PNC Infratech Limited

Transcription

1 Absolute : LONG PNC Infratech Limited Relative : Overweight 4QFY16 Result: Estimate ( ), Target ( ), Rating ( ) Regular Coverage 26% ATR in 13 Months 2016 Equirus All rights reserved Rating Information Price (Rs) 567 Target Price (Rs) 728 Target Date 30th Jun'17 Target Set On 31st May'16 Implied yrs of growth (DCF) 10 Fair Value (DCF) 563 Fair Value (DDM) 204 Ind Benchmark BSE Midcap Model Portfolio Position NA Stock Information Market Cap (Rs Mn) 29,097 Free Float (%) % 52 Wk H/L (Rs) 612.4/351.5 Avg Daily Volume (1yr) 51,170 Avg Daily Value (Rs Mn) 25 Equity Cap (Rs Mn) 513 Face Value (Rs) 10 Bloomberg Code PNCL IN Ownership Recent 3M 12M Promoters 56.1 % 0.0 % - DII 15.7 % -0.6 % - FII 6.5 % 0.0 % - Public 21.8 % -0.6 % - Price % 1M 3M 12M Absolute 8.6 % 18.9 % 41.9 % Vs Industry 5.5 % 0.0 % 35.6 % ASHOKA 0.0 % % % KNRCON -2.5 % 17.1 % 3.7 % Standalone Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (16A) EPS (17E) Execution & Order Inflows to be strong tailwinds going forward, Maintain Long PNC Infratech reported its 4QFY16 standalone Revenues/EBITDA which were +1%/- 2% vs. EE though they grew by 27%/26% yoy. In FY16, company has bagged 7 orders worth Rs. 40bn. We expect execution to remain robust with steady EBITDA margins of % in FY17E/FY18E & very low tax outflow in FY17E on account of 80IA tax benefits. Therefore, we have upward revised our standalone PAT estimates by 31%/2% for FY17E/FY18E. We maintain our LONG rating with Jun 17 SOTP based TP of Rs. 728/share (vis-à-vis earlier Mar 17 TP of Rs. 653/share). Higher Order-book + robust execution = higher top-line: PNC has won 7 EPC projects worth Rs. 40bn in FY16 & its Mar 16 OB stood at Rs. 55bn. Additionally, it has managed to win 2 projects worth Rs. 2.6bn in 1QFY17 till date. The strong OB gives better execution visibility going forward. This gives us confidence of 22%+ EPC Revenue CAGR between FY16-19E with steady EPC EBITDA Margins of %. Company will actively participate in the upcoming EPC and Hybrid Annuity projects but is not interested in BOT projects. It is looking to win new orders worth Rs. 50bn in FY17. Company s BOT Portfolio if fully operational & remains one of the best among its peers: PNC has built a lucrative BOT Portfolio across select geographies with prudent traffic assumptions and zero premium bids. All its 7 BOT projects are now operational. We expect FY19E BOT revenues to rise to Rs. 6.4bn vs. FY19E debt of Rs. 20.1bn (both figures, stake adjusted). We have however downgraded the Toll revenue generation from Bareily-Almora project on back of slower ramp up in toll collection vs. original estimates. We arrive at FCFE based valuation of Rs. 6.6bn after adjusting for 20% Holding company discount leading to a Price to Invested Equity of 1.4x. Order inflows and EPC execution ramp up would be key triggers while weak execution and project delays key risks: We expect the stock to re-rate with execution ramp-up, order inflows and new project commissioning. Weak execution and project delays are key downside risks. Lower interest rates and lower commodity prices could prove to be strong tailwinds. Construction Change in Standalone Estimates % change over previous estimates FY17E FY18E FY17E FY18E Sales 23,935 29,887 0% 1% EBITDA 3,238 4,240 8% 6% PAT 2,088 2,180 32% 2% EPS % 2% Consolidated Financials Rs. Mn YE Mar FY16A FY17E FY18E FY19E Sales 23,946 29,661 35,979 43,938 EBITDA 4,073 5,993 7,142 7,654 Depreciation 1,091 2,026 2,174 2,383 Interest Expense 1,287 2,253 2,105 2,074 Other Income Reported PAT 2,161 1,411 1,855 2,011 Recurring PAT 2,161 1,411 1,855 2,011 Total Equity 13,097 14,132 15,593 17,108 Gross Debt 16,035 22,092 20,340 20,170 Cash 1,168 4,692 4,016 4,544 Rs Per Share FY16A FY17E FY18E FY19E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 20 % 10 % 12 % 12 % Core ROIC (%) 13 % 10 % 9 % 8 % EBITDA Margin (%) 17 % 20 % 20 % 17 % Net Margin (%) 9 % 5 % 5 % 5 % May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 1 of 12

2 Standalone Quarterly Result Table % Change Rs Mn 4QFY16 4QFY16E 3QFY16 4QFY15 Comments 4QFY16E 3QFY16 4QFY15 Net Sales 5,887 5,804 5,215 4,643 1% 13% 27% In line with EE but strong improvement yoy Construction Expenses 4,176 4,295 3,861 3,420-3% 8% 22% Employees Cost % -3% -10% Other Expenses % 60% 94% Total Expenditures 5,119 4,567 4,536 4,032 12% 13% 27% Higher due to jump in other expenses EBITDA % 13% 26% Depreciation % 4% 35% EBIT % 16% 24% Interest % 9% -19% Lower yoy due to debt retirement via IPO proceeds. Higher than EE possibly due to BG charges required for bidding projects Other Income % 222% 51% Profit of Rs. 97.2mn from sale of Jaora-Nayagaon to Ashoka Buildcon PBT % 31% 38% Tax % -620% -719% Write back of excess provision of Rs. 152mn & MAT liability of Rs. 237mn eligible for MAT credit; both related to IT assessment year i.e. FY Also company has claimed benefit under 80IA by making provision for current year tax under MAT due to favourable assessment for AY13-14 Recurring PAT 1, % 374% 369% Outperformance mainly led by lower tax outgo Extraordinaries Reported PAT 1, % 374% 369% EPS (Rs) % 374% 264% EBITDA Margin EBIT Margin 13.1% 10.6% 13.6% 11.3% 13.0% 10.4% 13.2% 10.9% -50 bps -72 bps 3 bps 25 bps -11 bps Margins slightly lower than our estimates -26 bps PBT Margin 11.1% 10.9% 9.5% 10.2% 19 bps 156 bps 90 bps PAT Margin 26.1% 7.6% 6.2% 7.1% 1851 bps 1989 bps 1905 bps Tax Rate % 30.0% 34.4% 30.4% bps bps bps May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 2 of 12

3 Valuation SOTP Valuation Main changes in current and earlier SOTP Valuations: a) EPC Business Valuation higher by Rs. 136/share: We have maintained the earlier 15x TTM FY17E P/E multiple and factored an increase in PAT due to lower tax outflow. b) Net BOT Valuation is lower by Rs. 61/share due to 1) downward revision in toll collection in Bareilly-Almora and 2) 20% Holding company discount. Exhibit 5: Earlier SOTP Valuation Valuation Snapshot Rs. Mn Rs./share EPC Business Mar 17 TTM Sales 24,020 Mar 17 TTM Net Profit 1,577 Net Profit Margin 6.6% P/E Multiple 15 Valuation of EPC Business (A) 23, Gross Valuation of BOT Projects 9, Ghaziabad Aligarh 2, Kanpur Kabrai 2, Gwalior Bhind Narela Industrial Estate BareilyAlmora 2, Rae Bareli Jaunpur 1, Kanpur Ayodhya Add/(Less): Adjustment Net Valuation of PNC Infra BOT Portfolio (B) 9, Total Valuation (A) + (B) 33, Source: Equirus Securities Exhibit 6: Current SOTP Valuation Valuation Snapshot Rs. Mn Rs./share EPC Business Mar 17 TTM Sales 25,238 Mar 17 TTM Net Profit 2,042 Net Profit Margin 8.1% P/E Multiple 15 Valuation of EPC Business (A) 30, Gross Valuation of BOT Projects 7, Ghaziabad Aligarh 2, Kanpur Kabrai 1, Gwalior Bhind Narela Industrial Estate BareilyAlmora Rae Bareli Jaunpur 1, Kanpur Ayodhya 1, Add/(Less): Adjustment Net Valuation of PNC Infra BOT Portfolio (B) 8, Adj. for Holding Company Discount 6, Total Valuation (A) + (B) 37, Source: Equirus Securities May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 3 of 12

4 Key Highlights of the Concall: Key Highlights of the Con-call: Road Segment: Bidding pipeline remains strong Government has been working on easing regulatory hurdles and innovating financial models to help the private sector CCEA has approved 2 policy changes divestment of 100% of equity stake after 3 years of project completion and NHAI has been allowed to infuse funds into the projects which have got stuck Government has awarded projects covering 12,900kms since it took office in May 14. For FY17, total award target has been set at 25,000kms NHAI has awarded projects covering 4,171kms in FY16 vs. 3,060kms in FY15 & 1,437kms in FY14 Out of the 4,171kms, 3,017kms were awarded through EPC projects, 803kms through BOT projects and 351kms through Hybrid Annuity projects NHAI is targeting to construct 8,000kms for FY17 while MORTH+NHIDCL are targeting 7,000kms. Total target for construction is 15,000kms vs. 6,000kms in FY16. At present, more than 1,000 projects covering 32,000kms are being planned for improvement & construction NHAI has decided to stop movement of overloaded vehicles on the project roads on detection of such vehicles in addition to 10x penalty being imposed on the truck operator Company is qualified for Lucknow-Balia expressway project in state of UP. The project is worth Rs. 125bn and has been divided into 8 packages of Rs. 15bn each Apart from Lucknow-Balia project, UP government is also looking to award 15 projects worth Rs. 180bn in next months 4QFY16 Performance: For 4QFY16, EPC & Toll/Annuity revenues stood at Rs. 5.85bn & Rs. 1bn respectively vs. Rs. 4.7bn & Rs. 0.7bn in 4QFY15. For FY16, EPC & Toll/Annuity revenues stood at Rs. 20bn & Rs. 3.8bn respectively vs. Rs. 16bn & Rs. 2.6bn Project-wise Revenue breakup for 4QFY16 Projects Executed Value Rs. Mn Agra Firozabad 3,500 Varanasi Gorakhpur 800 Rae Bareily 320 Agra Bypass 110 Consolidated Net-worth for company stood at Rs. 13bn while Consolidated D/E in Mar 16 stood at 1.22 vs in Mar 15. Standalone Net-worth stood at Rs. 13.6bn while Standalone D/E in Mar 16 stood at 0.00 vs in Mar 15 Net Working Capital/Debtor days stood at 92/68 for FY16 vs. 122/86 days for FY15 Bareilly-Almora project started Toll collection from Oct 15. During FY16, company has commenced Toll collection from 3 projects namely Kanpur- Kabrai, Ghaziabad Aligarh & Bareilly Almora. Company now has all 7 of its BOT projects operational Capex for FY16 was Rs. 400mn in machinery while for FY17 & FY18 it expects capex of Rs. 10bn & Rs mn respectively Company sold its minority stake in Jaora-Nayagaon to Viva Highways, a subsidiary of Ashoka Buildcon for an aggregate consideration of Rs. 342mn. It has recognized the profit of Rs. 97.2mn from this sale in 4QFY16 as other income It is currently working on more than 20 projects. It has worked in states like UP, Bihar, Rajasthan, WB and Assam In Rae Bareily annuity project, company expects to get a bonus annuity of Rs. 3.4bn along with 1 st annuity payment in Dec 16 due to early completion of the project Interest costs were higher because most of the debt was repaid in month of Mar 16, once company received mobilization advance from UPEIDA for Agra Lucknow project Currently company has Rs. 1.7bn of interest free mobilization advance with it Gross Block as on Mar 16 was Rs. 4.3bn on which company can do work of Rs. 30bn Standalone Cash profit for 4QFY16 stood at Rs. 1,680mn vs. Rs. 433mn in 4QFY15 while for FY16 cash profit stood at Rs. 1,691mn vs. Rs. 459mn in FY15. Consolidated Cash profit for 4QFY16 stood at Rs. 2,952mn vs. Rs. May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 4 of 12

5 1,367mn in 4Q15 while for FY16 cash profit stood at Rs. 3,251mn vs. Rs. 1,516mn in FY15 Company s 2 Bihar projects are facing land acquisition issues due to which appointed date has been delayed. It expects appointed date by Jul 16 end In Aligarh Moradabad, appointed date is expected by Jun 16 end while in Varanasi-Gorakhpur & Nagina-Kashipur, appointed dates are expected by Jul 16 end Long term and short term credit ratings have been upgraded from CARE A to CARE A+ and CARE A1 to CARE A1+respectively It is not interested in bidding for Metro linked projects because the competition is very high Order-book movement& Guidance: Rae Bareli Jaunpur got COD from Feb 16, 98 days before its scheduled COD. In FY16, 4 of company s BOT projects namely, Kanpur-Kabrai, Ghaziabad Aligarh, Bareilly Almora& Rae Bareli, have started operations Unexecuted Order-book as on Mar 16 stood at Rs. 55bn. Company has won projects worth Rs. 2.6bn till date in 1QFY17 Company secured 7 new EPC orders (6 Highways & 1 Airport) worth Rs. 39.7bn in FY16 Major EPC projects under execution Projects Residual Value Rs. Mn Nagina Kashipur 11,560 Varanasi Gorakhpur 8,690 Agra Firozabad 8,600 Aligarh - Moradabad 6,450 Bhojpur Buxar 4,770 Other Projects 15,300 Total OB 55,370 Company will participate in orders from MORTH, NHAI & UP State Rs bn of projects from NHAI & MORTH, Rs. 80bn of HAM projects and Rs. 20bn of projects in UP May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 5 of 12

6 Company Snapshot How we differ from Consensus EPS Sales PAT - Equirus Consensus % Diff Comment FY17E % We have factored lower tax outgo in FY18E FY17E , ,736 9 % 3 % FY17E as per management guidance & expect consensus to streamline their estimates FY18E 35,979 33,461 8 % FY17E 1,411 1, % FY18E 1,855 1,696 9 % Our Key Investment arguments: Valuations attractive after factoring ramp-up in EPC execution and decent growth for BOT business Key Assumptions Particulars E 2018E 2019E Revenues (Rs. in Mn.) 15,610 20,142 23,935 29,887 37,383 EBITDAM % 13.88% 13.21% 13.53% 14.19% 14.14% PATM % 6.43% 12.05% 8.72% 7.29% 7.34% Order book (Rs. in Mn.) 34,447 55,149 76,214 93, ,807 Net Fixed Asset Turns Order book/billing Ratio Toll Collection 2,266 3,841 5,591 5,958 6,420 Risk to Our View Less than Rs. 10bn/Rs. 30bn order inflows in FY17E/FY18E, 11%-12% EPC EBITDA Margins and less than 5% Traffic CAGRs till FY18E Key Triggers Order book growth, better EBITDA margins, execution ramp Sensitivity to Key Variables % Change % Impact on FY17 EPS EBITDA Margins 1 % 17 % Interest Rate -1 % 13 % DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 7.5 % % 3.0 % 51.6 % - FY17E FY18E FY19-21E FY22-26E FY27-31E Sales Growth 24 % 21 % 18 % 11 % 10 % NOPAT Margin 11 % 9 % 7 % 7 % 7 % IC Turnover RoIC 10.2 % 8.5 % 9.3 % 13.0 % 16.3 % Years of strong growth Valuation as on date (Rs) Valuation as of Jun' Based on DCF, assuming 10 years of 11% CAGR growth and 13% average ROIC, we derive current fair value of Rs. 491 and Jun 17 fair value of Rs Company Description: PNC Infratech is a mid-sized Infra EPC + Road BOT player with ~2 decades of experience and proven expertise in execution of highway projects, bridges, flyovers, power transmission lines, airport runways, industrial area development etc. Company currently has 6 operational BOT projects and 1 OMT project. It has presence across states like Rajasthan, Uttar Pradesh, Delhi, Bihar, WB, MP, Karnataka, Tamil Nadu etc. Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY16A FY17E FY18E FY16A FY17E FY18E FY16A FY17E FY16A FY17E FY18E FY16A FY17E PNC Infratech LONG , th Jun' % 10 % 12 % 0.4 % 1.1 % Ashoka Buildcon LONG , th Sep' % 5 % 6 % 1.1 % 0.7 % KNR Constructions LONG , st Mar' % 12 % 13 % 0.2 % 0.5 % May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 6 of 12

7 Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q16A 2Q16A 3Q16A 4Q16A 1Q17E 2Q17E 3Q17E 4Q17E 1Q18E 2Q18E 3Q18E 4Q18E FY16A FY17E FY18E FY19E Revenue 4,344 4,695 5,215 5,887 5,213 5,399 6,259 7,065 6,516 6,317 8,011 9,043 20,142 23,935 29,887 37,383 Operating Expenses Employees Cost ,072 1,179 Periodic Maintenance Other Expenses ,016 2,207 2,522 2,882 EBITDA ,203 1,148 2,660 3,238 4,240 5,285 Depreciation EBIT , ,135 2,561 3,459 4,372 Interest Other Income PBT ,004 2,319 3,254 4,095 Tax ,074 1,351 Recurring PAT , ,428 2,088 2,180 2,744 Extraordinary Reported PAT , ,428 2,088 2,180 2,744 EPS (Rs) Key Drivers Order book (in Rs mn) 55,149 76,214 93, ,807 EBITDAM % 13% 14% 14% 14% Order Book/TTM Revenues Interest Coverage Debt Equity Non cash WC/Sales 25% 35% 34% 34% Sequential Growth (%) Revenue -6 % 8 % 11 % 13 % -11 % 4 % 16 % 13 % -8 % -3 % 27 % 13 % Construction Expenses -7 % 10 % 11 % 8 % -9 % 5 % 15 % 12 % -7 % -4 % 29 % 13 % EBITDA -2 % 2 % 11 % 13 % -1 % -4 % 22 % -5 % 12 % -2 % 29 % -5 % EBIT -4 % 1 % 11 % 16 % -3 % -7 % 28 % -7 % 15 % -3 % 35 % -6 % Recurring PAT -20 % 17 % 7 % 374 % -66 % -16 % 29 % -8 % -9 % -4 % 38 % -7 % EPS -38 % 17 % 7 % 374 % -66 % -16 % 29 % -8 % -9 % -4 % 38 % -7 % Yearly Growth (%) Revenue 15 % 41 % 35 % 27 % 20 % 15 % 20 % 20 % 25 % 17 % 28 % 28 % 29 % 19 % 25 % 25 % EBITDA 30 % 15 % 21 % 26 % 27 % 20 % 32 % 10 % 25 % 27 % 35 % 36 % 23 % 22 % 31 % 25 % EBIT 22 % 14 % 14 % 24 % 25 % 16 % 33 % 7 % 27 % 32 % 39 % 40 % 18 % 20 % 35 % 26 % Recurring PAT 15 % 43 % 38 % 369 % 103 % 47 % 78 % -65 % -9 % 4 % 11 % 11 % 142 % -14 % 4 % 26 % EPS -11 % 11 % 7 % 264 % 103 % 47 % 78 % -65 % -9 % 4 % 11 % 11 % 142 % -14 % 4 % 26 % Margin (%) EBITDA 14 % 13 % 13 % 13 % 15 % 14 % 14 % 12 % 15 % 15 % 15 % 13 % 13 % 14 % 14 % 14 % EBIT 11 % 10 % 10 % 11 % 12 % 10 % 12 % 9 % 12 % 12 % 13 % 10 % 11 % 11 % 12 % 12 % PBT 9 % 10 % 9 % 11 % 11 % 9 % 10 % 8 % 11 % 11 % 12 % 10 % 10 % 10 % 11 % 11 % PAT 6 % 6 % 6 % 26 % 10 % 8 % 9 % 8 % 7 % 7 % 8 % 7 % 12 % 9 % 7 % 7 % May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 7 of 12

8 Consolidated Financials Forecast P&L (Rs Mn) FY16A FY17E FY18E FY19E Balance Sheet (Rs Mn) FY16A FY17E FY18E FY19E Cash Flow (Rs Mn) FY16A FY17E FY18E FY19E Revenue 23,946 29,661 35,979 43,938 Equity Capital PBT 1,862 1,882 3,087 3,440 Op. Expenditure 19,873 23,668 28,837 36,284 Reserve 12,584 13,618 15,080 16,595 Depreciation 1,406 2,026 2,174 2,383 EBITDA 4,073 5,993 7,142 7,654 Networth 13,097 14,132 15,593 17,108 Others Depreciation 1,091 2,026 2,174 2,383 Long Term Debt 16,035 22,092 20,340 20,170 Taxes Paid ,122 1,410 EBIT 2,983 3,967 4,968 5,271 Def Tax Liability 1,612 4,534 4,958 5,382 Change in WC 406-4,770-1,968-2,449 Interest Expense 1,287 2,253 2,105 2,074 Minority Interest Operating C/F 4,104-1,135 2,172 1,965 Other Income Account Payables 2,046 1,691 2,112 2,642 Capex -11,269-3, ,068 PBT 1,862 1,882 3,087 3,440 Other Curr Liabi 3,114 2,312 2,887 3,611 Change in Invest Tax ,122 1,410 Total Liabilities & Equity 35,905 44,761 45,890 48,914 Others 7, PAT bef. MI & Assoc. 2,292 1,609 1,965 2,030 Net Fixed Assets 14,821 24,631 23,370 22,055 Investing C/F -3,262-3,744-1,017-1,176 Minority Interest Capital WIP 8, Change in Debt ,057-1, Profit from Assoc Others 3,118 3,105 3,208 3,316 Change in Equity 2, Recurring PAT 2,161 1,411 1,855 2,011 Inventory 2,364 3,279 4,094 5,121 Others -1,270 2, Extraordinaires Account Receivables 4,121 5,902 7,369 9,218 Financing C/F 221 8,404-1, Reported PAT 2,161 1,411 1,855 2,011 Other Current Assets 2,236 3,153 3,834 4,661 Net change in cash 1,063 3, FDEPS (Rs) Cash 1,168 4,692 4,016 4,544 RoE (%) 20 % 10 % 12 % 12 % DPS (Rs) Total Assets 35,905 44,761 45,890 48,914 RoIC (%) 10 % 8 % 8 % 8 % CEPS (Rs) Non-cash Working Capital 3,560 8,330 10,298 12,747 Core RoIC (%) 13 % 10 % 9 % 8 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 7 % 27 % 21 % 25 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 17 % 20 % 20 % 17 % FA Turnover P/B PATM (%) 9 % 5 % 5 % 5 % Net D/E P/FCFF Tax Rate (%) -23 % 14 % 36 % 41 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) 27 % 24 % 21 % 22 % Capital Employed/Equity EV/Sales FDEPS Growth (%) 77 % -35 % 31 % 8 % Dividend Yield (%) 0.4 % 1.1 % 1.2 % 1.5 % May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 8 of 12

9 Historical Consolidated Financials P&L (Rs Mn) FY13A FY14A FY15A FY16A Balance Sheet (Rs Mn) FY13A FY14A FY15A FY16A Cash Flow (Rs Mn) FY13A FY14A FY15A FY16A Revenue 13,056 13,599 18,918 23,946 Equity Capital PBT 1, ,702 1,862 Op. Expenditure 11,494 11,845 15,809 19,873 Reserve 5,481 6,699 8,313 12,584 Depreciation ,406 1,406 EBITDA 1,563 1,754 3,109 4,073 Networth 5,879 7,097 8,711 13,097 Others Depreciation ,091 Long Term Debt 5,881 10,250 16,924 16,035 Taxes Paid EBIT 1,329 1,353 2,505 2,983 Def Tax Liability 371 1,061 2,597 1,612 Change in WC Interest Expense ,287 Minority Interest Operating C/F 1,339 3,246 3,564 4,104 Other Income Account Payables 1, ,111 2,046 Capex -9,176-8,862-11,269-11,269 PBT 1, ,702 1,862 Other Curr Liabi ,631 3,114 Change in Invest Tax Total Liabilities & Equity 14,220 20,206 30,974 35,905 Others ,632 PAT bef. MI & Assoc ,223 2,292 Net Fixed Assets 4,439 6,489 6,833 14,821 Investing C/F -9,040-9,393-12,055-3,262 Minority Interest Capital WIP 2,959 5,926 14,822 8,078 Change in Debt 8,694 10,366 13, Profit from Assoc Others 1,685 1,969 2,191 3,118 Change in Equity 2, ,237 2,380 Recurring PAT ,223 2,161 Inventory 1,082 1,048 2,225 2,364 Others -3,866-4,895-5,491-1,270 Extraordinaires Account Receivables 2,388 1,917 2,644 4,121 Financing C/F 6,982 6,148 9, Reported PAT ,223 2,161 Other Current Assets 931 1,574 1,839 2,236 Net change in cash ,156 1,063 EPS (Rs) Cash 735 1, ,168 RoE (%) 14 % 9 % 15 % 20 % DPS (Rs) Total Assets 14,220 20,206 30,974 35,905 RoIC (%) 9 % 6 % 8 % 10 % CEPS (Rs) Non-cash Working Capital 2,313 2,742 3,966 3,560 Core RoIC (%) 9 % 6 % 8 % 13 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 5 % 6 % 8 % 7 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 12 % 13 % 16 % 17 % FA Turnover P/B PATM (%) 6 % 4 % 6 % 9 % Net D/E P/FCFF Tax Rate (%) 33 % 41 % 28 % -23 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 3 % 4 % 39 % 27 % Capital Employed/Equity EV/Sales FDEPS growth (%) -5 % -26 % 122 % 77 % Dividend Yield (%) 0.0 % 0.0 % 0.3 % 0.4 % May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 9 of 12

10 Equirus Securities Pankaj Sharma Executive Director /41 Research Analysts Sector/Industry Equity Sales AnirvanSarkar Banking & Financial Services VishadTurakhia Ashutosh Tiwari Auto, Metals & Mining VibhorRastogi Devam Modi Power & Infrastructure SubhamSinha DhavalDama FMCG, Mid-Caps SwetaSheth Maulik Patel Oil and Gas Dealing Room Nimish Mehta Pharma Ashish Shah UmeshRaut Industrials IleshSavla Associates JigarChokshi AnkitChoudhary Manoj Kejriwal Manoj Gori SandipAmrutiya Meet Chande Compliance Officer Parva Soni Smita Sharma Pranav Mehta Raj Kantawala Ram Varun SayleeWarade Vikas Jain 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 SHORT: ATR <= negative 5% over investment horizon TRADE: Stocks that do not meet the criteria for either LONG or SHORT 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 Target Price and Investment Horizon Target Price is a point value for stocks with Absolute rating of LONG or SHORT and a range value for stocks rated TRADE. Investment Horizon is set at a minimum 3 months to maximum 15 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 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 May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 10 of 12 Gujarat Tel. No: +91 (0) Fax No: +91 (0)

11 2016 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, Devam Modi, 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. Disclaimers 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 ). There are no disciplinary actions that have been taken by any regulatory authority. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker. ESPL/its affiliates provide investment banking services including but not limited to Private Equity, Mergers & Acquisitions, Structured Finance and Institutional Equities. ESPL/its affiliates might have, managed or co-managed public offering of securities of the subject company or have received a mandate from the subject company or might have received compensation from the subject company for investment banking or brokerage services in the past twelve months. ESPL & its affiliates, 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 or its Analyst 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. Research Analyst might have served as an employee of the subject company in the past. 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 this document may come 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. This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe a security. ESPL is 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 stand on date, which are subject to change or modification. 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, 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. Additional 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 applicable 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 website. This Report and its respective contents does 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. May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 11 of 12

12 "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. Disclosures Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Analyst/ESPL/Associate/Relatives financial interest Analyst/ESPL/Associate/Relatives actual/beneficial ownership of 1% or more Analyst/ESPL/Associate/Relatives material conflict of interest Whether ECPL managed any public offering in past 12 months * Associate means individual who assist Analyst No No No No May 31, 2016 Analyst: Devam Modi devam@equirus.com ( ) Page 12 of 12