Simplex Infrastructure (SIMCON)

Result Update Rating matrix Rating : Buy Target : 331 Target Period : 12-15 months Potential Upside : 42% Key Financials crore FY10 FY11E FY12E FY13E Net sales 4443.5 4749.7 5812.3 6867.0 EBITDA 433.7 458.1 508.6 618.0 Adj. Net profit 122.6 123.2 85.3 135.2 Valuation summary FY10 FY11E FY12E FY13E EPS ( ) 24.7 24.8 17.2 27.2 PE(x) 9.4 9.4 13.5 8.6 Target PE(x) 13.4 13.3 19.3 12.2 EV/EBITDA(x) 5.5 6.0 6.2 5.3 P/BV(x) 1.2 1.1 1.0 0.9 RoNW(%) 13.1 12.0 7.6 11.0 RoCE(%) 12.8 11.9 10.9 12.2 Stock data Mcap 1,156 crore Debt 2,052 crore Cash & Invst 74 crore EV 3,134 crore 52 week H/L (Rs) 375/160 Equity cap 10 crore Face Value 2.0 DII Holding (%) 18.8 FII Holding (%) 13.9 Price movement 6,500 5,850 5,200 4,550 3,900 3,250 2,600 Feb-11 Analyst s name May-11 Price (R.H.S) Aug-11 Deepak Purswani, CFA deepak.purswani@icicisecurities.com Bhupendra Tiwary bhupendra.tiwary@icicisecurities.com Nov-11 Nifty (L.H.S) Feb-12 450 400 350 300 250 200 150 100 WHAT S CHANGED February 16, 2012 PRICE TARGET... Changed from 285 to 331 EPS (FY12E)... Changed from 17.9 to 17.2 EPS (FY13E)... Changed from 22.9 to 27.2 RATING...Unchanged Topline growth momentum continues Simplex Infrastructure (SIL) reported another strong topline performance registering 36.6% YoY growth in net sales to 1596.4 crore. The EBITDA margin, however, at 8.1% was lower mainly on account of the initial startup cost across few projects and forex loss of 3.3 crore on the unhedged debt. The company has guided for topline growth of ~15-20% for FY13E, which we believe is achievable considering the robust order book and execution seen in the domestic business of late. Stellar topline growth again, margins disappoint SIL s topline grew 36.6% YoY to 1596 crore in Q3FY12 vs. our estimate of 1340.6 crore. While domestic revenues saw a jump of ~ 40% to 1428 crore, international sales grew 15% to 164 crore. The EBITDA margin, however, declined 111 bps YoY to 8.1% as the company booked initial start-up cost across a few projects and forex loss of 3.3 crore on the unhedged debt. The bottomline, consequently, at 18 crore was marginally lower than our estimate of 20.4 crore. Management guides for ~15-20% topline growth in FY13E SIL has received orders worth ~ 5,900 crore YTD (including orders worth 2094 crore in January). Additionally, SIL has L1 orders worth 2565 crore. The company has maintained its order inflow guidance of 7000 crore and has guided for ~15-20% growth in FY13E, which, we believe, is achievable considering the robust order book. Kharagpur road project update SIL won a BOT project for four laning of the Kharagpur Mahulia section. Total cost of the 127 km road project is 940 cost, including government grant of 126 crore. The company currently has 100% stake in the project and is looking for an equity partner to dilute 49%. SIL is also undertaking EPC work of the project and has bagged 770 crore order for the same. Valuation Simplex Infrastructure (SIMCON) 233 At the CMP of 233, the stock is trading at 8.6x FY13E EPS and 0.9x FY13E P/BV. SIL s strong well diversified order book, lowest equity commitment towards subsidiary and execution capabilities make it a strong candidate for a sharp earnings upgrade and re-rating in the multiples when the macro environment improves. We maintain our BUY recommendation on the stock with SOTP target price of 331 per share. Exhibit 1: Financial Performance crore Q3FY12 Q3FY12E Q3FY11 Q2FY12 YoY Gr (%) QoQ Gr (%) Net sales 1596.4 1340.6 1166.7 1323.3 36.8 20.6 EBITDA 129.4 123.0 107.6 120.4 20.3 7.5 EBITDA Margin (%) 8.1 9.2 9.2 9.1-111bps -99bps Depreciation 48.7 44.0 40.2 44.2 20.9 10.2 Interest 55.0 54.0 36.2 51.2 52.0 7.6 PAT 18.0 20.4 23.2 17.9-22.3 0.9 ICICI Securities Ltd Retail Equity Research

SIL s topline grew 36.6% YoY to 1596 crore in Q3FY12 vs. our estimate of 1340.6 crore. While domestic revenues saw a jump of ~ 40% to 1428 crore, international sales grew by 15% to 164 crore Stellar topline show, margins lower SIL reported another stellar topline number registering 36.6% YoY growth to post net sales of 1596 crore in Q3FY12 vs. our estimate of 1340.6 crore. While domestic revenues saw a jump of ~ 40% to 1428 crore, international sales grew 15% to 164 crore However, the EBITDA margin declined 111 bps YoY to 8.1% as the company booked initial start-up cost across a few projects and incurred a forex loss of 3.3 crore on the unhedged debt. While the management has indicated that margins in Q4FY12 would be ~8.5-9%, the company will be back to its normal margin range of ~9.5-10% from FY13E onwards. We highlight that we have built in lower margins of ~9.2% in FY13E The bottomline, consequently, at 18 crore was marginally lower than our estimates of 20.4 crore on account of lower margins and higher depreciation during the quarter Strong order book, guidance for order inflow maintained The order book stood at 14,440 crore implying 2.8x order book to bill (on TTM basis) and providing revenue visibility for the next couple of years. The average execution period for the order book is 2.5 years SIL has seen the order inflow of 1018 crore in Q3FY12. The company has so far received orders worth ~ 5,900 crore YTD (including orders worth 2094 crore received in January). Additionally, SIL has L1 orders worth 2565 crore The company has maintained its order inflow guidance of 7000 crore and guided for ~15-20% topline growth in FY13E Exhibit 2: Trend in order book & order book to bill ratio The order book stood at 14,440 crore, 2.8x order book to bill (on TTM basis) crore 16000 14000 12000 10000 8000 14,707 15,034 14,348 13,912 14,440 3.0 3.1 3.0 2.9 2.8 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 3.5 3.3 3.0 2.8 2.5 2.3 2.0 (x) Exhibit 3: Order book break up Orderbook (LHS) Orderinflow (RHS) Orderbook to bill ratio (RHS) (%) 100 80 60 40 20 0 22 25 24 27 13 12 10 9 21 22 17 19 15 14 14 14 3 2 2 2 22 21 26 26 4 4 5 4 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Piling & Grd eng Power Marine Industrial Roads, Railways & Bridges Urban Utilities Bldg & Housing ICICI Securities Ltd Retail Equity Research Page 2

Exhibit 4: Order book break-up by clientele Exhibit 5: Geographical break-up of order book 9% 28% 12% 63% 88% Government Private PPP Domestic Overseas Exhibit 6: Revenue composition Urban Infrastructure 11% Piling & Grd Eng 7% Industrial 9% Maximum revenue contribution (~37%) came from the power segment in Q3FY12 Bridges 10% Roads & Railways 7% Building & Housing 16% Marine 3% Power 37% So far, the company has invested 34 crore out of its equity requirement and remaining investment of ~ 13 crore is expected in FY13 Odisha road project update Toll collection for the Odisha road project has begun and the average daily toll stood at 20 lakh from the existing four lane. The stretch is witnessing daily traffic of ~36,500 PCUs and has exceeded company expectation of ~35,000 PCUs. So far, the company has invested 34 crore out of its equity requirement and the remaining investment of ~ 13 crore is expected in FY13. The Bhubaneshwar-Chandikol BOT road project is a JV between SIL (26%), Srei (48%) and Galfar (26%). SIL is also undertaking the EPC work of the project. Kharagpur road project update SIL won the BOT project for four laning of the Kharagpur Mahulia section. The total cost of the 127 km road project is 940 crore, including government grant of 126 crore. The company currently has a 100% stake in the project and is looking for an equity partner to dilute 49%. SIL is also undertaking EPC work of the project and has bagged 770 crore order for the same. ICICI Securities Ltd Retail Equity Research Page 3

Valuation We have incorporated the 9MFY12 performance and have now built in higher growth for FY13E. Consequently, we have marginally cut our FY12 earning estimates by ~4% while upgrading FY13E earnings by ~19%. We highlight that SIL s strong well diversified order book, lowest equity commitment towards subsidiary and execution capabilities make it a strong candidate for a sharp earnings upgrade and re-rating in the multiples when the macro environment improves. At the CMP, the stock is trading at 8.6x FY13 EPS and 0.9x FY13 P/BV. We maintain our BUY rating on the stock with a price target of 331/share. We have valued SIL s core business at 747/share (6x FY13 EV/EBITDA), oil rig business at 6/share and BOT road project at 7/share (at 1x P/BV) and net debt (- 429/share). Exhibit 7: SOTP valuation table Entity Value ( crore) Per share ( ) Comment We valued SIL based on our SOTP based price target of 331/share. Construction Business 3,708 747 6x FY13 EV/EBITDA Oil rig Business 29.0 6 DCF based valuation BOT Road project valuation 34 7 at 1x P/BV Less:Net Debt (2,129) (429) FY13 Net Debt Fair Value 1,643 331 Exhibit 8: Valuation metrics Sales ( cr) Sales Gr (%) EPS ( ) EPS Gr (%) P/E (x) P/BV(x) RoNW(%) RoCE(%) FY10 4443.5-4.7 24.7 6.4 9.4 1.2 13.1 12.8 FY11 4749.7 6.9 24.8 0.5 9.4 1.1 12.0 11.9 FY12E 5812.3 22.4 17.2-30.8 13.5 1.0 7.6 10.9 FY13E 6867.0 18.1 27.2 58.4 8.6 0.9 11.0 12.2 ICICI Securities Ltd Retail Equity Research Page 4

Financial summary Profit and loss statement ( Crore) FY10 FY11 FY12E FY13E Net Sales 4,443.5 4,749.7 5,812.3 6,867.0 Growth (%) -4.7 6.9 22.4 18.1 Op.Expenditure 4,009.7 4,291.6 5,303.7 6,249.0 EBITDA 433.7 458.1 508.6 618.0 Growth (%) 9.7 5.6 11.0 21.5 Other income 21.9 29.0 14.5 27.5 Depreciation 153.4 160.8 184.2 209.6 EBIT 302.3 326.2 338.9 435.9 Interest 111.2 130.8 213.5 234.2 PBT 191.0 195.5 125.5 201.7 Tax 68.5 72.2 40.1 66.6 Extraordinary item 0.0 0.0 0.0 0.0 Rep. PAT before MI 122.6 123.2 85.3 135.2 MI 0.0 0.0 0.0 0.0 Rep. PAT after MI 122.6 123.2 85.3 135.2 Adjustment 0.0 0.0 0.0 0.0 Adj. Net Profit 122.6 123.2 85.3 135.2 Growth (%) 6.4 0.5-30.8 58.4 EPS ( ) 24.7 24.8 17.2 27.2 Cash flow statement ( Crore) FY10 FY11 FY12E FY13E Net Profit before tax 191.0 195.5 125.5 201.7 Depreciation & Amortisation 153.4 160.8 184.2 209.6 Others 89.3 85.1 187.4 206.7 Direct tax paid -68.5-72.2-40.1-66.6 CF before change in WC 365.3 369.2 456.9 551.5 Inc/Dec in Trade Recv. -125.3-490.6-309.5-449.8 Inc/Dec in Inventories 16.8-138.5-319.5-141.6 Inc/Dec in Loans & Adv -55.6 3.5-67.1-7.2 Inc/Dec in other current assets -8.7-7.2-9.2-100.0 Inc/Dec in cur liabilities -41.2 276.4 244.7 428.4 CF from operations 151.3 12.9-3.6 281.3 Purchase of Fixed Assets -49.1-234.3-200.0-200.0 (Inc)/Dec in investments 14.2 7.5 10.2 12.5 CF from investing -34.9-226.8-189.8-187.5 Inc/(Dec) in Debt -29.3 227.5 176.5-84.2 Inc/(Dec) in Net worth -22.1-21.4 0.0 0.0 CF from Financing -51.4 206.1 176.5-84.2 Net Inc/Dec in cash & eq. -12.9-7.8-16.9 9.6 Opening cash balance 100.1 87.3 79.5 62.6 Closing cash balance 87.3 79.5 62.6 72.2 Balance sheet ( Crore) FY10 FY11 FY12E FY13E Liabilities Equity capital 9.9 9.9 9.9 9.9 Reserves & Surplus 959.7 1,067.8 1,153.1 1,288.2 Shareholder's fund 969.7 1,077.7 1,163.0 1,298.2 Minority Interest 0.0 0.0 0.0 0.0 Secured & unsecured debt 1,302.4 1,660.7 2,050.7 2,200.7 Deferred Tax Liablity 88.3 138.1 138.1 138.1 Sources of funds 2,360.4 2,876.4 3,351.7 3,636.9 Assets Gross Block 1250.9 1476.4 1676.4 1876.4 less: Acc. Depreciation 283.2 371.5 555.7 765.3 Net Block 967.7 1104.9 1120.8 1111.1 Capital WIP 18.7 27.5 27.5 27.5 Net Fixed Assets 986.4 1132.4 1148.2 1138.6 Investment 27.7 49.2 65.0 80.0 Inventories 659.3 797.8 1117.3 1258.9 Trade Receivables 1792.8 2283.4 2592.9 3042.7 Cash 87.3 79.5 62.6 72.2 Loans & Advances 386.8 383.3 450.3 457.6 Other current assets 133.7 140.8 150.0 250.0 Total current assets 3059.8 3684.7 4373.2 5081.3 Current Liab. & Prov. 1713.5 1989.9 2234.7 2663.0 Net Current Asset 1346.3 1694.8 2138.5 2418.3 Application of funds 2,360.4 2,876.4 3,351.7 3,636.9 Key ratios FY10 FY11 FY12E FY13E Per share data ( ) EPS 24.7 24.8 17.2 27.2 Cash EPS 55.6 57.2 54.3 69.4 BV 195.2 217.0 234.2 261.4 Revenue per share 894.7 956.3 1,170.3 1,382.7 Cash Per Share 17.6 16.0 12.6 14.5 Operating Ratios (%) EBITDA Margin 9.8 9.6 8.8 9.0 PBT / Net Sales 4.3 4.1 2.2 2.9 PAT Margin 2.8 2.6 1.5 2.0 Working Capital (ex cash) days 103.4 124.1 130.4 124.7 Debtor days 35.9 48.9 50.6 51.5 Creditor days 122.0 132.4 115.5 111.9 Return Ratios (%) RoE 13.1 12.0 7.6 11.0 RoCE 12.8 11.9 10.9 12.2 RoIC 13.9 12.9 11.1 12.7 Valuation Ratios (x) P/E 9.4 9.4 13.5 8.6 EV / EBITDA 5.5 6.0 6.2 5.3 EV / Net Sales 0.5 0.6 0.5 0.5 Div Yield (%) 1.0 1.0 0.0 0.0 Price to Book Value 1.2 1.1 1.0 0.9 Solvency Ratios Debt/EBITDA 2.8 3.5 3.9 3.4 Debt / Equity 1.3 1.5 1.7 1.6 Current Ratio 1.8 1.9 2.0 1.9 Quick Ratio 1.7 1.8 1.9 1.9 ICICI Securities Ltd Retail Equity Research Page 5

ICICIdirect.com coverage universe (Infrastructure) Simplex Infra Sales ( Crore) EPS ( ) Adj PE (x) P/BV(x) RoNW (%) RoCE (%) Idirect Code SIMCON CMP 233 FY10 FY10 24.7 9.4 1.2 13.1 12.8 Mcap ( crore) 1156 Target 331 FY11 FY11 24.8 9.4 1.1 12.0 11.9 % Upside 42% FY12E FY12E 17.2 13.5 1.0 7.6 10.9 FY13E FY13E 27.2 8.6 0.9 11.0 12.2 Unity Infra Idirect Code UNIINF CMP 51 FY10 1,476.8 11.7 4.4 0.5 17.6 17.6 Mcap ( crore) 377 Target 52 FY11 1,701.5 12.7 4.0 0.5 15.5 16.5 % Upside 2% FY12E 1,949.9 13.2 3.8 0.3 14.1 16.9 FY13E 2,217.6 14.7 3.5 0.3 13.8 17.2 IVRCL Idirect Code IVRINF CMP 58 FY10 5,477.6 7.9 3.7 0.8 11.5 14.3 Mcap ( crore) 1553 Target 56 FY11 5,617.4 5.9 4.9 0.8 8.2 11.6 % Upside -4% FY12E 5,204.9 2.0 14.4 0.8 2.7 7.3 FY13E 6,375.1 5.0 5.8 0.7 6.3 9.9 NCC Idirect Code NAGCON CMP 60 FY10 4,777.8 7.5 2.6 0.7 11.8 12.9 Mcap ( crore) 1540 Target 55 FY11 5,073.7 6.4 3.7 0.7 7.1 9.7 % Upside -8% FY12E 5,021.9 2.1 11.4 0.7 2.2 7.0 FY13E 5,740.2 3.8 6.1 0.6 4.0 7.9 Exhibit 9: Recommendation History 450 400 350 300 250 200 150 100 Feb-11 Apr-11 May-11 Jul-11 Aug-11 Oct-11 Nov-11 Jan-12 Feb-12 Price Target Price Source: Reuters, ICICIdirect.com Research Exhibit 10: Recent Releases Date Event CMP Target Price Rating 15-Feb-11 Q3FY11 Result Update 330 366 Buy 3-Jun-11 Q4FY11 Result Update 302 350 Buy 16-Aug-11 Q1FY12 Result Update 284 322 Buy 16-Nov-11 Q2FY12 Result Update 206 285 Buy ICICI Securities Ltd Retail Equity Research Page 6

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Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1 st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ANALYST CERTIFICATION We /I, Deepak Purswani CFA, PGDM (FINANCE) Bhupendra Tiwary MBA (FINANCE) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. 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