GREAVES COTTON LTD. ENGINEERED FOR GROWTH

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1 GREAVES COTTON LTD. ENGINEERED FOR GROWTH

2 4 Recommendation BUY Engine-ered for Growth!!! CMP (06/05/2013) Rs. 71 Target Price Rs 92 Sector Stock Details Industrial Machinery BSE Code NSE Code Bloomberg Code GREAVESCOT GRV IN Market Cap (Rs crs) 1,730 Free Float (%) 48.44% 52- wk HI/Lo (Rs) 88/60 Avg. volume BSE+NSE (Quarterly) 81,513 Face Value (Rs) 2.0 Dividend (FY 13) 80% Shares o/s (Crs) 24.4 Relative Performance 1Mth 3Mth 1Yr Greaves Cotton 5.7% -13.8% -11.7% Sensex 3.6% -0.1% 14.1% Shareholding Pattern 31 st Dec 12 Promoters Holding 51.56% Institutional (Incl. FII) 35.61% Corporate Bodies 3.28% Public & others 9.55% Silky Jain Research Analyst ( ) Sunil Jain HOR Retail ( ) Year Net Sales (Rs crs) Growth (%) EBITDA (Rs crs) Greaves Cotton (GC), established in 1859 is one of India's leading and welldiversified engineering companies. The company manufactures wide range of products such as Diesel / Petrol Engines for Automotive and Industrial applications, Gensets, Pump sets, Farming Equipment and Construction Equipment at 12 manufacturing facilities. Greaves Cotton enjoys dominant position in 3W engine market and is tapping the opportunity of accelerated growth in 4-wheeled SCV engines. Long-term supply agreements with large OEMs provide growth visibility. GC has nearly 53 OEMs as its customers which reduces the risk of dependence (earlier was highly dependent on Piaggio) for the company. GC is also targeting to add OEMs in its client list and the existing clients are launching new products which will also be supplied by Greaves Cotton. Apart from the automotive engine business where GC is comfortably placed, the company is also focusing on improving its market share in non automotive business. For the same the company is focusing on R&D and distribution network along with product launches expected to happen in FY14E. The company s construction equipment business is currently facing loss resulting from the turmoil happening in the overall industry. With break even expected in this segment towards the end of FY14E the company s overall performance is expected to witness improvement. We expect sales to report CAGR of 14% over FY13-FY15E and net profit to witness CAGR of 22% over the same period. Greaves Cotton has been focusing on reducing the overall cost through various efforts like vendor rationalization, change in product mix, rebuilding distribution network, focus on increasing spare parts business etc which we believe will help in improving the margins of the company. In addition the strong balance sheet position of the company with almost negligible D/E ratio, healthy free cash flow and attractive return on equity further adds to our confidence in the stock. GC has consistently been paying impressive dividend to its shareholders and has also rewarded with special dividend. Looking ahead the outlook looks encouraging and therefore we recommend investors to BUY the stock at current levels as it is available at attractive levels compared to its underlying earnings potential. Any positive change in the overall demand environment, will lead to a significant appreciation in the stock price. In Q4FY13, GC witnessed decline in EBITDA margins which was due to higher employee costs and unfavorable product mix. However, we believe that the recent price correction factors in all the major concerns. At CMP the stock is trading at 9.29x FY14E and 7.88x FY15E earnings respectively. Based on a target P/E multiple of 12x (as the stock was trading at multiple above 12 during April 10-April 12) and FY14E EPS of Rs 7.63, we arrive at target price of Rs92 indicating an upside of 29% from current levels. Thus, we recommend investors to BUY the stock at current levels from a long term perspective. Margin (%) Adj PAT (Rs crs) Margin (%) EPS (Rs) PE (x) EV/Sales EV/EBITDA FY12 1, % % % FY13 1, % % % FY14E 2, % % % FY15E 2, % % % P a g e

3 Investment Rationale Valuation attractive post stock decline Greaves Cotton stock has declined ~12% YTD despite recovery in the broader markets primarily factoring in the concerns over growth slowdown in most of the business segments where it operates like auto and construction equipment. Moreover, significant fall in the mid-cap stocks recently also attributed to the decline. Notably, BSE Auto Index is down more than 5% YTD, while the BSE MID CAP index was down ~10% during the same period. We believe that the decline in the stock offers an attractive entry point for long term investors as we believe that: Greaves Cotton has all the right ingredients for a scalable model- Stable management which has been able to sail the company in times of difficult environment Diversified product profile making the company less prone to any risk emerging in any particular segment concentration Attractively placed in the 3W segment with dominant market share Expanding foothold in the SCV segment Reducing dependence on single customer - currently serves nearly 53 OEMs Strong return ratios and attractive dividend yield Clean balance sheet with zero net debt The above factors convince us that the current underperformance of the stock is primarily due to the weakness prevailing in the overall industry in which the company operates. However, we believe that largely the concerns are overdone and expect the stock to recover smartly in coming months. Once the industry starts witnessing signs of revival (which we expect to happen in H2FY14E) the recovery in the stock would be at a faster pace as the future outlook of the company looks promising. We expect RoE to improve from 22.2% in FY13 to 23.4% in FY15E and RoCE to improve from 28.3% in FY13 to 30.7% in FY15E. At CMP of Rs71 the stock is trading at 9.29x FY14E and 7.88x FY15E earnings respectively. Based on a target P/E multiple of 12x (as the stock was trading at multiple above 12 during April 10-April 12) and FY14E EPS of Rs 7.63, we arrive at target price of Rs92 indicating an upside of 29% from current levels. Thus, we recommend investors to BUY the stock at current levels from a long term perspective. 140 P/E - Forward Closing price 3.0 X 6.0 X 9.0 X 12.0 X 15.0 X Source: Nirmal Bang Research 2 P a g e

4 120 P/BV - Forward Closing Price 1.0 X 1.5 X 2.0 X 2.5 X 3.0 X Source: Nirmal Bang Research Peer comparison Greaves Cummins Kirloskar Oil Engines FY14E FY15E FY14E FY15E FY14E FY15E Sales 2,182 2, EBITDA EBITDA margins 13.8% 14.1% 18.3% 18.5% 14.5% 13.7% EPS BV RoE 23.3% 23.1% 29.3% 29.5% 18.6% 20.0% P/E P/BV Based on BBG estimates for others and NB estimates for Greaves Dominant position in the automotive engine segment Greaves Cotton enjoys a very strong market position in 3W engine market. Greaves Cotton s engines command leadership with over 80% market share in the 3W diesel segment and the company is gradually increasing its market share in the small commercial 4W segment (SCV). The Small Commercial Vehicle (SCV) segment offers tremendous potential of growth driven by increasing acceptance of hub-and-spoke model in logistics sector and rapid urbanization of semi urban geographies. In 3 Wheelers: The company is sole supplier of light diesel engines to OEMs like Piaggio, M&M & Atul Auto. GC has a dominant market position in the auto engine business as there are very few players competing in the market. The entry barriers remain high as it takes nearly 3-4 years for a new engine development and around 6-9 months for an engine modification. Further, the players have to win the approval from their customer s post which the supply agreement is signed. We do not foresee any major competition threat to Greaves as it enjoys strong technological edge in the auto engine market Piaggio is the prime client accounting for the bulk of automotive engines revenue. However, Greaves has been able to reduce dependence on single customer and contribution from Piaggio stands at 35-40% of total auto revenues and nearly 25% of total revenues. Although 3W sales started on a weak note impacted by slowdown in economy, we have seen that there has been some uptrend in the sales in the last 3-4 months which helped the segment to report a marginal growth of 5% as against a de-growth last year. 3 P a g e

5 600, , , , , , W industry sales 26% 19% 5% -4% -2% -10% FY08 FY09 FY10 FY11 FY12 FY13 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Volume Growth in % Source: SIAM, Nirmal Bang Research Vehicles with Greaves engines enjoys nearly ~96% market share in the goods segment and 46% share in the passenger vehicles segment % 100.0% 80.0% 78.5% Market Share in 3W (%) 95.7% 92.7% 87.5% 87.2% 96.8% 60.0% 40.0% 20.0% 44.5% 50.0% 49.2% 47.4% 48.5% 46.0% 0.0% FY08 FY09 FY10 FY11 FY12 FY13 Passenger Cars Goods Carriers Source: SIAM, Nirmal Bang Research 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Apr 12 May 12 June 12 Monthly 3W volumes July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Goods Passenger Source: SIAM, Nirmal Bang Research Piaggio s volume growth has been slightly under pressure (in-line with the industry trend). However, GC has been successful in reducing dependence on Piaggio as it currently caters to nearly 53 OEMs reducing the risk of concentration. 4 P a g e

6 Source: SIAM, Nirmal Bang Research Strong growth at Atul Auto has been able to assist GC s top-line performance. Atul Auto has gained market share in both passenger (2.2% in FY13 from 1.5% in FY11) and goods carrier segment (15.5% in FY13 from ~9.5% in FY11) Source: SIAM, Nirmal Bang Research In 4 Wheeler SCV In the four wheeler SCVs (0-3.5T), Greaves supplies primarily to Tata Ace Zip and Magic Iris. GC s share in 4-wheeled SCV segment stood at ~10% in FY13 up from ~3% in FY11. Going forward, GC aims to emerge as the second largest supplier in SCV segment in next 3-5 years. GC sold nearly 65,000 engines in the 4W SCV segment registering a growth of 100% in FY13. The 4W segment is witnessing Sustained ramp-up and achieved monthly run rate of 7,300 units in March 13 vs 6,000 units in Mar 12. GC is also going to be the sole engine supplier for Tata Ace Zip's CNG variant to be launched in FY14E. Piaggio is focusing on increasing penetration in 4W SCV segment with launch of some products (brand Porter ( tonne category) in the 4W expected very soon (soft launch in process) similar to that of Tata Ace and Mahindra Maxximo. Greaves Cotton will provide a small capacity engine for the Porter 600 while for the Porter 1000 Piaggio will provide its own engine. It is also looking to re launch its LCV model Ape Truck in FY14 which will also source engines from Greaves Cotton. Greaves Cotton is in discussions with other OEMs (M&M, Ashok Leyland etc) for long-term engine supplies. GC s revenue will be boosted further when the company manages to add more OEMs in its client list. 5 P a g e

7 500,000 Industry 4W SCV 40% 400,000 28% 32% 30% 23% 21% 20% 300,000 10% 200, ,000-8% FY08 FY09 FY10 Volumes SCV FY11 FY12 Growth YoY FY13 0% -10% Source: SIAM, Nirmal Bang Research Agreement details Duration Effective from Piaggio Mahindra and Mahindra Atul Auto Tata Motors Long term relationships with the customers have enabled Greaves Cotton to create a strong foothold for itself in the industry, which has enabled the company to maintain strong position in the 3W and SCV engines market. Expansion in capacity to cater to increasing demands Greaves Cotton has expanded its capacity significantly over last two years from 3.6 lakh units in FY11 to 5.25 lakh units in FY13, reflecting an increase of ~50%. Capacity at Ranipet plant has been increased from 1.5 lakh units to 3 lakh units in order to cater to increasing demand from Tata Motors SCV (Magic Iris and Ace Zip). Sales of Magic Iris and Ace Zip have increased substantially over last one year as the SCV and LCV gained importance which affirms the management strategy to focus on increasing share of SCV. FY11 FY13E Ranipet (Tata SCV 4 W) 150, ,000 Total Capacity 360, ,000 The company is operating at 85% capacity utilization currently and is not worried about falling short of capacity as the company has created infrastructure background which would result in quick addition of capacity (in- house or outsourcing) which suggest that GC is not in a mood for further expansion and is well equipped for future demand. The flexibility of capacity ramp up at new plant provides a long term visibility for the top-line growth. Segment Capacity utilization Automotive 85% Farm equipment 90% Industrial engine and power genset 75-80% 6 P a g e

8 Diversification in different fields- Acts as cushion in challenging times Automotive engine is GC s largest business contributor and contributed nearly 60% of revenues in FY13. However, GC intends to increase its share in other non-automotive business which also offers huge demand potential. Steps taken by the company to increase diversification: Focus on three dimensions extend product range, extend market range, extend geographies Introduction of new products with upgraded features to enhance the product portfolio. Investing on R&D to improve the competitive position in the non automotive business. The R&D expenses as % of sales have been in the range of 2% which is expected to be maintained going forward. Focus on achieving breakeven at the Construction equipment business. The segment is poised to recover with uptick in economic activity from H2FY14 onwards. Introduction of new products in the farm equipment to increase contribution from this segment. 100% 80% 60% 40% 20% 0% 9% Break-up of revenues 9% 16% 15% 20% 16% 55% 60% FY12 FY13 Auto Engines Auxiliary power and industrials Agri Const Equp Product innovation along with increasing farm mechanization to have positive impact Greaves Cotton manufactures range of products in the agri segment like Kerosene, diesel and petrol engines: Greaves enjoys market share of more than 50% in the portable petrol/ kerosene engines. However, GC is not a leader in diesel engines and is taking steps to increase presence through product enhancements and focus on distribution. Pump sets (in the range of 1-10 HP): GC has a market share of ~40%. Power tillers: The other key contributor to the company s revenues apart from kerosene/petrol engine and pump set is the power tillers business where Greaves has a small market share of ~7%. Sprayers and Reapers Greaves has forayed in mini tractor segment with launch of 11 HP tractor. Greaves targets to launch more products in the mini tractor segment which comprises of sub 20 HP tractors. The overall market size for mini tractor is estimated to be Rs 400 cr and is expected to grow at 20% YoY. Within this, 11 HP market size is nearly 80 cr and Greaves is aiming to acquire a substantial market share in this segment. GC derives benefit in the form of distribution network with no change of customer base and use of in house engines leading substantial cost saving. GC plans to invest Rs 25 cr in FY14E in the farm equipment business. 7 P a g e

9 Going forward, stable monsoons and higher need for farm mechanization coupled with introduction of new products would lead to an increased contribution from the farm equipment business of the company. Currently farm contributes nearly 15% of total revenues. Industrial engines another feather in the cap Greaves focuses on expanding engine use for industrial applications through new product development along with increase in marketing network. The company currently offers HP engines for various industrial applications. Greaves caters to segments such as marine, fire-fighting equipment, material handling (cranes, forklifts), defense, and road sweepers etc. GC has 25% share (currently market leader) in the fire fighting pumps market. The fire fighting pumps market is growing at ~10% annually. In the marine engines GC currently caters to smaller engines whereas market is moving towards high engine business and GC is focusing on higher engine as well. Growing focus on Auxiliary Power business The Auxiliary Power Business of the company manufactures a range between KVA Silent Diesel Gensets and control panels, provides aftermarket support to its customers through presence of distributors. It caters to demand from retail, hospitality, healthcare, real estate, infrastructure, manufacturing, pharma, etc. Greaves is weak on competition front in the auxiliary power business; however it is taking steps to improve competitiveness in the segment by: Targeting an increase in post sales service network (currently GC dealer only provide spare parts for automotive engines) and Launching new products in the low KVA segments (sub 20 KVA). Players Range Kirloskar, Cummins, Greaves Upto 26 KVA Kirloskar, Cummins, Greaves KVA Kirloskar, Cummins KVA Cummins Above 1000 KVA Greaves is also expanding its footprints into higher KVA- 500 and above (currently Greaves is absent in higher KVA segment) in order to become a one stop-shop for all the customer needs. Resulting from the various measures adopted by the company to revamp its business strategy, Management expects its auxiliary power business to grow at a healthy rate in FY14E. Breakeven at Construction Equipments contributor to profitability Greaves Cotton manufacturers road compaction equipments (rollers and vibratory) and concreting products (concrete pumps, transit mixers and batching plants) in the construction equipment segment. Greaves has 22 23% market share in concrete and 12-13% market share in road segment. This segment is currently witnessing pressure due to overall slowdown in the infrastructure segment and higher imports. However, Greaves has been able to improve market share in the segment, aided by introduction of new products and technology tie up with SAMIL of Korea. In Q4FY13, GC reported revenues of Rs 51.6 cr in infra segment; however, higher costs due to rebranding and restructuring of assets and lower margins as old inventory was disposed off at discounted price impacted the overall EBIT margin of the segment and the company could not achieve break even in Q4FY13. 8 P a g e

10 However, with most of the rebranding done and introduction of new products like: Stationary concrete pump with S valve technology (market growing at 18-20%) and is replacing the earlier obsolete flat gate technology Boom pump which is also growing at 20%+ will drive the revenues in FY14E We believe that going forward; initiatives taken on the product portfolio would help in sustaining the growth in volumes and sales. Management aims to achieve EBIT break even in this segment by FY14E with revenues of Rs 200 cr. However, we expect breakeven to happen only by Q4FY14E. Q1FY12 Q2FY12 Q3FY12 Q4FY12 FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 FY EBITDA margins showing signs of improvement Greaves Cotton has been focusing on reducing the overall cost through various efforts like vendor rationalization, change in product mix, rebuilding distribution network etc. Structurally auto engines and farm equipment fetch better margins for the company. The efforts of the company have been visible and we have seen EBITDA margins improving from low of 12.1% in Q1FY13 to 12.8% in Q4FY13. However, margins were lower in Q4FY13 both QoQ and YoY on account of investment in capability building activities and higher employee cost. Going forward we expect EBITDA margins to improve to 13.8% in FY14E and 14.1% in FY15E based on the following: Cost rationalization to continue Higher contribution from 3W segment Addition of new OEMs in the company s client list Increasing contribution from farm equipment segment. Higher share of spares in total revenues. Breakeven of Construction equipment business which will help in absorbing the fixed cost of the company in the segment. 18.0% Quarterly EBITDA margins 17.0% 17.0% 16.0% 15.8% 15.0% 14.2% 14.4% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 13.1% 14.4% 12.4% 13.4% 12.1% 12.8% 13.9% 12.8% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% EBITDA margins 14.4% 15.3% 14.8% 13.6% 14.0% 13.5% 12.6% 11.0% FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E Increasing focus on high margin after sales business Greaves cotton has a strong network of spare part suppliers across the country. It has positioned itself well by focusing on after sales market for its products. The company has a wide dealership network of around 1200 dealers. This business provides after sales services for its engines, power tillers, construction equipments, gensets etc. In the farm equipment the company provides direct after sales service to its clients whereas in other segments the company operates through large 9 P a g e

11 distributors. Going forward the company intends to Increase contribution from spare and service business through renewed focus on aftermarket support. Spares reported revenue growth of 20% in FY13 and reported revenues of Rs 338 cr (contributing ~15% of revenue) in FY13. Going forward, Management aims to increase the contribution from spare parts to nearly 20% of the total revenues which will also aid in higher margins. Targeting exports Greaves has been consistently focusing on increasing the export contribution in the total sales of the company. The company exports industrial engines, gensets and other machinery to Asian, Middle East and African countries. The company is actively pursuing new market development and has initiated various steps to strengthen its competitive position in the 4W SCV segment besides exploring applications beyond the auto segment. GC has established ~25 distributors in international market in order to expand presence and offer after market services which is a crucial part of expanding international presence. Management aims to focus on growing sales of Greaves Gensets in the Middle East and construction equipment in the South Asian region. GC follows a region-specific approach and has identified & developed products relevant for each of these regions and is accordingly developing its network and sales strategy. The company also acquired one of its distributor firms, Ascot International FZC (Ascot) in Sharjah with the prime objective of serving its network in the Middle East. Owing to these efforts, Management expects to witness a strong growth in its export business and targets its overseas business to contribute nearly 10% to its overall sales by FY15E. 5.6% 5.4% 5.2% 5.0% 4.8% 4.6% 4.4% 4.2% 4.0% 4.5% 5.4% 4.6% 5.2% FY09 FY10 FY11 FY12 Overseas contribution Strong operating performance & better working cap cycle to result in higher cash flows Greaves enjoys healthy track record of positive free cash aided by stable profitability and tight control on the operating cycle. Company s free cash flow was impacted in FY12 as the company was in the investment phase and had incurred capex of ~Rs106cr which kept cash flows under pressure. In FY13 slowdown in industrial activities resulted in GC extending the time period for debtors which resulted in an increase in debtor days. However, with most of the capex behind and some improving economic conditions; we expect GC to reap the benefits and expect its cash flow to increase over the next couple of years. Working Capital FY11 FY12 FY13 FY14E FY15E Drs days Inv days Crs days WC Days P a g e

12 Rs Cr Free Cash Flows FY11 FY12 FY13 FY14E FY15E Going forward we believe that higher growth, improved profitability and better management of working capital would help GC to maintain stable working capital cycle which would result in higher cash flows going forward. Greaves cotton is a debt free company with zero net debt. Strong Return Ratios A notable point of Greaves Cotton is the consistency in the return ratios. GC operates in a highly knowledge intensive industry and is distinguished by high asset turnover and strong free cash flow from operations. Greaves Cotton has been able to sustain greater than 20% RoE and 30% RoCE (except in FY13). We believe that the company will be able to improve its return ratios going forward driven by improvement in earnings. 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% Return Ratios 39.0% 35.9% 33.0% 28.0% 27.3% 28.3% 30.4% 30.7% 23.1% 22.2% 23.4% 23.4% FY10 FY11 FY12 FY13 FY14E FY15E RoCE RoE Attractive Dividend yield GC has consistently been paying impressive dividend to its shareholders. In FY10 and FY12, dividend payout was 150% and 110% respectively on the face value (including special dividend of 75% and 40% in FY10 and FY12 respectively). However, in FY11, company did not pay any special dividend. Nonetheless, company has a very strong track record of paying dividends consistently for last 7-8 years. Further, with no significant capex lined up over next couple of years, we expect the dividend payout to be quite strong and result into an attractive yield of 3-4%. 11 P a g e

13 Rs 4 5% 3 4.2% 3.4% 4% 2 3.1% 2.8% 3% 1 1.7% 2.1% 2.3% 2% 0 1.1% FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E 1% Dividend Yield % Q4FY13 result snapshot Particulars Q4FY13 Q4FY12 YoY Q3FY13 QoQ Comment Net sales % (3.8%) Other operating income % 1.4 (33.3%) Total income % (3.9%) RM cost % (3.7%) RM cost % of sales 70.4% 68.3% 70.3% Employee cost % % Other exp (2.7%) % Total expenditure % (2.6%) EBITDA % 71.7 (12.1%) EBITDA margin 12.7% 13.4% 13.9% Other income % 6.9 (45.7%) Interest (68.4%) % Depreciation % % PBT before exceptional % 68.5 (18.9%) Exceptional items N/A N/A PBT (42.3%) % Tax (6.8%) 18.0 (4.2%) Tax rate 31.1% 35.0% 26.3% PAT % 50.5 (24.1%) Adjusted PAT (50.7%) 43.8 (12.7%) PAT margin 7.7% 17.5% 8.5% EPS (50.7%) 1.8 (12.7%) Revenues grew 11.3% yoy led by 35% yoy growth in Infrastructure segment The benefit of material cost reduction was offset by unfavorable product mix. EBITDA margins declined both QoQ and YoY led by higher employee costs and investment in capability building activities coupled with EBIT loss in Infrastructure segment 12 P a g e

14 Company overview Greaves cotton conducts its business under four different business segments Agri Equipment: Manufactures and market agri equipments and is a market leader in petrol/ kerosene engines. The product range includes such as light weight petrol, diesel engines, pump sets, power tillers, reapers and mini farming equipment etc. The manufacturing facility is located at Gummidipondi (TN) Automotive: Manufactures light diesel engines for automotive application (4.4 to 25 HP) for three and four wheeler small commercial vehicles. Greaves is the market leader in single and twin cylinder diesel engine. The manufacturing facility is located at Aurangabad and Ranipet (TN) Auxiliary Power and Industrial Engine: Manufactures diesel and gas gensets in the range of KVA, engines for marine, fire fighting pump sets, mining, rail cars etc. The manufacturing facility is located at Pune. The diesel engines range from 1.4 to 750 HP range with option for CNG/LPG fuel. Construction Equipment: Manufacture range of compaction, concreting and earthmoving equipment. The manufacturing facility is located at Gummidipondi (TN) Risks/Concerns: Any increase in the raw material prices can lead to a decline in the EBITDA margins of GC. Increasing competition and failure to meet the customers expectations can also impact the overall sales of the company. Any slowdown in demand for light commercial vehicle segment will have an adverse impact on the company s sales and profitability. Any slowdown in the performance of the major clients of the company can have an adverse impact on Greaves Cotton s top line performance. Any loss of OEM customer may impact business of the company Longer than expected time taken for break-even of the company s construction equipment segment may impact margins of the company 13 P a g e

15 Financials Profitability (Rs. In Cr) FY12A FY13 FY14E FY15E Balance sheet (Rs. In Cr) FY12A FY13E FY14E FY15E Net Sales 1,789 1,906 2,159 2,466 Share Capital Other op income Reserves & Surplus Total Income 1,789 1,906 2,159 2,466 Share Holder's Funds ,014 Total Cost 1,553 1,666 1,865 2,121 Deferred Tax Liab EBITDA Long Term Loans Dep Short Term Loans Op Income Other Long Term Liab Interest Total Liabilities ,083 Other Income Net Fixed Assets Exceptional Total Investments PBT Current Assets Tax Sundry Debtors PAT (reported) Cash & Bank Adj PAT Loans & Advances & Others Shares o/s ( No. in Cr.) Inventories EPS Current Liabilities & Provision Adj EPS Net Current Assets Adj Cash EPS Other Long Term Total Assets ,083 Quarterly (Rs. In Cr) Mar.12 June.12 Sep.12 Dec.12 Cash Flow (Rs. In Cr) FY12A FY13E FY14E FY15E Net Sales Operating income EBITDA Change in WC (39) (86.0) 12 (7) Dep Interest/Dividend net (19) (20) Op Income Direct Taxes Paid (66) (62.8) (80) (94) Interest Other Adjustment (38) Other Inc CF from Operation Extraordinary Capex (25) (71) (101) (93) PBT Interest/Div received Tax Others (40) 2 (10) (10) Exceptional item Total Investment (62) (69) (91) (81) PAT Dividend Paid (54) (46) (57) (69) Adj PAT Debt Repayment & Int 13 (17) (0) (1) Performance Ratio FY12A FY13 FY14E FY15E Total Financing (41) (63) (57) (70) Sales growth (%) 39.73% 6.5% 13.3% 14.2% Net Chg. in Cash 10 (29) EBITDA margin (%) 13.23% 12.6% 13.6% 14.0% Cash at beginning Adj.PAT margin (%) 7.35% 7.9% 8.6% 8.9% Cash at end ROE (%) 23.1% 22.2% 23.4% 23.4% Per Share Data FY12A FY13 FY14E FY15E ROCE (%) 33.0% 28.3% 30.4% 30.7% Reported EPS Valuation Ratio FY12A FY13 FY14E FY14E Adjusted EPS Price Earnings (x) BV per share Price / Book Value (x) Dividend per share EV / Sales Turnover Ratios FY12A FY13 FY14E FY15E EV / EBIDTA Debtor Days EV / Total Assets Inventory Days Dividend Yield 3.1% 2.3% 2.8% 3.4% Creditor Days P a g e

16 NOTES Disclaimer: This Document has been prepared by Nirmal Bang Research (A Division of Nirmal Bang Securities PVT LTD). The information, analysis and estimates contained herein are based on Nirmal Bang Research assessment and have been obtained from sources believed to be reliable. This document is meant for the use of the intended recipient only. This document, at best, represents Nirmal Bang Research opinion and is meant for general information only. Nirmal Bang Research, its directors, officers or employees shall not in anyway be responsible for the contents stated herein. Nirmal Bang Research expressly disclaims any and all liabilities that may arise from information, errors or omissions in this connection. This document is not to be considered as an offer to sell or a solicitation to buy any securities. Nirmal Bang Research, its affiliates and their employees may from time to time hold positions in securities referred to herein. Nirmal Bang Research or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document. Nirmal Bang Research (Division of Nirmal Bang Securities Pvt. Ltd.) B-2, 301/302, Marathon Innova, Opp. Peninsula Corporate Park Off. Ganpatrao Kadam Marg Lower Parel (W), Mumbai Board No. : /8001 Fax. : P a g e