REDUCE Relative - Business...

November 7, 2017 Analyst: Ashutosh Tiwari [email protected] (+91-8128694112, +91 79-6190 9517) of 10

Before reading this report, you must refer to the disclaimer on the last page.

Greaves Cotton Ltd. Absolute : REDUCE

Relative : UNDERWEIGHT

2QFY18 Result : Estimate (), TP (), Rating () Regular Coverage 2% Upside in 14months

Changing industry dynamics to shake up key business verticals - maintain REDUCE Industrials

© 2017Equirus All rights reserved

Rating Information

Price (Rs) 127

Target Price (Rs) 125

Target Date 31st Dec'18

Target Set On 7th Nov'17

Implied yrs of growth (DCF) 15

Fair Value (DCF) 107

Fair Value (DDM) 105

Ind Benchmark BSEAUTO

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 31,075

Free Float (%) 49.00 %

52 Wk H/L (Rs) 178.55/115.2

Avg Daily Volume (1yr) 395,629

Avg Daily Value (Rs Mn) 57

Equity Cap (Rs Mn) 488

Face Value (Rs) 2

Bloomberg Code GRV IN

Ownership Recent 3M 12M

Promoters 51.0 % 0.0 % 0.0 %

DII 25.6 % -1.3 % -5.6 %

FII 7.3 % 0.1 % 3.4 %

Public 16.1 % 1.2 % 2.2 %

Price % 1M 3M 12M

Absolute -5.0 % -20.5 % -5.2 %

Vs Industry -10.8 % -23.5 % -33.0 %

CUMMINSIND -2.4 % -6.0 % 6.0 %

KIRLOSENG -0.7 % -12.0 % 1.4 %

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) 1.8 2.3 1.7 1.7

EPS (18E) 1.4 1.8 1.9 1.9

As highlighted in our 1QFY18 results review, we see significant challenges in GRV’s

3W engine business due to the emergence and strong growth of e-rickshaws in many

parts of the country. We think even the company’s pump-set business will see

headwinds ahead as electric pumps are gaining traction, where GRV doesn’t have any

offerings. We lower our growth assumptions for both 3W and pump-set volumes,

leading to a 7%/9% reduction in our FY18/FY19E EPS. Due to growth uncertainties in

the two large verticals which contribute ~50% of GRV’s sales, a multiple contraction

is possible. We therefore cut our target TTM multiple from 18x to 16x and maintain

REDUCE on the stock with a Dec’18 TP of Rs 125 (Sep’18 TP of Rs 147 earlier).

3W diesel engines up for challenges from e-rickshaws, BSIV-VI shift: E-rickshaws

are growing at a rapid pace in many parts of the country, and replacing diesel 3Ws as

a shared mode of transportation. While diesel 3Ws plying outside city limits will not

be impacted by this, a shift to e-rickshaws within city limits would curb their growth.

Our industry interaction on a shift from BS-IV to VI norms from Apr’20 indicates that

diesel 3Ws would see volume declines as the gap between 3Ws and 4Ws narrows.

Pump-sets to see headwinds from electric pumps: Our interaction with an agri

team member at GRV’s major competitor suggests that with the falling level of

underground water tables, demand for electric pumps will increase; demand would

also be supported by improving electrification in villages. GRV doesn’t have any

offerings in the electric pump segment, and therefore will likely lag behind

competition under this market shift.

Sales up 3% yoy but 7% below EE on volume decline across segments, except gen-

sets: 3W volumes declined 5% yoy and came in line with EE. However, a 36% decline

in agri pump-set volumes surprised negatively; management attributed the decline

to floods in some parts of country, a delay in government subsidies, GST impact and

tightening of credit to dealers. Even aftermarket sales growth was only 4-5% vs.

double-digit growth last year due to similar reasons. Aftermarket sales are now

reviving and should see better growth in 2H.

EBITDA down 13% yoy on volume declines: EBITDA margin contracted 270bps yoy

due to a 295bps decline in gross margins as commodity prices spiralled up over last

year. Other expenses however were controlled well and declined 8% yoy and 5% qoq

as company had been taking measures to cut cost under rising commodity prices.

Standalone Estimate Revision:

Current

Change from previous

(%)

Rs Mn FY18E FY19E FY18E FY19E

Sales 17,893 19,707 -3.9% -4.3%

EBITDA 2,591 2,858 -4.0% -8.1%

PAT 1,839 1,950 -3.1% -8.7%

EPS 7.0 8.0 -6.7% -8.7%

Consolidated Financials

Rs. Mn YE Mar FY17A FY18E FY19E FY20E

Sales 16,344 17,894 19,709 21,173

EBITDA 2,434 2,591 2,858 3,070

Depreciation 469 519 554 600

Interest Expense 8 3 6 6

Other Income 507 450 448 455

Reported PAT 1,809 1,839 1,950 2,072

Recurring PAT 1,784 1,715 1,950 2,072

Total Equity 9,253 9,476 9,662 9,824

Gross Debt 0 0 0 0

Cash 4,238 3,923 3,791 3,720

Rs Per Share FY17A FY18E FY19E FY20E

Earnings 7.3 7.0 8.0 8.5

Book Value 38 39 40 40

Dividends 5.5 5.5 6.0 6.5

FCFF 6.2 5.3 6.7 7.5

P/E (x) 17.4 18.1 15.9 15.0

P/B (x) 3.4 3.3 3.2 3.2

EV/EBITDA (x) 11.1 10.6 9.6 9.0

ROE (%) 20 % 18 % 20 % 21 %

Core ROIC (%) 25 % 24 % 25 % 26 %

EBITDA Margin (%) 15 % 14 % 14 % 14 %

Net Margin (%) 11 % 10 % 10 % 10 %

Greaves Cotton Ltd. Absolute – REDUCE Relative – UNDERWEIGHT 2% Upside in 14 months

November 7, 2017 Analyst: Ashutosh Tiwari, [email protected] (+91-8128694112 +91 79- 61909517) of 10

Earnings call takeaways

GRV achieved its best-ever quarterly performance in Q2 with 11.8% QoQ and 3% yoy

growth.

PAT for 1HFY18 was flat vis-à-vis the year-ago period.

Revenue stood at Rs 4.52bn vs. Rs 4.89bn the previous quarter.

Other expenses declined on account of cost-cutting measures taken by the company.

Aftermarket sales grew 4-5% in 2Q as GST rollout had some impact in the first two

months of the quarter; now, retail is picking up with normal growth likely in 2H.

Volumes in 1QFY18:

o 3Ws: 76,000 units in 2QFY18 vs. 80,000 units in 2QFY17

o 4Ws: 9,300 units in 1QFY18 vs. 8,000 units in 2QFY17

o Pumps: 15,000 units in 1QFY18 vs. 25,000 units in 2QFY17

o Power tillers: 800 units in 1QY18 vs. 1,000 units in 2QFY17

o Gensets: 1,100 units in 1QFY18 vs. 800 units in 2QFY17

Sales of pump sets were hit by floods in some parts of the country, GST rollout,

delay in government subsidies and tightening of dealer credit,

GRV plans to go a bit slow on the tiller market.

The challenging market scenario and tightening credit norms have impacted the

tiller market; thus, the company plans to launch products systematically over the

next few years.

GRV has already finalized the design of BS-VI engines.

Many customers have signed up for BS-VI engines and the company expects some

more players to join the pipeline.

The company’s R&D is on advanced and emerging technology to create a sustainable

value proposition.

GRV is evaluating technology on the Altigreen product, and plans to offer it as a

retrofit solution. The company believes it would take a couple of quarters to offer

the best value proposition.

GRV is also working on developing electric pump-sets.

Management expects normal retail growth in 2H as the impact of GST seems to have

waned.



Quarterly performance, standalone

(Rs mn) 2QFY18 2QFY18E 1QFY18 2QFY17 % Change

Comments 2QFY18E 1QFY18 2QFY17

Net Sales 4,524 4,888 4,063 4,393 -7% 11% 3%

Cost of Goods sold 3,040 3,250 2,720 2,823 -6% 12% 8%

Employee cost 452 440 416 411 3% 9% 10%

Other Expenses 353 464 373 382 -24% -5% -8%

Total Expenditures 3,846 4,155 3,509 3,616 -7% 10% 6%

EBITDA 679 733 554 778 -7% 23% -13%

Depreciation 141 127 120 115 11% 18% 23%

EBIT 537 606 434 662 -11% 24% -19%

Interest -2 1 2 2 -239% -190% -212%

Other Income 110 119 103 130 -8% 6% -15%

PBT 649 723 535 791 -10% 21% -18%

Tax 220 217 184 220 1% 20% 0%

Recurring PAT 429 506 352 571 -15% 22% -25%

Extraordinaries -64 0 -60 59

Reported PAT 494 506 412 512 -2% 20% -4%

EPS (Rs) 1.8 2.1 1.4 2.3 -15% 22% -25%

EBITDA Margin 15.0% 15.0% 13.6% 17.7% 0 bps 137 bps -270 bps

EBIT Margin 11.9% 12.4% 10.7% 15.1% -52 bps 120 bps -320 bps

PBT Margin 14.3% 14.8% 13.2% 18.0% -45 bps 117 bps -365 bps

PAT Margin 10.9% 10.4% 10.1% 11.7% 55 bps 78 bps -75 bps

Tax Rate 33.8% 30.0% 34.3% 27.8% 385 bps -45 bps 607 bps

Cost as % of Sales

Raw Material 67.2% 66.5% 67.0% 64.3% 70 bps 25 bps 295 bps

Employee Cost 10.0% 9.0% 10.2% 9.4% 100 bps -25 bps 64 bps

Other Expenses 7.8% 9.5% 9.2% 8.7% -170 bps -137 bps -89 bps



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY18E 7.0 8.0 -12 % We are below consensus due to lower

growth and margin estimates FY19E 8.0 9.0 -11 %

Sales FY18E 17,894 18,600 -4 %

FY19E 19,709 20,378 -3 %

PAT FY18E 1,715 1,974 -1 %

FY19E 1,950 1,726 -14 %

Key Assumptions:

Standalone FY17 FY18E FY19E FY20E

3W Volumes 266,000 278,800 296,842 305,747

4W Volumes 30,000 32,350 35,262 38,082

Engine Segment Sales (Rsmn) 17,580 17,672 18,941 20,328

Other Sales (Rsmn) 626 696 766 843

Total Sales (Rsmn) 18,206 18,369 19,707 21,171

EBITDA Margin 14.9% 14.5% 14.5% 14.5%

Risk to Our View: Rise in commodity prices and increased competition from foreign

diesel engine manufacturers.

Key Triggers

Any auto OEM planning to enter the SCV market will have to either develop engines

in-house or look at an independent engine supplier. Selection of GRV as an engine

supplier would be a key stock price trigger.

Sensitivity to Key Variables % Change % Impact on EPS

Raw material cost 5 % -16 %

- - -

- - -

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.8 % 0.9 11.9 % 3.0 % 0.0 %

- FY18E FY19E FY20-22E FY23-27E FY28-32E

Sales Growth 9% 10% 7% 6% 6%

NOPAT Margin 8% 8% 8% 8% 8%

IC Turnover 2.85 2.97 3.06 3.06 3.06

RoIC 23.6% 25.3% 26.4% 26.4% 26.4%

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 69 75 81 88 94

Valuation as of Sept'18 78 85 92 100 107

Based on DCF, assuming 15 years of 9.2% CAGR growth and 26% average ROIC, we derive

our Dec’18 fair value of Rs 104.

Company Description: Greaves Cotton Ltd (Greaves), incorporated in 1922, is a leading manufacturer and

marketer of diesel/petrol engines, Gensets, Agro Equipments and Construction

Equipments. Greaves is a key supplier of diesel engines to leading auto OEMs

manufacturing small commercial vehicles (SCVs).

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E

Greaves Cotton REDUCE 127 31,075 125 31st Dec'18 7.3 7.0 8.0 17.4 18.1 15.9 37.9 3.3 20 % 18 % 20 % 4.4 % 4.4 %

CUMMINSIND NR 889 259,542 NR NR 26.6 27.8 32.9 33.5 32.0 27.0 62.3 13.2 25 % 23 % 20 % 1.0 % -

KIRLOSENG NR 352 50,911 NR NR 12.0 11.1 14.0 29.3 31.6 25.1 111.8 6.0 10 % 12 % 12 % 1.4 % -



Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18E 2Q18A 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E

Revenue 4,007 4,393 4,041 3,907 4,063 4,524 4,604 4,702 4,539 5,014 4,997 5,158 16,343 17,893 19,707 21,171

Cost of Goods sold 2,630 2,823 2,596 2,606 2,720 3,040 3,062 3,127 3,032 3,349 3,338 3,445 10,601 11,949 13,164 14,142

Employee cost 388 411 423 371 416 452 433 442 422 466 465 480 1,593 1,744 1,833 1,969

Selling and Admin expenses 386 382 417 397 373 353 437 447 427 471 470 485 1,714 1,610 1,852 1,990

EBITDA 604 778 605 533 554 679 672 687 658 727 725 748 2,434 2,591 2,858 3,070

Depreciation 109 115 117 125 120 141 129 130 135 139 139 142 467 519 554 600

EBIT 495 662 488 408 434 537 543 556 524 588 586 606 1,968 2,071 2,303 2,470

Interest 1 2 3 2 2 -2 1 1 1 1 1 1 8 3 6 6

Other Income 107 130 104 158 103 110 113 124 95 113 113 127 502 450 448 455

PBT 601 791 588 564 535 649 655 679 617 700 698 731 2,462 2,518 2,746 2,919

Tax 161 220 163 160 184 220 197 204 179 203 202 212 680 804 796 846

Recurring PAT 441 571 425 404 352 429 459 475 438 497 495 519 1,781 1,715 1,950 2,072

Extraordinary 55 59 -16 -66 -60 -64 0 0 0 0 0 0 -32 -124 0 0

Reported PAT 385 512 442 469 412 494 459 475 438 497 495 519 1,813 1,839 1,950 2,072

EPS (Rs) 1.81 2.34 1.74 1.65 1.44 1.76 1.88 1.95 1.79 2.04 2.03 2.13 7.29 7.02 7.98 8.49

Key Drivers

3W Volumes 65,000 80,000 67,000 54,000 63,000 76,000 75,000 64,800 66,150 80,560 79,500 70,632 266,000 278,800 296,842 305,747

4W Volumes 6,500 8,000 7,500 8,000 6,000 9,300 8,250 8,800 6,540 10,137 8,993 9,592 30,000 32,350 35,262 38,082

- - - - - - - - - - - - - - - - -

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- - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -1 % 10 % -8 % -3 % 4 % 11 % 2 % 2 % -3 % 10 % 0 % 3 % - - - -

Cost of Goods sold 1 % 7 % -8 % 0 % 4 % 12 % 1 % 2 % -3 % 10 % 0 % 3 % - - - -

EBITDA -3 % 29 % -22 % -12 % 4 % 23 % -1 % 2 % -4 % 10 % 0 % 3 % - - - -

EBIT -4 % 34 % -26 % -16 % 6 % 24 % 1 % 2 % -6 % 12 % 0 % 3 % - - - -

Recurring PAT -4 % 30 % -26 % -5 % -13 % 22 % 7 % 4 % -8 % 13 % 0 % 5 % - - - -

EPS -4 % 30 % -26 % -5 % -13 % 22 % 7 % 4 % -8 % 13 % 0 % 5 % - - - -

Yearly Growth (%)

Revenue 5 % 3 % 0 % -3 % 1 % 3 % 14 % 20 % 12 % 11 % 9 % 10 % 1 % 9 % 10 % 7 %

EBITDA -2 % 3 % -12 % -15 % -8 % -13 % 11 % 29 % 19 % 7 % 8 % 9 % -9 % 6 % 10 % 7 %

EBIT -2 % 4 % -15 % -21 % -12 % -19 % 11 % 36 % 21 % 9 % 8 % 9 % -11 % 5 % 11 % 7 %

Recurring PAT 21 % 1 % 18 % -12 % -20 % -25 % 8 % 18 % 25 % 16 % 8 % 9 % 2 % -4 % 14 % 6 %

EPS 21 % 1 % 18 % -12 % -20 % -25 % 8 % 18 % 25 % 16 % 8 % 9 % 2 % -4 % 14 % 6 %

Margin (%)

EBITDA 15 % 18 % 15 % 14 % 14 % 15 % 15 % 15 % 15 % 15 % 15 % 15 % 15 % 14 % 15 % 15 %

EBIT 12 % 15 % 12 % 10 % 11 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % 12 %

PBT 15 % 18 % 15 % 14 % 13 % 14 % 14 % 14 % 14 % 14 % 14 % 14 % 15 % 14 % 14 % 14 %

PAT 11 % 13 % 11 % 10 % 9 % 9 % 10 % 10 % 10 % 10 % 10 % 10 % 11 % 10 % 10 % 10 %



Consolidated Financials

P&L (Rs Mn) FY17A FY18E FY19E FY20E

Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E

Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E

Revenue 16,344 17,894 19,709 21,173 Equity Capital 488 488 488 488 PBT 2,464 2,519 2,746 2,919

Op. Expenditure 13,911 15,304 16,852 18,103 Reserve 8,765 8,987 9,174 9,335 Depreciation 469 519 554 600

EBITDA 2,434 2,591 2,858 3,070 Networth 9,253 9,476 9,662 9,824 Others -1,430 124 0 0

Depreciation 469 519 554 600 Long Term Debt 0 0 0 0 Taxes Paid 737 804 796 846

EBIT 1,965 2,071 2,303 2,470 Def Tax Liability 274 279 279 279 Change in WC 379 -469 -273 -233

Interest Expense 8 3 6 6 Minority Interest 0 0 0 0 Operating C/F 1,144 1,890 2,231 2,439

Other Income 507 450 448 455 Account Payables 2,199 1,539 1,695 1,821 Capex -160 -593 -600 -600

PBT 2,464 2,519 2,746 2,919 Other Curr Liabi 710 1,754 1,932 2,076 Change in Invest 440 0 0 0

Tax 680 804 796 846 Total Liabilities & Equity 12,435 13,048 13,568 14,000 Others 80 0 0 0

PAT bef. MI & Assoc. 1,784 1,715 1,950 2,072 Net Fixed Assets 2,921 3,002 3,047 3,047 Investing C/F 359 -594 -600 -600

Minority Interest 0 0 0 0 Capital WIP 147 198 198 198 Change in Debt 0 0 0 0

Profit from Assoc. 0 0 0 0 Others 317 259 259 259 Change in Equity 0 0 0 0

Recurring PAT 1,784 1,715 1,950 2,072

Inventory 1,294 1,128 1,242 1,334 Others -1,479 -1,611 -1,764 -1,911

Extraordinaires -25 -124 0 0 Account Receivables 2,702 2,451 2,700 2,900 Financing C/F -1,479 -1,611 -1,764 -1,911

Reported PAT 1,809 1,839 1,950 2,072 Other Current Assets 816 2,087 2,331 2,541 Net change in cash 24 -315 -132 -71

FDEPS (Rs) 7.3 7.0 8.0 8.5 Cash 4,238 3,923 3,791 3,720 RoE (%) 20 % 18 % 20 % 21 %

DPS (Rs) 5.5 5.5 6.0 6.5 Total Assets 12,435 13,048 13,568 14,000

RoIC (%) 19 % 18 % 20 % 21 %

CEPS (Rs) 9.2 9.2 10.3 10.9 Non-cash Working Capital 1,904 2,372 2,645 2,878

Core RoIC (%) 25 % 24 % 25 % 26 %

FCFPS (Rs) 6.2 5.3 6.7 7.5 Cash Conv Cycle 42.5 48.4 49.0 49.6 Div Payout (%) 89 % 88 % 90 % 92 %

BVPS (Rs) 37.9 38.8 39.6 40.2 WC Turnover 8.6 7.5 7.5 7.4 P/E 17.4 18.1 15.9 15.0

EBITDAM (%) 15 % 14 % 14 % 14 % FA Turnover 5.3 5.6 6.1 6.5 P/B 3.4 3.3 3.2 3.2

PATM (%) 11 % 10 % 10 % 10 % Net D/E -0.5 -0.4 -0.4 -0.4 P/FCFF 20.6 23.9 19.0 16.9

Tax Rate (%) 28 % 32 % 29 % 29 % Revenue/Capital Employed 1.9 2.0 2.1 2.2 EV/EBITDA 11.1 10.6 9.6 9.0

Sales Growth (%) -24 % 9 % 10 % 7 %

Capital Employed/Equity 1.0 1.0 1.0 1.0

EV/Sales 1.7 1.5 1.4 1.3

FDEPS Growth (%) -24 % -4 % 14 % 6 %

Dividend Yield (%) 4.4 % 4.4 % 4.9 % 5.3 %

TTM P/E vs. 2 yr forward EPS growth TTM P/B vs. 2 yr forward RoE TTM EV/EBITDA vs. 2 yr forward EBITDA growth

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Historical Consolidated Financials

P&L (Rs Mn) FY14A FY15A FY16A FY17A

Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A

Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A

Revenue 17,359 16,977 16,161 16,344 Equity Capital 488 488 488 488 PBT 1,671 1,740 2,693 2,464

Op. Expenditure 15,482 14,986 13,487 13,911 Reserve 7,707 7,742 8,423 8,765 Depreciation 446 477 456 469

EBITDA 1,877 1,991 2,674 2,434 Networth 8,196 8,231 8,911 9,253 Others -122 -576 578 -1,430

Depreciation 446 477 456 469 Long Term Debt 0 0 0 0 Taxes Paid 582 441 851 737

EBIT 1,431 1,514 2,218 1,965 Def Tax Liability 503 270 269 274 Change in WC 141 1,051 -576 379

Interest Expense 49 24 10 8 Minority Interest 0 0 0 0 Operating C/F 1,555 2,251 2,301 1,144

Other Income 290 249 485 507 Account Payables 1,865 1,451 1,941 2,199 Capex -309 -441 37 -160

PBT 1,671 1,740 2,693 2,464 Other Curr Liabi 1,468 1,655 654 710 Change in Invest 234 -1,511 -817 440

Tax 517 273 935 680 Total Liabilities & Equity 12,031 11,607 11,775 12,435 Others 88 162 80 80

PAT bef. MI & Assoc. 1,155 1,467 1,758 1,784 Net Fixed Assets 3,705 3,263 2,874 2,921 Investing C/F 13 -1,790 -701 359

Minority Interest 0 0 0 0 Capital WIP 53 84 245 147 Change in Debt -159 -1 0 0

Profit from Assoc. 0 0 0 0 Others 287 257 312 317 Change in Equity 0 0 0 0

Recurring PAT 1,155 1,467 1,758 1,784 Inventory 1,629 1,064 1,081 1,294 Others -392 -595 -1,664 -1,479

Extraordinaires -79 630 -251 -25 Account Receivables 3,256 2,314 2,006 2,702 Financing C/F -552 -596 -1,664 -1,479

Reported PAT 1,234 836 2,009 1,809 Other Current Assets 953 1,092 1,463 816 Net change in cash 1,016 -135 -63 24

EPS (Rs) 4.7 6.0 7.2 7.3 Cash 2,149 3,533 3,794 4,238

RoE (%) 15 % 18 % 21 % 20 %

DPS (Rs) 1.3 2.5 5.5 5.5

Total Assets 12,031 11,607 11,775 12,435

RoIC (%) 14 % 17 % 20 % 19 %

CEPS (Rs) 6.6 8.0 9.1 9.2 Non-cash Working Capital 2,505 1,364 1,956 1,904 Core RoIC (%) 14 % 21 % 26 % 25 %

FCFPS (Rs) 6.6 2.0 6.6 6.2 Cash Conv Cycle 52.7 29.3 44.2 42.5 Div Payout (%) 30 % 86 % 80 % 89 %

BVPS (Rs) 33.6 33.7 36.5 37.9 WC Turnover 6.9 12.4 8.3 8.6

P/E 26.9 21.2 17.7 17.4

EBITDAM (%) 11 % 12 % 17 % 15 % FA Turnover 4.6 5.1 5.2 5.3 P/B 3.8 3.8 3.5 3.4

PATM (%) 7 % 9 % 11 % 11 % Net D/E -0.3 -0.4 -0.4 -0.5 P/FCFF 19.4 64.6 19.3 20.6

Tax Rate (%) 31 % 16 % 35 % 28 % Revenue/Capital Employed 2.3 2.0 1.9 1.8 EV/EBITDA 15.9 14.1 10.4 11.1

Sales growth (%) -32 % -27 % -29 % -24 %

Capital Employed/Equity 1.1 1.1 1.0 1.0

EV/Sales 1.7 1.7 1.7 1.7

FDEPS growth (%) -43 % -5 % -10 % -24 %

Dividend Yield (%) 1.0 % 2.0 % 4.4 % 4.4 %



Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 SubhamSinha [email protected] 91-22-43320631

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 SwetaSheth [email protected] 91-22-43320634

Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Dealing Room E-mail

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Ashish Shah [email protected] 91-22-43320662

Maulik Patel Oil and Gas [email protected] 91-79-61909519 IleshSavla [email protected] 91-22-43320666

PrafulBohra Pharmaceuticals [email protected] 91-79-61909532 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

Associates E-mail SandipAmrutiya [email protected] 91-22-43320660

Ankit Choudhary [email protected] 91-79-61909533 Compliance Officer E-mail

Bharat Celly [email protected] 91-79-61909524 Jay Soni [email protected] 91-79-61909561

Harshit Patel [email protected] 91-79-61909522 Corporate Communications E-mail

Meet Chande [email protected] 91-79-61909513 Mahdokht Bharda [email protected] 91-22-43320647 Parva Soni [email protected] 91-79-61909521

Pranav Mehta [email protected] 91-79-61909514

Ronak Soni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

Shreepal Doshi [email protected] 91-79-61909541

Varun Baxi [email protected] 91-79-61909527

Vikas Jain [email protected] 91-79-61909531

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap > Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

Registered Office:

Equirus Securities Private Limited

Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,

N M Joshi Marg, Lower Parel,

Mumbai-400013.

Tel. No: +91 – (0)22 – 4332 0600

Fax No: +91- (0)22 – 4332 0601

Corporate Office:

3rd floor, House No. 9,

Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,

S.G. Highway Ahmedabad-380054

Gujarat

Tel. No: +91 (0)79 - 6190 9550

Fax No: +91 (0)79 – 6190 9560

© 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not

be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited

mailto:[email protected]




























Analyst Certification

I, Ashutosh Tiwari, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also

certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures

Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the

Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock

Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers

Regulations, 1993 (Reg. No. INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No. IN-DP-324-2017). There are no disciplinary actions taken by any regulatory

authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to

merchant banking services, private equity, mergers & acquisitions and structured finance.

As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for

investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have

received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their

directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in

their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or

Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor

Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or

brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.

The Research Analyst engaged in preparation of this Report:-

(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months;

(c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products

or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the

subject company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the

subject company.

This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein

may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable

restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this

document without subjecting ESPL and affiliates to any registration or licensing requirement within such jurisdiction.

This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based

on this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as

to its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant

information contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the

information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended

to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an

investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific

investment objectives, financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the

consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with

companies covered in its research report. Thus, investors should be aware that the firm may have conflict of interest.

A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the

“three years” period in the price chart).



Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst’ or Relatives’ financial interest No

Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No

Research Analyst’ or Relatives’ material conflict of interest No

Disclaimer for U.S. Persons

ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a

registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under appl icable state laws in the United States.

Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended

for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition

on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective

contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S.

Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US

Persons" under certain rules.

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