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 REDUCE
Minda Corp. (MDA)
Automobiles AUGUST 12, 2016
RESULT
Coverage view: Attractive

Lower profitability impacts 1QFY17 results. Minda reported 1QFY17 consolidated Price (`): 110
net profit of ₹249 mn (+36% yoy), which was 13% below our estimates due to EBITDA Target price (`): 110
margin miss in standalone business and joint ventures. Profitability in Minda Furukawa
BSE-30: 28,152
JV remained (5% EBITDA margin) weak due to pricing pressures and higher imports.
Management’s efforts to increase localization will lead to some improvement going
ahead but achieving 8-9% EBITDA margin in FY2017-18E looks difficult at this juncture.
Maintain REDUCE with target price of ₹110, valuing the stock at 15X June 2018E EPS.
Company data and valuation summary
Minda Corp.
Stock data Forecasts/Valuations 2016 2017E 2018E
52-week range (Rs) (high,low) 143-65 EPS (Rs) 4.6 5.5 6.9
Market Cap. (Rs bn) 23.1 EPS growth (%) 10.6 19.6 24.9
Shareholding pattern (%) P/E (X) 23.8 19.9 15.9
Promoters 65.2 Sales (Rs bn) 24.5 31.3 36.5
FIIs 1.4 Net profits (Rs bn) 1.0 1.2 1.4
MFs 3.0 EBITDA (Rs bn) 2.2 2.8 3.4
Price performance (%) 1M 3M 12M EV/EBITDA (X) 12.4 10.0 8.3
Absolute (20.1) (3.8) 42.1 ROE (%) 18.8 18.8 19.7
Rel. to BSE-30 (21.1) (11.8) 38.9 Div. Yield (%) 0.5 0.5 0.6

1QFY17 results below estimates on lower profitability in standalone business and JVs

Minda reported 1QFY17 consolidated EBITDA of ₹585 mn (+24% yoy), which was 13% below
our estimates due to lower-than-expected EBITDA margin in the standalone business and joint
ventures. Consolidated revenues grew by 32% yoy (KIE 36% yoy) aided by the consolidation of
Minda Stoneridge and Minda VAST joint ventures (like to like revenue growth was 11-14%, as
per our calculations). Consolidated EBITDA margin came in at 8.4% (up 70 bps qoq and down
50 bps yoy), which was lower than our estimate of 9.3%. The miss was led by (1) 9.8% EBITDA
margin in standalone business versus our estimate of 11.5% and (2) 5% EBITDA margin in
Minda Furukawa JV (KIE 6%) and 8% in Minda Stoneridge JV (KIE 10%). Due to lower
profitability, Minda Furukawa JV incurred net loss this quarter. The company reported
consolidated net profit of ₹249 mn (+36.2% yoy), which was 15% below our estimates.

Expect 17% revenue CAGR over FY2016-20E; lower profitability in Furukawa JV a concern

We expect the company to deliver 17% revenue CAGR over FY2016-20E (excluding impact of
consolidation of JVs) led by potential market share gains across segments and new product
launches. While revenue performance of Minda Furukawa will likely be muted in FY2017E,
we expect revenues to grow in double digits from FY2018E led by new order wins and pickup
in revenues from new products (steering roll connectors). We expect EBITDA margin of Minda
Furukawa to improve to 6-7% over two years, lower than management expectations of 8-9%.
Minda Stoneridge is another growth driver due to higher revenue contribution from automotive
sensors, which will ramp up further over the next two to three years. We note that the
company will incur capex of around ₹2 bn in FY2017E largely towards setting up a greenfield Nishit Jalan
nishit.jalan@kotak.com
facility in Mexico, which will impact FCF generation this year.
Mumbai: +91-22-4336-0877

Lower FY2017-18E EPS estimates by 5-6%; maintain REDUCE with unchanged TP of ₹110 Hitesh Goel
hitesh.goel@kotak.com
We cut our FY2017-8E EPS estimates by 5-6% as we lower our EBITDA margin estimates in the Mumbai: +91-22-4336-0878

standalone business and fine-tune our estimates for other subsidiaries. While medium-term
growth prospects remain strong (23% EPS CAGR over FY2016-20E), valuations offer limited
upside from current levels. We maintain our REDUCE rating with unchanged target price of
₹110, valuing the stock at 15X June 2018E EPS.

Kotak Institutional Equities Research

kotak.research@kotak.com
Mumbai: +91-22-4336-0000

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
Automobiles Minda Corp.

Key takeaways from the conference call

 Minda Furukawa JV. Revenues increased by 3% yoy to ₹1.05 bn in 1QFY17 (₹910 mn

in 4QFY16) while profitability remained weak with EBITDA margin of around 5%. We
build in 6% yoy revenue growth in FY2017E (unchanged) as there are no new models
where the company will commence supplies this year. Minda Furukawa has received
order for one new Maruti model (this order will have double-digit EBITDA margin and will
contribute to revenues in FY2018E) and is also making efforts to win business for other
new launches of Maruti. The management is hopeful of increase in market share with
Maruti to 21% in FY2018 from 18% currently. We expect 22% yoy revenue growth in
FY2019E as we build in 100 bps market share gain with Maruti. Higher import content
(60% of total) continues to impact profitability; the management expects to increase
localization by 5-7% over the next one to two years. The company is also undertaking
other efforts to improve EBITDA margin to 8-9% over the next 2-3 quarters. We build in
6%/6.8% EBITDA margin (excluding other income) n FY2017-18E.

 Minda Stoneridge JV. Revenues increased by ~25% yoy to ₹850 mn in 1QFY17 aided
by pickup in revenues from sensors and decent growth in instrument clusters segment.
EBITDA margin was on the lower side in this quarter at 8% (~12% in 4QFY16) largely
due to quarterly variations and will improve over the next few quarters.

 Two-wheeler locksets segment. Minda has increased its market share with Honda
Motorcycles to 21% from 17% earlier. The company has received orders from Royal
Enfield, which will start contributing to revenues by end-FY2017.

 After-markets segment revenues increased by 26% yoy to ₹650 mn in 1QFY17.

 The company has guided towards capex of ₹2 bn in FY2017E; this will be largely on
account of (1) EUR19 mn on Mexico facility to supply plastic components to Audi and
other OEMs; the company expects incremental revenues of EUR20 mn in FY2018E and
(2) expansion of die-casting facility where the company has received orders for export of
compressor housings to global suppliers (Borg Warner). The company maintained its
revenue growth guidance of 35% in FY2017E. Commissioning of new die casting facility
and Mexico facility will contribute to revenues largely from FY2018E.

 Increase in R&D expenses led to lower tax rate in the standalone entity in 1QFY17.

2 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Minda Corp. Automobiles

Exhibit 1: Minda Corp’s standalone 1QFY17 results were below estimates on lower-than-expected EBITDA margin
Minda Corporation standalone results, March fiscal year-end, 1QFY17 (₹ mn)

(%chg.)
1QFY17 1QFY17E 1QFY16 4QFY16 1QFY17E 1QFY16 4QFY16 FY2017E
Net sales from operations 1,779 1,895 1,575 1,792 13.0 (0.8)
Other operating income 28 30 30 28 (6.7) (2.1)
Net sales 1,806 1,925 1,604 1,820 (6.2) 12.6 (0.8) 8,166
Raw materials (1,121) (1,165) (998) (1,090) (3.8) 12.3 2.8 (5,063)
Staff costs (251) (260) (213) (250) (3.5) 18.0 0.3 (1,086)
Other expenses (257) (280) (215) (289) (8.1) 19.7 (10.9) (1,125)
Total expenses (1,629) (1,705) (1,425) (1,629) (4.5) 14.3 (0.0) (7,274)
EBITDA 178 220 179 191 (19.5) (0.8) (7.3) 892
Depreciation (48) (50) (45) (48) (5.0) 5.3 (1.5) (209)
EBIT 130 170 134 143 (23.7) (2.9) (9.2) 684
Other income 13 10 18 9 49
Interest expense (12) (8) (14) (6) 53.8 (14.6) 105.0 (48)
Profit before tax 130 172 137 147 (24.5) (5.2) (11.2) 685
Tax expense (26) (50) (44) (41) (47.6) (40.0) (35.8) (185)
Profit after tax 104 122 94 106 (15.1) 11.0 (1.7) 500
Adj PAT 104 122 94 106 (15.1) 11.0 (1.7) 500
# of shares 209 209 209 209 209
EPS (Rs/share) 0.5 0.6 0.4 0.5 (15.1) 11.0 (1.7) 2.4
Tax rate (%) 20.1 29.0 31.8 27.8 27.0
As a % of revenues
Raw material 62.0 60.5 62.2 59.9 62.0
Staff costs 13.9 13.5 13.3 13.7 13.3
Other expenses 14.3 14.5 13.4 15.9 13.8
EBITDA margin (%) 9.8 11.5 11.2 10.5 10.9
EBIT Margin 7.2 8.9 8.3 7.9 8.4

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Automobiles Minda Corp.

Exhibit 2: Minda Corp’s consolidated 1QFY17 results were below estimates on weak performance of standalone and Minda Furukawa JV
Minda Corporation consolidated results, March fiscal year-end, 1QFY17 (₹ mn)

(%chg.)
1QFY17 1QFY17E 1QFY16 4QFY16 1QFY17E 1QFY16 4QFY16 FY2017E
Net sales from operations 6,910 7,130 5,216 6,336 32.5 9.1
Other operating income 44 70 65 111 (32.5) (60.6)
Net sales 6,954 7,200 5,281 6,447 (3.4) 31.7 7.9 31,268
Raw materials (4,234) (4,370) (3,309) (3,909) (3.1) 27.9 8.3 (19,073)
Staff costs (1,249) (1,230) (861) (1,154) 1.5 45.0 8.2 (5,373)
Other expenses (886) (930) (649) (890) (4.7) 36.5 (0.4) (3,988)
Total expenses (6,369) (6,530) (4,819) (5,953) (2.5) 32.1 7.0 (28,433)
EBITDA 585 670 461 494 (12.6) 26.9 18.4 2,834
Depreciation (213) (200) (151) (188) 6.4 41.0 13.2 (903)
EBIT 372 470 310 306 (20.7) 20.0 21.6 1,931
Other income 41 50 30 61 178
Interest expense (89) (75) (87) (42) 18.7 2.3 113.9 (383)
Extraordinary income/(losses) — — 25 22 (100.0) —
Profit before tax 324 445 279 348 (27.1) 16.3 (6.8) 1,726
Share of profit of associates — — 3 — —
Minority interest 3 (35) (17) 10 (135)
Tax expense (79) (116) (62) (93) (32.0) 27.0 (15.5) (432)
Profit after tax 249 294 202 264 (15.4) 22.9 (5.8) 1,160
Adj PAT 249 294 183 248 (15.4) 36.2 0.4 1,160
# of shares 209 209 209 209 209
EPS (Rs/share) 1.2 1.4 0.9 1.2 (15.4) 36.2 0.4 5.5
Tax rate (%) 24.3 26.0 22.2 26.8 25.0
As a % of revenues
Raw material 60.9 60.7 62.7 60.6 61.0
Staff costs 18.0 17.1 16.3 17.9 17.2
Other expenses 12.7 12.9 12.3 13.8 12.8
EBITDA margin (%) 8.4 9.3 8.7 7.7 9.1
EBIT Margin 5.4 6.5 5.9 4.8 6.2

Source: Company, Kotak Institutional Equities estimates

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Minda Corp. Automobiles

Exhibit 3: We expect Minda to deliver 16% revenue CAGR over FY2016-20E (after excluding consolidation impact of JVs)
Revenue break-up across segments, March fiscal year-ends, 2013-20E (₹ mn)
Revenue CAGR (%)
2013 2014 2015 2016 2017E 2018E 2019E 2020E 2013-16 2016-20E
Revenues (Rs mn)
Standalone business 5,842 6,039 6,368 6,933 8,034 9,168 10,328 11,468 5.9 13.4
2-wheeler lock kits for OEM 2,399 2,718 3,230 3,653 4,100 4,614 14.1
Locksets for after-market 1,141 1,090 1,282 1,474 1,740 1,983 2,221 2,488 14.0
Die casting (Products sold outside group) 1,008 1,101 1,304 1,597 1,896 2,065 17.0
Exports 662 823 872 872 916 1,007 1,108 1,219
Others 807 767 844 928 1,002 1,083
Minda SAI 3,624 4,413 5,088 5,430 6,041 6,801 7,751 8,761 14.4 12.7
Minda Furukawa 1,848 4,387 4,668 5,693 8,144 10,777 25.2
Minda KTSN 4,048 4,548 4,515 3,950 4,148 5,184 5,703 6,273 (0.8) 12.3
PT Minda Automotive Indonesia 1,064 798 878 966 1,014 1,065 7.5
Minda Vietnam Automotive 255 191 210 231 243 255 7.5
Minda Automotive Soluction (Replacement) 1,642 1,597 1,938 2,221 2,615 3,020 3,386 3,798 10.6 14.3
Minda Schenk 8,368 —
Minda Stoneridge 1,385 3,486 4,100 4,863 5,748 17.7
Minda VAST — — 1,166 2,727 3,075 3,465 3,907 11.8
Panalfa — — — — 800 896 1,004 1,124
Revenues 23,525 16,794 21,076 26,460 33,606 39,134 45,899 53,175
Less: Eliminations 2,176 1,152 1,744 2,302 2,650 2,939 3,225 3,542
Other operating income 387 297 375 297 312 343 378 415
Consolidated net revenues 21,736 15,939 19,706 24,455 31,268 36,538 43,051 50,048 4.0 17.0
Domestic 8,657 10,568 13,000 18,644 25,116 29,150 34,984 41,237 22.5 22.0
Exports 662 823 872 872 916 1,007 1,108 1,219 14.8 8.7
Overseas entities (Largely Europe) 12,417 4,548 5,834 4,939 5,235 6,381 6,959 7,592 (31.5) 11.3
Revenues by business segment (Rs mn)
Safety security & restraint systems 5,764 6,681 7,913 9,007 11,813 13,521 15,210 16,950 17.2 17.1
Driver information & telematics systems 4,056 4,644 7,116 11,201 14,995 17,489 21,761 26,410 32.5 23.9
Interior systems 11,529 4,317 4,303 3,950 4,148 5,184 5,703 6,273 (38.9) 12.3
Contribution to revenues (%)
Safety security & restraint systems 27 43 41 37 38 37 36 34
Driver information & telematics systems 19 30 37 46 48 48 51 53
Interior systems 54 28 22 16 13 14 13 13

Notes:
(a) 2013-16 revenue CAGR is impacted by sell-off of Minda Schenk.
(b) FY2016-20E revenue CAGR is after adjustments for the consolidation impact of Minda Stoneridge (from Oct. 2015) and Minda VAST (from June 2015)

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

Automobiles Minda Corp.

Exhibit 4: We expect Minda to gain market share across most segments; profitability of Minda Furukawa likely to improve
Key assumptions, March fiscal year-ends, 2015-20E

2015 2016E 2017E 2018E 2019E 2020E

Domestic market share (%)
Passenger vehicle wiring harness 7.1 8.7 9.8 10.5 11.4 13.9
With Maruti Suzuki 12.5 16.0 17.8 19.0 19.7 23.8
Two-wheeler locksets 25.9 27.5 29.7 30.4 31.0 31.7
Four-wheeler locksets 24.1 24.7 24.9 25.2 25.4 25.6
Revenue from new products (Rs mn)
Steering roll connectors (part of Minda Furukawa) — 793 200 250 1,520 1,702
Automotive sensors (part of Minda Stoneridge) 210 420 715 1,143 1,715 2,401
EBITDA margin (excluding other income) of key subsidiaries/JVs (%)
Minda SAI 7.8 8.3 8.5 8.7 8.7 8.8
Minda Furukawa 7.5 6.0 6.0 6.8 7.3 7.7
Minda KTSN 6.2 6.0 6.0 6.0 6.0 6.0
PT Minda Automotive Indonesia 10.0 10.0 10.0 10.0 10.0 10.0
Minda Vietnam Automotive 13.0 13.0 13.0 13.0 13.0 13.0
Minda Automotive Soluction (Replacement) 2.5 2.4 3.3 3.4 3.4 3.4
Minda Stoneridge 8.5 10.8 10.2 10.5 10.7 10.8
Minda VAST — 8.6 8.0 8.5 8.5 8.5

Notes:
(a) FY2015 EBITDA margin of Minda Furkawa includes forex gains of Rs90 mn.

Source: Company, Kotak Institutional Equities estimates

Exhibit 5: We cut our FY2017-19E consolidated EPS estimates by 5-6%

Earnings revision table, March fiscal year-ends, 2017-19E (₹ mn)

New estimates Old estimates % change

2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E
Standalone
Net sales 8,166 9,320 10,498 8,040 9,124 10,226 1.6 2.1 2.7
EBITDA 892 1,022 1,149 930 1,055 1,185 (4.1) (3.1) (3.0)
Margin (%) 10.9 11.0 10.9 11.6 11.6 11.6
Adj net profit 500 569 647 520 593 672 (3.9) (4.0) (3.7)
Standalone EPS 2.4 2.7 3.1 2.5 2.8 3.2 (3.9) (4.0) (3.7)
Consolidated
Net sales 31,268 36,538 43,051 31,192 35,907 42,283 0.2 1.8 1.8
EBITDA 2,834 3,399 4,115 2,909 3,450 4,203 (2.6) (1.5) (2.1)
Margin (%) 9.1 9.3 9.6 9.3 9.6 9.9
Adj net profit 1,160 1,449 1,857 1,227 1,552 1,949 (5.5) (6.6) (4.7)
Consolidated EPS (Rs) 5.5 6.9 8.9 5.9 7.4 9.3 (5.5) (6.6) (4.7)

Source: Company, Kotak Institutional Equities estimates

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Minda Corp. Automobiles

Exhibit 6: We expect standalone net profit to grow at 12% CAGR over FY2016-20E
Standalone financial summary, March fiscal year-ends, 2011-20E (₹ mn)

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
Profit model (Rs mn)
Net sales 4,842 5,597 5,982 6,168 6,491 7,047 8,166 9,320 10,498 11,657
EBITDA 654 609 556 594 686 832 892 1,022 1,149 1,277
Other income 40 81 123 69 47 43 49 54 56 59
Interest and finance charges (130) (130) (138) (112) (78) (40) (48) (44) (31) (19)
Depreciation (119) (143) (168) (217) (174) (185) (209) (252) (288) (318)
Pre-tax profits 445 416 373 334 482 651 685 780 886 999
Extraordinary items — — (23) (22) — — — — — —
Income tax (103) (15) (83) (94) (140) (186) (185) (210) (239) (270)
Net profits 342 402 267 218 341 465 500 569 647 730
Adjusted net profit 342 402 285 286 340 465 500 569 647 730
Earnings per share (Rs) 1.8 1.9 1.4 1.4 1.6 2.2 2.4 2.7 3.1 3.5
Balance sheet (Rs mn)
Total equity 1,842 2,676 2,897 3,068 3,315 3,654 4,018 4,432 4,904 5,436
Total borrowings 487 1,083 1,008 918 589 569 519 369 219 69
Current liabilities 1,096 1,081 1,123 1,189 895 1,283 1,427 1,620 1,808 1,997
Other liabilities 46 139 109 114 119 102 102 102 102 102
Total liabilities and equity 3,471 4,979 5,136 5,290 4,917 5,608 6,066 6,523 7,033 7,603
Cash 459 758 160 239 93 477 250 392 619 837
Total fixed assets 1,017 1,132 1,475 1,423 1,281 1,359 1,850 1,897 1,910 1,991
Investments 599 887 1,035 1,763 1,855 2,005 2,005 2,005 2,005 2,005
Current assets 1,396 2,031 2,311 1,773 1,608 1,666 1,861 2,128 2,398 2,669
Other long-term assets — 170 155 91 80 101 101 101 101 101
Total assets 3,471 4,979 5,136 5,290 4,917 5,608 6,066 6,523 7,033 7,603
Free cash flow (Rs mn)
Operating cash flow, excl. working capital 555 502 493 541 637 608 707 811 910 1,007
Working capital (156) (545) (259) 625 (142) 331 (51) (75) (82) (82)
Capital expenditure/Acquisitions (176) (277) (514) (201) (205) (263) (700) (300) (300) (400)
Investments (178) (288) (293) (728) (91) (150) — — — —
Free cash flow 222 (320) (279) 965 291 676 (43) 437 528 525
Ratios (%)
EBITDA margin 13.5 10.9 9.3 9.6 10.6 11.8 10.9 11.0 10.9 11.0
Gross margin 37.3 38.7 39.9 38.9 39.2 38.7 39.0 38.5 38.4 38.0
Debt/equity (X) 0.3 0.4 0.3 0.3 0.2 0.2 0.1 0.1 0.0 0.0
Net debt/equity (X) 0.0 0.1 0.3 0.2 0.1 0.0 0.1 (0.0) (0.1) (0.1)
Core RoAE 48.2 25.3 15.0 18.1 24.6 29.9 27.3 25.6 24.3 23.1
Core RoACE 37.4 31.1 16.2 13.3 20.1 26.7 26.6 25.7 27.3 28.8

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

Automobiles Minda Corp.

Exhibit 7: We expect consolidated net profit to grow at 23% CAGR over FY2016-20E
Consolidated financial summary, March fiscal year-ends, 2011-20E (₹ mn)

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
Profit model (Rs mn)
Net sales 7,322 13,855 21,736 15,939 19,706 24,455 31,268 36,538 43,051 50,048
EBITDA 758 1,349 1,087 1,257 1,855 2,233 2,834 3,399 4,115 4,768
Other income 40 204 362 304 227 173 178 161 183 181
Interest and finance charges (174) (268) (424) (275) (395) (334) (383) (349) (322) (254)
Depreciation (172) (455) (771) (478) (603) (745) (903) (1,023) (1,135) (1,259)
Pre-tax profits 452 830 254 808 1,085 1,328 1,726 2,188 2,841 3,437
Extraordinary items — (176) (30) 147 24 137 — — — —
Income tax (105) (138) (175) (172) (272) (366) (432) (547) (710) (859)
Share of JVs — 6 — 10 44 3 — — — —
Minority interest — (2) 10 — 14 (30) (135) (192) (274) (358)
Net profits 347 519 60 793 895 1,073 1,160 1,449 1,857 2,219
Adjusted net profit 347 658 67 725 876 970 1,160 1,449 1,857 2,219
Earnings per share (Rs) 1.8 3.1 0.3 3.5 4.2 4.6 5.5 6.9 8.9 10.6
Balance sheet (Rs mn)
Total equity 2,693 3,530 3,462 3,894 4,666 5,674 6,698 7,992 9,674 11,695
Minority interest — 33 51 — 241 637 771 964 1,237 1,596
Total borrowings 2,046 4,759 5,319 5,523 5,018 5,430 5,630 5,130 4,730 3,730
Current liabilities 2,127 3,211 3,596 3,451 4,022 5,611 6,834 7,668 8,975 10,420
Other liabilities 85 390 301 253 269 357 357 357 357 357
Total liabilities and equity 6,951 11,922 12,729 13,122 14,216 17,708 20,290 22,111 24,972 27,797
Cash 655 972 575 540 441 882 275 179 266 244
Total fixed assets 2,646 4,978 5,342 5,418 5,861 7,318 8,815 8,992 9,657 10,198
Investments 38 189 — 245 289 52 52 52 52 52
Current assets 3,612 5,580 6,583 6,765 7,423 9,184 10,875 12,616 14,725 17,032
Other long-term assets — 203 229 154 202 272 272 272 272 272
Total assets 6,951 11,922 12,729 13,122 14,216 17,708 20,289 22,111 24,972 27,797
Cash flow (Rs mn)
Operating cash flow, excl. working capital 676 1,082 1,295 861 1,427 2,613 2,526 2,993 3,567 4,080
Working capital (66) (1,314) (617) (326) (88) (172) (469) (906) (803) (861)
Capital expenditure/Acquisitions (187) (1,565) (1,150) (321) (455) (2,201) (2,400) (1,200) (1,800) (1,800)
Investments (118) 249 — — — — — — — —
Free cash flow 424 (1,797) (472) 213 884 240 (343) 887 965 1,419
Ratios (%)
EBITDA margin 10.4 9.7 5.0 7.9 9.4 9.1 9.1 9.3 9.6 9.5
Gross margin 37.3 38.7 39.9 38.9 39.2 38.7 39.0 38.5 38.4 38.0
Debt/equity (X) 0.8 1.3 1.5 1.4 1.1 1.0 0.8 0.6 0.5 0.3
Net debt/equity (X) 0.5 1.1 1.4 1.3 1.0 0.8 0.8 0.6 0.5 0.3
RoAE 20.3 21.2 1.9 19.7 20.5 18.8 18.8 19.7 21.0 20.8
RoACE 13.7 15.4 2.0 10.4 12.3 12.8 14.2 15.2 17.5 18.9

Source: Company, Kotak Institutional Equities estimates

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Disclosures

"I, Nishit Jalan, hereby certify that all of the views expressed in this report accurately reflect my personal views about the
subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be,
directly or indirectly, related to the specific recommendations or views expressed in this report."

Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional
70%
Equities, within the specified category.

60%
Percentage of companies within each category for
which Kotak Institutional Equities and or its affiliates has
50%
provided investment banking services within the
previous 12 months.
40% * The above categories are defined as follows: Buy = We
35.0%
expect this stock to deliver more than 15% returns over
30.0%
30% the next 12 months; Add = We expect this stock to
22.2% deliver 5-15% returns over the next 12 months; Reduce
= We expect this stock to deliver -5-+5% returns over
20% the next 12 months; Sell = We expect this stock to deliver
12.8%
less than -5% returns over the next 12 months. Our
10% target prices are also on a 12-month horizon basis.
2.2% 3.3% 2.2% These ratings are used illustratively to comply with
0.0% applicable regulations. As of 30/06/2016 Kotak
0%
Institutional Equities Investment Research had
BUY ADD REDUCE SELL
investment ratings on 180 equity securities.

Source: Kotak Institutional Equities As of June 30, 2016

Ratings and other definitions/identifiers

Definitions of rating

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.

REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.

SELL. We expect this stock to deliver <-5% returns over the next 12 months.

Our target prices are also on a 12-month horizon basis.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)
and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction
involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient
fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock
and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

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