Simplex Infrastructures

3QFY2014 Result Update Infrastructure February 18, 2014 Simplex Infrastructures Performance Highlights Quarterly Highlights Standalone Y/E March (` cr) 3QFY14 3QFY13 2QFY14 % chg (yoy) % chg (qoq) Net sales 1,392 1,352 1,285 3.0 8.4 Operating profit 146 130 148 12.2 (1.5) Adjusted Net profit 15 12 15 26.4 0.7 For 3QFY2014, Simplex Infrastructures (SINF) reported a poor set of numbers which were below our estimates. SINF s top-line performance was below our estimate on account of slow execution (due to slow moving order book) and delayed payments from clients; while earnings were below our estimate owing to lower than expected revenue performance and high interest. Slow execution & higher interest drags down profitability: On the top-line front, the company reported revenues of `1,392cr, registering a growth of 3.0% yoy, which is 7.0% lower than our estimate. The revenue contribution from the domestic and overseas operations stood at 87% and 13%, respectively, for 3QFY2014. EBITDAM came in at 10.5% showing an improvement of 86bp on a yoy basis and was above our estimate of 10.0%. Interest cost grew by 16.9% yoy to `86cr for the quarter. The company reported an adjusted PAT of `15cr for the quarter, a growth of 26.4% yoy, which is below our estimate of `18cr. This is mainly owing to lower-than-expected revenue performance and high interest cost during the quarter. Outlook and valuation: Simplex has not been performing well on the revenue front since the last six consecutive quarters due to slow moving orders and delays in payments from clients. The company has a strong order book (`16,708cr; 3.0x trailing revenue) and we expect execution to pick up from FY2015. Considering the current order book mix, we estimate revenue and PAT CAGR of 4.7% and 33.3% respectively over FY2013-15E. However, due to recent increase in stock price, we recommend a Neutral rating on the stock. NEUTRAL CMP `83 Target Price - Investment Period - Stock Info Sector Infrastructure Market Cap (` cr) 405 Net debt 2,676 Beta 1.2 52 Week High / Low 180/39 Avg. Daily Volume 8,685 Face Value (`) 2 BSE Sensex 20,464 Nifty 6,073 Reuters Code SINF.BO Bloomberg Code SINF@IN Shareholding Pattern (%) Promoters 55.7 MF / Banks / Indian Fls 18.9 FII / NRIs / OCBs 12.3 Indian Public / Others 13.2 Abs. (%) 3m 1yr 3yr Sensex 0.3 5.1 12.4 SINF 23.9 (50.2) (75.4) Key financials (Consolidated) Y/E March (` cr) FY2012 FY2013 FY2014E FY2015E Net Sales 5,983 5,885 5,924 6,457 % chg 24.5 (1.6) 0.7 9.0 Adj.Net Profit 89 53 65 95 % chg (28.2) (40.5) 21.6 46.1 EBITDA (%) 8.9 9.1 10.1 10.4 FDEPS (`) 18.1 10.8 13.1 19.1 P/E (x) 4.6 7.7 6.3 4.3 P/BV (x) 0.3 0.3 0.3 0.3 RoE (%) 7.8 4.2 4.9 6.7 RoCE (%) 10.7 8.6 9.1 9.9 EV/Sales (x) 0.4 0.5 0.5 0.5 EV/EBITDA (x) 4.6 5.6 5.1 4.7 OB/Sales (x) 2.6 2.6 2.8 2.8 Order Inflows 6,561 6,117 6,954 7,899 % chg (18.2) (6.8) 13.7 13.6 ; Note: CMP as of February 17, 2014 Amit Patil 022-39357800 Ext: 6839 amit.patil@angelbroking.com Please refer to important disclosures at the end of this report 1

Exhibit 1: Quarterly performance (Standalone) Y/E March (` cr) 3QFY14 3QFY13 2QFY14 % chg (yoy) % chg (qoq) 9MFY2014 9MFY2013 % chg Net Sales 1,392 1,352 1,285 3.0 8.4 4,072 4,335 (6.1) Total Expenditure 1,246 1,222 1,137 2.0 9.6 3,628 3,932 (7.7) Operating Profit 146 130 148 12.2 (1.5) 444 402 10.4 OPM (%) 10.5 9.6 11.5 - - 10.9 9.3 - Interest 86 74 82 16.9 5.5 250 212 17.9 Depreciation 52 51 51 2.1 0.7 152 151 1.0 Non Operating Income 12 14 11 (11.6) 11.9 29 36 (19.7) Nonrecurring items (2) (1) (4) 208.2 (50.5) (9) (9) (5.1) Profit Before tax 18 19 22 (3.2) (17.5) 62 66 0.8 Tax 5 7 11 (34.5) (55.2) 25 23 7.6 Net Profit before MI 13 11 11 16.7 17.9 37 43 (13.8) PAT (%) 1.0 0.8 0.9 - - 0.9 1.0 - Minority Interest (MI) - - - - - - - Net Profit after MI 15 12 15 26.4 0.7 46 53 (12.3) Adj. PAT (%) 1.1 0.9 1.2 1.1 1.2 Adj. FDEPS 3.1 2.4 3.0 26.4 0.7 9.3 10.6 (12.3) Exhibit 2: 3QFY2014 Actual vs Estimates (` cr) Estimates Actual Variation (%) Net Sales 1,497 1,392 (7.0) EBITDA 150 146 (2.7) EBITDAM (%) 10.0 10.5 (46.2)bp Interest and Financial Charges 82 86 4.8 Adj. PAT 18 15 (13.3) Execution disappoints The company reported revenues of `1,392cr registering a growth of 3.0% yoy, which is 7.0% lower than our estimate. This is mainly due to (a) slow moving order book and (b) working capital pressures due to delay in payments from clients. The revenue contribution from the domestic and overseas operations stood at 87% and 13%, respectively, for 3QFY2014. The Management has reduced its revenue growth guidance from ~5-10% to ~0-2% and maintained its order inflows guidance of `8,000-8,500cr for the full year. On the back of healthy order inflows in 9MFY2014 and huge order bidding pipeline, we believe the company would be able to meet its guidance in terms of order inflows. February 18, 2014 2

Exhibit 3: Execution performance disappoints Exhibit 4: Revenue mix (3QFY2014, %) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 28.1 1,585 1,398 1,352 1,486 1,395 1,285 1,392 5.7 (17.2) (12.0) (8.1) (13.9) 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 Sales (` cr, LHS) Growth (yoy %, RHS) 3.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 (5.0) (10.0) (15.0) (20.0) 8 23 27 8 13 20 1 Piling Power Marine Industrial Road Urban Utilities Bldg. & Hsg. Slower execution hurts profitability On the operating front, Simplex posted an EBITDA of `146cr in 3QFY2014, indicating a growth of 12.1% yoy. The EBITDAM came in at 10.5%, showing an improvement of 86bp on a yoy basis and is above our estimate of 10.0%. Going forward, given the current order book mix, we estimate Simplex to report EBITDA margins in the range of 9.0-9.5%. On the bottom-line front, the company reported an adjusted PAT of `15cr for 3QFY2014 (below our estimate of `18cr), a growth of 26.4% yoy. This is mainly owing to lower-than-expected revenue performance and high interest cost (up 16.9% yoy to `86cr) during the quarter. Exhibit 5: EBITDAM improves Exhibit 6: Slower execution hurts profitability 180 160 140 120 100 80 60 40 20 9.7 153 8.5 119 9.6 130 9.8 145 10.8 11.5 151 148 10.5 146 14.0 12.0 10.0 8.0 6.0 4.0 2.0 30 25 20 15 10 5 1.8 28 0.9 0.9 13 12 1.2 18 1.1 1.2 16 15 1.1 15 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 0.0 0 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 0.0 EBITDA (`cr, LHS) EBITDAM (%, RHS) PAT (` cr, LHS) PATM (%, RHS) Order book analysis The company s order book stood at `16,708cr (excluding L1 orders of ~`940cr), a growth of 10.9% yoy, thus converting into an order book to sales ratio of 3.0x trailing revenues. Simplex secured orders worth `1,611cr and `6,912cr in 3QFY2014 and 9MFY2014 respectively. Going forward, we expect the domestic segment to drive revenue growth, which constitutes 83% of the total order book. February 18, 2014 3

Exhibit 7: Order inflows Segment wise (%) Exhibit 8: Order backlog Segment wise (%) 31 5 4 8 - Piling Power 29 3 11 3 6 Piling Power Marine Marine 10 42 Industrial Road 10 37 Industrial Road Urban Utilities Urban Utilities Bldg. & Hsg. Bldg. & Hsg. Outlook and valuation Simplex has not been performing well on the revenue front since the last 6 consecutive quarters due to slow moving orders and delays in payments from clients. However, the company has a strong order book (`16,708cr; 3.0x trailing revenue) and we believe execution should pick up in FY2015. The Management has guided for a revenue growth of ~0-2% (from an earlier 5-10%) for FY2014; it expects order inflows to be around `8,000-8,500cr in FY2014. We believe the company would be able to meet its guidance in terms of order inflows. Further, Simplex is a well-diversified player in terms of sectors, geographies and client mix, and has limited exposure to road BOT assets unlike its peers. On back of the current order book mix, we estimate a revenue and PAT CAGR of 4.7% and 33.3%, respectively, over FY2013-15E. However, due to recent increase in stock price, we recommend a Neutral rating on the stock. Investment argument Diversified play Simplex is one of the oldest infrastructure companies in India (over eight decades of work log). Since inception, the company has been involved in different segments of the infrastructure sector, from piling (1924) to power (1960), to roads, railways and bridges (1980), and the real estate business (2007). The company has executed ~2,400 projects and is currently involved in more than 150 ongoing projects in India and abroad. This reflects the company's ability to successfully execute complex and numerous projects on time. The company is also well spread geographically, with a presence in countries in the Middle East such as Qatar, Oman, and UAE and is now venturing into newer geographies such as Bangladesh. In terms of its client profile, Simplex has a healthy mix of government and private sector projects. This successful diversification has not only provided the company the experience of executing different and complex projects but has also qualified it to bid for bigger ticket-size projects going ahead. February 18, 2014 4

Exhibit 9: Recommendation summary Company CMP TP Rating Top-line (` cr) EPS (`) P/E (x) OB/ FY13 FY14E FY15E CAGR (%) FY13 FY14E FY15E CAGR (%) FY13 FY14E FY15E Sales (x) ITNL 105 156 Buy 6,645 7,273 7,970 9.5 26.8 24.3 28.4 2.9 3.9 4.3 3.7 1.8 JP Assoc. 39 - Neutral 13,415 13,238 15,218 6.5 2.5 1.6 2.5 0.7 15.7 24.8 15.5 - L&T 998 1,237 Buy 60,873 66,667 74,669 10.8 44.1 46.9 52.0 8.6 22.7 21.3 19.2 2.8 NCC 24 30 Buy 5,725 6,044 6,533 6.8 2.4 1.4 1.9 (11.3) 9.7 17.1 12.4 3.3 Sadbhav 88 99 Accu. 1,811 2,458 2,727 22.7 0.9 4.6 5.4 148.0 100.6 19.0 16.4 4.9 Simplex In. 83 - Neutral 5,897 5,935 6,469 4.7 10.8 13.1 19.1 33.3 7.7 6.3 4.3 3.0 Exhibit 10: SOTP breakup Company Core Const. Real Estate Road BOT Invst. In Subsidiaries Others Total ` % to TP ` % to TP ` % to TP ` % to TP ` % to TP ` ITNL 58 37 - - 98 63 - - - - 156 JP Assoc. 24 59 16 39 - - - - 1 2 41 L&T 962 78 - - - - 275 22 - - 1,237 NCC 14 47 - - 7 23 - - 9 30 30 Sadbhav 45 45 - - 54 55 - - - - 99 Simplex In. 80 100 - - - - - - - - 80 Company background Simplex is one of the oldest construction companies in India, based in Kolkata. Over the years, it has diversified across various segments to encash upon the untapped opportunities emerging in the construction business and has delivered on an excellent track record. The company is present across eight segments buildings (24% of order book), bridges (13%), industrial (7%), marine (1%), pilling (3%), power (18%), rail and roads (21%) and urban infrastructure (12%). February 18, 2014 5

Profit & loss statement (Consolidated) Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E Net Sales 4,552 4,808 5,983 5,885 5,924 6,457 Other operating income 12 16 26 12 11 12 Total operating income 4,564 4,824 6,010 5,897 5,935 6,469 % chg (3.1) 5.7 24.6 (1.9) 0.6 9.0 Total Expenditure 4,110 4,333 5,477 5,361 5,333 5,799 R.M. consumed 1,856 1,705 2,306 2,252 2,133 2,389 Construction expenses 580 250 293 252 255 278 Employee expenses 1,472 1,711 1,972 2,015 2,116 2,222 SG&A 202 668 907 841 829 910 EBITDA 454 491 532 536 602 670 % chg 12.5 8.1 8.5 0.7 12.3 11.3 (% of Net Sales) 9.9 10.2 8.9 9.1 10.1 10.4 Depreciation & Amortisation 157 167 189 206 213 226 EBIT 297 324 344 330 390 444 % chg 9.2 9.1 6.1 (4.0) 18.1 14.1 (% of Net Sales) 6.5 6.7 5.7 5.6 6.6 6.9 Interest & other Charges 122 148 231 290 341 355 Other Income 26 24 21 43 47 52 (% of PBT) 13.0 12.0 15.6 51.8 49.3 36.6 Share in profit of Associates - - - - - - Recurring PBT 201 200 133 83 96 141 % chg 15.8 (0.1) (33.5) (37.7) 15.9 46.9 Extraordinary Expense/(Inc.) - - (5.8) - - - PBT (reported) 201 200 127 83 96 141 Tax 71.5 74.4 44.7 30.9 32.7 48.0 (% of PBT) 35.6 37.1 35.1 37.3 34.0 34.0 PAT (reported) 129 126 83 52 63 93 Add: Share of earnings of asso. - - - - - - Less: Minority interest (MI) 1.9 1.4 (1.0) (1.2) (1.4) (1.5) Prior period items - - - - - - PAT after MI (reported) 127 125 84 53 65 95 ADJ. PAT 127 125 89 53 65 95 % chg 3.0 (2.0) (28.2) (40.5) 21.6 46.1 (% of Net Sales) 2.8 2.6 1.5 0.9 1.1 1.5 Basic EPS (`) 25.7 25.2 18.1 10.8 13.1 19.1 Fully Diluted EPS (`) 25.7 25.2 18.1 10.8 13.1 19.1 % chg 3.0 (2.0) (28.2) (40.5) 21.6 46.1 Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers February 18, 2014 6

Balance sheet (Consolidated) Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E SOURCES OF FUNDS Equity Share Capital 10 10 10 10 10 10 Share App Money - warrants - - - - - - Reserves & Surplus 968 1,078 1,197 1,291 1,350 1,439 Shareholders Funds 978 1,088 1,207 1,301 1,360 1,449 Minority Interest 5 6 6 10 8 7 Total Loans 1,302 1,661 2,132 2,656 2,806 2,956 Deferred Tax Liability 88 138 195 205 210 217 Total Liabilities 2,374 2,893 3,539 4,171 4,384 4,628 APPLICATION OF FUNDS Gross Block 1,277 1,509 1,804 1,901 2,001 2,101 Less: Acc. Depreciation 289 384 525 666 815 973 Net Block 988 1,125 1,279 1,235 1,186 1,128 Capital Work-in-Progress 19 27 44 43 43 43 Goodwill - - - - - - Investments 3 23 54 110 110 110 Current Assets 3,125 3,766 4,909 5,764 6,061 6,574 Inventories 671 812 879 798 804 890 Sundry Debtors 1,806 2,298 1,689 2,305 2,382 2,535 Cash 110 106 73 83 143 190 Loans & Advances 398 405 630 798 847 923 Other 140 145 1,638 1,780 1,885 2,036 Current liabilities 1,760 2,048 2,747 2,981 3,016 3,227 Net Current Assets 1,364 1,718 2,162 2,783 3,045 3,347 Mis. Exp. not written off - - - - - - Total Assets 2,374 2,893 3,539 4,171 4,384 4,628 Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers February 18, 2014 7

Cash flow statement (Consolidated) Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E Profit before tax 201 200 127 83 96 141 Depreciation 81 95 141 141 149 158 Change in Working Capital (212) (357) (478) (611) (202) (255) Less: Other income (26) (24) (21) (43) (47) (52) Direct taxes paid (71) (74) (45) (31) (33) (48) Cash Flow from Operations (28) (160) (275) (461) (37) (56) (Inc.)/ Dec. in Fixed Assets (63) (241) (312) (96) (100) (100) (Inc.)/ Dec. in Investments (1) (20) (31) (56) - - Other income 26 24 21 43 47 52 Cash Flow from Investing (37) (237) (322) (109) (53) (48) Issue of Equity (21) - (0) - - - Inc./(Dec.) in loans 82 358 471 524 150 150 Dividend Paid (Incl. Tax) (12) (12) (11) (11) (6) (6) Others 7 47 104 68 5 7 Cash Flow from Financing 56 393 564 580 149 151 Inc./(Dec.) in Cash (9) (4) (33) 10 60 47 Opening Cash balances 119 110 106 73 83 143 Closing Cash balances 110 106 73 83 143 190 Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers February 18, 2014 8

Key Ratios Y/E March FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E Valuation Ratio (x) P/E (on FDEPS) 3.2 3.3 4.6 7.7 6.3 4.3 P/CEPS 1.4 1.4 1.5 1.6 1.5 1.3 P/BV 0.4 0.4 0.3 0.3 0.3 0.3 Dividend yield (%) 2.4 2.4 2.4 1.2 1.2 1.2 EV/Sales 0.4 0.4 0.4 0.5 0.5 0.5 EV/EBITDA 3.5 4.0 4.6 5.6 5.1 4.7 EV / Total Assets 0.7 0.7 0.7 0.7 0.7 0.7 Per Share Data (`) EPS (Basic) 25.7 25.2 18.1 10.8 13.1 19.1 EPS (fully diluted) 25.7 25.2 18.1 10.8 13.1 19.1 Cash EPS 57.5 58.9 56.2 52.5 56.1 64.7 DPS 2.0 2.0 2.0 1.0 1.0 1.0 Book Value 197.7 219.9 244.0 262.9 274.8 292.8 Dupont Analysis EBIT margin 6.5 6.7 5.7 5.6 6.6 6.9 Tax retention ratio 64.4 62.9 64.9 62.7 66.0 66.0 Asset turnover (x) 2.1 1.9 1.9 1.6 1.4 1.5 ROIC (Post-tax) 8.8 8.1 7.1 5.5 6.2 6.8 Cost of Debt (Post Tax) 6.2 6.3 7.9 7.6 8.2 8.1 Leverage (x) 1.2 1.3 1.6 1.8 2.0 1.9 Operating ROE 11.9 10.5 5.9 1.6 2.1 4.1 Returns (%) ROCE (Pre-tax) 13.0 12.3 10.7 8.6 9.1 9.9 Angel ROIC (Pre-tax) 13.8 12.9 11.1 8.8 9.5 10.3 ROE 13.5 12.1 7.8 4.2 4.9 6.7 Turnover ratios (x) Asset Turnover (Gross Block) 3.7 3.5 3.6 3.2 3.0 3.2 Inventory / Sales (days) 54 56 51 52 49 48 Receivables (days) 139 155 121 124 144 139 Payables (days) 156 159 159 194 204 195 Wcap cycle (ex-cash) (days) 234 253 258 325 357 347 Solvency ratios (x) Net debt to equity 1.2 1.4 1.7 2.0 2.0 1.9 Net debt to EBITDA 2.6 3.2 3.9 4.8 4.4 4.1 Interest Coverage 2.4 2.2 1.5 1.1 1.1 1.3 Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers February 18, 2014 9

Research Team Tel: 022-39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report. Disclosure of Interest Statement Simplex Infra 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies' Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors. Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to -15%) Sell (< -15%) February 18, 2014 10