Minda Industries Ltd. - systematixgroup.in Industries Limited (MIL) is the flagship company of the...

Minda Industries Ltd.

Minda Industries Ltd. Stock Idea

Auto Components Rating: BUY

Date September 26, 2016 CMP (Rs.) 294 Target (Rs.) 380 Potential Upside 29% BSE Sensex 28294 NSE Nifty 8723

Scrip Code Bloomberg MNDA IN Reuters MNDA.BO BSE Group B BSE Code 532539 NSE Symbol MINDAIND Market Data Market Cap.(Rs. Cr) 2396 Equity Sh. Cap. (Rs Cr) 19.4 52 Wk High/Low 330/99 Avg. Quarterly Volume 15445 Face Value (Rs.) 2 Shareholding Pattern (Jun-16)

Comparative Price Chart

Varsha Bang

Research Analyst [email protected] Arun Gopalan

Vice President – Research [email protected]

Minda Industries Limited (MIL) is the flagship company of the UNO Minda Group. MIL is one

of the leading suppliers of switching systems, lighting systems, acoustic systems & alloy

wheels among others for 2W/3W/4W in the Indian automotive market. MIL has more than 28

manufacturing plants in India and 5 R&D centers globally. Minda’s technology tie-ups with

global suppliers that give it access to new and high value products, its ability to gain market

share across segments & globe and robust growth potential would benefit from a demand

recovery in the industry and ramp-up with new customers and products. We estimate

consolidated revenue to post 24% CAGR over FY16-18E, resulting in EBITDA margin

expansion of 90bps and EPS CAGR of ~37%.

Technology tie-ups and innovation in products will drive to increase market share

Strategic alliances with global players in the auto ancillary segment have established MIL as a

technology leader with the capability to innovate and introduce new high value products. MIL has

partnered with 9 global technology players with 120 product patents and 145 registered designs.

Given its focus on innovation & its varied product range, MIL has gained access to new platforms of

clients & thus enabling it to gain market share globally. Apart from superior technology, we believe

these tie ups provide access to OEMs as well as access to innovative products. MIL is well poised

to outgrow automotive industry & expect it to post a CAGR of 24% in revenue over FY2016-18E.

Robust portfolio of differentiated products

MIL has evolved from being a switch player to a company supplying multiple products in the auto ancillary industry. MIL is the largest manufacturer of automotive switches in India with a market share of 67%. Manufacture switches for 2W/3W and off road and it also has a presence in 4W switches through its associate company. MIL is a prominent player in lighting system and recently acquired the global lighting business of Rinder Group for Euro 20 mn with this acquisition market share of MIL will be 22%. We are expecting Lighting segment to post 50% CAGR over a period of FY16-FY18E on account of Rinder acquisition which will enhance its footprint in Indonesia and Vietnam. In horns segment MIL is the largest manufacturer in India with a market share of 55%. It acquired Spain based Clarton Horns in FY14 which has catapulted MIL to the No 2 position among horn manufacturers worldwide. It also manufactures other auto components like Alloy wheels, Low pressure Die Casting, Gas kits, Blow Molds, Fuel Caps and Batteries. We believe that well diversified product range will give MIL an edge over the other players in the industry and boost the margins going forward.

Expanding footprint in the replacement market

With a strong network of 764 dealers and 10000 touch retailers, MIL’s aftermarket sales have been growing at a CAGR of 24% over a five year period to Rs. 438 cr. In the overall revenue mix the replacement market sales account for 18%. We are in agreement with the projections made by the Management & expect aftermarket sales to grow at a CAGR of 25% during FY16-18E. The revenue contribution of the replacement market will also improve from 18% in FY16 to 20% in FY18E

Return ratios to improve led by strong profit growth over FY16-FY18E

With an expected revival in the auto industry providing multiple levers of growth and margin expansion, we believe MIL will benefit from strong revenue growth in lighting business and other high margin products, turnaround of subsidiaries will improve PAT going forward. EBITDA margin is expected to improve from 9.5% in FY16 to 10.4% in FY18E, on the back of higher utilization levels. Due to limited CAPEX requirements and strong operating cash flow, FCF generation of Rs. 218 crs in FY18E. With this, net debt to equity is likely to decline to 0.3X in FY2018E from 0.7X in FY2016. The company’s return ratios are likely to improve over the next two years. We expect MIL to report RoE/RoCE of 29%/28% in FY2018E.

Valuation: Decent growth story at reasonable valuation

We estimate MIL revenue to grow at a CAGR of 24% over FY16-FY18E led by product innovation,

increase in market share and strategic joint ventures. With better capacity utilization and the benefit

of operating leverage, the EBITDA margin will inch upwards to 10.4% in FY18E supporting the net

earnings of the company. At CMP of Rs. 294, MIL is trading at 11.6x FY18E EPS. We value the

company at a P/E 15x for FY18E EPS and recommended a BUY with a target price of Rs. 380, an

upside of 29% in a year.

YearSales

(Rs.cr)Growth (%)

EBITDA

(Rs.cr)Margin (%)

PAT

(Rs.cr)Margin (%)

Adj EPS

(Rs)P/E (x) EV/EBITDA ROE%

FY15 2200.3 30.2% 154.3 7.0% 55.7 2.5% 7.0 41.9 13.8 16.5%

FY16 2506.1 13.9% 237.8 9.5% 107.0 4.3% 13.5 21.8 8.4 25.6%

FY17E 3332.3 33.0% 332.1 10.0% 153.6 4.6% 19.4 15.2 5.7 28.4%

FY18E 3840.0 15.2% 398.6 10.4% 201.2 5.2% 25.4 11.6 5.2 28.5%

Promoter, 70.9

FII, 3.6

DII, 1

Others, 24.5

50

100

150

200

250

300

350

18-Sep 18-Dec 18-Mar 18-Jun 18-Sep

MIL Sensex


Segment wise Breakup Q1FY17 Geographical Presence Q1FY17

Revenue EBITDA MARGIN

Replacement Market Growth ROE &RONW

Channel Wise Breakup Q1FY17 Segment Wise Breakup Q1FY17

Source: Company, Systematix Research

38%

22%

20%

20%

Swtich

Lighting

Horns

Others

85%

15%

India

International

936 1,166

1,328

1,690

2,200 2,506

3,332

3,840

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Rs.

Cr

8.9%

6.5% 7.0%

4.6%

7.0%

9.5% 10.0%

10.4%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%


206 247

297

372 438

548

684

35.5%

19.9% 20.2%

25.3%

17.7%

25.0%

25.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

50

150

250

350

450

550

650

750

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

1.0%

6.0%

11.0%

16.0%

21.0%

26.0%

31.0%

1.0%

6.0%

11.0%

16.0%

21.0%

26.0%

31.0%


RONW ROE

84%

16%

OEM

Replacement

40%

60%

2Wheeler

4 Wheeler


INDUSTRY OVERVIEW

Indian auto component sector

The Indian auto ancillary industry is one of the fastest growing industries and is riding on the success of the auto sector. The auto industry is highly competitive with the presence of a large number of global and Indian auto-companies. As per ACMA, Indian auto components Industry grew by 8.8% to a turnover US$ 39 bn in 2016. Exports accounted for US$ 10.8 bn of the total turnover in 2016. The auto component sector contributes about 7% of India’s GDP and is among the largest employers in the economy. Original equipment’s sales constitutes 54%, while replacement and exports comprise 17% and 29% of the revenue mix

Automotive industry

Asia-Pacific is the most attractive region for automotive switches market. There is a significant increase in demand for automotives in the Asia-pacific region which is driving the market for automotive switches. The adoption of latest technology is another driver, driving the automotive switches market in this region. Increasing number of vehicle manufacturing facilities due to low cost of production in developing countries, increasing production capacity, and growing demand for light and heavy vehicles is driving the market for automotive switches in these countries. Presence of developing countries like India and China are also boosting the demand for automotive switches as there is a huge demand for automotives in these countries. The automotive switches market of the Asia-Pacific region is projected to grow at a CAGR of 6.16% from 2014–2019E. The North America, OEMs are setting up manufacturing facilities in Mexico, given the cheap labor and lower cost of vehicle production. This has pushed the vehicle production volume in Mexico, and this is expected to drive the switches market. The North American automotive switches market is projected to grow at a CAGR of 6.39% from 2014–2019E. The European automotive industry was growing negatively following the Euro Crisis of 2008. However, the European automotive industry is recovering at a faster pace after 2013, and this is expected to drive the demand for switches in Eastern and Western Europe. The European automotive switches market is projected to grow at a CAGR of 5.33% from 2014–2019E. Overall, the automotive switches market, in terms of volume, is projected to grow at a CAGR of 5.9% from 2014–2019E and reach 666.6 mn units by 2019E.

Lighting Industry

The Automotive Lighting Market is projected to grow at a CAGR of 7.22%, from FY2016 to FY2021 reaching US$ 29.53 bn. The automotive lighting market is driven by increasing vehicle production, technological advancements and partly by stringent regulations. The automotive lighting market has been segmented by region, technology, vehicle type, position, two-wheeler and adaptive lighting. LED is the fastest growing technology in automotive lighting market. It is energy efficient, lightweight and takes less space. Given the advantages of LED, they are being increasingly adopted in vehicles across the globe. Therefore, there is a great opportunity for Indian manufacturers to have a chunk of business from the global market. Demand for LEDs used in automotives will touch US$2.5 billion by 2018E. From 2014-18E, the market for automotive LEDs is expected to grow revenue wise by compounded growth rate of 9%.

Outlook

Implementation of the 7th Pay Commission is expected to support demand for urban/semi-urban segment demand for PV, and scooter, whereas rural demand for motorcycles and tractors will be driven by robust monsoon improving farmer cash flows and sentiments. In exports, robust demand for PV in North America as well as Europe is likely to offset decline in the M&HCV segment in those markets. Consequently, both exports and OE demand is expected to perform relatively better in FY2017E. Relatively higher OE and exports demand, coupled with stable aftermarket demand, is likely to drive overall auto component industry growth.


COMPANY BACKGROUND

Founded in 1958, Minda Industries Ltd. (MIL), a flagship company of UNO Minda, NK Minda group,

engaged in diversified businesses of manufacturing of auto electrical parts including switches, lights,

horns, gas kits and batteries for the off road, two, three and four wheelers. MIL is a market leader in

switches and horns segment commanding a market share of 61% and 55% respectively. The Company

caters to both domestic and international markets with good hold in both OEMs and After-market

segments.

MIL has a wide clientele covering major automobile manufacturers in India as well as abroad. With the

new acquisitions and ventures, it is adding advanced, technology enabled products to its present portfolio

and also gaining in its market share. Headquartered in Delhi, MIL has more than 28 manufacturing plants

in India and 5 R&D centers globally. Minda has partnered with 9 Global Technology players. Till date, it

has more than 120 plus product patents and 145 plus design registrations.

Group Profile Of Minda Industries Ltd.

Group Profile: Products & Structure (as on June 2016)

MIL Standalone

Subsidiaries

Joint Ventures

Associate Companies & Partnership

2W/3W Switch

MKL (72%/Blow moulding)

PMSBIN (40%/Battery)

KMAC (30% Alloy Wheels)

Acoustics/Horn

MJ Casting (98%/Casting)

METL (49% CNG/LPG kits)

Yogendra Engineering (49%/ Switches)

Lighting

Clarton (100%/Horns)

MRPL (49%)

Auto components Haridwar

(49%/Lighting)

Fuel Cap

MACL (100%/2W Switch)

MNGTL (26%/ Led/Non auto)

Auto Gas

MDSL (100%/ Aftermarket)

MKAWL (70%/ Alloy

wheels)

PTMA (51%/Indonesia)

MIVCL (51%/Vietnam)

Minda TG Rubber (51%

Rubber Hoses)

RIPL (100%/ Lamps/LED)

Glossary:

MIL –Minda Industries Ltd

. MKL –Minda Kyoraku Ltd . PMSBIN -Panasonic Minda Storage Batteries India Private Ltd

. MNGTL-Minda Nex Gen Tech Ltd

MACL –Minda Auto Components Ltd

. . KMAC – Kosei Minda Aluminum Company

MDSL –Minda Distribution and Service Ltd

. METL –Minda Emer Technologies Ltd

MKAWL – Minda Kosei Aluminum Wheels Ltd

. MRPL –Minda Rika

PTMA –PT Minda Asean Automotive

.

MIVCL –Minda Industries Vietnam Company Ltd

.

RIPL- Rinder India Private Ltd



Switches- Extending leadership position

MIL is the largest manufacturer of switching systems and handle bar solutions for 2/3W and off road

players with a market share of 67%. The division also has a major share of business in all Indian two

wheeler OEMs. Developing top notch products for 2/3W and off-road vehicles, the Switch Division

operate five plants in India and two overseas plants in Indonesia and Vietnam. Switch Division serves

end markets in India, US, Europe, Japan, ASEAN and Brazil.

Switches is the largest division of the company comprising of ~43% of the consolidated revenues out of

which 78% was contributed by OEM sales, 14% by replacement market and 8% by exports. MIL supplies

switch mainly to 2W with Bajaj accounting for 45%, HMSI and TVS forming 9% each, Royal Enfield and

Hero around 5% each and other contributing 26%. MIL key focus in switches segment is to improve the

product mix towards innovative technology switches and also increase share of business among OEM

and presence in exports and replacement market.

Lighting: Focusing on market leadership and improving utilization

MIL is the prominent player in the Lighting segment (after Lumax and FIEM) commanding a market share

of 12%. The lighting division contributes 18% of consolidated revenues, of this, OEM sales constitute

68%, replacement 28% and exports constitute of 8%. Products are offered across all three ranges – head

lamp, tail lamp and small lamp (interior light, side light etc). The lighting division of MIL operates across

five plants, with one each in Pantnagar, Sonepat, Manesar, Haridwar and Chennai.

In June 2016, MIL acquired global lighting business of Spain Based Rinder group for Euro ~20 mn. The

acquisition will provide the company with cutting edge lighting technology, backed by extensive R&D

centre in Spain. The acquisition will include there facilities in India and one in Spain and Columbia each.

The strategic acquisition will aid MIL to increase it market share to 22% from 12%. The key focus area for

MIL is to improve the utilization levels and also to increase the product mix.

499 585 602 602

722 805 73

97 117 124

129

146

16 22 26 47

44

84

13%

11% 11%

8%

10%

10%

2%

4%

6%

8%

10%

12%

14%

200

400

600

800

1000

1200

FY11 FY12 FY13 FY14* FY15 FY16

Export Replacement OEM EBITDA margin

45%

9% 9%

5%

6%

26%

Bajaj Auto

HMSI

TVS

Royal Enfield

Hero

Others

173 196 208 196

295 285 42

58 67 82

104 121

10

13 17 30

15 33

12% 12%

8%

6%

8%

11%

1%

3%

5%

7%

9%

11%

13%

100

150

200

250

300

350

400

450

500



40%

1% 13%

3%

7%

36%

MSIL

Volkswagen

Mahindra

HMSI

Royal Enfield

Others

Switches Revenue breakup& EBITDA margin % Diversified OEM Mix for FY16

Diversified OEM Mix for FY16 Lighting Revenue breakup& EBITDA margin %


Acoustic Systems: Largest player in Horn

MIL is the largest manufacturer of horns in India with a market share of 55%. The segment contributes

16% in the consolidated revenues. The segment dedicatedly works on developing and innovating quality

products of optimum sound performance and high durability. The company’s acoustic division has

manufacturing units at Manesar and Pantnagar. The company is a preferred supplier to all leading two-

wheeler, four-wheeler, off-road and commercial vehicle

MIL acquired Clarton Horn S.A., in 2013, which is a leading manufacturer of automotive horns, trumpet

horns and disc horns in Spain. With this acquisition, MIL is positioned among top two horn manufacturers

in the world which has helped MIL to get access to leading European and American OEMs. To cater to

American markets, MIL is investing Euro 6 mn over 3 years in a new facility at Mexico. The company has

commenced the manufacturing and supplies to global companies like Volkswagen, Daimler and Bentley.

Other business

Entered into technical arrangement with Kosei Aluminum Co ltd (Japan) to develop, manufacture and sell

Aluminum Alloy wheels for passenger vehicles. MIL is setting up new plant in Bawal (Haryana) with a

manufacturing capacity of 72000 unit’s p.a with an investment of Rs. 200 crs in first phase of production.

The proposed shareholding of the Joint Venture Company will be in the ratio of 70:30 i.e. UNO Minda

Group 70% and Kosei Group 30%.

Alloy wheels will be manufactured in Minda Kosei Aluminum Wheel Pvt. Ltd. and Kosei Minda Aluminum

Co. Ltd. MIL through its holding in the above companies will be largest manufacturer of alloy wheel in

India with capacity in excess of 1.44 mn wheels per annum. Other product includes CNG/LPG kits, Die

casting, Blow moulds, batteries, fuel cap. MIL has strategic joint venture with Emer, Italy for CNG/PNG

kits and Kyoraku Co. Ltd for Blow moulded products.

56 72 65 73 67

78 33

47 50

55 67

77 50

37 34

33 32

29 14% 13%

12%

14% 14%

15%

1%

3%

5%

7%

9%

11%

13%

15%

17%

40

60

80

100

120

140

160

180

200



13%

7%

8%

8%

6%

58%

Bajaj

FIAMM

HMSI

TVS

Royal Enfield

Others

74 120

218

322 374

597

0

100

200

300

400

500

600

700

FY11 FY12 FY13 FY14 FY15 FY16

Revenue from Other Segment


Valuation: Decent growth story at reasonable valuation

MIL is a market leader in domestic switches and horn segment and also among the top three in lighting

segment. We estimate MIL revenue to grow at a CAGR of 24% over FY16-FY18E led by improving its

product mix with value added offerings, increase in market share and diversified its geography mix by

building an export market for its products and acquiring global companies. The company is aiming further

to enhance the product range and more up the value chain by introducing new products like alloy wheels

and electronic horns. Further, better capacity utilization, operating leverage and improvement in margin

of subsidiaries would lead to a CAGR of 37% in earnings over FY16-18E.

At CMP of Rs. 294, MIL is trading at 11.6x FY18E EPS. We value the company at P/E 15x for FY18E

EPS and recommended a BUY rating with a target price of Rs. 380, an upside of 29% in a year.

PEER COMPARISION

Company (FY18E) CMP Mar Cap Sales (Rs.cr)

EBITDA (Rs.cr)

Margin (%)

PAT (Rs.cr)

Margin (%)

Adj EPS (Rs)

P/E (x) EV/EBITDA

(x)

Minda Industries Ltd 294 2332 3840.0 398.6 10.4% 201.2 5.2% 25.4 11.6 5.2

Lumax Industries Ltd 788 843 1481.6 129.7 8.8% 54.1 3.7% 58.1 13.6 6.1

FIEM Industries Ltd 1049 877 1392.7 184.3 13.2% 85.3 6.1% 71.3 14.7 7.6

Phoenix Lamps 168 471 478.0 58.8 0.12 27.5 0.06 9.8 17.1 5.6 Source: Company, Bloomberg, Systematix Research

We have compared MIL with Lumax, FIEM and Phoenix lamps which are also in auto ancillary space.

Though the stock has ran up in the past, we believe the valuations are still attractive and the stock can

give decent returns in the future.

Mutual Fund Holding as of 31st August

Fund MV(Aug 2016)

MV(Jul 2016)

Mkt Value Change

Shares inAug-2016

Shares inJul-2016

Shares Change

IDFC MF 35.2 0.0 35.2 278906 0 278906

Grand Total 35.2 0.0 35.2 278906 0 278906

Key Management Personnel

Name & Designation Brief Profile

Mr. Nirmal K Minda Chairman and MD

He is Graduate in B.Sc with more than 32 years of rich experience in Auto Components sector. Under his dynamic leadership, the group has grown manifold and has established footprints across the globe and has received numerous awards and recognitions. He has been instrumental in forging new alliances and joint venture partnership with globally renowned names. “Haryana Ratna award” has been bestowed upon him for his professional and social achievements. He has served as the chairman of ACMA northern region for three consecutive years. At present, he is the member of the executive committee of ACMA northern region.

Mr. Anand Kumar Minda Non Executive Director

Over 35 years of hands on experience in financial control, reviews, manufacturing, and project management. He has been appointed as member of the Board since 2011. He plays a pivotal role in new projects and strategy formulation.

Mr. Sudhir Jain CFO and Executive Director

He is CA, CS, FCA and ACS and has more than 25 years of experience in Minda Group. He heads all strategic planning for sustainable growth as well as vetting all strategic alliances and business valuation activities.

Minda Industries Ltd. FINANCIAL PERFORMANCE (Rs. In Crs)

P&L (Rs. Cr) FY15 FY16 FY17E FY18E Balance Sheet (Rs. Cr) FY15 FY16 FY17E FY18E

Net sales 2200.3 2506.1 3332.3 3840.0 Share Capital 19.4 19.4 19.4 19.4

Other Op. Income 26.3 21.2 24.4 28.0 Reserve & Surplus 345.9 452.3 592.1 779.8

% Growth 30.2% 13.9% 33.0% 15.2% Networth 365.3 471.7 611.5 799.2

Operating Expense 2072.3 2289.5 3024.6 3469.4 Minoirty Interest 21.3 109.6 129.6 154.6

EBITDA 154.3 237.8 332.1 398.6 Long term Borrowings 97.2 170.1 203.1 60.0

EBITDA Margin 7.0% 9.5% 10.0% 10.4% Long term Liabilities 3.0 9.1 10.0 11.0

Depreciation 83.5 92.6 114.8 130.6 Long term Provision 26.4 33.6 37.0 40.7

Other Income 22.9 14.0 18.2 23.6 Total Non-Current Liab. 126.6 212.8 250.0 111.7

Interest 25.0 25.7 41.7 42.3 Short term Borrowings 111.6 190.4 243.9 279.3

Exceptional Items 16.0 5.2 0.0 0.0 Trade Payable 267.0 321.7 445.8 514.6

PBT 84.7 138.7 193.8 249.3 Current Liabilities 61.3 134.0 144.3 151.2

Tax 19.4 27.7 43.6 56.1 Current Maturiies 28.0 28.0 42.0 63.0

MI & Profit of Ass. 2.6 0.2 3.4 8.0 Short term Provisions 15.6 18.9 21.7 25.0

PAT 68.0 111.1 153.6 201.2 Total Current Liabilities 483.4 693.0 897.8 1,033.2

Adj. PAT 55.7 107.0 153.6 201.2 Total Liabilites 996.6 1,487.1 1,888.9 2,098.7

Adj. PAT Margin 2.5% 4.3% 4.6% 5.2% Net Fixed Assets 411.6 573.1 798.3 767.7

Shares o/s (No. Cr.) 7.9 7.9 7.9 7.9 Capital WIP 9.0 129.8 75.0 75.0

Adj. EPS 7.0 13.5 19.4 25.4 Investments 28.4 43.6 50.2 57.7

Cash EPS 17.5 25.2 33.8 41.8 Long term Advances 18.6 25.1 28.9 33.2

Quarterly (Rs. Cr) Q3FY16 Q4FY16 Q4FY16 Q1FY17 Other non Current assets 12.1 15.2 16.4 17.8

Net Sales 645.0 622.9 709.5 759.8 Cash & Bank 28.0 56.7 59.2 151.3

Other Op. Income 6.7 2.8 7.8 6.8 Inventories 140.6 183.8 248.6 285.2

EBITDA 63.2 58.9 81.5 72.4 Debtors 289.5 363.9 502.1 578.6

Depreciation 24.5 21.7 28.2 27.7 Short term Advances 54.3 72.4 83.3 99.9

EBIT 38.6 37.3 53.3 44.8 Other Current assets 4.7 23.5 27.0 32.4

Interest 8.2 7.1 5.4 13.0 Total Assets 996.6 1,487.1 1,888.9 2,098.7

Other Income 4.6 7.6 1.8 2.0 Cash Flow (Rs. Cr) FY15 FY16 FY17E FY18E

PBT 35.0 37.8 49.7 33.8 EBITDA 154.3 237.8 332.1 398.6

Tax 8.3 9.0 6.7 8.4 Add: Profit of Associate 2.4 11.7 23.4 33.0

Exceptional item 0.0 2.6 2.6 0.0 Less: Exceptional items (16.0) (5.2) - -

MI & profit of Ass. (0.7) (2.6) (3.0) 1.8 Op. profit before WC 172.7 254.7 355.5 431.6

PAT 26.1 28.8 42.6 27.1 Change in WC (15.7) (13.3) (80.8) (57.1)

Adj. PAT 26.1 26.8 40.3 27.1 Less: Tax 19.4 27.7 43.6 56.1

Performance Ratio FY15 FY16 FY17E FY18E CF from operations 137.6 213.6 231.2 318.4

EBITDA Margin (%) 7.0% 9.5% 10.0% 10.4% Addition to assets (65.4) (239.4) (35.2) (100.0)

PAT Margin (%) 2.5% 4.3% 4.6% 5.2% Adj. for Acquisitions - - (250.0) -

ROE (%) 16.5% 25.6% 28.4% 28.5% Investments 19.1 (15.3) (6.5) (7.5)

ROCE (%) 18.7% 24.4% 26.4% 28.4% Others Income 22.9 14.0 18.2 23.6

D/E (x) 0.6 0.7 0.7 0.3 CF from Investing (23.4) (240.7) (273.6) (83.9)

Sales Growth (%) 30.2% 13.9% 33.0% 15.2% Change in borrowings (67.9) 151.7 100.5 (86.6)

PAT Growth (%) 748% 92% 44% 31% Dividends paid (10.5) (13.5) (13.3) (13.5)

Per Share Data FY15 FY16 FY17E FY18E Interest paid (25.0) (25.7) (41.7) (42.3)

Adj. EPS 7.0 13.5 19.4 25.4 Others (10.6) (56.9) (0.5) 0.0

BV Per Share 45.6 59.0 76.6 100.3 CF from Financing (114.0) 55.7 45.0 (142.4)

Cash Per Share 3.5 7.1 7.5 19.1 Net Change in cash 0.3 28.6 2.5 92.1

Dividend Per Share 6.0 7.0 1.4 1.4 Cash at beginning 27.8 28.0 56.7 59.2

Valuation Ratio FY15 FY16 FY17E FY18E Cash at end 28.0 56.7 59.2 151.3

Price/Earnings (x) 41.9 21.8 15.2 11.6 Turnover Ratio FY15 FY16 FY17E FY18E

EV/EBITDA (x) 13.8 8.4 5.7 5.2 Debtors Days 48.0 53.0 55.0 55.0

Price/BV (x) 6.4 5.0 3.8 2.9 Creditors Days 78.2 87.5 85.0 85.0

Mkt cap/Sales (x) 1.1 0.9 0.7 0.6 Inventory Days 24.8 29.3 30.0 30.0

EV/Sales (x) 1.0 0.8 0.6 0.5 Fixed Asset Turnover (x) 2.0 1.9 2.1 2.1


DISCLOSURES/ APPENDIX

I. ANALYST CERTIFICATION We, Varsha Bang and Arun Gopalan, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report, (2) No part of our compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report by Systematix Shares & Stocks (I) Limited or its Group/associates companies. (3) has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.

Disclosure of Interest Statement Response

Analyst holding in the stock No

Served as an officer, director or employee No

II. ISSUER SPECIFIC REGULATORY DISCLOSURES, UNLESS SPECIFICALLY MENTIONED IN POINT NO. 9 BELOW:

1. The Research Analyst(s), Systematix Shares & Stocks(I) Limited (SSSIL), Associate of Analyst or his relative does not have any financial interest in the company(ies) covered in this report. 2. The Research Analyst, SSSIL 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 associate, his relative and SSSIL do not have any other material conflict of interest at the time of publication of this research report. 4. The Research Analyst, SSSIL 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, SSSIL 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. SSSIL 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 SSSIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details SSSIL, 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 SSSIL No

2 Whether Research Analyst, SSSIL 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 SSSIL or its associates from the company(ies) covered in the Research report No

4 SSSIL 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, SSSIL 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 month

No

10. There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities. 11. Systematix Shares & Stocks (I) Limited is in a process of seeking registration under SEBI (Research Analyst) Regulations, 2014.

EXPLANATION TO RATINGS: BUY: TP>15%; ACCUMULATE: 5%<TP<15%; HOLD: -5%<TP<5%; REDUCE: -15%<TP<-5%; SELL: TP<-15%

III. DISCLAIMER The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy completeness or correctness.

This document is for information purposes only. This report is based on information that we consider reliable, but we do not represent that it is accurate or complete, and one should exercise due caution while acting on it. Descriptions of any company or companies or their securities mentioned herein are not complete and this document is not, and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. All opinions, projections and estimates constitute the judgment of the author as on the date of the report and these, plus any other information contained in the report, are subject to change without notice. Prices and availabili ty of financial instruments also are subject to change without notice.

This report is not directed to or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject to SSSIL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. Any unauthorized use, duplication, redistribution or disclosure of this report including, but not limited to, redistribution by electronic mail, posting of the report on a website or page, and/or providing to a third party a link , is prohibited by law and will result in prosecution. The information contained in the Report is intended solely for the recipient and may not be further distributed by the recipient to any third party.

SSSIL generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, SSSIL generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein. Our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. The views expressed in this research report reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The compensation of the analyst who prepared this document is determined exclusively by SSSIL however, compensation may relate to the revenues of the Systematix Group as a whole, of which investment banking, sales and trading are a part. Research analysts and sales persons of SSSIL may provide important inputs to its affiliated company(ies).

Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addit ion, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. SSSIL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report including but not restricted to fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc.

SSSIL and its affiliates, officers, directors, and employees subject to the information given in the disclosures may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation (financial interest) or act as a market maker in the financial instruments of the company (ies) discussed herein or act as advisor or lender / borrower to such company (ies) or have other potential material conflict of interest with respect to any recommendation and related information and opinions. The views expressed are those of the analyst and the Company may or may not subscribe to the views expressed therein.

SSSIL, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall SSSIL, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. The Company accepts no liability whatsoever for the actions of third parties. The Report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the Report refers to website material of the Company, the Company has not reviewed the linked site. Accessing such website or following such link through the report or the website of the Company shall be at your own risk and the Company shall have no liability arising out of, or in connection with, any such referenced website

SSSIL shall not be liable for any delay or any other interruption which may occur in presenting the data due to any technical glitch to present the data. In no event shall the SSSIL be liable for any damages, including without limitation, direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by SSSIL through this presentation.

Neither SSSIL, nor any of its other group companies or associates, shall be responsible for any decisions taken on the basis of this report. Investors are advised to consult their Investment and Tax consultants before taking any investment decisions based on this report. Systematix Shares & Stocks (I) Ltd. CIN: U65993TN1995PLC031285 : SEBI Regn. No.: BSE: INB/F011132736 Member Code: 182 | NSE: INB/F/E231132730 Member Code : 11327 | MCX-SX: INB/F261132733 Member Code: 17560 | PMS SEBI Reg No. : INP000002692 | Depository Participant: IN-DP-CDSL-246-2004 | AMFI: ARN No. 64917 Corporate Office Address: A 603-606 , The Capital, BKC, Bandra (E), Mumbai, India - 400051

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