Maruti Suzuki India Limited

Transcription

1 Maruti Suzuki India Limited Absolute : LONG Relative : Overweight 4QFY18 Result: Estimate (),PT (), Rating () Regular Coverage 13% ATR in 14 Months Margins impacted by one-offs, to normalize from 1QFY19- upgrade to LONG Auto 2018 Equirus All rights reserved Rating Information Price (Rs) 8,783 Target Price (Rs) 9,980 Target Date 30th Jun'19 Target Set On 27th Apr'18 Implied yrs of growth (DCF) 20 Fair Value (DCF) 7,785 Fair Value (DDM) 2,281 Ind Benchmark BSEAUTO Model Portfolio Position NA Stock Information Market Cap (Rs Mn) 2,653,275 Free Float (%) % 52 Wk H/L (Rs) 10000/ Avg Daily Volume (1yr) 518,906 Avg Daily Value (Rs Mn) 4,250 Equity Cap (Rs Mn) 1,510 Face Value (Rs) 5 Bloomberg Code MSIL IN Ownership Recent 3M 12M Promoters 56.2 % 0.0 % 0.0 % DII 11.5 % 0.5 % -0.8 % FII 25.2 % -0.6 % 0.6 % Public 7.2 % 0.2 % 0.2 % Price % 1M 3M 12M Absolute -0.8 % -5.3 % 37.8 % Vs Industry -7.6 % -5.6 % 24.1 % Bajaj Auto 1.7 % % % TVS Motors 15.8 % 13.8 % 29.0 % Standalone Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (18A) EPS (19E) MSIL s 4Q EBITDA (+18% yoy to ~Rs 30.2bn) fell short of estimates (EE: Rs 31.9bn) due to one-offs related to higher gratuity provisioning, exchange rate variation in royalty, and higher sales & promotion expenses. We expect margins to normalize from 1QFY19 and maintain our FY19/FY20E estimates. Demand for new models like Swift and Dzire remains strong (as seen in waiting periods), and therefore outstanding bookings as of Mar 18 stood at 110k. While commissioning of Gujarat plant s second line will start from Jan 19, MSIL is making efforts to increase production at Manesar and Gurgaon plants; therefore, management is confident of achieving double-digit volume growth in FY19. In view of the correction over last three months, we upgrade the stock to LONG with a Jun 19 TP of Rs 9,980 (vs. a Mar 19 TP of Rs 9,772) set at 30x Jun 19 EPS. High waiting periods to keep growth momentum strong in FY19; MSIL eyeing double-digit growth: With waiting periods on Swift, Brezza, Baleno and S-Cross, demand momentum for MSIL cars is expected to remain strong. During FY18, demand from rural India also picked up with the company clocking 16% yoy rural growth. On expectations of a good monsoon, demand is set to remain strong in FY19 as well. Apart from the Gujarat plant ramp-up, management is working towards increasing Haryana plant capacities through de-bottlenecking to achieve double-digit growth. Cost control, favorable mix to help negate impact of RM price inflation: MSIL has avoided taking meaningful price hikes to offset the impact of higher RM prices, and is instead trying to weather the impact through cost control. From 4Q, the company has shifted to royalty in INR terms on all new models lke Ignis, Swift and Dzire. A favorable product mix also helped the company counter the impact of RM cost inflation in 4Q, aiding a 122bps qoq expansion in gross margins. 4Q marred by one-offs; things to normalize from 1QFY19: Employee costs increased 34% yoy/21% qoq due to gratuity-related provisioning and some year-end provisioning. Sales promotion expenses were also higher during the quarter owing to the Auto Expo and Swift launch, and should normalize next year. Other expenses were impacted by higher royalty of Rs 1bn due to exchange variation, half of which was related to 3Q. Royalty rate for the quarter stood at 5.7% vs. 5.4% for the full year. Interest costs included Rs 2.06bn of one-offs related to land compensation. Estimate Revision: Current Change from previous (%) Rs Mn FY19E FY120E FY19E FY20E Sales 9,13,161 10,67, % 0.0% EBITDA 1,39,938 1,63, % 0.0% PAT 95,920 1,13, % -0.6% EPS % -0.6% Consolidated Financials Rs. Mn YE Mar FY18A FY19E FY20E FY21E Sales 797, ,161 1,067,953 1,238,506 EBITDA 120, , , ,112 Depreciation 27,579 29,358 31,695 34,775 Interest Expense 3, Other Income 20,455 23,677 28,075 33,604 Reported PAT 80,531 95, , ,306 Recurring PAT 77,219 95, , ,306 Total Equity 422, , , ,414 Gross Debt Cash 341, , , ,289 Rs. Mn YE Mar FY18A FY19E FY20E FY21E Earnings Book Value 1,398 1,595 1,834 2,140 Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 19 % 21 % 22 % 22 % Core ROIC (%) 64 % 75 % 91 % 111 % EBITDA Margin (%) 15 % 15 % 15 % 15 % Net Margin (%) 10 % 11 % 11 % 11 % April 28, 2018 Analyst: AshutoshTiwari ashutosh@equirus.com ( ) Page 1 of 12 Before reading this report, you must refer to the disclaimer on the last page.

2 Thousands Maruti Suzuki India Ltd. Absolute LONG Relative Overweight 13% ATR in 14 Months Exhibit 1: Domestic and export sales segmentation (in 000 units) Exhibit 3: Segmental split of sales volumes (in 000 units) ('000s) Domestic Vehicle sales Export sales Total vehicle sold Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 1Q FY18 2Q FY18 3Q FY18 4Q FY Mini Cars Compact Cars Super Compact Mid Size Utility Vans Others 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 1Q FY18 2Q FY18 3Q FY18 4Q FY18 Source: Company, Equirus Securities Source: Siam, Equirus Securities Exhibit 2: Average selling price and EBITDA margin variation (Rs/car) Blended ASP (Rs/car) Margins - RHS 470, , , , , , , ,000 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 1Q FY18 2Q FY18 3Q FY18 4Q FY18 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Source: Company, Equirus Securities April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 2 of 11

3 Earnings call takeaways Maruti Suzuki India Ltd. Absolute LONG Relative Overweight 13% ATR in 14 Months Industry & business update The domestic PV industry grew at about 7.9% in FY18; UVs grew by 21%, passenger cars by 3.3% and vans by 5.5%. There is continued weakness in demand for diesel models. Management expects double-digit growth for FY19. MSIL outperformed the industry, posting 11.4% yoy volume growth at 461,773 vehicles and 14.4% sales growth at 205,943mn in 4Q. Growth was largely driven by the compact and UV segments. 4QFY18 EBITDA grew ~18% yoy to Rs 30.2bn led by a better product mix and cost reduction efforts despite higher other expenses and rising commodity prices. The company expects RM prices to firm up further. For FY18, volumes grew by 13.4% to 1,779,574 units and sales by 16.7% to Rs 781,048mn. For FY18, EBITDA grew 16.5% yoy to Rs 120.6bn. In FY18, petrol vehicles outperformed industry growth, growing at 16.8% vs. 7.1% for the diesel segment. The diesel: petrol vehicle mix stood at 29:71 for 4QFY18. During FY18, the company sold 10,033 LCVs. Cab aggregator contribution is ~5, vehicles per month. A decline in the segment stemmed from various problems in the cab aggregator business. A shift towards non-hybrid vehicles was driven by the withdrawal of incentives for hybrid vehicles under GST. Rural markets saw a robust ~16% yoy growth in FY18, with the momentum likely to continue ahead. The share of rural market in the sales mix is about 36%. Staff costs increased in 4Q due to changes in provisions and in the Gratuity Act. Export revenue for 4QFY18 stood at Rs 16.25bn as against Rs 14.30bn for 3QFY18. Average discount per vehicle was at Rs 13,880 vs. Rs 17,900 last quarter. Price increases in 4Q have not been significant and the commodity impact was of ~1%. Gross margins improved on a favorable product mix and cost reduction efforts. Other expenses increased as (a) MSIL incurred freight expenditure of ~Rs 1.8bn, the recovery against which is included in other operating income, (b) exchange variation on royalty of ~1bn in 4QFY18, and (c) increasing power & fuel costs. Royalty payment for FY18 was 5.4% of net sales as against 5.8% last year. For 4Q, it was 5.7% owing to adverse exchange rates. The new method of royalty calculation has been approved by Suzuki. Royalty will be computed in INR instead of Yen for all models after Ignis, and the percentage of R&D will be compensated. The entire amount of ~Rs 2.5bn towards the Haryana government is accounted under interest expenses, while the remaining has been capitalized under land. Capacity and production Gujarat plant is expected to deliver 250,000 units in FY19 as it will be the first full year of double-shift operations. Second line at Gujarat will come on stream from Jan 19. New Swift and Baleno will be manufactured from the Gujarat plant. The Gujarat plant contributed 58,000 units in 4Q and 157,000 units in FY18. As a result of capacity expansion, MSIL s pending bookings have declined to ~110,000 this year vs. ~120,000 last year. Capex, dealership network and FY19 guidance Capex guidance for FY19 is at Rs 50bn. Land acquisition costs for FY18 were at Rs 7.9bn and would likely be at Rs 10bn for the next year. MSIL expects significant impact of rising material costs going forward. During the year, the company added 315 sales outlets, including 140 for commercial channels. Nexa contributed 20% of total domestic sales during the year. Investment towards Arena is being done by dealers only. April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 3 of 11

4 Quarterly performance, standalone % Change Rs Mn 4QFY18 4QFY18E 3QFY18 4QFY17 4QFY18E 3QFY18 4QFY17 Net Sales 211, , , ,334 2% 10% 15% Comments Raw Material 143, , , ,669-1% 8% 13% Employee Cost 8,282 6,875 6,869 6,160 20% 21% 34% Other Expenses 29,461 24,584 22,262 23,898 20% 32% 23% Total Expenditures 181, , , ,727 3% 12% 15% EBITDA 30,150 31,876 30,378 25,607-5% -1% 18% Depreciation 7,025 7,125 6,890 7,010-1% 2% 0% EBIT 23,125 24,751 23,488 18,597-7% -2% 24% Interest 2, NA 938% 1108% Other Income 5,950 4,085 2,449 4,449 46% 143% 34% PBT 26,344 28,788 25,674 22,820-8% 3% 15% Tax 7,523 8,349 7,684 5,730-10% -2% 31% Recurring PAT 18,821 20,440 17,990 17,090-8% 5% 10% Extraordinaries 1, ,504 NA 699% -174% Reported PAT 17,710 20,440 17,851 18,594-13% -1% -5% EPS (Rs) % 5% 10% EBITDA Margin 14.2% 15.3% 15.8% 14.0% -106 bps -151 bps 28 bps EBIT Margin 10.9% 11.9% 12.2% 10.1% -95 bps -125 bps 78 bps PBT Margin 12.4% 13.8% 13.3% 12.4% -137 bps -87 bps 0 bps PAT Margin 8.4% 9.8% 9.3% 10.1% -144 bps -89 bps -177 bps Tax Rate 28.6% 29.0% 29.9% 25.1% -44 bps -137 bps 345 bps Raw Material 67.9% 69.6% 69.1% 69.6% -168 bps -122 bps -171 bps Employee Cost 3.9% 3.3% 3.6% 3.4% 61 bps 35 bps 55 bps Other Expenses 13.9% 11.8% 11.5% 13.0% 212 bps 237 bps 88 bps Domestic Volumes 427, , , ,668 0% 7% 12% Export Volumes 34,691 34,691 30,526 31,771 0% 14% 9% Total Volume 461, , , ,439 0% 7% 11% ASP (Rs/car) 458, , , ,367 2% 2% 4% EBITDA/car (Rs) 65, ,464 61,787-5% -7% 6% April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 4 of 11

5 Company Snapshot How we differ from Consensus EPS Sales PAT - Equirus Consensus % Diff Comment FY19E % Below consensus due to lower margin FY20E % assumptions FY19E 913, ,516 0 % FY20E 1,067,953 1,035,362 3 % FY19E 95, ,048-5 % FY20E 113, ,178-2 % Key Investment arguments: Largest dealership network, high resale value and lower service cost are key advantages. Success of new launches has put MSIL in a strong position to deliver industry-leading growth. Volumes to grow at 11% CAGR over FY17-FY20E driven by mid-to-premium segment cars, leading to better value growth. Structural growth story; waiting period on key models to help stock trade at valuation premiums. Key Estimates: FY17 FY18A FY19E FY20E FY21E Volumes ('000) 1,569 1,780 1,960 2,188 2,425 yoy change 10% 13% 10% 12% 11% ASP (Rs/car) 433, , , , ,783 yoy change 8% 3% 4% 5% 5% Sales (Rs mn) 680, , ,161 1,067,953 1,238,506 yoy change 18% 17% 14% 17% 16% EBITDA Margin 15.2% 15.1% 15.3% 15.3% 15.3% EBITDA (Rs mn) 103, , , , ,112 Key triggers Margin decline & volume pressure Sensitivity to Key Variables % Change % Impact on EPS Revenue 5 % 4 % EBITDAM 1 % 5 % DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 7.6 % % 3.0 % 0.0 % - FY19E FY20E FY21-23E FY24-28E FY29-33E Sales Growth 14 % 17 % 9 % 10 % 8 % NOPAT Margin 9 % 9 % 9 % 9 % 9 % IC Turnover RoIC 74.5 % 91.0 % % % % Years of strong growth Valuation as on date (Rs) 3,494 3,864 4,730 5,865 6,642 Valuation as of 30 th Sep'18 4,007 4,432 5,424 6,726 7,618 Based on DCF, assuming 20 years of 13% CAGR growth and 87% average ROIC, we derive our 30th Jun 19 fair value of Rs 7,785. Company Description: MSIL is the leading passenger vehicle manufacturer in India with 47.4% of domestic market share. The company was established in 1981 as a JV between the Government of India and Suzuki Motor Corporation (SMC), Japan. Today, it is SMC s largest subsidiary in terms of volume of production and sales. SMC owns 56.21% equity stake in the company. MSIL s operational structure consists of manufacturing sites at Gurugram and Manesar with an installed capacity of 1.55mn vehicles per year. It also sources vehicles from SMC s new plant in Gujarat, India. Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E Maruti Suzuki LONG 8,783 2,653,275 9,980 Jun , % 21 % 22 % 0.9 % 1.1 % TATAMOTORS NA 337 1,068,728 NA NA % 56 % 45 % % M&M NA 863 1,072,502 NA NA % 26 % 21 % 0.8 % 0.6 % April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 5 of 11

6 Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E Revenue 175, , , , , , , , , , , , , ,161 1,067,953 1,238,506 EBITDA 23,312 36,776 30,378 30,150 31,856 37,606 33,618 36,857 37,793 44,067 38,643 42, , , , ,112 Depreciation 6,839 6,825 6,890 7,025 7,043 7,241 7,438 7,636 7,635 7,827 8,020 8,212 27,579 29,358 31,695 34,775 EBIT 16,473 29,951 23,488 23,125 24,813 30,365 26,180 29,222 30,158 36,240 30,623 34,355 93, , , ,338 Interest , , Other Income 6,827 5,229 2,449 5,950 5,721 5,527 6,064 6,365 6,764 6,563 7,218 7,530 20,455 23,677 28,075 33,604 PBT 22,987 35,030 25,674 26,344 30,508 35,867 32,218 35,561 36,897 42,777 37,816 41, , , , ,840 Tax 7,423 10,186 7,684 7,523 8,695 10,222 9,182 10,135 10,516 12,191 10,778 11,930 32,816 38,234 45,415 53,534 Recurring PAT 15,564 24,844 17,990 18,821 21,813 25,645 23,036 25,426 26,381 30,586 27,039 29,930 77,219 95, , ,306 Extraordinary , , , Reported PAT 16,281 28,689 17,851 17,710 21,813 25,645 23,036 25,426 26,381 30,586 27,039 29,930 80,531 95, , ,306 EPS (Rs) Key Drivers Volumes 394, , , , , , , , , , , ,981 1,779,574 1,959,718 2,188,117 2,424,719 ASP 444, , , , , , , , , , , , , , , , Sequential Growth (%) Revenue -4 % 24 % -11 % 10 % -3 % 18 % -8 % 7 % 0 % 18 % -8 % 7 % EBITDA -9 % 58 % -17 % -1 % 6 % 18 % -11 % 10 % 3 % 17 % -12 % 10 % EBIT -11 % 82 % -22 % -2 % 7 % 22 % -14 % 12 % 3 % 20 % -15 % 12 % Recurring PAT -9 % 60 % -28 % 5 % 16 % 18 % -10 % 10 % 4 % 16 % -12 % 11 % EPS -9 % 60 % -28 % 5 % 16 % 18 % -10 % 10 % 4 % 16 % -12 % 11 % Yearly Growth (%) Revenue 18 % 22 % 14 % 15 % 17 % 11 % 16 % 14 % 17 % 17 % 17 % 16 % 39 % 14 % 17 % 16 % EBITDA 5 % 21 % 22 % 18 % 37 % 2 % 11 % 22 % 19 % 17 % 15 % 15 % 36 % 16 % 17 % 16 % EBIT 4 % 24 % 27 % 24 % 51 % 1 % 11 % 26 % 22 % 19 % 17 % 18 % 53 % 19 % 19 % 17 % Recurring PAT 5 % 3 % 3 % 10 % 40 % 3 % 28 % 35 % 21 % 19 % 17 % 18 % 44 % 24 % 19 % 18 % EPS 5 % 3 % 3 % 10 % 40 % 3 % 28 % 35 % 21 % 19 % 17 % 18 % 44 % 24 % 19 % 18 % Margin (%) EBITDA 13 % 17 % 16 % 14 % 16 % 16 % 15 % 15 % 16 % 16 % 15 % 15 % 15 % 15 % 15 % 15 % EBIT 9 % 14 % 12 % 11 % 12 % 13 % 12 % 12 % 13 % 13 % 12 % 12 % 12 % 12 % 12 % 12 % PBT 13 % 16 % 13 % 12 % 15 % 15 % 14 % 15 % 15 % 15 % 14 % 15 % 14 % 15 % 15 % 15 % PAT 9 % 11 % 9 % 9 % 11 % 11 % 10 % 11 % 11 % 11 % 10 % 11 % 10 % 11 % 11 % 11 % April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 6 of 11

7 Consolidated Financials Maruti Suzuki India Ltd. Absolute LONG Relative Overweight 13% ATR in 14 Months P&L (Rs Mn) FY18A FY19E FY20E FY21E Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E Revenue 797, ,161 1,067,9 53 1,238,506 Equity Capital 1,510 1,510 1,510 1,510 PBT 110, , , ,840 Op. Expenditure 677, , ,882 1,049,394 Reserve 420, , , ,903 Depreciation 27,579 29,358 31,695 34,775 EBITDA 120, , , ,112 Networth 422, , , ,414 Others 3, Depreciation 27,579 29,358 31,695 34,775 Long Term Debt Taxes Paid 32,816 38,234 45,415 53,534 EBIT 93, , , ,338 Def Tax Liability 23,182 23,182 23,182 23,182 Change in WC 20,483 15,270 16,163 12,245 Interest Expense 3, Minority Interest Operating C/F 128, , , ,325 Other Income 20,455 23,677 28,075 33,604 Account Payables 104, , , ,087 Capex -55,927-40,000-40,000-40,000 PBT 110, , , ,840 Other Curr Liabi 48,343 58,274 67,290 71,364 Change in Invest Tax 32,816 38,234 45,415 53,534 Total Liabilities & Equity 598, , , ,200 Others PAT bef. MI & Assoc. 77,219 95, , ,306 Net Fixed Assets 133, , , ,734 Investing C/F -56,605-40,000-40,000-40,000 Minority Interest Capital WIP 21,259 21,259 21,259 21,259 Change in Debt -4, Profit from Assoc Others 36,113 36,113 36,113 36,113 Change in Equity Recurring PAT 77,219 95, , ,306 Inventory 31,608 35,975 41,821 48,506 Others -17,319-36,349-41,801-41,801 Extraordinaires -3, Account Receivables 14,618 16,638 19,341 22,433 Financing C/F -22,155-36,349-41,801-41,801 Reported PAT 80,531 95, , ,306 Other Current Assets 20,119 22,897 26,615 30,867 Net change in cash 49,833 64,199 79,991 99,524 FDEPS (Rs) Cash 341, , , ,289 RoE (%) 19 % 21 % 22 % 22 % DPS (Rs) Total Assets 598, , , ,200 RoIC (%) 19 % 20 % 21 % 22 % CEPS (Rs) Non-cash Working Capital -86, , , ,645 Core RoIC (%) 64 % 75 % 91 % 111 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 36 % 38 % 37 % 31 % BVPS (Rs) 1, , , ,139.9 WC Turnover P/E EBITDAM (%) 15 % 15 % 15 % 15 % FA Turnover P/B PATM (%) 10 % 11 % 11 % 11 % Net D/E P/FCFF Tax Rate (%) 30 % 29 % 29 % 29 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) 17 % 14 % 17 % 16 % Capital Employed/Equity EV/Sales FDEPS Growth (%) 3 % 24 % 19 % 18 % Dividend Yield (%) 0.9 % 1.1 % 1.3 % 0.0 % TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 7 of 11

8 Historical Consolidated Financials Maruti Suzuki India Ltd. Absolute LONG Relative Overweight 13% ATR in 14 Months P&L (Rs Mn) FY15A FY16A FY17A FY18A Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A Revenue 508, , , ,627 Equity Capital 1,510 1,510 1,510 1,510 PBT 49,760 74,658 99, ,035 Op. Expenditure 439, , , ,011 Reserve 258, , , ,693 Depreciation 25,153 28,218 26,039 27,579 EBITDA 68,441 88, , ,616 Networth 260, , , ,203 Others -7,123-11,978-21,452 3,312 Depreciation 25,153 28,218 26,039 27,579 Long Term Debt 1, ,836 0 Taxes Paid 10,751 19,475 23,229 32,816 EBIT 43,288 60,669 77,542 93,037 Def Tax Liability 2,650 5,604 11,422 23,182 Change in WC 8,352 14,421 21,918 20,483 Interest Expense 2, ,457 Minority Interest Operating C/F 65,391 85, , ,593 Other Income 8,650 14,806 22,896 20,455 Account Payables 56,860 74,089 83, ,970 Capex -32,631-26,047-33,748-55,927 PBT 49,760 74,658 99, ,035 Other Curr Liabi 32,494 35,578 43,840 48,343 Change in Invest -15,239-47,917-58, Tax 11,854 20,875 26,162 32,816 Total Liabilities & Equity 354, , , ,852 Others 2, PAT bef. MI & Assoc. 37,906 53,783 73,382 77,219 Net Fixed Assets 120, , , ,561 Investing C/F -45,810-73,188-91,732-56,605 Minority Interest Capital WIP 18,169 10,069 12,523 21,259 Change in Debt -13,578-2,255 2,527-4,836 Profit from Assoc ,493 0 Others 17,078 17,034 16,277 36,113 Change in Equity Recurring PAT 38,074 54,771 74,865 77,219 Inventory 26,831 31,326 32,637 31,608 Others -6,457-10,133-13,820-17,319 Extraordinaires ,312 Account Receivables 11,181 13,234 12,026 14,618 Financing C/F -20,035-12,388-11,293-22,155 Reported PAT 38,074 54,962 75,100 80,531 Other Current Assets 14,671 18,125 16,384 20,119 Net change in cash ,833 EPS (Rs) Cash 145, , , ,574 RoE (%) 16 % 19 % 22 % 19 % DPS (Rs) Total Assets 354, , , ,852 RoIC (%) 16 % 19 % 22 % 19 % CEPS (Rs) Non-cash Working Capital -36,671-46,982-66,485-86,968 Core RoIC (%) 27 % 40 % 57 % 64 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 24 % 20 % 36 % 36 % BVPS (Rs) , , ,397.7 WC Turnover P/E EBITDAM (%) 13 % 15 % 15 % 15 % FA Turnover P/B PATM (%) 7 % 10 % 11 % 10 % Net D/E P/FCFF Tax Rate (%) 24 % 28 % 26 % 30 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 14 % 13 % 18 % 17 % Capital Employed/Equity EV/Sales FDEPS growth (%) 33 % 44 % 37 % 3 % Dividend Yield (%) 0.3 % 0.3 % 0.9 % 0.9 % April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 8 of 11

9 Equirus Securities Research Analysts Sector/Industry Equity Sales Abhishek Shindadkar IT Services Vishad Turakhia Ashutosh Tiwari Auto, Metals & Mining Subham Sinha Depesh Kashyap Mid-Caps Viral Desai Dhaval Dama FMCG, Mid-Caps Viraj Mehta Manoj Gori Consumer Durables Rushabh Shah Maulik Patel Oil and Gas Dealing Room Pranav Mehta Building Materials Ashish Shah Praful Bohra Pharmaceuticals IleshSavla Rohan Mandora Banking & Financial Services Manoj Kejriwal Associates Dharmesh Mehta Ankit Choudhary Sandip Amrutiya Bharat Celly Compliance Officer Harshit Patel Jay Soni Hetal Bhatia Corporate Communications Meet Chande Mahdokht Bharda Nishant Bagrecha Parva Soni Ronak Soni Samkit Shah Shreepal Doshi Varun Baxi Vikas Jain Rating & Coverage Definitions: Absolute Rating LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies ADD: ATR >= 5% but less than Ke over investment horizon REDUCE: ATR >= negative 10% but <5% over investment horizon SHORT: ATR < negative 10% over investment horizon Relative Rating OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon BENCHMARK: likely to perform in line with the benchmark UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion. Registered Office: Equirus Securities Private Limited Unit No. 1201, 12th Floor, C Wing, Marathon Futurex, N M Joshi Marg, Lower Parel, Mumbai Tel. No: +91 (0) Fax No: +91- (0) Corporate Office: 3rd floor, House No. 9, Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge, S.G. Highway Ahmedabad April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 9 of 11 Gujarat Tel. No: +91 (0) Fax No: +91 (0)

10 2018 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited Analyst Certification I, Ashutosh Tiwari, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Disclosures Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital Market (Reg. No. INB ), Futures & Options Segment (Reg. No.INF ) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB ) of Bombay Stock Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH ), as a Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg. No.INP ) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP ). There are no disciplinary actions taken by any regulatory authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to merchant banking services, private equity, mergers & acquisitions and structured finance. As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ESPL has not been engaged in market making activity for the subject company. The Research Analyst engaged in preparation of this Report:- (a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company. This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this document without subjecting ESPL and affiliates to any registration or licensing requirement within such jurisdiction. This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its research report. Thus, investors should be aware that the firm may have conflict of interest. April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 10 of 11

11 A graph of daily closing prices of securities is available at and (Choose a company from the list on the browser and select the three years period in the price chart). Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Research Analyst or Relatives financial interest Research Analyst or Relatives actual/beneficial ownership of 1% or more Research Analyst or Relatives material conflict of interest No No No Disclaimer for U.S. Persons ESPL/its affiliates are not a registered broker dealer under the U.S. Securities Exchange Act of 1934, as amended (the 1934 act ) and under applicable state laws in the United States. In addition Equirus is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the Acts ), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules April 28, 2018 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 11 of 11