INDIA NIPPON ELECTRICALS LTD Result Update (PARENT BASIS): Q3 FY18

INDIA NIPPON ELECTRICALS LTD Result Update (PARENT BASIS): Q3 FY18 Index Details Stock Data Sector Auto Parts & Equipment BSE Code 532240 Face Value 10.00 52wk. High / Low (Rs.) 1424.80/505.00 Volume (2wk. Avg.) 1154 Market Cap (Rs. in mn.) 11201.99 Annual Estimated Results(A*: Actual / E*: Estimated) Years(Rs. In mn) FY17A FY18E FY19E Net Sales 3943.00 4510.50 5051.76 EBITDA 513.10 717.58 850.88 Net Profit 324.00 462.61 554.01 EPS 28.65 40.90 48.98 P/E 34.57 24.21 20.22 Shareholding Pattern (%) As on Dec 2017 As on Sep 2017 Promoter 66.39 66.39 Public 33.61 33.61 Others -- -- 1 Year Comparative Graph INDIA NIPPON ELECTRICALS LTD S&P BSE SENSEX CMP: 990.45 MAR 6 th, 2018 Overweight SYNOPSIS ISIN: INE092B01017 India Nippon Electricals Limited is an India-based manufacturer of electronic ignition systems for twowheelers, three wheelers and portable engines. The company has achieved a turnover of Rs.1100.10 mn for Q3 FY 2017-18 as compared to Rs.977.50 mn in the corresponding quarter of the previous year, up by 12.54%. For the quarter ended Q3 FY18, EBITDA stood at Rs.179.40 mn as against Rs.140.50 mn in the corresponding period of the previous year, an increase of 27.69%. PBT of the company stood at Rs. 163.50 mn in Q3 FY18 as against Rs. 129.00 mn Q3 FY 17. During the quarter, net profit increased by 23.23% Rs. 116.70 mn from Rs. 94.70 mn in the corresponding period of the previous year. EPS of the company stood at Rs.10.32 in Q3 FY18 as compared to Rs.8.37 in the corresponding period of the previous year. India Nippon Electricals Ltd has declared an interim dividend of Rs. 6/- per fully paid up equity share of Rs. 10 each, for the year April 2017-March 2018. Nine months ended 31 st Dec 2017, Net Sales of the company increased by 15.50% to Rs.3454.40 mn from Rs.2990.90 mn in corresponding nine months of the previous year. In 9M FY2017-18, PAT of the company grew 37.48% to Rs.361.30 mn from Rs.262.80 mn in 9M FY2016-17. Net Sales & PAT of the company are expected to grow at a CAGR of 11% and 25% over 2016 to 2019E, respectively. PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND Company Name (Rs.) Rs. In mn. (Rs.) Ratio Ratio (%) India Nippon Electricals Ltd 990.45 11201.99 37.35 26.52 3.35 120.00 The Hi-Tech Gears Ltd 428.90 8049.60 15.19 28.24 4.37 25.00 PPAP Automotive Limited 536.55 7511.70 22.90 23.43 3.23 30.00 Talbros Automotive Components Ltd. 281.05 3469.70 11.79 23.84 2.56 15.00

QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q3 FY18, (Rs. In millions) Dec-17 Dec-16 % Change Revenue 1100.10 977.50 12.54% Net Profit 116.70 94.70 23.23% EPS 10.32 8.37 23.23% EBIDTA 179.40 140.50 27.69% Revenue for the 3 rd quarter stood at Rs. 1100.10 million as compared to Rs. 977.50 million in the corresponding period of the previous year, an increase of 12.54%. EBIDTA rose by 27.69% at Rs. 179.40 million as against Rs. 140.50 million in the corresponding period of the previous year. The company s net profit increased by 23.23% at Rs. 116.70 million from Rs. 94.70 million in the corresponding quarter ending of previous year. Reported earnings per share of the company stood at Rs. 10.32 as compared to Rs. 8.37 per share over previous year period. Break up of Expenditure Break up of Expenditure Cost of Raw Materials Consumed Other manufacturing Expenses Employee Benefit Expenses Depreciation & Amortization Exp Q3 FY18 Value in Rs. Million Q3 FY17 % Change 744.20 623.00 19% 60.00 48.60 23% 130.50 111.80 17% 15.70 11.30 39% Excise Duty 0.00 107.70 -- Other Expenditure 53.90 36.00 50%

Dividend: India Nippon Electricals Ltd has declared an interim dividend of Rs. 6/- per fully paid up equity share of Rs. 10 each, for the year April 2017-March 2018. COMPANY PROFILE India Nippon Electricals Limited was incorporated in 1984 and is based in Chennai, India. India Nippon Electricals Limited designs, manufactures, and sells electronic ignition systems in India and internationally. The company primarily offers flywheel magneto, digital/analog CDI/TCI, regulator/rectifier, and ignition coil products, as well as capacitor discharge and transistor ignition units and integral units. Its products are used for application in various engines fitted on motorcycles, scooters, mopeds, three wheelers, portable gensets, lawn movers, wood saw cutters, and other types of IC engines.

FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as of March 31, 2016-2019E FY16A FY17A FY18E FY19E ASSETS 1) Non-Current Assets a) Property, plant and equipment 418.53 496.34 555.90 628.17 b) Capital Work in Progress 20.58 32.19 52.15 69.88 c) Other Intangible assets 23.83 19.61 20.59 22.23 d) Financial assets i) Investments 978.75 988.64 1166.59 1306.58 ii) loans 7.55 8.98 9.52 10.38 iii) Others 3.32 3.70 3.96 4.32 e) Deferred tax assets 93.55 64.32 67.53 72.94 f) Other noncurrent assets 8.32 9.48 9.20 9.75 Sub - Total Non- Current assets 1554.43 1623.26 1885.44 2124.25 2) Current Assets a) Inventories 249.20 224.21 338.56 399.50 b) Financial assets i) Investments 781.86 1153.47 1115.52 1245.83 ii) Trade receivables 606.92 663.86 942.67 1140.64 iii) Cash and Cash equivalents 101.60 30.99 137.61 174.76 vi) Others 8.61 8.28 17.55 20.53 c) Other current assets 54.40 39.18 60.73 71.66 Sub - Total current assets 1802.58 2119.99 2612.64 3052.92 Total Assets (1+2) 3357.01 3743.25 4498.08 5177.17 EQUITY AND LIABILITIES 1) EQUITY a) Equity Share Capital 113.11 113.11 113.10 113.10 b) Other Equity 2546.80 2766.76 3232.71 3786.72 Total Equity 2659.90 2879.87 3345.81 3899.82 2) Non Current Liabilities a) Provisions 20.07 19.93 31.88 30.29 Sub - Total Non Current liabilities 20.07 19.93 31.88 30.29 3) Current Liabilities a) Financial liabilities i) Borrowings 0.00 0.00 0.00 0.00 ii) Trade payables 385.91 469.53 626.82 676.96 iii) Others 60.74 4.43 5.04 5.55 b) Other current liabilities 179.33 232.67 393.22 456.13 c) Provisions 36.02 119.08 53.58 60.01 d) Current tax liabilities 15.04 17.76 41.73 48.41 Sub - Total current liabilities 677.04 843.46 1120.39 1247.07 Total Equity and Liabilities (1+2+3) 3357.01 3743.25 4498.08 5177.17

Annual Profit & Loss Statement for the period of 2016 to 2019E Value(Rs.in.mn) FY16A FY17A FY18E FY19E Description 12m 12m 12m 12m Net Sales 3784.20 3943.00 4510.50 5051.76 Other Income 100.50 136.20 123.23 135.56 Total Income 3884.70 4079.20 4633.73 5187.31 Expenditure -3428.30-3566.10-3916.15-4336.43 Operating Profit 456.40 513.10 717.58 850.88 Interest -1.30-0.60-0.81-0.90 Gross profit 455.10 512.50 716.77 849.98 Depreciation -41.80-41.70-61.13-69.69 Profit Before Tax 413.30 470.80 655.64 780.30 Tax -107.50-146.80-193.03-226.29 Net Profit 305.80 324.00 462.61 554.01 Equity capital 113.10 113.10 113.10 113.10 Reserves 2546.80 2770.10 3232.71 3786.72 Face value 10.00 10.00 10.00 10.00 EPS 27.04 28.65 40.90 48.98 Quarterly Profit & Loss Statement for the period of 30 th Jun, 2017 to 31 st Mar 2018E Value(Rs.in.mn) 30-June-17 30-Sep-17 31-Dec-17 31-Mar-18E Description 3m 3m 3m 3m Net sales 1177.20 1177.10 1100.10 1056.10 Other income 33.30 26.70 30.40 32.83 Total Income 1210.50 1203.80 1130.50 1088.93 Expenditure -1036.00-1001.80-951.10-927.25 Operating profit 174.50 202.00 179.40 161.68 Interest -0.30-0.10-0.20-0.21 Gross profit 174.20 201.90 179.20 161.47 Depreciation -14.30-14.80-15.70-16.33 Profit Before Tax 159.90 187.10 163.50 145.14 Tax -27.00-75.40-46.80-43.83 Net Profit 132.90 111.70 116.70 101.31 Equity capital 113.10 113.10 113.10 113.10 Face value 10.00 10.00 10.00 10.00 EPS 11.75 9.88 10.32 8.96

Ratio Analysis Particulars FY16A FY17A FY18E FY19E EPS (Rs.) 27.04 28.65 40.90 48.98 EBITDA Margin (%) 12.06% 13.01% 15.91% 16.84% PBT Margin (%) 10.92% 11.94% 14.54% 15.45% PAT Margin (%) 8.08% 8.22% 10.26% 10.97% P/E Ratio (x) 36.63 34.57 24.21 20.22 ROE (%) 11.50% 11.24% 13.83% 14.21% ROCE (%) 17.11% 17.78% 21.42% 21.80% Debt Equity Ratio 0.00 0.00 0.00 0.00 EV/EBITDA (x) 22.61 19.52 13.86 11.50 Book Value (Rs.) 235.18 254.92 295.83 344.81 P/BV 4.21 3.89 3.35 2.87 Charts

OUTLOOK AND CONCLUSION At the current market price of Rs. 990.45, the stock P/E ratio is at 24.21 x FY18E and 20.22 x FY19E respectively. Earning per share (EPS) of the company for the earnings for FY18E and FY19E is seen at Rs. 40.90 and Rs. 48.98 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 25% over 2016 to 2019E, respectively. On the basis of EV/EBITDA, the stock trades at 13.86 x for FY18E and 11.50 x for FY19E. Price to Book Value of the stock is expected to be at 3.35 x and 2.87 x for FY18E and FY19E respectively. Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment. INDUSTRY OVERVIEW While the industry enjoyed robust growth early in the year, a significant slowdown was noticed since the last quarter of last fiscal due to demonetisation. The two wheeler industry recorded an overall growth of around 6% led by a 25% and 11% growth in moped and scooter segment while motor cycle market remained flat and three wheeler registered negative growth of 16% compared to last year. Industry has witnessed negative growth of 6% in exports. Two wheeler industry growths shrank in the later part of the year and was significantly affected by weak rural demand after demonetisation and changes in emission standards from BS III to BS IV during the last quarter. The measures taken by Govt during last fiscal are expected to result in positive trend in the long term. Demonetisation is expected to increase the liquidity among the public and in banking system helping to lower lending rates and lift economic activity. This will help the company to increase the sales from two wheeler market. Implementation of GST is expected to catapult GDP growth. Moderate inflation and with solid agricultural input from bumper harvests after drought last year will provide fillip. Economy is forecast to regain its momentum with GDP growth rising to 7.4% FY18 from 7.1% in last fiscal. Automotive two wheeler industry is expected to growth between 7~9% in current financial year. Industry has never been more uncertain and globalisation of the market and competition from global players continue to drive the industry. Disruptive technological changes, electronic manufacturing services and continuous upgradation of emission standards offer both the opportunities and challenges. Introduction of BS VI, Electric Vehicles are on the cards. Sharing and connected vehicles will dramatically change both the types of vehicles and how they are used. More digitalisation in automotive industry gives us scope for further growth. Few existing products may be phased out in the medium term. The company is technologically well geared and ready to take up the challenges and convert into business opportunity.

The company is planning to focus more new technology products such as ISG, Immobilisers, Instrument Clusters, Electronic Control Units, Electronic Fuel Injection system and Brushless Alternators in coming years. The company stands to gain from the improving economic environment and investing in technologies and delivering higher value to customers by enabling them to stay ahead of global competition.

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