IEA Report 11th January

IEA Report
11th Jan 2017

INDUSINDBK
"BUY"
11th Jan 2017
Among the mid size private bank, Indusind bank remains one of the consistent performers in growth and profitability parameter. Superior loan
book growth, diversified fee income profile and low credit cost are the key drivers of the bank. We expect the IIB to maintain 25%+ loan growth in
near to mid-term backed by revival in economic environment and declining interest rate. We expect the consumer loan demand to pick up with
improving vehicle financing and card business giving the boost. Spike in CASA ratio and focus on consumer finance segment will help to maintain
the NIM at 4%. With healthy capitalization of Tier 1 at 14.7% we expect the RoA of 1.9%+, RoE of 16%-17% and maintain BUY with our previous
target price of Rs 1400. ....................................... ( Page : 2-8 )
AUROPHARMA
"HOLD"
10th Jan 2017
Post this acquisition ARBP will jump from current 11th position in Portugal market to no. 1 player and becomes part of the top-10 generic company
in EU (from no 13 earlier). For Aurobindo the Europe push comes amid Aurobindos successful turnaround of the money-losing Western European
commercial operations of Irish drug maker Actavis Plc, which it bought for 30 million Euros in 2014. Considering fruitful synergy benefits coming
out of this deal, we maintain HOLD rating in this stock. ........................ ( Page : 9-10)
BEML
10th Jan 2017
" BOOK PROFIT"
Government will sell 26 percent stake in defence equipment manufacturer BEML, making it the first major PSU to be sold through strategic
disinvestment, which may fetch the exchequer over Rs 1,000 crore. With this stake sale, the government's shareholding will be reduced to 28%.This
divestment may be positive for BEML as a company. BEML has been suffering because of lack of technological advancement. This step may lead to
less government control in companys affair and can boost efficiency in the long term. Though, with the current news of Government divesting
stake, we assume that the stock price movement will be depend more on news flow around the stake sale and less on Financials. We recommend
"Book Profit" at current levels. ....................................... ( Page : 11-14)
VINATIORGA
"Neutral"
9th Jan 2017
We expect that the company to maintain its leadership position in IBB and ATBS along with its increasing product basket could able to cater to the
growing needs of specialty chemicals industry which in turn to drive revenue. A well experienced and able management coupled along with good
growth in the ATBS segment driven by demand in the water treatment segment projects a positive outlook for the company. The company
currently trades at a P/E of 14x FY18E EPS and P/B of 4.6 x FY18 book value. We Initiate Coverage on the stock . Presently we rate it as 'Neutral' due
to its stretch valuation. Our price target on the stock is Rs 659 rating it as P/B of 3.7 on FY19e. ............................................. ( Page : 15-28)
KEC
"Hold"
6th Jan 2017
In short run, companys revenue growth will remain lackluster but medium to long-term growth remains intact. Efficient working capital
management strengthened balance sheet position and we expect it to continue going forward. We expect to ramp up in an execution of substation
(T&D) projects and railway projects. Robust opportunity in railway segment with improving margin will help KEC to post healthy numbers going
forward. But considering the short-term uncertainty, we maintain HOLD on the stock with unchanged target price of Rs. 164.
......................................................... ( Page : 29-31)
M&M
"BUY"
5th Jan 2017
Management believes that the demonetization issue may have short term negative impact on Farm Equipment segment. They expect this concern
will last for next 4 months but sticks with previous growth guidance of 20% for tractor industry in FY17. We believe that the tractor industry may
not see much slow-down because the monsoon was good during the year and almost 90% of the tractors are financed. New launches in 2HFY18 in
Tractor and SUV segments will make the Mahindras presence further stronger in the domestic market. Ssangyong have also seen recovery on nine
month basis and it may post positive results in the current fiscal after three consecutive years of losses. Considering the strong volume growth and
recovery in the non- performing business we recommend 'BUY' with a target price of Rs.1600. ............................................... ( Page : 32-34)
MARUTI
"BUY"
3rd Jan 2017
We expect current demonetization issue may not be impacting much in the long run to the passenger vehicle segment because more than 75%
vehicles are financed. But this issue may be hampering sales in near future due to cash crunch in the economy. We assume volumes in the second
half may be down by 10% in comparison to the first half 2017. Higher sales of premium segment cars will further increase the realization per car,
which will in turn maintain the margins going ahead despite the rising commodity prices. Hence we have positive view on this stock and we
recommend "BUY" with a target price of Rs.6100. .................................... ( Page : 35-37)
Narnolia Securities Ltd
IEA Edition No.-
926
BUY
Indusind Bank
11-Jan-17
Profitability remains Intact, Defying the Expectation
Result Update
CMP
1161
Target Price
1400
Previous Target Price
1400
Upside
21%
Change from Previous
0%
Market Data
BSE Code
532187
NSE Symbol
INDUSINDBK
1255/799
69444
52wk Range H/L

Mkt Capital (Rs Cr)
Av. Volume (,000)
89
8288
Nifty
Stock Performance
1Month
1Year
YTD
Absolute
8.5
25.4
6.9
Rel.to Nifty
7.2
15.9
5.6
Share Holding Pattern-%

3QFY17
2QFY17 1QFY17
Promoters
16.7
16.7
16.7
Public
Others
Total
83.3
83.3
83.3
100.0
100.0
100.0
Company Vs NIFTY
130
INDUSINDBK
NIFTY
125
120
115
110
Indusind Bank posted the strong set of 3Q FY17 results. NII grew by 35%
YoY (better than the industry expectation) backed by healthy loan growth as
well as improvement in NIM. Other Income grew by 21%. C/I ratio was well
within control to 47.5% with only 20 bps increase YoY. Operating Profit
remained healthy with 29% YoY growth. PAT grew by 29% YoY to Rs 751 Cr.
NIM improved by 9 bps YoY to 4%, it remained flat QoQ. Sequentially assets
quality saw marginal deterioration with GNPA at 94bps against 90bps. NNPA
increased by 2bps to 0.39%.
Advances increased by 25% YoY backed by growth in both consumer as well
as corporate portfolio. Deposits Increased by 38% YoY, whereas CASA
Increased by 46% YoY. CASA ratio increased by 50 bps QoQ to 37%.
Advances growth remained healthy, CASA Spiked

Advances grew by a healthy pace of 25% YoY despite the busy quarter (on
liability side) backed by both Consumer Finance and Corporate Bank
division. Both the segment registered the 25% growth YoY. Overall vehicle
finance grew by 20% YoY and Non Vehicle consumer portfolio grew by 38%
YoY. Under Vehicle Finance, CV grew by 10%, SCV picked up to 18% and
car loan grew by 22%. Equipment financing grew by 28% YoY, Credit card
business grew by 51% YoY, LAP growth remained intact at 35% YoY.
Management highlighted that the IIB has gained the market share in overall
vehicle financing except in 2 wheeler segment which remained flat QoQ. In
respect of 2 wheeler business, management sees demonetization as
opportunity for the IIB. Going forward management intends to shift the
portfolio towards CFD as it generates higher yields in comparison to CBD.
Deposits grew by 38% YoY mainly due to demonetization effect. However
growth was only 6% QoQ due to one off IPO deposits in 2Q FY17 got
redeem in 3Q FY17. CASA grew by 46% YoY which led the CASA ratio to
37%(against our expectation of 38%+). SA increased by 56% and CA
increased by 35% YoY. Management highlighted that the increase in CASA
can be attributed equally to both- customer acquisition as well as
demonetization. However it will be interesting to watch that how much of the
deposits remain in the IIB as it will be further driver for the cost of fund.
Operating Profit Remain Healthy.
105
100
95
90
85
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
Apr-16
May-16
Feb-16
Mar-16
Jan-16
80
DEEPAK KUMAR
Deepak.kumar@narnolia.com
Operating profit of the Indusind bank has shown a healthy growth of 29%
YoY backed by strong NII and other income growth of 35% and 21%
respectively. Other income growth was supported by 22% YoY growth in fee
income. Fee from investment banking grew by 41% YoY but remain flat
sequentially. Loan processing fees grew by 5% YoY. Distribution fee income
grew by 44% YoY. C/I ratio increased marginally to 47.5% from 47.3% a year
back due to 29% growth in operating expenses. Bank opened 40 new
branches this quarter which led the total branches to 1075 and has the target
of 1200 in FY17.
2
Please refer to the Disclaimers at the end of this Report
INDUSINDBK
Demonetization led huge decline in Cost of Fund.
NIM has improved by 9bps YoY to 4% but remain flat QoQ. Improvement in NIM was backed by decline in cost of
fund. Cost of fund declined by 53bps YoY to 5.27%. Cost of deposits fall by 80 bps YoY to 6.35% as on 3Q FY17.
This 80 bps fall in cost of deposits was the highest in last 18 quarters. Decline in cost of deposits was the result of
spike in CASA ratio due to demonetization. Overall Yield of IIB declined by 44bps to 9.27%. Yield on advances
declined by 34 bps YoY to 11.73%. Yield on consumer finance division declined by 53 YoY bps whereas corporate
portfolio saw as decline of 22 bps YoY in its Yield. However sequentially yield on CFD decline marginally by 4 bps.
Most of the CFD book is on fixed rate. In the declining interest rate scenario, Yields will further taper but with the
strategy of management to shift to portfolio mix towards high yield CFD and decline in cost of fund will maintain the
NIMs at current level.
Assets Qaulity remains largely stable

Assets Quality of IIB saw marginal increase in its GNPA to 0.94% against 0.90% as on 2Q FY17. NNPA increased by
2 bps to 0.39%. Slippages were Rs 281 Cr, increased by 8% QoQ. However slippages in CFD improved to Rs 170 Cr
against Rs 188 Cr on 2Q FY17. GNPA in vehicle segment improved except in Car segment. LAP also saw 10bps
increase in GNPA. Management highlighted that delinquencies and slippages in the consumer bank have actually
improved over the quarter because repayments came in faster before December 30.Bank also saw delinquent clients
as well as written-off clients end with paying up. Restructured assets declined to 41 bps against 44 bps on 2Q FY17.
The decline was due to slip of 2 small accounts into NPA. PCR remained flat at 59%. Credit cost was 15 bps for the
quarter and it was 45 bps for 9 months. Management expects the credit cost to restrict to 60bps in FY17.
(Rs in Crore)
Quarterly Performance
Financials
Interest Inc.
Interest Exp.
NII
Other Income
Total Income
Ope Exp.
PPP
Provisions
PBT
Tax
Net Profit
3QFY15
2437
1576
861
611
1472
698
774
98
676
229
447
4QFY15
2579
1654
925
658
1584
733
851
107
743
248
495
1QFY16
2724
1743
981
724
1705
782
923
123
799
274
525
2QFY16
2798
1703
1094
784
1878
871
1007
158
848
288
560
3QFY16
2928
1754
1173
839
2012
951
1061
177
884
303
581
4QFY16
3132
1863
1268
913
2181
1030
1151
214
938
317
620
1QFY17
3292
1935
1356
973
2329
1096
1234
230
1003
342
661
Financials
NII Growth % (YoY)
Other Inc./Net Inc. %
C/I Ratio %
Empl. Cost/ Tot. Exp. %
Other Exp/Tot. Exp.%
PPP Growth % (YoY)
Provision/PPP %
Tax %
PAT Growth %
RoE %
RoA %
3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
18.0
18.4
22.5
31.3
36.2
37.1
38.3
33.4
34.5
41.5
41.6
42.5
41.7
41.7
41.9
41.8
39.9
39.2
(2.51)
(0.74)
47.4
46.3
45.9
46.4
47.3
47.2
47.0
47.3
47.5
0.19
0.19
36.6
36.2
34.8
34.5
34.3
32.7
32.6
32.7
32.0
(2.35)
(0.72)
63.4
63.8
65.2
65.5
65.7
67.3
67.4
67.3
68.0
2.35
0.72
(22.3)
(10.9)
11.7
116.0
80.7
98.9
86.9
35.3
22.5
12.7
12.6
13.4
15.7
16.7
18.6
18.7
16.7
15.9
(0.78)
(0.78)
33.8
33.3
34.3
34.0
34.3
33.8
34.1
34.0
34.5
0.26
0.48
28.9
25.1
24.7
30.2
29.9
25.3
26.0
25.8
29.2
18.3
19.8
20.4
16.7
14.1
14.6
15.1
15.4
15.7
1.67
0.34
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
(0.04)
(0.05)
2QFY17
3469
2009
1460
970
2431
1149
1282
214
1068
364
704
3QFY17
3699
2121
1578
1017
2595
1232
1363
217
1146
396
751
YoY %
26%
21%
35%
21%
29%
29%
28%
22%
30%
31%
29%
QoQ%
7%
6%
8%
5%
7%
7%
6%
1%
7%
9%
7%
INDUSINDBK
Margins Performance
Yield % on Advances
Yield % on Corporate Bank
Yield % on Consumer Finance
Overall Yield % on Total Assets
Cost of Deposits %
Overall Cost Of Funds %
NIM %
NII Growth % (YoY)
13.0
12.8
12.7
12.4
12.1
12.0
12.1
11.9
11.7
(0.34)
(0.13)
10.9
10.6
10.4
10.1
10.0
10.1
10.2
9.9
9.8
(0.22)
(0.16)
15.8
15.8
15.7
15.4
15.1
14.9
14.6
14.6
14.5
(0.53)
(0.04)
10.3
10.1
10.1
9.8
9.7
9.7
9.6
9.5
9.3
(0.44)
(0.24)
7.8
6.6
3.7
7.7
6.5
3.7
PAT Growth %
7.6
6.4
3.7
7.4
5.9
3.9
7.2
5.8
3.9
7.1
5.7
3.9
C/I Ratio %
50.00
48.00
40.00
47.50
47.00
30.00
10.00
-
6.6
5.5
4.0
Overall Yield % on Total Assets
6.4
5.3
4.0
(0.80)
(0.53)
0.09
Overall Cost Of Funds %
(0.25)
(0.24)
-
NIM %
12.00
10.00
8.00
46.50
20.00
6.9
5.7
4.0
6.00
46.00
4.00
45.50
2.00
45.00
3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
(Rs in Crore)
Other Income Break Up

Trade and Remittances
Foreign Exchange Income
Distribution Fees
General Banking Fees
Loan Processing fees
Investment Banking
Total Fee-Based Income
Securities/MM/FX
Trading/Others
Total Other Income
3QFY15
62
169
98
42
91
59
522
88
611
4QFY15
80
110
127
45
111
96
569
90
658
1QFY16
56
159
107
49
104
123
599
125
724
2QFY16
84
170
119
41
145
114
673
110
784
3QFY16
85
170
126
46
185
113
726
113
839
Other Income/Total Net Income %
1QFY17
109
151
137
56
215
114
782
191
973
2QFY17
103
156
156
49
201
161
826
145
970
3QFY17
106
179
181
64
195
160
885
132
1017
YoY %
25%
5%
44%
38%
5%
41%
22%
17%
21%
QoQ%
4%
15%
16%
29%
-3%
-1%
7%
-9%
5%
Fee Income/ Advances %
43.00
0.90
42.00
0.88
41.00
0.86
40.00
0.84
39.00
0.82
38.00
0.80
37.00
4QFY16
97
140
138
48
228
122
774
139
913
0.78
4
INDUSINDBK
Outlook & Valuation:
Among the mid size private bank, Indusind bank remains one of the consistent performers in growth and profitability
parameter. Superior loan book growth, diversified fee income profile and low credit cost are the key drivers of the bank.
We expect the IIB to maintain 25%+ loan growth in near to mid-term backed by revival in economic environment and
declining interest rate. We expect the consumer loan demand to pick up with improving vehicle financing and card
business giving the boost. Spike in CASA ratio and focus on consumer finance segment will help to maintain the NIM at
4%. With healthy capitalization of Tier 1 at 14.7% we expect the RoA of 1.9%+, RoE of 16%-17% and maintain BUY
with our previous target price of Rs 1400.
Concall Highlights:
>> Biggest challenge of Q3 was Balance sheet management.
>> Mortgage loan will become more attractive due to rate cut.
>> Bond book will do well as the rate goes down. But the issue lies in the reinvestment risk in the book of banks.
>> Credit cost is well within the guidance. May come up slightly better than the guidance of 60 Bps of full year.
>> Security Receipts is Rs 223 Cr.
>> 2 small accounts slipped from restructured book.
>> RWA to total assets declined to 79% from 83% previous quarter. Quality of book has improved.
>> Assets quality in vehicle book has improved except for Car.
>> CASA increased can be attributed 50% to demonetization effect and 50% for the customer accquisition.
>> Gained market share in vehicle finance in all segment except in 2 wheeler segment.
>> LAP was slow in the month of Nov, but the business came back in Dec.
>> MFI book is flat QoQ with Rs 3000 Cr. MFI loan book target is Rs 10000 Cr in 3 years.
(Rs in Crore)
Assets Quality
GNPA (Rs)
GNPA %
NNPA (Rs)
NNPA %
Slippages (Rs)
Restructured Assets %
Total Stress Assets (Rs)
(GNPA+Std.
Specific
PCR Rest.)
%
673
563
570
602
681
777
861
899
971
43%
8%
1.05
0.81
0.79
0.77
0.82
0.87
0.91
0.90
0.94
0.12
0.04
202
210
225
241
273
322
356
369
401
47%
9%
0.32
0.31
0.31
0.31
0.33
0.36
0.38
0.37
0.39
0.06
0.02
161
449
133
189
252
274
253
261
281
12%
8%
0.55
0.53
0.63
0.63
0.58
0.53
0.49
0.44
0.41 -0.17
-0.03
353
368
455
493
482
473
464
440
424 -12%
-4%
70.1
62.6
60.6
60.0
59.9
58.6
58.7
59.0
58.7 -1.16
-0.25
GNPA Composition Consumer Finance %

Commercial Vehicle
Utility
Construction Equipment
Small CV
TW
Cars
LAP/HL/PL
Tractor
Cards
Total
1.44
1.27
1.18
1.10
1.05
1.00
1.08
1.07
1.02 -0.03
-0.05
0.97
1.08
1.06
1.03
1.00
1.21
1.27
1.17
1.07
0.07
-0.10
1.64
1.44
1.46
1.57
1.45
1.26
1.39
1.40
1.24 -0.21
-0.16
0.90
0.92
1.04
0.84
0.81
0.98
1.05
0.97
0.83
0.02
-0.14
2.36
2.53
2.65
2.83
2.95
3.02
3.15
3.62
3.60
0.65
-0.02
0.48
0.56
0.58
0.41
0.39
0.50
0.49
0.49
0.75
0.36
0.26
0.32
0.33
0.48
0.41
0.57
0.65
0.68
0.71
0.81
0.24
0.10
0.24
0.49
0.28
N/A
-0.21
1.53
1.24
1.32
1.35
1.48
1.45
1.73
1.68
1.62
0.14
-0.06
1.22
1.15
1.14
1.09
1.08
1.08
1.14
1.17
1.16
0.08
-0.01
5
INDUSINDBK
GNPA %
NNPA %
Restructured Assets %
Specific PCR %
1.20
72.00
70.00
68.00
66.00
64.00
62.00
60.00
58.00
56.00
54.00
52.00
1.00
0.80
0.60
0.40
0.20
-
(Rs in Crore)
Advances
Net Advances (Rs in Cr)
Adv. Growth YoY %
>> Growth QoQ %
Sectoral Breakup %
Corporate Banking%
Consumer Finance%
3QFY15
63,847
21.69
6.53
4QFY15
68,788
24.84
7.74
1QFY16
72,243
23.15
5.02
2QFY16
78,294
30.64
8.38
3QFY16
82,167
28.69
4.95
4QFY16
88,419
28.54
7.61
1QFY17
93,678
29.67
5.95
2QFY17
98,949
26.38
5.63
3QFY17
102,770
25.07
3.86
3QFY15
57.7
42.3
4QFY15
58.7
41.3
1QFY16
58.5
41.5
2QFY16
59.2
40.8
3QFY16
58.3
41.7
4QFY16
58.7
41.3
1QFY17
58.8
41.2
2QFY17
59.0
41.0
3QFY17
58.3
41.7
Net Advances (Rs in Cr)
Adv. Growth YoY %
Corporate Banking %
1,20,000
35.00
1,00,000
30.00
80,000
25.00
40,000
20,000
-
60.00
50.00
20.00
40.00
15.00
30.00
10.00
20.00
5.00
10.00
60,000
Consumer Finance %

INDUSINDBK
Consumer Finance Book Break Up
1QFY16
Comm. Vehicle Loans
11,405
>>Tractor
Utility Vehicle Loans
2,043
Small CV
1,860
Two Wheeler Loans
2,829
Car Loans
3,293
Equipment Financing
2,827
Credit Card
786
Loan Against Property
4,032
Others-BL,PL,GL,etc
932
(Rs in Crore)
2QFY16
12,360
2,037
1,938
2,857
3,539
2,861
885
4,331
1,147
3QFY16
13,204
2,041
2,019
3,034
3,754
3,036
1,008
4,759
1,393
4QFY16
14,101
2,058
2,045
3,045
3,917
3,244
1,204
5,248
1,687
1QFY17
13,847
1,229
2,097
2,133
3,076
4,076
3,435
1,258
5,585
1,855
4QFY15
74,134
22.5
6.9
25,300
28.5
7.0
34.1
16.7
17.5
92.8
1QFY16
77,693
21.6
4.8
26,945
26.5
6.5
34.7
16.6
18.0
93.0
2QFY16
80,841
22.5
4.1
28,085
25.6
4.2
34.7
16.1
18.6
96.8
3QFY16
86,423
24.6
6.9
30,232
27.9
7.6
35.0
16.3
18.7
95.1
2QFY17
14,208
1,460
2,157
2,274
3,134
4,324
3,597
1,408
5,872
2,124
YoY(+/-)
10%
N/A
10%
18%
10%
22%
28%
51%
35%
58%
QoQ(+/-)
3%
21%
4%
5%
6%
6%
8%
8%
9%
3%
1QFY17
101,768
31.0
9.4
35,043
30.1
7.1
34.4
15.7
18.8
92.1
2QFY17
112,313
38.9
10.4
41,034
46.1
17.1
36.5
18.2
18.3
88.1
3QFY17
119,218
37.9
6.1
44,162
46.1
7.6
37.0
15.9
21.1
86.2
(Rs in Crore)
DEPOSITS
Deposits (Rs in Cr)
>> Growth YoY %
>> Growth QoQ %
CASA (Rs)
>>CASA Growth YoY %
>> Growth QoQ %
CASA %
CA %
SA %
Credit Deposit Ratio
3QFY15
69,376
23.3
5.1
23,634
30.6
5.7
34.1
16.5
17.6
92.0
Deposit Growth YoY %
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
-
3QFY17
14,569
1,764
2,237
2,381
3,323
4,570
3,875
1,519
6,429
2,198
>>CASA Growth YoY %
4QFY16
93,000
25.4
7.6
32,724
29.3
8.2
35.2
16.6
18.5
95.1
CA %
SA %
CASA %
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-

INDUSINDBK
Financials Snap Shot
INCOME STATEMENT
Int./disc. on advances / bills

Income on Investments
Int. on bal.with RBI
Others
Total Interest Income
Total Interest expended
Net Interest Income
Other Income
Total Income
Total Operating Expenses
Pre Provisioning Profit
Provisions and Contingencies
Profit Before Tax
Tax
PAT
(Rs in Crore)
FY14
6,627
1,477
149
1
8,254
5,363
2,891
1,891
4,781
2,185
2,596
468
2,128
720
1,408
BALANCE SHEET
FY15
7,717
1,680
277
17
9,692
6,272
3,420
2,404
5,824
2,726
3,098
389
2,709
915
1,794
FY16
9,245
1,781
409
147
11,581
7,064
4,517
3,297
7,814
3,672
4,141
672
3,469
1,183
2,286
FY17E
11,643
2,201
341
137
14,323
8,470
5,853
4,184
10,036
4,809
5,228
803
4,425
1,497
2,928
(Rs in Crore)
Capital
Reserves & Surplus
Deposits
Borrowings
Other Liabilities & Provisions
Total Capital & Liabilities
FY14
526
8517
60502
14762
2719
87026
FY15
FY16
FY17E
529
595
595
10115 17101 19625
74134 93000 116341
20618 22156 25179
3719
7205
8758
109116 140057 170498
Cash & Balances with RBI

Bal. with Bank&Money at Call
Investments
Advances
Fixed Assets
Other Assets
Total Assets
4414
2356
21563
55102
1016
2575
87026
4035
4521
7161
6744
5591
6112
22878 31214 35368
68788 88419 110524
1158
1255
1386
5513
9057
9947
109116 140057 170498
RATIOS
Business Ratios
Credit-Deposit(%)
CASA %
Efficiency Ratios
Emp. Cost as a % of Total Inco. (%)
Other Exp./Total Inco. (%)
Cost Income Ratio (%)
Spread Analysis As Calculated
Yield on Advances (%)
Yield on Investments (%)
Yield on Earning Assets (%)
Cost of Deposits (%)
Cost of Fund (%)
Interest Spread (%)
NIM (%)
Profitability Ratio
RoE %
RoA %
Int. Expended / Int. Earned (%)
Provisions/PPP (%)
Other Income/Net Income (%)
Tax Rate (%)
Asset Quality Ratio
GNPA (%)
GNPA(Rs)
NNPA (%)
NNPA (Rs)
PCR (%)
Os. Std. Restr. Assets (%)
Capital Adequacy Ratio
Capital Adequacy Ratio (%)
Tier I Capital (%)
Tier II Capital (%)
Narnolia Securities
Ltd
8
FY14
91.1
32.5
FY15
92.8
34.1
FY16
95.1
35.2
FY17E
95.0
35.5
16.9
28.8
45.7
16.8
30.0
46.8
15.8
31.2
47.0
15.9
32.0
47.9
13.6
7.9
11.5
8.2
8.1
3.5
4.0
13.2
8.0
11.2
7.9
7.8
3.5
4.0
12.3
7.3
10.7
7.3
7.0
3.8
4.2
12.2
7.1
10.6
6.9
6.7
4.0
4.3
17.5
1.8
65.0
18.0
39.5
33.8
19.0
1.8
64.7
12.6
41.3
33.8
16.6
1.8
61.0
16.2
42.2
34.1
16.2
1.9
59.1
15.4
41.7
33.8
1.12
621
0.33
184
70
0.33
0.81
563
0.31
210
63
0.53
0.87
777
0.36
322
59
0.53
0.96
59.0
0.40
13.8
12.7
1.1
12.1
11.2
0.9
15.5
14.9
0.6
15.3
14.6
0.7
0.41
HOLD
AUROBINDO PHARMA LTD
10-Jan-17
Company Update
CMP
694
Target Price
890
890
Upside
28%
0%
Market Data
BSE Code
524804
NSE Symbol
AUROPHARMA
895/582
40645
138.1
8236.1
52wk Range H/L

Mkt Capital (Rs Cr)
Av. Volume(,000)
Nifty
Stock Performance
1M
3M
12M
Absolute
-3.3
-19.9
-9.2
Rel.to Nifty
-3.5
-26.3
-12.4
Promoters
Public
DII
Total
Post this acquisition ARBP will jump from current 11th position in Portugal
market to no. 1 player and becomes part of the top-10 generic company in
EU (from no 13 earlier). For Aurobindo the Europe push comes amid
Aurobindos successful turnaround of the money-losing Western European
commercial operations of Irish drug maker Actavis Plc, which it bought for
30 million Euros in 2014. Considering fruitful synergy benefits coming out of
this deal, we maintain HOLD rating in this stock.
1QFY17 4QFY16
53.79
46.21
53.79
46.21
53.9
This deal will be funded through Term loan taken in Euro.
46.1
100
100
100
Generics business will give the synergy benefits immediately.

The estimated goodwill of Generics is ~ Rs. 8 Cr
ARBP will have the largest generic product portfolio consisting of 271
products.
In overall generics market there is no price drop at this point of time, there
prices are stable.
Company Vs NIFTY
115
Outlook
Current concall Highlights on Acquisition

2QFY17
Aurobindo Pharma has announced the signing of a binding agreement

through its wholly owned subsidiary (Agile Pharma B.V.) to acquire Generis
Farmaceutica S.A (involves in manufacturing and sale of pharmaceutical
products in Portugal).The total consideration for the acquisition is ~ Rs.968
Cr. This acquisition cost will be funded through Term loan in Euro. This
acquisition includes manufacturing facility in Amadora (Portugal) which has
the capacity to manufacture 1.2 bn tablets/capsules/sachets annually. With
this ARBP will have its first formulations plant in EU. Existing capacity
utilization is at ~50%. Portugal has pharma market size of 3.4 bn with
generic penetration in volume at ~30% significantly below EU average of
~53% and US average of ~80%. Management expects synergy benefits
coming out from FY18E.
AUROPHARMA
NIFTY
110
The generics market in Portugal market is ~ $600mn.
105
51 products are pending in pipeline.
100
ARBP is going to launch 39 products going ahead.
95
Financials
2012
2013
2014
2015
Rs,Cr
2016
Sales
EBITDA
Net Profit
EPS
ROCE
4627
561
-124
-4
11%
5855
861
294
10
16%
8100
2132
1173
40
36%
12121
2564
1576
54
34%
13896
3206
1982
34
36%
90
85
80
Jan-17
Dec-16
Oct-16
Nov-16
Sep-16
Jul-16
Aug-16
Jun-16
Apr-16
May-16
Feb-16
Mar-16
Jan-16
75
Aditya Gupta
aditya.gupta@narnolia.com

Revenue
Other Income
Total Revenue
COGS
GM
Other Expenses
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
PBT
Tax
Tax Rate (%)
Reported PAT
Dividend Paid
No. of Shares

INCOME STATEMENT
FY13
FY14
FY15
FY16
5855
8100
12121
13896
EPS
29
23
97
68
Book Value
5884
8123
12217
13964
DPS
2,991
3,606
5,506
6,158
Payout (incl. Div. Tax.)
49%
55%
55%
56%
P/E
1,340
1,530
2,749
2,982
Valuation(x)
861
2132
2564
3206
Price / Book Value
15%
26%
21%
23%
Dividend Yield (%)
249
313
333
393
RoE
612
1,819
2,231
2,813
Profitability Ratios
267
310
160
159
RoCE
374
1,533
2,168
2,722
Asset Turnover (x)
83
363
597
744
Turnover Ratios
22%
24%
28%
27%
Debtors (No. of Days)
294
1173
1576
1982
Inventory (No. of Days)
67
60
179
359
Creditors (No. of Days)
29
29
29
58
Net Debt/Equity (x)
Share Capital
Reserves and surplus
Shareholders' funds
Long term Debt
Total Borrowings
Non Current liabilities
Long term provisions
Short term Provisions
Current liabilities
Total liabilities
Net Fixed Assets
Non Current
Investments
Other
non Current assets
Current assets
Total Assets
FY13
29
2,577
2,606
1,148
3,384
77
9
80
1,195
7,273
2,857
22
19
4,137
7,273
BALANCE SHEET
FY14
FY15
29
29
3,721
5,127
3,750
5,156
1,279
1,361
3,634
3,864
215
235
9
24
127
218
1,865
3,634
9,490 12,914
3,031
4,061
20
0
18
30
5,631
8,299
9,490 12,914
FY16
29
6,958
6,987
1,368
3,883
242
31
240
3,543
14,681
4,115
0
30
10,035
14,681
FY13
10
89
2
0
14.46
2
2%
11%
RATIOS
FY14
FY15
40
54
129
12
2
76
0
2
12.71
22.64
15
4
7
0%
1%
31%
31%
16%
1
36%
1
34%
1
34%
1
100
120
60
0.44
119
107
61
0.34
107
109
62
0.26
107
109
63
0.20
CASH FLOW STATEMENT

FY13
FY14
FY15
OP/(Loss) before Tax
374
1,533
2,168
Depreciation
249
313
333
Direct Taxes Paid
119
344
597
Operating profit before
819
2,047
2,644
working
capital
CF
from Op.
Activity
275
646
1,797
Capital expenditure on
(273)
(390) (1,362)
fixed
assets
including
CF
from
Inv. Activity
(246)
(819) (1,426)
Proceeds from long180
147
82
term borrowings
Repayment
of Long Term Borrowings
(523)
(51)
Interest Paid
(112)
(94)
(144)
Divd Paid (incl Tax)
(67)
(60)
(179)
CF from Fin. Activity
108
118
(94)
Inc/(Dec) in Cash
137
(55)
277
Add: Opening Balance
66
203
179
Closing Balance
203
148
455

FY16
69
11
84
0
17.81
12
5
0%
29%
FY16
2,670
427
667
3,290
871
(481)
(481)
7
(193)
(171)
(345)
46
469
515
10
BOOK PROFIT
BEML LTD.
10-Jan-17
Result Update
CMP
Target Price
Upside
View & Recommendation

1158
1240
7%
-
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Av. Volume
Nifty
500048
BEML
1247.20/770.15
4,821
355
8236
Stock Performance
Absolute
Rel.to Nifty
Government will sell 26 percent stake in defence equipment manufacturer

BEML, making it the first major PSU to be sold through strategic
disinvestment, which may fetch the exchequer over Rs 1,000 crore. With this
stake sale, the government's shareholding will be reduced to 28%.This
divestment may be positive for BEML as a company. BEML has been
suffering because of lack of technological advancement. This step may lead
to less government control in companys affair and can boost efficiency in the
long term. Though, with the current news of Government divesting stake, we
assume that the stock price movement will be depend more on news flow
around the stake sale and less on Financials. We recommend "Book Profit"
at current levels.
Recent management commentaries
1Month
1Year
YTD
9.6
8.7
4.4
-4.4
-2.1
2.5
As per the management company would be looking to double its revenue to

over Rs 6000 Cr by 2020 and Rs 3500 Cr in FY17.
Order book is roughly about Rs 7300cr in FY17.
Management expects Mining segment will improve in FY18E and expects
almost another Rs 800-1,000 Cr worth of mining orders.

2QFY17 1QFY17
In Defence segment, lots of opportunities are coming. Management assures
4QFY16
Promoter
54.03
54.03
54.03
Public
45.97
45.97
45.97
--
--
--
100
100
100
Others
Total
Company Vs NIFTY
120
BEML
NIFTY
110
that this particular sector will take huge jump in near future. In Defence front
order inflow will be double in FY17 as compare to FY16, these would all be in
the vehicle space, the mine systems, the missile systems, the other vehicles,
etc.
In Metro segment company is having order book roughly about Rs 2000 Cr

out of which Rs 1000 Cr will execute in FY17 and rest Rs 1000 Cr will be
executing in FY18E. In FY18E company is having another order worth Rs
2400 Cr. So, total order book in Metro is Rs 3500 Cr in FY18E.
There are a lot of options and opportunities that are going to emerge.
Company have a big special economic zone (SEZ) land in Bangalore so they
100
90
80
70
60
50
Bibha Kashyap
bibha.kashyap@narnolia.com
are already poised. They will wait for the opportunities and talking to a lot of
partners as well.
Rs in Cr
Financials
FY13
FY14
FY15
FY16
FY17E
Sales
2801
2904
2802
2978
2620
EBITDA
-49
115
70
129
156
Net Profit
-83
6
6
53
54
EBIDTA%
-1.7%
4.0%
2.5%
4.3%
6.0%
P/E
0.0
0.0
0.0
0.0
0.0
11
Order book position:

8000
5933
5422
14000
7261
7016
7000
6000
Manpower in nos:
6050
11798 11644
12000
6314
11005
5686
10328
9599
10000
5000
8827
8348
8000
4000
3000
6000
2000
4000
1000
2000
FY11
FY12
FY13
FY14
FY15
Order book in Crs
FY16 30 Nov'
16
FY11
FY12
FY13
FY14
FY15
FY16 30 Nov'
16
Manpower in nos.
Trend of Gross margin and EBITDA margin:
Gross Margin %
EBIDTA %
0.75
0.80
0.66
0.70
0.60
0.50
0.40
0.52 0.50 0.13
0.47
0.40 0.43
0.05 0.06 0.37
0.35
0.01 (0.00)
0.30
0.40
0.01
0.37
(0.01)
(0.07)
0.20
0.18
0.47
0.50
0.37
0.02
(0.00)
(0.09)
(0.13)
0.10
-
(0.25)
0.20
0.15
0.10
0.05
(0.05)
(0.10)
(0.15)
(0.20)
(0.25)
(0.30)
Trend of Net sales and PAT:

Net Sales(Cr)
169
155
64
-11
-24

454
-115
346
1009
764
577
451
502
780
783
-68
-96
751
-30
-55
590
-39
676
1279
-26
598
1400
1200
1000
800
600
400
200
0
PAT (Cr)
200
150
100
50
0
-50
-100
-150
12
Trend of Employee benefit and Other expenses:

Employee benefit Expence % as Sales
Other expenses % as Sales
60%
52%
50%
40%
38%
41%
25%
30%
39%
32%
31%
24%
19%
28%
25%
18%
16%
20%
10%
32%
39%
36%
24%
15%
15%
14%
0%
10%
13%
18%
16%
12%
13%
10%
11%
Investment Arguments:
The approval for Tatra trucks has come through with delivery commencing from August 2015. The
order backlog of ~Rs11bn-12bn from Tatra is likely to get executed in 18-24 months. which will help
improve profitability of BEMLs defence business for FY16 &FY17.
All the three segments have done well especially on the defence side it is very good. It is very
satisfied and defence for the future is going to be much more exciting because of Make in India
campaign where management is expecting exciting opportunities, which are already up and running.
That should go very well in FY16-FY17.
Coal India, in its commentary, has stated its intent to spend Rs 1500 Cr -2000Cr annually on
machinery procurement including heavy equipment, dumpers, etc segments where BEML is the
market leader.
Key Risks:
Inventory obsolescence
Metro capex cycle recovery
Production Units:
About the company:

BEML Limited is an India-based company engaged in manufacture of rail coaches and
spare parts and mining equipment. Its segment includes Mining & Construction, Rail &
Metro and Defense. The Trading Division deals in non-Company products. The
International Division exports products manufactured by all the three verticals. Under
Mining and Construction business, the Company manufactures and supplies Mining &
Construction equipment such as Bull Dozers, Excavators, Dumpers, Shovels, Loaders
and Motor Graders to various user segments and under Rail & Metro Business, it
manufactures and supplies Rail Coaches, Metro Cars, Steel and Aluminium Wagons
to the rail sector.

13
FY14
1.5
506.8
3.0
200%
RATIOS
FY15
FY16
1.4
12.8
505.8
506.6
1.2
4.7
82%
37%
FY17E
13.0
515.0
4.7
36%
196.6
0.6
1.02%
759.6
2.2
0.11%
68.8
1.7
0.53%
70.9
1.8
0.51%
0%
2%
0%
1%
3%
3%
3%
4%
0.6
122.9
271.6
48.9
0.22
0.6
129.2
250.3
70.8
0.20
0.7
148.1
208.7
50.5
0.17
0.7
150.0
201.6
40.0
0.16
INCOME STATEMENT
Revenue
Other Income
Total Revenue
COGS
GPM
Other Expenses
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
PBT
Tax
Tax Rate (%)
Reported PAT
Dividend Paid
No. of Shares
FY14
2904
64
2967
1694
1
373
115
4%
54
60
111
13
4
29%
6
12
4
FY15
2802
60
2862
1564
1
393
70
2%
53
17
71
6
0
-8%
6
5
4
Share Capital
Reserves
Net Worth
Long term Debt
Short term Debt
Deferred Tax
Total Capital Employed
Net Fixed Assets
Capital WIP
Debtors
Cash & Bank Balances
Trade payables
Total Provisions
Net Current Assets
Total Assets
FY14
42
2039
2081
465
441
0
2546
686
135
977
18
389
284
2420
4770
FY15
42
2035
2077
414
178
0
2491
660
150
992
145
543
290
2148
4591
FY16
2978
39
3017
1703
1
373
129
4%
54
75
49
65
11
18%
53
19
4
FY17E
2620
26
2646
904
0
786
156
6%
52
104
42
87
17
20%
54
19
4
EPS
Book Value
DPS
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Net Debt/Equity (x)
BALANCE SHEET
FY16
42
2068
2110
363
147
0
2472
657
59
1208
66
412
317
2157
4331
FY17E
42
2103
2145
345
105
0
2489
698
150
1077
58
287
290
2087
3988

Depreciation
Direct Taxes Paid
OP before WC changes
CF from Op. Activity
FY14
10
54
(26)
171
394
CAPEX
CF from Inv. Activity
Repayment of LTB
Interest Paid
Inc/(Dec) in Cash
Closing Balance
(43)
(28)
(34)
(109)
(12)
(427)
(61)
78
18

CASH FLOW STATEMENT

FY15
FY16
FY17E
5
65
87
53
54
52
12
(15)
(17)
151
201
182
548
84
223
(41)
(36)
(31)
(67)
(5)
(384)
128
18
146
(24)
(30)
(31)
(45)
(5)
(134)
(79)
146
66
(93)
(93)
(18)
(42)
(19)
(122)
7
66
73
14
A Niche play
Neutral
VINATI ORGANICS LTD
9-Jan-17
About the Company :
Company Update
CMP
625
Target Price
659
NA
Upside
5%
NA
Market Data
BSE Code
524200
NSE Symbol
VINATIORGA
664/361
3,222
6.5
52wk Range H/L

Mkt Capital (Rs Cr)
Av. Volume(,000)
Nifty
8244
VOL is into the manufacturing of specialty organic chemicals. largest

manufacturer of Isobutyl Benzene (IBB) and the 2nd largest manufacturer of
ATBS. ATBS is used in oilfield recovery, water treatment, acrylic fiber
manufacturing, adhesives, and personal care products, as well as in mining
industry, coatings, and as dispersing and flocculating agents. Other products
include IBB which is the basic raw material for manufacturing Ibuprofen and
Isobutylene (IB) which is used in agro-chemicals and is also a raw material for
manufacturing ATBS. VOL exports more than 75% of its production across USA,
Europe, Asia, Middle East and China and has been the preferred source for
some of the largest chemical manufacturing companies in the world. The
company started with a small capacity of 1,000 TPA and gradually expanded to
26,000 TPA today for its ATBS production, capturing 45% of the market share.
The company also command more than 65% market share in the world for IBB.
With consistent investments in technology and capacities, the company is the
largest producer of IBB in the world with a capacity of 16,000 TPA.
Stock Performance
1Month
1Year
YTD
Key Investment Arguments :
Absolute
4.6
36.0
34.8
Rel.to Nifty
3.7
30.1
30.4
Promising player in the Domestic Speciality Chemicals growth story

Enjoying synergy through strategic backward & forward integration. FY19
Capex plan to drive growth
Expansion of Product Basket, Improvement in Operating Efficiency to Drive
Growth
ATBS - contributing ~30% to the top line - fully backward integrated
VOLs contribution towards revenue from three main products
Robust Client base and long-term contracts provides a safe guard
VOL is well placed within its Competitors
Hedged pricing policy give confidence for higher margins
Healthy Balance Sheet, Strong returns ratios and Healthy Cash Flows displays
strong financial participation.
R & D backed by technology collaborations gives it competitive advantage
Snapshot of VOLs phenomenal track record during the last 5 years

Q2FY17
Q1FY17 Q4FY16
Promoter
74.0
72.6
72.3
Public
26.0
27.4
27.7
Others
0.0
0.0
0.0
100.0
100.0
100.0
Total
Company Vs NIFTY
145
VINATIORGA
NIFTY
135
125
115
105
95
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
May-
Apr-16
Jan-16
Mar-16
Dec-15
75
Jun-16
85
Bhabani Prasad Dehury

bhabani.dehury@narnolia.com
Financials
Sales
EBITDA
PBT
Net Profit
EBIDTA %
PBT %
PAT %
Q2FY17
148
46
41
30
31.1%
27.7%
20.5%
Q1FY17
167
60
54
36
35.6%
32.4%
21.4%
Narnolia Securities Ltd,

Q2FY16
163
52
47
31
32.2%
28.9%
19.1%
QoQ
-11.4%
-22.7%
-24.2%
-14.8%
(456) Bps
(470) Bps
(83) Bps
Rs,Cr
YoY
-9.1%
-12.1%
-13.0%
-2.1%
(108) Bps
(124) Bps
147Bps
15
Key Risks:
Concern :
De-risk Strategy :
Highly dependent on three products:

VOLs 72% of revenue accrued from three products - namely IBB, ATBS and IB. Thus its highly sensitive for market
changes in these three products. VOL has not only met this standard but also beat industry standard by achieving
purity levels of 99.8% which is the highest level of purity recognized globally. VOL is updated with latest
technology trends in the industry. VOL manufactures IBB with technology collaboration of Institut Francais du
Petrole . ATBS plant was installed based with the aid of National Chemical Laboratories today it is the worlds
largest manufacturer of ATBS. We believe company holds a strong entry barrier for its peers.
Concern :
De-risk Strategy :
Exposed to foreign currency fluctuations

The Company is protected through a natural hedge. It procures raw material through imports and local
purchases, where local purchases track the import parity price. The Company receives 67% of its revenue from
exports and the company borrows largely through ECBs which are in USD.
Concern :
De-risk Strategy :
Client retention risk

VOL, a preferred supplier for largest manufacturing companies like BASF, Dow Chemicals, Nalco Company (USA),
AkzoNobel, SNF Floerger, Ciba, Clariant Chemicals and many others. It is increasing its product basket with new
products to decrease its dependency on mainstream products (ATBS and IBB). VOL is expanding geographically
and equally emphasising on productsegment with capacity expansion for a sustainable future.
Concern :
De-risk Strategy :
Any Distortion in user Industry & Exposed to Government Policies of other countries
It is expected that the Indian chemical industry is expected to grow to reach US$ 300 Bn by 2021. Indias per
capita consumption of chemicals lower than that of other countries could trigger growth opportunity for the
Industry. Chemical industry is one of the most diversified covering sectors like inorganic chemicals, organic
chemicals, fine and specialties, drugs, agrochemicals; and it has registered a growth of 14% during the last 5
years. It is expected that the industry to hold the growth trajectory with strong government support for R&D,
100% FDI permitted through automatic route, rise in GDP and PPI hasgrowth potential for the domestic market.
VOL is well placed to grab the opportunities from the potential growth poised ahead.
Concern :
De-risk Strategy :
Fund raising for upcoming capex

Company enjoys a D/E ratio at 0.03x and a high interest cover of 26.3. Management believe company will be
debt free by FY17. Management believe internal accrual will manage all the capex plans. We beleive debt free
balance sheet will help the Company raise funds as and when required easily.
Concern :
De-risk Strategy :
Agrresive Capex plans

VOL is carrying Rs. 700 Cr capex plan mostly to increase its product portfolio. The market acceptance of the new
products is yet to be established. It has a well track record of selecting products for its launch pipeline which
have inherent synergies with the companys existing portfolio. They designed the ongoing process to give the
company competitive advantages for both backward and forward integration. This ensures a high level of supply
chain control and quality assurance as well cost-efficiencies with better margins.

16
Promising player in the Domestic Speciality Chemicals growth story

It is expected that the Indian chemical industry is expected to grow to reach US$ 300 Bn by 2021. Indias per capita consumption of chemicals lower than
that of other countries could trigger growth opportunity for the Industry. Chemical industry is one of the most diversified covering sectors like inorganic
chemicals, organic chemicals, fine and specialties, drugs, agrochemicals; and has registered a growth of 14% during the last 5 years. Rise in GDP and PPI
hasgrowth potential for the domestic market. VOLs 72% of revenue accrued from three products - namely IBB, ATBS and IB. VOL has not only met this
standard but also beat industry standard by achieving purity levels of 99.8% which is the highest level of purity recognized globally. VOL is updated with
latest technology trends in the industry. We believe company holds a strong entry barrier for its peers.
70%
65%
VOL Market share
60%
6.0%
8.0%
9.0%
31.0%
50%
45%
40%
30%
46.0%
20%
IBB
ATBS
IB
HPMTBE
FY16
Others
10%
0%
IBB marketShare
ATBS market share
Enjoying synergy through strategic backward & forward integration. Capex plan to drive growth
VOL is carrying Rs. 700 Cr capex plan mostly to increase its product portfolio. The market acceptance of the new products is yet to be established. It has a
well track record of selecting products for its launch pipeline which have inherent synergies with the companys existing portfolio. They designed the
ongoing process to give the company competitive advantages for both backward and forward integration (See page no :11) . This ensures a high level of
supply chain control and quality assurance as well cost-efficiencies with better margins.Capacity utilisation, about 80-90 percent and planning a lot of
expansion or rather new product launches in the next two-three years. Announced an investment close to Rs 700 crore. Rs 500 crore is going to be
towards introducing a new product, para-aminophenol (PAP), which is like how IBB is used for ibuprofen, PAP is used for paracetamol. Will also be making
an investment of Rs 160-200 crore to make butylated phenols which are made from phenols and isobutylene. This will add about Rs 350 crore in
revenues, but these two products will come on stream in FY19. In FY18, revenue growth by virtue of ATBS growth as well as the new products that
started this year which include two customised products as well as P-Tert-Butyltoluene (PTBT), P-Tert-Butylbenzoic Acid (PTBBA), Tert-Butylamine (TB
Amine), etc.
Expansion of Product Basket, Improvement in Operating Efficiency to Drive Growth

Company is addind two new products to its portfolio which includs PAP and butylated phenols. This two products will add ~350Cr to its ttopline from
FY19. PAP is a very genuine product which is used for making paracetamol drugs, very mature market. But the reason behind launching these products is
company developed a novel process along with NCL who has a patented technology and have exclusive licence for its new process.It is more cost effective
and environment friendly process.Management beleive to replace at least about 22,000 tonnes of PAPs imported into the country from China. on account
of a superior process. In FY18, revenue growth by virtue of ATBS growth as well as the new products that started this year which include two customised
products as well as P-Tert-Butyltoluene (PTBT), P-Tert-Butylbenzoic Acid (PTBBA), Tert-Butylamine (TB Amine), etc.PTBT and PTBBA which will come on
stream from the 2HFY17 is set to add approx. INR 500 700 mn; thereby leading to an improvement in the companys revenue growth and margin profile.

17
ATBS - contributing ~45% to the top line - fully backward integrated. VOLs contribution towards revenue
from three main products.
Basic use of IBB to make ibuprofen which is a mature segment in pain killer drug market, hence demand likely to same. Company also
strategically lowered the IBB revenue segment. ATBS is used for different industries such as water treatment, oil and gas, personal care etc.
Current market shows a dip in demand from Oil Recovery segment. But demand from water treatment segment is good and likely to increase.
In FY17 volume may go in a slow pace but going forward it has to come back through recovery in oil segment backed by strong water
treatment demand. ATBS is having a 46% contribution towards revenue.
IB is a forward integration process to manufacture ATBS and used in agrochemicals where we expect a good growth in demand. This improves
the cost efficiency among its peers. Currently, VOL is the largest player for IBB (65% of the global market share). VOL started manufacturing
ATBS with an initial 1,200 MTPA, through the years it increased the capacity to 26,000 MTPA and is the world's largest manufacturer of ATBS
(45% of the global market share). VOL also commands a leadership position in India in another product it manufactures, HPMTBE (High Purity
Methyl Tertiary Butyl Ether).
Robust Client base and long-term contracts provides a safe guard

VOL, a preferred supplier for largest manufacturing companies like BASF, Dow Chemicals, Nalco Company (USA), AkzoNobel, SNF Floerger,
Ciba, Clariant Chemicals and many others. It is increasing its product basket with new products to decrease its dependency on mainstream
products (ATBS and IBB). VOL is expanding geographically and equally emphasising on product segment with capacity expansion for a
sustainable future and long_term contracts with clients.
Hedged pricing policy give confidence for higher margins

Comoany performs a sensitive price strategy,as its finshed products are strongly crude derivatives. But on a good track record, company
always able to paas on the increase and decrease in crude to its customer. This pricing policy ensures stable margins.
When we come to the dollar-rupee movement also; 80 percent of therevenues are coming from exports, most of revenues are US dollar
based, but because company's raw material are also priced in dollars, even the inputs that are purchasing locally, are priced in dollar values,
so it does not affect company's margins. If whatever is the surplus of exports minus the imports, company also take dollar denominated
loans. So, net-net, company is neutral to the exchange rate movement as well.
Healthy Balance Sheet, Strong returns ratios and Healthy Cash Flows displays strong financial participation.
VOLs cash flow from operations has been consistently positive and never turned negative in the past 20 years. Despite the on-going capex
cycle, the company generated healthy Cash flow from operation for FY15 and FY16 of Rs 113Cr and Rs 167Cr, respectively. We believe VOLs
cash flow from operations or CFO will remain positive and will also continue over FY17E-FY18E. We expect WC days to remain in a similar
range. Company enjoys a D/E ratio at 0.08x and a high interest cover of 26.3. Management believe company will be debt free by FY17.
Management believe internal accrual will manage all the capex plans.

18
Management Highlights
Management currently enjoys D/E ratio at 0.3x and Will be debt free by end of FY17E.
The company has easily able to pass on crude price movements to customers.
ATBS accounts for 45 percent of the total revenue and makes up for 50 percent market share.
Capacity utilisation, about 80-90 percent and planning of expansion. Company is going to lunch new products in the next two-three years.
Company announced an investment close to Rs 700 crore. Rs 500 crore is going to be towards introducing a new product, para-aminophenol
(PAP), PAP is used for paracetamol. Will also be making an investment of Rs 160-200 crore to make butylated phenols which are made from
phenols and isobutylene. This will add about Rs 350 crore in revenues, but these two products will come on stream in FY19.
In FY18, revenue growth by virtue of ATBS growth as well as the new products that we started this year which include two customised
products as well as P-Tert-Butyltoluene (PTBT), P-Tert-Butylbenzoic Acid (PTBBA), Tert-Butylamine (TB Amine), etc.
IBB is a mature product its very common.about 3-5 percent annual growth rate in IBB, dependence on IBB as a product has been going
down. Initially, it was about 40 % of our revenue mix; today it is close to 25%.
ATBS Growing at about 10 percent and our revenues in ATBS grow at 15 percent.
H2FY17 is going to be in line with the first half. So, as far as revenues and profitability margins go, so company should be able to maintain
that.
Q2FY17 Result Update

For Q2 FY17, VOL's revenue was RS. 148.1 cr,-26.7% YoY and -11.4% QoQ; EBITDA was RS. 46.0 cr, -13.3% YoY and -22.7% QoQ; and PAT was
RS. 30.4 cr, -1.3% YoY and -14.8% QoQ.
Revenues de-grew on account of annual maintenance shutdown, which was shifted from 1Q to 2Q and ban on movement of heavy cargo
vehicles for ~10 days during Ganpati festival. The company is expected to launch new products during FY17, the full effect of which will be
realised in FY18E. Going forward, we expect introduction of new products to be the key volume driver
Recommendation and Outlook:

We expect that the company to maintain its leadership position in IBB and ATBS along with its increasing product basket could
able to cater to the growing needs of specialty chemicals industry which in turn to drive revenue. A well experienced and able
management coupled along with good growth in the ATBS segment driven by demand in the water treatment segment projects a
positive outlook for the company. The company currently trades at a P/E of 14x FY18E EPS and P/B of 4.6 x FY18 book value. We
Initiate Coverage on the stock . Presently we rate it as 'Neutral' due to its stretch valuation. Our price target on the stock is Rs
659 rating it as P/B of 3.7 on FY19e.
5 yr Snapshot of Vinati organics : excellent management with a distinguished track record, making it a
compelling growth story
Net revenue from operation grown at a CAGR of ~20% during FY11-FY16 whereas EBITDA and PAT clocked a CAGR of ~26% and ~22%
respectively over the same period. Vinati organics abled to maintain its EBITDA margins at more than 22%; whereas NPM% recorded more
than 14%. The RoE is in a range 20%-30% and RoCE is at ~20% during the last 5 years. We expect Revenue, EBITDA and PAT to grow at CAGR of
12%, 15% and 15% respectively during FY18 to FY19E. Accordingly, we also expect RoE and ROCE to be intact above 20%
Vinati Organics, established in 1989 by Mr. Vinod Saraf, is a specialty chemicals company producing aromatics, monomers, polymers and
other specialty products. VOL started operations at its first plant in Mahad-Raigad in 1992, with its focus on IBB. In 2002, the company started
commercial production at its second plant in Lote, Ratnagiri, for manufacturing ATBS. Superior technology and strategic capacity expansion
plan made VOL the worlds largest manufacturer of IBB as well as ATBS (with 65% and 45% market share globally, respectively).
19
Brief Highlights Q4FY16 Results : 3QFY15

4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
Net Sales / Income from Operations 202.1
175.0
163.4
162.9
152.2
154.4
167.1
148.1
Other Income
1.4
3.5
1.1
1.6
1.5
2.0
1.3
0.8
Total Income
203.5
178.4
164.5
164.5
153.7
156.4
168.4
148.9
COGS
117.2
91.4
78.0
79.5
71.6
69.1
72.8
59.0
Employee Benefit Expenses
8.2
7.7
9.0
8.8
8.7
9.3
10.2
10.4
Other Expenses
23.6
26.3
23.2
22.2
21.3
25.2
24.6
24.4
Excise Duty
0.0
0.0
0.0
0.0
0.0
0.0
0.0
8.3
Expenditure
149.0
125.4
110.2
110.5
101.7
103.7
107.6
102.1
EBITDA
53.1
49.6
53.1
52.4
50.5
50.7
59.5
46.0
Depreciation and Amortisation expense 4.5
4.4
4.6
4.6
4.6
4.7
5.3
5.4
EBIT
48.6
45.2
48.6
47.8
45.9
46.0
54.3
40.7
Interest
2.8
0.8
2.5
2.2
2.0
1.2
1.4
0.5
PROFIT BEFORE TAX
47.2
47.9
47.3
47.1
45.4
46.8
54.1
41.0
Tax
16.4
15.5
16.2
16.0
15.2
7.6
18.4
10.6
PROFIT AFTER TAX
30.8
32.4
31.0
31.1
30.2
39.3
35.7
30.4
EPS
6.2
6.6
6.3
6.3
6.1
8.0
7.2
6.2
QoQ
YoY
-11.4%
-36.8%
-11.6%
-19.0%
2.0%
-0.7%
-26.7%
-44.3%
-26.8%
-49.7%
27.6%
3.1%
-5.1%
-22.7%
1.3%
-25.0%
-66.6%
-24.2%
-42.6%
-14.8%
-14.8%
-31.5%
-13.3%
19.2%
-16.3%
-82.9%
-13.2%
-35.7%
-1.3%
-1.3%
Margin %
EBIDTA %
EBIT %
PAT %
3QFY15
QoQ
Cost Calculation % to sales

COGS % as Sales
Employee Expence % as Sales
Other expenses % as Sales
Expenditure % as Sales
Tax % to PBT
3QFY15
Growth calculation
Sales Growth
EBIDTA Growth
EBIT Growth
PAT Growth
3QFY15
26.3%
24.0%
15.3%
58.0%
4.0%
11.7%
73.7%
34.7%
14.8%
33.2%
35.6%
32.7%
4QFY15
28.3%
25.8%
18.5%
4QFY15
52.3%
4.4%
15.0%
71.7%
32.3%
4QFY15
-10.4%
9.7%
9.5%
17.4%
1QFY16
32.5%
29.7%
19.0%
1QFY16
47.8%
5.5%
14.2%
67.5%
34.3%
1QFY16
-17.6%
31.3%
34.4%
28.7%
2QFY16
3QFY16
32.2%
29.3%
19.1%
2QFY16
3QFY16
48.8%
5.4%
13.6%
67.8%
34.0%
2QFY16
4QFY16
33.2%
30.1%
19.8%
32.9%
29.8%
25.4%
4QFY16
47.1%
5.7%
14.0%
66.8%
33.5%
3QFY16
-17.1%
7.7%
8.1%
9.3%
44.7%
6.0%
16.3%
67.1%
16.1%
4QFY16
-24.7%
-4.8%
-5.5%
-2.1%
-11.8%
2.3%
1.8%
21.1%
1QFY17
35.6%
32.5%
21.4%
1QFY17
43.6%
6.1%
14.7%
64.4%
34.0%
1QFY17
2.3%
12.0%
11.7%
15.1%
2QFY17
31.1% (456) Bps

27.5% (501) Bps
20.5% (83) Bps
2QFY17
QoQ
YoY
481Bps
341Bps
529Bps
YoY
39.8% (373) Bps (1816) Bps

7.0%
92Bps 300Bps
16.5% 177Bps 476Bps
68.9% 456Bps (481) Bps
25.7% (822) Bps (900) Bps
2QFY17
QoQ
YoY
-9.1% (1136) Bps (2383) Bps

-12.1% (2417) Bps (4533) Bps
-14.9% (2652) Bps (5046) Bps
-2.1% (1712) Bps (3477) Bps
Segment Sales
FY08
IBB in Cr
ATBS in Cr
IB In Cr
HPMTBE
Others In Cr
Revenue from Operations in Cr
Domestic Sales in Cr
Export Sales in Cr
FY09
100
40
0
0
7
146
53
93
FY10
184
123
0
0
16
191
46
145
FY11
118
100
0
0
14
232
56
176
FY12
106
184
13
0
19
323
71
252

FY13
179
215
36
0
18
447
107
340
FY14
238
227
55
0
33
553
171
381
FY15
244
285
90
0
77
696
230
466
FY16
232
355
93
31
62
772
247
525
196
290
57
38
50
631
208
423
20
Revenue and Profit

250
200
Net Sales
196
EBITDA
PROFIT AFTER TAX
174
150
144
150
160
149
137
145
100
50
53
31
50
32
53
31
52
31
51
30
51
39
60
36
46
30
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
Revenues de-grew on account of annual maintenance

shutdown, which was shifted from 1Q to 2Q and ban on
movement of heavy cargo vehicles for ~10 days during
Ganpati festival.
EBIDTA and EBIDTA Margin

EBITDA (Cr)
EBIDTA %
35.5% 36.4% 36.8% 34.0% 37.1%
70
60
40.0%
31.8%
30.0%
27.0% 28.5%
50
40
30
53
53
50
20
52
51
51
20.0%
60
46
We expect a strong set of EBIDTA% going ahead due

to new launches and strong ATBS margin
10.0%
10
0.0%
0
3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Depriciation and Interest cost

6.0
5.0
4.5
Depreciation (Cr)
4.6
4.4
5.4
5.3
Interest (Cr)
4.6
4.6
4.7
4.0
3.0
2.8
2.5
2.2
2.0
2.0
1.4
1.2
0.8
1.0
Company enjoys 0.3x D/E ratio. By end of FY17E it

will be debt free, further capex will be done by
internal accruals
0.5
0.0
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
Strong set of Margins

70.0%
Gross Margin %
EBIDTA %
EBIT %
60.0%
50.0%
40.0%
30.0%
47.7%
52.2%
51.2%
52.9%
42.0%
26.3%
32.5%
32.2%
33.2%
18.5%
19.0%
19.1%
19.8%
4QFY15
1QFY16
2QFY16
3QFY16
28.3%
20.0%
10.0%
55.3%
PAT %
60.2%
56.4%
32.9%
25.4%
15.3%
35.6%
31.1%
21.4%
20.5%
1QFY17
2QFY17
We expect a strong set of margins going ahead due to

new launches , debt free balance sheet and strong ATBS
margin
0.0%
3QFY15
4QFY16

21
Revenue (Rs. Cr) and Growth (%)

900
50.0%
Revenue from Operations (Net)

Growth YoY
39.2% 38.7%
30.2%
23.6% 25.9%
21.7%
800
700
600
500
400
300
200
100
191
232
FY09
FY10
323
447
553
696
772
40.0%
30.0%
20.0%
10.9%
10.0%
0.0%
631
-10.0%
-18.2%
-20.0%
We expect the revenue to grow at a CAGR of 12% during FY18FY19E. We expect a muted growth during FY17E on the back of
falling crude prices that could affect the ATBS realization. We
expect that the recovery of crude prices and increase in demand of
its products other than ATBS could pull the sales.
-30.0%
0
FY11
FY12
FY13
FY14
FY15
FY16
Cost of Material Consumed to Net Operating Revenue

60.6%
60.2%
60.0%
191
122
232
133
323
183
447
268
553
335
FY09
FY10
FY11
FY12
FY13
300
200
50.0%
40.0%
COGS % to sales
772
400
457
500
47.0%
696
600
70.0%
59.2%
Revenue from
Operations (Net)
COGS
700
100
59.8%
56.8%
FY14
FY15
30.0%
631
57.3%
20.0%
296
64.0%
800
419
900
We expect the falling crude prices could reduce the input cost. We
also expect that with upgraded technologies and with further
R&D, it could achieve better material and energy efficiencies.
10.0%
0.0%
FY16
EBITDA (Rs. Cr) and Margins

32.8%
250
EBITDA
200
21.6%
21.2%
21.8%
35.0%
30.0%
24.8%
22.0%
25.0%
17.8%
FY10
FY12
FY13
153
120
53
FY09
95
34
50
70
100
207
20.0%
192
150
22.7%
EBIDTA%
15.0%
10.0%
We expect the EBITDA to register a growth of 15% CAGR during

FY18-FY19E. VOL is likely to maintain the margins above 20.0%
during FY18E-FY19E. Softening crude prices could decline the
input prices which might help to improve the margins further.
5.0%
0.0%
FY11
FY14
FY15
FY16
Net Profit (Rs. Cr) and Margins

140
25.0%
PAT
17.3%
100
20.9%
20.0%
16.1%
13.2%
15.0%
12.2%
12.4%
52
55
40
25
FY11
FY12
10.0%
86
40
69
60
20
15.0%
12.4%
116
80
PAT %
132
120
PAT clocked a CAGR of ~26% over last 5 yrs . Vinati organics

abled to record NPM% more than 14%. We expect PAT to
grow at CAGR of 15% during FY18 to FY19E.
5.0%
0.0%
FY09
FY10
FY13
FY14
FY15
FY16

22
RoCE (%) and RoE (%)

40.0%
ROE %
35.0%
30.0%
ROCE %
24.0%
22.6%
25.0%
20.0%
15.4%
18.5%
21.7%
VOLs RoE and RoCE are likely to be around 20% during

the next couple of years..
14.7%
15.0%
36.2%
29.3%
28.5%
27.8%
26.7%
24.3%
10.0%
FY11
FY12
FY13
FY14
FY15
FY16
5.0%
0.0%
Debt / Equity (x)

0.82
0.90
0.83
0.80
0.70
0.60
0.50
0.43
Company enjoys a D/E ratio at 0.03x . Management

believe company will be debt free by FY17.
Management believe internal accrual will manage all
the capex plans.
0.39
0.40
0.30
0.20
0.09
D/E Ratio
0.10
0.03
0.00
FY11
FY12
FY13
FY14
FY15
FY16
Current Ratio (x)

4.5
4.1
4.0
3.5
3.2
3.1
3.0
2.7
2.5
2.8
2.7
Current Ratio
2.0
1.5
Historically, VOL has already maintained a current ratio

above 2.5x. We expect that it can maintain its working
capital management on a sustainable basis.
1.0
0.5
0.0
FY11
FY12
FY13
FY14
FY15
FY16
17.5%
17.0%
Dividend Yield and Dividend Payout

25.0%
20.9%
21.0%
20.1%
20.0%
14.4%
15.0%
Dividend Payout
10.0%
VOL is a good proxy for dividend. Historically, it pays

dividend on a regular basis.
5.0%
0.0%
FY11
FY12
FY13
FY14
FY15
FY16

23
30.0
25.0
20.0
15.0
10.0
5.0
0.0
EV/EBDITA
10.0
5.0
25.0
20.0
5.0
5.0
0.0
0.0
2.7 2.3
1.9 2.2
30.0
15.0
6.6
4.8
7.5
30.0
10.0
5.8
6.7
5.9

3.4
7.3
15.0
8.2
2.1 2.0 1.7
20.0
11.7
7.4 7.3
ROCE
5.7 5.5
13.7
12.912.9
12.411.9 12.8
11.011.4
9.5
9.3 9.9
25.6
21.1
22.0
22.5
27.4
24.6
23.7
21.8
28.2
24.1
20.0
30.0
11.1
11.1
20.6
26.8
23.8
ROCE
3.1
ROCE
25.6
21.1
22.0
22.5
27.4
24.6
23.7
21.8
28.2
24.1
20.0
18.9
18.4
19.4
15.0
18.9
18.4
ROE
P/E
5.0
19.4
35.0
30.0
11.1
10.0
ROE
10.0
14.1
20.0
11.1
15.0
20.0
20.6
0.0
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
25.0
14.1
20.0
25.0
26.8
23.8
14.1
20.6
11.1
19.4
11.1
18.9
18.4
25.6
21.1
22.0
22.5
27.4
24.6
23.7
21.8
28.2
24.1
20.0
25.0
1.9
28.8
2.2
29.3
2.7
28.8
2.3
32.1
3.4
28.8
2.1
28.5
2.0
27.1
1.7
25.0
3.1
26.7
4.5 27.8
4.9 29.2
5.5 26.3
5.2 26.2
6.2 26.7
5.8 26.4
4.7 25.3
4.6 23.7
3.7 24.3
4.9 23.6
4.9 23.6
30.0
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
35.0
P/B
26.8
23.8
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
5.0
6.6 28.8
7.5 29.3
9.3
28.8
7.3 32.1
28.8
11.7
7.4 28.5
7.327.1
6.725.0
26.7
11.8
27.8 16.0
29.2 16.7
26.3
20.9
26.2
20.0
26.7
23.4
26.4
21.9
25.3
18.8
23.7
19.3
24.3 15.2
23.6
20.6
23.6
20.6
10.0
ROE
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
15.0
4.8
28.8
5.8
29.3
6.7
28.8
5.9
32.1
8.2
28.8
5.7
28.5
5.5
27.1
4.9
25.0
7.6
26.7
9.3
27.8
9.9
29.2
12.4 26.3
11.9
26.2
13.7 26.7
12.8 26.4
11.0
25.3
11.4 23.7
9.5
24.3
12.9 23.6
12.9 23.6
35.0
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
Valuation Matrix and Band

ROE & P/B
ROCE & P/B
P/B
4.5 4.9
5.5 5.2
25.0
20.9
20.0
16.016.7
ROE & P/E

6.2 5.8
ROE & P/E

4.7 4.6
23.4
21.9
18.819.3
3.7
4.9 4.9
0.0
ROCE & P/E
P/E
20.620.6
15.2
9.3
11.8
6.7
0.0
ROCE & P/E
EV/EBDITA
4.9
7.6
24
Product Segment : Each product is well positioned through strategic backward integration
Facilities
Location
Products manufactured
Capacity
As On
Plant1
Mahad-Raigad,Maharashtra
IBB and NBB
16000TPA
Total capacity as on 31 March, 2016
Plant2
Lote-Ratnagiri, Maharashtra
ATBS, NaATBS, TBA, IB, HPMTBE, DAAM
47500TPA
Total capacity as on 31 March, 2016
About the Company :

VOL is into the manufacturing of specialty organic chemicals. largest manufacturer of
Isobutyl Benzene (IBB) and the 2nd largest manufacturer of ATBS. ATBS is used in
oilfield recovery, water treatment, acrylic fiber manufacturing, adhesives, and
personal care products, as well as in mining industry, coatings, and as dispersing and
flocculating agents. Other products include IBB which is the basic raw material for
manufacturing Ibuprofen and Isobutylene (IB) which is used in agro-chemicals and is
also a raw material for manufacturing ATBS. VOL exports more than 75% of its
production across USA, Europe, Asia, Middle East and China and has been the preferred
source for some of the largest chemical manufacturing companies in the world. The
company started with a small capacity of 1,000 TPA and gradually expanded to 26,000
TPA today for its ATBS production, capturing 45% of the market share. The company
also command more than 65% market share in the world for IBB. With consistent
investments in technology and capacities, the company is the largest producer of IBB in
the world with a capacity of 16,000 TPA.
4000
3500
3000
5.1x
2500
3.9x
2000
1500
2.8x
1000
1.6x
500
0
P/B Band
25
Product :
Applications :
2-acrylamido 2-methylapropane sulphonic acid (ATBS)
Sodium salt of 2-acrylamido-2- methylpropane sulphonic

acid (NaATBS)
N-Tertiary Butyl Acrylamide (TBA)
N-Tertiary Octyl Acrylamide (TOA)
Diacetone Acrylamide (DAAM)
Iso Butyl Benzene (IBB)

Normal Butylbenzene (NBB)
C 10 Aromatic (Solvent)
Isobutylene (IB)
Water treatment chemicals

Oil field and mining chemicals
Construction chemicals
Textiles auxiliaries and acrylic fibre
Detergents and cleaners
Emulsions for paint and paper coatings
Adhesives
Water treatments chemicals
Emulsions for paint and paper coatings
Adhesives
Textiles auxiliaries and acrylic fibre
Detergents and cleaners
Oil field and mining chemicals
Construction chemicals
Thickener in personal care
Water treatment
Metal working fluid
Adhesives
Antiscalants
Enhanced oil recovery
Personal care
Coatings
Personal care
Epoxy resin
Gelatin substitute
Light sensitive resin additive
Pharmaceutical industry
Perfume industry
Speciality solvent
Speciality solvent
LCD based applications
Paints and coatings
Inks
Cleaning solvents
Environmental friendly agrochemical and Pesticides formulations
Butyl rubbers
Antioxidants
Fragrances and perfumes
Insecticides and pesticides
Personal care
Monomers

26
Product :
Applications :
Methanol
High Purity- Methyl Tertiary Butyl Ether (HP-MTBE)
Hexene
Vinflow (HT)
Vinplast 245 (Acrylic Super Plasticizer)
Pharmaceutical industry
Paint and varnish industry
Perfume industry
Manufacture of formaldehyde
Chemical synthesis (sodium methoxide, dimethyl ether and methyated
derivatives)
Low cost solvent in some organic synthesis
Extract solvent for pharmaceutical synthesis
Synthesis of grignards reagent
Low boiling point solvent
Used as thinners
Hydrocarbon resins
Solvent extractions
Tyre re-treading
Octane booster for gasoline
Manufacturing C-5 / C-6 aliphatic petroleum
Construction
Ceramics
Oil drilling
Mining
Leather
Paper
Construction
Ceramics
Oil drilling
Mining
Leather
Paper

27

INCOME STATEMENT
P/L
Ratio
FY13
FY14
FY15
FY16
Revenue from Operations (Net)
553
696
772
631
Earnings Per Share
Other Income
4
9
9
6
Book Value per share
Total Revenue
557
705
781
637
Dividend Per Share
COGS
335
419
457
296
Dividend Payout
Gross Margin %
39%
40%
41%
53%
Valuation(x)
Employee Expense
23
27
32
36
P/E
Other Expenses
75
97
92
92
P/BV
Expenditure
433
543
580
424
EV/Sales
EBITDA
120
153
192
207
M-cap/EBIDTA
EBIDTA %
22%
22%
25%
33%
EV/EBIDTA
Depreciation
10
15
18
19
EBIT
110
138
174
188
Return on Equity
EBIT %
20%
20%
23%
30%
ROCE
Finance Costs
12
18
10
8
Turnover Ratios
PROFIT BEFORE TAX
103
129
173
187
Asset Turnover ratio
TOTAL TAX
34
42
58
55
Debtor/Receivable Days
Tax % to PBT
33%
33%
33%
29%
Inventory Days
PROFIT AFTER TAX
69
86
116
132
Payable Days
PAT %
12%
12%
15%
21%
D/E Ratio
B/S
FY13
Share capital
Reserves and surplus
Net Worth
Long-term borrowings
Short-term borrowings
Deferred tax liabilities
Trade payables
Short-term provisions
Total Liabilities
Fixed assets (Total )
Longterm Loans advance
Non-current assets
Current investments
Inventories
Trade receivables
Cash and bank balances
Total Assets
10
231
241
136
65
26
16
17
546
304
0
304
13
55
113
34
546
BALANCE SHEET
FY14
FY15
10
300
310
110
12
33
14
21
552
314
5
322
3
47
115
43
552
10
424
434
37
2
39
22
26
599
347
10
358
3
54
129
27
599
FY13
14
49
2.5
21.0%
RATIOS
FY14
FY15
17
23
63
88
3.0
3.5
20.1% 17.5%
FY16
27
110
3.9
17.0%
7.4
2.1
1.2
4.2
1.2
16.0
4.5
2.1
9.0
2.1
22.4
6.0
3.4
13.5
3.4
14.6
3.5
2.9
9.3
2.9
28.5%
14.7%
27.8%
18.5%
26.7%
22.6%
24.3%
21.7%
1.0
75
36
10
0.8
1.3
60
24
7
0.4
1.3
61
26
10
0.1
0.9
61
26
10
0.0
FY16
C/F
CASH FLOW STATEMENT

FY13
FY14
FY15
FY16
10
530
541
13
3
49
22
12
687
407
15
424
3
45
115
72
687
Profit before tax

Depreciation
Direct taxes
PBWC
Trade receivables
Inventories
Trade& other payables
Net cash operating
Fixed assets purchased
CWIP
Net cash investing
Interest paid
Dividends paid
Net cash financing
Net cash & equivalents
Cash at the beginning
Cash at the end
103
10
-22
125
-18
-12
19
92
-156
43
-113
6
-10
22
2
32
34

129
15
-37
158
1
8
3
134
-29
4
-9
7
-12
-113
12
34
45
173
18
-52
188
-11
-8
-4
113
-42
-15
-53
5
-12
-75
-16
43
27
187
18
-45
205
14
10
-16
167
-73
-3
-72
3
-18
-50
45
27
72
28
HOLD
KEC International
6-Jan-17
Result Update
CMP
Target Price
Upside
146
165
13%
-
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Av. Volume
Nifty
532714
KEC
153/97
3,744
30699
8191
Stock Performance
Absolute
Rel.to Nifty
1Month
3 Month
1Year
4.2
3.5
15.4
21.4
-8.0
-10.9

2QFY17
Promoters
Public
51%
49%
1QFY17 4QFY16
51%
49%
51%
49%
KECs Management, in its recent interview, has said that the Q3 will not be
great in terms of revenue growth. The companys domestic business was
impacted due to non availability of labour and trucks. Management is not
sure enough to achieve its revenue guidance of 10% growth in FY17. But
management is confident to maintain 8.5% of EBITDA margin in current
fiscal year. According to our view, in short run, companys revenue growth will
remain lackluster but medium to long run growth remains intact.
Robust Revenu visibility in Railway:Railway Ministry has set target to award 2000 Km, 4000 Km and 6000 km of
overhead electrification orders in FY17, FY18 and FY19 respectively. In
railways, KEC commands 20% market share, which may translate into
approx.2400 Cr of expected new orders in FY18E. Order Intake in Railway
segment is up by 158% in H1FY17 and it is the lowest bidder in 400 Cr of
orders. Railway ministrys focus on execution helps contractor to execute
project smoothly and timely. We expect improvement in EBITDA margin
based on increase volume and speedy execution.
Reduction in Debt through efficient working capital management:KEC has reduced gross debt by Rs. 300 cr with the help of better AR
management (reduction of Rs 485 Cr). Working capital days improved to
229 days from 246 days. Management expects to release retention money
from project in Saudi as project gets completed in next 2-3 months. Hence, it
will lead to further reduction in working capital days. Company aims to bring it
down to 180 days by the year end.
Outlook and Valuation
Company Vs NIFTY
120
KEC
NIFTY
110
100
90
80
In short run, companys revenue growth will remain lackluster but medium to
long-term growth remains intact. Efficient working capital management
strengthened balance sheet position and we expect it to continue going
forward. We expect to ramp up in an execution of substation (T&D) projects
and railway projects. Robust opportunity in railway segment with improving
margin will help KEC to post healthy numbers going forward. But considering
the short-term uncertainty, we maintain HOLD on the stock with unchanged
target price of Rs. 164
70
In Rs. Cr
60
50
40
Sandip Jabuani
sandip.jabuani@narnolia.com
Financials
Sales
EBITDA
Net Profit
EBIDTA%
PAT
Q2FY16
2021
155
44
7.7%
2.2%
Q1FY17
1785
150
31
8.4%
1.7%

Q2FY17
2121
185
65
8.7%
3.1%
YoY %
5%
20%
47%
QoQ %
19%
24%
110%
29
Result Highlights Q2FY17 & H2FY17

Revenue grew by 5% YoY and de-grew by 1% YoY in Q2FY1 and H1FY17 respectively. Delay in conversation of L1 order into
firm orders, back ended execution project and weak execution led to muted revenue growth in Q2FY17 and H1FY17.
EBITDA grew by 49% YoY and 13% to Rs. 185 cr and Rs. 335 Cr in Q2FY17 and H1FY17 respectively. Strong double digit and
increased EBITDA margin of SEA and railway business respectively support the EBITDA margin.
PAT margin reported robust growth of 47% YoY and 96% YoY to 72 Cr , 119 Cr in Q2FY17 and H1FY17 respectively. Lower
interest out go, strong performance at revenue and EBITDA level helped to grew higher.
SAE revenue grew by 30% YoY to Rs. 261 cr as compared to Rs. 201 Cr in same period last year with strong double digit
EBITDA marin. SAE business current order book stands at Rs. 1510 Cr (1.8x of FY16 revenue) and expect huge demand going
forward.
Railway business reported robust revenue growth of 94% YoY to Rs. 66 Cr as against Rs. 34 Cr in same period last year.
Railways current order book stands at Rs. 1186 Cr (7x of FY16 Revenue) and management expects to close order book around
Rs. 1200 Cr by year end.
Managment / Concall Update

Management is not sure to achieve 10% revenue growth in FY17. If things pick up immediately than KEC might able to achieve
revenue growth
Maintain 8.5% EBITDA margin
KEC managed to collect Rs.1000 Cr of debtors from Saudi Arabia in Q2FY17 and it overall reduced debtors by Rs. 500 Cr and
gross debt by Rs. 150 Cr. Expect to complete 3-4 projects in Saudi in coming quarter.
Working capital days reduce to 229 days from 246 days and it will further reduce to 180 days by year end. Expect to release
retention money from Saudi project. This will reduce working capital requirement.
SAE reported double digit EBITDA margin. Current order stands at Rs. 1500 Cr executable over next 2 years.
Cable Business: - Positive on EBITDA level but still negative on PBT level due to high depreciation. Management expects to turn
positive on PBT level by year and EBITDA margin will be accretive from next year. EHV and Solar cable is key driver for the future
growth.
International Orders:- Rs. 2500 Cr out of 3800 cr of L1 orders belongs to international market.
T &D:- Management see huge opportunity in domestic T&D market. Growth will driven by Karnataka, Tamilnadu, Rajasthan, West
Bengal and Telengana SEBs.
Normal tax rate in FY17 (35%-36%)
Interest cost will be 3% of sales in FY17 and 2.7% of sales in FY18
Order Book
Order Intake
Book to bill
10785
10,403
9,487
9,351
9,872
10,537
9,508
8,770
9,320
10,325
37%
2000
1500
1000
500
-5%
-13%
-37%
-7%
-8%
-33%

3103
4,000
42%
2825
63%
2500
1877
6,000
3000
2246
1506
106%
3085
Growth YoY%
3500
2423
8,000
1100
10,000
2,000
Order Intake
1892
12,000
2808
Order Book
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
30
Segmental Revenue
Maintain 10% revenue

growth and 8.5%
EBITDA margin for the
FY17
EBITDA margin
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
8.7%
7.3%
5.9%
5.6%
7.5%
7.7%
7.8%
8.4%
8.7%
Managment guided
8.5% EBIDTA margin
for the FY17
5.1%
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Finance Cost As % of Sales

5%
4%
4%
4%
4%
4%
4%
3%
4%
3%
3%
3%
2.8%
3%
3%
Finance cost will be 3%

and 2.7% of sales in
Fy17 & FY18
respectively.
2%
2%
1%
1%
0%
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
About the Company

KEC International Limited is an India-based company, engaged in infrastructure engineering,
procurement and construction (EPC). The Company is also a manufacturer of power cables and
telecom cables in India. The Company operates in four business verticals, which include power
transmission and distribution, cables, railways and water. The Company is also a provider of turnkey
solution in the railway infrastructure EPC space. The Company has powered infrastructure development
across 50 countries in developed, developing and emerging economies of South Asia, the Middle East,
Africa, Central Asia, the United States and South East Asia. The Company has eight manufacturing
facilities for lattice towers, monopoles, hardware and cables. The Companys manufacturing facilities
located at Vadodara (Gujarat), Mysore (Karnataka) and Silvassa (Union Territory) in India.
31

INCOME STATEMENT
Revenue
Other Income
Total Revenue
COGS
GPM
Other Expenses
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
PBT
Tax
Tax Rate (%)
Reported PAT
Dividend Paid
No. of Shares
FY14
7902
14
7916
4099
48%
883
493
6%
71
423
263
173
88
51%
67
15
26
Share Capital
Reserves
Net Worth
Long term Debt
Short term Debt
Deferred Tax
Net Fixed Assets
Capital WIP
Debtors
Trade payables
Total Provisions
Net Current Assets
Total Assets
FY14
51
1140
1192
603
1207
73
1794
992
18
3808
144
3213
125
1374
7411
FY15
8468
146
8614
4566
46%
917
512
6%
88
424
309
261
100
38%
161
18
26
FY16
8516
10
8527
4148
51%
975
679
8%
88
592
277
325
133
41%
192
57
26
FY17E
8943
10
8954
4561
51%
1020
760
9%
84
676
274
412
144
35%
268
80
26
EPS
Book Value
DPS
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Net Debt/Equity (x)
RATIOS
FY14
2.6
46.3
0.6
23%
FY15
6.3
51.7
0.7
11%
FY16
7.4
58.8
2.2
30%
FY17E
10.4
66.1
3.1
30%
26.0
1.5
0.87%
12.8
1.5
0.88%
16.4
2.1
1.82%
15.8
2.5
1.88%
6%
24%
12%
20%
13%
28%
16%
29%
1.1
175.9
45.0
148.4
0.51
1.1
166.1
38.1
143.3
0.55
1.0
192.6
37.8
126.0
0.40
1.1
193.0
38.0
126.0
0.35
FY14
155
71
113
499
(9)
161
(136)
305
263
15
132
(14)
146
132
CASH FLOW
FY15
FY16
261
325
88
88
122
135
596
853
153
(51)
90
78
125
18
640
264
309
277
17
58
(216)
(63)
62
(96)
132
194
194
98
FY17E
412
84
144
770
478
0
0
0
274
80
(354)
124
111
235
BALANCE SHEET
FY15
51
1278
1330
737
1308
70
2067
881
16
3853
206
3325
122
1668
7745
FY16
51
1460
1512
602
1723
66
2114
860
12
4495
111
2939
114
2151
8138
FY17E
51
1648
1700
602
1723
66
2302
860
0
4729
0
3087
114
2187
8322

Depreciation
Direct Taxes Paid
Op. before WC Change
Capex
Repayment of LTB
Interest Paid
Inc/(Dec) in Cash
Closing Balance

32
BUY
MAHINDRA & MAHINDRA LIMITED
Result Update
CMP
1221
Target Price
1600

Upside
31%
Market Data
BSE Code
500520
NSE Symbol
M&M
52wk Range H/L
1509/1092
Mkt Capital (Rs Cr)
75,845
Av. Volume
90339
Nifty
8,191
1Month
1Year
YTD
Absolute
3.9
-12.7
-1.9
Rel.to Nifty
3.3
-6.4
-7.0
2QFY17 1QFY17
PAT Margin was increased by 230 bps YoY to 11% because of higher other
income which came in the form of special dividend received from Tech M,
Mahindra holidays and Swaraj Engines.
4QFY16
26.8
26.8
26.9
73.2
-100.0
73.2
-100.0
73.1
-100.0
Company Vs NIFTY
125
2QFY17 Result Highlights
EBITDA Margin improved by 70 bps YoY to 11.6% due to higher sales of

tractors during the quarter.
Public
Others
Total
M&M posted strong volume growth in the Farm Equipment segment with a
growth of 22% YoY during the 3QFY17. Good Monsoon and recovery in the
rural areas helped the company to garner strong growth in this quarter. M&M
commands 43% market share in the tractor segment putting Mahindra and
Swaraj brands together. Management expects rural demand to remain robust
on good monsoon. Growing competitiveness in the utility vehicle segment is a
concern for Mahindra because earlier launches by Maruti & Hyundai have taken
the large share from the market leader. The market share has reduced to 29%
from 35% in the UV segment. We assume that M&M will further respond to the
changing dynamics in the utility vehicle segment going ahead. Recovery in the
Ssangyong is a good sign for UV segment. Going forward, the management
has guided for 15-20% growth in the UV segment, 20% growth for tractor
industry and single digit for the commercial vehicle space in FY17.
M&M have reported 14% YoY growth in net revenue in 2QFY17 due to 12%
growth in Automotive and 36% growth in Farm Equipment segment.
Stock Performance
Promoter
5-Jan-17
M&M
NIFTY
120
115
110
105
Outlook
Management believes that the demonetization issue may have short term
negative impact on Farm Equipment segment. They expect this concern will
last for next 4 months but sticks with previous growth guidance of 20% for
tractor industry in FY17. We believe that the tractor industry may not see much
slow-down because the monsoon was good during the year and almost 90% of
the tractors are financed. New launches in 2HFY18 in Tractor and SUV
segments will make the Mahindras presence further stronger in the domestic
market. Ssangyong have also seen recovery on nine month basis and it may
post positive results in the current fiscal after three consecutive years of losses.
Considering the strong volume growth and recovery in the non- performing
business we recommend 'BUY' with a target price of Rs.1600.
100
Rs. In crore
95
90
85
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Jul-16
Aug-16
Jun-16
Apr-16
May-16
Jan-16
Mar-16
Dec-15
80
Naveen Kumar Dubey
Financials
2QFY17
1QFY17
2QFY16
QoQ
YoY
Sales
EBITDA
Net Profit
EBIDTA%
PAT %
10609
1233
1163
11.6%
11.0%
11041
1286
955
11.6%
8.7%
9276
1008
915
10.9%
9.9%
-4%
-4%
22%
14%
22%
27%
naveen.dubey@narnolia.com
33
M&M
Investment Arguments
Monsoon has played a significant role in shaping the rural demand in favour of M&M, because about 90% of the tractors and
more than 40% of the utility vehicles have been sold in rural areas by the company. So M&M remains the big beneficiary of
improving rural demand in long run.
Recently launched "Yuvo" brand tractors have made the Farm Equipment segment portfolio stronger and M&M is all set to take
advantage of growing demand of 41-50 HP tractors. This category contributes more than 45% of total tractor sales.
The Company has built adequate manufacturing capacity for the immediate future and is planning to invest in additional capacity
in preparation for the mid to long term.
The company is strengthening its presence in neighbouring markets of Sri Lanka and Bangladesh.
Ssangyong have also seen recovery on nine month basis and it may post positive results in the current fiscal after three
consecutive years of losses. It can be a new growth driver for M&M in utility vehicles segment and this could lead further expansion
in margins of the company going ahead.
There will be short term negative impact of demonetization on the farm equipment segment and the management expects that
this concern may last for next 4 months.
Rural economy looks positive for Q3 & Q4 on good monsoon. 20% industry volume growth in Tractor segment for FY17.
80-85 percent UVs and 90% Tractors are financed through Banks & NBFCs.
15-20 percent growth in UV segment in next 6 months.
CV segment will end up high single digit for the rest of the year.
There will not be significant price change in the truck segment due to GST.
Other income was higher due to special dividend received from Tech M, Mahindra holidays and Swaraj Engines,
The company will be llaunching 2 new vehicles in UV segment in Q2FY18.
Ssangyong has a capital expenditure plan of more than $700 million for the next three-four years to bring out one new product
every year.
Mahindra and the Ssangyong version of the SUV will drive the Korean brands ambitious entry into the North American market by
2020.
Sustainable growth in Farm Equipment Segment

Farm Equipment Segment
36%
40%
22%
20%
0%
5%
3%
30%
20%
12%
10%
0%
76486
61658
74595
43321
-10%
62666
45246
-16% -26%
62358
38604
59714
61152
-24% -30%
74555
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Growth
-20%
-30%
-40%

34
M&M
Net Revenue
Other Income
Total Revenue
COGS
GPM
Other Expenses
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
PBT
Tax
Tax Rate (%)
Reported PAT
Dividend Paid
No. of Shares
FY13
68,693
389
69,082
41,892
39%
11,132
9,116
13%
2,080
7,036
2,297
5,128
1,935
38%
4,099
934
61
INCOME STATEMENT
FY14
FY15
74,001
71,949
505
525
74,506
72,474
44,893
42,850
39%
40%
12,342
13,444
10,120
8,793
14%
12%
2,170
2,124
7,951
6,669
2,954
3,157
5,502
4,038
1,496
1,720
27%
43%
4,667
3,137
1,009
872
62
62
Share Capital
Reserves
Net Worth
Long term Debt
Short term Debt
Deferred Tax
Net Fixed Assets
Capital WIP
Debtors
Trade payables
Total Provisions
Net Current Assets
Total Assets
FY13
295
19,666
19,961
19,860
3,368
894
39,821
17,941
1,120
5,177
4,937
11,911
4,286
11,462
76,470
BALANCE SHEET
FY14
FY15
295
296
23,012
25,561
23,307
25,856
25,492
22,327
2,781
7,177
1,202
1,287
48,799
48,183
19,228
21,315
1,244
1,273
5,725
5,476
6,523
4,912
11,800
11,355
5,089
5,654
14,817
13,195
88,270
94,844
FY16
78,016
541
78,557
45,340
42%
15,036
9,647
12%
2,582
7,066
3,373
4,234
1,864
44%
3,211
872
62
FY16
296
28,323
28,620
25,096
8,251
1,552
53,716
24,186
806
6,419
4,906
13,628
5,901
14,739
108,223
EPS
Book Value
DPS
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Net Debt/Equity (x)
FY13
67
325
15.2
23%
FY16
52
461
14.0
27%
4.0
0.8
5.63%
6.3
1.3
3.43%
12.8
1.6
2.16%
23.4
2.6
1.16%
21%
18%
20%
16%
12%
14%
11%
13%
0.9
27.5
73.3
63.3
1.0
FY13
5,128
Depreciation
2,085
Direct Taxes Paid
(1,781)
7,663
(922)
(45,661)
Capex
(3,291)
(2,788)
Repayment of Long Term Borrowings
(54,392)
Interest Paid
(638)
(997)
4,508
Inc/(Dec) in Cash
799
3,139
Closing Balance
3,823
RATIOS
FY14
FY15
76
51
378
416
16.4
14.0
22%
28%
0.8
28.2
67.9
58.2
1.1
0.8
27.8
72.0
57.6
0.9
30.0
85.6
63.8
0.9
CASH FLOW STATEMENT

FY14
FY15
FY16
5,502
4,038
4,234
2,175
2,128
2,612
(1,275)
(1,701)
(2,044)
8,086
6,454
7,252
(244)
1,055
971
(66,102) (80,047) (88,000)
(3,665)
(4,759)
(4,334)
(4,490)
(4,444)
(5,238)
(53,265) (45,084) (94,098)
(583)
(489)
(541)
(1,094)
(1,200)
(1,068)
5,577
1,669
3,971
844
(1,720)
(296)
3,823
4,633
3,000
4,633
2,720
2,792
35
BUY
MARUTI SUZUKI INDIA LIMITED
3-Jan-17
Result Update
CMP
5466
Target Price
6100

Upside
12%
Market Data
BSE Code
532500
NSE Symbol
MARUTI
52wk Range H/L
5972/3202
Mkt Capital (Rs Cr)
165120
Av. Volume
52910
Nifty
8,180
Stock Performance
1Month
1Year
YTD
Absolute
7.8
-3.8
18.4
Rel.to Nifty
6.7
2.6
15.5
Royalty stood at Rs.1088 crore (6.1% of sales) during the quarter due to
appreciation in Yen.
4QFY16
56.2
56.2
56.2
43.8
-100.0
43.8
-100.0
43.8
-100.0
Company Vs NIFTY
140
Maruti reported Rs.17843 crore of net sales in 2QFY17 a growth of 29% over
previous year. This was driven by 18% volume growth and 9% realization
growth YoY.
Maruti reported a PAT of Rs.2398 crore a growth of 60.2% YoY on account

of higher other income in the quarter.
2QFY17 1QFY17
Public
Others
Total
2QFY17 Result Highlights
EBITDA margin improved to 17% by 150bps YoY higher steel prices and
employee cost.

Promoter
Maruti reported 3% growth in sales volume in the 3QFY17, despite the

current demonetisation issue. Domestic volumes grew by 4% on account of
higher sales of premium segment cars (Baleno and Brezza). Exports have
shown 1% of de-growth YoY primarily led by currency issue in various
countries and higher import duty imposition by Sri-Lankan government on
800-1000 cc cars. Realization improved on account of better product mix and
price increase during the quarter. Management has stated that the first phase
of the Gujarat plant will begin its commercial production in 4QFY17 and this
plant will take care of new models and the exports. There will be some cost
pressure going ahead due to higher depreciation and fixed cost on new
plant. The management is also exploring new geogarphies to expand it reach
in Latin American and Europen market.
MARUTI
NIFTY
130
120
Outlook
We expect current demonetization issue may not be impacting much in the
long run to the passenger vehicle segment because more than 75% vehicles
are financed. But this issue may be hampering sales in near future due to
cash crunch in the economy. We assume volumes in the second half may be
down by 10% in comparison to the first half 2017. Higher sales of premium
segment cars will further increase the realization per car, which will in turn
maintain the margins going ahead despite the rising commodity prices.
Hence we have positive view on this stock and we recommend "BUY" with a
target price of Rs.6100.
110
Rs. In crore
100
90
Dec-16
Nov-16
Oct-16
Sep-16
Jul-16
Aug-16
Jun-16
May-16
Apr-16
Mar-16
Jan-16
Feb-16
Dec-15
80
Naveen Kumar Dubey
Financials
2QFY17
1QFY17
2QFY16
QoQ
YoY
Sales
EBITDA
Net Profit
EBIDTA%
PAT %
17843
3037
2398
17.0%
13.4%
14927
2216
1486
14.8%
10.0%
13851
2245
1497
16.2%
10.8%
20%
37%
61%
29%
35%
60%
naveen.dubey@narnolia.com
Narnolia Securities Ltd,
36
MARUTI
Investment Arguments
In the recent past a series of new product launches have been successful for the company. It was a strategic decision to enter in
those segments where it has very few or no products. The same way the company is planning to launch 15 new products till 2020.
Maruti is onset to unleash the potential in the international business by targeting European and Latin American markets. Recently
launched and upcoming new products are technologically sound and competent to the export markets.
Gujarat plant will begin its commercial production in 4QFY17 and this plant will take care of new models and the exports. It will
take 6 months to ramp up the production and there will be some cost pressure going ahead due to higher depreciation and fixed
cost on new plant.
Maruti is also aggressively working towards bringing down the import content in its cars from an average 16% at the end of FY16
to 10% as part of its vision 2.0 plan. Currently about 14 percent of imports are yen denominated. Management expects to bring it
down to 5 percent. Typically, 1% movement in yen leads to around 1% change in the operating profit of Maruti.
Lower double digit growth guidance for FY17 due to current demonetisation issue. 25% decline in retail sales in rural areas and
25% enquiries have been impacted in urban areas.
Maximum impact on taxi part, specially Ola and Uber. They contributes to 30% of the volumes.
Export may remain flat in FY17
Management expects 50000 Baleno's to be exported to Japan. Apart from Japan, the vehicle is being exported to Europe,
Australia, New Zealand and Latin America.
Maruti's newly launched light commercial vehicle, Super Carry, is also exported to South Africa and Tanzania and will be exported
to SAARC countries in the future.
Gujarat plant is likely to be commissioned in Q4FY17. Management expects it will take 6 months to ramp up.
Steel prices have started going up and its impact may be seen in second half of the year.
Margins can come under pressure once the Gujarat plant becomes operational due to higher fixed cost and depreciation.
Capex- Rs.4500 crore,(Rs.2000 crore for maintenace and R&D, Rs.1000 crore on marketing expenses and Rs.1500 crore on
product development.
The waiting period for Brezza is 27 weeks and for Baleno 33 weeks. Maruti has increased the production for Baleno by 25% to
meet customer requirements.
The company has 15 new models in the pipeline, which will come out by 2020.
Volumes Trend
Volume
Volume Growth
18%
17%
16%
2%

387251
4%
418,470
374182
353335
341329
7%
346712
323,911
321,898
10%
348443
13%
360402
14%
12%
299,894
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
3%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
37
MARUTI
FY14
Revenue (Net of Excise Duty)44,451
Other Income
831
Total Revenue
45,281
COGS
31,853
GPM
28%
Other Expenses
5,970
EBITDA
5,204
EBITDA Margin (%)
12%
Depreciation
2,116
EBIT
3,088
Interest
185
PBT
3,734
Tax
902
Tax Rate (%)
24%
Reported PAT
2,855
Dividend Paid
424
No. of Shares
30
Share Capital
Reserves
Net Worth
Long term Debt
Short term Debt
Deferred Tax
Net Fixed Assets
Capital WIP
Debtors
Trade payables
Total Provisions
Net Current Assets
Total Assets
FY14
151
21,345
21,496
627
1,238
596
22,124
13,673
2,640
1,489
649
5,000
873
7,561
31,411
INCOME STATEMENT
FY15
FY16
50,801
58,612
865
472
51,666
59,084
35,615
39,318
30%
33%
6,741
8,115
6,844
9,119
13%
16%
2,515
2,867
4,329
6,252
218
94
4,976
6,630
1,185
1,999
24%
30%
3,807
4,699
884
1,237
30
30
FY17E
65,460
134
65,594
44,348
32%
8,709
10,068
15%
2,425
7,643
67
7,710
2,513
33%
5,266
1,386
30
EPS
Book Value
DPS
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Net Debt/Equity (x)
BALANCE SHEET
FY15
FY16
151
151
24,167
27,598
24,318
27,749
278
147
53
91
484
475
24,597
27,896
14,380
13,989
1,890
1,013
1,144
1,387
43
77
5,657
7,127
1,652
2,137
(234)
(3,965)
34,479
40,270
FY17E
151
31,477
31,628
147
101
475
31,775
15,178
1,549
551
7,960
2,391
(3,850)
45,529
FY14
3,734
Depreciation
2,116
Direct Taxes Paid
(858)
5,111
4,995
(13,100)
Capex
(3,545)
(4,997)
Repayment of Long Term Borrowings
(22)
Interest Paid
(170)
(283)
(74)
Inc/(Dec) in Cash
(76)
165
Closing Balance
89

FY14
94
712
14.0
15%
RATIOS
FY15
FY16
126
156
805
919
29.3
41.0
23%
26%
FY17E
174
1,047
45.9
26%
24.0
3.2
0.62%
29.3
4.6
0.79%
23.9
4.0
1.10%
28.1
4.7
0.94%
13%
14%
16%
18%
17%
22%
17%
24%
1.4
12.2
20.2
41.1
0.0
1.5
8.2
27.4
40.6
0.0
1.5
8.6
29.7
44.4
0.0
1.4
8.6
32.0
44.4
0.0
CASH FLOW STATEMENT

FY15
FY16
FY17E
4,976
6,630
7,710
2,515
2,867
2,425
(1,075)
(1,948)
(2,513)
6,779
9,089
10,271
6,539
8,584
8,246
(17,354) (12,189)
(87)
(3,279)
(2,443)
(3,614)
(4,581)
(7,319)
(6,328)
(211)
(292)
(222)
(104)
(67)
(424)
(909)
(1,386)
(2,004)
(1,239)
(1,443)
(45)
26
474
89
43
77
43
69
551
38

201 | 2nd Floor | Marble Arch Building | 236B-AJC Bose Road |
Kolkata-700 020 , Ph : 033-40501500
email: narnolia@narnolia.com, website
: www.narnolia.com
Risk Disclosure & Disclaimer: This report/message is for the personal information of
the authorized recipient and does not construe to be any investment, legal or taxation
advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any
action based upon it. This report/message is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or
redistributed to any other person in any from. The report/message is based upon publicly
available information, findings of our research wing East wind & information that we
consider reliable, but we do not represent that it is accurate or complete and we do not
provide any express or implied warranty of any kind, and also these are subject to change
without notice. The recipients of this report should rely on their own investigations,
should use their own judgment for taking any investment decisions keeping in mind that
past performance is not necessarily a guide to future performance & that the the value of
any investment or income are subject to market and other risks. Further it will be safe to
assume that NSL and /or its Group or associate Companies, their Directors, affiliates
and/or employees may have interests/ positions, financial or otherwise, individually or
otherwise in the recommended/mentioned securities/mutual funds/ model funds and
other investment products which may be added or disposed including & other
mentioned in this report/message.

IEA Report 11th January

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IEA Report 11th January

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IEA Report

11th Jan 2017

11th Jan 2017

10th Jan 2017

10th Jan 2017

" BOOK PROFIT"

9th Jan 2017

6th Jan 2017

5th Jan 2017

3rd Jan 2017

IEA Edition No.-

Profitability remains Intact, Defying the Expectation

Previous Target Price

Change from Previous

52wk Range H/L

Share Holding Pattern-%

Advances growth remained healthy, CASA Spiked

Operating Profit Remain Healthy.

Assets Qaulity remains largely stable

Overall Yield % on Total Assets

Overall Cost Of Funds %

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

Other Income Break Up

Other Income/Total Net Income %

Fee Income/ Advances %

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

GNPA Composition Consumer Finance %

Net Advances (Rs in Cr)

Adv. Growth YoY %

Narnolia Securities Ltd

Deposit Growth YoY %

>>CASA Growth YoY %

Narnolia Securities Ltd

Int./disc. on advances / bills

Cash & Balances with RBI

AUROBINDO PHARMA LTD

Previous Target Price

Change from Previous

52wk Range H/L

This deal will be funded through Term loan taken in Euro.

Generics business will give the synergy benefits immediately.

Current concall Highlights on Acquisition

Share Holding Pattern-%

Aurobindo Pharma has announced the signing of a binding agreement

The generics market in Portugal market is ~ $600mn.

51 products are pending in pipeline.

ARBP is going to launch 39 products going ahead.

Narnolia Securities Ltd

Financials Snap Shot

CASH FLOW STATEMENT

Narnolia Securities Ltd

View & Recommendation

Government will sell 26 percent stake in defence equipment manufacturer

Recent management commentaries

As per the management company would be looking to double its revenue to

Share Holding Pattern-%

In Defence segment, lots of opportunities are coming. Management assures

In Metro segment company is having order book roughly about Rs 2000 Cr

Order book position:

Order book in Crs

Trend of Gross margin and EBITDA margin:

0.52 0.50 0.13

Trend of Net sales and PAT: