Switch To JK Cement Ltd from JK Lakshmi Cement Ltd.

Transcription

1 Thematic Switch To JK Cement Ltd from JK Lakshmi Cement Ltd. We believe Cement to be the best play on the expected economic recovery in the domestic market in the years to come. Cement industry by virtue of its nature is largely driven by the domestic demand and being a local commodity it is largely insulated from the international prices. Though, the there is excess capacity to the tune of ~100 MnT in the Indian market and the capacity utilization is running at ~70-73%, ex-south the capacity utilization remains quite favorable at ~85% and hence the north based Cement players have been operating at healthy EBITDA margin. We don t see major improvement in the demand scenario in the southern market in the near term. However, believe that the north and west based players will continue to operate at strong margins and hence we are Bullish on selective Mid-Sized Cement Players operating in the Northern & Western Geography of India. Our top Pick Remains JK Cements Ltd. On a comparative basis we recommend switching over from JK Lakshmi Cement Ltd to JK Cement Ltd. JK Lakshmi Cement Ltd FY14 FY15E FY16E JK Cement Ltd FY14 FY15E FY16E Volume ( Mn T) Volume ( Mn T ) Volume Growth % 6.7% 7.4% 19.1% Volume Growth % -2.5% 31.0% 20.1% Realisation 3,652 3,908 4,142 Realisation 4,538 4,704 4,840 Realisation Growth % -6.2% 7.0% 6.0% Realisation Growth % -1.5% 3.7% 2.9% EBITDA / Ton EBITDA / Ton EBITDA ( RsMn) 3,020 3,966 6,186 EBITDA ( RsMn ) 3,527 6,036 8,476 EBITDA Growth % -29.6% 31.3% 56.0% EBITDA Growth % -36.8% 71.1% 40.4% EV/ EBITDA EV/ EBITDA Peak EV/ EBITDA 8.7 Peak EV / EBITDA 10.1 EV/ Ton EV/ Ton P/E P/E ROE % 7.1% 10.5% 16.0% ROE % 5.5% 9.3% 13.5% ROCE % 7.6% 9.2% 13.1% ROCE % 8.5% 11.4% 15.8% D/E D/E *Higher realizations in JK Cements vs JK Lakshmi Cement is due to the presence of White Cement, which derives ~ x realizations compared to normal grey cement. We had initiated BUY call on JK Cement Ltd at Rs.488, and currently it is sitting on gain of 22 % since then (CMP Rs.595). Subsequently we studied JK Lakshmi Cement Ltd and feel that it is overvalued compared to JK Cement Ltd. We have valued JK Lakshmi Cement Ltd at 9x its one year EBITDA, and JK Cement Ltd at 7.5x one year EBITDA. Despite assigning a higher valuation multiple to JK Lakshmi compared to JK Cement, we believe the current price of JK Lakshmi is overvalued and hence we recommend switching over from JK Lakshmi Cement Ltd to JK Cement Ltd. Both JK Cement as well as JK Lakshmi Cement has seen sharp run up in the last one year. However, we believe JK Cement Ltd (CMP, Rs 595) is still attractively valued, while JK Lakshmi Cement Ltd looks expensive at current levels (CMP Rs.377). On the estimates front, we have taken higher realization growth in case of JK Lakshmi Cement Ltd compared to JK Cement. However, the volume growth is expected to be higher in case of JK Cement due to commencement of new facility as per schedule (1.5 Mn Tons capacity in Mangrol, Rajasthan started on 30th Sept,2014 i.e 16% incremental capacity additions on top of 9 Mn Tons, existing) and improvement in utilisation levels of it s Karnatak plant. ANALYST : Siddharth Purohit siddharth.purohit@sushilfinance.com SALES:Devang Shah /62 devang.shah@sushilfinance.com Please refer to important disclosures at the end of the report For private Circulation Only.

2 Thematic Switch To JK Cement Ltd from JK Lakshmi Cement Ltd. JK Lakshmi Cement Ltd-Target Price Derivation Valuations EV/ EBITDA EBITDA (FY16E) Cement ,671 EV 55,671 Consol Net Debt 20,214 Implied Equity 35,457 Implied Per / Share 300 Equity 589 FV 5 No of shares 118 CMP 377 Upside (20%) EV/ Ton ( Rs ) 5,714 $-INR 60 EV/ Ton ( US $ ) 95 At the CMP of Rs.377, JK Lakshmi Cement is trading at 10.4x its FY16 EV/ EBITDA and 16.6x P/E. Historically the stock has traded at average 5x its EV/ EBITDA and peak EV/ EBITDA of 8.7x, even if we assign it a 9x EV/ EBITDA (higher than its 5 year peak multiple) we arrive at a fair value of Rs.300, 20% downside from the current levels. It is to be noted that we have assigned a much higher multiple to JK Lakshmi compared to JK Cement and despite this the target price is below the current market price. We believe when the large cap cement stocks are trading at ~11x their one year forward EBITDA, the current valuations of JK Lakshmi leaves little scope for further re-rating in the near term. JK Cement Ltd-Target Price Derivation While at the Current levels of Rs 595, JK Cement is trading at 13.5x its FY16 EPS of Rs 41.3 and 7.1x EV/ EBITDA and $ 95 EV/ Ton. Which is still attractive compared to the growth it provides. The peak valuation for JK Cement has been 10.1x EV/EBITDA in FY14. The Return ratio of JK Cement is also quite higher compared to JK Lakshmi Cement Ltd. We like JK Cement because of its presence in the white cement business which is a duopolistic business in India. White cement provides hedge to any slowdown in the grey cement business in case of prolonged economic slowdown. Valuations EV/ EBITDA EBITDA (FY16E) Grey Cement ,833 White Cement ,506 UAE Operations 8.0 4,882 EV 65,221 Consol Net Debt 20,793 Implied Equity 44,428 Implied Per / Share 635 Equity 699 FV 10 No of shares 70 CMP 595 Upside 7% EV/ Ton 6,211 $-INR 61 EV/ Ton 102 Please refer to important disclosures at the end of the report Sushil Financial Services Private Limited Regd. Office : 12, Homji Street, Fort, Mumbai For private Circulation Only. Member : BSEL, SEBI Regn.No. INB/F NSEIL, SEBI Regn.No.INB/F Phone: Fax: info@sushilfinance.com

3 SWITCH OVER TO JK CEMENT MEDIUM RISK PRICE Rs. 377 TARGET Rs.300 CEMENT SHARE HOLDING (%) Promoters 45.9 FII 11.7 FI / MF 18.3 Body Corporates 5.1 Public & Others 19.0 STOCK DATA Reuters Code Bloomberg Code BSE Code NSE Symbol Market Capitalization* Shares Outstanding* JKLC.BO JKLC.IN JKLAKSHMI Rs.41,886.9 mn US$ 686.7mn mn 52 Weeks (H/L) Rs.369 /64 Avg. Daily Volume (6m) 449,510 Shares Price Performance (%) 1M 3M 6M Days EMA: Rs.216 *On fully diluted equity shares Part of Bonanza ANALYST Siddharth Purohit siddharth.purohit@sushilfinance.com SALES: Devang Shah /62 devang.shah@sushilfinance.com Please refer to important disclosures at the end of the report Sushil Financial Services Private Limited Regd. Office : 12, Homji Street, Fort, Mumbai JK Lakshmi Cement Ltd. STRENGTH: One of the most efficient plants in terms of power consumption per unit. WEAKNESS: Higher average lead distance.opportunity: Expanding foot print in Central and Eastern India, where the utilization rates and realization remains favorable. THREAT:Inability to scale up in newer geography due to competition. Capacity to rise by 50% over FY14-16: The current cement capacity of JK Lakshmi stands at 6.65 MnTand it is undertaking an expansion of 3.35 MnTto be completed by FY17 end. It is adding 1.7 MnT integrated plant at Durg (Chhattisgarh) likely to come up in Q3FY15 and another 1 MnT split grinding unit in Cuttack (Odisha) expected in Q4FY16. Another 0.65 MnT grinding unit will come up in Surat by Q4FY16. Further the company is likely to revive the Udaipur Cement works with 1.4 MnT wherein it has a 75% stake. Post all the capex the combined capacity of JK Lakshmi will go up to 10 MnT (11.4 MT including Udaipur Plant), growing by 71% over next three years. However, the benefit of most of the expansion is likely to be seen in FY16 and FY17 only. JK Lakshmi has always maintained high capacity utilization.new plants in newer geographies will be an acid test: JK Lakshmi has always maintained very high capacity utilization except in FY14 when the demand environment deteriorated substantially. We expect volume growth of 7.4% In FY15 &19.1% in FY16. The incremental capacity of 1.3 MT in FY14 came only in March and hence the utlisation levels looks low, however, the effective utlisation levels were very high at ~98%. Utilization levels of the existing 6.65MnT plant is expected to remain 85% in FY15.The Durg plant will source slag from the Bhilai steel plant and this will help improving the blending ratios. This plant will serve the Central and Eastern market. However, since the company is entering a new geography it is too early to predict a very high utilization levels for the new plants. Lower utlisation levels in the new Durg unit can impact the EBITDA/ Ton going ahead. EBITDA to double over FY14-16: We expect JK Lakshmi s revenues to grow by 14.9% in FY15 and 26.2% in FY16 backed by volume growth of 7.4%(6.05MnT) & 19.1%(7.2MnT) and realization growth of 7% & 6% over FY15 and FY16 respectively. We expect EBITDA / Ton to improve to Rs 656 in FY15 and Rs 859 in FY16, from Rs 536 in FY14; as a result EBITDA is expected to double to Rs 6186Mnin FY16 vsrs 3,020 Mn in FY14.Higher fixed cost absorption coupled with lower freight cost will add to the EBITDA / Ton improvement. Improvement in the return ratios is factored in the current valuations: The average lead distance of JK Lakshmi currently stands at 520 Km, higher than the industry standard, but with the commissioning of Durg and Cuttack plant it is likely to come down. The new plants can operate at high utilization levels, with high EBITDA/ Ton, which will help in improving ROE from 7% in FY14 to 16% in FY16 and ROCE is likely to improve to 13.1% by FY16 from 7.6% in FY15. We believe the recent run up in the stock factors in the improvement in the return ratios in the years to come. OUTLOOK & VALUATION We believe cement is the best commodity to play the Indian infrastructure story. Cement by virtue of its nature is not impacted by international prices and is driven by the domestic demand supply scenario. The Indian cement industry had the toughest time in recent years due to overcapacity and lack of demand on the other hand. The Industry utilization levels have been ~70%. However, excluding south which is facing severe overcapacity utilization, the utilization rates are in the range of 85-90%.In the absence of any major capacity being added in the northern part we like companies which are coming up with capacity when the apparent demand seems picking up. Cement stocks have appreciated sharply in the last one year and JK Lakshmi Cement has gone up by ~ 6 x over the same time. At the CMP of Rs.377 the stock trades at 16.6x its FY16E EPS and 10.4x FY16 EV/ EBITDA. At EV/ Ton of $ 110 for FY16 we believe the stock is overvalued compared to the growth opportunities that it provides. We recommend reducing position from JK Lakshmi Cement and believe the fair value to be Rs 300, based on 9x FY16 EV/ EBITDA. The peak valuation of JK Lakshmi Cement has been 8.7x its one year forward EBITDA and with large cement players trading at ~11x forward EV/EBITDA, We believe there is limited scope for immediate re-rating in the stock. KEY FINANCIALS (Consolidated) Y/E Revenue APAT AEPS AEPS P/E ROCE ROE P/BV Mar. (Rsmn) (Rsmn) (Rs) (% Ch.) (x) (%) (%) (x) FY13 20,550 1, FY14 20, (47.1) FY15E 23,624 1, FY16E 29,817 2, For private Circulation Only. Member : BSEL, SEBI Regn.No. INB/F NSEIL, SEBI Regn.No.INB/F Phone: Fax: info@sushilfinance.com

4 Plant Locations Jhajaar: Grinding Unit 1.3 Mn Tons. (Existing) Udaipur: Integrated Unit Grinding Capacity 1.4 Mm T (Q2FY16) Sirohi: Integrated Unit Grinding Capacity 4.65 Mm T Clinker Capacity 4.62 (Existing) kalol: Grinding Unit 0.7 Mn Tons. (Existing) Surat: Split Grinding Unit 0.65 Mn T (Q3FY16) Cuttack: Split Grinding Unit 1 Mn T. (Q4FY16) Durg: Integrated Plant Grinding capacity Mn Tons Clinker Capacity Mn T (Q3FY15) 5

5 Plant Locations & Details State Region Capacity ( MT) Date of Completion Jaykaypuram Rajasthan North 4.65 Jhajjar Haryana North 1.3 Kalol Gujarat West 0.7 Total Existing Capacity 6.65 On Going Expansion Durg Chhattisgarh Central 1.7 Q3FY15 UCWL Rajasthan North 1.4 Q2FY16 Cuttack Odisha East 1.0 Q4FY16 Surat Gujarat West 0.65 Q4FY16 Total Expansion 4.8 Capacity Post Expansion JK Lakshmi expanded its Jhajjar grinding unit s capacity by 0.65 Mn Tons taking the total capacity to 1.3Mn Ton. The capacity of the Jaykaypuram plant was also expanded by 0.4Mn Tons to 4.65Mn Tons from 4.25 Mn Tons. The work at new plant in Durg is going as per schedule and is expected to start contribute from Q3FY15. However, the split grinding unit at Cuttack is likely to get delayed as the environment clearance is still pending and will take ~12 months to function once the clearance is obtained and hence we don t expect the unit to start before Q4FY16. The revival of Udaipur Cement is to be completed by FY15 end. This unit upon completion will add a capacity of 1.4 MnTons to JK Lakshmi s kitty. A capex of Rs6,000mn is being incurred for this unit for which Rs 1000 Mn will be brought in by JK Lakshmi as equity and the balance will be in the form of debt. 6

6 Capacity to rise by 50% over FY14-16:The current capacity of JK Lakshmi stands at 6.65 MnT and it is undertaking an expansion of 3.35 MnTto be completed by FY17 end. JK Lakshmi is adding a 1.7 MnT integrated plant in Durg (Chhattisgarh) likely to come up in Q3FY15 and another 1 MnT split grinding unit in Cuttack (Odisha) expected in Q4FY16. Further the company is likely to revive the Udaipur Cement works with 1.4 MnT. Post all the capex the combined capacity of JK Lakshmi will go up to 10 MnTp.a (11.4 MnT including Udaipur plants where it has 75% stake ). In additions to the above expansion, it is adding grinding unit with a capacity of 0.65 MnT at Surat, Gujarat, which is expected to commence operations in Q4FY16. Post all the new plants commencing operations the total capacity of JK Lakshmi Cement will grow by 71% over next three years. FY09 FY10 FY11 FY12 FY13 FY14 Capacity ( Mt) % YoY Growth 0.0% 0.0% 0.0% 11.5% 25.6% Capacity Utilization % 85% 96% 91% 100% 94% 79% Historical Capacity 25.5% 11.5% 0.0% 0.0% 0.0% FY09 FY10 FY11 FY12 FY13 FY14 Capacity ( Mt) % YoY Growth Projected Capacity 25.6% 16.8% FY15e FY16e FY17e Capacity ( Mt) % YoY Growth 30.0% 16.9% 10.0% -10.0% -30.0% -50.0% Source: Company, Sushil Finance Research Estimates JK Lakshmi has been very conservative as far as capacity additions growth is concerned in the past. However, it is embarking upon the growth path now when there is an improvement in the demand scenario and we read this as a positive development. There was 11.5% capacity addition in FY13 and another 25% capacity addition in FY14. Another capacity of 25% i.e.1.7mntp.a is expected to come up by FY15 end in Durg and another 17% capacity expansion will come in FY16.We believe this will result in higher volume growth in the years to come. Though the company is adding significant capacity, we see the benefit of Durgplant coming only in FY16 and that of Cuttack and Surat to be visible in FY17 only. Grinding Capacity ( Mn Tons ) FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Installed Capacity Additions Capacity Addition % 11.5% 25.5% 25.6% 16.8% 16.9% 7

7 JK Lakshmi has always maintained high capacity utilization.new plants in newer geographies will be an acid test: JK Lakshmi has always maintained very high capacity utilization except in FY14 when the demand environment deteriorated substantially. We expect volume growth of 7.4% In FY15 and 19.1% in FY16. Utilization level of the existing 6.65MnT plant is expected to remain at ~90% in FY15.The Durg plant will source slag from the Bhillai steel plant and this will help improving the blending ratios. This plant will serve the Central and Eastern market, where JK Lakshmi is currently not present. Though the company has always maintained very high capacity utilization in the past,it is very early to predict similar capacity utilization in the newer geography and we believe gaining market share from existing players will not be an easy job for the company in the near term. FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Sales Volume Cement ( Mt ) % YoY Growth 0.0% 14.2% -6.2% 13.6% 7.9% 6.7% 7.4% 19.1% 19.7% Capacity Utilisation % 84.7% 96.4% 90.8% 99.5% 94.4% 78.8% 72.5% 73.9% 75.6% Historical Sales Volume % 13.6% 7.9% -6.2% % Projected Sales Volume % 19.1% 7.4% 30.0% 20.0% 10.0% 0.0% % FY09 FY10 FY11 FY12 FY13 FY14 Sales Volume Cement ( Mt ) % YoY Growth % FY15e FY16e FY17e Sales Volume ( Mt ) % YoY Growth Source: Company, Sushil Finance Research Estimates 8

8 EBITDA to grow by 50% over FY14-16: We expect JK Lakshmi s revenues to grow by 14.9% in FY15 and 26.2% in FY16 backed by volume growth of 7.4% and 19.1% and realization growth of 7% &6% over FY15 and FY16 respectively. We expect EBITDA/ Ton to improve to Rs.656 in FY15 and Rs.859 in FY16 from Rs.536 in FY14; as a result EBITDA is expected to double to Rs.6186Mn vs Rs.3020 Mn in FY14.We expect EBITDA margins to improve by 210 bps in FY15 to 16.8% and another 400 bps improvement in FY16 to 20.7%. 5,000 4,000 3,000 3,071 2,628 Realisation, Cost and EBITDA/ Ton 3,894 3,908 3,514 3,652 3,082 2,843 3,116 3,252 4,142 4,350 3,283 3,345 2,000 1, ,005 - FY11 FY12 FY13 FY14 FY15e FY16e FY17e Realisation ( Rs / Ton ) Cost ( Rs / Ton) EBITDA / Ton Source: Company, Sushil Finance Research Estimates JK Lakshmi is one of the most efficient cement manufacturers in India and the power consumption per ton is one of the lowest at 73 units per ton. All the existing plants are having its own captive power plant as a result the power & fuel cost/ ton is also much lower compared to similar size players. However, the new Durg Plant in Chhattisgarh is not going to have captive power plant and it is likely to source power from the Grid. Chhattisgarh being a power surplus state is having very competitive pricing as far as grid power is concerned. However, depending entirely on grid power might escalate the average power cost/ ton for the new plants Power Consumption per Ton FY09 FY10 FY11 FY12 FY13 FY14 FY15e FY16e FY17e Power Consumption per Ton Source: Company, Sushil Finance Research Estimates 9

9 Intends to become a pan India player (except south): Post expansion, JK Lakshmi intends to become a pan India player with manufacturing facilities in North (Rajasthan & Haryana), West (Gujarat), Central (Chhattisgarh) & East (Odisha). Though North will continue to be the largest contributor in terms of both capacity and sales volume, the diversification across different region will help reduce the price volatility. Capacity Region Wise Post Expansion (FY17) 9% 15% 11% 65% North West Central East Currently the sales volume of JK Lakshmi is largely concentrated in North and western India.Rajasthan accounts for 30% of the sales, while Gujarat another 30%, further Haryana, NCR and other northern states account for 30% of the sales, while Maharashtra forms 5% of the sales volume. Currently the company has negligible presence in the central part and no presence in the Eastern part. With the Durg plant (Chhattisgarh) coming on-stream by Q3FY15, central India will be covered and the Cuttack plan can cater to the needs of the Eastern States like Odisha, West Bengal and Jharkhand. This will make JK Lakshmi a pan Indian player with presence in most part of India except the southern part. The company has no intension to venture into the southern part which is already reeling under overcapacity situation. We believe it is a welcome idea to venture into the new geographies, however we will also be cautious as newer geography might also result higher efforts to push volumes to compete with the existing players. Efficient plants and further reduction lead distance will result in improved return ratios.however, it seems factored in the current valuations: The average lead distance of JK Lakshmi currently stands at 520 Km, higher than the industry standard. With the commissioning of Durg and Cuttack plant the average lead distance is likely to come down. JK Lakshmi s new plants will be able to operate at a high utilization levels and with high EBITDA/ Ton, which will help in improving ROE from 7% in FY14 to 15% in FY16 and ROCE is likely to improve to 13% by FY16 from 8% in FY14.We believe the recent run up in the stock factors in the improvement in the return ratios in the years to come. Plant Distance KM Plant Distance KM Plant Distance KM From To From To From To Sirohi Ahmedabad 271 Durg Raipur 40 Cuttack Bhubaneswar 30 Baroda 373 Nagpur 241 Rourkela 311 Rajkot 438 Bhopal 588 Jamshedpur 326 Bhopal 674 Indore 730 Kolkata 420 Jaipur 414 Bilaspur 148 Patna 806 Jodhpur 195 Raygarh 275 Ranchi 487 Indore 513 Jabalpur 363 Sambalpur 273 NCR 673 Korba 240 Balasore

10 PRIMARY ASSUMPTIONS JK Lakshmi Cement Ltd RsMn FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E ( A) - Grey Cement Clinker Capacity ( Mn T ) % YoY Growth 7.8% 9.1% 4.2% 4.0% 7.7% 32.5% 0.0% 0.0% Cement Capacity ( Mn T) % YoY Growth 0.0% 0.0% 0.0% 11.5% 25.5% 25.6% 16.8% 16.9% Sales Volume Cement ( Mt ) % YoY Growth 14.2% -6.2% 13.6% 7.9% 6.7% 7.4% 19.1% 19.7% Capacity Utilisation % 96% 91% 100% 94% 79% 72% 74% 76% Revenues 13,222 17,181 20,550 20,566 23,624 29,817 37,463 % YoY 29.9% 19.6% 0.1% 14.9% 26.2% 25.6% Realisation ( Rs / Ton ) 3,071 3,514 3,894 3,652 3,908 4,142 4,350 % YoY 14.4% 10.8% -6.2% 7.0% 6.0% 5.0% (a) EBITDA 1,908 3,280 4,287 3,020 3,966 6,186 8,656 % YoY 71.9% 30.7% -29.6% 31.3% 56.0% 39.9% EBITDA ( Rs / Ton) % YoY 51.3% 21.1% -34.0% 22.3% 31.0% 16.9% Per Ton Analysis Per Ton Analysis FY11 FY12 FY13 FY14 FY15E FY16E FY17E Grey Cements Realisation ( Rs / Ton ) 3,071 3,514 3,894 3,652 3,908 4,142 4,350 Rawmaterials Cost/ Ton Purchase of Stock/ Ton Power & Fuel / Ton Freight / Ton Employee Cost / Ton Other Expenses / Ton Cost ( Rs / Ton) 2,628 2,843 3,082 3,116 3,252 3,283 3,345 EBITDA / Ton ,005 11

11 OUTLOOK & VALUATION We believe cement is the best commodity to play the Indian infrastructure story. Cement by virtue of its nature is not impacted by international prices and is driven by the domestic demand supply scenario. The Indian cement industry had the toughest time in recent years due to overcapacity and lack of demand on the other hand. The Industry utilization levels have been ~70%. However, excluding south which is facing severe overcapacity utilization, the utilization rates are in the range of 85-90%.In the absence of any major capacity being added in the northern part we like companies which are coming up with capacity when the apparent demand seems picking up. Cement stocks have appreciated sharply in the last one year and JK Lakshmi Cement has gone up by ~ 6x over the same time. At the CMP of Rs.377 the stock trades at 16.6x its FY16E EPS and 10.4x FY16 EV/ EBITDA. At EV/ Ton of $ 110 for FY16 we believe the stock is overvalued compared to the growth opportunities that it provides. We recommend reducing position from JK Lakshmi Cement and believe the fair value to be Rs.300, based on 9x FY16 EV/ EBITDA. The peak valuation of JK Lakshmi Cement has been 8.7x its one year forward EBITDA and with large cement players trading at ~11x forward EV/EBITDA,we believe there is limited scope for immediate re-rating in the stock EV/EBITDA Rs EV

12 PROFIT & LOSS (Consolidated) (Rs.mn) Y/E Mar FY13 FY14 FY15E FY16E Total Net Sales 20,550 20,566 23,624 29,817 Total Raw material Consumption 3,540 3,643 4,234 5,025 Staff costs 1,132 1,230 1,449 1,777 Other Expenditure 10,266 10,805 11,929 14,271 Total Expenditure 16,262 17,546 19,658 23,631 EBITDA 4,287 3,020 3,966 6,186 Interest ,016 1,342 Depreciation 1,489 1,352 1,536 1,938 Other Income PBT 2,517 1,339 2,005 3,651 Tax APAT 1, ,504 2,665 BALANCE SHEET (Consolidated) (Rs.mn) As on 31 st Mar. FY13 FY14 FY15E FY16E Share Capital Reserves & Surplus 12,010 12,444 13,682 16,054 Net Worth 12,598 13,032 14,271 16,642 Secured Loans 12,957 15,891 16,891 22,334 Unsecured Loans Capital Employed 25,968 29,345 36,605 39,441 Net Block 14,346 15,715 25,263 29,825 Cap. WIP 14,346 15,715 25,263 29,825 Investments 4,065 4,477 4,701 5,701 Sundry Debtors Cash & Bank Bal ,678 Loans & Advances 4,335 3,764 4,140 4,885 Inventories 1,148 1,024 1,156 1,385 Other Current Asset Current Assets 6,145 6,388 6,836 10,603 CurrLiab& Prov. 4,335 5,094 5,470 5,962 Net Current Assets 1,810 1,295 1,366 4,640 Deferred Tax Assets (1,134) (1,226) (1,226) (1,226) Total Assets 25,968 29,345 36,605 39,441 FINANCIAL RATIO (Consolidated) Y/E Mar. FY13 FY14 FY15E FY16E Growth (%) Net Sales 19.6% 0.1% 14.9% 26.2% EBITDA 30.7% -29.6% 31.3% 56.0% APAT 61.6% -47.1% 61.7% 77.3% Profitability (%) EBITDA Margin 20.9% 14.7% 16.8% 20.7% Adj. PAT Margin 8.6% 4.5% 6.4% 8.9% ROCE 14.3% 7.6% 9.2% 13.1% ROE 13.9% 7.1% 10.5% 16.0% Per Share Data (Rs.) Adj. EPS Adj. CEPS BVPS Valuations (X) PER P/BV EV / EBITDA EV / Net sales Dividend Yield (%) 0.8% 0.6% 0.7% 0.8% Turnover Days Debtors days Inventory days Creditors days Gearing Ratio Total Debt to Equity CASH FLOW (Consolidated)(Rs.mn) Y/E Mar. FY13 FY14 FY15E FY16E PAT 2,517 1,339 2,005 3,651 Depreciation & Amortization 1,243 1,154 1,536 1,938 Chg in Deferred tax (99) Chg in Working cap (1,220) 741 (293) (727) Cash flow from operations 1,845 3,102 2,746 3,876 Chg in Gross Block (2,291) (2,523) (11,084) (6,500) Chg in Investments 473 (413) (224) (1,000) Chg in others (3,940) (2,203) 2,584 6,000 Cash flow from investing (5,758) (5,139) (8,724) (1,500) Chg in debt 4,224 2,943 6, Chg in Net Worth (782) (445) (0) - Dividend (293) (235) (265) (294) Cash flow from financing 3,149 2,263 5, Chg in cash (764) 226 (221) 2,547 Cash at start Cash at end ,678 Source: Company, Sushil Finance Research Estimates 13

13 HOLD MEDIUM RISK PRICE Rs.595 TARGET Rs.635 CEMENT EARLIER RECO BUY Price Rs.488 Target Rs.635 Date Sept. 08, 2014 SHARE HOLDING (%) Promoters FII FI / MF 8.85 Public & Others STOCK DATA Reuters Code Bloomberg Code BSE Code NSE Symbol Market Capitalization* Shares Outstanding* JKCE.BO JKCE.IN JKCEMENT Rs mn US$ 641.9mn 69.9 mn 52 Weeks (H/L) Rs.597 /153 Avg. Daily Volume (6m) 105,296 Shares Price Performance (%) 1M 3M 6M Days EMA: Rs.372 *On fully diluted equity shares Part of Bonanza ANALYST Siddharth Purohit siddharth.purohit@sushilfinance.com SALES: Devang Shah /62 devang.shah@sushilfinance.com JK Cement Ltd. STRENGTH:Second largest player in high margin white cement & wall putty business. WEAKNESS: High operating cost of existing northern plants & lower utilization of southern plant.opportunity: Capacity coming up in high growth northern market and reducing lead time.threat: Delay in volumegrowth pick up, Rise in input cost and lower capacity utilisation. Capacity addition in the right location in a timely manner will be a key catalyst: JK Cement has added 3MnTp.a. grey cement capacity in north India, 1.5 Mn split grinding unit in Haryana and 1.5 Mn Plant in Rajasthan. The new capacity of JK is coming up at a time when no major capacity is being added by other north based players. A total of ~7 MnT of incremental capacity is likely to come in the Northern part by FY16 and the incremental supply is likely to be absorbed and hence no major demand supply mismatch is likely to happen in the near term. We expect grey cement volume growth of 31% in FY15 to 7 MnT& 21% in FY16 to 8.5 MnT. White cement volume is expected to grow by 35% in FY15 to 1.08 MnT& 25% in FY16 to 1.35 MnT. White cement biz continues to be a cash cow: White cement is manufactured by only two players, JK cement &Ultratech, duopolistic nature of the business has enabled a pricing discipline for many years.jk has expanded white cement capacity from 0.4 MnT to 0.6 MnT in FY14. JK has come up with a plant in UAE, which is capable of manufacturing 0.6 MnT of White Cement or 1 MnT of Grey Cement. White cement enjoys EBITDA margin of 25-30% vs 8-12% in grey cement. White cement contributed 60% of total EBITDA in FY14 and is likely to contribute ~40% of EBITDA in FY15/ FY16 respectively. In percentage terms though the contribution of White cements EBITDA seems coming down in absolute term it is expected to grow by 17% in FY15 and 31% in FY16. Higher absolute contribution of white cement s EBITDA lends visibility to the earnings and is likely to protect it from the volatility in grey cement biz. EBITDA to grow by 2.4x in the next two years, backed by significant improvement in margins: We expect revenues to post 30% CAGR, backed by 25.5% CAGR in volume and 3.5% CAGR in realization over FY During the same period EBITDA is expected to witness 53% CAGR, both on the back of cost savings and higher operating leverage. JK Cements northern plants are quite old and hence the cost structure was on a higher side compared its peers and hence the EBITDA/ Ton in grey cement was lower by ~ Rs.200/ Ton compared to the new plants of existing players. With the new plants coming up and lead distance reducing, we expect EBITDA margins to improve from 13% in FY14 to 15.9% in FY15 and 18.1% in FY16. Other factors which can contribute to improved margins are better capacity utilization of the southern plant to ~65% in FY15 vs 50% in FY14 and higher contribution from white cement business. OUTLOOK & VALUATION We believe cement is the best commodity to play the Indian infrastructure story. Cement by virtue of its nature is not impacted by international prices and is driven by the domestic demand supply scenario. The Indian cement industry had the toughest time in recent years due to overcapacity and lack of demand on the other hand. The Industry utilization levels have been ~70%. However, excluding south which is facing severe overcapacity condition, the utilization rates are in the range of 85-90%. In the absence of any major capacity being added in the northern part we like companies which are coming up with capacity when the apparent demand seems picking up. Cement stocks have appreciated sharply in the last 6 months and JK Cement has gone up by ~ 3 x over the same time. However considering an improving macro coupled with renewed focus on infra and housing, we believe the best days are yet to come. At the CMP of Rs.595 the stock trades at 14.4x its FY16E EPS and 7.4x FY16 EV/ EBITDA. At EV/ Ton of $ 99 for FY16 we believe the stock is still undervalued compared to the growth opportunities that it provides. We recommend BUY on the stock with a target price of Rs.635, implying 7% upside from the current levels. At the target price the stock will trade at EV/Ton of $ 102, which is ~30-35% discount to the large cement manufacturers in India. KEY FINANCIALS (Consolidated) Y/E Revenue APAT AEPS AEPS P/E ROCE ROE P/BV Mar. (Rs.mn) (Rs.mn) (Rs.) (% Ch.) (x) (%) (%) (x) FY13 29,040 2, % % 13.8% 2.5 FY14 27, % % 5.5% 2.4 FY15E 37,951 1, % % 9.3% FY16E 46,903 2, % % 13.5% 1.6

14 JK Lakshmi JK Cement Ltd. Plant Locations Jhajjar:1.5Mn Tons, Split Grinding Unit started in Q1FY15. Mangrol:Integrated Unit 0.75 Mn Tons (Existing) 1.5 Mn Tons (Started in Q2FY15) Nimabahera:Integrated Unit 3.25 Mn Tons Gotan: 0.50 Mn Tons Grey Cement & 0.6 Mn Tons White Cement Muddapur:Integrated Unit 3 Mn Tons Grey Cement State Region Capacity ( MT) Nimbahera Rajasthan North 3.25 Mangrol Rajasthan North 0.75 Gotan Rajasthan North 0.50 Muddapur Karnataka South 3.00 Total Existing Capacity 7.50 Grey Cement Expansion Mangrol Rajasthan North 1.5 Jhajhar Haryana North 1.5 Total Expansion 3.0 Grey Cement Capacity Post Expansion White Cement Existing Gotan 0.60 White Cement Expansion UAE 0.60 White Cement Capacity Post Expansion

15 JK Lakshmi JK Cement Ltd. Capacity addition in the right location in a timely manner will be a key catalyst: Historically JK Cement has been very conservative in capacity additions. There were no capacity additions between FY10-14 and we believe it was a conscious decision by the management not to do capex aggressively when the entire industry was going through a situation of oversupply. Lower capacity utilization coupled with lack of pricing power had dented the profitability of lot of cement players. However, JK Cement decided to come up with new plants sensing no major capex being announced by other north based players. JK Cement has added 3MnTp.a grey cement capacity in north India, 1.5 Mn split grinding unit in Jhajjar (Haryana) and 1.5 MnT p.a. plant in Mangrol (Rajasthan). The new capacity of JK has come up at a time when no major capacity is being added by other north based players. A total of ~7 MnT of incremental capacity is likely to come in the Northern part by FY16 and the incremental supply is likely to be absorbed and hence no major demand supply mismatch is likely to happen in the near term. The grey cement capacity of JK Cement has gone up by 40% post the new expansion to 10.5 Mn Tons from 7.5 Mn Tons, while white cement capacity has doubled to 1.2 Mn Tons from 0.6 Mn Tons. The company has already started its UAE facility which is capable of manufacturing 0.6 Mn Tons of White cement or 1 Mn Tons of Grey Cement. Grey Cement Capacity ( Mn Tons) White Cement Capacity ( Mn Tons) % 0% 0% 0% 0% 40% 0% 0% FY09 FY10 FY11 FY12 FY13 FY14 FY15e FY16e 80% 60% 40% 20% 0% -20% % 0% 0% 0% 0% 0% 50% 0% FY09 FY10 FY11 FY12 FY13 FY14 FY15e FY16e 110% 90% 70% 50% 30% 10% -10% Grey Cement % YoY Growth White Cement % YoY Growth Capacity FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E Grey Cement % YoY Growth 66.7% 0.0% 0.0% 0.0% 0.0% 40.0% 0.0% Capacity FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E White Cement % YoY Growth 0% 0% 0% 0% 50% 100% 0% 16

16 JK Lakshmi JK Cement Ltd. Expect Strong volume growth in Grey Cement...while White cement biz continues to be a cash cow: In FY14 the sales volume of Grey Cement declined by 5% YoYY due to lack of overall demand from construction activity and infrastructure projects. However, FY15 has started with a strong note with volume growing by 24% in Q1FY15, partly due to the commencement of the new grinding unit (1.5 MnT at Jhajaar, Haryana) as well as due to demand picking up. The 2 nd unit with 1.5 Mn Tons p.a in Mangrol, Rajasthan has started commercial production from 30 th September, With both the new units now functional we believe FY15 to be a strong year as far as volume growth is concerned. We expect Grey Cement sales volume of 7 Mn Ton for FY15, up 30% YoY and 8.4 Mn Ton in FY16 up 20% YoY. White cement is manufactured by only two players, JK cement &Ultratech, duopolistic nature of the business has enabled a pricing discipline for many years.jk has expanded white cement capacity from 0.4 MnT to 0.6 MnT in FY14. JK has also come up with a plant in UAE, which is capable of manufacturing 0.6 MnT of White Cement or 1 MnT of Grey Cement. The realization of white cement in India is ~2.5x that of Grey Cement and it enjoys EBITDA margin of 25-30% vs 8-12% in grey cement. We believe the new capacity in Grey cement will result in better efficiency of plants, lower lead time to the target market and cost savings resulting in EBITDA/ Ton improvement of ~ Rs in next 2 years. White cement contributed 60% of total EBITDA in FY14 and is likely to contribute ~40% of EBITDA in FY15/ FY16 respectively, though in percentage terms the contribution of white cement s EBITDA seems coming down, in absolute term it is expected to grow by 17% in FY15 and 31% in FY16. Higher absolute contribution of White cement s EBITDA lends visibility to the earnings of JK Cement and is likely to protect it from the volatility in grey cement business. White Cement is the key differentiating factor of JK Cement from other similar sized cement players, due to the following factors Threat of new entrant is very low, due to lack of fresh availability of high quality limestone mine, which is the key input for white cement. Higher capital cost for new project ~2x of Grey Cement. Sales Volume Grey Cement % YoY Growth FY FY % FY % FY % FY % FY % FY15E FY16E % 20% Sales Volume White Cement + WallPutty % YoY Growth FY FY % FY % FY % FY % FY % FY15E % FY16E % 17

17 JK Lakshmi JK Cement Ltd. EBITDA to grow by 2.4x in the next two years, backed by Significant improvement in margins: We expectjk Cement to report 36% revenue growth in FY15 backed by 31% volume growth to8.06 Mn Tons ( Grey + White cement ) from 6.16 Mn Tons and 3.7% improvement in realizations in Grey cement to Rs 4,704/ Ton from Rs 4,538/ Ton in FY14. EBITDA/ Ton is expected to improve to Rs 748 from Rs 573 in FY14. Higher capacity utilization coupled with lower lead distance will result in better EBITDA / Ton in quarters to come. We have been very conservative in realization growth for JK Cement and believe there is an upside risk to our assumption, if economy picks faster than expected. The existing plants of JK Cement are quite old compared to other midsize cement players in the region and hence the cost/ ton is also on a higher side as a result of which EBITDA / Ton in grey cement was lower by ~ Rs.200/ Ton compared to the new plants by existing players. The split grinding unit in Haryana will help reducing the average lead distance & lower fixed overhead thus ensuring better EBITDA/ Ton going ahead. Other factors which can contribute to improvement in margins are better capacity utilization of the southern plant to ~65% in FY15 vs 50% in FY14 and higher contribution from white cement business. The southern plant of JK Cement is located at Muddapur (Karnataka), and has close proximity to Maharashtra border and hence it will be in a position to push higher incremental volumes to this region when demand picks up. The plant is located at a distance of 151 KM from Kolhapur and 217 KM from Sholapur in Maharashtra. RsMn FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Total Revenues 14,957 18,267 20,936 25,463 29,120 27,955 37,951 46,903 52,755 % YoY 22.1% 14.6% 21.6% 14.4% -4.0% 35.8% 23.6% 12.5% Total EBITDA 3,231 4,377 2,763 5,147 5,578 3,52 6,036 8,476 11,044 % YoY 35.5% -36.9% 86.3% 8.4% -36.8% 71.1% 40.4% 30.3% Blended Capacity &Realisation Total Capacity (Grey+White+WallPutty) % YoY 57.7% 0.0% 0.0% 0.0% 4.9% 41.9% 0.0% 0.0% Total Sales % YoY 13.7% 18.6% 4.6% 7.8% -2.5% 31.0% 20.1% 7.2% Realisation ( Rs / Ton ) 3,604 3,870 3,739 4,345 4,608 4,538 4,704 4,840 5,076 % YoY 7.4% -3.4% 16.2% 6.0% -1.5% 3.7% 2.9% 4.9% Blended EBITDA ( Rs / Ton ) ,063 % YoY 19.1% -46.8% 78.0% 0.5% -35.1% 30.7% 16.9% 21.5% FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Revenue Contribution Grey Cement 82% 81% 79% 79% 75% 69% 71% 71% 69% White Cement 18% 19% 21% 21% 25% 31% 29% 29% 31% EBITDA Contribution Grey Cement 75% 76% 56% 68% 65% 39% 58% 61% 61% White Cement 25% 24% 44% 32% 35% 61% 42% 39% 39% EBITDA % Grey Cement 20% 23% 9% 18% 17% 7% 13% 16% 18% White Cement 30% 30% 28% 30% 27% 25% 23% 24% 26% 18

18 PRIMARY ASSUMPTIONS JK Lakshmi JK Cement Ltd. Rs.Mn FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E ( A) -Grey Cement Capacity ( Mt) % YoY 66.7% 0.0% 0.0% 0.0% 0.0% 40.0% 0.0% 0.0% Sales Volume ( Mt ) % YoY 13.2% 18.8% 4.3% 5.8% -5.0% 30.8% 19.8% 5.7% Revenues 12,265 14,796 16,551 20,002 21,712 19,390 26,830 33,095 36,191 % YoY 20.6% 11.9% 20.9% 8.5% -10.7% 38.4% 23.4% 9.4% Realisation ( Rs / Ton ) 3,228 3,441 3,239 3,753 3,850 3,618 3,827 3,942 4,080 (a) EBITDA 2,423 3,336 1,549 3,514 3,611 1,368 3,519 5,178 6,695 % YoY 37.7% -53.6% 126.9% 2.8% -62.1% 157.2% 47.2% 29.3% EBITDA% 22.5% 9.4% 17.6% 16.6% 7.1% 13.1% 15.6% 18.5% EBITDA ( Rs / Ton) ( B)- White Cement + Wall Putty Capacity ( Mt) Sales Volume ( Mt ) Revenues 2,692 3,471 4,385 5,461 7,408 8,565 9,462 10,672 11,897 % YoY 28.9% 26.3% 24.5% 35.7% 15.6% 10.5% 12.8% 11.5% Realisation ( Rs / Ton ) 7,691 8,264 8,949 10,304 10,894 10,706 11,027 11,413 11,756 (b) EBITDA 808 1,041 1,214 1,633 1,967 2,159 2,417 2,688 3,083 % YoY 28.8% 16.6% 34.5% 20.5% 9.8% 12.0% 11.2% 14.7% EBITDA% 30.0% 30.0% 27.7% 29.9% 26.6% 25.2% 25.6% 25.2% 25.9% EBITDA ( Rs / Ton) 2,309 2,479 2,478 3,081 2,893 2,699 2,818 2,875 3,047 ( C )- UAE Subsidiary Capacity ( Mt) Sales Volume ( Mt ) Revenues 1,660 3,137 4,667 Realisation ( Rs / Ton ) 8,300 8,715 9,151 ( c ) EBITDA ,266 % YoY 510% 107% EBITDA% 6.0% 19.4% 27.1% EBITDA ( Rs / Ton) 500 1,695 2,482 19

19 OUTLOOK & VALUATION JK Lakshmi JK Cement Ltd. We believe cement is the best commodity to play the Indian infrastructure story. Cement by virtue of its nature is not impacted by international prices and is driven by the domestic demand supply scenario. The Indian cement industry had the toughest time in recent years due to overcapacity and lack of demand on the other hand. The Industry utilization levels have been ~70%. However, excluding south which is facing severe overcapacity condition, the utilization rates are in the range of 85-90%.In the absence of any major capacity being added in the northern part we like companies which are coming up with capacity when the apparent demand seems picking up. Cement stocks have appreciated sharply in the last 6 months and JK Cement has gone up by ~ 3 x over the same time. However considering an improving macro coupled with renewed focus on infra and housing, we believe the best days are yet to come. At the CMP of Rs.595 the stock trades at 14.4x its FY16E EPS and 7.4x FY16 EV/ EBITDA. At EV/ Ton of $ 99 for FY16 we believe the stock is still undervalued compared to the growth opportunities that it provides. We recommend BUY on the stock with a target price of Rs.635, implying 7 % upside from the current levels. At the target price the stock will trade at EV/Ton of $ 102, which is ~40% discount to the large cement manufacturers in India EV/EBITDA Rs EV

20 JK Cement Ltd. PROFIT & LOSS (Consolidated) (Rs.mn) Y/E Mar FY13 FY14 FY15E FY16E Net Sales 29,040 27,815 37,951 46,903 RM cost 3,839 4,237 5,767 6,955 Staff Cost 1,579 1,678 2,137 2,345 Other Expenditure 18,096 18,285 24,004 29,127 Total Expenditure 23,519 24,209 31,918 38,434 EBITDA 5,521 3,606 6,036 8,476 Interest 1,398 1,526 2,193 2,747 Depreciation 1,283 1,340 1,898 2,181 Other Income PBT 3,406 1,363 2,591 4,252 Tax 1, ,361 APAT 2, ,762 2,891 BALANCE SHEET (Consolidated) (Rs.mn) As on 31 st Mar. FY13 FY14 FY15E FY16E Share Capital Reserves & Surplus 16,275 16,885 18,298 20,769 Net Worth 16,974 17,585 18,997 21,469 Secured Loans 9,531 19,866 22,845 20,561 Unsecured Loans 1,887 1,985 2,283 2,328 Capital Employed 28,392 39,435 44,125 44,358 Net Block 23,643 23,126 38,248 36,817 Cap. WIP 1,075 11, Investments 1,693 2,995 3,145 3,459 Sundry Debtors 1,153 1,117 1,452 1,888 Cash & Bank Bal 3,325 3,476 2,242 2,097 Loans & Advances 3,451 3,732 4,292 4,936 Inventories 4,614 5,420 6,774 8,468 Other Current Asset Current Assets 12,608 13,887 14,917 17,556 Curr.Liab& Prov. 8,137 8,907 10,168 11,374 Net Current Assets 4,471 4,979 4,749 6,182 Deferred Tax Assets (2,490) (2,685) (2,765) (2,848) Total Assets 28,392 39,435 44,125 44,358 FINANCIAL RATIOS(Consolidated) Y/E Mar. FY13 FY14 FY15E FY16E Growth (%) Net Sales 14% -4% 36% 24% EBITDA 9% -35% 67% 40% APAT 26% -58% 82% 64% Profitability (%) EBITDA Margin 19.0% 13.0% 15.9% 18.1% Adj. PAT Margin 8.0% 3.5% 4.6% 6.2% ROCE 17.6% 8.5% 11.4% 15.8% ROE 13.8% 5.5% 9.3% 13.5% Per Share Data (Rs.) Adj. EPS Adj. CEPS BVPS Valuations (X) PER P/BV EV / EBITDA EV / Net sales Dividend Yield (%) 1.4% 0.6% 1.0% 1.2% Turnover Days Debtors days Inventory days Creditors days Gearing Ratio (%) Total Debt to Equity CASH FLOW (Consolidated) (Rs.mn) Y/E Mar. FY13 FY14 FY15E FY16E PBT 3,406 1,363 2,591 4,252 Depreciation 1,379 1,455 1,898 2,181 Change in tax (1,071) (392) (829) (1,361) Chg in Deferred tax Chg in Working cap (1,214) (357) (1,003) (1,579) Cash flow from operations 2,699 2,263 2,738 3,578 Chg in Gross Block (1,863) (938) (17,020) (750) Chg in Investments (1,585) (1,302) (150) (314) Chg in others (225) (9,945) 10,270 - Cash flow from investing (3,672) (12,185) (6,900) (1,064) Chg in debt ,433 3,278 (2,239) Chg in Net Worth (197) (150) 0 (0) Dividend (455) (210) (350) (420) Cash flow from financing (27) 10,073 2,928 (2,658) Chg in cash (1,000) 151 (1,234) (145) Cash at start 4,325 3,325 3,476 2,242 Cash at end 3,325 3,476 2,242 2,097 Source: Company, Sushil Finance Research Estimates 21

21 Rating Scale This is a guide to the rating system used by our Institutional Research Team. Our rating system comprises of six rating categories, with a corresponding risk rating. Risk Rating Risk Description Low Risk Medium Risk High Risk Predictability of Earnings / Dividends; Price Volatility High predictability / Low volatility Moderate predictability / volatility Low predictability / High volatility Total Expected Return Matrix Rating Low Risk Medium Risk High Risk Buy Over 15 % Over 20% Over 25% Accumulate 10 % to 15 % 15% to 20% 20% to 25% Hold 0% to 10 % 0% to 15% 0% to 20% Sell Negative Returns Negative Returns Negative Returns Neutral Not Applicable Not Applicable Not Applicable Not Rated Not Applicable Not Applicable Not Applicable Please Note Recommendations with Neutral Rating imply reversal of our earlier opinion (i.e. Book Profits / Losses). ** Indicates that the stock is illiquid With a view to combat the higher acquisition cost for illiquid stocks, we have enhanced our return criteria for such stocks by five percentage points. Stock ReviewReports:These are Soft coverage son companies where Management access is difficult or Market capitalization is below Rs mn. Views and recommendation on such companies may not necessarily be based on management meeting but may be based on the publicly available information and/or attending Company AGMs. Hence Stock Reviews may be just one-time coverage s with an occasional Update, wherever possible. Additional information with respect to any securities referred to herein will be available upon request. This report is prepared for the exclusive use of Sushil Group clients only and should not be reproduced, recirculated, published in any media, website or otherwise, in any form or manner, in part or as a whole, without the express consent in writing of Sushil Financial Services Private Limited. Any unauthorized use, disclosure or public dissemination of information contained herein is prohibited. This report is to be used only by the original recipient to whom it is sent. This is for private circulation only and the said document does not constitute an offer to buy or sell any securities mentioned herein. While utmost care has been taken in preparing the above, we claim no responsibility for its accuracy. We shall not be liable for any direct or indirect losses arising from the use thereof and the investors are requested to use the information contained herein at their own risk. This report has been prepared for information purposes only and is not a solicitation, or an offer, to buy or sell any security. It does not purport to be a complete description of the securities, markets or developments referred to in the material. The information, on which the report is based, has been obtained from sources, which we believe to be reliable, but we have not independently verified such information and we do not guarantee that it is accurate or complete. All expressions of opinion are subject to change without notice. Sushil Financial Services Private Limited and its connected companies, and their respective directors, officers and employees (to be collectively known as SFSPL), may, from time to time, have a long or short position in the securities mentioned and may sell or buy such securities. SFSPL may act upon or make use of information contained herein prior to the publication thereof. The Investment horizon of this report is approximately 1 year. Any calls which lapse the time duration of a year would be auto closed without any further notifications/updates. Clients are requested to keep track of the same. 22