Cummins India Ltd. Re Initiate: BUY Sector Diesel Engines. Analyst: Neha Majithia

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1 Cummins India Ltd Re Initiate: BUY Market Data Current Market Price (CMP) 459 Target Price 556 Upside Potential 21% 52 Week High Low 542/41 Market Cap () Non Institutions 13.65% Cummins Inc 51.% Key Highlights Sector Diesel Engines We recommend Cummins India Ltd (CIL) a BUY. We had earlier recommended Cummins India Ltd a BUY at INR462 in our report dated 29 th March, 212 with a Target price of INR537. The stock had surpassed our target price of INR537, giving a return of 16% on 3 rd January, 213. We are re initiating the stock at current level on account of strong growth in domestic revenue supported by powergen business and recovery in industrial business, growth in exports though in low teens, volume growth due to prebuying on change of emission norms, 15 2% price hike post emission norms, and stable margins due to its cost control efficiencies. At the current price of INR459, the stock is trading at adjusted P/E of 17.23x its FY14e EPS and 15.67x its FY15e EPS. We believe that CIL will continue to enjoy premium valuations due to its dominant market positioning, impressive long term growth outlook, healthy balance sheet, strong ROE as compared to its peers and dividend yield of 2.83%. Institutions 35.35% Domestic Powergen business (35% of total domestic revenue) to gain ground on continued power shortages. Exports to continue with the traction of growing at low teens; Management expects exports to grow between 3 5% in FY14e Stock Scan Scrip ID Cummins India Ltd Scrip Code (NSE) CUMMINSIND Scrip Code (BSE) 548 Bloomberg Ticker KKC IN Reuters Ticker CUMM.BO Industry Diesel Engines Face Value INR2 per Share Equity Share Capital ( ) Avg 5 years P/E Avg daily volume (Last 1 Year) 239,269 Beta Vs Sensex.71 Dividend Yield 2.83% 2 Jan 12 2 Feb 12 2 Mar 12 2 Apr 12 2 May 12 2 Jun 12 2 Jul 12 2 Aug 12 2 Sep 12 2 Oct 12 2 Nov 12 2 Dec 12 2 Jan 13 2 Feb 13 2 Mar 13 2 Apr 13 2 May 13 2 Jun 13 Cummins India Ltd Analyst: Neha Majithia nmajithia@microsec.in Sensex Industrial Business to witness recovery over FY15e. Distribution to perform consistently at an average rate of 19% over FY15e; Auto to recover in FY15e. Change in Emission norms to be one of the drivers for the volume growth in FY14e and margin growth in FY15e. Higher absorption of corporate cross charges seen further at ~2% of revenue; Royalty to remain stable between 2 3%. Capex to spend INR4 5 crores both in FY14e and FY15e at Megasite, Technical Centre and India Office Campus. Domestic Revenue to grow between 8 1% in FY14e. Q4FY13 Margins dented due lower export margins and higher corporate charges; Margins to remain stable at 22%. Financial Performance of Cummins India Ltd (All figures in INR Crores except % and per share data) Particulars FY8A FY9A FY1A FY11A FY12A FY13E FY14E FY15E Net Sales Growth 25.1% 24.4% 13.9% 38.7% 4.4% 9.5% 8.% 1.% EBITDA EBITDA Margin 17.36% 18.18% 21.88% 2.4% 19.35% 21.95% 21.65% 21.75% Net Profit excl Exceptional Items Net Profit Margin (excl Exceptional Items) 11.77% 12.% 14.96% 14.33% 12.73% 14.9% 14.65% 14.69% Net Profit Growth 11.57% 27.55% 7.1% 33.15% 8.66% 32.75% 3.3% 9.95% Adjusted EPS Adjusted EPS excl Exceptional Items Adjusted P/E(x) Adjusted P/E(x) excl Exceptional Items P/BV(x) ROE 26.33% 29.2% 28.43% 32.72% 28.94% 32.1% 26.8% 25.77% EV/EBITDA(x) Source:, Company Data - 1 -

2 Domestic Powergen business (35% of total domestic revenue) to gain ground on continued power shortages The domestic powergen business unit (PBU) which accounts for 35% of the total domestic business of Cummins India is expected to gain ground due to prolonged power shortages in India, particularly southern and northern regions, where power deficits averaged at ~17% and 9% in Q4FY13, thus, touching a peak level from 13% and 7% in Q4FY12. Apart from this, demand has been strong with deficit rising in eastern region as well to 5% in Q4FY13. In 9MFY13, the southern region contributed ~3% to the domestic gensets volume. The management expects this traction to continue with the peak deficit of at least 8 1% and base deficit of 4 5% to sustain over long period of time. Hence, with other regions like eastern and western regions also joining the race with incremental deficit, we expect domestic powergen business to witness strong demand and grow substantially over next couple of years. PBU has been growing at a CAGR of 11.11% over FY8 13. We expect it to grow at an average rate of 1 11% in FY14e and FY15e. Power Deficit to continue; Gensets demand to remain strong in Southern & Northern Region 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % From August, 212 onwards, the power deficit has increased to 17 18% in the southern region from the levels of 11 12%. Increase in power deficits has also been witnessed in north eastern regions and western regions in recent times. Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12 Jun'12 Jul'12 Aug'12 Sep'12 Oct'12 Nov'12 Dec'12 Jan'13 Feb'13 Mar'13 Northern Western Southern Eastern North Eastern Source: CEA,, *Mar 13 figures are provisional Key triggers like genset price increase post new emission norms (CPCB Norms II), launch of new products in LHP segment and capacity addition across different sectors augur well for the domestic powergen The other key triggers which augur well for sustainable growth in domestic power are: a. Launch of new products in LHP segment. b. Company s aim to considerate inventorying channel in Mid Horsepower segment (MHP). The company had shown de growth in MHP segment in FY13 due to inventory correction as well as because of the lower demands in various markets across the world. c. Company s expectation to maintain its market position in MHP & HHP segment, while expand presence in LHP segment. This would help company improve its LHP volume. Currently, LHP engines constitute ~25% of the total domestic volume with MHP, Heavy duty & HHP accounting for 1%, 1% and 55% respectively. d. Capacity additions across varies sectors like pharma, data centres and textiles, etc. e. Price increase of ~15 2% post new emission norms. Emission norms will change for power gensets of <8 kva

3 % 25% % 8% % 6% 3% % % 15% 1% 11% 1% 5% % 5% 1% FY8A FY9A FY1A FY11A FY12A FY13E FY14E FY15E Q1FY Q2FY Q3FY Q4FY11 Q1FY Q2FY Q3FY Q4FY Q1FY Q2FY13 Q3FY Q4FY13 PBU Growth (%) PBU Source:, Company Data Exports to continue with the traction of growing at low teens; Management expects exports to grow between 3 5% in FY14e Exports which are primarily to its global parent (Cummins Inc) constitute ~28% of the Cummins total revenue. Cummins witnessed a QoQ growth of 19% in exports in Q4FY13 after declining for last two consecutive quarters by ~48% to INR249 crore from INR431 crore in Q1FY13. Also, on YoY basis, it has fallen by ~15% due to surprising decline in LHP exports, which contribute ~3% to the total exports, ongoing inventory correction in both HHP and LHP segments and weak demand in Cummins target markets like Middle east, South America, Europe, etc. In FY13, exports grew by 7%. Management continues to keep a cautious outlook on exports with the traction of growth on low teens. Management expects exports to grow between 3 5% in FY14e; Maintained long term growth guidance of low teens: Exports have been growing at a CAGR of 11.51% for last six years. We expect exports to grow at a CAGR of 2.56% over FY15e with a growth of 3% in FY14E and 8% in FY15e. We expect growth in exports to be largely supported by following factors: LHP to be the growth driver: We expect growth in LHP (Low Horsepower) segment, which constitutes ~3% of the total exports. In FY13, the LHP was INR388 crore, almost double of INR2 crore in FY12. We expect growth on back of a) demand revival in developing economies like Middle east, South America & Europe b) improvement in ongoing inventory correction at channel partner level c) Production start up of the new powergen factory (for Urja Gensets) which will be commissioned post HIFY14e, with an initial capacity of 15, 2, engines p.a. and expected be ramp up to 5, engines in next 2 3 years and d) encouraging response of new gensets launched in the market and e) pick up in market share globally from the current 5% to 2% in a span of next 5 years. Flat growth in HHP (High Horsepower): HHP which constitutes ~6 65% of the total exports is expected to remain flat in FY14e. It is also expected that the new export facility for LHP in Phaltan might replace exports, thus, leading to a decline in HHP in FY15e. Management has counted on additional INR3 4 crores to appear in LHP exports in next 5 years. However, we assume an addition of ~INR6 8 crores each in FY14e and FY15e (which means an average growth of 19% over FY15e), with HHP and MHP remaining flattish in FY14e and further decline in FY15e. Hence, despite huge growth in LHP, exports would grow only between 3 5% over FY14e due to LHP which is growing at a lower base and HHP remaining flat on higher base

4 % % % 12% 7% 3% 8% % FY8A FY9A FY1A FY11A FY12A FY13E FY14E FY15E 15% 1% 5% % 5% 1% Q1FY Q2FY Q3FY Q4FY Q1FY Q2FY Q3FY Q4FY Q1FY13 33 Q2FY Q3FY Q4FY13 Exports Growth (%) Exports Source:, Company Data Industrial Business to witness recovery over FY15e The industrial business Unit (IBU) which caters to engine requirements for sectors like mining, construction, Oil & Gas, compressors, marine engines, and rail locomotives has been growing at the CAGR of 4.98% over FY8 13. The industrial business had been under performing in last few quarters due to slowdown in industrial capex, iron ore mining ban in various states, and various other macro economic factors like higher interest rates and GDP growth. Management expects industrial business to recover in coming quarters in anticipation of mining sector bottoming out (Mining had been a huge disappointment last year), increasing trend for electronic engines for dozers and excavators and entry in high offshore oil & gas market. Demand in compressors, a cyclical market, was good due to voltage shortage issues, but expects not to sustain at the same rate. Construction, again, depends on GDP but is envisaged to be a growth area in future. IBU had declined by 8% in FY13 due to factors mentioned above. The compressor segment which constituted ~33% of the total IBU segment, grew by a fast pace of 18% on YoY basis in FY13 (from INR147 crore in FY12 to INR175 crore in FY13) due to water shortage in places like Maharastra, Karnataka, etc. Management assumes the rainfall to be normal next year, which leaves much scope for the under performance of the compressor segment. Management expects IBU business to come back and recover from the fall witnessed last year. It envisages the decline in compressor segment to be offset by the recovery in construction, marine, rail, mining and various segments which together form the remaining ~75 78% of the total IBU business. Hence, we reckon the IBU business to grow at a CAGR of 4.59% over FY15e on back of growth in various segments and improvement in macro economic factors. We foresee growth of 17% and 14% in FY14e and FY15e in the IBU business % % % % 355 8% 7% 8% 16% FY8A FY9A FY1A FY11A FY12A FY13E FY14E FY15E 4% 3% 2% 1% % 1% 2% Q1FY11 16 Q2FY Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY Q2FY Q3FY13 Q4FY13 IBU Growth (%) IBU Source:, Company Data - 4 -

5 Distribution to perform consistently at an average rate of 19% over FY15e; Auto to recover in FY15e Cummins distribution business Unit (DBU) which consists of sale of spare parts and engines to small OEMs has been growing at a CGAR of 17.4% over FY8 13, the only segment giving the highest compounded annualised return, after power generation segment which has given annualised return of 11.11% over the same period of time. Management expects distribution to perform consistently in next couple of years on basis of increase in product line and by encouraging its current channels to use their outlets as sales points as well as working to develop new retail sales state by state. The company has focused on three states till now in South and it is expecting to increase its density state by state. Management indicated that since, this has started last quarter itself, so it would take two more quarters to start seeing the impact of the sales density. Hence, we expect DBU to grow by 18% and 19% in FY14e and FY15e. On the other side, Auto Business Unit (ABU) which contributes merely ~4 5% to the overall business de grew by 32% in FY13A due to slowdown witnessed in auto industry. ABU, which sells to a few OEMs only, grew at a CAGR of 4.82% over FY8 13. After seeing a depressed year (FY13), management expects to see some recovery in the auto market mostly in the second half of FY14e. We expect ABU to de grow by 14% in FY14e, but witness a recovery of 28% in FY15e (growth rate of 28% looks higher as its growing on a lower base) % 29% % % % 18% 674 2% % % 15% 12% 9% 13% 1% 5% % FY8A FY9A FY1A FY11A FY12A FY13E FY14E FY15E Q1FY Q2FY Q3FY Q4FY11 Q1FY Q2FY Q3FY Q4FY Q1FY Q2FY13 Q3FY Q4FY13 DBU Growth (%) DBU Source:, Company Data INRin Cr % % 7% 4% 1% 1% 8% 187 6% 4% 28% 2% % 32% 14% 2% FY8A FY9A FY1A FY11A FY12A FY13E FY14E FY15E 4% Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 ABU Growth (%) ABU Source:, Company Data - 5 -

6 Change in Emission norms to be one of the drivers for the volume growth in FY14e and margin growth in FY15e The company expects CPCB II norms to be effective post 3QFY14e (around 1 st January, 214). The change in emission norms will be applicable for engines below 8kva, which contribute ~18 2% to the total revenue. Management expects pre buying of engines just one or two quarters before the new CPCB II norms and 2 22% higher than the normal demand during that phase. So, assuming the CPCB II to be applicable in Q4FY14e, Cummins will witness impressive volume growth in Q2FY14e and Q3FY14e because of pre buying and then see a decline in Q4FY14e and Q1FY15e. Howbeit, company expects ~15 2% hike in the prices of these diesel engines post the emission norms due to 2% rise in average cost of engines. We believe that FY14e will be play more on volume growth, with consistent price hikes as witnessed in January, 213 (hike of 2 3%) because the hike would be a cost led price increase. However, FY15e sales growth is expected to be more on higher prices post CPCB II norms. So, change in emission norms would be one of the drivers for the volume growth in FY14e and margin growth in FY15. However, uncertainty with respect to margins may arise from the change in norms as it would be a cost led price increase. We believe KKC is well equipped to comply with the changing norms and also be the first one to actively launch new emission backed products in the market. Also, the company is not expecting any significant threat from its competitors. Higher absorption of corporate cross charges seen further at ~2% of revenue; Royalty to remain stable between 2 3% Cummins Inc. as the parent company incurs certain expenses on its subsidiary companies for activities like marketing or products etc. The management in its Q3FY13 concall had indicated that some pressure is being imposed on USbased companies from the US tax authorities on benefitting there overseas subsidiaries for the services rendered by them. With this regards, the management has indicated that it doesn t expect any meaningful increase in the royalty payments, but can see a higher absorption of corporate cross charges for the services the parent provide. Furthermore, we expect that there could be marginal increase in cross charges because of upgradation of the product offering post the new CPCB emission norms kicking in during CY213, thus, taking the cross charges to ~2 3% of the revenue from current rate of 3.6% in FY12. Cummins India pays "Royalty and Cross 3.6% of Revenue"; Management expects to see marginally higher absorption of corporate cross charges going further Particulars Name of the Company FY8A FY9A FY1A FY11A FY12A FY13A* Services Received Cummins Power Generation Ltd NA Cummins Technologies Ltd NA Cummins Inc NA Others NA Total Corporate Crosss Charges Corporate Cross Charges as a % of Revenue.28%.17%.99% 1.67% 2.2% 2.35% Transfer of technology including royalty Cummins Inc Royalty as a % of Revenue 1.62% 1.31%.96% 1.57% 1.58% 1.6% Total Payment Total as a % of Revenue 1.89% 1.48% 1.96% 3.24% 3.6% 3.95% Note: All figures in INR Crores, *FY13A data is provisional. Capex to spend INR4 5 crores both in FY14e and FY15e at Megasite, Technical Centre and India Office Campus Cummins India (CIL) is moving in a smooth pace in setting up its integrated manufacturing called Megasite at Phaltan in Maharashtra. The group is investing ~INR7 crores for setting up 1 facilities representing almost all Cummins group companies present in India in one location. At present, four plants are operational viz. 1. Tata Cummins plant for the B series engines, 2. High horsepower rebuild centre, 3. Recon plant to re manufacture parts and engines and 4.Parts distribution center. The facility for power generation business to manufacture generator sets and generator drive engines in medium and low horse power range for export market with annual capacity of 51, - 6 -

7 units recently started production. The production is expected to be ~15 2, per annum initially and will be increased to full capacity over next three to four years. Cummins had spent an amount of INR226 crores in FY13 as capital expenditure. Out of this, INR82 crores was spent at the megasite, INR5 crores being the biggest on Low horsepower plant, INR87 crores on India Office Campus and rest among other categories. Management expects to spend INR5 croes both in FY14e and FY15e because of Corporate Office which is likely to be ready by January, 214 and others like technical centre, Low horsepower plant and some tactical projects in High Horsepower manufacturing in Kothrud. The total capital expenditure would be ~INR73 crores and is expected to be ready for occupation in phases post H2FY14e. Domestic Revenue to grow between 8 1% in FY14e Management Guidance: CIL expects domestic revenue to grow between 8 1% in FY14e led by sustained growth in power generation business due to power shortages and recovery in industrial business as discussed above. Domestic revenue has been growing at a CAGR of 11.4% over FY We expect domestic revenue to grow at an average rate of 1% over FY15e % 19% % 6% 25% 391 2% % 1% 12% 1% 9% 5% 1% % FY8A FY9A FY1A FY11A FY12A FY13E FY14E FY15E Domestic Revenue Growth (%) Source:, Company Data Q4FY13 Margins dented due lower export margins and higher corporate charges; Margins to remain stable at 22% During Q4FY13, the EBITDA Margins decline by 144bps on QoQ basis due to INR15.7 crores of corporate cross charges booked in the same quarter, lower export margins and.5% increase in material cost. 1. Corporate Cross charges: CIL paid INR15.7 crores to its parent company for the services offered by them. 2. Lower Export Margin: The Company registered a 1% decline in Q4FY13 margins due to realignment of its High Horsepower export pricing. For exports, the company enters into a 3 year agreement with the parent at a foreign rate prevailing at the time of signing the contract subject to +/ 3% cap. And, if the exchange rate goes beyond the 3% band either way, again there is an adjustment which automatically kicks in. CIL indicated that over the last three years, the company had seen margins go up and down, but the exchange variations had been more favourable in the last 1 year. CIL re priced it three year agreement on 1 st Jan, 213 (INR54 55/$ vs 46 47/$ in last agreement). 3. Increase in material cost offset the positive impact of price hike: The price hike taken in Jan 13 led to a +ve tailwind of 5bps in Q4FY13. Management stated that.7% increase in material cost had largely offset this positive impact of 3% price increases taken during Jan' % % 2.4% 19.4% 18.2% % 21.7% % % 2.% 2 Management envisages the margins to remain stable at the Q4FY13 levels. We believe that the company will be able to improve profitability in domestic market due to FY8A FY9A FY1A FY11A FY12A FY13E FY14E FY15E EBITDA EBITDA Margin (%) 15.% Source:, Company Data - 7 -

8 continuous cost cutting, possible 15 2% price increase on implementation of CPCB II norms and regular price hikes taken by the company. Peer Analysis Particulars CMP M cap Net Sales EBITDA PAT EBITDA Margin (%) PAT Margin (%) EPS P/E (x) BV P/BV (x) EV/EBITDA(x) ROE (%) D/E Cummins India % 15.9% %. Kirloskar Oil Engines Ltd % 8.4% %. Greaves Cotton Ltd % 7.8% %.2 Source:, Company data Particulars CMP P/E(x) EV/EBITDA(x) ROE FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E Cummins India % 26.8% 25.8% Kirloskar Oil Engines Ltd % 18.6% 18.8% Greaves Cotton Ltd % 21.3% 21.% Valuation Re Initiate with a BUY rating target price of INR556; upside of 21% We had earlier recommended Cummins India Ltd a BUY at INR462 in our report dated 29 th March, 212 with a Target price of INR537. The stock had surpassed our target price of INR537, giving a return of 16% on 3 rd January, 213. We are re initiating the stock a BUY at current level on account of strong growth in domestic revenue supported by powergen business and recovery in industrial business, growth in exports though in low teens, volume growth due to pre buying on change of emission norms, 15 2% price hike post emission norms, and stable margins due to its cost control efficiencies. At the current price of INR459, the stock is trading at adjusted P/E of 17.23x its FY14e EPS and x its FY15e EPS. We believe that CIL will continue to enjoy premium valuations due to its dominant market positioning, impressive long term growth outlook, healthy balance sheet, strong ROE as compared to its peers and dividend yield of 2.83%. The average P/E of CIL has been trading in the range of 8x 26x in last 1 years. It is now trading at a P/E of 16.7x, which is at a premium of ~4% to its peer group. Hence, we expect this trend to continue over FY15e. We have valued the stock by assigning a P/E multiple of 19x FY15e EPS of and arrived at a target price of INR556 per share.i.e. an upside of 21% from the current market price of INR459 per share

9 Financial Statements Income Statement Particulars (ores) FY8A FY9A FY1A FY11A FY12A FY13 FY14E FY15E Net Sales Growth (%) 25.9% 24.43% 13.9% 38.69% 4.35% 9.52% 8% 1% Other Operating Income Total Income Growth (%) 25.87% 25.13% 14.14% 38.98% 2.85% 13.43% 4.77% 9.66% TOTAL EXPENDITURE as % of sales 82.64% 81.82% 78.12% 79.6% 8.65% 78.5% 78.35% 78.25% EBITDA EBITDA Margin (%) 17.36% 18.18% 21.88% 2.4% 19.35% 21.95% 21.65% 21.75% Depreciation EBIT EBIT Margin (%) 15.98% 16.86% 2.66% 19.51% 18.36% 2.96% 2.56% 2.61% Interest Other Income PBT PBT Margin (%) 15.88% 16.78% 2.59% 19.46% 18.23% 2.87% 2.49% 2.54% Tax Tax (%) 31.83% 28.52% 27.34% 26.34% 3.18% 28.61% 28.5% 28.5% PAT Exceptional Items PAT (inc. EI) Minority Interest Shares of Associates Consolidated PAT PAT Margin (%) 11.77% 12.55% 14.96% 14.33% 13.94% 15.89% 14.65% 14.69% PAT Growth (%) 11.57% 45.4% 2.36% 33.15%.5% 29.23% 3.37% 9.95% Basic EPS Adjusted EPS Excl Exceptional Items PAT excl Exceptional Items PAT Margin (%) 11.77% 12.% 14.96% 14.33% 12.73% 14.9% 14.65% 14.69% PAT Growth (%) 11.57% 27.55% 7.1% 33.15% 8.66% 32.75% 3.3% 9.95% EPS Adjusted EPS Adjusted EPS excl Exceptional Items Source:, Company Data - 9 -

10 Balance Sheet Particulars (ores) FY8A FY9A FY1A FY11A FY12A FY13 FY14E FY15E SOURCES OF FUNDS Share Capital Reserves & Surplus Shareholder's Funds Secured Loans Unsecured Loans Loan Funds Finance Lease Liability Total APPLICATION OF FUNDS Gross Block ( ) Accumulated Depreciation Net block Capital Work ion Progress Goodwill Investments Net Deferred Taxation Fixed Assets & Investments Inventories Sundry Debtors Other Current assets Cash & Bank balance Loans & Advances Total Current Assets,Loans & Advances Current Liabilities Provisions Less:Total Current Liabilities & Provisions Net Current Assets Miscellaneous Expenditure TOTAL Cash Flow Statement Particulars (ores) FY8A FY9A FY1A FY11A FY12A FY13 FY14E FY15E A. Cash Flow From Operating Activites Net Profit Before Tax Operating profit before working capital (Increase)/Decrease in Inventories (Increase)/Decrease in Sundry Debtors (Increase)/ Decrease in loans and advances Increase/ (Decrease) in Current & Liabilities (Increase)/Decrease in Other Current Assets Cash generated from operations Direct taxes paid Net Cash from Operating Activities B. Cash Flow From Investing Activities Purchase of Fixed Assets Sale of Fixed Assets Sale of Investments (Purchase) of Investments Net Cash used in Investing Activities C. Cash Flow From Financing Activities Interest paid Dividend paid (including tax on dividend) Net cash used for financing activities Net (Increase)/Decrease in cash & cash equivalents Cash & Cash Equivalents at beginning Cash & Cash Equivalents at End Source:, Company Data, FY13 figures are provisional - 1 -

11 Ratio Analysis Particulars (ores) FY8A FY9A FY1A FY11A FY12A FY13 FY14E FY15E Profitability Ratios Return on Assets (ROA) 26.8% 28.32% 35.3% 35.17% 29.82% 31.47% 28.5% 28.37% Return on Capital Employed (ROCE) 25.61% 28.66% 28.28% 32.39% 28.94% 32.1% 26.8% 25.77% Return on Equity (ROE) 26.33% 29.2% 28.43% 32.72% 28.94% 32.1% 26.8% 25.77% Per Share Adj. EPS Adjusted EPS excl Exceptional Items Dividend Per share Cash Earning Per Share BVPS Valuation Parameters Adj. P/E (x) Adjusted P/E(x) excl Exceptional Items P/CEPS(x) P/BV(x) Market Cap/Sales(x) EV/EBITDA(x) Liquidity Ratios Current Ratio Acid Test Ratio Debt Equity Ratio Efficiency Ratios (%) Asset turnover Ratio Working Capital Turnover Ratio Inventory Turnover Ratio Margin Ratios (%) EBITDA Margin 17.36% 18.18% 21.88% 2.4% 19.35% 21.95% 21.65% 21.75% EBIT Margin 15.98% 16.86% 2.66% 19.51% 18.36% 2.96% 2.56% 2.61% PBT Margin 15.88% 16.78% 2.59% 19.46% 18.23% 2.87% 2.49% 2.54% Net Profit Margin 11.77% 12.55% 14.96% 14.33% 13.94% 15.89% 14.65% 14.69% Source:, Company Data

12 : Phone No.: Ajay Jaiswal: President, Investment Strategies, Head of Research: Fundamental Research Name Sectors Designation ID Nitin Prakash Daga IT, Telecom & Entertainment AVP Research Naveen Vyas Midcaps, Market Strategies AVP Research Sutapa Roy Economy Research Analyst s roy@microsec.in Sanjeev Jain BFSI Research Analyst sjain@microsec.in Neha Majithia Metal, Mineral & Mining Research Analyst nmajithia@microsec.in Soumyadip Raha Mid Cap Executive Research sraha@microsec.in Saroj Singh Mid Cap Executive Research ssingh2@microsec.in Kapil Bhati Mid Cap Executive Research Associate kbhati@microsec.in Technical & Derivative Research Vinit Pagaria Derivatives & Technical VP vpagaria@microsec.in Ranajit Saha Technical Research Sr. Manager rksaha@microsec.in Institutional Desk Puja Shah Institutional Desk Dealer pdshah@microsec.in Abhishek Sharma Institutional Desk Dealer Asharma3@microsec.in PMS Division Siddharth Sedani PMS Research AVP ssedani@microsec.in Ketan Mehta PMS Sales AVP ksmehta@microsec.in Research: Financial Planning Division Shrivardhan Kedia FPD Products Manager Research skedia@microsec.in Research Support Subhabrata Boral Research Support Asst. Manager Technology sboral@microsec.in Recommendation Strong Buy Expected absolute returns (%) over 12 months >2% Buy between 1% and 2% Hold between % and 1% Underperform between % and 1% Sell < 1% MICROSEC RESEARCH IS ALSO ACCESSIBLE ON BLOOMBERG AT <MCLI>

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