th

25 May, 2009
India
Moser Baer
CMP: Rs. 95 Target: Rs. 160

We initiate a buy calll on Moser Baer, on basis of huge potential in its PV business,
stabilizing sales in Optical discs and increasing share in high margins Blu Ray and DVD
Sovid Gupta +911243024840 format production.
Equity Analyst: Fairwealth Securities
Private. Ltd. Also positive Operational cash flows and stable balance sheet is a trigger for the company.

Moser Baer is a potential multibagger which can give huge returns if the the technologioes
company is betting on (Thin film PV vells) establishes itself as best cost PV cells. Company
as well as experts expect PV to acheive Grid parity within next couple of years. Besides
Moser Baer there are many other players in the country which are betting huge on this
Priced on May, 26th , 2009 business like Videocon and Reliance, but Moser Baer, one of the ealiest entrant into the
±% potential 66% business is likely to get maximum benefit due iots manufacturing capabilities and expertise
Target set on in highend technology work.

We initiate a buy call on Moser Baer, with a target price of 160. We recommend Risk
averse(avoiding) investors to ignore this stock.

Market Data Q4 Highlights:

Beta 1.1
52Wk hi/lo 194.95/41.0 Significant increase in margins for the quarter on back of reduction in Raw Material and fuel
Marketcap, INR Crore 1518.91 Costs. Margins expansion was led by Optical discs divisions where margins increased to
Shares in issue (mn.) 168.30 32%.

Last Quarter depreciation increased on back on capitalization of forex losses under AS-11.

FCCB’s worth USD 51 million were bought back at more than 70% discount and
consequently 97 crores of extra-ordinary profits were earned after writing off losses for
Share Holding Pattern (%) startegic investments and provisioning forex losses for previous years.
Promoters 17%
FII 31% We expect further USD 25 million of buyback within this quarter at a discount of around
Foreign Others 37% 35%..
Domestic Inst. & Corp Bod. 5%
Public & Others 10% FY09 Highlighs.

As of March ’08 company had a net cash of 821 crores.

We expect company to have a total cash of around 750 crores at the moment.

Company had Capital expenditure of USD 260 million in FY09, with majority fo it going
towards PV business( USD 233 million).

Company raised around USD 260 million this year through FCCB/ internal accruals- USD
22 million, USD 144 million thru debt/bridge finance and US$ 94 million thru Equity.
Majority raised by PV business.

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Quarterly Result Round up:

Q4 FY09 Q4 FY08 Y-o-Y Growth(%) Q3 FY09

Net Sales 509.85 477.62 6.75 639.31

Operating Profit 56.48 76.53 -26.2 132.55
OPM Margin(%) 11.08 16.02 -30.84 20.73
Other Income Operating 155.46 13.36 999 25.07
PBIDT 211.94 89.89 135.78 157.62
Depreciation 141.7 117.9 20.19 120.08
PBDT 184.65 45.08 309.61 93.32
PBT 42.95 -72.82 -158.98 -26.76
Extra-Ordinary 97.79 4.18 999 0
PBT after EO & Min -54.84 -77 -28.78 -26.76
Tax 0.02 -1.1 -101.82 -1.11
PAT 42.93 -71.72 -159.86 -25.65
EPS* 2.55 -4.26 -159.86 -1.52
Source: Company Data, Capital Line

Future Estimates.
Capex plan for FY10 is US$ 32 million:
Optical Media – US$ 5 million, PV – US$ Comapny has a very healthy cash Balance of around 750 crores currently, of which
22 million and Entertainment – US$ 5
standalone cash in hand is expected to be around 450 crores.
million lower than guided earlier. Further
capex for PV segment will be finalized in
the due course of the quarter. Funding Going forward Company has said that it does not have any major Capital Expenditure plan
would be: US$ 18 million thru
for FY10E.
FCCB/internal accrual, US$ 14 million thru
debt/bridge finance and US$ 32 million thru
Equit. As it is very difficult raising capital due to current business environment globally and low
attractiveness towards PV business, we understand it would be a prudent move to go slow
with expansion.

In long term however we remain increasingly bullish over attractiveness of Non

Conventional Energy secor and in particular solar energy.

Company has finalised its deal to sell power to Rajasthan Government at Rs. 18/ unit
st
( 21 May-Company Website)

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Optical Media Bsuiness
OM for the quarter improved to 32% against
25% in the sequential quarter on the back of
lower input costs.
Decrease in Net working Capital to boost
cash flows.
PV Business:
Revenue Contribution-33%
The Company has current capacity of 80MW
of crystalline film and 40MW of thin film. The
65MW capacity expansion has completed
before schedule.
Phase-I of 135MW capacity in Gujarat is on
track.
Company Description
Moser Baer, headquartered in New Delhi, is one of India's leading technology companies.
Established in 1983, the company successfully developed cutting edge technologies to
become the world's second largest manufacturer of Optical Storage media like CDs and
DVDs. The company also emerged as the first to market the next-generation of storage
formats like Blu-ray Discs and HD DVD. Recently, the company has transformed itself from a
single business into a multi-technology organisation, diversifying into exciting areas of Solar
Energy, Home Entertainment and IT Peripherals & Consumer Electronics.
1. Around 70% revenues contributed by Optical Discs division.
2. MBPV aims to distinguish itself as a significant player in the global photovoltaic
market by leveraging its high-volume manufacturing expertise and planned
investments of nearly US$ 3.2 billion in research, development and manufacturing
of products dedicated to generating solar power.
a. fully automated in-line crystalline silicon cell manufacturing facility - 40 MW
already in production - this will be scaled up to 240 MW.
b. A 40 MW module manufacturing facility with expansion plans to scale it up
to 200 MW.
c. A 200 MW thin film module plant, capable of producing the world's largest
non-flexible thin film modules, is under construction.
3. The company is the first to offer home videos in every popular language of India
and it is today India's largest Home Entertainment company. It currently offers home
video titles in Hindi, English, Tamil, Telugu, Malayalam, Kannada, Marathi, Gujarati,
Bengali and non-film categories. Moser Baer Entertainment has acquired the rights
for close to 10,000 titles in all the popular languages and has already released close
to 3,000 of them in the market.

Estimates:
FY10E FY09 FY08
Total Income 2650 2415 2124
Total Expenditure 1987.5 1847 1590
EBITDA Profit 662.5 568 534
Depreciation 500 500 432
EBIT 163 68 102
Interest 160 205 179
Profit Before Tax 3 -137 -77
Tax -8 2
Reported Net Profit 3 -129 -79
Extraordinary Items 90 21
Adjusted Net Profit 3 -39 -100
Earnings Per Share(Adj)-Unit Curr 0
Book Value-Unit Curr 117
Source: Company Reports, Fairwealth Research

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Optical Media
1. High margins in the Optical
Media Segment.(Above 25%)
2. Short term Benefits from AS-11
3. Increased Cashflows from strong
focus on Networking capital
4. Lower Capex for FY10E(less
than USD 50 million)
5. Post FY10, depreciation costs
from Optical media segment is
expected to decline rapidily,
which will give boost to
bottomline.
Investment Rational
1. Synergies in all lines of business.
Company has smartly moved across verticals, and rather than expanding its line of business
vertically, it has grown across sectors horizontally with a stronger focus on topline, where one
business leverages other lines of businesses.
To continue selling Moser Baer Optical discs and to utilize excess capacities. Moser Baer
entered Home Entertainment Business. Capacity utilization for Company’s main line of
business has stabilized around 75% levels thanks to continuing sales of Optical Discs from its
Home Entertainment business.
Also company has leveraged its manufacturing capabilities by moving PV division.
2. Early mover advantage.
Moser Baer has been the earliest mover in manufacture of PV cells. Company currently has a
capacity of 125 MW and plans to take it to one GW (1,000 MW) by 2010.

With Governements across the world stressing on cleaner power even at higher costs
(around Rs. 15/unit). Companies like Moser Baer will be largest beneficiaries as they have
access to all the technologies( crystalline, thin film and high concentrate PV dvision).

TECHNICAL OUTLOOK: Moser Baer India Limited

Source:Meta Stock

Moser Baer is in a bullish trend when it closed above a crucial resistance level of 75.Hence we recommend to
buy the stock on every declines for a price Target of 140 in coming few months.

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Key Risks:

We rate Moser Baer India Limited in the high risk category.

While the upsides for the company are unlimited, there are huge downside risks as well.

1. PV still a very risky business. While the capital expenditure in PV business is huge at the
moment, it is likely to fall of sharply, giving late entrants a huge advantage in term of
lower capital requirement. Moreover for existing Photo Voltaic units company is putting
unit life at 20 years which we beleive is high.
2. Optical media business is loosing attractiveness quickly. Constant pressure on topline.
3. High depreciation rates hitting bottomline.
4. Excess Competition-
a. Optical Media:
i. Price competition from Chinese players is hitting domestic sales and margins
ii. Decrease in both volumes and cost per unit highlights despite weaker rupee
highlights unattractiveness of the business.
b. PV
With entry of very large players like Reliance and Videocon, smaller company like
Moser might not be able to face the challenges of the business and downsides linked
to oil prices.
c. Home Entertainment:
Company has waged a price war by lowering the prices of Optical Discs hitting the
margins of other Home Entertainment players like Reliance and Shemaroo, company
will face backlash as such players have stopped keelping Moser Baer labels.

We have attached Moser Baer chart since

January 2008, when fall of markets began..
Moser Baer has a beta of 1.1 and movements
more or less similar to the Nifty although much
sharper movements tehn Nifty.

Operationally Moser Baer has performed well in

recessionary conditions considering that major
revenues for the company are Exports.

Stock prices for the company are currently

down by over 70% form its 2008 high’s.

Company has posted operational losses from

last 6 quarters, partly due to high depreciation
and interests costs.

Company has posted positive cash flow from

oeprations and has a healthy balance sheet.
Source: Capital Line

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Annexure:

1. Income Statement: Fund Flow Statement:

200803 200703
2008 (12) 2007 (12) 2006(12)
SOURCES OF FUNDS :
INCOME :
Share Capital 561.25 111.6
Operating Income 2135.62 2079.93 1731.91
Reserves Total 1639.5 1935.49
Other Income 106.89 76.61 60.4
Stock Adjustments 128.79 63.71 55.47 Total Shareholders Funds 2200.75 2047.09
Total Income 2303.85 2123.07 1779.53 Minority Interest 0 1.23
EXPENDITURE : Secured Loans 2066.9 1838.93
Cost of Traded
949.04 802.19 787.37 Unsecured Loans 1117.3 11.3
Software Packages
Power & Fuel Cost 135.57 105.95 82.25 Total Debt 3184.2 1850.23
Employee Cost 237.96 144.38 101.45 Total Liabilities 5384.95 3898.55
Other Man.
Expenses
77.9 67.01 28.78 APPLICATION OF FUNDS
Selling & Admin. Net Block 2850.93 2496.95
Expenses 128.08 148.86 117.47
Capital Work in Progress 530.38 389.21
Total Expenditure 1846.04 1550.49 1376.39 Investments 376.85 89.93
Operating Profit 457.81 572.58 403.14
Current Assets, Loans &
Interest 207.48 126.33 93.56 Advances
Gross Profit 250.33 446.25 309.58 Inventories 724.75 613.88
Depreciation 445.84 358.22 316.76
Sundry Debtors 376.75 334.17
Profit Before Tax -195.51 88.03 -7.18
Total Tax -0.11 0.02 -0.64 Cash and Bank 821.04 269.73
Net Profit before Loans and Advances 298.07 162.06
Minority Interest -197.79 77.87 -6.47
Total Current Assets 2220.61 1379.84
Minority Interest 1.24 -0.96 0
Less : Current Liabilities and
EO 1.09 -0.02 0.05 Provisions
Adj. Net Profit -200.12 78.85 -6.52 Current Liabilities 509.59 408.26
EPS (Adj) 0 4.54 0 Provisions 75.07 40.25
Adj Book Value
(Unit Curr.)
107.46 183.43 178.35 Total Current Liabilities 584.66 448.51
Source: Company Report, Capital Line Net Current Assets 1635.95 931.33
Net Deferred Tax -9.16 -8.87
Total Assets 5384.95 3898.55
Contingent Liabilities 1654.08 450.39
2. Cash Flow Statement:
Source: Company Report, Capital Line

2008 2007 2006

Cash and Cash Equivalents at
Beginning of the year 243.89 283.72 458.99
Net Cash from Operating Activities 306.28 706.99 183.15
Net Cash Used in Investing Activities -632.64 -653.02 -308.23
Net Cash Used in Financing Activities 721.22 -93.8 -50.19
Net Inc/(Dec) in Cash and Cash
Equivalent 394.86 -39.83 -175.27
Cash and Cash Equivalents at End of
the year 638.75 243.89 283.72
Source: Company Report, Capital Line

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Disclaimer

This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. While
the information contained therein has been obtained from sources believed to be reliable; investors are advised to satisfy themselves before making
any investments. Fairwealth Securities Pvt Ltd does not bear any responsibility for the authentication of the information contained in
the reports and consequently, is not liable for any decisions taken based on the same. Further, Fairwealth Research Reports only provide information
updates and analysis. All opinion for buying and selling are available to investors when they are registered clients of Fairwealth Investment Advisory
Services. As a matter of practice, Fairwealth refrains from publishing any individual names with its reports. As per SEBI requirements it is stated that,
Fairwealth Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale while this report is
in circulation.

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