Apex Frozen Foods Ltd

Transcription

1 Apex Frozen Foods Ltd Absolute : LONG Relative : Overweight 2QFY19 Result: Estimate ( ), TP ( ), Rating ( ) Regular Coverage 53% ATR in 14 Months Valuations attractive even on conservative guidance maintain LONG Consumer Discretionary 2018 Equirus All rights reserved Rating Information Price (Rs) 383 Target Price (Rs) 620 Target Date Target Set On Implied yrs of growth (DCF) 15 Fair Value (DCF) 560 Fair Value (DDM) 127 Ind Benchmark Model Portfolio Position Stock Information 31st Dec'19 15th Nov'18 SPBSMIP NA Market Cap (Rs Mn) 11,981 Free Float (%) % 52 Wk H/L (Rs) 941.4/330 Avg Daily Volume (1yr) 2,53,424 Avg Daily Value (Rs Mn) 143 Equity Cap (Rs Mn) 313 Face Value (Rs) 10 Bloomberg Code APEX IN Ownership Recent 3M 12M Promoters 72.5 % 0.0 % 0.4 % DII 5.3 % -0.1 % -4.8 % FII 0.6 % 0.0 % -0.1 % Public 21.6 % 0.0 % 4.5 % Price % 1M 3M 12M Absolute -1.3 % % % Vs Industry -5.6 % % % Avanti Feeds Ltd % % % Waterbase Ltd -7.1 % % 1.8 % Consolidated Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (18A) EPS (19E) Apex Frozen Foods (APEX) reported 2QFY19 revenues of Rs 2.55bn (-10% yoy, 7% below EE). Volumes declined 6% yoy (flat qoq) off a high base even as capacity utilization was optimum at ~97%. Average realizations slid 14% in USD terms but were partly offset by INR depreciation. EBITDA margins contracted 106bps yoy to 9.7%% (-76bps vs EE) on higher employee costs as APEX moved a few contract workers to its own payroll. Construction of the new plant (earlier delayed due to bad weather) remains on track for operations to commence by Mar 19. We update our FY19/FY20 EPS by +1%/-10% to factor in management s conservative FY20 sales guidance, but maintain our LONG rating on expectations of strong earnings growth in FY20 as the new capacity (20,000 MTPA) comes on-stream. Our Dec 19 TP of Rs 620 (rolled over from a Sep 19 TP of Rs 630) is set at 18x TTM P/E (reduced from 20x previously to factor in near term headwinds). Mix changes, lower shrimp prices hurt topline: APEX clocked volumes of 3,688MT in 2QFY19 with almost full capacity utilization (owned + leased) vs. 3,941MT in 2QFY18 (-6% yoy) and 3,680MT in 1QFY18. Average realizations stood at US$ 9.2/kg (US$ 8.5/kg in 1QFY19, US$ 10.6/kg in 2QFY18) impacted by lower international shrimp prices and mix changes towards lower-sized shrimps. However, international shrimp prices have stabilized now and the business environment is expected to improve going forward. APEX is trying to diversify into newer geographies; the share of European exports to its revenues has increased to 25% in 1HFY19 (FY18: 18%) while the number of enquiries from South Korea and China has also gone up. New 20,000 MTPA capacity expected to commence operations by Mar 19: Construction of the new plant with a capacity of 20,000MTPA remains on track and is expected to begin commercial operations by Mar 19. APEX expects 70% capacity utilization in FY20, and has given a tentative revenue guidance of Rs 14bn for FY20; a precise guidance would be given towards FY19-end. Roll over to a Dec 19 TP of Rs 620; maintain LONG: Though a recovery in farmgate prices pushed up RM costs qoq, adj. EBITDAM improved 40bps qoq as international prices also recovered. New capacity in FY20 would drive volumes, and value-added products in the mix would aid margin expansion. We update our FY19/FY20 PAT estimates by +1%/-10% to factor in management s FY20 sales guidance of Rs 14bn, which appears conservative and should be revised up as conditions improve ahead. We roll over to a Dec 19 TP of Rs 620 (from a Sep 19 TP of Rs 630) set at 18x TTM P/E. Maintain LONG. Change in Estimates Rs. Mn FY19E Chg (%) FY20E Chg (%) Sales 9,840-4% 14,218-11% EBITDA 1,055-3% 1,776-9% EPS % % Consolidated Financials Rs. Mn YE Mar FY18A FY19E FY20E FY21E Sales 9,986 9,840 14,218 17,806 EBITDA 1,100 1,055 1,776 2,448 Depreciation Interest Expense Other Income Reported PAT ,250 1,764 Recurring PAT ,250 1,764 Total Equity 3,023 3,657 4,758 6,310 Gross Debt Cash ,495 Rs Per Share FY18A FY19E FY20E FY21E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 38 % 22 % 30 % 32 % Core ROIC (%) 25 % 16 % 25 % 28 % EBITDA Margin (%) 11 % 11 % 12 % 14 % Net Margin (%) 8 % 7 % 9 % 10 % November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 1 of 12 Before reading this report, you must refer to the disclaimer on the last page.

2 Quarterly performance % Change Rs mn 2QFY19 2QFY19E 1QFY19 2QFY18 2QFY19E 1QFY19 2QFY18 Net Sales 2,555 2,752 2,393 2,851-7% 7% -10% Comments Consumption of raw Material & Components 1,762 1,872 1,501 2,013-6% 17% -12% Employee Benefits Expenses % 3% 33% Other Expenses % -6% -4% Total Expenditures 2,306 2,463 2,070 2,543-6% 11% -9% EBITDA % -23% -19% Depreciation % 6% 16% EBIT % -25% -22% Interest % 12% -33% Other Income % 83% 23% PBT % -12% -12% Tax % -21% -15% Recurring PAT % -6% -10% Extraordinaires Reported PAT % -6% -10% EPS (Rs) % -6% -10% Gross Margin 31.1% 32.0% 37.3% 29.4% -95 bps -622 bps 165 bps EBITDA Margin 9.7% 10.5% 13.5% 10.8% -76 bps -374 bps -106 bps EBIT Margin 8.7% 9.6% 12.4% 10.0% -89 bps -374 bps -130 bps PBT Margin 11.3% 10.6% 13.7% 11.5% 74 bps -236 bps -15 bps PAT Margin 7.8% 7.0% 8.9% 7.7% 77 bps -110 bps 3 bps Tax Rate 31.5% 34.0% 35.3% 32.7% -248 bps -376 bps -114 bps Cost Items as a % of Sales RM Cost 68.9% 68.0% 62.7% 70.6% 95 bps 622 bps -165 bps Employee Cost 4.7% 4.0% 4.9% 3.2% 73 bps -18 bps 155 bps Other Expenses 16.6% 17.5% 18.9% 15.4% -93 bps -229 bps 116 bps November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 2 of 11

3 Earnings call takeaways Industry overview International shrimp prices corrected by 15-20% in Apr-May 18 from their FY18 peak, but have started stabilizing from 2QFY19 onwards. Due to piled-up inventory in the US, festive season demand (2QFY19 and part of 3QFY19) was muted. Also, as certain shrimp sizes were not available with the company, APEX had to postpone the supply of such products. Farmgate prices have improved recently; APEX expects the business environment to normalize going forward. Anti-dumping duty (ADD) is 1.35% up to Jul 20 for US exports; products sold in Europe are not subject to any ADD. Business updates APEX clocked volumes of 3,688MT in 2QFY19 with almost full capacity utilization (owned + leased) vs. 3,941MT in 2QFY18 (-6% yoy). Average realization (including other income) came in at ~Rs 716/kg vs ~Rs 741/kg in 2QFY18. Reasons for increase in RM cost qoq: (a) increase in farmgate prices and (b) difference in shrimp sizes (1Q dominated by small-size harvest). Realizations for 3QFY19 would be similar to current levels. APEX targets to bring down US exports to <70% of overall exports. Capex and upcoming plant APEX is setting up a new processing facility (20,000MT) with a capital outlay of ~Rs 902mn; of this, ~Rs 625mn has been deployed as on Sep 18. Civil construction work which was delayed is now on track with the installation of key equipment. By 3QFY19-end, major work would be completed. Commercial production would begin from 4QFY19 and full capacity will be available for FY20. Management has not decided on the future course of action for the leased facility. APEX will first move production to the new facility, but a final decision will be taken towards FY19-end depending on the demand-supply scenario at that time. Once the new facility is up and running, maintenance activity (30-45 days) at the existing plant would be taken up. Export incentives were to the tune of ~Rs 170mn in 2QFY19. Share of European exports for the company increased to ~25% in 1HFY19 from ~18% in FY17. A sharp increase in receivables is on account of increased proportion of European exports. Receivable days are higher for European exports. Employee costs increased due to (a) adding hatcheries and farms, and (b) shifting of some employees (casual labor) onto company payroll; earlier, this was accounted as a part of other expenses. Management expects ~70% utilization of the new facility (to become operational in 4QFY19) in the first year of operations. Capacity utilization for the ready-to-eat capacity would be % in FY20E, and would be one of the major levers for EBITDA margin expansion. Tentative guidance for FY20 revenues is ~Rs 14bn. A precise guidance would be given towards FY19-end. APEX is witnessing good enquiries from S.Korea and China; once the new capacity comes on-stream, the company will get an opportunity to diversify into new markets. November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 3 of 11

4 Exhibit 1:New capacity in FY20 shall drive volumes Owned capacity(mt) Arrangement with Royale Marine(MT) New capacity for frozen shrimps VAP capacity Capacity utilisation (%) (RHS) 40, % 35,000 93% 100% 30,000 82% 78% 81% 74% % % 25,000 70% 20,000 67% 60% , , % 5,000 20% % FY14 FY15 FY16 FY17 FY18 FY19e FY20e FY21e Source: Company Data, Equirus Securities; VAP= Value added products Exhibit 2:EBITDA/kg to improve further on rising VAP contribution, backward integration and discontinuation of leased capacity FY14 FY15 FY16 FY17 FY18 FY19e FY20e FY21e Source: Company Data, Equirus Securities EBITDA/kg (Rs) Improvement in FY20 and FY21 to be mainly led by higher contribution of value-added products, discontinuation of leased facility and higher procurement from own farms Exhibit 3: Quarterly revenue trend Exhibit 4: Quarterly EBITDA and EBITDAM trend Revenue (Rs. mn) 3,000 2,851 2,628 2,476 2,555 2,393 2,500 2,031 2,000 1,640 1,500 1, Q4 Q1 Q2 Q3 Q4 Q1 Q2 Source: Company, Equirus Securities EBITDA (Rs. mn) EBITDAM (%) % % 12.3% 11.4% 9.9% 9.7% % Q4 Q1 Q2 Q3 Q4 Q1 Q2 Source: Company, Equirus Securities 16% 14% 12% 10% 8% 6% 4% 2% 0% November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 4 of 11

5 Company Snapshot How we differ from Consensus EPS Sales PAT - Equirus Consensus % Diff Comment FY19E No consensus available FY20E FY19E 9, FY20E 14, FY19E FY20E 1, Key Estimates: Particulars FY11 FY12 FY13 FY14E FY15E FY16E Particulars ADHO Revenue (Rs Mn) 3,432 4,443 FY18 5,771 FY19E 6,381 FY20E 7,270 8,397 FY21E Frozen Nomark shrimp (Rs Mn) export volumes (MT) ,169-14, , , EBITDA (Rs Mn) 1,089 1,166 1,729 1,848 2,102 2,460 VAT export volumes (MT) 0 0 4,500 6,000 EBITDA Margin (%) 30.3% 24.6% 28.5% 27.2% 26.2% 26.3% Frozen shrimp realizations (Rs/kg) PAT (Rs Mn) 1,031 1,201 1,674 1,473 1,439 1,752 VAP PAT realization Margin (%) (Rs/kg) 28.7% 25.4% 027.6% 21.7% % % 788 Risk to Our View: 1. Sharp fall in global shrimp prices. 2. Any labor issues may disrupt the processing business as it is highly labor-intensive. 3. Any major disease may affect the shrimp culture in India. DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 7.7 % % 4.0 % 16.8 % - FY19E FY20E FY21-23E FY24-28E FY29-33E Sales Growth -1 % 44 % 14 % 11 % 10 % NOPAT Margin 6 % 8 % 8 % 8 % 8 % IC Turnover RoIC 15.7 % 25.0 % 29.2 % 30.2 % 31.5 % Years of strong growth Valuation as on date (Rs) Valuation as of Dec' Based on DCF, we derive a Dec 19 fair value of Rs 560. Company Description: Apex Frozen Foods Limited is one of India s integrated producers and exporters of shelf stable quality aquaculture products. The company supplies ready-to-cook products to a diversified customer base of food companies, retail chains, restaurants, club stores and distributors spread across developed markets such as the US, the UK and various European countries. Key Triggers Government participation in resolving infrastructural problems like poor power supply and lack of cold storages. Shrimp realization improving in export markets. Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E Apex Frozen Foods LONG , st Dec' % 22 % 30 % 0.6 % 0.6 % Avanti Feeds Ltd LONG , th Sep' % 29 % 33 % 4.9 % 1.9 % Waterbase Ltd NA 178 7,391 NA NA % % - November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 5 of 11

6 Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19A 2Q19A 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E Revenue 2,476 2,851 2,628 2,031 2,393 2,555 2,694 2,198 3,319 3,529 3,660 3,710 9,986 9,840 14,218 17,806 Consumption of raw Material & Components 1,769 2,013 1,855 1,394 1,501 1,762 1,872 1,546 2,240 2,382 2,470 2,525 7,031 6,681 9,618 12,011 Employee Benefits Expenses Other Expenses , Manufacturing expenses ,031 1,441 1,727 EBITDA ,100 1,055 1,776 2,448 Depreciation EBIT , ,583 2,226 Interest Other Income PBT ,126 1,088 1,667 2,352 Tax PAT bef. MI & Assoc ,250 1,764 Minority Interest Profit from Assoc Recurring PAT ,250 1,764 Extraordinaries Reported PAT ,250 1,764 EPS (Rs) Key Drivers Frozen shrimp export volumes (MT) ,169 14,151 15,036 17,892 VAP export volumes (MT) ,500 6,000 Frozen shrimp realization (Rs/kg) VAP realization (Rs/kg) Sequential Growth (%) Revenue 51 % 15 % -8 % -23 % 18 % 7 % 5 % -18 % 51 % 6 % 4 % 1 % Consumption of raw Material & Components 45 % 14 % -8 % -25 % 8 % 17 % 6 % -17 % 45 % 6 % 4 % 2 % EBITDA 93 % 25 % -3 % -16 % 29 % -23 % 7 % -19 % 90 % 8 % 5 % -3 % EBIT 99 % 25 % -3 % -19 % 32 % -25 % 8 % -24 % 100 % 10 % 5 % -4 % Recurring PAT 168 % 19 % -16 % -6 % 21 % -6 % -12 % -22 % 112 % 9 % 5 % -4 % EPS 168 % 19 % -16 % -6 % 21 % -6 % -12 % -22 % 112 % 9 % 5 % -4 % Yearly Growth (%) Revenue % -3 % -10 % 2 % 8 % 39 % 38 % 36 % 69 % 43 % -1 % 44 % 25 % EBITDA % 31 % -19 % -11 % -13 % 27 % 79 % 75 % 109 % 148 % -4 % 68 % 38 % EBIT % 31 % -22 % -13 % -19 % 22 % 80 % 75 % 122 % 166 % -7 % 69 % 41 % Recurring PAT % 14 % -10 % -6 % -22 % 36 % 58 % 89 % 134 % 215 % -9 % 73 % 41 % EPS % 14 % -10 % -6 % -22 % 36 % 58 % 89 % 134 % 215 % -9 % 73 % 41 % Margin (%) EBITDA 10 % 11 % 11 % 12 % 13 % 10 % 10 % 10 % 12 % 13 % 13 % 12 % 11 % 11 % 12 % 14 % EBIT 9 % 10 % 11 % 11 % 12 % 9 % 9 % 8 % 11 % 11 % 11 % 11 % 10 % 10 % 11 % 13 % PBT 10 % 11 % 11 % 12 % 14 % 11 % 10 % 9 % 12 % 12 % 12 % 11 % 11 % 11 % 12 % 13 % PAT 7 % 8 % 7 % 9 % 9 % 8 % 6 % 6 % 9 % 9 % 9 % 9 % 8 % 7 % 9 % 10 % November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 6 of 11

7 Consolidated Financials Apex Frozen Foods Ltd Absolute LONG Relative Overweight 53% ATR in 14 Months P&L (Rs Mn) FY18A FY19E FY20E FY21E Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E Revenue 9,986 9,840 14,218 17,806 Equity Capital PBT 1,126 1,088 1,667 2,352 Op. Expenditure 8,886 8,786 12,441 15,358 Reserve 2,710 3,345 4,445 5,997 Depreciation EBITDA 1,100 1,055 1,776 2,448 Networth 3,023 3,657 4,758 6,310 Others Depreciation Long Term Debt Taxes Paid EBIT 1, ,583 2,226 Def Tax Liability Change in WC Interest Expense Minority Interest Operating C/F Other Income Account Payables Capex , PBT 1,126 1,088 1,667 2,352 Other Curr Liabi Change in Invest Tax Total Liabilities & Equity 4,311 5,001 6,247 8,035 Others PAT bef. MI & Assoc ,250 1,764 Net Fixed Assets 1,111 2,320 2,377 2,468 Investing C/F Minority Interest Capital WIP Change in Debt Profit from Assoc Others Change in Equity 1, Recurring PAT ,250 1,764 Inventory 1, ,107 1,657 Others Extraordinaires Account Receivables ,169 1,758 Financing C/F Reported PAT ,250 1,764 Other Current Assets Net change in cash FDEPS (Rs) Cash ,495 RoE (%) 38 % 22 % 30 % 32 % DPS (Rs) Total Assets 4,311 5,001 6,247 8,035 RoIC (%) 28 % 18 % 26 % 28 % CEPS (Rs) Non-cash Working Capital 1,843 1,793 2,220 3,124 Core RoIC (%) 25 % 16 % 25 % 28 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 10 % 10 % 10 % 10 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 11 % 11 % 12 % 14 % FA Turnover P/B PATM (%) 8 % 7 % 9 % 10 % Net D/E P/FCFF Tax Rate (%) 30 % 34 % 25 % 25 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) 43 % -1 % 44 % 25 % Capital Employed/Equity EV/Sales FDEPS Growth (%) 215 % -9 % 73 % 41 % Dividend Yield (%) 0.6 % 0.6 % 1.1 % 1.5 % November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 7 of 11

8 Historical Consolidated Financials P&L (Rs Mn) FY15A FY16A FY17A FY18A Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A Revenue 5,994 6,035 6,987 9,986 Equity Capital PBT ,126 Op. Expenditure 5,662 5,627 6,543 8,886 Reserve ,710 Depreciation EBITDA ,100 Networth ,094 3,023 Others Depreciation Long Term Debt , Taxes Paid EBIT ,014 Def Tax Liability Change in WC Interest Expense Minority Interest Operating C/F Other Income Account Payables Capex PBT ,126 Other Curr Liabi Change in Invest Tax Total Liabilities & Equity 1,651 1,788 2,767 4,311 Others PAT bef. MI & Assoc Net Fixed Assets ,111 Investing C/F Minority Interest Capital WIP Change in Debt Profit from Assoc Others Change in Equity ,178 Recurring PAT Inventory ,016 Others Extraordinaires Account Receivables Financing C/F Reported PAT Other Current Assets Net change in cash EPS (Rs) Cash RoE (%) 40 % 30 % 27 % 38 % DPS (Rs) Total Assets 1,651 1,788 2,767 4,311 RoIC (%) 19 % 18 % 17 % 28 % CEPS (Rs) Non-cash Working Capital ,356 1,843 Core RoIC (%) 17 % 16 % 14 % 25 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 0 % 0 % 10 % 10 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 6 % 7 % 6 % 11 % FA Turnover P/B PATM (%) 3 % 3 % 4 % 8 % Net D/E P/FCFF Tax Rate (%) 34 % 35 % 33 % 30 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 17 % 1 % 16 % 43 % Capital Employed/Equity EV/Sales FDEPS growth (%) 38 % 6 % 28 % 215 % Dividend Yield (%) 0.0 % 0.0 % 0.3 % 0.6 % November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 8 of 11

9 Equirus Securities Research Analysts Sector/Industry Equity Sales Abhishek Shindadkar IT Services Vishad Turakhia Ashutosh Tiwari Auto, Metals & Mining Subham Sinha Bharat Celly Healthcare Viral Desai Depesh Kashyap Mid-Caps Viraj Mehta Dhaval Dama FMCG, Mid-Caps Ruchi Bhadra Manoj Gori Consumer Durables Cash Dealing Room Maulik Patel Oil and Gas Ashish Shah Pranav Mehta Building Materials Ilesh Savla Praful Bohra Healthcare Manoj Kejriwal Rohan Mandora Banking & Financial Services Dharmesh Mehta Associates Sarit Sanyal Ankit Choudhary Vikram Patil Dhairya Dhruv Gaurav Mehta Harshit Patel Compliance Officer Nishant Bagrecha Jay Soni Prateeksha Malpani Corporate Communications Ronak Soni Mahdokht Bharda Rushabh Shah Quant Analyst Shreepal Doshi Kruti Shah Varun Baxi F&O Dealing Room Vikas Jain Kunal Dand 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. Dhananjay Tiwari dhananjay.tiwari@equirus.com Mukesh Jain Mukesh.jain@equirus.com Registered Office: Equirus Securities Private Limited Unit No. 1201, 12th Floor, C Wing, Marathon Futurex, N M Joshi Marg, Lower Parel, Mumbai Tel. No: +91 (0) Fax No: +91- (0) Corporate Office: 3rd floor, House No. 9, Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge, S.G. Highway Ahmedabad Gujarat Tel. No: +91 (0) Fax No: +91 (0) November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 9 of 11

10 2018 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 Analyst Certification I, Depesh Kashyap/Harshit Patel, 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 U65993MH2007PTC is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital Market (Reg. No. INB ), Futures & Options Segment (Reg. No.INF ) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB ) of Bombay Stock Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH ), as a Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg. No.INP ) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP ). 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. 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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. November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 10 of 11

11 A graph of daily closing prices of securities is available at and (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 Equirus Securities Private Limited (ESPL) is 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 ESPL 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 applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by ESPL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major 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") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., ESPL has entered into a chaperoning agreement with a U.S. registered broker-dealer name called Xtellus Capital Partners, Inc, (''XTELLUS'). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. "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. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, XTELLUS, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. November 16, 2018 Analysts: Depesh Kashyap, CFA ( )/Harshit Patel ( ) Page 11 of 11