INSTITUTIONAL EQUITY RESEARCH GE T&D India (GETD...

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.

GE T&D India (GETD IN)

Bottom cycle + Improving macros + New management =Trifecta?

INDIA | CAPITAL GOODS | Company Update

3 July 2020

FY20 - a forgettable year GETD’s FY20 performance was impacted by multiple challenges such as a lower opening orderbook (-10% yoy), order cancellations, slow moving orders, execution of low margin/loss making orders leading to provisions for warranty, bad debt and liquidated damages (8% of sales). Consequently, it reported an EBITDA and net loss of Rs 869mn/ Rs 1.4bn. NWC intensity rose to 25% of sales (vs. 20% yoy) and net debt increased to Rs 4.3bn (vs. Rs 200mn yoy). Catalysts falling into place for growth in FY22-23

We believe GETD’s financial performance has bottomed in FY20 and expect lower losses in FY21. Growth in FY22-23 should be driven by (i) a cyclical improvement in T&D ordering (ii) leading to an increase in addressable market, (iii) lower competition in the current upcycle, (iv) strength in local manufacturing of global T&D products and (v) a new management team focused on gaining market share, reducing costs and improving the balance sheet.

T&D ordering to witness a sharp uptick over next two years Based on our analysis, India’s T&D market shrank by 40% over FY17-20 as the national grid went live and on lack of any large anchor programs. However, over next two years we expect domestic ordering to grow by c.30% driven by GEC. We first highlighted opportunities from the GEC in early 2019 (Click here), since then Rs 120bn of orders have been awarded. More importantly, in the past six months Rs 410bn of projects have been added to the prospect list and these projects should be awarded in the next 12-18 months as issues pertaining to the backend solar power projects have been resolved. In addition, we had also identified a strong pipeline of projects in Bangladesh. While there has not been much progress in terms of awards in the past 12 months we believe the prospects (Rs 460bn) still remain potent opportunities for Indian T&D companies over the next three years though competition from Chinese players is a risk in that market.

GETD a pure play on this cyclical rebound with potential to gain market share GETD’s product portfolio is geared towards transmission equipment across the value chain - Transformers, HVDC, AIS/GIS substations, grid management software and stability products. We expect GETD’s addressable market to grow at 23% CAGR over FY20-22 based on the potential T&D ordering. Historically, GETD has had significant market share in high end products - 28% in HVDC and 24% in WAMS/SCADA. Its share in traditional products has also been decent - 17% in transformers and 9% in Substations. GETD should benefit from market share gains as clients become more selective due shorter execution cycle times, as international players with no manufacturing base, historically accounting for 5%-40% share, exit and weaker positioning of certain domestic equipment and EPC companies.

Upgrade to BUY with target price Rs 110 We upgrade GETD to BUY from Sell with a revised target price of Rs 110 (Rs 85 earlier). We position GETD as a tactical idea for investors looking for MNC’s with a strong product portfolio and market positioning offering an opportunity for a potential turnaround while the stock is unloved. We expect cash flows to improve on a controlled working capital turning the company net cash in FY23. ROE/ROIC’s of 18%/22% in FY23. While we do highlight that visibility of orders beyond FY23 is low. However, a potential to increase exports from the current c.17% of sales could be an off setter. In addition, we believe that the risk of flattening domestic market opportunity is adequately priced into current valuations (10x PE FY23) and our target multiple (15x), which is at a steep discount to valuations for MNC peers – APPSIL (18x PE) and Siemens Gas and Power segment (30x).

BUY (Upgrade) CMP RS 77 TARGET RS 110 (+45%)

SEBI CATEGORY: SMALL CAP

COMPANY DATA

O/S SHARES (MN) : 256

MARKET CAP (RSBN) : 22

MARKET CAP (USDBN) : 0.3

52 - WK HI/LO (RS) : 247 / 58

LIQUIDITY 3M (USDMN) : 0.1

PAR VALUE (RS) : 2

SHARE HOLDING PATTERN, %

Mar 20 Dec 19 Jun 19

PROMOTERS : 75.0 75.0 75.0

FII / NRI : 2.5 2.6 2.6

FI / MF : 14.7 14.6 14.5

NON PRO : 1.9 1.9 2.0

PUBLIC & OTHERS : 5.9 5.9 5.9

KEY FINANCIALS

Rs bn FY20 FY21E FY22E

Net Sales 31.59 25.15 35.57 EBIDTA -0.86 0.00 2.01 Net Profit -3.03 -1.20 0.41 EPS, Rs (5.4) (3.7) 3.0 PER, x nm nm 25.9 EV/EBIDTA, x nm 6,715 10.0 P/BV, x 0.8 0.9 0.6 ROE, % (11.1) (9.6) 8.0 Debt/Equity (%) 46.6 32.2 15.4

Jonas Bhutta, Research Analyst (+ 9122 6246 4119) [email protected] Vikram Rawat, Research Associate (+ 9122 6246 4120) [email protected] Sandesh Shetty, Research Associate (+ 9122 6246 4139) [email protected]

http://backoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_Capital_Goods_Update_-_TnD_Feb_2019_20190219113849.pdf

mailto:[email protected]



Page | 2 | PHILLIPCAPITAL INDIA RESEARCH

GE T&D INDIA COMPANY UPDATE

4QFY20 result highlights Top takeaways from 4QFY20 GETD reported a recurring loss of Rs 1.4bn (vs. Rs 260mn profit yoy) due to weak

execution, delayed deliveries, spike in warranty and LD provisions.

Revenue (Rs 6.6bn, -26% yoy) was 30%/20% below our/consensus expectations on the impact of a declining orderbook, lower contribution of HVDC project, deferment of sales due to lockdown in late March.

Gross margins collapsed -10pp yoy to 24.5% on project cost overruns, quality issues at the Naini transformer plant and covid led disruptions. Other expenses almost doubled due to c.Rs 1.8bn provisions on warranty, LD’s and bad debts. This led to an EBITDA loss (Rs 1.8bn) against our estimates of profit (Rs 655mn).

Order inflows (Rs 6.6bn, -33% yoy) due to order deferrals. Order book (Rs 59bn, -8% yoy) stood at 1.9x TTM sales.

In ability to ship out products and recover dues in March coupled with lower advances due to decline in new orders led to an increase in NWC intensity to 25% of sales vs. 20% yoy but was lower compared to 30% in 1HFY20.

FY20 OCF was –Rs 2.6bn vs. –Rs 3.6bn yoy.

Conference call takeaways

The new CEO’s, Mr Pitamber Shivnani (Ex- head of ABB India’s - Power Grids), focus is to strengthen the order book by increasing market share with profitable orders and improving working capital with a cash over revenue strategy.

Almost all its 75 sites are now operational with 60% activity levels compared to pre covid.

Pipeline of domestic T&D orders linked to GEC is robust but project awards have got delayed due to lockdown. Large opportunities in Bangladesh but Indian vendors facing competition from Chinese players. However, Indian companies should benefit from orders for projects funded by the Indian Exim bank.

Exports currently account for c.17% of sales. The management is looking at increasing exports. It is also looking at entering allied sectors such as electrical products for railways.

GE T&D India - Quarterly results

Y/E Mar, Rs mn Q4FY20 Q4FY19 Change yoy

Net Sales 6,642 8,953 -26% Raw Material (5,016) (5,844) -14% - % of sales 75.5% 65.3% 1025 bps Gross profit 1,626 3,109 -48% Gross margin (%) 24.5% 34.7% -1025 bps Employee cost (1,045) (836) 25% - % of sales 15.7% 9.3% 639 bps Other Expenses (2,388) (1,503) 59% - % of sales 36.0% 16.8% 1917 bps EBITDA (1,807) 770 -335% EBITDA Margin (%) -27.2% 8.6% -3581 bps Depreciation (175) (198) -12% EBIT (1,982) 572 -447% EBIT margins (%) -29.8% 6.4% -3623 bps Interest (158) (226) -30% Other Income 343 56 511% PBT (1,797) 402 -547% Tax 360 (141) -356% Effective tax rate (%) 20.0% 35.0% -1500 bps Recurring PAT (1,437) 261 -651% Recurring PAT margin (%) -21.6% 2.9% -2455 bps Exceptional (435) - na Reported PAT (1,871) 261 -817% Recurring EPS (Rs) (5.6) 1.0 -651%

Source: PhillipCapital India Research



Our thesis in charts and tables

GETD’s opening orderbook for FY20 was weak…

…impacting execution in addition to other headwinds such as order cancellations and slow moving projects…

Source: Company, PhillipCapital India Research

…coupled with poor sales mix and one time provisions pulled down EBITDA

NWC intensity also rose sharply…


…leading to deterioration in cash flows…

…turning the company net debt

Source: Company, PhillipCapital India Research, *EBITDA is negative or insignificant

81.3 79.7 81.2

71.3 64.0

1.0

1.5

2.0

2.5

0.0

15.0

30.0

45.0

60.0

75.0

90.0

FY15 FY16 FY17 FY18 FY19

(Rs bn) Order book Book to bill (x)

37.1 33.6

41.2 44.2

42.2

31.6

-30%

-20%

-10%

0%

10%

20%

30%

0.0

10.0

20.0

30.0

40.0

50.0

FY15 FY16 FY17 FY18 FY19 FY20

(Rs bn) Revenue % yoy

3.6

1.5

3.3 4.0

4.9

-0.9

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0


(Rs bn) EBITDA EBITDA margin (%)

20.1%

23.3%

15.0%

1.0%

20.0%

24.7%

0%

5%

10%

15%

20%

25%

30%


NWC % of Sales

5.7

-0.4

2.1

11.9

-2.3 -1.9

1.6 (0.3)

0.6

3.0

(0.5)

(2.2)

(3.0)

(1.5)

-

1.5

3.0

4.5

6.0

-6

-3

0

3

6

9

12

FY15 FY16 FY17 FY18 FY19 FY20*

(Rs bn) OCF pre-tax (Rs bn) OCF to EBITDA (x)

2.0

4.4 4.5

-4.3

0.2

4.3

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0


(Rs bn) Net debt



India’s T&D market declined by 40% in the past three years…

…mainly led by lower capex by PGCIL as the national grid went live…

Source: PGCIL, PhillipCapital India Research

…impacting orderbooks of T&D equipment companies

However, we now see a new upcycle in T&D projects over FY21-23 as orders for GEC are awarded

Source: Company, PGCIL, PhillipCapital India Research

Bangladesh too offers a large opportunity with Rs 458bn of capex planned over the next 3-4 years

Opportunity

(Rs bn) Upcoming

projects Ongoing projects Total

Funded by Indian LOC - 127 127

WB, ADB, AIIB, KfW 123 189 313

GOB & PGCB 10 8 18

Opportunity for Indian players 133 325 458

China funding 104 128 232

EDCF, South Korea 24 - 24

Total 261 452 713

GEC+Bangladesh should help cyclically revive the T&D market to FY17 peak levels

Source: PGCB, PhillipCapital India Research

566

302 257

341

0

100

200

300

400

500

600

FY17 FY18 FY19 FY20

(Rs bn) T&D India

283

82 35 28

174

183 187 190

109

36 35

123

0

100

200

300

400

500

600

FY17 FY18 FY19 FY20

(Rs bn) PGCIL State TBCB

84.9 81.2

34.1 28.9 25.5

51.9 58.9

37.5

14.6 23.0

0

20

40

60

80

100

ABB GE T&D KEC KPP Techno

(Rs bn) T&D order book FY17 FY20

408

170

274

78

115

0

100

200

300

400

500

600

GEC Dec'18 GECJul/Sep'19

Non-GEC Awarded Pendingopportunity

(Rs bn)

257 341

397 435

100 50

153 153

357 391

551 588

0

100

200

300

400

500

600

700

FY19 FY20 FY21 FY22

(Rs bn) T&D India PGCB



GETD’s addressable market within the opportunity pie should be c.40%

Historically, GETD has had a significant market share in high end products*

Source: PGCIL, PhillipCapital India Research; *Market share based PGCIL ordering over FY09-20

Players that accounted for c.35% market share in transformers in the past 10 years should not be aggressive in the current upcycle Transformers & Reactors Market share (%)

TBEA 19.8%

GETD 18.0%

ABB 8.3%

Siemens 4.6%

BHEL 5.6%

TRIL 4.2%

Toshiba 2.6%

Crompton 22.4%

Hyosung 6.7%

Baoding 5.8%

Others 2.0%

Total 100%

Similarly in substations players with c.30% historical share would be missing Substations Market share (%)

GETD 9.5%

Siemens 7.8%

Techno 8.1%

ABB 6.0%

L&T 4.7%

BHEL 4.5%

Crompton 1.8%

Hyosung 15.7%

New Northeast 8.1%

Pinggao 4.7%

Others 28.9%

Total 100%


Likewise for SVC & STATCOM’s FACTS (FSC, SVC, STATCOM) Market share (%)

Siemens 51%

Rongxin 40%

Hyosung 4%

GETD 3%

BHEL 2%

ABB 1%

Total 100%

Despite chances of lower competition in this upcycle our FY21-22 order inflow estimates for GETD do not bake in a major increase in market share


35%

43% 40%

0%

10%

20%

30%

40%

50%

PGCIL T&D ex-HVDC PGCIL T&D incl.HVDC

Our est. of GETD'sdom. addressable

mkt

40%

28% 24%

18%

9% 3% 0%

10%

20%

30%

40%

50%

Cir

cuit

Bre

ake

r

HV

DC

SCA

DA

, EM

S,C

MS,

DM

S,W

AM

S

Tran

sfo

rmer

& R

eact

or

Sub

stat

ion

s

FAC

TS(F

SC, S

VC

,ST

ATC

OM

)

17%

21%

0%

3%

6%

9%

12%

15%

18%

21%

24%

GETD's historical marketshare in PGCIL

Implied mkt sh on our FY21-22order inflow est.

GETD's market share



GETD has a strong local manufacturing presence across entire value chain of T&D equipment and technologies

S. no. Manufacturing Units Products and Services

1 Vadodara, Gujarat - Kotambi Village, Taluka Waghodia

- Power Transformers (upto 500MVA) and Shunt Reactors; - Converter transformers for HVDC applications (800 kV); - Rectifier Transformers for special application

2 Hosur, Tamil Nadu - SIPCOT Industrial Complex

Instrument Transformer which includes - Transformers up to 800kV; - Capacitive Voltage Transformers up to 1,200kV; - Line Traps up to 800kV; Condenser Bushings up to 420kV - Ultra high voltage testing laboratory up to 1,200 kV

3 Pallavaram, Tamil Nadu - Protection Relays (electro-mechanical and numerical); - Control and Protection Systems; -Substation Automation Systems

4 Padappai, Tamil Nadu - High Voltage Switchgears; Gas Insulated Switchgear (GIS); - Circuit Breakers; Disconnectors

5 Naini, Uttar Pradesh - Transformers upto 400kV (generator & auto transformers and shunt reactors), - Furnace Transformers; - Traction Transformers; Regulating Transformers

6 Noida, Uttar Pradesh - Assembly, integration and supply of automation cubicles; - Project management related to supply erection & commissioning of substations on turnkey basis - Customer services related to substation activities.


In the past two years (FY19-20) GETD has demonstrated its capability to win orders across the spectrum of clients Products Client

Central Transcos

765kV AIS and a new 400kV/220kV GIS at Bhuj for 2.5GW wind power under GEC PGCIL

500MVAr Static VAR Compensator (SVC) at Kurukshetra substation PGCIL

765kV GIS bays at Phagi in Jaipur for Solar parks energy evacuation PGCIL

Retrofitting & modernization of three 220kV substations in Jharkhand DVC

State Transcos & Discoms

400/220/66kV GIS substation in Shapar GETCO

220/33kV GIS substations at Heling, Chamba HPPTCL

220kV Substation augmentation & 220kV conductor stringing at Kangoo HPPTCL

SCADA/ADMS for the distribution operations in J&K JKPDD

220kV GIS substation at Vizhinjham & Ettumanoor, Kerala KSEB

Grid modernization to augment renewable energy RRVPNL

420/220/132kV Sub-station in Sahupuri, UP UPPTCL

132/33kV GIS substations in Ramnagar, Manbazaar & Birlarpur, West Bengal WBSETCL

Private Transcos

765kV Substation & reactors for Ghatampur Transmission system Adani

Extension of 765kV GIS at Vadodara and 765kV AIS at Lakadia in Gujarat Sterlite

Power Gencos, Industrial & Overseas

400kV AIS substation & Transformers at Bikaner for Solar Plant Avaada Power

400kV AIS switchyard for 600MW Solar ISTS project, Rajasthan Azure Power

220KV Switchyard at Bikaner (Rajasthan) Saurya Urja Co

400kV AIS switchyard at Khurja THDC

220kV GIS at Kochi Refinery BPCL

400/66 kV GIS substation at Bhatinda refinery HMEL

220kV GIS substation Vizag Refinery HPCL

220/33kV GIS substation for Ranchi Smart City project L&T

Revamping of existing rectifier control system of DC substation in Angul, Odisha NALCO

400kV Switchyard & Transformers for Summit Group, Bangladesh GE (Switzerland)




We expect GETD’s order inflows to grow over FY20-23E…

…leading to a higher orderbook and revenue visibility


Revenue growth from FY22-23 as FY21 execution would be impacted by Covid

Better sales mix coupled with lower raw material prices to aid gross margins in FY21…


…coupled with operating leverage should lead to a rebound in EBITDA margins…

…and help lower losses in FY21 and turnaround in FY22 with robust earnings


43.1

39.2 37.5

30.2

37.8

43.1 44.6

20.0

25.0

30.0

35.0

40.0

45.0

50.0

FY17 FY18 FY19 FY20 FY21E FY22E FY23E

(Rs bn) Order inflows

81.2

71.3 64.0

58.9

71.6 79.2

83.6

1.0

1.5

2.0

2.5

3.0

0.0

15.0

30.0

45.0

60.0

75.0

90.0


(Rs bn) Order book Book to bill (x)

41.2 44.2

42.2

31.6

25.2

35.6

40.2

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0.0

10.0

20.0

30.0

40.0

50.0


(Rs bn) Revenue % yoy

31.3% 31.9%

33.7%

27.8%

31.0% 31.5% 31.5%

25%

27%

29%

31%

33%

35%


Gross margin (%)

3.3 4.0 4.9

-0.9

0.0 2.0 3.4

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0


(Rs bn) EBITDA EBITDA margin (%)

1.4

2.4 2.3

-1.4 -1.0

0.8

1.9

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0


(Rs bn) Recurring PAT



NWC intensity should moderate from FY20 peak levels…

…as the new management focuses on cash collections…

Source: Company, PhillipCapital India Research, *EBITDA is negative or insignificant

…making GETD net cash in FY23

ROE/ROIC should improve on higher margins and controlled working capital


GETD’s valuations have sharply de-rated in the past four years

Valuations do not price in a turnaround in opportunities leading to a sharp rebound in earnings. We ascribe 15x PE to FY23E, a significant discount to average. Tactical BUY.

Source: Bloomberg, PhillipCapital India Research

15.0%

1.0%

20.0%

24.7%

21.5%

12.9% 14.0%

0%

5%

10%

15%

20%

25%

30%


NWC % of Sales

2.1

11.9

-2.3 -1.9

2.6 3.1 2.6

0.6

3.0

(0.5)

(2.2)

-

1.5 0.8

(3.0)

(1.5)

-

1.5

3.0

4.5

6.0

-6

-3

0

3

6

9

12

FY17 FY18 FY19 FY20* FY21E* FY22E FY23E

(Rs bn) OCF pre-tax (Rs bn) OCF to EBITDA (x)

4.5

-4.3

0.2

4.3

2.3 0.3

-0.8

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0


(Rs bn) Net debt Interest costs % of sales1

2.6

% 2

1.9

%

17

.9%

-11

.1%

-9.6

%

8.0

% 18

.1%

11

.6%

21

.0%

26

.5%

-9.7

%

-5.3

%

9.4

%

21

.7%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%


RoE (%) RoIC (%)

0

10

20

30

40

50

60

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-17

Mar

-18

Mar

-19

Mar

-20

GETD 1Y fwd PE (consensus) Avg 34.5x+1SD 43.6x -1SD 25.3x5yr Avg 37.6x

0

10

20

30

40

50

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-17

Mar

-18

Mar

-19

Mar

-20

GETD 2Y fwd PE (consensus) Avg 27.8x+1SD 34.3x -1SD 21.2x5yr Avg 29.6x



Financials Income Statement Y/E Mar, Rs mn FY20 FY21e FY22e FY23e

Net sales 31,587 25,155 35,570 40,235 Growth, % -25 -20 41 13 Total income 31,587 25,155 35,570 40,235 Raw material expenses -22,807 -17,351 -24,358 -27,552 Employee expenses -4,205 -4,027 -4,219 -4,419 Other Operating expenses -5,439 -3,773 -4,980 -4,828 EBITDA (Core) -863 3 2,014 3,435 Growth, % (117.8) nm 61,320.3 70.6 Margin, % (2.7) 0.0 5.7 8.5 Depreciation -784 -833 -842 -865 EBIT -1,647 -829 1,172 2,570 Growth, % (140.9) nm nm 119.2 Margin, % (5.2) (3.3) 3.3 6.4 Interest paid -682 -675 -460 -363 Other Non-Operating Income 595 231 306 346 Pre-tax profit -1,734 -1,273 1,018 2,552 Tax provided 359 320 -256 -642 Net Profit (adjusted) -1,375 -953 762 1,910 Growth, % (158.7) nm nm 150.7 Net Profit (reported) (3,026) (1,204) 406 1,709 Wtd avg shares (m) 256 256 256 256

Balance Sheet Y/E Mar, Rs mn FY20 FY21e FY22e FY23e

Cash & bank 595 695 1,166 1,775 Debtors 18,988 15,506 18,516 20,393 Inventory 6,495 4,516 6,340 7,171 Other assets 8,457 7,290 9,158 10,163 Total current assets 34,535 28,007 35,180 39,503 Investments 0 0 0 0 Gross fixed assets 9,534 9,620 9,746 10,164 Less: Depreciation -4,157 -4,990 -5,831 -6,697 Add: Capital WIP 121 85 59 42 Net fixed assets 5,499 4,716 3,974 3,509 Total assets 40,034 32,723 39,154 43,011 Current liabilities 19,429 15,810 22,379 24,599 Provisions 6,695 6,104 7,061 7,489 Total current liabilities 26,124 21,914 29,439 32,088 Borrowings 4,897 3,000 1,500 1,000 Deferred tax liabilities, net -1,502 -1,502 -1,502 -1,502 Total liabilities 29,519 23,412 29,437 31,586 Paid-up capital 512 512 512 512 Reserves & surplus 10,003 8,799 9,205 10,913 Shareholders’ equity 10,515 9,311 9,717 11,425 Total equity & liabilities 40,034 32,723 39,154 43,011

Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY20 FY21e FY22e FY23e

Pre-tax profit -3,557 -1,273 1,018 2,552 Depreciation 784 833 842 865 Chg in working capital -740 2,418 824 -1,065 Total tax paid -668 320 -256 -642 Cash flow from operating activities -2,596 2,941 2,841 2,000 Capital expenditure -319 -50 -100 -400 Cash flow from investing activities -306 -269 -409 -528 Free cash flow -2,915 2,891 2,741 1,600 Equity raised/(repaid) 0 0 0 0 Debt raised/(repaid) 4,092 -1,897 -1,500 -500 Dividend (incl. tax) -556 0 0 0 Other financing activities -635 -675 -460 -363 Cash flow from financing activities 2,901 -2,572 -1,960 -863 Net chg in cash -1 100 471 609

Valuation Ratios Y/E Mar, Rs mn FY20 FY21e FY22e FY23e

Per Share data EPS (INR) (5.4) (3.7) 3.0 7.5

Growth, % (158.7) nm nm 150.7 Book NAV/share (INR) 41.1 36.4 37.9 44.6 FDEPS (INR) (5.4) (3.7) 3.0 7.5 CEPS (INR) (2.3) (0.5) 6.3 10.8 DPS (INR) - - - - Return ratios

Return on assets (%) (2.1) (1.2) 3.1 5.3 Return on equity (%) (11.1) (9.6) 8.0 18.1 Return on capital employed (%) (5.9) (3.6) 10.8 21.1 Turnover ratios

Asset turnover (x) 2.3 2.1 3.8 4.5 Sales/Total assets (x) 0.8 0.7 1.0 1.0 Sales/Net FA (x) 5.9 4.9 8.2 10.8 Working capital/Sales (x) 0.2 0.2 0.1 0.1 Working capital days 90.3 78.3 46.9 51.2 Liquidity ratios Current ratio (x) 1.3 1.3 1.2 1.2 Quick ratio (x) 1.1 1.1 1.0 1.0 Interest cover (x) nm nm 2.5 7.1 Dividend cover (x) nm nm nm nm Total debt/Equity (%) 46.6 32.2 15.4 8.8 Net debt/Equity (%) 40.9 24.8 3.4 (6.8) Valuation PER (x) (14.3) (20.7) 25.9 10.3 Price/Book (x) 1.9 2.1 2.0 1.7 Yield (%) - - - - EV/Net sales (x) 0.8 0.9 0.6 0.5 EV/EBITDA (x) (27.8) 6,715.4 10.0 5.5 EV/EBIT (x) (14.6) (26.6) 17.1 7.4



Stock Price, Price Target and Rating History

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,

N (TP 440)

S (TP 375) S (TP 365)

S (TP 265)

S (TP 210)

S (TP 205)

N (TP 295) B (TP 280)

N (TP 165)

S (TP 120) S (TP 110)

0

50

100

150

200

250

300

350

400

450

500

J-17 J-17 S-17 O-17 N-17 J-18 F-18 A-18M-18 J-18 A-18 O-18S (TP 205)J-19 F-19 A-19M-19 J-19 A-19 S-19 N-19 D-19 F-20 M-20M-20



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 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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