Nestlé India (NESIND) 6178

Transcription

1 Result Update Rating matrix Rating : Buy Target : 724 Target Period : 12-1 months Potential Upside : 17% What s changed? Target Unchanged EPS CY1E Changed from 4.3 to 4.9 EPS CY16E Changed from 116. to EPS CY17E Changed from 19.3 to 19.1 Rating Unchanged Quarterly performance Q3CY1 Q3CY14 YoY(%) Q2CY1 QoQ (%) Sales EBITDA EBITDA % bps bps PAT Key financials Crore CY14 CY1E CY16E CY17E Net Sales 9,86.3 8, , ,2.9 EBITDA 2,73.4 1,41. 1, ,49.4 Net Profit 1, ,12.7 1,33.8 EPS ( ) Valuation summary CY14 CY1E CY16E CY17E P/E Target P/E Div. Yield Mcap/Sales EV/EBITDA RoNW (%) RoCE (%) Stock data Particular Amount Market Capitalization ( Crore) 968 Total Debt (CY14) ( Crore) 1. Cash & Investments (CY14) ( Crore) 93.2 EV ( Crore) 8, week H/L 7 / 1 Equity capital 96.4 crore Face value 1 Price performance 1M 3M 6M 12M Nestle India HUL ITC GSK Consumer Research Analyst Sanjay Manyal sanjay.manyal@icicisecurities.com Parineeta Rajgarhia parineeta.rajgarhia@icicisecurities.com November 9, 21 Nestlé India (NESIND) 6178 Return of Maggi to mitigate turbulence The Maggi noodles issue adversely impacted Nestlé India s (NIL) second consecutive quarter as net sales declined 32.1% YoY to crore. There was a reversal of 1.3 crore of sales during Q3CY1. Export sales witnessed de-growth of 6.4% as noodles issue and lower sales to Nepal due to blockage of border hit exports RM cost as percentage of sales declined 33 bps on the back of benign commodity prices. However, a 12 bps higher employee expense to sales & 29 bps rise in other overhead expenditure to net sales resulted in a 43 bps decline in operating margins to 16.4% Net profit fell 6.1% YoY to crore. The company realised exceptional cost of 24. crore associated with the noodles recall Post forgettable CY1E, Maggi relaunch to restore stability, going forward NIL recalled Maggi Noodles after FSSAI found excess lead in the product. Simultaneously, production of Maggi noodles had been halted for domestic sales. Prepared dishes accounts for ~3% of NIL's sales. Our estimate suggests 7% has been contributed by Maggi noodles, which has been out of sales for six months in CY1E. This would result in a % decline in prepared dishes segment sales. We estimate crore of prepared dishes sales in CY1E compared to crore in CY14. However, with the Maggi noodles rollout having begun, we expect revenue from prepared dishes to recover to crore in CY16E. We believe NIL would aggressively increase its A&P spends to rebuild the brand equity of Maggi Noodles, which could result in lower operating margins for CY16E. We expect NIL to increase its A&P spend by ~2 bps to 11.% to the sales. Strong brand equity to aid focus on volume, going ahead NIL is the market leader in instant noodles and baby food products in India and No. 2 player in the instant coffee and chocolates segment. The company s high brand equity in its leading segments has aided it to take significant price hikes without denting its market share. Hence, despite a decline in volume and revenue growth (9.4% CAGR in CY11-14 from 2% CAGR in CY8-11) margins remained strong and strengthened from ~2% in CY8-11 to ~21.% in CY Nestlé, being one of the reputed brands in India, enjoys strong recall value in the minds of consumers. We believe that since NIL has taken a hit due to the noodles fiasco, going ahead, it would shift its focus to reviving volume growth in the process of getting back the consumer confidence it enjoyed in the past. Maggi rollout quashes worst for NIL; maintain BUY In a strong boost for the company and its flagship noodles, the freshly manufactured batch of NIL s noodles has also been cleared by the Bombay High Court authorised laboratories. The company can now sell its instant noodles, in compliance with the Bombay High Court s order. NIL has also begun rollout of noodles across offline and online channels. This forms the basis of our positive stance on the company. We have modelled net sales CAGR of 7.7% during CY14-17E and earnings CAGR of 9% for NIL during the same period. We value the stock at 4x (considering high earnings visibility) CY17E EPS of 19.1 to arrive at a target price of 724 and maintain BUY recommendation. ICICI Securities Ltd Retail Equity Research

2 Variance analysis Q3CY1 Q3CY1E Q3CY14 YoY (%) Q2CY1 QoQ (%) Comments Net Sales 1, , , , Net sales de-growth can be attributed to absence of Maggi noodles in the domestic market coupled with 6.4% decline in export sales Operating Income Raw Material Expenses , Raw material cost to sales were down 33 bps mainly due to decline in commodity costs Employee Expenses Other operating Expenses EBITDA EBITDA Margin (%) bps bps Operating margin contracted 43 bps mainly due to lower sales Depreciation Interest...2 NA.1 NA Other Income PBT Exceptional Items NA 41.7 NA The company realised a one-time exceptional loss of 24. crore associated with recall of Maggi noodles' stocks Tax Outgo PAT Change in estimates CY1E CY16E CY17E ( Crore) Old New % Change Old New % Change Old New % Change Comments Sales 8,8.9 8, EBITDA 1,381. 1, , , ,493. 2, EBITDA Margin(%) bps bps bps PAT PAT adversely impacted by exceptional items totalling crore in Q2CY1 & Q3CY1 EPS ( ) Assumptions Current Earlier CY14 CY1E CY16E CY17E CY1E CY16E CY17E Gross Sales ( crore) Milk Product and Nutrition 4,7.2 4,91.,44.8 6,71.2 4,91.,44.8 6,71.2 No change in our estimates Beverages 1, ,477. 1, , ,477. 1, ,829.6 Prepared dishes 2, ,48.6 2,73.3 3,6.7 1,48.6 2,73.3 3,6.7 Chocolate & confectionery 1,23.2 1, ,22.3 1, , ,22.3 1,694.3 Volume Growth (%) Overall Volume Growth Milk Product and Nutrition Beverages Prepared dishes Chocolate & confectionery Comments ICICI Securities Ltd Retail Equity Research Page 2

3 Company Analysis Maggi recall takes toll on revenues in CY1E, recovery expected ahead Nestlé s revenue growth has declined from 2.9% CAGR (CY7-11) to 9.4% CAGR (CY11-14) following the incessant price hikes impacting volume growth, declining urban consumption demand and increasing competitive intensity in its segments. NIL s average price increases have gone up from ~4% (CY8-1) to ~8.6% (CY11-14), consequently pulling down its volume growth from ~16% (CY8-1) to ~.7% (CY11-14). Apart from the higher price hikes, the slowdown in urban discretionary and premium segment demand have also impacted Nestlé s revenue growth as the company s portfolio is largely urban centric and discretionary in nature. Further, we believe NIL s volume growth is also restricted due to increasing competitive pressures across its categories (chocolates Cadbury s, milk Amul, Britannia) with leading FMCG players getting aggressive given the large untapped opportunity in the segment. The recent regulatory issue faced by NIL due to which sale of Maggi noodles was banned in India has also impacted the volumes & revenue growth of the company. As a result, we expect 26.3% decline in overall volumes for the company during CY1E. However, with NIL s Maggi noodles being declared safe by Bombay High Court mandated laboratories, we believe that the company may be coming out of its worst crisis in India as it prepares for relaunch of its instant noodles. With its newly manufactured batch of noodles also cleared by the authorised laboratories, NIL has commenced commercial production & sale of Maggi noodles. We estimate 33% volume growth in CY16E due to the low base effect of CY1E. We expect revenues to grow at a CAGR of 7.7% in CY14-17E. Exhibit 1: Revenues to grow at CAGR of 7.7% in CY14-17E CY9 CY1 CY11 CY12 CY13 CY14 CY1E CY16E CY17E Net Sales ( crore) - LHS Net Sales Growth (%) - RHS ICICI Securities Ltd Retail Equity Research Page 3

4 Exhibit 2: Decline of % in prepared dishes segment impacted overall sales & volume CY9 CY1 CY11 CY12 CY13 CY14 CY1E CY16E CY17E Milk products & nutrition Volume Growth (%) Price Growth (%) Milk products & nutrition, the largest contributor to NIL s revenues (4.1% of gross revenues in CY14) with brands Cerelac, NAN, Nestlé A+, Nestlé Milkmaid, has witnessed a significant decline in revenue growth from 2.8% CAGR in CY7-CY11 to 1.9% CAGR in CY The decline has been led by a significant increase in prices in CY11 and CY12 by ~2% following the increasing milk prices. Though price hikes were modest in CY14 there was no revival in volume growth. We believe that in the wake of the robust price hikes for two consecutive years, NIL would have lost some market share in the segment that has failed to revive its volume growth. During the same period, the decline in urban consumption demand also took a toll on the company s growth. Going ahead, though we expect price hikes to be the key revenue driver, it would be at % keeping volume growth at 4.7%. We estimate revenues from milk products & nutrition will grow at 9.9% CAGR in CY14-17E. Exhibit 3: Revenue growth to remain at 9.9% CAGR in CY14-17E Exhibit 4: Revenue growth to be largely price led CY1 CY11 CY12 CY13 CY14E CY1E CY16E CY17E CY1 CY11 CY12 CY13 CY14E CY1E CY16E CY17E Revenues ( crore) - LHS Revenue Growth (%) - RHS Volume growth (%) Realisation growth(%) ICICI Securities Ltd Retail Equity Research Page 4

5 Beverages NIL s beverage portfolio (13.2% of gross revenues in CY14) comprises brands like Nescafe, Nestea. Though NIL enjoys high brand equity in instant coffee category in India, increasing competition (HUL s Bru) & lower demand in the segment has kept volume and value growth low at 2.6% and 1.3% CAGR (CY7-14), respectively. Going ahead, we remain cautious on volume growth and expect prices to continue dominating revenue growth in this segment. We expect the beverages segment to see volume growth of 4.7% (CAGR CY14-17E) & price growth of.9% (CAGR CY14-17E) keeping value growth at 1.9% CAGR (in CY14-17E). Exhibit : Beverages revenue growth to remain at 1.9% CAGR Exhibit 6: Volume growth expected to remain tepid Nescafe was the company s largest brand until mid-nineties CY1 CY11 CY12 CY13 CY14E CY1E CY16E CY17E CY1 CY11 CY12 CY13 CY14E -11. CY1E CY16E CY17E -. Revenues ( crore) - LHS Revenue Growth (%) - RHS Volume growth (%) Realisation growth(%) Prepared dishes & cooking aids Prepared dishes & cooking aids (29.2% of gross revenues in CY14) comprises NIL s largest brand Maggi. It includes sales of instant noodles, pasta, cooking aids, soups and sauces. Enjoying a virtual monopoly in the segment until FY1, NIL s revenues from the segment grew at 28.9% CAGR in CY7-11 led by strong volume growth of 22.2% and price led growth of.%. Volume growth was strong until CY11 but started moderating beyond that following the increasing competition in the segment (ITC s Sunfeast, HUL s Knorr, GSK Consumer s Foodles) and higher prices increases (~1% in CY11, ~7% in CY13 & ~.8% in CY14). However, with instant noodles off Indian retail shelves since June 21, it has adversely impacted the company severely on the topline front for most of CY1E. We expect prepared dishes sales and volumes to plunge % in CY1E as a result. However, Maggi noodles has been cleared by Bombay High Court appointed laboratories. This is a major positive for NIL. Hence, we expect steadiness in this segment s revenues by CY16E. We estimate revenues in this segment at crore, crore & 36.7 crore in CY1E, CY16E & CY17E, respectively. Exhibit 7: Prepared dishes revenues and revenue growth Exhibit 8: Noodles recall impacted prepared dishes segment growth CY1 CY11 CY12 CY13 CY14E CY1E CY16E CY17E CY1 CY11 CY12 CY13 CY14E CY1E - CY16E CY17E Revenues ( crore) - LHS Revenue Growth (%) - RHS Volumes growth (%) Realisation growth(%) ICICI Securities Ltd Retail Equity Research Page

6 Chocolate and confectionery NIL s chocolate & confectionery segment (12.4% of gross revenues CY14) includes strong brands as KitKat, Munch, Milky Bar, Bar One and Polo. Following the considerable price hikes in CY11 and CY12, NIL s chocolate volumes have witnessed a drastic setback. Though it is the second largest player in the segment (leader is Cadbury) we believe the decline in volume growth is concerning given the increasing competition from the market leader and other players. However, with the increasing marketing initiatives and new launches (dark chocolates, Alpino, KitKat Senses), we believe volume growth should gain traction over time. We estimate volume and value CAGR in CY14-17E at 4% and 1.6%, respectively, against 3% and 13.6% in CY8-13, respectively. Exhibit 9: Revenue growth to remain at 1.6% in CY14-17E Exhibit 1: Revival in volume growth to gain traction CY1 CY11 CY12 CY13 CY14E CY1E CY16E CY17E CY1 CY11 CY12 CY13 CY14E CY1E CY16E CY17E Revenues ( crore) - LHS Revenue Growth (%) - RHS Revenues ( crore) - LHS Revenue Growth (%) - RHS Hence, we believe NIL s subdued volume growth since CY12 has largely been led by the company s exceptional price hikes with the aim of maintaining its margins at the cost of lost volume growth. Though we do expect higher marketing initiatives and lower price hikes to aid in recovery of volume growth given the company s high brand equity across segments, we believe the recovery would be slower as near term concerns of demand slowdown continues to persist. ICICI Securities Ltd Retail Equity Research Page 6

7 Sales loss impact on margins in CY1E, expected uptick in margins by CY17E NIL s margins remained healthy at ~2% until CY1 with strong volume growth of ~16% and moderate price hikes of ~4%. However, in CY11-14, higher price hikes at ~1% pushed margins to ~22% while pulling down volume growth to ~3%. The increase in margins at the cost of growth clearly shows the concentration of the company on maintaining margins. However, the Maggi noodles recall has led to lower net sales for the company, which impacted its margins adversely. Going ahead, as the instant noodles have been declared safe, we believe that margins would revive closer to previous levels of 2.2% in CY17E as we expect recovery for the company on the revenues front CY16E onwards. Exhibit 11: EBITDA margin (%) trend CY9 CY1 CY11 CY12 CY13 CY14 CY1E CY16E CY17E EBITDA Margins (%) Earnings expected to revive from CY16E NIL s PAT growth remained healthy at 23.% CAGR in CY7-11 following healthy revenue growth and sustained higher margins. However, PAT growth moderated, thereafter, until CY13, following the slowdown in revenue growth and increase in the interest cost and depreciation impacting the earnings. The increase in interest and depreciation during the period was following the aggressive capex of ~ 3 crore to double its existing capacity. With the company having repaid its debt completely in July 214, we expect savings in interest cost from CY1E onwards. However, NIL realised cumulative exceptional loss of crore in Q2CY1 & Q3CY1 arising out of costs incurred by the company due to the nationwide recall of Maggi noodles. We expect this to adversely affect the earnings estimated at crore in CY1E from crore in CY14. However, we expect earnings revival to crore in CY16E and crore in CY17E. ICICI Securities Ltd Retail Equity Research Page 7

8 Exhibit 12: PAT growth trend CY1 CY11 CY12 CY13 CY14 CY1E CY16E CY17E Net Profit ( crore) PAT Growth (%) ICICI Securities Ltd Retail Equity Research Page 8

9 Outlook & valuation With a population of ~12 crore, India is one of the largest consumer markets in the world. The categories in which NIL operates have comparatively lower penetration in India (instant noodles, packaged milk, chocolates) when compared to the world economies. Further, with penetration in urban India itself being low, rural India has further lower penetration, thereby providing huge scope of growth for the company. The three laboratories mandated by the Bombay High Court have given clean chit to Nestlé s flagship Maggi noodles. NIL had said it will commence production and sale of Maggi noodles after the newly manufactured products are also cleared by the above-mentioned three laboratories while announcing its resolve to get back the instant noodles on domestic retail shelves at the earliest. In a strong boost for the company and its flagship noodles, the freshly manufactured batch of NIL s noodles has also been cleared by these authorised labs. NIL can now sell its instant noodles, in compliance with the Bombay High Court s order. NIL has also begun rollout of noodles across offline and online channels. This forms the basis of our positive stance on the company. We believe the recent events would remain an overhang on the stock in the near-term. However, NIL would be able to get back to steady growth state from CY16E onwards. We have modelled net sales CAGR of 7.7% during CY14-17E and earnings CAGR of 9% for NIL during the same period. We value the stock at 4x (considering high earnings visibility) CY17E EPS of 19.1 to arrive at a target price of 724 with BUY recommendation. Exhibit 13: Valuations Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) CY CY1E CY16E CY17E ICICI Securities Ltd Retail Equity Research Page 9

10 Company snapshot 7, 7, Target Price 724 6, 6,,, 4, 4, 3, 3, 2, 2, Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-1 Apr-1 Jul-1 Oct-1 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event CY1 ITC and GSK Consumer enter instant noodles segment intensifying competition in the near monopoly segment for Nestlè Jul-11 Decline in coffee prices (~11% since April, 211); revenue growth & margins back to 2%+; FMCG Index return - ~33% in Q2CY11 Jan-12 Volume growth in CY11 dips to 7% vs. 17% in CY1; increasing prices due to higher input cost impacts volume growth; ITC gets aggressive in noodles segment with HUL re-launching Knorr in the segment H1CY12 Declining volume growth keeps revenue growth below 1%; higher margins (+21%) continue to drive profitability (+1% YoY); stock supported by rising FMCG index (~26% return YoY) as a safe haven during underperforming markets CY12 Stock return ~13% due to less than 1% volume growth in CY12, thereby not justifying high valuations; FMCG Index return CY12 - ~3% Apr-13 Intensifying competition and incessant price increases across categories drags revenue growth to ~9% with volume growth at 2-3% Jul-13 Decline of ~2% in coffee prices YoY; revival in revenue growth to ~12% supported by price cuts in milk products and new launches in noodles segment; FMCG continues to remain the preferred sector among investors (FMCG Index return ~3% YoY in Q2CY13) Nov-13 Rumours of buyback by the parent drive stock price; revenue growth remains muted Jan-1 Softening commodity prices aiding the company's operating margins Apr-1 UP FSDA orders recall of 2,, packets of Maggi noodles citing higher lead content beyond permissible limit thereby declaring it unsafe Jun-1 FSSAI bans sale of Maggi noodles in India Oct-1 NIL declares that Maggi noodles are safe for consumption citing test results from 3 labs mandated by Bombay High Court Nov-1 NIL commences rollout of Maggi instant noodles through online and offline channels Top 1 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Nestle SA 3-Sep Maggi Enterprises, Ltd. 3-Sep Life Insurance Corporation of India 3-Sep ARISAIG Partners (Asia) Pte. Ltd. 3-Sep Aberdeen Asset Management (Asia) Ltd. 3-Sep Vontobel Asset Management, Inc. 31-Jul Stewart Investors 3-Jun The Vanguard Group, Inc. 3-Sep BlackRock Institutional Trust Company, N.A. 3-Sep Franklin Advisers, Inc. 31-Jul Source: Reuters, ICICIdirect.com Research Recent Activity Shareholding Pattern (in %) Sep-14 Dec-14 Mar-1 Jun-1 Sep-1 Promoter FII DII Others Buys Sells Investor name Value Shares Investor name Value Shares Life Insurance Corporation of India 1.32m.16m Aberdeen Asset Management (Asia) Ltd m -.4m Axis Asset Management Company Limited 11.66m.12m Robeco Institutional Asset Management B.V m -.14m First State Investments (Singapore) 2.27m.2m IDFC Asset Management Company Private Limited -1.3m -.11m Vontobel Asset Management, Inc. 2.21m.2m Michel & Cortesi Asset Management AG -8.48m -.1m BMO Global Asset Management 2.18m.2m British Columbia Investment Management Corp. -.87m -.7m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 1

11 Financial summary Profit and loss statement Crore (Year-end December) CY14 CY1E CY16E CY17E Total operating Income Growth (%) Raw Material Expenses 3,76.8 4,182.9,19.6,2.8 Employee Expenses ,41.3 Marketing Expenses ,26. 1,347.6 Administrative Expenses ,1.4 1,286.3 Other expenses 1,27.7 1, Total Operating Expenditure 7,781. 7, ,8.1 9,813.7 EBITDA 2,73.4 1,41. 1, ,49.4 Growth (%) Depreciation Interest Other Income PBT 1, ,17.9 1, ,191.1 Others Total Tax PAT 1, ,12.7 1,33.8 Growth (%) EPS ( ) Cash flow statement Crore (Year-end December) CY14 CY1E CY16E CY17E Profit after Tax 1, ,12.7 1,33.8 Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL CF from operating activities 1, , ,7.3 (Inc)/dec in LT loans & adv (Inc)/dec in other investments (Inc)/dec in Fixed Assets Others CF from investing activities Issue/(Buy back) of Equity.... Inc/(dec) in loan funds -1, Dividend paid & dividend tax , ,398.1 Inc/(dec) in Sec. premium.... Others.4... CF from financing activities -1, , ,398.1 Net Cash flow Opening Cash Closing Cash Balance sheet Crore (Year-end December) CY14 CY1E CY16E CY17E Liabilities Equity Capital Reserve and Surplus 2,74.8 2,78.6 2,76.8 2,896. Total Shareholders funds 2, ,8. 2,87.2 2,993. Total Debt Deferred Tax Liability Long Term Provisions 1, , ,88.7 1,688.7 Total Liabilities 4,464. 4,1.8 4,64.1 4,799.8 Assets Gross Block,9.,19.,29.,39. Less: Acc Depreciation 1, ,186. 2,4.6 2,98.7 Net Block 3, ,922. 2, ,4.3 Capital WIP Total Fixed Assets 3, , , ,64. LT Loans & Advances Inventory ,8.6 1,342.6 Debtors Loans and Advances Current Investments Cash Total Current Assets 1, ,9.8 2,61.4 3,197.7 Creditors Provisions Other Current Liabilities Total Current Liabilities 1,3. 1,19.7 1, ,447.4 Net Current Assets ,266. 1,7.4 Application of Funds 4,464. 4,1.8 4,64.1 4,799.8 Key ratios (Year-end December) CY14 CY1E CY16E CY17E Per share data ( ) EPS Cash EPS BV DPS Cash Per Share Operating Ratios (%) EBITDA Margin PBT / Net Sales PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA.... Debt / Equity.... Current Ratio Quick Ratio ICICI Securities Ltd Retail Equity Research Page 11

12 ICICIdirect.com coverage universe (FMCG) CMP M Cap EPS ( ) P/E (x) Price/Sales (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY1E FY16E FY17E FY1E FY16E FY17E FY1E FY16E FY17E FY1E FY16E FY17E FY1E FY16E FY17E Colgate (COLPAL) 947 1,18 Hold 26, Dabur India (DABIND) Buy 1, GSK CH (SMIBC),918 7,193 Buy 26, Hindustan Unilever (HINLEV) 792 1,17 Buy 177, ITC Limited (ITC) Buy 268, Jyothy Lab (JYOLAB) 33 3 Hold, Marico (MARIN) 41 Buy 26, Nestle (NESIND) 6,178 7,24 Buy 9, Tata Global Bev (TATTEA) Hold 7, VST Industries (VSTIND) 1,8 1,7 Hold 2, ICICI Securities Ltd Retail Equity Research Page 12

13 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >1%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/1% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 13

14 ANALYST CERTIFICATION We /I, Sanjay Manyal, MBA (Finance) and Parineeta Rajgarhia, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH99. ICICI Securities is full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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