Sadbhav Engineering Limited

Transcription

1 Absolute : LONG Sadbhav Engineering Limited Relative : Overweight 4QFY17 Result: Estimate (), Target (), Rating () Regular Coverage 20% ATR in 13 Months 2017 Equirus All rights reserved Rating Information Price (Rs) 314 Target Price (Rs) 382 Target Date 30th Jun'18 Target Set On 30th May'17 Implied yrs of growth (DCF) 15 Fair Value (DCF) 299 Fair Value (DDM) 152 Ind Benchmark BSE Midcap Model Portfolio Position NA Stock Information Market Cap (Rs Mn) 53,976 Free Float (%) % 52 Wk H/L (Rs) 350.9/220 Avg Daily Volume (1yr) 147,396 Avg Daily Value (Rs Mn) 43 Equity Cap (Rs Mn) 172 Face Value (Rs) 1 Bloomberg Code SADE IN Ownership Recent 3M 12M Promoters 46.8 % 0.0 % -0.4 % DII 31.3 % 5.2 % 4.4 % FII 17.2 % 0.3 % 2.2 % Public 4.8 % -5.5 % -6.2 % Price % 1M 3M 12M Absolute -5.8 % 13.4 % 13.0 % Vs Industry % 5.0 % -3.5 % Ashoka -0.9 % 12.4 % 43.0 % PNC Infra -8.4 % 42.8 % 25.8 % Standalone Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (17A) EPS (18E) Smart Move to HAM + WC Streamlining + Debt Reduction to support multiple re-rating Sadbhav outperformed on execution and profitability front but saw a spike in WC due to higher requirement related to EPC projects. The company has managed to build a sizeable order book of Rs. 92.6bn with a focus on HAM in FY17. With reducing margin and WC overhangs of legacy irrigation and NHAI EPC projects, the sizeable share of HAM projects should enable margin expansion and WC improvements. We maintain our LONG rating & obtain a Jun 18 SOTP based TP of Rs. 382/share (vs. earlier Jun 18 TP of Rs. 379/share). Recent HAM wins boost order book to Rs. 92.6bn and pave the way for steady growth: Post the recent HAM wins, BOT/HAM share has risen to >50% of FY17 order book. Rising acceptance of HAM model amidst lower competitive intensity could lead to rise of BOT/HAM share to 65-70% in Sadbhav s order books by FY20E. We expect small order inflows across EPC, Mining and Irrigation verticals and are confident of 3 year revenue CAGR of 19% till FY20E. Expect shift in revenue mix away from EPC projects to enable margin expansions along with WC improvements: We expect the share of WC intensive EPC projects in overall execution to reduce post Jun 17. We have observed lower competitive intensity in recently bid HAM projects and also expect a more efficient WC cycle for these projects. We have modelled a reduction in non cash WC levels from ~58% in FY17 to 25% by FY19E. Value unlocking of Sadbhav Infra subsidiaries + WC improvements to enable debt reduction at standalone level: Our channel checks suggest that the value unlocking of Sadbhav Infra subsidiaries is in advanced stages. We expect the deal to be announced by 1QFY18E and entire money to be received by 3QFY18E. Along with this, the above anticipated WC improvements should support Standalone debt reduction from Rs. 15.2bn in FY17 to Rs. 10.2bn/Rs. 3.4bn in FY18E/FY19E. Re-rating apparent due to lined up triggers and relative price movements, Valuations provide comfort amidst business consolidation: Smooth HAM execution and Sale of BOT Projects are inevitable re-rating triggers from current levels. After netting off the BOT Valuations, the EPC business is trading at ~1.3x/1.2x FY18E/FY19E P/B with RoEs of 13%/17% and 11x/8x FY17A/FY18E P/E at 33%/29% 2/3 year EPS CAGR. Weak order inflows and lower execution are key downside risks to our estimates. Construction Change in Standalone Estimates % change over previous estimates FY18E FY19E FY18E FY19E Sales 39,879 44, % 0.0% EBITDA 4,578 5, % 9.8% PAT 2,338 3, % 16.0% EPS % 16.0% Standalone Financials Rs. Mn YE Mar FY17A FY18E FY19E FY20E Sales 33,203 39,879 44,823 56,630 EBITDA 3,556 4,578 5,630 6,321 Depreciation 1, ,035 1,077 Interest Expense 992 1, Other Income Reported PAT 1,879 2,338 3,321 4,006 Recurring PAT 1,879 2,338 3,321 4,006 Total Equity 16,609 18,596 20,921 23,725 Gross Debt 15,183 10,194 3,419 3,947 Cash 230 1,077 1,383 1,713 Rs Per Share FY17A FY18E FY19E FY20E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 12% 13% 17% 18% Core ROIC (%) 11% 13% 17% 19% EBITDA Margin (%) 10.7% 11.5% 12.6% 11.2% Net Margin (%) 6% 6% 7% 7% May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 1 of 13 Before reading this report, you must refer to the disclaimer on the last page.

2 Standalone Quarterly Result Table Rs Mn 4QFY17 4QFY17E 3QFY17 4QFY16 % Change 4QFY17E 3QFY17 4QFY16 Comments Net Sales 10,329 9,557 8,648 8,580 8% 19% 20% Construction Expenses 8,106 7,742 6,986 6,900 5% 16% 17% Employees Cost % 19% 20% Other Expenses % 85% 64% Total Expenditures 9,233 8,540 7,710 7,671 8% 20% 20% EBITDA 1,096 1, % 17% 21% Depreciation % -3% -28% EBIT % 24% 49% Interest % 46% 21% Other Income % 262% -3% PBT % 42% 42% Tax % -277% -47% Recurring PAT % 30% 55% Extraordinaries Reported PAT % 30% 95% EPS (Rs) % 30% 95% EBITDA Margin 10.6% 10.6% 10.9% 10.6% -3 bps -24 bps 2 bps EBITDA margins slightly better than expectations EBIT Margin 8.3% 8.0% 8.0% 6.7% 26 bps 30 bps 158 bps PBT Margin 6.9% 6.9% 5.8% 5.9% 0 bps 108 bps 105 bps PAT Margin 6.6% 6.6% 6.1% 4.1% 2 bps 54 bps 253 bps Tax Rate 4.7% 5.0% -3.7% 12.6% -33 bps 840 bps -794 bps May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 2 of 13

3 Key Quarterly Updates Exhibit 1: Execution in Cash Contracts picked upsignificantly FY17 Revenue (Rs. Mn) Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec Mar-17 Transport 6,593 5,066 5,926 5,596 5,618 5,607 4,577 6,902 8,237 BOT Projects 4,698 4,070 4,610 4,281 4,016 1, ,461 Cash Contracts 1, ,316 1,315 1,601 4,493 4,244 6,482 6,776 Irrigation 1,683 2, ,003 2,035 1, ,255 Mining 1,389 1,202 1, Power Generation Total Revenues 9,675 8,293 7,459 7,530 8,579 8,036 6,156 8,648 10,329 Source:Company, Equirus Securities Exhibit 2: Toll collections hit due to demonetization in some stretches Name of SPV Units 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17** 4Q17 Ahmedabad Ring Road Rs. Mn Aurangabad Jalna* Rs. Mn DhulePalasner Rs. Mn Hyderabad Yadgiri Rs. Mn BijapurHungund Rs. Mn RohtakPanipat Rs. Mn Maharashtra Border Check Post Rs. Mn Shreenathji Udaipur Rs. Mn Bhilwara Rajsamand Rs. Mn Rohtak Hissar Rs. Mn Total Toll Collections Rs. Mn 1,615 1,813 2,021 2,101 2,144 2,052 2,383 * 3Q17 numbers are calculated for some portion of the quarter due to impact of demonetization ** In MBCPNL, 13 checkposts were operational till 26th Jan'17 while 16 checkposts were operational from 27th Jan'17. In 4Q16, 13 checkposts were operational Source: Company BSE filings, Equirus Securities Exhibit 3: Segment wise Details of Order Book Order Book Segment Rs. Mn %age Transport 49,969 65% BOT 32,038 42% Cash Contracts 17,931 23% Mining 16,966 22% Irrigation 9,899 13% Total Order Book 76, % Source: Quarterly BSE Update, Equirus Securities Valuation SOTP Valuation Main changes in current and earlier SOTP Valuations: a) EPC Business Valuation higher by Rs. 3/share: We have maintained the earlier 15x TTM FY17E P/E multiple but have factored higher EBITDA margins of 11% on Standalone basis. Exhibit 4: Current SOTP Valuation Valuation Snapshot Rs. Mn Rs./share Net Sales 40,589 Net Profit Margin 6.1% Net Profit 2,490 P/E 15 Valuation of EPC Business (A) 37, Overall Valuation of BOT Projects 49, MNEL ARR 3, AJT 1,190 7 NSE -8-0 MBCP 21, DPT 4, HYT 2, RPT -2, BHT 5, MBT 1, May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 3 of 13

4 SUTPL 4, RBT 4, RHT Hybrid Annuities 3,559 -RK RK BT UK BRT 1, WM UB 49 0 Add: Standalone SIPL 4, Less: Profit on BHT and DPT Sale 3, MBCP 21, DPT 3, HYT 2, RPT BHT 5, MBT 1, SUTPL 5, RBT 5, RHT 2, Hybrid Annuities 753 -RK RK BT UK 57 0 Valuation of SIPL 50, SEL's Holding 69% Holding Company Discount 20% Stake Adjusted Contribution to SEL 28, BRT WM UB 49 0 Add: Standalone SIPL 3, Less: Profit on BHT and DPT Sale 3, Total SEL Valuation 65, Valuation of SIPL 51, Source: Equirus Securities Exhibit 5: Previous SOTP Valuation Valuation Snapshot Rs. Mn Rs./share Net Sales 40,605 Net Profit Margin 6.0% Net Profit 2,451 P/E 15 Valuation of EPC Business (A) 36, SEL's Holding 68% Holding Company Discount 20% Stake Adjusted Contribution to SEL 28, Total SEL Valuation 64, Source: Equirus Securities Overall Valuation of BOT Projects 51, MNEL ARR 2, AJT 1, NSE May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 4 of 13

5 Key Highlights of the Con call Bidding activity across sectors: NHAI has gone slow on order awarding & company is looking to bid for Metro Projects NHAI has gone slow on awarding new projects due to the land acquisition issues related to the already awarded projects. Till this gets resolved, the awarding activity will be slow Currently financial bids for 10 EPC projects having combined length of 447kms & cost of Rs. 73.7bn are to be submitted by Jun 17 Additionally bids for 5 EPC projects by Gujarat government covering a length of 197kms & costing Rs. 23.7bn are to be submitted by Jun 17 Vadodara Expressway project worth Rs. 72bn will come under EPC segment HAM projects worth Rs bn are coming up for bidding over next 3 months In Mining, 7 projects for OB removal worth Rs. 28.7bn and 3 MDO projects are coming up for bidding by Jun 17 In Irrigation, 5 projects worth Rs. 13.4bn in states of AP, Karnataka & MP are coming up for bidding Company is also actively bidding for Phase I & Phase II Metro projects in cities like Mumbai, Pune, Ahmedabad, Bangalore etc. Order Book Update: The order book of the company as on Mar 17 stood at Rs. 76.8bn. Following is the breakup: 65% from Roads 22% from Mining & 13% from Irrigation Company will be handing over Rs. 1.2bn of Mining order from BCCL over next few months due to issues related to service tax (Rs. 350mn payment related to service tax is yet to be received from BCCL by the company) The irrigation OB will be fully completed by FY19 while the entire o/s OB of EPC contracts would be executed in FY18 Company is looking to get incremental orders of Rs bn in FY18 It is also L1 is a Rs. 1.4bn Mining contract wherein LOA is expected soon OB intake for FY17 was Rs 47bn Update on HA Projects: 3 HA projects have got appointed dates and the EPC work has already been started by SEL. The revenues recognized in 4QFY17 from these 3 projects was Rs. 414mn 2 projects (Rampur Kathgodam pckg. II and BRT reserve) are expected to receive the appointed dates in next few months and they will start contributing to the topline by 2QFY18 The 2 new HA projects (Mahagaon& Udaipur Bypass), are yet to achieve FC and they would start contributing to the topline by 2HFY18 Company has closed Loan term sheets with lenders for all the 5 HA projects wherein they will have to bring in only 25-30% of equity upfront while 25% of equity will be funded via BG at time of COD. The average interest rate is around 9.25% In Warangal-Mahagaon project, 80% land is not available but state government has assured that land would be available within next 6 months. In Udaipur Bypass, more than 80% land is available Top 5 projects by execution in 4QFY17 Project Name Segment Rs. Mn Eastern Peripheral Expressway II Road EPC 1,763 Eastern Peripheral Expressway I Road EPC 1,860 Yamunagar Panchkula Pckg II Road EPC 852 Yamunagar Panchkula Pckg I Road EPC 818 Rohtak Hissar Road BOT 559 Additional Info Company has repaid Rs. 1.65bn to NHAI towards Mobilization advance since it would have cost nearly 18% interest cost after 1 year of Moratorium. This was in addition to Rs. 1.13bn repaid in 3QFY17. Due to this, finance cost & short term loans have increased in 4QFY17 SEL did a capex of Rs. 390mn in FY17 Company has pumped in around Rs bn of WC in the JV projects of Metro EPC and Irrigation projects for finishing the projects. Company has received around Rs. 900mn of this due to finishing of 2 Irrigation projects Company expects tax rate of 20% in FY18 but full tax rate to apply from FY19 due to ending of incentives on Road EPC projects Debt from SIPL stood at Rs. 4.3bn which has increased slightly vs. 3QFY17 due to funding done by company in Mysore Bellary as Authority had not provided the required Grant amount. However the company has now received the Grant and so debt level should come down May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 5 of 13

6 Guidance: Expecting to clock revenues of Rs. 38bn in FY18 SEL expects WC debt to reduce by Rs. 2bn in 1HFY18 and by Rs. 2.5bn in 1HFY19 due to finishing of milestone based EPC projects and some legacy Irrigation projects Company expects revenues of Rs. 38bn in FY18 on current OB not considering the 2 new HA projects - Rs. 13.5bn is expected from road projects - Rs. 15.5bn from HA projects - Rs. 5bn from Irrigation projects - Rs. 4bn from Mining projects EBITDAM expected to improve to 11% due to more contribution from HA projects WC strain would be less in HA projects vs. EPC projects as they do not have milestone based payments but monthly payments as per certified bills Company would be doing a capex of Rs. 500mn in FY18 May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 6 of 13

7 Company Snapshot How we differ from Consensus EPS Sales PAT - Equirus Consensus % Diff Comment FY18E % Expect consensus to upward revise their FY19E FY18E FY19E ,879 44, ,400 44, % 1 % 1 % guidance in line with management s commentary of better margins infy18& lower tax outgo due to MAT credit entitlement FY18E 2,338 2, % FY19E 3,321 2, % Our Key Investment arguments: Valuations at comfortable levels after factoring base growth scenario and assumptions for EPC and BOT business Key Parameters Units FY16A FY17A FY18E FY19E FY20E Standalone Net Sales Rs. Mn 31,863 33,203 39,879 44,823 56,630 Sales Growth %age 7% 4% 20% 12% 26% EBITDA Rs. Mn 3,348 3,556 4,578 5,630 6,321 EBITDAM% %age 11% 11% 11% 13% 11% BOT Projects Toll Collections Rs. Mn 8,795 12,497 15,790 18,330 18,129 EBITDA Rs. Mn 6,671 9,066 11,375 13,616 14,013 EBITDAM% %age 76% 73% 72% 74% 77% Risk to Our View Lower than expected order inflows in FY17, Lower EPC EBITDA Margins and fall in Traffic/Toll incomes Order book growth, Early Completion of BOT Projects, Acquisition of BOT Projects, Winning of a large MDO order Sensitivity to Key Variables % Change % Impact on EPS EBITDA Margins 1 % 12 % Interest Rate 1 % -2 % DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 6.8 % % 3.0 % 36.2 % - FY18E FY19E FY20-22E FY23-27E FY28-32E Sales Growth 22 % 13 % 11 % 5 % 3 % NOPAT Margin 16 % 19 % 12 % 14 % 14 % IC Turnover RoIC 6.6 % 7.3 % 6.2 % 12.2 % 16.8 % Years of strong growth Valuation as on date (Rs) Valuation as of Jun' Based on DCF, assuming 15 years of 3% CAGR growth and 17% average ROIC, we derive current fair value of Rs. 262 and Jun 18 fair value of Rs Company Description: Sadbhav is in the business of EPC Contracting for Cash Contracts, Mining, Irrigation and BOT Road Projects. It has an order book of ~Rs. 77bn and its subsidiary SIPL has a portfolio of 16 BOT Projects.It is one of the leading road BOT companies in India that specializes in the development, operation and maintenance of highways, roads and related projects. Key Triggers Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E Sadbhav Engg LONG , th Jun' % 13 % 17 % 0.2 % 0.6 % Ashoka Buildcon LONG , st Mar' % 4 % 10 % 0.8 % 0.9 % PNC Infratech Reduce , th Sep % 9 % 9 % 1.7 % 0.4 % May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 7 of 13

8 Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18E 2Q18E 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E Revenue 8,070 6,156 8,648 10,329 9,009 6,620 10,906 13,344 9,719 6,631 12,971 15,501 33,203 39,879 44,823 56,630 Construction Expenses 6,621 4,839 6,986 8,106 7,297 5,230 8,725 10,675 7,775 5,239 10,247 12,246 26,552 31,927 35,507 46,191 Employees Cost ,366 1,516 1,683 1,915 Other Expenses ,729 1,858 2,003 2,204 EBITDA ,096 1, ,387 1,437 1, ,852 1,892 3,556 4,578 5,630 6,321 Depreciation , ,035 1,077 EBIT ,137 1, ,592 1,629 2,556 3,583 4,595 5,243 Interest , Other Income PBT , ,550 1,789 1,897 2,727 4,428 5,341 Tax ,107 1,335 Recurring PAT ,162 1,342 1,879 2,338 3,321 4,006 Extraordinary Reported PAT ,162 1,342 1,879 2,338 3,321 4,006 EPS (Rs) Key Drivers Cash Contract Revenues 4,493 4,244 6,482 6,500 2,970 3,600 5,220 5,400 2,673 3,240 4,698 4,860 21,718 17,190 15,471 13,924 BOT EPC Revenues 1, ,000 2,700 2,835 3,402 4,082 4,050 4,253 5,103 6,124 3,866 13,019 19,529 29,294 Mining EPC Revenue , , ,325 1,058 3,183 3,661 4,210 4,841 Irrigation EPC Revenue 1, ,500 1, ,575 2,037 1, ,733 4,826 5,196 5,716 6, Sequential Growth (%) Revenue -6 % -24 % 40 % 19 % -13 % -27 % 65 % 22 % -27 % -32 % 96 % 20 % (Increase) / Decrease in Work in progress EBITDA -4 % -25 % 44 % 17 % -2 % -36 % 103 % 4 % -14 % -48 % 186 % 2 % EBIT 7 % -35 % 72 % 24 % -3 % -47 % 161 % 4 % -17 % -60 % 308 % 2 % Recurring PAT 10 % -62 % 183 % 30 % -30 % -77 % 641 % 13 % -33 % -69 % 509 % 15 % EPS 39 % -62 % 183 % 30 % -30 % -77 % 641 % 13 % -33 % -69 % 509 % 15 % Yearly Growth (%) Revenue -3 % -17 % 15 % 20 % 12 % 8 % 26 % 29 % 8 % 0 % 19 % 16 % 4 % 20 % 12 % 26 % EBITDA -3 % -19 % 27 % 21 % 23 % 4 % 48 % 31 % 16 % -5 % 34 % 32 % 6 % 29 % 23 % 12 % EBIT -11 % -32 % 32 % 49 % 35 % 9 % 65 % 39 % 19 % -10 % 40 % 38 % 8 % 40 % 28 % 14 % Recurring PAT 23 % -53 % 94 % 55 % -3 % -40 % 57 % 36 % 32 % 72 % 41 % 44 % 24 % 24 % 42 % 21 % EPS 23 % -33 % 84 % 95 % -3 % -40 % 57 % 36 % 32 % 72 % 41 % 44 % 42 % 24 % 42 % 21 % Margin (%) EBITDA 11 % 11 % 11 % 11 % 12 % 10 % 13 % 11 % 13 % 10 % 14 % 12 % 11 % 11 % 13 % 11 % EBIT 8 % 7 % 8 % 8 % 9 % 7 % 10 % 9 % 10 % 6 % 12 % 11 % 8 % 9 % 10 % 9 % PBT 6 % 3 % 6 % 7 % 6 % 2 % 8 % 9 % 9 % 4 % 12 % 12 % 6 % 7 % 10 % 9 % PAT 6 % 3 % 6 % 7 % 5 % 2 % 8 % 7 % 6 % 3 % 9 % 9 % 6 % 6 % 7 % 7 % May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 8 of 13

9 Jun/08 Dec/08 Jun/09 Dec/09 Jun/10 Dec/10 Jun/11 Dec/11 Jun/12 Dec/12 Jun/13 Dec/13 Jun/14 Dec/14 Jun/15 Dec/15 Jun/16 Dec/16 Jun/17 Dec/17 Jun/18 Jun/08 Dec/08 Jun/09 Dec/09 Jun/10 Dec/10 Jun/11 Dec/11 Jun/12 Dec/12 Jun/13 Dec/13 Jun/14 Dec/14 Jun/15 Dec/15 Jun/16 Dec/16 Jun/17 Dec/17 Jun/18 Jun/08 Dec/08 Jun/09 Dec/09 Jun/10 Dec/10 Jun/11 Dec/11 Jun/12 Dec/12 Jun/13 Dec/13 Jun/14 Dec/14 Jun/15 Dec/15 Jun/16 Dec/16 Jun/17 Dec/17 Jun/18 Sadbhav Engineering Absolute LONG Relative: Overweight 20% ATR in 13 months Consolidated Financials Forecast P&L (Rs Mn) FY17A FY18E FY19E FY20E Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E Revenue 45,700 55,669 63,153 74,759 Equity Capital PAT before MI -1,622 6,869 8,189 5,749 Op. Expenditure 33,078 36,342 40,222 50,306 Reserve 9,284 14,437 19,998 25,559 Depreciation 3,211 4,630 4,631 7,283 EBITDA 12,622 19,327 22,931 24,452 Networth 9,456 14,609 20,170 25,730 Others Depreciation 3,211 4,630 4,631 7,283 Long Term Debt 95,041 90,125 95,966 95,572 Taxes Paid 94 1,365 1,631 1,762 EBIT 9,411 14,697 18,301 17,170 Def Tax Liability 16,501 18,959 28,685 31,970 Change in WC -7, ,505-2,591 Interest Expense 11,874 8,603 6,993 7,887 Minority Interest Operating C/F -5,718 10,872 15,693 8,678 Other Income 842 4, Account Payables 5,605 3,168 3,561 4,499 Capex -5,219-33,952-11,710 4,478 PBT -1,622 6,869 8,189 5,749 Other Curr Liabi 8,579 7,976 8,965 11,326 Change in Invest Tax 94 1,365 1,631 1,762 Total Liabilities & Equity 135, , , ,418 Others 0 27,664-13,292-14,372 PAT bef. MI & Assoc. -1,716 5,504 6,557 3,987 Net Fixed Assets 99, , , ,914 Investing C/F -5,219-6,289-25,002-9,894 Minority Interest -1, Capital WIP Change in Debt 8,651-4,917 5, Profit from Assoc Others 9,901-2,090-14,351-24,993 Change in Equity -1, ,775 Recurring PAT ,504 6,557 3,987 Inventory 1,234 1,639 1,842 2,327 Others 3,433 2,204 8,839 2,198 Extraordinaires Account Receivables 15,912 12,018 12,280 15,515 Financing C/F 10,924-2,712 14,680 4,579 Reported PAT ,504 6,557 3,987 Other Current Assets 7,441 7,151 3,562 5,733 Net change in cash -14 1,871 5,372 3,364 FDEPS (Rs) Cash 1,316 3,187 8,558 11,922 RoE (%) -5 % 46 % 38 % 17 % DPS (Rs) Total Assets 135, , , ,419 RoIC (%) 6 % 9 % 8 % 6 % CEPS (Rs) Non-cash Working Capital 10,402 9,664 5,159 7,750 Core RoIC (%) 5 % 7 % 7 % 6 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) -27 % 6 % 15 % 30 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 28 % 35 % 36 % 33 % FA Turnover P/B PATM (%) -1 % 10 % 10 % 5 % Net D/E P/FCFF Tax Rate (%) -6 % 20 % 20 % 31 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) 12 % 22 % 13 % 18 % Capital Employed/Equity EV/Sales FDEPS Growth (%) -63 % -1,113 % 19 % -39 % Dividend Yield (%) 0.2 % 0.6 % 1.6 % 0.0 % TTM P/E vs. 2 yrs. forward EPS growth TTM EV/EBITDA vs. 2 yrs. forward EBITDA growth TTM P/B vs. 2 yrs. forward RoE % RoE EPS Growth 100% EBITDA Growth % 16x % 5x 80% 35x x % 30% x 28x % 60% % 11x x % % 3x 40% 8x 14x % % 2x % x % 4x 100 5% 1x 0 0% % 0 0% % 0-30% % May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 9 of 13

10 Historical Consolidated Financials P&L (Rs Mn) FY14A FY15A FY16A FY17A Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A Revenue 27,325 34,468 40,658 45,700 Equity Capital PAT before MI 261-2,325-1,400-1,622 Op. Expenditure 22,870 28,624 30,639 33,078 Reserve 12,579 15,201 11,132 9,284 Depreciation 1,305 2,235 2,326 3,211 EBITDA 4,456 5,844 10,019 12,622 Networth 12,730 15,372 11,304 9,456 Others 3,127 6,047 7,264 0 Depreciation 1,305 2,235 2,326 3,211 Long Term Debt 55,718 69,628 86,390 95,041 Taxes Paid EBIT 3,151 3,609 7,693 9,411 Def Tax Liability ,640 14,096 16,501 Change in WC 3,732-1, ,213 Interest Expense 4,555 6,150 10,752 11,874 Minority Interest 2,258 1, Operating C/F 7,864 3,850 7,872-5,718 Other Income Account Payables 3,880 4,728 3,907 5,605 Capex -12,042-14,091-17,309-5,219 PBT , Other Curr Liabi 3,322 4,068 8,500 8,579 Change in Invest Tax Total Liabilities & Equity 78, , , ,182 Others -1, PAT bef. MI & Assoc ,224-1, Net Fixed Assets 52,313 75, ,019 99,379 Investing C/F -14,409-13,575-16,783-5,219 Minority Interest ,173-1,173 Capital WIP 7,754 20, Change in Debt 11,454 13,646 8,278 8,651 Profit from Assoc Others 3,399 3,999 7,253 9,901 Change in Equity 268 3, ,160 Recurring PAT Inventory 1,638 2,134 1,410 1,234 Others -4,661-6, ,433 Extraordinaires -1, Account Receivables 5,758 6,839 8,086 15,912 Financing C/F 7,060 10,368 8,098 10,924 Reported PAT Other Current Assets 5,538 8,285 6,100 7,441 Net change in cash EPS (Rs) Cash 2,309 2,095 1,329 1,316 RoE (%) -6 % -13 % -11 % -5 % DPS (Rs) Total Assets 78, , , ,182 RoIC (%) 5 % 3 % 5 % 6 % CEPS (Rs) Non-cash Working Capital 5,732 8,463 3,189 10,402 Core RoIC (%) 3 % 1 % 4 % 5 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 29 % -8 % -14 % -27 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 16 % 17 % 25 % 28 % FA Turnover P/B PATM (%) 2 % -5 % -3 % -1 % Net D/E P/FCFF Tax Rate (%) 13 % -16 % -9 % -6 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 27 % 26 % 18 % 12 % Capital Employed/Equity EV/Sales FDEPS growth (%) 45 % 142 % -22 % -63 % Dividend Yield (%) 0.2 % 0.2 % 0.2 % 0.2 % May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 10 of 13

11 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 Sweta Sheth Devam Modi Power & Infrastructure Viral Desai Dhaval Dama FMCG, Mid-Caps Binoy Dharia Manoj Gori Consumer Durables Dealing Room Maulik Patel Oil and Gas Ashish Shah Rohan Mandora Banking & Financial Services Ilesh Savla Associates Manoj Kejriwal Ankit Choudhary Rohit Rajani Bharat Celly Sandip Amrutiya Harshit Patel Compliance Officer Meet Chande Jay Soni Parva Soni Pranav Mehta Ronak Soni 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 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) 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. Corporate Office: 3rd floor, House No. 9, Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge, S.G. Highway Ahmedabad Gujarat Tel. No: +91 (0) Fax No: +91 (0) May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 11 of 13

12 2017 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, Devam Modi, 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 ) and as Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg. No. INP ). 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 &acquisitionsandstructuredfinance. 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. May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 12 of 13

13 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. May 30, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 13 of 13