand from data centers, which should account for 11%-13% of KKC’s Powergen sales

FY20 FY22E FY23E FY24E FY25E FY26E

Net IT load (MW) cap add 60 200 250 250 275 300

PUE (x) 1.6 1.6 1.6 1.6 1.6 1.6

Gross load (MW) 96 320 400 400 440 480

Absorption rate (%) 75% 75% 75% 75% 75% 75%

Annual demand (MW) 72 240 300 300 330 360

12M lead time to order 100 300 300 330 360 ASP (Rsmn/MW) 9 10 10 10 10 Total mkt size (Rs mn) 900 3,000 3,000 3,300 3,600 KKC's market share 70% 70% 70% 70% 70%

KKC's revenue from DC's (Rs mn) 630 2,100 2,100 2,310 2,520 % of domestic PG sales 4% 13% 11% 11% 11%

Source: PhillipCapital India Research, JLL

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

18%

FY9

5

FY9

7

FY9

9

FY0

1

FY0

3

FY0

5

FY0

7

FY0

9

FY1

1

FY1

3

FY1

5

FY1

7

FY1

9

FY2

1

IIP % yoy (LHS) Cummins Domestic sales % yoy

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

50

55

60

65

70

75

80

85

FY0

9

FY1

0

FY1

1

FY1

2

FY1

3

FY1

4

FY1

5

FY1

6

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

CU (%) Capacity utilization (%)

Cummins Domestic sales % yoy

791.4

806.4

15.4%

16.6%

13.0%

13.5%

14.0%

14.5%

15.0%

15.5%

16.0%

750

755

760

765

770

775

780

785

790

795

800

2020 1H 2021 2020 1H 2021

Stock (mn sq ft) Vacancy (%)

10.1 10.9

16.7 16.9

15.5

16.0

16.5

17.0

4

5

6

7

8

9

10

11

12

2020 1H 2021 2020 1H 2021

Quarters-to-sell Age of unsold inventory

40%

45%

50%

55%

60%

65%

70%

75%

80%

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

4Q

FY1

9

1Q

FY2

0

2Q

FY2

0

3Q

FY2

0

4Q

FY2

0

1Q

FY2

1

2Q

FY2

1

3Q

FY2

1

4Q

FY2

1

1Q

FY2

2

Average HHP+HD % of PG sales



Cummins is a significant supplier of engines to the construction equipment industry, which is looking to pivot to exports after recent upgrade in emission norms to BS IV (CEV) which are in line with global standards

Company Product No. of Models

Models with Cummins Engines Key Competitors

JCB Excavators 14 6 JCB, Kirloskar

Tata Hitachi Construction Excavator 11 5

Isuzu, Yanmar, MHI, Tata Mining Excavators 9 4

Backhoe Loaders 2 1

SANY Heavy Industry Excavators 23 4 Yanmar, Kubota, Isuzu, SANY

Mitsubish, WEICHAI Motor Grader 4 3

Port Machinery 25 6

L&T Construction Equipment Excavators 17 1 Kirloskar, M&M, Ashok Leyland,

Komatsu

Hyundai Construction Equipment Construction Excavators 9 3

Kubota, Yanmar, Kirloskar,Hyundai Mining Excavators 6 4

Diesel Forklifts 8 3


There is significant headroom for CE OEM’s to scale up their exports as demonstrated by JCB

JCB Hitachi Komatsu Sany Hyundai

India sales (Rs mn) 1,00,269 33,121 7,340 15,367 13,902

% Exports 17% 3% 1% 6% 12%

Exports % of global sales 8% 0.2% na 0.1% 1.1%

Source: PhillipCapital India Research, MCA

Scenario analysis: Likely impact on Powergen sales if KKC’s share in QSK-60 engines were to increase from current levels

Rs mn FY15 FY16 FY17 FY18 FY19 FY20

CTIL Engine sales 2,202 2,426 3,937 6,353 12,043 10,410

CIL's sales to CTIL 298 300 532 1,017 2,138 1,814

% of CTIL engine sales 14% 12% 14% 16% 18% 17%

QSK-60 % of CTIL's engine sales 33% 35% 37% 38%

QSK -60 Sales 1,300 2,224 4,456 3,956

CIL's supply of QSK-60 components 176 356 791 689

Scenario-1 - CIL's share 25%

CIL's supply of QSK-60 components 989

% impact on CIL's FY22E PG sales 2%


CIL's supply of QSK-60 components 1,187



CIL's supply of QSK-60 components 1,385





As global recovery precedes domestic exports should sequentially improve


Continued strength in relatively higher margin high HP exports was a positive in 1QFY22


Roll out of 5G services across Asia is likely to be a key driver of demand for the next 2-3 years

Source: The Economist, Ookla, PhillipCapital India Research

KKC is looking to double exports to North America on back of product certifications and should benefit from infra spending over next five years

Source: PhillipCapital India Research, WSJ

34

%

31

%

30

%

25

%

25

%

26

%

26

%

25

%

26

%

35

%

27

%

21

%

26

%

0%

10%

20%

30%

40%

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

4Q

FY1

9

1Q

FY2

0

2Q

FY2

0

3Q

FY2

0

4Q

FY2

0

1Q

FY2

1

2Q

FY2

1

3Q

FY2

1

4Q

FY2

1

1Q

FY2

2

Exports (% of Sales)

40%

45%

50%

55%

60%

65%

1Q

FY1

7 2

QFY

17

3Q

FY1

7 4

QFY

17

1Q

FY1

8 2

QFY

18

3Q

FY1

8 4

QFY

18

1Q

FY1

9 2

QFY

19

3Q

FY1

9 4

QFY

19

1Q

FY2

0 2

QFY

20

3Q

FY2

0 4

QFY

20

1Q

FY2

1 2

QFY

21

3Q

FY2

1 4

QFY

21

1Q

FY2

2

Average HHP+HD % of Export sales

20%

13%

12%

12%

10%

9%

7%

5%

4%3%

3%2%

0% Roads, bridges and major projects

Power infrastructure

Passenger and freight rail

Broadband

Water infrastructure

Resiliency

Public Transport

Airports

Environmental remediation

Ports and waterways

Electric Vehicles

Road Safety

Reconnecting communities



Cummins has managed gross margins well, in line with long term average despite recent decline in exports


Cummins has taken calibrated price hikes that should support gross margins going forward


Most of Cummins’ margin contraction in FY20-21 was on back of negative operating leverage…


…we see scope for margin surprise as volumes pick up and expectations are relatively subdued…

Source: PhillipCapital India Research, Company, Bloomberg

…this should aid a 19% CAGR in FY20-24E in core earnings…


10%

15%

20%

25%

30%

35%

40%

45%

25%

27%

29%

31%

33%

35%

37%

39%

41%

FY0

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FY0

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FY1

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FY1

6

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7

FY1

8

FY1

9

FY2

0

FY2

1

Gross margin (%) Avg GM (FY01-21) Exports % of sales (RHS)

20%

25%

30%

35%

40%

45%

20,000

25,000

30,000

35,000

40,000

45,000

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

4Q

FY1

9

1Q

FY2

0

2Q

FY2

0

3Q

FY2

0

4Q

FY2

0

1Q

FY2

1

2Q

FY2

1

3Q

FY2

1

4Q

FY2

1

1Q

FY2

2

(Rs/Tn) Avg Pig iron price (Rs/Tn)

Gross Margin (%)

Exports % of sales

8.8% 8.5% 9.8% 9.6% 10.9% 11.4%

2.5% 2.4%2.5% 2.5%

3.2% 3.4%

9.3% 8.8%9.2% 8.8%

9.2% 8.1%

20.6%19.7%

21.5% 20.9%

23.3% 22.8%

0%

5%

10%

15%

20%

25%

FY16 FY17 FY18 FY19 FY20 FY21

Employee cost % of sales Tech fees & Royalty Other exp

10%

12%

14%

16%

18%

20%

FY1

1

FY1

2

FY1

3

FY1

4

FY1

5

FY1

6

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2E

FY2

3E

EBITDA margin (%)

EBITDA margin (%) - Consensus est.

Avg EBITDA margin (FY05-21)

5.7

5.7

4.9

5.2

3.5

3.3

5.1

6.1

7.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Core PAT (Rs bn)

19% CAGR-11% CAGR



…and 13% in reported earnings


ROE’s…


…and ROIC’s should expand on back of higher margins…


…coupled controlled NWC intensity should lead to significant cash generation


We see upside risks to consensus estimates

Estimates change __PC Est. __ __Consensus__ __Difference__

(Rs bn) FY22E FY23E FY22E FY23E FY22E FY23E

Revenues 54.8 62.3 52.7 60.6 4% 3%

EBITDA 8.0 9.6 7.5 9.2 6% 5%

Recurring PAT 7.9 8.9 7.5 8.7 5% 3%

Source: PhillipCapital India Research, Bloomberg

7.5

7.4

6.7

7.2

6.2

6.2

7.9

8.9

10

.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0


Recurring PAT (Rs bn)

-5% CAGR13% CAGR

22

.6%

20

.6%

17

.3%

17

.8%

14

.8%

14

.4%

17

.1%

18

.0%

19

.0%

19

.9%

20

.1%

20

.0% 23

.8%

18

.6%

18

.2%

25

.7% 29

.1%

31

.6%

0%

5%

10%

15%

20%

25%

30%

35%


RoE (%) Core RoE (%)

20

.0%

19

.7%

18

.5%

21

.0%

15

.5%

16

.0%

24

.8% 28

.2%

30

.6%

0%

5%

10%

15%

20%

25%

30%

35%

FY1

6

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2E

FY2

3E

FY2

4E

RoIC (%)1

.1 1.2

1.1

0.9

1.3

1.5

1.2

1.0 1.1

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

FY1

6

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2E

FY2

3E

FY2

4E

OCF to EBITDA (x)



Cummins has serially disappointed in the past five years, this we believe should change in FY22-24 with improving demand scenario and strategic initiatives yielding benefits


Stock currently trades at 30x PE on reported earnings…


…and 39x PE on core earnings on 2-year forward consensus estimates, which have upside risks


SOTP Valuation

Cummins - SOTP value EPS (Rs) EPS (Rs) Target Target CAGR

(Rs per share) FY21 FY22 FY23E FY24E Sept'2023 PE (x) Price (Rs) FY21-24E

Core EPS 12.8 12.1 18.4 22.0 23.7 45.0 1,066 28%

Investment properties 3.9 4.2 4.4 4.5 4.6 12.5 57 4%

Other income ex-rental 5.5 6.0 5.6 5.7 6.0 10.0 60 1%

Total 22.2 22.3 28.4 32.2 34.3 34.5 1,184 18%

Source: PhillipCapital India Research

15

18

21

24

27

30

33

36

Jun

-12

Dec

-12

Jun

-13

Dec

-13

Jun

-14

Dec

-14

Jun

-15

Dec

-15

Jun

-16

Dec

-16

Jun

-17

Dec

-17

Jun

-18

Dec

-18

Jun

-19

Dec

-19

Jun

-20

Dec

-20

Jun

-21

Cummins consensus EPS trend FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-17

Mar

-18

Mar

-19

Mar

-20

Mar

-21

Cummins 2Y fwd PE (consensus) Avg 20.6x

+1SD 24.9x -1SD 16.2x

0

5

10

15

20

25

30

35

40

45

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-17

Mar

-18

Mar

-19

Mar

-20

Mar

-21

2Y fwd Core PE Avg 24.6x+1SD 30.4x -1SD 18.8x



Coverage Universe

Company Size 1 Yr Fwd PE Reco Upside

Larsen & Toubro L 20 Buy 11%

Siemens India L 61 Neutral -19%

BHEL M 20 SELL -50%

Bharat Electronics M 18 Buy 9%

Cummins India M 32 BUY 13%

ABB India M 71 Neutral -16%

Thermax M 40 Sell -19%

VA Tech Wabag S 13 Buy 24%

GE T&D India S 25 BUY 50%

Engineers India S 10 Sell 0%

KEC International S 14 Buy 17%

Bharat Dynamics Ltd S 12 Buy 21%

Cochin Shipyard S 12 Neutral 0%

Kalpataru Power S 8 Buy 33%

Source: Company, PhillipCapital India Research (Note: L/M/S = Large/Mid/Small Cap)



Financials Income Statement Y/E Mar, Rs mn FY21 FY22E FY23E FY24E

Net sales 42,561 54,093 61,542 67,686

Growth, % (15.9) 27.1 13.8 10.0

Other operating income 732 732 768 806

Cost of Goods Sold 27,606 35,592 40,234 44,226

Employee expenses 4,926 5,462 5,840 6,239

Other Operating expenses 4,965 5,799 6,623 7,040

EBITDA (Core) 5,795 7,971 9,615 10,989

Growth, % (1.2) 37.6 20.6 14.3

Margin, % 13.4 14.5 15.4 16.0

Depreciation 1,255 1,286 1,346 1,411

EBIT 4,540 6,685 8,269 9,577

Growth, % (2.9) 47.3 23.7 15.8

Margin, % 10.5 12.2 13.3 14.0

Interest paid 162 89 101 110

Other Income 3,702 3,579 3,797 4,081

Non-recurring Items - - - -

Pre tax profit 8,080 10,175 11,965 13,549

Tax provided 1,901 2,307 3,051 3,455

Profit after tax 6,179 7,868 8,914 10,094

Minorities/JV shares - - - -

Net Profit 6,179 8,904 8,914 10,094

Growth, % 0.2 27.3 13.3 13.2

Net Profit (adjusted) 6,177 8,904 8,914 10,094

Unadj. shares (m) 277 277 277 277

Wtd avg shares (m) 277 277 277 277

Balance Sheet Y/E Mar, Rs mn FY21 FY22E FY23E FY24E

Cash & bank 9,652 13,051 14,869 18,177

Marketable securities at cost - - - -

Debtors 10,745 12,917 14,169 15,387

Inventory 5,578 6,338 7,165 7,876

Loans & advances - - - -

Other current assets 4,174 4,812 5,225 5,567

Total current assets 30,149 37,118 41,428 47,007

Investments 3,692 3,692 3,692 3,692

Gross fixed assets 31,978 33,116 35,026 36,430

Less: Depreciation (10,126) (11,411) (12,757) (14,168)

Add: Capital WIP 1,275 1,138 478 74

Net fixed assets 23,128 22,842 22,747 22,335

Non - current assets - - - -

Total assets 56,969 63,653 67,867 73,035

Trade Payables 7,293 8,776 9,370 10,299

Provisions 2,199 2,385 2,505 2,605

Total current liabilities 11,922 14,620 15,711 16,936

Non - current liabilities 980 980 980 980

Total liabilities 12,902 15,600 16,691 17,916

Paid - up capital 554 554 554 554

Reserves & surplus 43,513 47,499 50,622 54,564

Minorities - - - -

Shareholders’ equity 44,068 48,053 51,177 55,118

Total equity & liabilities 56,969 63,653 67,867 73,035

Cash Flow Y/E Mar, Rs mn FY21 FY22E FY23E FY24E

Pre-tax profit 8,080 11,498 11,965 13,549

Depreciation 1,255 1,286 1,346 1,411

Chg in working capital 1,028 (872) (1,401) (1,045)

Total tax paid (832) (2,307) (3,051) (3,455)

Cash flow from operating activities 7,879 6,577 7,036 8,456

Capital expenditure (778) (1,000) (1,250) (1,000)

Chg in investments (75) - - -

Chg in marketable securities - - - -

Cash flow from investing activities 155 1,830 673 1,114

Free cash flow 7,100 5,577 5,786 7,456

Equity raised/(repaid) - - - -

Debt raised/(repaid) (4,697) - - -

Dividend (incl. tax) (3,881) (4,918) (5,791) (6,152)

Cash flow from financing activities (8,633) (5,008) (5,891) (6,262)

Net chg in cash (599) 3,399 1,818 3,308

Valuation Ratios FY21 FY22E FY23E FY24E

Per Share data

EPS (INR) 22.3 28.4 32.2 36.4

Growth, % (1.8) 27.3 13.3 13.2

Book NAV/share (INR) 159.0 173.4 184.6 198.8

FDEPS (INR) 22.3 32.1 32.2 36.4

CEPS (INR) 26.8 36.8 37.0 41.5

CFPS (INR) 28.4 23.7 25.4 30.5

DPS (INR) 15.0 20.9 20.9 23.7

Return ratios

Return on assets (%) 10.6 14.8 13.6 14.3

Return on equity (%) 14.4 19.3 18.0 19.0

Return on capital employed (%) 7.5 11.0 12.2 13.2

ROIC (%) 10.5 16.2 18.7 21.0

Turnover ratios

Asset turnover (x) 1.8 2.4 2.7 3.0

Sales/Net FA (x) 1.8 2.4 2.7 3.0

Working capital/Sales (x) 2.3 2.4 2.4 2.3

Receivable days 93.0 78.8 79.3 78.8

Inventory days 47.7 39.7 39.5 40.1

Payable days 60.1 53.5 53.1 52.4

Working capital days 156.3 151.8 152.5 162.2

Liquidity ratios

Current ratio (x) 2.5 2.5 2.6 2.8

Quick ratio (x) 1.9 2.0 2.1 2.2

Interest cover (x) 28.1 75.0 82.1 86.9

Total debt/Equity (x) 0.0 0.0 0.0 0.0

Net debt/Equity (x) (0.2) (0.3) (0.3) (0.3)

Valuation

PER (x) 43.8 34.4 30.3 26.8

PEG (x) yoy growth (24.0) 1.1 2.3 2.0

Price/Book (x) 6.1 5.6 5.3 4.9

EV/Net sales (x) 6.1 4.8 4.2 3.7

EV/EBITDA (x) 45.0 32.3 26.6 23.0

EV/EBIT (x) 57.5 38.5 30.9 26.4

Source: Company, PhillipCapital India Research



Stock Price, Price Target and Rating History

N (TP 775)N (TP 790)

N (TP 825)

N (TP 675)

N (TP 545)

N (TP 625)

N (TP 495)N (TP 437)

N (TP 437)N (TP 495)

N (TP 690)

N (TP 805)

N (TP 860)

B (TP 1180)

0

200

400

600

800

1000

1200

A-18 O-18 D-18 J-19 M-19 A-19 J-19 J-19 S-19 N-19 D-19 F-20 M-20 M-20 J-20 A-20 S-20 N-20 D-20 F-21 M-21 M-21 J-21 A-21

Source: 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. We have different threshold for large market capitalisation stock and Mid/small market capitalisation stock. The categorisation of stock based on market capitalisation is as per the SEBI requirement.

Large cap stocks Rating Criteria Definition

BUY >= +10% Target price is equal to or more than 10% of current market price

NEUTRAL (10% > to < +10% Target price is less than +10% but more than (10%

SELL <= (10% Target price is less than or equal to (10%.

Mid cap and Small cap stocks 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%.

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 the company(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 No

4 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. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.

Kindly note that past performance is not necessarily a guide to future performance.

For Detailed Disclaimer: Please visit our website www.phillipcapital.in IMPORTANT DISCLOSURES FOR U.S. PERSONS 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. PhillipCapital (India) Pvt Ltd. is authorized to engage in securities activities in India. PHILLIPCAP is not a registered broker(dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a(6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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.

Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Rosenblatt Securities Inc, 40 Wall Street 59th Floor, New York NY 10005, a registered broker dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through PHILLIPCAP. Rosenblatt Securities Inc. accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor.

The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account. Ownership and Material Conflicts of Interest Rosenblatt Securities Inc. or its affiliates does not ‘beneficially own,’ as determined in accordance with Section 13(d) of the Exchange Act, 1% or more of any of the equity securities mentioned in the report. Rosenblatt Securities Inc, its affiliates and/or their respective officers, directors or employees may have interests, or long or short positions, and may at any time make purchases or sales as a principal or agent of the securities referred to herein. Rosenblatt Securities Inc. is not aware of any material conflict of interest as of the date of this publication

http://www.phillipcapital.in/



Compensation and Investment Banking Activities Rosenblatt Securities Inc. or any affiliate has not managed or co(managed a public offering of securities for the subject company in the past 12 months, nor received compensation for investment banking services from the subject company in the past 12 months, neither does it or any affiliate expect to receive, or intends to seek compensation for investment banking services from the subject company in the next 3 months. Additional Disclosures This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. Neither PHILLIPCAP nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report.

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Investing in any non(U.S. securities or related financial instruments (including ADRs) discussed in this research report may present certain risks. The securities of non(U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on such non(U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect within the United States.

The value of any investment or income from any securities or related financial instruments discussed in this research report denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related financial instruments.

Past performance is not necessarily a guide to future performance and no representation or warranty, express or implied, is made by PHILLIPCAP with respect to future performance. Income from investments may fluctuate. The price or value of the investments to which this research report relates, either directly or indirectly, may fall or rise against the interest of investors. Any recommendation or opinion contained in this research report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein.

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