ACC (ACC) 1,783. On high growth track. Result Update. ICICI Securities Ltd Retail Equity Research. July 18, 2017

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1 Result Update Rating matrix Rating : Buy Target : 2050 Target Period : months Potential Upside : 15% What s Changed? Target Changed from 1850 to 2050 EPS CY17E Changed from 58.5 to 60.3 EPS CY18E Changed from 67.5 to 68.1 Rating Unchanged Quarterly Performance Q2CY17 Q2CY16 YoY (%) Q1CY17 QoQ (%) Revenue 3, , , EBITDA EBITDA (%) bps bps PAT Key Financials Crore CY15 CY16 CY17E CY18E Net Sales EBITDA PAT EPS ( ) Valuation summary CY15 CY16 CY17E CY18E PE (x) Target PE (x) EV to EBITDA (x) EV/Tonne(US$) Price to book (x) RoNW (%) RoCE (%) Stock data Particular Amount Mcap crore Debt (CY16) 70 crore Cash & Invest (CY16) 1877 crore EV crore 52 week H/L 1799 / 1257 Equity cap crore Face value 10 Price performance (%) 1M 3M 6M 12M ACC Ambuja Cement Shree Cement UltraTech Cement Research Analyst Rashesh Shah rashes.shah@icicisecurities.com Devang Bhatt devang.bhatt@icicisecurities.com On high growth track July 18, 2017 ACC (ACC) 1,783 ACC reported a good set of Q2CY17 numbers. The topline beat was led by 10.1% YoY increase in volumes to 6.7 MT (vs. I-direct estimate of 6.5 MT) and 6.2% YoY increase in realisation to 4,915/t (vs. I- direct estimate of 4900/t) Revenues increased 16.9% YoY to 3,312.5 crore (above I-direct estimate of 3,172.9 crore) led by 10.1% YoY increase in volumes due to commissioning of Jamul plant (10% of overall capacity) and better pricing scenario across regions EBITDA margin rose 33 bps YoY to 15.0% (vs. I-direct estimate of 14.4%) due to operating leverage benefit and 13.9% YoY decline in raw material cost. EBITDA/tonne increased 8.6% YoY to 736/t (vs. I- direct estimate of 706/t) Net profit increased 32.6% YoY to crore (vs. I-direct estimate of crore) mainly due to higher other income Improving demand environment, Jamul expansion key growth drivers Over the past few years ACC reported subdued volume growth (1.3% CAGR in CY10-16) led by a poor macro environment and absence of new capacity additions. However, going forward, we expect cement demand to improve on the back of higher infra spend by govt especially on roads & housing. Consequently, cement demand is expected to reach 311 MT by FY19E (i.e. at CAGR of 7.5%) vs. (CAGR of 4.7% over last five years). Apart from improving macro demand, the company s expansion in the eastern region by ~5 MT (of which 2.8 MT already commissioned at Jamul and rest to come up in Kharagpur) is expected to drive volumes over the next few years (10.3% CAGR in CY16-18E). ACC s acquisition by Ambuja to drive cost synergies The acquisition of ACC by Ambuja is expected to reduce cost through consolidation of shared services (like finance, HR and marketing) vendor consolidation and swapping of plants (to reduce lead distance). The proposed restructuring is expected to result in synergy benefits of ~ 900 crore resulting in long term benefits for ACC and Ambuja. We expect the benefits of synergies to start flowing in from CY17E. margins to further improve led by operational efficiency ACC has one of the oldest manufacturing plants in the industry, leading to higher operating costs for it. However, it is taking steps to rationalise cost by raising usage of low cost fuels. Similarly, use of alternative fuel may rise from the current 3% to 5% in the next 12 months. The company is also focusing on increasing volume of premium products and higher exfactory sales to reduce lead distance resulting in higher margins. On path to recovery; maintain BUY After reporting subdued volume growth (1.3% CAGR in CY10-16), ACC reported double digit volume growth (up 10.1% YoY) in Q2FY17. Going forward, we expect the company to report volume CAGR of 10.3% in CY16-18E mainly led by capacity expansion of 5 MT and an improving demand environment. Further, we expect OPM to improve from 11.8% to 14.7% in CY18E mainly led by cost control initiatives like use of alternative fuels, better sales mix and reduction of employees. Also, with implementation of Good and Service Tax (GST) there will be freight cost rationalisation, which will further lead to margin expansion, going forward. Hence, we maintain our BUY recommendation with a revised target price of 2,050/share (i.e. valuing the stock at CY18E EV/tonne of $174/tonne, 18.0x CY18E EV/EBITDA). ICICI Securities Ltd Retail Equity Research

2 Variance analysis Q2CY17 Q2CY17E Q2CY16 YoY (%) Q1CY17 QoQ (%) Comments The increase in revenues was mainly led by capacity expansion and a healthy pricing Net Sales 3, , , , scenario in the company's key markets Other Incomes Raw Material Expenses Employee Expenses Change in stock NM Power and fuel The rise in power cost was mainly due to higher pet coke prices (pet coke consumption increased from 58.0% in Q2CY16 to 65.0% in Q2CY17) Freight Hike in diesel prices (up 12.0% YoY) and increase in lead distance led to higher freight cost Others Rise in packaging cost led to higher other expenses EBITDA EBITDA Margin (%) bps bps Operating leverage benefit and lower RM cost led to margin expansion in Q2CY17 Interest Depreciation The increase in depreciation was due to commissioning of Jamul plant PBT Total Tax Adjusted PAT Increase in other income led to higher PAT during the quarter Key Metrics Volume (MT) Capacity expansion in the east led to 10.1% YoY growth in volumes Realisation ( ) 4,915 4,900 4, , Better pricing scenario across regions led to higher realisation EBITDA per Tonne ( ) EBITDA/tonne improved led by lower RM cost/t Change in estimates CY17E CY18E ( Crore) Old New % Change Old New %Change Comments Revenue 12, , , ,951.8 Better pricing scenario coupled with macro tailwind is expected to drive -0.3 revenues over the next two years EBITDA 1, , , , EBITDA Margin (%) bps bps Operating leverage benefit and cost efficiency to drive margins PAT 1, , , , EPS ( ) Assumptions Current Earlier Comments CY13 CY14 CY15 CY16 CY17E CY18E CY17E CY18E Volume (MT) Capacity expansion and improving demand scenario to lead to 10.3% 29.8 CAGR increase in volumes in CY16-18E Realisation ( ) 4,556 4,742 4,838 4,701 4,933 4,983 4,872 4,921 EBITDA per Tonne ( ) We expect EBITDA/t of 735/t in CY18E ICICI Securities Ltd Retail Equity Research Page 2

3 Annual Report Analysis Loss in market share led to volume decline: In CY16, the company expanded its capacity by 2.8 MT, taking the total capacity to 33.4 MT from 30.6 MT in CY15. The new capacity was commissioned in the second half of the calendar year. The new capacity comprises a new clinkering line of capacity 2.79 MT at Jamul and cement grinding units of capacity 1.10 MT at Jamul and 1.35 MT at Sindri. However, despite capacity expansion, ACC registered 2.7% YoY decline in volumes vs. industry growth of 5.0%, which, we believe, is mainly due to a loss in market share. Cost rationalisation helps maintain stable margins: On the cost side, the company undertook various cost saving measures like re-negotiation of fly ash contracts (fly ash cost declined 5.9% YoY), changes in mix optimisation and lower landed cost of gypsum (cost of gypsum declined 10.8% YoY), increased usage of pet coke (increased from 18.0% in CY15 to 62.0% in CY16). Further, ACC was able to reduce cost of generation at captive power plant by 2.4% YoY to 4.56 per KWh in CY16 mainly due to better efficiencies. The average cost of purchased power declined 3.1% YoY to 6.3 per Kwhr in CY16. In addition, rationalisation of advertising expenses (declined by 29.6 crore to 80.6 crore in CY16 mainly due to reduction in various promotional activities) and 10.0% YoY decline in packaging cost per tonne led to 2.4% YoY decline in cost per tonne. The cost structure may further improve in coming years mainly led by better operating cost parameters at newly commissioned Jamul/Sindri plant coupled with higher volumes, reduction in employees (reduced by 535 people to 7,833) and expected synergy benefit for ACC-ACEM over next three years. Depreciation on downward trajectory: During the year, depreciation cost declined 7.2% YoY to crore mainly led by full depreciation of few fixed asset. However, it was partly offset by capitalisation of Jamul project in Q3CY16 and Sindri project in Q4CY16. Technical know how fees trend CY12 CY13 CY14 CY15 CY 16 Technology know how fees as % of PAT Dividend payout ratio CY12 CY13 CY14 CY15 CY16 Poor return ratio continues: In the past two years, ACC has clocked average RoE of 7.0%, which is the lowest in the past 10 years mainly due to low utilisation (~71%), higher fixed cost and capacity expansion. Better working capital management: Although there was a marginal increase in inventory days (from 39 days to 40 days), increase in payable days (from 96 days to 110 days) enabled the company to register an improvement in the working capital cycle. As a result of this, the company was able to register crore improvement in operating cash flow. Technical know-how fees continue to rise: The company has paid crore (increased from nil in CY12 to ~18% of PAT in CY16) as technology know-how fees to Holcim Technology for technical support received by the company. In addition, remuneration, severance to top management, independent directors and non-executive directors accounted for 3% of PAT. Dividend payout remained stable: The company declared a dividend of 17 per share (dividend payout ratio of 53%) in CY16, the same as last year ( 17 per share and dividend payout of 54% in CY15). Dividend payout ratio ICICI Securities Ltd Retail Equity Research Page 3

4 Company Analysis Regional presence Central 13% North 17% Pan-India presence to reduce regional risk ACC is a pan-india player with an installed capacity of 33.4 MTPA distributed across all regions, thereby insulating the company from any weakness in a particular region. Out of the total capacity, the company has ~10 MTPA capacity in the southern region, ~9 MTPA capacity in the eastern region, ~6 MTPA capacity in the northern region, ~4.5 MTPA capacity in the central region and ~ 4 MTPA capacity in the western region. East 28% West 12% South 30% Higher government spending to drive growth Over the long term, the demand environment looks healthy owing to an increase in the government s focus on infrastructure and higher budgetary allocation to the roads and housing sector. The company has also indicated 7-8% YoY growth in volumes over the next three years mainly led by higher government spending. Recovery in southern region to benefit company ACC has a third of its total capacity in the southern region. With the resolution of political problems in the region along with expectations of an overall recovery in the demand environment, going forward, ACC should benefit from its presence in the southern market. To increase capacity to ~35 MT by CY17E ACC s capacity will be 35 MT by CY17E mainly led by commissioning of Jamul clinker (2.8 MT) & grinding unit (1.1 MT) and Sindhri grinding unit (1.4 MT). Further one more expansion of 2.7 MT is expected in Kharagpur. Higher free operating cash flow sufficient for expansion plans ACC has consistently been generating healthy operating cash flows for many years. Higher operating cash flow has ensured that the company does not require debt for further expansion. At the end of CY13, ACC was a totally debt-free company. Going by the present scenario, the company will not need to raise debt for the planned expansion of 5 MT given strong cash flows. Exhibit 1: Healthy operating cash flow Crore CY12 CY13 CY14 CY15 CY16 CY17E CY18E Operating Cashflow ICICI Securities Ltd Retail Equity Research Page 4

5 Old, inefficient plants lead to higher cost of production ACC has one of the oldest manufacturing plants in the industry, resulting in higher operating costs for the company. As can be seen from the chart below, its other costs per tonne, which includes maintenance costs of the plants, as percentage of industry average, is much higher than total costs except other costs, on a per tonne basis. For example, for CY08, if the industry s average costs per tonne after deduction of other costs was 100, the same for ACC was 90 while the industry s average other costs per tonne was 100 while that for ACC was Higher other costs are the result of older machinery of the company. Exhibit 2: Costs as percentage of industry average costs CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY Total Costs except Other cost Other Costs but efforts on to improve efficiency and reduce cost To improve efficiency and reduce overall cost, the company has adopted a two-pronged approach. One is phasing out of old and inefficient plants. The second approach is to reduce dependency on power purchase from outside. Captive power plant capacity of the company has increased from ~237 MW in CY08 to ~384 MW till CY12. The company met ~69% of its power requirement through captive sources in CY08 while the remaining is through the state grid while the contribution of captive source increased to ~74% in CY16. This helped reduce overall cost per tonne for the company. Further, with proposed synergies from the Holcim restructuring, we expect efficiencies to improve, going ahead. Exhibit 3: Fuel mix CY CY16* Linkage Coal E-Auction Coal Petcoke Imported Coal Alternative Fuels, * domestic coal consumption is assumed Exhibit 4: Purchased power share stands at 26.0% in CY (%) CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 Purchased Own Generation ICICI Securities Ltd Retail Equity Research Page 5

6 Expect revenue CAGR at ~13.6 % during CY16-18E Going forward, we expect revenue CAGR of 13.6% during CY16-18E with volume growth at 10.3% CAGR. Realisation growth is expected at 3.0% CAGR over the same period. The company is well on track on the capacity expansion front and will likely achieve its target of 35 MT by CY17E. Exhibit 5: Expect revenue CAGR of 13.6% during CY16-18E Exhibit 6: Capacity addition plans Existing Capacity (MT) 33 16, Planned capacity addition 14, , Kharagpur ,000 Total 2.7 8,000 Total Capacity by CY17E (MT) ,000 4,000 2,000 - CY11 CY12 CY13 CY14 CY15 CY16 CY17E CY18E Sales ( crore) Exhibit 7: Volume to grow at 10.3% CAGR during CY16-18E Exhibit 8: Realisation to grow 3.0% CAGR during CY16-18E MT / tonne (%) CY12 CY13 CY14 CY15 CY16 CY17E CY18E Sales Volumes CY12 CY13 CY14 CY15 CY16 CY17E CY18E Realisation ( /tonne) -LS Growth (%) -RS Exhibit 9: Q2CY17 volume increases 10.1% YoY Exhibit 10: Realisation during Q2CY17 up 6.2% YoY 6.0 In MT Q2CY Q3CY Q4CY Q1CY16 Q2CY Q3CY Q4CY Q1CY17 Q2CY (%) Q2CY15 Q3CY15 Q4CY Q1CY16 Q2CY16 Q3CY16 Q4CY16 Q1CY Q2CY (%) Sales volumes -LHS Growth (%) -RHS Realisation-LHS Growth (%) -RHS ICICI Securities Ltd Retail Equity Research Page 6

7 Margins to improve over the coming years With operating leverage benefit and operational efficiency due to cost optimisation the company is expected to report ~300 bps increase in EBITDA margins over CY16-18E. Exhibit 11: Expect EBITDA/tonne of 735 in CY18E Exhibit 12: Margins to improve led by operating leverage benefit CY12 CY13 CY14 CY15 CY16 CY17E CY18E (%) CY11 CY12 CY13 CY14 CY15 CY16 CY17E CY18E EBITDA/Tonne EBITDA Margin (%) Exhibit 13: Q2CY17 EBITDA/tonne at 736/t Exhibit 14: Margin trend (%) per tonne Q2CY15 Q3CY Q4CY Q1CY Q2CY Q3CY16 Q4CY Q1CY Q2CY17 (%) Q2CY15 Q3CY15 Q4CY15 Q1CY16 Q2CY16 Q3CY16 Q4CY16 EBITDA Margin Q1CY17 Q2CY17 Expect net profit CAGR of 32.1% during CY16-18E We expect net margins to improve to 9.2% in CY18E from 6.3% in CY16. Overall, we expect net profit to grow at a CAGR of 32.1% in CY16-18E. Exhibit 15: Profitability trend crore (%) CY13 CY14 CY15 CY16 CY17E CY18E Net profit - LS Net profit margin -RS ICICI Securities Ltd Retail Equity Research Page 7

8 Outlook and valuation With a capacity expansion of 2.8 MT in Jamul (Chhattisgarh) and 1.4 MT in Sindri (Jharkhand), we expect CY17 to witness an improvement in the volume growth. We expect sales volume and realisation CAGR of 10.3% and 3.0%, respectively, during CY16-18E. Cement demand is expected to improve over the next few years led by a revival in the rural economy and increased infrastructure spends by the government. Apart from improving macro, capacity expansion of 5 MT (i.e. 16% of capacity) is expected to result in 10.3% CAGR in revenues over CY16-18E. Further, cost control initiatives such as use of alternative fuels, better sales mix and reduction of employees is expected to help the company in margin expansion, going forward. We expect the OPM to improve from 11.8% to 14.7%in CY18E. Hence, we maintain our BUY recommendation with a revised target price of 2,050/share (i.e. valuing the stock at CY18E EV/tonne of $174/tonne, 18.0x CY18E EV/EBITDA). Exhibit 16: Key assumptions per tonne CY13 CY14 CY15E CY16 CY17E CY18E Sales Volume (mtpa) Net Realisation Total Expenditure Stock Adjustment Raw material Power & Fuel Employees Freight Others EBITDA per Tonne Source: ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 8

9 Exhibit 17: One year forward EV/EBITDA Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 ( crore) EV 30.0x 25.0x 20.0x 15.0x 5.0x 10.0x Exhibit 18: One year forward EV/tonne Million $ Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 EV $172 $151 $131 $111 $91 $70 Exhibit 19: Valuation Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) ($) (x) (%) (%) CY CY CY17E CY18E ICICI Securities Ltd Retail Equity Research Page 9

10 Recommendation history vs. Consensus estimate ( ) 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 Aug-15 Nov-15 Feb-16 May-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul Price Idirect target Consensus Target Mean % Consensus with Hold Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Feb-12 The company looks to set up a new clinker production facility of 2.79 MTPA and allied grinding facility at Jamul. The existing clinkering and grinding lines at Jamul May-12 CCI completes probe into alleged cartilsation by 39 cement companies and finds these companies, including ACC, guilty of cartelisation Jun-12 CCI passes an order against several cement manufacturers including ACC and imposes a penalty of 0.5 times the profit for and For ACC, the penalty works out to crore Oct-12 The company's wholly-owned subsidiary company, ACC Concrete Ltd amalgamated with the company Nov-12 Files petition with COMPAT against CCI order that imposed penalty of 1,147.6 crore on ACC Dec-12 Holcim hikes royalty payment to 1% of sales with effect from January 1, 2013 Jul-13 Holcim Group to consolidate its holding in ACC through Ambuja Cements. The transaction will result in Ambuja holding 50% stake in ACC, in which Holcim India currently holds 50.01% Sep-13 To expand its capacity by nearly 4 MTPA in the eastern region in the next three years with an investment of over 3000 crore Oct-14 Suspension of limestone mining operations at Chaibasa and Bargarh Feb-15 Resumption of limestone mining at Chaibasa Plant in Jharkhand Jun-15 Resumption of limestone mining at Bargarh Plant in Odhisa Jul-16 Commisions 2.79 MT clinker facility at Jamul Aug-16 ACC becomes subsidiary of Ambuja Oct-16 Commisions 1.4 MT grinding unit at Sindri, Jharkhand Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Jul-16 Sep-16 Dec-16 Mar-17 Jun-17 1 Holcim Group 31-Mar Promoter Life Insurance Corporation of India 31-Mar FII J.P. Morgan Asset Management (Hong Kong) Ltd. 31-May DII JPMorgan Asset Management U.K. Limited 31-Mar Others Aberdeen Asset Management (Asia) Ltd. 31-Dec Capital Research Global Investors 31-Mar Franklin Templeton Asset Management (India) Pvt. Ltd. 30-Jun The Vanguard Group, Inc. 31-May BlackRock Institutional Trust Company, N.A. 30-Jun ICICI Prudential Asset Management Co. Ltd. 31-May Source: Reuters, ICICIdirect.com Research Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Reliance Nippon Life Asset Management Limited Life Insurance Corporation of India Aberdeen Asset Management (Asia) Ltd Lyxor Asset Management Mirae Asset Global Investments Co., Ltd BNP Paribas Asset Management Asia Limited Franklin Templeton Asset Management (India) Pvt. Ltd Caisse de Depot et Placement du Quebec BlackRock Institutional Trust Company, N.A Eastspring Securities Investment Trust Co. Ltd Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 10

11 Financial summary Profit and loss statement Crore (Year-end March) CY15 CY16 CY17E CY18E Total operating Income 11, , , ,951.8 Growth (%) Raw material Power & Fuel Employees Freight Others Total Operating Exp. 10, , , ,894.4 EBITDA 1, , , ,057.4 Growth (%) Depreciation Interest Other Income Exceptional items PBT , ,728.2 Total Tax PAT , ,279.1 Adjusted PAT , ,279.1 Growth (%) EPS ( ) Cash flow statement Crore (Year-end March) CY15 CY16 CY17E CY18E Profit after Tax , ,279.1 Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL and Prov CF from operating activities , , ,610.3 (Inc)/dec in Investments (Inc)/dec in Fixed Assets , ,000.0 Others CF from investing activities , ,000.0 Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Inc/(dec) in Sec. premium Others CF from financing activities Net Cash flow Opening Cash Closing Cash Balance sheet Crore (Year-end March) CY15 CY16 CY17E CY18E Liabilities Equity Capital Reserve and Surplus 8, , , ,985.6 Total Shareholders funds 8, , , ,173.6 Total Debt Other Liabilities Total Liabilities 8, , , ,805.8 Assets Gross Block 11, , , ,186.9 Less: Acc Depreciation 5, , , ,909.0 Net Block 5, , , ,277.9 Capital WIP 1, , Total Fixed Assets 7, , , ,277.9 Investments+Goodwill 1, , , ,696.7 Inventory 1, , , ,527.2 Debtors Loans and Advances 1, , , ,071.9 Other Current Assets Cash Total Current Assets 3, , , ,817.6 Creditors 3, , , ,190.3 Provisions Total Current Liabilities 3, , , ,986.4 Net Current Assets Application of Funds 8, , , ,805.8 Key ratios (Year-end March) CY15 CY16 CY17E CY18E Per share data ( ) EPS Cash EPS BV DPS Cash Per Share Operating Ratios (%) EBITDA Margin 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 (Cement) CMP M Cap EPS ( ) EV/EBITDA (x) EV/Tonne ($) RoCE (%) RoE (%) Company ( ) TP( ) Rating ( Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E ACC* Buy 33, Ambuja Cement* Buy 53, UltraTech Cem 4, Buy 121, Shree Cement 18, Hold 63, Heidelberg Cem Buy 3, India Cement Buy 6, JK Cement Buy 6, JK Lakshmi Cem Hold 5, Mangalam Cem Buy 1, Star Cement Hold 5, *December year ending 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: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1 st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 13

14 ANALYST CERTIFICATION We /I, Rashesh Shah, CA, and Devang Bhatt, PGDBM 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 full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a SEBI registered Research Analyst with SEBI Registration Number INH ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. ( associates ), the details in respect of which are available on ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report. It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. ICICI Securities Ltd Retail Equity Research Page 14

ACC (ACC) 1,562. Operationally good performance. Result Update. ICICI Securities Ltd Retail Equity Research. April 24, 2017

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