Strong sales momentum continues, however margins continue to remain at lower levels. Retain TRADE until clarity on margin improves

Transcription

1 2016 Equirus All rights reserved Rating Information Price (Rs) 384 Target Price (Rs) 398 Target Date 30thSept 17 Target Set On 31stJuly'16 Implied yrs of growth (DCF) 20 Fair Value (DCF) 328 Fair Value (DDM) 0 Ind Benchmark SPBSMIP Model Portfolio Position - Stock Information Market Cap (Rs Mn) 15,571 Free Float (%) % 52 Wk H/L (Rs) /280.1 Avg Daily Volume (1yr) 28,356 Avg Daily Value (Rs Mn) 12 Equity Cap (Rs Mn) 405 Face Value (Rs) 10 Bloomberg Code IFBI IN Ownership Recent 3M 12M Promoters 75.0 % 0.0 % 0.0 % DII 9.8 % 0.3 % 4.9 % FII 0.0 % 0.0 % -1.8 % Public 15.3 % -0.3 % -3.0 % Price % 1M 3M 12M Absolute 15.9 % 10.5 % % Vs Industry 9.1 % -4.2 % % Whirlpool 1.8 % 13.2 % 13.3 % Hitachi 4.0 % 6.9 % -2.3 % Standalone Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (16A) EPS (17E) IFB Industries Ltd Absolute : TRADE Relative : Benchmark 1QFY17 Result: Est. ( ), TP ( ), Rating ( ) Regular Coverage 3% ATR in 14 months Strong sales momentum continues, however margins continue to remain at lower levels. Retain TRADE until clarity on margin improves Consumer Durable IFB Industries Ltd. (IFB) reported revenue growth of 19% yoy during 1QFY17, in-line with EE, largely due to strong sales growth witnessed in the Home Appliances division. EBIDTAM stood at ~6.0%, down 27bps yoy and 103bps below EE mainly due to increase in contribution from AC category to total sales. With wide range of launches across the product categories we believe that IFB could register strong sales growth in the coming quarters. Localization plans coupled with few other initiatives by IFB could result in gross margin expansion in FY18E; however we wait for some signs of improvement to factor in it in our projections. We remain TRADE on IFB due to lack of clarity on margin triggers. Our Sep 17 TP of Rs. 398 is based on 25x TTM EPS of Rs (prev. Jun 17 TP Rs. 339). Strong sales momentum to continue in the coming quarters on the back of new launches; favorable monsoon and 7 th Pay Commission: During 1QFY17, IFB launched a wide range of new products in the washing machines (WM) and the air conditioners (AC) categories. Based on the new launches and strong summer, IFB clocked healthy AC sales of 50,000 units during the quarter. Further, normal to excess rainfall in most of the areas in South India (50%+ revenues) could be lead to strong sales in the coming quarters. Implementation of 7 th Pay Commission could be prove to be a strong trigger for the industry as a whole. We expect revenue CAGR of 18.5% for FY16-FY19E. Stable operating costs followed by localization plans could lead to margin expansion for IFB: During 1QFY17, the operating expenses were largely under control and management indicated that the costs will remain stable in the coming quarters as well. Currently of the total raw material consumption for WM, 35% of the FL and 25% of the TL are imported which results in higher exposure to forex fluctuations. To mitigate the forex losses, IFB plans to open facilities by 4QFY17 which will lower the total imports to 20% for FL and 10% for the TL. This could results in gross margin expansion of ~150bps. Further IFB expects efficiencies to kick in from the TL manufacturing facility which could result in another 150bps margin expansion. Management indicated that they continue to focus on the industrial sales which are normally high margin products. Change in estimates and valuation: We maintain our sales estimates; however we raise our EBIDTA/PAT estimates by 2%/9% for FY17E and by 2%/1% for FY18E largely to factor in lower depreciation and tax rate versus our previous estimates. We reiterate TRADE rating due to lack of clarity on the margin triggers. Our Sep 17 TP of Rs. 398 is based on 25x TTM EPS of Rs (prev. Jun 17 TP Rs. 339). Change in Estimates Rs. Mn FY17E Chg (%) FY18E Chg (%) Sales 17,667 0% 21,313 0% EBITDA 1,099 2% 1,446 2% EPS % % Consolidated Financials Rs. Mn YE Mar FY16A FY17E FY18E FY19E Sales 15,009 17,667 21,313 24,947 EBITDA 694 1,099 1,446 1,761 Depreciation Interest Expense Other Income Reported PAT Recurring PAT Total Equity 4,183 4,715 5,415 6,292 Gross Debt Cash Rs Per Share FY16A FY17E FY18E FY19E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 8 % 12 % 14 % 15 % Core ROIC (%) 5 % 9 % 11 % 13 % EBITDA Margin (%) 5 % 6 % 7 % 7 % Net Margin (%) 2 % 3 % 3 % 4 % August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 1 of 11 Before reading this report, you must refer to the disclaimer on the last page.

2 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 IFB industries Ltd. Absolute TRADE Relative Equal weight 3% ATR in 14 Months IFB does not intend to increase trade schemes or any price cuts to face intense competition: Management has a clear view that they won t rush for further increase in trade schemes or indulge into any price war to face the increased competitive activities. Management reiterated that better features and new product launches will remain their key initiative to face competition. Further, better product knowledge and effective training would result in higher efficiencies from the current employees to achieve higher sales. Also, IFB will address rising competition on market to market basis and will take steps accordingly. Exhibit 1: Trade Schemes seems to have stabilized at the current levels 22% 20% 18% 16% 14% 12% Source: Company, Equirus Trade schemes as % of gross sales Exhibit 1 indicates that the trade schemes offered by IFB seem to have stabilized in the 18-20% range. Further, management indicated that they do intend to further increase the trade schemes and hence we expect the trade schemes to remain at the current levels in the coming quarters. Further, the stable trade schemes during 1QFY17 further validates that trade schemes are likely to remain in the current range, despite higher AC sales (trade schemes for ACs would be relatively higher as compared to WMs). Exhibit 2: Change in revenue mix has not resulted in desired results for the company Sales (Rs. mn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q WM 1,403 1,700 1,723 1,434 1,688 2,074 2,327 1,780 1,999 Clothes Dryer MW Dishwasher AC IDW/ILE/KA /MK Other Total 2,391 2,542 2,688 2,632 2,896 2,972 3,437 2,977 3,464 Source: Company, Equirus With increase in contribution from the imported finished products like Microwave oven, Dishwashers, Air Conditioners, etc. to the total sales has had led to decline in gross margins. The impact on margins is for two reasons, i.e., 1) these products are of low margins as compared to margins of in-house manufactured washing machines and 2) substantial depreciation in the Indian currency we have witnessed over the past few quarters. With current USDINR rate at ~Rs , we expect further pressure on margins in the near term till the localizations plans set by the company are executed and price hikes come into play. August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 2 of 11

3 Key Highlights of the Con-Call: 1) During the quarter, the company reported topline growth of ~19% yoy. Strong sales growth during 1QFY17 was largely driven by strong sales witnessed in the AC category. 2) Segmental Highlights: Home appliances segment reported growth of 20% in 1QFY17, whereas Fine blanking division reported growth of 14%. As per the company reporting (excluding unallocable expenses), EBITM of ~4.3% for Home appliances segment during 1QFY17 improved by ~20bps yoy and by ~50bps yoy for the Fine blanking division. 3) During 1QFY17, IFB sold 50,000 units in the AC category and management expects to sell around 80, ,000 units during FY17E. 10) Margin gap for the TL and the FL WM continues to narrow down. Management indicated that they expect similar margins of TL and FL WM in the coming two quarters. 11) On significantly higher forex exposure, management indicated that they have laid out a localization plan where the company will start in-house production which will lower its exposure to currency fluctuations and sustainable margins can be expected in future. 12) Management indicated that the key drivers for better margins in the coming quarter would be localization plan, higher manpower efficiencies and increase focus on industrial sales. 4) New product launches across categories resulted in the strong sales during the quarter. Further management indicated that new product launches and addition of new features in the current product offering remains their key answer to the rising competition. 5) During the quarter, in the WM category TL grew by 128% on smaller base and FL grew by ~6-7%. Management expects strong sales in the coming times due to new product launches and from the manpower efficiencies. 6) Market Share: Market share in the FL WM stands at ~45%, TL WM stands at 8-9%, MW market share is at 18-19% and less than 1% in the AC category. Management is targeting market share of 10-15% in TL WM category. 7) Trishan Metals Acquisition: IFB acquired 51% stake in Trishan Metals at a consideration of ~Rs. 120mn. The rationale behind the acquisition is to improve the product quality in the Fine Blanking Division. 8) Management indicated that currently all the players in the CD space are doing well and are expected to do well in the coming quarters. 9) IFB plans to do capex of ~Rs. 700mn in FY17E. Of the total capex, Rs. 350mn would be utilized for the fine blanking division (Rs. 250mn on Bangalore facility and Rs. 100mn for Kolkata facilty). Rs. 350mn capex would be for the Home appliances division which would be for the new plant to increase in-house manufacturing. August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 3 of 11

4 Quarterly Result Table (Standalone) % Change RsMn 1QFY17 1QFY17E 4QFY16 1QFY16 1QFY17E 4QFY16 1QFY16 Net Sales 4,177 4,152 3,685 3,520 1% 13% 19% In-line with EE Comments Cost of RM consumed 1,535 1,661 1,346 1,673-8% 14% -8% Purchase of stock-in-trade % 23% 127% Employee Cost % -5% 7% Other Expenses 1,090 1,021 1, % 0% 27% Total Expenditures 3,928 3,861 3,595 3,300 2% 9% 19% EBITDA % 176% 14% Higher than expected other expenditures led to the EBIDTA miss, which was somewhat offset by lower than expected employee costs Depreciation % 2% -8% Lower than expected EBIT % -1198% 37% Interest % -7% 0% Other Income % -75% -49% PBT % 196% 16% Tax % 173% -73% Recurring PAT % 197% 41% Extraordinaries Reported PAT % 197% 41% EPS (Rs) % 197% 41% Lower tax and depreciation led to the PAT beat EBITDA Margin 6.0% 7.0% 2.4% 6.2% -103 bps 352 bps -27 bps EBIT Margin 3.4% 3.9% -0.4% 3.0% -48 bps 380 bps 45 bps PBT Margin 3.8% 4.5% 1.4% 3.8% -71 bps 232 bps -8 bps PAT Margin 3.6% 3.4% 1.4% 3.0% 17 bps 221 bps 58 bps Tax Rate 5.2% 24.0% 5.6% 22.2% bps -43 bps bps August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 4 of 11

5 Company Snapshot How we differ from Consensus EPS Sales PAT - Equirus Consensus % Diff Comment FY17E % Limited coverage on the stock FY18E % FY17E 17,667 17,997-2 % FY18E 21,313 21,374 0 % FY17E % FY18E % Our Key Investment arguments: Revival in consumer sentiment, leadership position in front loads, indigenous manufacturing of top loads and introduction of new product categories to aid 18.5% revenue CAGR over FY16-19E. Weakening INR; higher manpower costs; increase in trade schemes will continue to weigh on margins. Unfavourable revenue mix from the low margin categories will continue to have an impact on margins. Key Assumptions: Rs. Mn FY 14 FY 15 FY 16 FY17E FY18E FY19E Revenue Front load WM 5,664 7,325 8,233 10,043 12,003 13,947 Revenue TL WM ,975 2,904 3,963 4,740 Net Revenue 10,215 12,615 15,009 17,667 21,313 24,947 EBITDA ,099 1,446 1,761 EBITDA Margin (%) 5.8% 6.9% 4.6% 6.2% 6.8% 7.1% PAT PAT Margin (%) 4.9% 3.9% 2.1% 3.0% 3.3% 3.5% Units Sold: Volume of Front Load WM 226, , , , , ,753 Volume of TL WM 39,299 39, , , , ,160 Risk to Our View: Adverse currency movement, high capacity utilization Key Triggers Revival in consumer sentiment, improvement in sales volumes, indigenous manufacturing to lower forex exposure Sensitivity to Key Variables % Change % Impact on EPS EBITDA Margin (%) 1 % 12 % DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 7.5 % % 3.0 % 5.0 % - FY17E FY18E FY19-21E FY22-26E FY27-36E Sales Growth 18 % 21 % 17 % 16 % 10 % NOPAT Margin 3 % 3 % 4 % 5 % 5 % IC Turnover RoIC 9.4 % 11.3 % 17.1 % 19.2 % 18.7 % Years of strong growth Valuation as on date (Rs) Valuation as of 30 th Sept Based on DCF, assuming 20 years of 14% revenue CAGR growth and 18.5% average ROIC, we derive current fair value of Rs. 280 and Sept 17 fair value of Rs Company Description: Incorporated in 1974 as Indian Fine Blanks Ltd., IFB Industries currently manufactures markets and trades in home appliances like fully automatic front and top load washing machines, microwave ovens, ACs etc. It also manufactures and markets fine blanking products for the auto industry. Set up by a technocrat named Mr. Bijon Nag in Kolkata, it has manufacturing facilities in Kolkata and Bangalore for fine blanking division and in Goa for Home appliances division. It also imports various products from countries like Italy, China, and Korea etc. Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY16A FY17E FY18E FY16A FY17E FY18E FY16A FY17E FY16A FY17E FY18E FY16A FY17E IFB TRADE , thSept % 12 % 14 % 0.0 % 0.0 % Hitachi TRADE 1,452 39,472 1,165 31st Mar' % 25 % 29 % 0.2 % 0.4 % Whirlpool NR ,270 NR NR % 17 % 23 % 0.0 % 0.0 % August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 5 of 11

6 Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q16A 2Q16A 3Q16A 4Q16A 1Q17A 2Q17E 3Q17E 4Q17E 1Q18E 2Q18E 3Q18E 4Q18E FY16A FY17E FY18E FY19E Revenue 3,520 3,680 4,125 3,685 4,177 4,364 4,911 4,215 5,158 5,115 6,458 4,582 15,009 17,667 21,313 24,947 Cost of RM consumed 1,673 1,362 1,792 1,346 1,535 1,750 1,989 1,673 2,063 2,005 2,596 1,819 6,071 6,947 8,483 9,932 Purchase of stock-in-trade , ,536 3,202 3,623 4,241 Employee Cost ,556 1,650 2,167 2,484 EBITDA ,099 1,446 1,761 Depreciation EBIT ,091 Interest Other Income PBT ,169 Tax Recurring PAT Extraordinary Reported PAT EPS (Rs) Key Drivers Washing Machines - FL (units) 300, , , ,753 Washing Machines - TL (units) 120, , , ,160 Sequential Growth (%) Revenue 8 % 5 % 12 % -11 % 13 % 4 % 13 % -14 % 22 % -1 % 26 % -29 % Cost of RM consumed 111 % -19 % 32 % -25 % 14 % 14 % 14 % -16 % 23 % -3 % 29 % -30 % EBITDA 53 % -1 % -23 % -46 % 176 % 23 % 19 % -50 % 150 % -20 % 44 % -80 % EBIT -241 % -7 % -49 % -126 % -1,198 % 26 % 29 % -82 % 661 % -30 % 71 % -113 % Recurring PAT 793 % -12 % -30 % -23 % 197 % -4 % 24 % -65 % 297 % -29 % 65 % -101 % EPS 777 % -12 % -30 % -23 % 197 % -4 % 24 % -65 % 304 % -29 % 65 % -101 % Yearly Growth (%) Revenue 21 % 17 % 25 % 13 % 19 % 19 % 19 % 14 % 23 % 17 % 31 % 9 % 19 % 18 % 21 % 17 % EBITDA 2 % -25 % -22 % -37 % 14 % 41 % 117 % 101 % 82 % 19 % 44 % -42 % -20 % 58 % 31 % 22 % EBIT -50 % -50 % -60 % -82 % 37 % 85 % 363 % -415 % 118 % 20 % 60 % -220 % -48 % 149 % 43 % 27 % Recurring PAT -39 % -40 % -59 % 325 % 41 % 54 % 175 % 23 % 64 % 21 % 60 % -103 % -37 % 70 % 32 % 25 % EPS -40 % -41 % -60 % 318 % 41 % 54 % 175 % 23 % 67 % 23 % 63 % -103 % -37 % 70 % 32 % 25 % Margin (%) EBITDA 6 % 6 % 4 % 2 % 6 % 7 % 7 % 4 % 9 % 7 % 8 % 2 % 5 % 6 % 7 % 7 % EBIT 3 % 3 % 1 % 0 % 3 % 4 % 5 % 1 % 6 % 4 % 6 % -1 % 2 % 3 % 4 % 4 % PBT 4 % 3 % 1 % 1 % 4 % 4 % 5 % 2 % 6 % 4 % 6 % 0 % 2 % 4 % 4 % 5 % PAT 3 % 3 % 2 % 1 % 4 % 3 % 4 % 1 % 5 % 3 % 4 % 0 % 2 % 3 % 3 % 4 % August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 6 of 11

7 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Consolidated Financials IFB industries Ltd. Absolute TRADE Relative Equal weight 3% ATR in 14 Months P&L (Rs Mn) FY16A FY17E FY18E FY19E Balance Sheet (Rs Mn) FY16A FY17E FY18E FY19E Cash Flow (Rs Mn) FY16A FY17E FY18E FY19E Revenue 15,009 17,667 21,313 24,947 Equity Capital PBT ,169 Op. Expenditure 14,315 16,567 19,867 23,186 Reserve 3,771 4,302 5,002 5,879 Depreciation EBITDA 694 1,099 1,446 1,761 Networth 4,183 4,715 5,415 6,292 Others Depreciation Long Term Debt Taxes Paid EBIT ,091 Def Tax Liability Change in WC Interest Expense Minority Interest Operating C/F ,208 1,417 Other Income Account Payables 2,266 3,236 3,951 4,626 Capex ,000-1,600 PBT ,169 Other Curr Liabi ,066 1,247 Change in Invest Tax Total Liabilities & Equity 7,914 9,539 11,137 12,869 Others PAT bef. MI & Assoc Net Fixed Assets 2,977 3,277 3,687 4,167 Investing C/F ,000-1,600 Minority Interest Capital WIP Change in Debt Profit from Assoc Others ,178 Change in Equity Recurring PAT Inventory 2,144 2,904 3,503 4,101 Others Extraordinaires Account Receivables 1,155 1,307 1,577 1,845 Financing C/F Reported PAT Other Current Assets ,074 Net change in cash FDEPS (Rs) Cash RoE (%) 8 % 12 % 14 % 15 % DPS (Rs) Total Assets 7,913 9,538 11,136 12,869 RoIC (%) 7 % 11 % 13 % 14 % CEPS (Rs) Non-cash Working Capital ,018 1,148 Core RoIC (%) 5 % 9 % 11 % 13 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 0 % 0 % 0 % 0 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 5 % 6 % 7 % 7 % FA Turnover P/B PATM (%) 2 % 3 % 3 % 4 % Net D/E P/FCFF Tax Rate (%) 11 % 21 % 25 % 25 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) 19 % 18 % 21 % 17 % Capital Employed/Equity EV/Sales FDEPS Growth (%) -37 % 70 % 32 % 25 % Dividend Yield (%) 0.0 % 0.0 % 0.0 % 0.0 % TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward RoE TTM P/B vs. 2 yr forward EBITDA growth EPS Growth 80% 60% 40% 20% 0% -20% -40% 50x 35x 25x 15x 5x RoE 80% 70% 60% 50% 40% 30% 20% 10% 0% 8x 6x 4x 2x 1x EBITDA Growth 140% 120% 100% 80% 60% 40% 20% 0% -20% 40x 30x 20x 15x 10x August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 7 of 11

8 Historical Consolidated Financials P&L (Rs Mn) FY13A FY14A FY15A FY16A Balance Sheet (Rs Mn) FY13A FY14A FY15A FY16A Cash Flow (Rs Mn) FY13A FY14A FY15A FY16A Revenue 9,159 10,215 12,615 15,009 Equity Capital PBT Op. Expenditure 8,654 9,619 11,749 14,315 Reserve 2,751 2,967 3,457 3,771 Depreciation EBITDA Networth 3,156 3,372 3,870 4,183 Others Depreciation Long Term Debt Taxes Paid EBIT Def Tax Liability Change in WC Interest Expense Minority Interest Operating C/F Other Income Account Payables 1,199 1,420 2,267 2,266 Capex PBT Other Curr Liabi Change in Invest Tax Total Liabilities & Equity 5,383 6,412 7,709 7,914 Others PAT bef. MI & Assoc Net Fixed Assets 1,868 2,257 2,730 2,977 Investing C/F Minority Interest Capital WIP Change in Debt Profit from Assoc Others Change in Equity Recurring PAT Inventory 1,320 1,555 2,231 2,144 Others Extraordinaires Account Receivables ,155 Financing C/F Reported PAT Other Current Assets Net change in cash EPS (Rs) Cash 1,014 1, RoE (%) 11 % 15 % 14 % 8 % DPS (Rs) Total Assets 5,384 6,412 7,709 7,913 RoIC (%) 10 % 13 % 11 % 7 % CEPS (Rs) Non-cash Working Capital Core RoIC (%) 9 % 10 % 10 % 5 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 0 % 0 % 0 % 0 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 6 % 6 % 7 % 5 % FA Turnover P/B PATM (%) 3 % 5 % 4 % 2 % Net D/E P/FCFF Tax Rate (%) 27 % 13 % 16 % 11 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 14 % 12 % 23 % 19 % Capital Employed/Equity EV/Sales FDEPS growth (%) -29 % 57 % -3 % -37 % Dividend Yield (%) 0.0 % 0.0 % 0.0 % 0.0 % August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 8 of 11

9 Equirus Securities Pankaj Sharma Executive Director /41 Research Analysts Sector/Industry Equity Sales AbhishekShindadkar IT Services SubhamSinha AnirvanSarkar Banking & Financial Services Sweta Sheth Ashutosh Tiwari Auto, Metals & Mining VishadTurakhia Devam Modi Power & Infrastructure DhavalDama FMCG, Mid-Caps Dealing Room Maulik Patel Oil and Gas Ashish Shah Nimish Mehta Pharma IleshSavla UmeshRaut Industrials JigarChokshi Associates Manoj Kejriwal Ankit Choudhary Sandip Amrutiya Manoj Gori Compliance Officer Meet Chande Smita Sharma ParvaSoni Pranav Mehta Raj Kantawala Saylee Warade 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 SHORT: ATR <= negative 5% over investment horizon TRADE: Stocks that do not meet the criteria for either LONG or SHORT 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 Target Price and Investment Horizon Target Price is a point value for stocks with Absolute rating of LONG or SHORT and a range value for stocks rated TRADE. Investment Horizon is set at a minimum 3 months to maximum 15 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 Gujarat Tel. No: +91 (0) Fax No: +91 (0) August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 9 of 11

10 2016 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 We, Manoj Gori / DhavalDama, 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.we 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. Disclaimers 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 ). There are no disciplinary actions that have been taken by any regulatory authority. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker. ESPL/its affiliates provide investment banking services including but not limited to Private Equity, Mergers & Acquisitions, Structured Finance and Institutional Equities. ESPL/its affiliates might have, managed or co-managed public offering of securities of the subject company or have received a mandate from the subject company or might have received compensation from the subject company for investment banking or brokerage services in the past twelve months. ESPL & its affiliates, 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 or its Analyst 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. Research Analyst might have served as an employee of the subject company in the past. 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Thus, investors should be aware that the firm may have conflict of interest. Additional 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 website. This Report and its respective contents does 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. August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 10 of 11

11 Disclosures Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Analyst/ESPL/Associate/Relatives financial interest Analyst/ESPL/Associate/Relatives actual/beneficial ownership of 1% or more Analyst/ESPL/Associate/Relatives material conflict of interest Whether ECPL managed any public offering in past 12 months * Associate means individual who assist Analyst No No No No August 1, 2016 Analyst:ManojGori( )/DhavalDama ( ) Page 11 of 11