India Post Conference Notes Day-3 - Feb-18-EDEL PDF

Post Conference Notes - Day 3
February 2018
Edelweiss
India Conference 2018
February 7-9, 2018 | Grand Hyatt, Mumbai Another Tryst with Destiny
February 15-17,
February 7-9, 2016
2018 Grand Hyatt,
St. Regis Mumbai
Hotel, Mumbai
Edelweiss Research Team

+91 22 2286 4400 Edelweiss Securities Limited
research@edelweissfin.com
Profile of Participating Companies
Preface
We present key takeaways of Day 3 of the Edelweiss India Conference 2018 – India 2025: Another Tryst With Destiny.
The 3-day event (February 7-9) was a resounding success, which brought together over 150 corporates, 600 investors,
apart from a host of CEOs, policymakers and industry experts, resulting in over 5,000 meetings.
Day 3 schedule was lighter compared to the previous two days. It comprised primarily of investor-corporate meetings
with a higher corporate attendance. The mix of companies was also more varied with representation from a large
number of sectors—logistics, IT, agrochemicals, specialty chemicals, auto, retail, NBFCs, banks, insurance, consumers,
among others.
While IT companies perceive improved demand outlook and expanding customer wallets, financial sector companies
continued to dwell on the theme of democratisation of credit and financialisation of savings. The latter envisage
retail to be the vital piece on assets as well as liabilities fronts. Consumer staple companies are optimistic on the
hitherto languishing rural economy bouncing back given encouraging announcements by the government in Budget
2018. Consumer durables and auto companies also anticipate things to be better in FY19 as GST disruptions ebb.
The real stars of Day 3 were mid-cap companies. Agriculture inputs, building materials and logistics companies
evinced tremendous investor interest. Agrochemical companies stated that despite two consecutive good monsoons,
their top lines have been weak, perhaps owing to low food prices. However, they believe things are getting better
and sentiments will improve, especially given the finance minister’s announcement in budget speech that MSPs will
be at 50% of cost of production. Building material companies are betting on implementation of e-way bill, which they
expect to help wrest market share from unorganised players, and thus garner superior top-line growth. Logistics
companies highlighted the huge growth potential in the sector, especially post GST, given the dominant presence of
unorganised players in the space.
Apart from corporate-investor interactions, this year’s conference has been unique in terms of investor mood, investor
focus and corporate sentiments. It’s amazing how things change in a year’s time. Last year, this time was characterised
by gloom underpinned by demonetisation and Donald Trump’s election as US President. However, despite the
pessimism, Indian and global markets performed exceptionally well, with 2017 being one of the best years in a
decade in terms of performance as well as volatility. This time around, sentiments are much more constructive;
though investors anticipate global growth to sustain, they are a bit wary of volatility in asset prices. On the domestic
front as well, companies seemed a lot more optimistic about growth as disruptions from GST, RERA and demonetisation
fade and earnings outlook finally seems to be brightening.
The conference, apart from providing a platform for investors to interact with corporate, also saw the release of our
book—India 2025: Another Tryst With Destiny. We argue that defying all expectations, India has indeed achieved its
Tryst With Destiny on the political front over the past 70 years of independence, but performed below its potential on
the economic front. We believe, India will now have its Tryst With Economic Destiny, throwing up large investment
opportunities. It was a pleasure organising the conference and we hope investors ride this multi-hued journey with
us.
Team Edelweiss
1 Edelweiss Securities Limited

CONTENTS
Aditya Birla Fashion & Retail ................................................................................................................................................................................. 4
Advanced Enzyme Technologies ............................................................................................................................................................................ 6

Apar Industries .......................................................................................................................................................................................................... 8
APL Apollo Tubes ..................................................................................................................................................................................................... 10
Arvind ......................................................................................................................................................................................................................... 12
Bajaj Electricals ....................................................................................................................................................................................................... 14
Care Ratings ............................................................................................................................................................................................................. 16

CESC ............................................................................................................................................................................................................................ 18
Cipla ........................................................................................................................................................................................................................... 20
Cochin Shipyards ..................................................................................................................................................................................................... 22
Deepak Fertilisers & Petrochemicals Corp ........................................................................................................................................................ 24
Eicher Motors ........................................................................................................................................................................................................... 26

Essel Propack ........................................................................................................................................................................................................... 28
First Source Solutions ............................................................................................................................................................................................ 30

Future Consumer ..................................................................................................................................................................................................... 32
Future Supply Chain Solutions ............................................................................................................................................................................. 34
Glenmark Pharmaceuticals ................................................................................................................................................................................... 36

GMR Infrastructure ................................................................................................................................................................................................. 38
Greenlam Industries .............................................................................................................................................................................................. 40

Greenply Industries ............................................................................................................................................................................................... 42
Gulf O il Lubricant ................................................................................................................................................................................................... 44

HealthCare Global Enterprises ............................................................................................................................................................................ 46
Heritage Foods ........................................................................................................................................................................................................ 48
Hinduja Global Solutions ..................................................................................................................................................................................... 50

Hindustan Unilever ................................................................................................................................................................................................ 52
ICICI Prudential Life Insurance ............................................................................................................................................................................ 54

Info Edge ................................................................................................................................................................................................................... 56
Insecticides India ................................................................................................................................................................................................... 58
KEC International .................................................................................................................................................................................................... 60

KEI Industries ........................................................................................................................................................................................................... 62
Kotak Mahindra Bank ............................................................................................................................................................................................. 64

KPIT Cummins ........................................................................................................................................................................................................... 66
Maharashtra Seamless ......................................................................................................................................................................................... 68

Manappuram Finance ............................................................................................................................................................................................ 70
MAS Financial .......................................................................................................................................................................................................... 72
Nitin Spinners .......................................................................................................................................................................................................... 74
2 Edelweiss
Edelweiss Securities Securities Limited
Limited
Orient Refractories ................................................................................................................................................................................................. 76
Parag Milk Foods ..................................................................................................................................................................................................... 78

Persistent Systems ................................................................................................................................................................................................. 80
Praj Industries ......................................................................................................................................................................................................... 82

Sadbhav Infrastructure Projects ........................................................................................................................................................................... 84
Security and Intelligence Srvs India ................................................................................................................................................................... 86

Shankara Building Products .................................................................................................................................................................................. 88
Sharda Cropchem .................................................................................................................................................................................................... 90
Sheela Foams .......................................................................................................................................................................................................... 92

Shoppers Stop .......................................................................................................................................................................................................... 94
Sintex Industries ..................................................................................................................................................................................................... 96

SKF India ................................................................................................................................................................................................................... 98
Solar Industries ..................................................................................................................................................................................................... 100
Sterlite Technologies ........................................................................................................................................................................................... 102

TCS ............................................................................................................................................................................................................................ 104
Vedanta ................................................................................................................................................................................................................... 106
Since the number of companis coverage is huge it is impossible to include all the price charts in one note. However, is a client request for a particular
price chart we can provide the same.
3 Edelweiss
Limited
Company Profile
ADITYA BIRLA FASHION & RETAIL

Brand power
India Equity Research l Retail
Key takeaways EDELWEISS 4D RATINGS
GST disruption normalising and management believes the wholesale channel will Absolute Rating BUY
recover over the next few months. Rating Relative to Sector Performer
Risk Rating Relative to Sector Low
Wholesale channel contribution was relatively low in Q3FY18 compared to Sector Relative to Market Underweight
previous quarters. The channel has started to recover and is expected to return to
pre-GST levels over the next few months.
MARKET DATA (R : PNTA.BO, B: ABFRL IN)
Management believes that most markets have recovered, apart from South India.
Tamil Nadu and Andhra Pradesh have taken time to recover. CMP : INR 156
Target Price : INR 206
Lifestyle revenue grew 8.2% YoY in Q3FY18 with retail LTL at 4%. SSSG for 9mFY18 is 52-week range (INR) : 188 / 142
8.5% YoY, which is a trajectory the company wants to sustain going forward. Share in issue (mn) : 771.7
M cap (INR bn/USD mn) : 121 / 1,875
Pantaloons: The company is aiming high single digit to double digit SSSG by going Avg. Daily Vol. BSE/NSE (‘000) : 749.3
deeper into Tier-2 & 3 cities to get growth versus from price cut-led growth
previously.
Forever 21 business has closed/resized legacy stores, which led to decline in Share Holding Pattern (%)
revenue. LTL in legacy stores still under pressure. Restructuring is to be completed Current Q1FY18 Q4FY17
by FY19. Promoters * 59.2 59.3 59.3
MF's, FI's & BK’s 14.2 14.7 15.0
The company is planning to scale up People brand. It is almost achieving breakeven FII's 11.6 11.7 11.1
in this business. It is now confident of the business model. Others 14.9 14.4 14.5
* Promoters pledged shares : 0.1
Investment conclusion (% of share in issue)
Aditya Birla Fashion and Retail (ABFRL) is one of the largest branded clothing
players with 5 brands clocking >INR10bn sales each. The company has now
ventured into fast fashion via Forever 21 and innerwear under the Van Heusen PRICE Performance (%)
brand, thereby now housing full bouquet of segments in the apparel category. Stock Nifty EW Retail
Anchored by these potent growth boosters, we estimate ABFRL to post healthy Index
growth in sales and EBITDA. We maintain ‘BUY/SP’. 1 month (13.7) (0.6) (9.9)
3 months (0.6) 0.4 (3.0)
12 months 3.8 19.3 21.2
Abneesh Roy
+91 22 6620 3141
Financials abneesh.roy@edelweissfin.com
Year to March FY17 FY18E FY19E FY20E Rajiv Berlia

Revenues (INR mn) 66,029 75,620 86,065 98,576 +91 22 6623 3377
Rev. growth (%) 9.4 14.5 13.8 14.5 rajiv.berlia@edelweissfin.com
EBITDA (INR mn) 4,375 6,050 8,520 10,646
Alok Shah
Adjusted Profit (INR mn) 535 1,585 3,349 5,115
+91 22 6620 3040
Adjusted Diluted EPS (INR) 0.7 2.1 4.4 6.7
alok.shah@edelweissfin.com
Diluted P/E (x) 224.0 75.7 35.8 23.4
EV/EBITDA (x) 32.3 23.3 16.2 12.4
ROAE (%) 5.7 15.3 26.1 30.0 February 9, 2018
Edelweiss Research is also available on www.edelresearch.com, Edelweiss Securities Limited

Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Financial Statements Balance sheet (INR mn)

As on 31st December FY17 FY18E FY19E FY20E
Income statement (INR mn)
Share capital 7,733 7,728 7,728 7,728
Year to March FY17 FY18E FY19E FY20E Reserves & surplus 1,849 3,434 6,783 11,899
Total operating income 66,029 75,620 86,065 98,576 Shareholders funds 9,582 11,162 14,511 19,627
Cost of materials 30,087 34,483 38,557 43,965 Long term borrowings 13,495 14,000 14,000 14,000
Gross profit 35,942 41,137 47,508 54,611 Short term borrowings 8,718 9,800 9,800 9,800
Employee costs 7,058 7,864 8,693 9,858 Total Borrowings 22,213 23,800 23,800 23,800
Rental costs 10,871 11,494 12,565 14,195 Long term liabilities & prov. 756 756 756 756
Advertisement expenses 2,867 3,554 3,959 4,337 Sources of funds 32,551 35,718 39,067 44,183
Other expenses 13,638 15,729 17,729 19,912 Gross Block 7,916 9,846 11,652 11,877
EBITDA 4,375 6,050 8,520 10,646 Net Block 6,275 4,832 3,725 981
Depreciation 2,425 2,768 3,134 3,202 Capital work in progress 250 250 250 250
EBIT 1,951 3,281 5,387 7,444 Intangible Assets 18,596 20,400 21,379 22,346
Add: Other income 382 450 450 500 Total Fixed Assets 25,121 25,481 25,354 23,578
EBIT incl. other income 2,332 3,731 5,837 7,944 Cash and cash equivalents 676 2,971 5,915 12,118
Less: Interest Expense 1,797 1,750 1,650 1,550 Inventories 14,313 18,258 18,161 23,366
Profit before tax 535 1,981 4,187 6,394 Sundry debtors 4,539 4,237 5,751 5,689
Less: Provision for Tax - 396 837 1,279 Loans & advances 2,565 2,566 2,566 2,566
Reported Profit 535 1,585 3,349 5,115 Other Current Assets 962 972 981 991
Adjusted Profit 535 1,585 3,349 5,115 Total Current Assets (ex cash) 22,378 26,032 27,459 32,612
No. of Shares outstanding (mn) 769 769 769 769 Trade payable 15,511 18,654 19,547 24,012
Adjusted Basic EPS 0.7 2.1 4.4 6.7 Other Current Liab. & ST Prov. 2,297 2,297 2,297 2,297
No. of Dil. shares outstand. (mn) 769 769 769 769 Total Current Liab. & Prov. 17,808 20,951 21,844 26,309
Adjusted Diluted EPS 0.7 2.1 4.4 6.7 Net current assets (ex cash) 4,571 5,081 5,614 6,303
Adjusted Cash EPS 3.9 5.7 8.4 10.8 Uses of funds 32,551 35,718 39,067 44,183
Tax rate 0.0 20.0 20.0 20.0 Book value per share 12.5 14.5 18.9 25.5
Common size metrics as % of net revenues

Year to March FY17 FY18E FY19E FY20E
Cost of materials 45.6 45.6 44.8 44.6
Employee costs 10.7 10.4 10.1 10.0 Ratios
Rental costs 16.5 15.2 14.6 14.4 Year to March FY17 FY18E FY19E FY20E
Other expenses 20.7 20.8 20.6 20.2 ROAE (%) 5.7 15.3 26.1 30.0
Depreciation 3.7 3.7 3.6 3.2 ROCE (%) 7.7 11.2 15.9 19.4
Net interest expenditure 2.7 2.3 1.9 1.6 Debtor days 21 21 21 21
EBITDA margins 6.6 8.0 9.9 10.8 Inventory days 172 172 172 172
EBIT margin 3.0 4.3 6.3 7.6 Payable days 181 181 181 181
Net profit margin 0.8 2.1 3.9 5.2 Cash conversion cycle (days) 13 13 13 13
Current ratio 1.3 1.4 1.5 1.7
Gross Debt/EBITDA 5.1 3.9 2.8 2.2
Growth metrics (%) Gross Debt/Equity 2.3 2.1 1.6 1.2
Year to March FY17 FY18E FY19E FY20E Adjusted debt/equity 2.3 2.1 1.6 1.2
Net Debt/Equity 2.2 1.9 1.2 0.6
Revenues 9.4 14.5 13.8 14.5 Interest coverage (x) 1.1 1.9 3.3 4.8
EBITDA 15.6 38.3 40.8 25.0
PBT 270.0 111.3 52.7
Adjusted Profit 196.0 111.3 52.7
EPS 196.0 111.3 52.7
Cash flow statement (INR mn)

Year to March FY17 FY18E FY19E FY20E Valuation parameters
Reported Profit 535 1,585 3,349 5,115 Year to March FY17 FY18E FY19E FY20E
Add: Depreciation 2,425 2,768 3,134 3,202 Adjusted Diluted EPS (INR) 0.7 2.1 4.4 6.7
Interest (Net of Tax) 1,797 1,400 1,320 1,240 Y-o-Y growth (%) (148.8) 196.0 111.3 52.7
Others (113) (100) (120) (190) Adjusted Cash EPS (INR) 3.9 5.7 8.4 10.8
Less:Changes in WC 461 501 524 678 Diluted P/E (x) 224.0 75.7 35.8 23.4
Operating cash flow 4,183 5,152 7,159 8,689 Price to Book Ratio (P/B) (x) 12.5 10.7 8.3 6.1
Less: Capex 3,031 3,129 3,006 1,426 Enterprise Value / Sales (x) 2.1 1.9 1.6 1.3
Free cash flow 1,152 2,023 4,153 7,263 Enterprise Value / EBITDA (x) 32.3 23.3 16.2 12.4

Company Profile
ADVANCED ENZYME TECHNOLOGIES

Strong player in niche enzyme market
India Equity Research l Miscellaneous
Key takeaways EDELWEISS RATINGS
The company is likely to end FY18 with INR3.8-4.0bn revenue. Further, management Absolute Rating NOT RATED
has guided for INR10bn revenue over the next five years. Management also expects
margin to remain stable at ~42%.
While revenue from top customer is expected to grow at 7-8% in USD, unfolding
opportunities from new applications like animal nutrition (USD500mn market
potential), oil & fat processing (USD700mn market potential), bio-diesel (USD650mn MARKET DATA (R : NA.BO, B: ADVENZY IN)
market potential) and washing solutions (USD200mn market potential) are likely to
CMP : INR 254
drive growth for the company.
Target Price : NA
As these categories are new, the company may take longer to capitalise on some of 52-week range (INR) : 445 / 244
these opportunities and there could be some lumpiness in performance in the near Share in issue (mn) : 111.6
term. It is targeting meaningful contribution from these categories to commence from M cap (INR bn/USD mn) : 28 / 441
Avg. Daily Vol. BSE/NSE (‘000) : 533.3
FY20.
The focus remains on introduction of enzymes for new applications through sustained
investment in R&D and geographical expansion and deeper penetration in existing Share Holding Pattern (%)
geographies. Further, the company will continue to scout for inorganic growth Current Q1FY18 Q4FY17
opportunities as small players in this industry face limitations in scaling operations. Promoters * 71.3 71.3 70.1
MF's, FI's & BK’s 4.7 5.5 7.4
Recently, the company acquired Evoxx Technologies based in Germany. Evoxx has a
FII's 2.4 1.9 1.8
team of around 40 scientists and technicians and two R&D centres in Germany which
Others 21.5 21.3 20.7
will help the company strengthen its research and development capabilities.
(% of share in issue)
Current utilisation rate stands at ~55%. As these manufacturing facilities are largely
process-driven and not based on a particular product, any capacity constraint in the
medium term is unlikely.
Relative Performance (%)
Sensex Stock Stock over
Sensex
1 month (0.1) (18.1) (18.0)
3 months 3.5 (4.8) (8.3)
12 months 21.5 (30.5) (52.0)
Financials
Year to March FY14 FY15 FY16 FY17

Net revenues (INR mn) 2,395 2,231 2,938 3,314
Revenue growth (%) 8.6 (6.8) 31.7 12.8
EBITDA (INR mn) 1,038 905 1,376 1,507 Rohan Gupta
+91 22 4040 7416
Adj. profit (INR mn) 741 510 799 906
rohan.gupta@edelweissfin.com
Adj. diluted EPS (INR) 34.0 23.4 36.7 40.6
EPS growth (%) 50.5 (31.2) 56.8 10.5
ROAE (%) 45.1 26.8 32.3 24.4 February 9, 2018


As on 31st March FY14 FY15 FY16 FY17
Share capital 218 218 218 223
Year to March FY14 FY15 FY16 FY17 Other Equity 1,446 1,902 2,563 4,378
Net revenues 2,395 2,231 2,938 3,314 Total shareholders funds 1,664 2,120 2,781 4,602
Raw material costs 471 477 590 681 Minority interest 36 45 54 124
Employee Benefits Expense 329 365 445 515 Long term Borrowings 875 540 388 197
Other expenses 557 483 527 611 Short term Borrowings 391 236 296 265
Total expenses 1,357 1,326 1,562 1,807 Total Borrowings 1,266 777 684 463
EBITDA 1,038 905 1,376 1,507 Long Term Liabilities & Prov. 0 0 2 8
Depreciation & amortization 99 90 87 122 Deferred Tax Liability (net) 39 104 172 175
EBIT 939 815 1,288 1,385 Sources of funds 3,005 3,045 3,692 5,371
Less: Interest Expense 132 93 79 42 Gross Block 1,560 1,612 1,732 2,229
Add: Other income 10 26 13 23 Net Block 1,149 1,111 1,144 1,518
Add: Exceptional items (540) 0 (41) 0 Capital work in progress 24 53 18 15
Profit Before Tax 278 748 1,182 1,366 Intangible Assets 1,722 1,749 1,761 2,562
Less: Provision for Tax 64 230 414 442 Total Fixed Assets 2,895 2,913 2,924 4,096
Less: Minority Interest 13 8 9 17 Non current investments 1 1 1 1
Reported Profit 201 510 758 906 Cash & bank balances 26 43 263 79
Less: Excep. Items (Net of Tax) (540) 0 (41) 0 Inventories 499 526 605 685
Adjusted Profit 741 510 799 906 Sundry Debtors 324 370 418 510
No. of Sha. outstanding (mn) 22 22 22 22 Loans & Advances 240 254 225 339
Adjusted Basic EPS 34.0 23 37 41 Other Current Assets 8 8 68 50
No. of dil. Sha. outstand. (mn) 22 22 22 22 Total Current Assets (Ex Cash) 1,071 1,158 1,316 1,583
Adjusted Diluted EPS 34.0 23.4 36.7 40.6 Trade payable 104 117 123 110
Adjusted Cash EPS 38.6 27.6 40.7 46.1 Other Current Liab. & ST Prov. 885 954 688 277
Dividend per share 0.5 0.5 1.0 0.4 Total Current Liab. & Provis. 989 1,071 811 387
Dividend Payout Ratio (%) 1.5 2.1 2.7 1.0 Net Current Assets (ex cash) 83 88 504 1,196
Uses of funds 3,005 3,045 3,692 5,372
Book value per share (INR) 78 99 130 212
Materials costs 19.7 21.4 20.1 20.5
Staff costs 13.7 16.4 15.2 15.5
Ratios
S G & A expenses 23.3 21.7 17.9 18.5
Depreciation 4.1 4.0 3.0 3.7
Interest Expense 5.5 4.1 2.7 1.3 ROAE (%) 45.1 26.8 32.3 24.4
EBITDA margins 43.3 40.6 46.8 45.5 ROCE (%) 31.1 28.5 40.3 32.3
Net Profit margins 31.5 23.2 27.5 27.9 Inventory Days 366.6 392.3 350 346
Debtors Days 54.4 56.8 49 51
Payble Days 106.0 84.5 74 63
Cash conversion cycle (days) 315.0 364.5 324.5 334.3
Current Ratio 1.1 1.1 1.9 4.3
Growth metrics (%) Gross Debt/EBITDA 1.2 0.9 0 0
Year to March FY14 FY15 FY16 FY17 Gross Debt/Equity 0.7 0.4 0.2 0.1
Adjusted Debt/Equity 0.7 0.4 0.2 0.1
Revenues 8.6 (6.8) 31.7 12.8
EBITDA 15.9 (12.8) 52.0 9.5
Interest Coverage Ratio 7.1 8.8 16.4 33.2
PBT (63.6) 169.6 58.0 15.6
Adjusted Profit 50.5 (31.2) 56.8 13.4
EPS 50.5 (31.2) 56.8 10.5
Cash flow statement (INR mn) Valuation parameters

Year to March FY14 FY15 FY16 FY17 Year to March FY14 FY15 FY16 FY17
Reported Profit 201 510 758 906 Adjusted Diluted EPS (INR) 34.0 23.4 36.7 40.6
Add: Depreciation 99 90 87 122 Y-o-Y growth (%) 50.5 (31.2) 56.8 10.5
Interest (Net of Tax) 102 64 51 28 Adjusted Cash EPS (INR) 38.6 27.6 40.7 46.1
Others 363 29 324 585 Diluted P/E (x) 7.5 10.8 6.9 6.3
Less:Changes in WC 137 (110) (77) 44 Price/BV (x) 3.3 2.6 2.0 1.2
Operating cash flow 626 803 1,298 1,598 EV/Sales (x) 2.8 2.8 2.0 1.8
Less: Capex 95 84 133 118 EV/EBITDA (x) 6.5 6.9 4.3 4.0
Free cash flow 532 719 1,165 1,480 Dividend yield (%) 0.2 0.2 0.4 0.2

Company Profile
APAR INDUSTRIES
Short-term disruption; improvement ahead

New opportunities in conductors Absolute Rating BUY
• Copper conductors for railways, wherein diesel locomotives are to be replaced Investment Characteristics Growth
with electrical locomotives.
• Optical fiber through earth wires (OPEW).
• Copper transpose conductors (CTC), heart of a transformer.
MARKET DATA (R : APAR.BO, B: APR IN)
Management believes these higher margin new segments within conductors can
generate incremental INR3.5bn revenue with incremental capex of mere INR750mn. CMP : INR 767
Target Price : INR 1,056
• High efficiency conductors (HeC) prospects: Management estimates HeC 52-week range (INR) : 909 / 617
segment to clock INR5.5-6.0bn revenue in FY19 from less than INR3.0bn in Share in issue (mn) : 38.3
FY18. M cap (INR bn/USD mn) : 29 / 456
• EBIDTA/MT of conductors will keep moving higher as the mix will improve from Avg. Daily Vol. BSE/NSE (‘000) : 54.0
INR8-10,000 of traditional conductors to INR12-15,000/MT of HeC and further

INR20,000/MT for copper conductors.
Share Holding Pattern (%)
• With the INR6.6bn of capex completed across all the three segments,
Current Q1FY18 Q4FY17
management believes incremental capex can be within the depreciation of the
Promoters * 58.0 58.0 58.0
company (INR500mn) mainly catering to automotive oil towards expansion
MF's, FI's & BK’s 20.8 19.7 18.4
and automation. Further INR200mn capex will be towards copper conductors
FII's 7.5 8.8 8.4
for cables.
Others 13.7 13.6 15.3
• HeC contribution: Management expects HeC to contribute 25% to sales by FY20 * Promoters pledged shares : Nil
versus 20% expected earlier ( 15% currently). This is driven by strong demand
in India as well as Asia (Nepal and Bangladesh).
• Management believes sales of oils portfolio can grow at ~15% on blended PRICE Performance (%)
basis led by pick up in transformer oil demand and automotive & industrial BSE Midcap Stock Stock Over
oils. Index Index
1 month (9.9) (12.2) (2.3)
• Management believes cables can grow at 20% consistently going forward. 3 month (3.0) (2.7) 0.3
12 month 21.2 8.7 (12.5)
Investment conclusion
We remain structurally positive as Apar is well placed to capitalise on the T&D
uptick with improving mix leading to strong 20%/28% EBITDA and PAT CAGR over
FY18-20E. We maintain ‘BUY’.
Financials

Revenues (INR mn) 48,320 53,351 60,829 68,047
EBITDA (INR mn) 4,068 4,049 5,009 5,831
Adjusted Profit (INR mn) 1,762 1,642 2,226 2,695
No. of Shares outstanding (mn) 38.3 38.3 38.3 38.27
Shradha Sheth
Adjusted Diluted EPS (INR) 46.1 42.9 58.2 70.4 +91 22 6623 3308
Diluted P/E (x) 17.1 18.4 13.6 11.2 shradha.sheth@edelweissfin.com
EV/EBITDA (x) 7.5 7.8 5.5 4.7
ROACE (%) 30.0 26.7 31.6 34.0
ROAE (%) 18.7 15.0 18.0 19.0 February 9, 2018


As on 31st March FY17 FY18E FY19E FY20E
Net revenues 48,320 53,351 60,829 68,047 Shareholder equity 10,361 11,520 13,170 15,219
Raw material costs 35,728 40,446 46,027 51,260 Minority Interest 0 12 12 12
Gross profit 12,591 12,906 14,802 16,787 Long term borrowings 906 906 900 900
Employee expenses 1,074 907 973 1,089 Short term borrowings 1,865 1,365 865 365
Other expenses 7,450 7,949 8,820 9,867 Total Borrowings 2,770 2,270 1,765 1,265
Operating expenses 8,524 8,856 9,793 10,956 Deferred Tax Liability (net) 461 461 461 461
Total expenditure 44,252 49,302 55,820 62,216 Long Term Liabilities & Prov. 69 69 69 69
EBITDA 4,068 4,049 5,009 5,831 Sources of funds 13,662 14,332 15,477 17,026
Depreciation & amortisation 450 552 582 612 Gross Block 6,356 7,356 7,756 8,156
EBIT 3,618 3,498 4,427 5,220 Accumulated depreciation 713 1,264 1,846 2,458
Interest expense 1,044 1,109 1,165 1,258 Net Block 5,643 6,092 5,910 5,698
Other income 160 100 110 121 Intangible assets 106 95 95 95
Profit before tax 2,734 2,488 3,372 4,083 Capital work in progress 267 370 120 100
Provision for tax 972 846 1,147 1,388 Total net fixed assets 6,016 6,557 6,125 5,894
Share of net profit of associates 3 - - - Cash and cash equivalents 2,415 967 4,546 3,975
Reported Profit 1,766 1,642 2,226 2,695 Inventories 9,935 7,573 11,847 9,781
Adjusted Profit 1,766 1,642 2,226 2,695 Sundry Debtors 12,543 12,013 14,652 15,177
Core profit 1,762 1,642 2,226 2,695 Loans & Advances 871 871 871 871
No. of Shares outstanding (mn) 38.3 38.3 38.3 38.3 Other Current Assets 3,396 3,396 3,396 3,396
Adjusted Basic EPS 46.1 42.9 58.2 70.4 Total Current Assets (ex cash)26,745 23,852 30,765 29,224
No. of Dil. Sh. outstanding (mn) 38.3 38.3 38.3 38.3 Trade payable 17,725 12,859 21,189 16,730
Adjusted Diluted EPS 46.1 42.9 58.2 70.4 Other Current Liab. & ST Prov. 3,790 4,185 4,771 5,338
Adjusted Cash EPS 56.7 57.3 73.4 86.4 Total Current Liab. & Prov. 21,515 17,044 25,960 22,068
Dividend per share (DPS) 10.0 10.5 12.5 14.0 Net Current Assets (ex cash) 5,230 6,808 4,805 7,157
Dividend Payout Ratio (%) 26.1 29.4 25.9 23.9 Uses of funds 13,662 14,332 15,477 17,026
Book Value per share (INR) 270.7 301.0 344.1 397.7

Ratios
Gross margin 26.1 24.2 24.3 24.7
ROCE (%) 30.0 26.7 31.6 34.0
Operating expenses 17.6 16.6 16.1 16.1
ROAE (%) 18.7 15.0 18.0 19.0
EBITDA margins 8.4 7.6 8.2 8.6
ROA (%) 13.6 11.7 14.9 16.6
EBIT margin 7.5 6.6 7.3 7.7
Interest 2.2 2.1 1.9 1.8
Quick ratio 0.9 1.0 0.9 1.1
Net profit margin 3.7 3.1 3.7 4.0
Cash ratio 0.1 0.1 0.2 0.2
Receivable turnover (x) 4.1 4.3 4.6 4.6
Inventory turnover (x) 4.1 4.6 4.7 4.7
Payables turnover (x) 2.3 2.6 2.7 2.7
Growth metrics (%) Receivables (days) 89 84 80 80
Year to March FY17 FY18E FY19E FY20E Inventory (days) 90 79 77 77
Revenues (4.9) 10.4 14.0 11.9 Payables (days) 162 138 135 135
EBITDA 25.0 (0.5) 23.7 16.4 Cash conversion cycle (days) 17 25 22 22
PBT 54.0 (9.0) 35.5 21.1 Debt-equity (x) 0.3 0.2 0.1 0.1
Net profit 45.1 (7.0) 35.5 21.1 Debt/EBITDA 0.7 0.6 0.4 0.2
EPS 46.0 (7.0) 35.5 21.1 Adjusted debt/Equity (x) 0.3 0.2 0.1 0.1
Long term debt / Cap. empl. (%) 20.3 15.8 11.4 7.4
Total debt / Capital empl. (%) 181.1 138.0 182.1 139.8
Interest coverage (x) 3.5 3.2 3.8 4.1
Reported Profit 1,766 1,642 2,226 2,695 Year to March FY17 FY18E FY19E FY20E
Add: Depreciation 450 552 582 612 Adjusted Diluted EPS (INR) 46.1 42.9 58.2 70.4
Add: Interest 699 743 781 843 Y-o-Y growth (%) 46.0 (7.0) 35.5 21.1
Add:Others (165) (843) (891) (964) Adjusted Cash EPS (INR) 56.7 57.3 73.4 86.4
Gross cash flow 2,750 2,094 2,697 3,185 Diluted P/E (x) 17.1 18.4 13.6 11.2
Less: Changes in working cap. (375) 1,579 (2,003) 2,351 Price to Book Ratio (P/B) (x) 2.9 2.6 2.3 2.0
Operating cash flow 3,124 516 4,700 834 Enterprise Value / Sales (x) 0.6 0.6 0.5 0.4
Less: Capex (1,682) (1,103) (150) (380) Enterprise Value / EBITDA (x) 7.5 7.8 5.5 4.7
Free cash flow 1,443 1,618 4,850 1,214 Dividend Yield (%) 1.3 1.3 1.6 1.8

Company Profile
APL APOLLO
Largest player in ERW steel tubes space
Volume growth guidance: APL Apollo has maintained its volume growth guidance of Absolute Rating NOT RATED
20% CAGR over coming years. Further, in 9mFY18, the company has posted volume
growth of 19% YoY and is confident of achieving its guidance in FY18. Further, exports
will account for 15% of sales by FY20 compared to 5% currently. Exports also entail
higher realisations compared to the domestic business.
EBITDA per tonne: The company is seeing high demand for steel pipes even when MARKET DATA (R : APLA.BO, B: APAT IN)
steel prices continue to be high. It generally passes on the raw material cost fluctuation
CMP : INR 2,094
within a week and expects EBITDA per tonne to hover around INR3,300-3,400, plus-
Target Price : NA
minus INR200-300.
52-week range (INR) : 2,587 / 1,002
First company to introduce DFT: APL Apollo is the first company in India to introduce Share in issue (mn) : 23.7
direct forming technology (DFT). The company in Q3FY18 has already installed six M cap (INR bn/USD mn) : 50 / 772
lines of DFT technology and more two lines are likely to be installed in the next two-
three months. The company has a three-year exclusivity contract with the DFT
technology provider. Through DFT, the company will further solidify its position in
the structural pipes and tubes segment since it will not only offer more customised Share Holding Pattern (%)
options, but also significantly cut the lead time to complete customised orders in Current Q1FY18 Q4FY17
comparison to the industry. Further, management remains focused on familiarising Promoters * 37.3 37.5 37.5
rising number of clients with the product the technology can offer and thus will focus MF's, FI's & BK’s 13.6 15.2 15.3
on providing advanced customised products at similar prices and margins as earlier FII's 0.0 0.0 0.4
and will benefit from higher margins in the long run. Others 49.1 47.3 46.8
* Promoters pledged shares : Nil
JV called off with Japanese company Daiwa: Recently, the company has called off a (% of share in issue)
joint venture with a Japanese company Daiwa as it restricted APL Apollo’s marketing
geography spread. This is not expected to materially impact company’s performance
as the intended JV was expected to account for marginal, around 3%, of current sales Relative Performance (%)
Focus on branding: Management envisages increasing adoption of steel pipes and Sensex
tubes in place of wooden structures. Hence, according to the management going 1 month (0.1) (6.9) (6.8)
forward APL Apollo as a brand will play a key role in the company’s growth. Towards 3 months 3.5 8.8 5.3
this end, management has guided for expense of INR250mn in the coming year. The 12 months 21.5 86.4 64.9
specified spend will be utilised to propagate the following brands—Apollo Costguard,
Apollo Fabritech, Apollo Agritech and Apollo Bheem.
Financials

EBITDA (INR mn) 1,645.6 1,816.1 2,816.6 3,243.8 Rohan Gupta
Adj. profit (INR mn) 592 637 1,259 1,459 +91 22 4040 7416
Adj. diluted EPS (INR) 25.3 27.2 53.7 61.8 rohan.gupta@edelweissfin.com
Diluted P/E (x) 83.0 77.2 39.1 33.9
EV/EBITDA (x) 32.8 29.5 19.7 17.1
RoACE (%) 17.2 17.2 23.5 21.9 February 9, 2018


Raw material costs 22,115 26,835 35,507 38,024 Long term Borrowings 1,372 1,406 1,876 1,049
Employee Benefits Expense 293 412 629 721 Short term Borrowings 3,676 3,416 4,630 4,913
Other expenses 916 2,320 3,183 3,462 Total Borrowings 5,048 4,822 6,506 5,962
Total expenses 23,324 29,567 39,319 42,206 Long Term Liabilities & Prov. 25 40 61 83
EBITDA 1,646 1,816 2,817 3,244 Deferred Tax Liability (net) 521 745 859 905
Depreciation & amortization 164 220 341 512 Sources of funds 9,846 10,557 13,101 14,152
EBIT 1,481 1,596 2,476 2,732 Gross Block 4,545 6,473 7,253 8,031
Less: Interest Expense 609 664 695 683 Net Block 4,001 5,711 6,199 6,639
Add: Other income 20 45 103 38 Capital work in progress 245 204 320 1,224
Add: Exceptional items (3) 0 (253) 0 Intangible Assets 233 466 462 707
Profit Before Tax 890 977 1,630 2,086 Total Fixed Assets 4,479 6,381 6,982 8,570
Less: Provision for Tax 300 339 624 627 Non current investments 176 191 131 127
Reported Profit 590 637 1,006 1,459 Cash & bank balances 101 188 14 17
Less: Excep. Items (Net of Tax) (3) 0 (253) 0 Inventories 2,885 3,196 5,944 4,696
Adjusted Profit 592 637 1,259 1,459 Sundry Debtors 2,494 1,753 2,201 2,952
No. of Shares outstanding (mn) 23 23 23 24 Loans & Advances 1,131 1,277 1,615 2,565
No. of dil. shares outstand. (mn) 23 23 23 24 Total Current Assets (Ex Cash) 6,747 6,876 10,200 10,672
Adjusted Diluted EPS 25.3 27.2 53.7 61.8 Trade payable 1,242 2,045 2,543 3,704
Adjusted Cash EPS 37.5 46.1 73.1 85.5 Other Current Liab. & ST Prov. 415 1,033 1,683 1,530
Dividend per share 5.0 6.0 10.0 - Total Current Liab. & Prov. 1,657 3,078 4,225 5,233
Dividend Payout Ratio (%) 0.2 0.2 0.2 - Net Current Assets (ex cash) 5,091 3,798 5,975 5,438
Uses of funds 9,846 10,557 13,101 14,152
Book value per share (BV) (INR) 181 211 242 305

Staff costs 1.2 1.3 1.5 1.6
S G & A expenses 3.7 7.4 7.6 7.6 Ratios
Depreciation 0.7 0.7 0.8 1.1 Year to March FY14 FY15 FY16 FY17
Interest Expense 2.4 2.1 1.6 1.5 RoAE (%) 14.9 13.9 23.7 22.7
EBITDA margins 6.6 5.8 6.7 7.1 RoACE (%) 17.2 17.2 23.5 21.9
Debtors Days 34.3 24.7 17 21
Payble Days 18.3 22.4 24 30
Growth metrics (%) Current Ratio 4.1 2.3 2.4 2.0
Year to March FY14 FY15 FY16 FY17 Gross Debt/EBITDA 3.1 2.7 2 2
Gross Debt/Equity 1.2 1.0 1.1 0.8
Revenues 24.3 25.7 34.3 7.9
EBITDA 3.2 10.4 55.1 15.2
PBT (15.3) 9.8 66.9 28.0
Adjusted Profit (14.7) 7.6 97.5 15.9
EPS (18.7) 7.6 97.5 15.1

Reported Profit 590 637 1,006 1,459 Adjusted Diluted EPS (INR) 25.3 27.2 53.7 61.8
Add: Depreciation 164 220 341 512 Y-o-Y growth (%) (18.7) 7.6 97.5 15.1
Less:Changes in WC 92 (1,367) 2,335 (694) Price/BV (x) 11.6 9.9 8.7 6.9
Operating cash flow 1,327 3,148 113 3,384 EV/Sales (x) 2.2 1.7 1.3 1.2
Less: Capex 1,263 1,812 1,108 1,651 EV/EBITDA (x) 32.8 29.5 19.7 17.1
Free cash flow 64 1,336 (995) 1,733 Dividend yield (%) 0.2 0.3 0.5 0.0

Company Profile
ARVIND
Weaving a growth story
India Equity Research l Textiles
Brands: Absolute Rating BUY

• Of the 24 brands, 15-16 are sizeable. Investment Characteristics Growth
• Calvin Klein (CK) has been doing well. Average price point is ~INR3,000 plus.
• The distribution mix for Arvind for brands business among EBO:LFS:MBO:Online
is 40-:25:25:10.
MARKET DATA (R : ARVN.BO, B: ARVND IN)
• Arvind’s tenure of brand licenses is long and it has clauses built in to prevent any CMP : INR 399
losses arising from brand licences not being renewed. Target Price : INR 493
52-week range (INR) : 477 / 353
• While GAP was initially doing well, the imposition of CVD impacted business Share in issue (mn) : 258.6
expansion plans. However, now the issue has been resolved. M cap (INR bn/USD mn) : 103 / 1,602
Avg. Daily Vol. BSE/NSE (‘000) : 1,749.3
• Earlier, the entire collection was imported, but now only ~40% is imported.
• Every brand has its own team.

• While Arrow had been doing very well, the slowdown in formal wear segment has
impacted the business.
Promoters * 42.9 42.9 43.1
Unlimited/Megamart: MF's, FI's & BK’s 13.8 13.8 15.3

FII's 26.6 25.4 24.3
• Megamart’s business model was impacted because of change in tax structure by
Others 16.8 17.9 17.4
the government. It is post this that Arvind changed the format to value retail and * Promoters pledged shares : 2.2
launched Unlimited. (% of share in issue)
• The specialty retail format reported loss of INR600mn last year. However, Unlimited
will turn positive this year.
PRICE Performance (%)
BSE Midcap Stock Stock Over
Index Index
1 month (9.9) (14.7) (4.8)
3 month (3.0) (13.0) (10.0)
12 month 21.2 0.9 (20.3)
Financials

Net revenue (INR mn) 79,894 91,991 109,926 124,518
Revenue growth (%) 1.8 15.1 19.5 13.3
EBITDA (INR mn) 9,562 9,434 10,294 13,689
No. of Shares outstanding (mn) 258 258 258 258
Adjusted Diluted EPS (INR) 12.1 12.7 15.1 24.6 Nihal Mahesh Jham
EPS growth (%) (15.8) 4.6 18.9 62.9 +91 22 6623 3352
nihal.jham@edelweissfin.com
Diluted P/E (x) 32.9 31.4 26.4 16.2
EV/EBITDA (x) 14.8 14.2 12.6 9.2
ROAE (%) 12.7 11.0 11.7 15.5 February 9, 2018


As on 31st March FY16 FY17 FY18E FY19E
Share capital 2,582 2,584 2,584 2,584
Year to March FY16 FY17 FY18E FY19E Reserves & surplus 23,882 33,098 36,327 42,025
Net revenues 79,894 91,991 109,926 124,518 Shareholders' funds 26,464 35,682 38,911 44,608
Raw material costs 34,666 41,965 45,479 49,834 Minority Interest 556 1,514 1,624 1,754
Gross profit 45,228 50,026 64,448 74,684 Long term borrowings 14,926 7,566 7,000 5,000
Employee expenses 8,981 10,963 13,191 14,942 Short term borrowings 23,262 22,090 21,997 23,920
EBITDA 9,562 9,434 10,294 13,689 Long Term Liabilities & Prov. 966 1,212 1,429 1,619
Depre. & amortisation 2,405 2,971 3,190 3,451 Deferred tax liability 675 817 1,206 1,831
EBIT 7,157 6,463 7,104 10,238 Sources of funds 66,849 68,880 72,168 78,732
Less: Interest Expense 3,586 2,884 2,434 2,317 Gross Block 36,595 40,126 43,876 47,376
Add: Other income 821 780 900 1,000 Net Block 32,900 34,045 34,604 34,653
Add: Exceptional items 13 (181) 0 0 CWIP (incl. intangible) 983 957 457 457
Profit before tax 4,404 4,178 5,570 8,921 Intangible assets 1,154 1,489 1,489 1,489
Current tax 1,188 1,322 1,337 2,052 Total Fixed Assets 35,036 36,490 36,550 36,599
Deferred tax 58 (326) 390 624 Non current investments 7,353 6,218 4,500 4,500
Other tax 0 0 (111) (178) Cash and cash equivalents 609 539 3,851 7,977
Less: Provision for Tax 1,246 997 1,615 2,498 Inventories 19,205 23,828 25,013 26,910
Add: Share of profit of associates 0 19 50 50 Sundry debtors 7,682 8,139 9,344 10,584
Less: Minority Interest 20 62 110 130 Loans & advances 7,572 6,772 7,535 8,469
Reported Profit 3,138.3 3,138 3,895 6,343 Other Current Assets 4,464 4,719 5,138 5,488
Less: Excep. Items (Net of Tax) 9.2 (137.5) 0.0 0.0 Total Current Assets (ex cash)38,923 43,457 47,031 51,452
Adjusted Profit 3,129 3,276 3,895 6,343 Trade payable 12,142 14,788 16,026 17,561
No. of Shares outstanding (mn) 258 258 258 258 Ot. Cur. Liab. & Sh. Term Prov. 2,930 3,036 3,737 4,234
Adjusted Basic EPS 12 13 15 25 Total Current Liab. & Prov. 15,071 17,824 19,764 21,795
No. of Dil. shares OS (mn) 258 258 258 258 Net current assets (ex-cash) 23,851 25,633 27,267 29,657
Adjusted Diluted EPS 12.1 12.7 15.1 24.6 Uses of funds 66,849 68,880 72,168 78,732
Adjusted Cash EPS 21.7 22.9 28.9 40.3 Book value per share 102 138 151 173
Dividend per share (DPS) 2.4 2.4 2.4 2.4
Dividend Payout Ratio (%) 23.4 23.1 18.6 11.4

Year to March FY16 FY17 FY18E FY19E Ratios
Operating expenses 88.0 89.7 90.6 89.0 Year to March FY16 FY17 FY18E FY19E
Materials costs 43.4 45.6 41.4 40.0 ROAE (%) 12.2 10.4 10.3 14.9
Staff costs 11.2 11.9 12.0 12.0 Pre-tax ROCE (%) 12.7 11.0 11.7 15.5
S G & A expenses 33.4 32.2 37.3 37.0 Inventory Days 137.1 140.0 137 132
Depreciation 3.0 3.2 2.9 2.8 Debtors Days 32.1 31.4 29 29
Interest Expense 4.5 3.1 2.2 1.9 Payble Days 119.2 117.1 124 123
EBITDA margins 12.0 10.3 9.4 11.0 Cash Conversion Cycle 50.0 54.3 42.5 38.2
Net Profit margins 3.9 3.6 3.6 5.2 Current Ratio 2.6 2.5 2.6 2.7
Gross Debt/EBITDA 4.0 3.1 3 2
Year to March FY16 FY17 FY18E FY19E Adjusted Debt/Equity 1.6 1.0 0.9 0.8
Revenues 1.8 15.1 19.5 13.3 Interest Coverage Ratio 2.0 2.2 2.9 4.4
EBITDA (5.6) (1.3) 9.1 33.0
PBT 3.1 (5.1) 33.3 60.2
Net profit (15.8) 4.7 18.9 62.9
EPS (15.8) 4.6 18.9 62.9

Year to March FY16 FY17 FY18E FY19E Year to March FY16 FY17 FY18E FY19E
Reported Profit 3,138 3,138 3,895 6,343 Adjusted Diluted EPS (INR) 12.1 12.7 15.1 24.6
Add: Depreciation 2,405 2,971 3,190 3,451 Y-o-Y growth (%) (15.8) 4.6 18.9 62.9
Interest (Net of Tax) 2,571 2,196 1,728 1,668 Adjusted Cash EPS (INR) 21.7 22.9 28.9 40.3
Others (830) (1,334) 256 353 Diluted P/E (x) 32.9 31.4 26.4 16.2
Less:Changes in WC 781 1,536 1,416 2,201 Price to Book Ratio (P/B) (x) 3.9 2.9 2.6 2.3
Operating cash flow 6,503 5,435 7,653 9,615 Enterprise Value / Sales (x) 1.8 1.5 1.2 1.0
Less: Capex 6,161 4,536 3,250 3,500 Enterprise Value / EBITDA (x) 14.8 14.2 12.6 9.2
Free cash flow 342 899 4,403 6,115 Dividend Yield (%) 0.6 0.6 0.6 0.6

Company Profile
BAJAJ ELECTRICALS
Steady progress
India Equity Research l Engineering and Capital Goods
28 to 18% is the reduction in fans and lighting GST. Appliances too are expected to Absolute Rating HOLD
be rationalised in the next GST review meeting now that a representation has been Rating Relative to Sector Performer
made by the industry. Risk Rating Relative to Sector Medium
Sector Relative to Market Overweight
There is no sales target at BJE given their Monday morning restocking model which
is working well. This gives retailer flexibility to stay light on BJE inventory versus
other companies. This approach of no target was initiated from April 17 and is
MARKET DATA (R : BJEL.BO, B: BJE IN)
helping dealer/retailer improve over RoCE. 70% of BJE’s sales were from
wholesalers, which have now been replaced with retailers. CMP : INR 537
Retailer bonding scheme: BJE initiated incentive structure which has no time limit 52-week range (INR) : 584 / 228
and is based in point system and incentives in kind. There is no special pricing for Share in issue (mn) : 101.9
large dealer and pan-India distributors are given uniform pricing. This has helped M cap (INR bn/USD mn) : 55 / 850
bring stability amongst dealers with respect to pricing behaviour. Avg. Daily Vol. BSE/NSE (‘000) : 455.2
The company expects 15-20% growth to sustain over two-three with potential
margin expansion as the company alters its fixed cost structure.
BJE initially faced a lot of resistance from 80% of dealers ahead of RREP scheme
launch leading to market share loss to large players like Havells, Crompton, etc. Current Q1FY18 Q4FY17
Promoters * 63.0 63.3 63.4
By FY19-20, BJE is targeting to significantly ramp up its retail touch points from MF's, FI's & BK’s 4.9 5.3 6.8
135,000 to 2.0lacs. FII's 9.8 9.3 7.5
In Mumbai, BJE only had wholesalers and no distributors. Now it has eight-nine Others 22.3 22.2 22.2
distributors. The company has clearly missed on new SKU ramp up across key * Promoters pledged shares : Nil
products and is now gearing up to improve this. It will not keep any budget for new
innovation as of now.
In the projects business, the company will have an upper limit of 40% of overall PRICE Performance (%)
sales and would not like to exceed the same.
Stock Nifty EW Capital
Goods Index
1 month (21.3) (0.6) (3.5)
With its consumer facing business growing steadily, BJE is now focused more on 3 month 13.6 0.4 3.6
growing its E&P division. The company is in the midst of significant operational 12 month 83.6 19.3 26.2
overhaul under RREP, which has had a bearing on its overall market positioning
over the past few quarters. We believe, given the yawning gap versus large peers,
it will be challenging for management to regain market positioning. We maintain
‘HOLD/SP’.
Financials Amit Mahawar
+91 22 4040 7451
Year to March FY16 FY17 FY18E FY19E amit.mahawar@edelweissfin.com
Revenues (INR mn) 45,903 42,617 45,136 51,764
Rev. growth (%) 7.8 (7.2) 5.9 14.7 Darshika Khemka
+91 22 4063 5544
EBITDA (INR mn) 2,642 2,428 2,463 3,155
darshika.khemka@edelweissfin.com
Net profit (INR mn) 1,103 1,077 1,274 1,757
EPS (INR) 10.9 10.7 12.6 17.4 Ashutosh Mehta
EPS growth (%) NM (2.4) 18.4 37.9 +91 22 6141 2748
P/E (x) 49.1 50.4 42.5 30.8 ashutosh.mehta@edelweissfin.com
ROAE (%) 23.4 24.3 23.7 18.6
15.3 13.2 13.9 17.0
February 9, 2018


Equity capital 202 203 203 203
Income from operations 45,903 42,617 45,323 51,842 Shareholders funds 7,563 8,715 9,695 11,222
Materials costs 30,882 27,573 29,686 33,773 Long term borrowings 959 170 170 170
Employee cost 2,851 3,289 3,471 3,970 Short term borrowings 7,251 5,286 5,786 6,286
Total operating expenses 43,261 40,190 42,747 48,505 Long Term Liabilities & Prov. 1,074 1,121 1,121 1,121
EBITDA 2,642 2,428 2,576 3,337 Deferred tax liability/asset (493) (560) (560) (560)
Depreciation and amortisation 274 299 328 346 Sources of funds 16,354 14,736 16,213 18,240
EBIT 2,369 2,129 2,248 2,991 Gross Block 4,537 5,171 5,471 5,771
Interest 1,081 804 616 590 Net Block 2,764 3,100 3,071 3,025
Other income 481 356 404 448 capital work in progress 207 79 79 79
Profit before tax 1,769 1,680 2,035 2,849 Total Fixed assets 2,971 3,178 3,150 3,103
Provision for tax 665 604 702 969 Non current investments 797 804 804 804
Reported profit 1,103 1,077 1,333 1,881 Inventories 5,067 5,712 6,181 7,032
Adjusted Profit 1,103 1,077 1,333 1,881 Sundry debtors 16,711 16,538 17,517 20,038
Shares outstanding (mn) 101 101 101 101 Cash and cash equivalents 555 653 1,187 1,244
EPS (INR) basic 11 11 13 19 Loans and advances 33 30 30 30
Diluted shares (mn) 101 101 101 101 Other current assets 2,969 3,338 3,338 3,338
Adjusted Diluted EPS 10.9 11 13 19 Total current assets (ex cash)24,780 25,618 27,066 30,438
Adjusted Cash EPS 14 14 16 22 Trade payable 7,226 9,366 9,841 11,196
Dividend per share (INR) 2.8 3.5 3.5 3.5 Ot. Cur. Liab. & Sh. Term Prov. 5,524 6,149 6,149 6,149
Dividend payout (%) 30.715 39.3 31.8 22.5 Total current liab. & prov. 12,750 15,515 15,990 17,345
Net current assets (ex cash) 12,030 10,102 11,076 13,093
Uses of funds 16,354 14,736 16,213 18,240
Book value per share (INR) 74.9 86.3 96.0 111.2

Year to March FY16 FY17 FY18E FY19E
Depreciation and Amortization 0.6 0.7 0.7 0.7
Ratios
Interest expenditure 2.4 1.9 1.4 1.1
Net profit margins 2.4 2.5 2.9 3.6 ROAE (%) (on adjusted profits) 15.3 13.2 14.5 18.0
ROACE (%) 21.5 16.6 17.8 20.6
Inventory days 58.0 71.3 73 71
Debtors days 133.2 142.4 137 132
Payable days 112.1 109.8 118 114
Cash conversion cycle 79.1 103.9 92.2 89.9
Debt/EBITDA 3.1 2.2 2 2
Growth metrics (%) Interest coverage 2.2 2.6 3.6 5.1
Year to March FY16 FY17 FY18E FY19E Fixed assets t/o (x) 16.6 14.5 14.7 17.0
Revenues 7.8 (7.2) 6.3 14.4 Debt/equity 1.1 0.6 0.6 0.6
EBITDA 196.9 (8.1) 6.1 29.6
PBT (949.5) (5.0) 21.1 40.0
Net profit (891.0) (2.4) 23.8 41.1
EPS (885.9) (2.4) 23.8 41.1

Net profit 1,103 1,077 1,333 1,881 Diluted EPS (INR) 10.7 12.6 17.4 22.9
Depreciation 274 299 328 346 Y-o-Y growth (%) (2.4) 18.4 37.9 31.5
Interest (Net of Tax) 674 515 404 389 CEPS (INR) 13.6 16.0 21.0 26.8
Less:Changes in WC (1,038) (1,834) 973 2,017 Price/BV(x) 6.2 5.6 4.9 4.2
Operating cash flow 3,568 4,366 1,304 799 EV/Sales (x) 1.4 1.3 1.1 1.0
Free cash flow 3,109 3,830 1,004 499 Dividend yield (%) 0.7 0.7 0.7 0.7

Company Profile
CARE
Improving prospects
India Equity Research l Credit Rating

Current budget mandating SEBI and RBI to come up with terms to encourage Absolute Rating BUY
corporate to tap the market for 25% of their borrowings is a huge positive for the Investment Characteristics Growth
industry. Further, considering ‘A’ rated bonds for investments will further aid growth.
Key growth drivers include dual ratings for commercial papers (CPs), RBI’s
emphasis on structural shift towards the profitable bond market, further
strengthened by the Insolvency & Bankruptcy Code.
MARKET DATA (R : CREI.BO, B: CARE IN)
The upgrade/downgrade cycle has become balanced versus more downgrades CMP : INR 1,351
earlier. CARE expects to grow in double digits. Target Price : INR 1,704
52-week range (INR) : 1,800 / 1,293
RBI’s efforts to structurally shift towards the bond market: IBC is a key game Share in issue (mn) : 29.5
changer, which is likely to boost investor confidence and enhance penetration & M cap (INR bn/USD mn) : 40 / 618
demand for bond market. Avg. Daily Vol. BSE/NSE (‘000) : 74.1
Diversification efforts: CARE Africa is the only rating agency in Mauritius and the
company is looking to enter more countries in Africa. CARE Risk operates mainly
in Sri Lanka and expects good growth. Its efforts in diversifying are shaping up and
the company expects strong growth. Current Q1FY18 Q4FY17
Promoters * 0.0 0.0 0.0
As structural transformation towards the corporate bond market plays out, CARE MF's, FI's & BK’s 24.6 28.7 38.2
expects the addressable market, in terms of volume of debt hitting capital markets, FII's 43.5 39.0 37.8
to expand significantly and competitive intensity to be moderate. Growth is highly Others 31.9 32.4 24.0
linked to the economy. The company expects to grow 1.7x growth rate of economy. * Promoters pledged shares : Nil
CARE believes the growth story and margin are sustainable in the long run.
On an improving macroeconomic and credit environment we estimate 12% sales
CAGR over FY18 20. We maintain ‘BUY’ led by CARE’s strong positioning (second
Index Index
largest player) factoring 15% growth in first two years, 14% in next five and 1 month (9.9) (1.8) 8.1
declining further to terminal rate of 5% and discount rate of 10.9%. 3 month (3.0) (14.0) (10.9)
12 month 21.2 (5.6) (26.9)
Financials

Revenues (INR mn) 2,874 3,191 3,556 3,990
EBITDA (INR mn) 1,826 1,983 2,184 2,562
No. of Shares outstanding (mn) 29.5 29.5 29.5 29.5 Shradha Sheth
EV/EBITDA (x) 20.7 18.8 16.9 14.2
ROACE (%) 46.5 46.9 42.3 43.0
ROAE (%) 32.6 28.4 28.8 30.9 February 9, 2018


Year to March FY17 FY18E FY19E FY20E Revenue and surplus 4,658 5,102 5,562 6,088
Net revenues 2,874 3,191 3,556 3,990 Shareholder fund 4,952 5,396 5,857 6,382
Employee expenses 726 860 1,002 1,012 Minority interest 5 5 5 5
Gross profit 2,149 2,331 2,554 2,977 Long Term Liab. & Prov. 40 40 40 40
Other expenses 322 348 370 415 Deferred Tax Liability (net) 35 35 35 35
Total expenditure 1,048 1,208 1,372 1,427 Sources of funds 5,032 5,476 5,937 6,462
EBITDA 1,826 1,983 2,184 2,562 Gross Block 748 768 788 808
Depreciation & Amortisation 34 35 35 36 Net Block 526 512 497 481
EBIT 1,792 1,948 2,149 2,527 Intangible assets 83 83 83 83
Other income 329 244 272 297 Capital work in progress 1 1 1 1
Profit before tax 2,121 2,192 2,421 2,824 Total Fixed Assets 610 595 580 564
Reported Profit 1,474 1,469 1,622 1,892 Cash and cash equivalents 3,688 4,119 4,563 5,066
Adjusted Profit 1,474 1,469 1,622 1,892 Sundry Debtors 253 280 312 350
No. of Shares outstanding (mn) 29.5 29.5 29.5 29.5 Loans & Advances 146 146 146 146
Adjusted Basic EPS 50.0 49.9 55.1 64.2 Other Current Assets 36 36 36 36
No. of Dil. shares OS (mn) 29.5 29.5 29.5 29.5 Total Current Assets (ex cash) 436 462 494 532
Adjusted Diluted EPS 50.0 49.9 55.1 64.2 Ot. Cur. Liab. & Short Term Prov. 494 494 494 494
Adjusted Cash EPS 51.6 51.1 56.3 65.5 Total Current Liab. & Prov. (59) (39) 0 38
Dividend per share (DPS) 28.0 30.0 34.0 40.0 Uses of funds 5,032 5,476 5,937 6,462
Dividend Payout Ratio (%) 64.9 69.8 71.6 72.2 Book Value per share (INR) 168.2 183.2 198.9 216.7

EBITDA margins 63.5 62.1 61.4 64.2
Ratios
Depreciation & amortisation 1.2 1.1 1.0 0.9
Pre-tax ROCE (%) 46.9 42.3 43.0 46.1
ROAE (%) 32.6 28.4 28.8 30.9
ROA (%) 32.0 28.0 28.4 30.5
Current ratio 8.3 9.3 10.2 11.3
Quick ratio 7.5 8.4 9.3 10.3
Cash ratio 7.5 8.3 9.2 10.3
Growth metrics (%)
Year to March FY17 FY18E FY19E FY20E Receivables (days) 31 30.5 30.4 30.3
Revenues 2.9 11.0 11.4 12.2 Cash conversion cycle (days) 31 30.5 30.4 30.3
EBITDA 5.0 8.6 10.1 17.3 Total debt / Capital empl. (%) 10.5 9.7 8.9 8.2
PBT 18.9 3.4 10.4 16.6
Adjusted Profit 23.2 (0.3) 10.4 16.6
EPS 23.0 (0.3) 10.4 16.6

Reported Profit 1,474 1,469 1,622 1,892 Year to March FY17 FY18E FY19E FY20E
Add: Interest 8 0 0 0 Y-o-Y growth (%) 23.0 (0.3) 10.4 16.6
Less: Changes in working cap. 30.1 (27) (32) (38) Price to Book Ratio (P/B) (x) 8.4 7.7 7.1 6.5
Less: Capex 10 20 20 20 Enterprise Value / EBITDA (x) 20.7 18.8 16.9 14.2
Free cash flow 1,180 1,457 1,605 1,870 Dividend Yield (%) 2.0 2.1 2.4 2.8

Company Profile
CESC
Muscling up
India Equity Research l Power
CESC is targeting INR9.0-9.5bn PAT in FY19 at the group level mainly led by reduction Absolute Rating BUY
of losses at the Chandrapur power plant. Investment Characteristics Value
Spencers’ balance sheet will be debt free and net worth is expected to be around
INR5bn with cash balance of INR2bn.
Spencers’ current EBITDA margin at 0.5% with the company targeting 4% margin
MARKET DATA (R : CESC.BO, B: CESC IN)
over the next two years. Area square feet can grow by 10% each year for the next
four-five years. CMP : INR 1,008
Regulated RoE is expected to dip by 1% in the upcoming new CERC norms as CERC 52-week range (INR) : 1,188 / 693
will not permit companies to enjoy higher spreads (RoE-15.5%, Gsec rates-7.0- Share in issue (mn) : 132.6
7.5%). M cap (INR bn/USD mn) : 134 / 2,075
The distribution franchise business is expected to do well led by new circles
addition. Currently, there are four new bids in the Maharashtra circle. The company
is targeting INR1bn profit over the next three years. This business is expected to do
capex of INR3.5bn over the next two years.
Listing of all the entities is expected by June 2018. Promoters * 49.9 49.9 49.9
MF's, FI's & BK’s 24.0 40.8 20.3
Investment conclusion FII's 14.8 0.0 21.1
CESC has an existing regulated book of ~INR40bn with steady RoE of 20%. In its Others 11.3 9.2 8.7
generation business, the only chink in its armour is the Dhariwal project which is * Promoters pledged shares : Nil
currently incurring a loss of more than ~INR6bn annually due to PPA issues which
is funded by the patent company which, however, is now getting resolved. We
believe this plant can potentially improve the company’s cash flow generation
over the next two-three years and incrementally provide cash flow comfort and
reinvestment opportunity. Though early to say, but if successful, the company’s BSE Midcap Stock Stock Over
Index Index
renewed focus on the distribution business (low capex) can add significant amount
1 month (9.9) (9.0) 0.9
of profitability in coming years. We maintain ‘BUY’.
3 month (3.0) (0.6) 2.5
12 month 21.2 28.1 6.9
Financials

Revenues (INR mn) 121,242 139,035 170,082 184,082
Rev. growth (%) 9.6 14.7 22.3 8.2
EBITDA (INR mn) 31,836 31,118 35,154 38,989
No. of Shares outstanding (mn) 133 133 133 133 Swarnim Maheshwari
EPS growth (%) 272.6 (19.6) 64.6 36.3 swarnim.maheshwari@edelweissfin.com
Diluted P/E (x) 18.1 22.5 13.7 10.0
P/B(x) 1.3 1.3 1.2 1.1
ROAE (%) 9.3 6.1 9.9 11.8 February 9, 2018


Share capital 1,332 1,332 1,332 1,332
Year to March FY16 FY17 FY18E FY19E Reserves & Surplus 104,705 104,895 113,078 124,587
Income from operations 121,242 139,035 170,082 184,082 Shareholders' funds 106,037 106,227 114,410 125,919
Direct costs 39,416 50,999 71,378 79,499 Minority interest 10,920 12,101 14,518 17,104
Employee costs 30,836 34,143 49,521 50,817 Deferred Revenue 15,540 16,781 16,781 16,781
Other expenses 19,154 22,775 14,029 14,777 Long term borrowings 104,514 116,221 113,515 110,972
Total operating expenses 89,406 107,918 134,928 145,093 Short term borrowings 23,398 23,723 23,723 23,723
EBITDA 31,836 31,118 35,154 38,989 Total Borrowings 127,912 139,944 137,238 134,695
Depreciation & amortisation 7,665 8,164 8,254 8,408 Long Term Liabilities & Prov. 29,928 29,573 29,573 29,573
EBIT 24,171 22,954 26,900 30,582 Deferred Tax Liability (net) 34,599 34,797 34,797 34,797
Less: Interest expense 14,943 14,972 12,779 12,278 Sources of funds 324,936 339,423 347,318 358,869
Add: Other Income 2,637 2,987 1,492 1,886 Gross Block 348,154 355,886 364,528 371,362
Add: Exceptional Items (2,083) 452 0 0 Net Block 240,393 243,159 244,836 243,263
Profit before tax 9,781 11,421 15,613 20,189 Capital work in progress 4,976 3,905 2,617 2,617
Less: Provision for Tax 3,130 3,803 3,362 4,204 Intangible Assets 25,244 23,116 23,116 23,116
Less: Minority Interest 1,307 1,194 2,417 2,586 Total Fixed Assets 270,614 270,181 270,569 268,996
Reported Profit 5,345 6,425 9,833 13,400 Non current investments 3,537 4,224 4,224 4,224
Less: Excep. Items (Net of Tax) 2,083 (452) 0 0 Cash and cash equivalents 17,894 22,931 23,524 37,820
Adjusted Profit 7,427 5,973 9,833 13,400 Inventories 6,967 8,454 13,058 11,336
No. of Shares outstanding 133 133 133 133 Sundry Debtors 14,132 15,596 21,682 20,682
Adjusted Basic EPS 55.8 44.8 73.8 100.6 Loans & Advances 4,825 5,384 5,384 5,384
No. of Diluted shares OS 133 133 133 133 Other Current Assets 46,255 48,204 48,204 48,204
Adjusted Diluted EPS 55.8 44.8 73.8 100.6 Total Cur. Assets (ex cash) 72,179 77,639 88,328 85,607
Adjusted Cash EPS 390.0 107.6 135.8 163.7 Trade payable 5,951 7,890 11,665 10,115
Dividend per share (DPS) 10.0 10.0 10.6 12.1 Ot. Cur. Liab. & Sh. Term Prov. 33,337 27,662 27,662 27,662
Dividend Payout Ratio (%) 29.9 24.8 16.8 14.1 Total Current Liab. & Prov. 39,289 35,552 39,327 37,777
Net Current Assets (ex cash) 32,891 42,086 49,001 47,830
Uses of funds 324,936 339,423 347,318 358,869
Common size metrics as % of net revenues Book Value per share (INR) 796.0 797.4 858.8 945.2
EBITDA margins 26.3 22.4 20.7 21.2 Ratios
Net profit margins 7.2 5.2 7.2 8.7 Year to March FY16 FY17 FY18E FY19E
ROAE (%) 9.3 6.1 9.9 11.8
Pre-tax ROCE (%) 10.8 9.7 10.2 11.2
Inventory Days 63 55 55 56
Growth metrics (%) Debtors Days 47 39 40 42
Year to March FY16 FY17 FY18E FY19E Payble Days 55 50 50 50
Cash Conversion Cycle 55 45 45 48
Revenues 9.6 14.7 22.3 8.2
EBITDA 68.1 (2.3) 13.0 10.9
PBT 96.4 16.8 36.7 29.3
Net profit 273.2 (19.6) 64.6 36.3
EPS 272.6 (19.6) 64.6 36.3
Adjusted debt/Equity 1.1 1.2 1.1 0.9

Year to March FY16 FY17 FY18E FY19E Valuation parameters
Reported Profit 5,345 6,425 9,833 13,400 Year to March FY16 FY17 FY18E FY19E
Depreciation 7,665 8,164 8,254 8,408 Adjusted Diluted EPS (INR) 55.8 44.8 73.8 100.6
Deferred tax 36,869 198 0 0 Y-o-Y growth (%) 272.6 (19.6) 64.6 36.3
Less: Changes in W. C. (9,551) (9,195) (6,915) 1,171 Diluted P/E (x) 18.1 22.5 13.7 10.0
Others (26,524) 11,102 5,169 5,142 Price to Book Ratio (P/B) (x) 1.3 1.3 1.2 1.1
Free cash flow (67,797) 19,814 19,016 31,008 Dividend Yield (%) 1.0 1.0 1.1 1.2

Company Profile
CIPLA
Gaining scale in US
India Equity Research l Pharmaceuticals
US: Absolute Rating HOLD

• Most of the profit and cash flow comes from the legacy business like India and Rating Relative to Sector Performer
South Africa. US is still not contributing to profit. Risk Rating Relative to Sector Low
Sector Relative to Market Equalweight
• Recently launched products in US are gPulmicort, gRenvela and gDacogen;
they will start contributing from Q4FY18. There are four-five players in each of
these products. Cipla is anticipates approval for gToprol. MARKET DATA (R : CIPL.BO, B: CIPLA IN)
• Cipla expects single digit price erosion in its portfolio going forward. CMP : INR 621
• gAdvair: Pk studies have been completed, clinical trial has been initiated and
52-week range (INR) : 663 / 479
filing in US is atleast 15-18 months away. Likely to be launched in FY21 at the
Share in issue (mn) : 804.9
earliest. Cipla will be in the second wave of launch. Mylan, Hikma and Sandoz
are in the first wave.
• 94 pending approvals, which include 27 tentative approved.
• The company has 50 projects under development which has brand size of
>USD35mn. 16 will be para-iv filings in respiratory, oncology and dermatology
and 15 are limited competition. Current Q1FY18 Q4FY17
Promoters * 36.7 36.7 36.7
Domestic: MF's, FI's & BK’s 13.9 14.8 15.5
• 22% growth, adjusted for change in accounting. Growth may moderate as FII's 23.4 21.8 19.8
inventory builds up to pre-GST level. Cardiac grew 12%; anti-infective, derma Others 26.0 26.7 27.9
also grew higher than market. * Promoters pledged shares : Nil

• Key therapeutic areas delivered above market performance including cardiac
(12% versus market 7%), anti-infective (14% versus market 11%), respiratory
(14% versus market 12%) and derma (18% versus market 17%). PRICE Performance (%)
Stock Nifty EW Pharma
Europe:
Index
• gAdvair: Cipla is currently selling gAdvair in seven-eight countries and earning 1 month (8.3) (0.6) (7.5)
USD27-28mn per annum revenue. The company has also launched gAdvair in 3 month (13.8) 0.4 (5.2)
UK and revenue is ~USD5mn. Mylan and GSK are other players selling in UK. 12 month (6.2) 19.3 (10.7)
• Europe business has achieved company level profitability against losses a

few years ago.
Though domestic growth is a respite for Cipla, growth engines it has invested in
over the past three years remain subdued. The stock’s CMP factors in the optimism,
but not the challenging macro environment. We maintain ‘HOLD/SP’.
Deepak Malik
Financials
+91 22 6620 3147
Year to March FY16 FY17 FY18E FY19E deepak.malik@edelweissfin.com
Net Revenues (INR mn) 134,942 142,809 155,286 178,210

Ankit Hatalkar
EBITDA (INR mn) 24,796.7 24,757.9 29,405.1 33,475.9 +91 22 2286 3097
Adjusted Profit (INR mn) 13,600 12,019 15,580 19,161 ankit.hatalkar@edelweissfin.com
Diluted P/E (x) 36.7 41.6 32.1 26.1
EV/EBITDA (x) 22.0 21.5 17.8 15.2 February 9, 2018


Share capital 1,607 1,609 1,609 1,609
Net revenues 134,942 142,809 168,689 191,142 Minority interest 3,501 4,382 4,382 4,382
Other operating income 2,959 3,494 3,542 3,801 Long term borrowings 2,219 36,454 33,454 28,454
Total operating expenses 113,104 121,545 140,385 158,560 Short term borrowings 49,697 4,672 4,672 4,672
Materials cost 50,899 53,171 61,142 68,718 Total Borrowings 51,916 41,126 38,126 33,126
Employee cost 24,340 26,338 29,499 33,039 Long Term Liabilities & Prov. 2,882 2,792 2,792 2,792
R&D cost 8,964 11,119 14,640 16,570 Deferred tax liability (net) 8,970 5,888 5,888 5,888
Selling, admin & gen. exp. 28,902 30,916 35,105 40,233 Sources of funds 182,431 179,442 192,375 205,638
Depreciation 7,542 13,229 9,327 10,027 Gross Block 74,621 86,269 93,269 100,269
EBITDA 24,797 24,758 31,846 36,384 Net Block 66,628 67,936 65,609 62,582
Operating Profit 24,797 24,758 31,846 36,384 Capital work in progress 20,609 16,830 16,830 16,830
EBIT 17,255 11,529 22,519 26,357 Intangible assets 27,056 26,784 26,784 26,784
Less: Interest Expense 2,066 1,594 1,525 1,325 Total Fixed assets 114,292 111,550 109,223 106,196
Add: Other income 2,082 2,287 2,280 2,280 Non current investments 1,764 1,374 1,374 1,374
Profit before tax 17,270 12,222 23,274 27,312 Long term loans and advances 418 395 395 395
Less: Provision for Tax 3,316 1,798 5,120 6,828 Other non-current assets 5,609 6,472 6,472 6,472
Less: Minority Interest 234 290 290 290 Cash and cash equivalents 8,714 14,616 10,250 29,896
Add: Share of profit from assoc.(120) (70) 0 0 Inventories 38,081 34,853 49,014 45,244
Reported Profit 13,600 10,064 17,863 20,194 Sundry debtors 23,563 24,974 32,165 32,509
Adjusted Profit 13,600 12,019 17,863 20,194 Loans & advances 18,055 13,618 17,223 19,494
No. of Shares outstanding 803 805 805 805 Total current assets (ex cash)79,698 73,445 98,402 97,248
Adjusted Basic EPS 16.9 14.9 22.2 25.1 Trade payable 14,758 15,711 19,326 20,053
No. of Diluted shares OS 803 805 805 805 Ot. Cur. Liab. & Sh. Term Prov. 13,306 12,697 14,414 15,890
Adjusted Diluted EPS 16.9 14.9 22.2 25.1 Total current liab. & prov. 28,064 28,408 33,740 35,943
Adjusted Cash EPS 26.3 31.4 33.8 37.6 Net current assets (ex cash) 51,635 45,036 64,662 61,305

Operating expenses 82.0 83.1 81.5 81.3 Ratios
Materials costs 36.9 36.3 35.5 35.3 Year to March FY16 FY17 FY18E FY19E
R&D costs 6.5 7.6 8.5 8.5
ROAE (%) 12.1 9.9 13.2 13.2
Staff costs 17.7 18.0 17.1 16.9 Pre-tax ROACE (%) 12.6 7.9 13.7 14.7
S G & A expenses 21.0 21.1 20.4 20.6
Inventory days 272.1 250.3 250.3 250.3
Debtors days 59.0 62.0 61.8 61.7
Interest Expense 1.5 1.1 0.9 0.7 Payble days 109.5 104.6 104.6 104.6
EBITDA margins 18.0 16.9 18.5 18.7
Cash Conversion Cycle 221.6 207.8 207.6 207.5
Net profit margins 10.0 8.4 10.5 10.5
Net Revenues 23.2 5.8 18.1 13.3 Interest Coverage Ratio 8.4 7.2 14.8 19.9
EBITDA 14.7 (0.2) 28.6 14.3
PBT 4.4 (29.2) 90.4 17.4
Adjusted Profit 15.2 (11.6) 48.6 13.0
EPS 15.2 (11.8) 48.6 13.0

Add: Depreciation 7,542 13,229 9,327 10,027 Y-o-Y growth (%) 15.2 (11.8) 29.6 23.0
Interest (Net of Tax) 1,670 1,359 1,190 994 Adjusted Cash EPS (INR) 26.3 31.4 35.2 36.3
Others (10,212) 1,941 (37,027) 7,840 Diluted P/E (x) 36.7 41.6 32.1 26.1
Less: Changes in WC (4,809) 2,769 (17,737) 4,152 Price to Book Ratio (P/B) (x) 4.3 4.0 3.6 3.2

Company Profile
COCHIN SHIPYARDS
Ruling the high seas
Ship repairs: Excluding IAC, INR3.5bn was repair revenue last year. This year, the Absolute Rating NOT RATED
company expects to touch around INR6bn. 22-24% is the margin range on a
sustainable basis.
Market opportunity: There is no large player in the repair business in India

currently with more than INR1bn revenue. On competency front, CSL is on strong
footing in technical competencies, but has to ramp up its project execution
MARKET DATA (R : COCH.BO, B: COCHIN IN)
capabilities.
CMP : INR 532
CSL is currently handling 80-90 ships and is looking to handle 150-200 annually Target Price : NA
over the next two-three years. 52-week range (INR) : 598 / 435
May 2018 will be the start date for Mumbai dock where INR750-800mn is feasible M cap (INR bn/USD mn) : 72 / 1,124
revenue for FY18 and INR2.5bn for FY19. Overall, in FY19, the company is targeting Avg. Daily Vol. BSE/NSE (‘000) : 1,034.8
INR28bn revenue.
CSL expects to bag eight ASW orders by mid-year and is already L1. There is a
significant synergy benefit in case CSL and GRC resort to joint sourcing.
Ship building profitability is likely to stay in the of 22-24% range largely driven by Promoters * 75.0 NA NA
IAC work part which has higher contribution. MF's, FI's & BK’s 10.9 NA NA
FII's 3.5 NA NA
Others 10.6 NA NA

Sensex
1 month (0.1) (0.4) (0.3)
3 months 3.5 (5.6) (9.1)
12 months 21.5 NA NA
Amit Mahawar
+91 22 4040 7451
Financials amit.mahawar@edelweissfin.com
Year to March FY14 FY15 FY16 FY17 Swarnim Maheshwari

+91 22 4040 7418
Revenues( INR mn) 18,003 15,862 19,924 20,595
swarnim.maheshwari@edelweissfin.com
Growth (%) 7.1 (11.9) 25.6 3.4
EBITDA (INR mn) 4,180 909 3,851 3,802
Ashutosh Mehta
Adjusted profit (INR mn) 2,836 712 2,858 3,125 +91 22 6141 2748
Diluted EPS ( INR) 25 6 25 28 ashutosh.mehta@edelweissfin.com
Growth (%) 3.8 (75.4) 315.9 9.3
Diluted P/E (x) 21.5 87.6 21.1 19.3
ROAE ( %) 20.9 4.7 17.5 16.7 February 9, 2018


Equity capital 1,133 1,133 1,133 1,133
Year to March FY14 FY15 FY16 FY17 Reserves & surplus 13,768 14,254 16,072 19,178
Materials costs 8,160 9,816 10,379 9,948 Long term borrowings 1,230 1,230 1,230 1,230
Sub contract & ot. direct exp. 1,747 1,601 1,929 3,194 Short term borrowings 2,109 0 0 0
Employee cost 2,092 2,158 2,108 2,166 Total Borrowings 3,339 1,230 1,230 1,230
Other expenses 1,824 1,379 1,657 1,485 Long Term Liabilities & Prov. 235 219 216 240
Total operating expenses 13,823 14,953 16,073 16,792 Deferred Tax (Net) (163) (226) (316) (243)
EBITDA 4,180 909 3,851 3,802 Sources of funds 18,312 16,609 18,335 21,538
Dep. & amortisation 253 377 372 385 Gross block 0 6,368 6,622 7,011
EBIT 3,927 532 3,479 3,417 Depreciation 0 2,594 2,920 3,305
Interest expense 193 183 119 105 Net block 3,701 3,701 3,702 3,706
Other income 611 771 1,068 1,490 Capital work in progress 76 128 234 539
Profit before tax 4,345 1,119 4,428 4,802 Total Fixed Assets 3,777 3,829 3,937 4,245
Provision for tax 1,509 407 1,570 1,677 Non Current Investments 2 2 1 1
Reported profit 2,836 712 2,858 3,125 Inventories 3,959 3,034 2,316 1,865
Adjusted Profit 2,836 712 2,858 3,125 Sundry debtors 12,071 5,898 4,638 5,397
Eq. shares outstanding (mn) 115 117 113 113 Cash and cash equivalents 5,564 14,194 18,204 19,913
EPS (INR) basic 25 6 25 28 Loans and advances 2,736 2,461 4,286 1,332
Diluted shares (mn) 114.9 117.4 113.3 113.3 Other current assets 1,643 539 1,327 169
Adjusted Diluted EPS 25 6 25 28 Total cur. assets (ex cash) 25,973 26,126 30,771 28,676
DPS 1.5 1.4 7.5 8.6 Ot. Cur. Liab. & Sh. Term Prov. 3,659 3,482 4,907 2,105
Uses of funds 18,312 16,610 18,335 21,538

Depreciation and Amortization 1.4 2.4 1.9 1.9 Ratios
Interest expenditure 1.1 1.2 0.6 0.5 Year to March FY14 FY15 FY16 FY17
EBITDA margins 23.2 5.7 19.3 18.5 ROAE (%) (on adjusted profits) 20.9 4.7 17.5 16.7
Net profit margins 15.8 4.5 14.3 15.2 ROACE (%) 25.6 3.0 19.9 17.1
Debtors days 191.9 206.7 96 89
Payable days 358.3 328.1 375 381
Cash conversion cycle 1.6 8.7 (184.5) (215.0)
Growth metrics (%)
Debt/EBITDA 0.8 1.4 0 0
Revenues 7.1 (11.9) 25.6 3.4 Fixed assets t/o (x) 5.9 4.3 5.4 5.6
EBITDA 18.5 (78.3) 323.8 (1.3) Debt/equity 0.2 0.1 0.1 0.1
PBT 9.1 (74.2) 295.7 8.4
Net profit 6.2 (74.9) 301.3 9.3
EPS 3.8 (75.4) 315.9 9.3

Net profit 2,836 712 2,858 3,125 Diluted EPS (INR) 24.7 6.1 25.2 27.6
Depreciation 253 377 372 385 Y-o-Y growth (%) 3.8 (75.4) 315.9 9.3
Others 410 (1,013) (756) (1,172) Diluted P/E (x) 21.5 87.6 21.1 19.3
Less:Changes in WC 9,466 (6,442) 2,159 284 Price/BV(x) 4.1 4.1 3.5 3.0
Operating cash flow (5,842) 6,634 393 2,123 EV/Sales (x) 3.3 3.1 2.2 2.0
Less: Capex 1,512 348 347 404 EV/EBITDA (x) 14.1 54.4 11.2 10.9
Free cash flow (7,354) 6,286 46 1,719 Dividend Yield (%) 0.3 0.3 1.4 1.6

Company Profile
DEEPAK FERTILISERS
Leading light
India Equity Research l Fertilisers

Chemicals business offers strong growth potential Absolute Rating BUY
Deepak Fertiliser (DFPCL) management is confident about strong growth in its Investment Characteristics Growth
chemical business comprising TAN, IPA and nitric acids on back of its aggressive
capex plans.
The company has committed capex of INR8bn in IPA to increase capacity by

1,00,000mtpa to 170,000 mtpa. This plant is likely to be completed over the next MARKET DATA (R : DPFE.BO, B: DFPC IN)
three years and is likely to enjoy higher margin driven by efficiency versus current
CMP : INR 362
margin of 25-30%. In nitric acid, it is planning to invest INR5.5-6.0bn, which is
likely to be completed in two years and expected to contribute INR1bn to EBITDA.
52-week range (INR) : 499 / 233
DFPCL enjoys leadership in TAN in India and controls 2/3 market. The productrd Share in issue (mn) : 88.2
M cap (INR bn/USD mn) : 32 / 496
enjoys margin of 25% and the company is planning further capex; however, the
same has not been finalised as yet.
Commissioning of fertilizer plant has already started contributing to revenue and

the company estimates 5lac mt of NPK fertilizer sales in FY18 and 8lac mt in FY19. Share Holding Pattern (%)
Rising raw material price (ammonia) a near-term concern
Promoters * 51.1 51.1 51.1
DFPCL has high dependency on ammonia since ~75% of the manufactured products MF's, FI's & BK’s 3.9 3.9 3.1
are dependent on it. With increase in ammonia prices in Q3FY18 (40%YoY), margins FII's 7.9 11.4 13.3
have come under pressure. Others 37.1 33.6 32.6
We believe DFPCL’s aggressive capex led growth will drive its revenue going forward
and large part of the capex is likely to be funded through debt and internal accruals.
We maintain ‘BUY’.
Index Index
1 month (9.9) (17.1) (7.2)
3 month (3.0) (20.8) (17.8)
12 month 21.2 32.7 11.5
Financials

Revenues (INR mn) 43,092 41,501 47,855 54,327
Rev. growth (%) 13.0 (3.7) 15.3 13.5 Rohan Gupta
EBITDA (INR mn) 3,565 4,734 5,790 7,380 +91 22 4040 7416
Net profit (INR mn) 1,157 1,757 2,302 3,348 rohan.gupta@edelweissfin.com
Share outstanding (mn) 88 88 88 88
Nihal Mahesh Jham
EPS (INR) 13.1 19.9 26.1 38.0
+91 22 6623 3352
EPS growth (%) 94.7 51.9 31.0 45.4
Diluted P/E (x) 27.5 18.1 13.8 9.5
EV/EBITDA (x) 13.7 10.1 8.4 6.5
ROAE (%) 7.8 11.0 13.1 17.4 February 9, 2018


Operating expenses 6,095 7,335 6,699 7,596 Deferred Tax Liability (net) 1,224 1,189 1,224 1,224
EBITDA 3,565 4,734 5,790 7,380 Gross block 14,260 22,389 25,760 32,260
Depreciation & amortisation 1,218 1,364 1,696 1,983 Accumulated depreciation 1,070 2,263 4,147 6,130
EBIT 2,347 3,370 4,095 5,397 Net block 13,190 20,127 21,614 26,131
Less: Interest Expense 1,300 1,215 1,448 1,415 Capital work in progress 3,962 3,853 5,511 1,011
Add: Other income 724 159 517 575 Intangible assets 201 320 201 201
Profit Before Tax 1,771 2,313 3,163 4,558 Total Fixed Assets 17,353 24,300 27,326 27,343
Less: Provision for Tax 599 533 861 1,210 Non current investments 147 124 147 147
Less: Minority Interest 16 23 0 0 Current investments 358 1,416 358 358
Reported Profit 1,156.6 1,757 2,302 3,348 Investments 506 1,540 506 506
Adjusted Profit 1,157 1,757 2,302 3,348 Cash 2,326 976 1,732 1,089
Profit before tax 1,771 2,313 3,163 4,558 Cash and Cash equivalents 2,684 2,392 2,091 1,447
Provision for tax 599 533 861 1,210 Inventories 6,059 5,045 5,630 5,612
Core profit 1,172 1,780 2,302 3,348 Sundry debtors 15,481 11,834 10,140 13,301
Profit after tax 1,172 1,780 2,302 3,348 Loans and advances 476 406 634 634
No. of Shares outstanding (mn) 88 88 88 88 Other assets 2,339 3,068 3,000 3,000
Adjusted Basic EPS 13.1 19.9 26.1 38.0 Total current assets (ex cash) 24,355 20,354 19,404 22,546
No. of Diluted shares OS (mn) 88.2 88.2 88.2 88.2 Trade payable 4,701 4,152 4,531 5,031
Adjusted Diluted EPS 13.1 19.9 26.1 38.0 Ot. Cur. Liab. & Sh. Term Prov. 3,564 6,208 6,470 6,970
Book Value per share (INR) 173 193 204 232

Gross margin 22.4 29.1 26.1 27.6
Operating expenses 14.1 17.7 14.0 14.0 Pre-tax ROCE (%) 9.6 10.0 12.7 15.9
EBITDA margin 8.3 11.4 12.1 13.6 ROAE (%) 7.8 11.0 13.1 17.4
EBIT margin 5.4 8.1 8.6 9.9 ROA 3.5 4.9 6 9
Interest 3.0 2.9 3.0 2.6 Current ratio 3.3 2.2 2 2
Net profit margin 2.7 4.3 4.8 6.2 Quick ratio 2.2 1.5 1 1
Operating cash flow (1,103.8) 9,464.4 6,519.9 4,028.3
receivable turnover 3.4 3.0 4.4 4.6
Growth metrics (%) Inventory turnover (x) 6.6 5.3 7 7
Year to March FY16 FY17 FY18E FY19E Payables turnover (x) 8.0 6.6 8.1 8.2
Receivables (days) 106 120 84 79
Revenues 13.0 (3.7) 15.3 13.5 Inventory (days) 55 69 55 52
EBITDA 20.5 32.8 22.3 27.5 Payables (days) 46 55 45 44
PBT 98.4 30.6 36.7 44.1 Cash conversion cycle (days) 116 134 94 87
Adjusted Profit 94.7 51.9 31.0 45.4 Gross Debt/Equity 1.3 1.1 1.0 0.9
EPS 94.7 51.9 31.0 45.4 Gross Debt/EBITDA 5.5 3.9 3.2 2.4

Add: Depreciation 1,218 1,364 1,696 1,983 Adjusted Diluted EPS (INR) 13.1 19.9 26.1 38.0
Add:Interest 871 814 970 948 Y-o-Y growth (%) 94.7 51.9 31.0 45.4
Add: Others 1,194 1,341 931 840 Adjusted Cash EPS (INR) 26.8 35.1 45.3 60.4
Less: Changes in WC 4,672 (5,002) (1,591) 2,142 Price to Book Ratio (P/B) (x) 2.1 1.9 1.8 1.6
Operating cash flow (1,104) 9,464 6,520 4,028 Enterprise Value / Sales (x) 1.1 1.2 1.0 0.9

Company Profile
EICHER MOTORS
Premium play
India Equity Research l Automobiles
Demand outlook: Remains strong for Royal Enfield (RE). FY19 growth could be Absolute Rating BUY
subdued due to capacity constraint. Management believes it is a temporary rather Rating Relative to Sector Outperformer
than structural issue. If demand would have been an issue the company would not Risk Rating Relative to Sector Medium
have taken a price hike on Feb 1, 2018. Sector Relative to Market Underweight
Value growth can outstrip volume growth: With launch new 650cc twins, re-launch
of Himalayan and recent introduction of rear disc break (priced 8-10K) higher MARKET DATA (R : EICH.BO, B: EIM IN)
than normal classic, revenue growth to outstrip volumes.
CMP : INR 27,748
Capacity: Revised production capacity will be indicated along with Q4FY18 results Target Price : INR 34,945
as RE is in planning stage. Currently, rated capacity is at 900K. In the past, the 52-week range (INR) : 33,483/22,406
company has been able to debottleneck and increase capacity. Share in issue (mn) : 27.2
M cap (INR bn/USD mn) : 756 / 11,743
Customer profile: ~5% are repeat customers, 15% are first-time buyers; balance Avg. Daily Vol. BSE/NSE (‘000) : 49.1
80% equally split between upgrade from commuter segment and 150cc segment.
Exports: With the launch of 650cc twins, there will be renewed focus on exports
markets as it is the right product (given 45HP vs current offerings of ~20HP). The
long-term aspiration is to be leader in the mid-size market; become a relevant
Promoters * 50.5 50.6 50.6
player in each country (for instance currently in India, RE has ~12% of motorcycle
MF's, FI's & BK’s 5.5 4.3 4.0
revenue market share).
FII's 32.1 31.9 32.5
RE dealer network: Current dealer network is ~825. The company intends to add Others 11.8 13.2 12.9
another 100 dealers in FY19. Addition will largely be in smaller towns. * Promoters pledged shares : Nil
Eicher is a structural story on premiumisation theme in motorcycles given low
penetration of >250cc motorcycles (3/1000 male) as compared to > 150cc
motorcycles (23/1000 male) as well as rising spending power of consumers. Stock Nifty EW Auto
Index
Support from new technology centre in UK and new launches (650cc) specifically
1 month (5.7) (0.6) (6.0)
targeted towards export markets can have a big delta on export markets. In
3 month (11.3) 0.4 (2.4)
M&HCVs, it is well positioned to take advantage of changing demand dynamics
12 month 15.8 19.3 12.0
post introduction of GST as well as stringent implementation of ban on overloading.
We maintain ‘BUY/SO’.
Financials

Revenues (INR mn) 61,735 70,334 91,347 126,861
Rev. growth (%) (39.9) 31.6 29.9 38.9
EBITDA (INR mn) 16,896 21,740 29,496 43,530
Chirag Shah
No. of Shares outstanding (mn) 27 27 27 27 +91 22 6623 3367
Adjusted Diluted EPS (INR) 438.2 613.8 874.3 1,278.9 chirag.shah@edelweissfin.com
EPS growth (%) 64.0 69.5 42.4 46.3
Diluted P/E (x) 63.2 45.1 31.7 21.7
EV/EBITDA (x) 33.8 27.3 21.1 14.0
ROAE (%) 32.8 37.1 37.5 39.7 February 9, 2018


Materials costs 34,351 37,045 47,295 64,868 Long term borrowings 226 444 - -
Staff costs 3,502 4,024 5,187 5,944 Short term borrowings - - 300 300
S G & A expenses 6,985 7,526 9,369 12,519 Total Borrowings 226 444 300 300
Total operating expenses 44,839 48,594 61,851 83,331 Deferred tax liability (net) 359 778 778 778
Depreciation & amortisation 1,366 1,538 2,196 2,592 Gross Block 10,708 12,951 20,951 25,951
EBIT 15,530 20,201 27,300 40,938 Net Block 7,942 8,728 14,531 16,939
Less: Interest Expense 21 36 27 27 Capital work in progress 945 3,738 3,738 3,738
Add: Other income 1,781 2,273 4,333 5,583 Total Fixed assets 8,886 12,466 18,269 20,677
Profit before tax 17,290 22,439 31,606 46,494 Cash and cash equivalents 34,195 50,044 66,234 96,572
Less: Provision for Tax 5,389 7,203 9,482 13,948 Inventories 3,084 3,359 4,188 5,819
Add: Share of profit from assoc. 1,435 1,621 2,189 Sundry debtors 326 500 636 883
Reported Profit 11,901 16,671 23,745 34,735 Loans & advances 2,830 3,535 4 6
Adjusted Profit 11,901 16,671 23,745 34,735 Other Current Assets 68 3 4,568 6,348
No. of Shares outstanding 27 27 27 27 Total current assets (ex cash) 6,309 7,397 9,396 13,056
Adjusted Basic EPS 438 614 874 1,279 Trade payable 11,714 14,548 18,849 26,192
No. of Dil. shares outstanding 27 27 27 27 Ot. Cur. Liab. & Sh. Term Prov. 561 686 891 1,239
Adjusted Diluted EPS 438 614 874 1,279 Total current liabilities & prov. 12,275 15,234 19,740 27,431
Adjusted Cash EPS 438 625 894 1,304 Net current assets (ex cash) (5,967) (7,837) (10,344) (14,374)
Dividend per share (DPS) 100 100 131 192 Uses of funds 37,115 54,673 74,158 102,874
Dividend Payout Ratio (%) 26 23 17 17 Book Value per share 1,345 1,968 2,691 3,748

Staff costs 5.7 5.7 5.7 4.7 Ratios
S G & A expenses 11.3 10.7 10.3 9.9
Interest Expense 0.0 0.1 0.0 0.0 ROE (%) 32.8 37.1 37.5 39.7
EBITDA margins 27.4 30.9 32.3 34.3 Pre-tax ROCE (%) 47.2 49.6 49.7 53.0
Net profit margins 19.3 23.7 26.0 27.4 Inventory days 51 32 29 28
Debtors days 18 2 2 2
Payble days 178 129 129 127
Cash Conversion Cycle (110) (95) (97) (96)
Growth metrics (%)
Revenues (39.9) 34.0 29.9 38.9
EBITDA 28.8 51.4 35.7 47.6
PBT 48.1 52.7 40.9 47.1
Adjusted Profit 64.4 64.8 42.4 46.3
EPS 64.0 64.8 42.4 46.3
Valuation parameters
Cash flow statement (INR mn) Adjusted Diluted EPS (INR) 438.2 613.8 874.3 1,278.9
Year to March FY16 FY17 FY18E FY19E Y-o-Y growth (%) 64.0 64.8 42.4 46.3
Reported Profit 11,901 16,671 23,745 34,735 Adjusted Cash EPS (INR) 438.1 625.1 894.3 1,304.4
Add: Depreciation 1,366 1,538 2,196 2,592 Diluted P/E (x) 63.2 45.1 31.7 21.7
Interest (Net of Tax) 15 24 19 19 Price to Book Ratio (P/B) (x) 20.6 14.1 10.3 7.4
Others 1,349 (392) (1,817) (1,545) Enterprise Value / Sales (x) 11.6 10.0 7.5 5.2
Less: Changes in WC 1,683 1,870 2,508 4,030 EV/Sales adj. for Volvo share(x) 6.4 6.0 5.0 3.7
Operating cash flow 14,631 17,841 24,144 35,801 Enterprise Value / EBITDA (x) 42.5 32.3 23.3 15.1
Less: Capex (25,587) 5,036 8,000 5,000 EV/EBITDA adj. for Volvo sh. (x) 33.8 27.3 21.1 14.0
Free cash flow 40,218 12,805 16,144 30,801 Dividend yield (%) 0.4 0.4 0.5 0.7

Company Profile
ESSEL PROPACK
Riding the non-oral wave

• In oral care, the challenge is how to grow the market. Absolute Rating BUY
Investment Characteristics Growth
• While the oral care market is about mass production, non-oral is much more
customised.
• The company retains its intention to take the share of non-oral to 50%.
• Europe has been growing due to small base. MARKET DATA (R : ESSL.BO, B: ESEL IN)
• Issues in EAP were related to loss of market share to multinational firms. The CMP : INR 280
company has managed to tie up with a few local manufacturers as well. Target Price : INR 300
52-week range (INR) : 317 / 226
Mystik: Share in issue (mn) : 157.2
• Sales from Mystik not factored in from this year. Next year sales will depend on Avg. Daily Vol. BSE/NSE (‘000) : 98.6
stability tests with customers.
• Mystik was originally designed for hair colour. The company is looking at
expanding this into food items as well.
Guidance: Promoters* 57.2 57.2 57.1
MF's, FI's & Banks 5.1 5.3 5.1
• Focus is on growing top line. The company remains committed to expanding
FII's 15.5 14.5 14.5
growth in all geographies.
Others 22.3 23.0 23.3
We maintain ‘BUY’.

Index Index
1 month (9.9) (9.8) 0.1
3 month (3.0) (8.0) (5.0)
12 month 21.2 3.5 (17.7)
Financials

Net revenue (INR mn) 21,275 23,023 26,181 28,834
Revenue growth (%) (8.4) 8.2 13.7 10.1
EBITDA (INR mn) 4,038 4,213 4,782 5,764
Adj. profit (INR mn) 1,685 1,792 2,030 2,691 Nihal Jham
Diluted EPS (INR) 11 11 13 17 +91 22 6623 3352
EPS growth (%) 24.7 6.3 13.3 32.6 nihal.jham@edelweissfin.com
Diluted P/E (x) 26.0 24.5 21.6 16.3
EV/EBITDA (x) 12.4 12.1 10.2 8.2
ROAE (%) 19.4 18.3 19.7 22.2 February 9, 2018


Share Capital 314 314 314 314
Net Revenues 21,275 23,023 26,181 28,834 Shareholders' Funds 9,648 10,390 11,945 14,006
Raw Material Costs 9,235 10,079 11,699 12,415 Minority Interest 81 57 261 545
Gross Profit 12,040 12,944 14,482 16,418 Long Term Borrowings 5,534 6,050 5,000 3,500
Employee Expenses 3,744 4,058 4,464 4,888 Short Term Borrowings 1,558 1,934 2,417 2,505
Other Expenses 4,258 4,673 5,236 5,767 Total Borrowings 7,093 7,984 7,417 6,005
EBITDA 4,038 4,213 4,782 5,764 Long Term Liabilities & Prov. 194 233 265 265
Depreciation & Amortisation 1,232 1,415 1,506 1,601 Deferred Tax Liability (net) 197 317 286 245
EBIT 2,806 2,798 3,276 4,162 Sources of funds 17,212 18,981 20,174 21,066
Less: Interest Expense 609 575 524 423 Gross Block 10,314 15,007 16,568 18,294
Add: Other income 238 353 349 392 Net Block 9,128 11,167 11,223 11,347
Add: Exceptional items 23 157 0 0 Capital work in progress 512 114 114 114
Profit Before Tax 2,459 2,732 3,102 4,132 Intangible Assets 173 707 707 707
Less: Provision for Tax 776 787 869 1,157 Total Fixed Assets 9,813 11,988 12,044 12,168
Less: Minority Interest 30 53 204 284 Non Current Investments 304 153 200 200
Add: Share of Profits from Associate48 11 0 0 Cash and Cash Equivalents 844 1,028 2,779 3,243
Less: Excep. Items (Net of Tax) 15.8 111.4 - - Sundry Debtors 3,312 3,766 3,945 4,345
Adjusted Profit 1,685 1,792 2,030 2,691 Loans & Advances 1,284 1,140 1,250 1,250
Equity Shares Outstand. (mn) 157 157 157 157 Other Current Assets 2,538 1,962 2,068 2,278
Adjusted Basic EPS (INR) 10.7 11.4 12.9 17.1 Total Current assets (ex-cash) 9,120 9,328 9,667 10,424
No. of Diluted shares OS (mn) 157.0 157.2 157.2 157.2 Trade Payable 1,282 1,473 1,763 1,871
Adjusted Diluted EPS 10.7 11.4 12.9 17.1 Other Current Liab. & Prov. 1,587 2,043 2,754 3,098
Dividend per share (DPS) 2.2 2.4 3.0 4.0 Net Current Assets (ex-cash) 6,252 5,812 5,151 5,455
Dividend Payout Ratio (%) 17.8 21.8 23.4 23.4 Uses of Funds 17,213 18,981 20,174 21,066
Book value per share 61 66 76 89

Operating expenses 81.0 81.7 81.7 80.0 Ratios
Materials costs 43.4 43.8 44.7 43.1 Year to March FY16 FY17 FY18E FY19E
Staff costs 17.6 17.6 17.0 17.0 ROE (%) 19.4 18.3 19.7 22.2
S G & A expenses 20.0 20.3 20.0 20.0 Pre-tax ROCE (%) 17.7 17.9 19.1 22.7
Depreciation 5.8 6.1 5.8 5.6 Inventory Days 67.8 64.4 61 58
Interest Expense 2.9 2.5 2.0 1.5 Debtors Days 60.6 56.1 54 52
EBITDA Margins 19.0 18.3 18.3 20.0 Payble Days 57.2 49.9 50 53
Net Profit Margin 8.1 8.0 8.5 10.3 Cash Conversion Cycle 71.3 70.6 64.4 57.3
Gross Debt/EBITDA 1.8 1.9 2 1
Revenues (8.4) 8.2 13.7 10.1 Net Debt/Equity 0.6 0.7 0.4 0.2
EBITDA 3.3 4.3 13.5 20.5 Interest Coverage Ratio 4.6 4.9 6.3 9.8
PBT 22.5 11.1 13.5 33.2
EPS 24.7 6.3 13.3 32.6

Reported Profit 1,701 1,903 2,030 2,691 Diluted EPS (INR) 10.7 11.4 12.9 17.1
Add: Depreciation 1,232 1,415 1,506 1,601 Y-o-Y Growth (%) 24.7 6.3 13.3 32.6
Others 259 (41) 653 (344) Diluted P/E (x) 26.0 24.5 21.6 16.3
Operating cash flow 3,608 3,687 4,565 4,252 P/BV (x) 4.5 4.2 3.7 3.1
Less:Changes In WC (227) (479) (693) 304 EV/Sales (x) 2.4 2.2 1.9 1.6
Free Cash Flow 1,848 1,861 3,697 2,223 Dividend Yield(%) 0.8 0.9 1.1 1.4

Company Profile
FIRSTSOURCE SOLUTIONS
Excellence delivered
India Equity Research l IT
Firstsource has divested its domestic business to Vertex BPO; just one PSU client in Absolute Rating NOT RATED
domestic business remains and it has good margin.
The company has consciously reduced telecom clients as the vertical is highly
competitive resulting in low margin; currently, has only one client in the space.
Outlook for healthcare payer business is good; this business has better margin.
MARKET DATA (R : FISO.BO, B: FSOL IN)
Firstsource expects revenue and profitability of healthcare business to improve going CMP : INR 44
forward. Target Price : NA
52-week range (INR) : 49 / 30
The company estimates to post high single digit growth in FY19 along with 13% plus
margin.
The company would become debt-free from Q3FY19. Avg. Daily Vol. BSE/NSE (‘000) : 4,462.6
It has a contract of 10 years with largest customer Sky (~29% of total revenue). The
contract will expire in FY26 and the company does not perceive any risk in this Share Holding Pattern (%)
contract. Current Q1FY18 Q4FY17
Promoters * 54.6 54.8 54.9
Attrition in the US has dipped below 40% from 55%; attrition is at par with competitors.
MF's, FI's & BK’s 6.2 6.4 6.8
FII's 5.9 8.6 9.2
Others 33.3 30.2 29.1

Sensex
1 month (0.1) 5.9 6.0
3 months 3.5 15.0 11.5
12 months 21.5 (3.1) (24.6)
Sandip Agarwal
Financials +91 22 6623 3474
sandip.agarwal@edelweissfin.com
Revenues (INR mn) 31,270 30,347 32,173 35,556 Pranav Kshatriya
+91 22 4040 7495
Rev. growth (%) 10.0 (3.0) 6.0 10.5
pranav.kshatriya@edelweissfin.com
EBITDA (INR mn) 3,622 3,872 3,984 4,465
Net profit (INR mn) 1,930 2,343 2,609 2,792
Nikunj Mandowara
EPS (INR) 1,930 2,343 2,609 2,792 +91 22 4040 7431
EPS growth (%) 31.2 20.2 10.2 5.8 nikunj..andowara@edelweissfin.com
Diluted P/E (x) 15.1 12.5 11.4 10.7
EV/EBITDA (x) 10.3 9.7 9.4 8.4
ROE (%) 10.2 11.2 13.5 14.8 February 9, 2018


Equity capital 6,597 6,663 6,733 6,813
Direct Costs 1,386 1,532 1,221 1,360 Minority Interest 14 16 20 12
Employee costs 21,294 20,172 21,727 23,834 Borrowings 9,100 7,303 5,623 5,657
Other expenses 4,968 4,770 5,240 5,896 Non Current Liabilities 439 178 457 587
Total operating expenses 27,648 26,474 28,188 31,091 Deferred Tax Assets / Liabilities 317 345 (1,478) (1,191)
Depreciation & amortisation 757 722 609 590 Gross block 34,615 32,465 27,717 29,260
EBIT 2,865 3,150 3,376 3,875 Depreciation 7,311 8,026 7,502 8,582
Interest expenses 940 801 608 538 Net block 27,304 24,439 20,216 20,678
Profit before tax 2,033 2,440 2,862 3,369 Total fixed assets 27,308 24,524 20,238 20,721
Provision for tax 101 95 253 577 Investments 26 58 84 106
Core profit 1,932 2,345 2,609 2,792 Other Non Current Assets 2,027 2,222 1,455 2,776
Profit after tax 1,932 2,345 2,609 2,792 Sundry debtors 3,019 2,890 3,041 3,041
Add: Minority interests (2) (2) 0 0 Cash and equivalents 1,889 1,478 1,454 1,910
PAT after minority interest 1,930 2,343 2,609 2,792 Other current assets 2,573 3,068 1,981 2,874
Adjusted net profit 1,930 2,343 2,609 2,792 Total current assets 7,481 7,461 6,475 7,825
Adjusted EPS 2.9 3.5 3.9 4.1 Sundry creditors 1,129 833 869 994
Tax rate (%) 5.0 3.9 8.8 17.1 Other Current Liabilities 4,979 4,705 4,992 5,089
Total CL & provisions 6,108 5,537 5,861 6,083
Net current assets 1,424 1,924 614 1,742
Uses of funds 30,785 28,728 22,392 25,345
Adjusted BV per share (INR) 32 31 26 30

Interest expenditure 3.0 2.6 1.9 1.5 Ratios
EBITDA margins 11.6 12.8 12.4 12.6 Year to March FY14 FY15 FY16 FY17
ROAE (%) 10.2 11.2 13.5 14.8
ROACE (%) 9.5 10.1 12.0 13.9
Payable days 16 14 11 11
Cash conversion cycle 24 22 23 20
Growth metrics (%)
Debt/EBITDA 2.5 1.9 1.4 1.3
Fixed assets t/o (x) 1.1 1.2 1.4 1.7
Revenues 10.0 (3.0) 6.0 10.5 Debt/equity 0.4 0.3 0.3 0.3
EBITDA 24.8 6.9 2.9 12.1
PBT 27.7 20.0 17.3 17.7
Net profit 31.9 21.4 11.4 7.0
EPS 31.2 20.2 10.2 5.8

Net profit (Adjusted) 1,930 2,343 2,609 2,792 Adjusted EPS (INR) 2.9 3.5 3.9 4.1
Depreciation 757 722 609 590 Y-o-Y growth (%) 31.2 20.2 10.2 5.8
Others 23 444 119 198 CEPS 4.1 4.6 4.8 5.0
Changes in WC 1,247 (1,048) (366) (1,598) Diluted P/E (x) 15.1 12.5 11.4 10.7
Operating cash flow 3,956 2,460 2,971 1,981 Price/BV (x) 1.4 1.4 1.7 1.5
Less: Capex (123) (452) (849) (766) EV/Sales (x) 1.2 1.2 1.2 1.1
Free cash flow 3,833 2,009 2,122 1,215 EV/EBITDA (X) 10.3 9.7 9.4 8.4

Company Profile
FUTURE CONSUMER
The food specialist
India Equity Research l Media
Target is to achieve top line growth of 30% YoY and become PAT positive by FY19. Absolute Rating NOT RATED
Estimates to clock ~10% EBITDA margin by FY22.
FCL is present across a spectrum of products—within food (~93% of revenue) and

home and personal care (~7% of revenue).
The company can be considered a startup, building its business on the FMCG 2.0
platform – launching innovative products in emerging categories, leveraging digital MARKET DATA (R : NA.BO, B: FCON IN)
assets and focusing on consumer acquisition closer to the point of sale. CMP : INR 64
Target Price : NA
It can also build on opportunity to leverage Future Group’s store network, consumer 52-week range (INR) : 79 / 22
insights/data, which enables it to launch innovative products rather than pure Share in issue (mn) : 1,846
“me-too” products. M cap (INR bn/USD mn) : 107 / 1,670
Currently, ~74% of sales are through Future Group’s retail outlets. The company is
incrementally trying to build brands in a few categories, which will help push
those brands in other modern and general trade formats.
Promoters * 43.1 44.7 44.8
MF's, FI's & BK’s 1.1 1.0 1.0
FII's 19.6 18.3 9.7
Others 36.2 36.0 44.5

Sensex
1 month (0.1) 5.9 6.0
3 months 3.5 15.0 11.5
12 months 21.5 (3.1) (24.6)
Abneesh Roy
+91 22 6620 3141
Financials abneesh.roy@edelweissfin.com
Year to March FY14 FY15 FY16 FY17 Alok Shah

Revenues (INR mn) 8,224 13,123 17,021 21,158 +91 22 6620 3040
Rev. growth (%) NM 59.6 29.7 24.3
EBITDA (INR mn) (854) (507) (164) 96
Rajiv Berlia
Adjusted Profit (INR mn) (153) (883) (1,077) (610) +91 22 6623 3377
Adjusted Diluted EPS (INR) (0.1) (0.5) (0.7) (0.3) rajiv.berlia@edelweissfin.com
Diluted P/E (x) NM NM NM NM
EV/Sales (x) 12.8 8.5 6.7 5.8
ROAE (%) (3.7) (10.1) (18.7) (10.7) February 9, 2018


Share capital 9,588 9,943 9,875 9,884
Year to March FY14 FY15 FY16 FY17 Reserves & Surplus (1,531) (2,247) (4,331) (999)
Cost of materials 7,183 11,402 14,467 18,231 Minority interest 163 338 122 78
Gross profit 1,041 1,720 2,553 2,928 Long term borrowings 1 3,607 2,794 1,623
Employee costs 678 861 979 981 Short term borrowings 1,095 3,024 2,041 1,842
Others 1,216 1,367 1,738 1,851 Total Borrowings 1,095 6,631 4,835 3,465
EBITDA (854) (507) (164) 96 Long Term Liab. & Provisions 41 154 472 508
Depreciation & amortisation 393 475 284 326 Deferred tax liability - 0 434 441
EBIT (1,247) (982) (448) (230) Sources of funds 9,356 14,819 11,407 13,378
Less: Interest Expense 53 319 702 448 Net block 752 2,249 4,017 4,566
Add: Other income 1,141 352 273 250 Capital work in progress 70 505 368 607
Profit before tax (159) (950) (877) (427) Intangible Assets 2,950 2,949 2,271 2,486
Less: Provision for Tax (6) (0) (2) 9 Total Fixed Assets 3,772 5,702 6,655 7,659
Profit after tax (153) (949) (875) (436) Goodwill on Consolidation 1,026 3,685 1,677 1,677
Add: Min. Int. & Adjustments - 66 (202) (174) Deferred tax assets 6 - 1 1
Add: Excep. items (Net of tax) - (144) - - Non current investments 151 116 569 404
Reported Profit (153) (1,028) (1,077) (610) Cash and cash equivalents 1,349 1,433 370 475
Less: Excep. Items (Net of Tax) - (144) - - Inventories 1,045 1,115 1,101 1,757
Adjusted Profit (153) (883) (1,077) (610) Sundry debtors 1,095 1,547 1,650 3,242
No. of Diluted SO (mn) 1,598 1,616 1,653 1,824 Loans & advances 2,076 2,779 585 1,073
Adjusted Diluted EPS (0.1) (0.5) (0.7) (0.3) Other Current Assets 75 93 714 630
Adjusted Cash EPS 0.2 (0.3) (0.5) (0.2) Total Current Assets (ex cash) 4,291 5,533 4,050 6,702
Tax rate 3.7 0.0 0.2 (2.1) Trade payable 1,106 1,296 993 1,671
Short Term Provisions 132 354 922 1,869
Total Current Liab. & Provisions 1,238 1,650 1,915 3,540
Uses of funds 9,356 14,819 11,407 13,378
Employee costs 8.2 6.6 5.8 4.6
Others 14.8 10.4 10.2 8.7
EBITDA margin (10.4) (3.9) (1.0) 0.5
EBIT margin (15.2) (7.5) (2.6) (1.1) Ratios
Net profit margin (1.9) (7.3) (7.5) (3.7) Year to March FY14 FY15 FY16 FY17
ROAE (%) (3.7) (10.1) (18.7) (10.7)
Pre-tax ROCE (%) (2.3) (5.3) (1.4) 0.2
Inventory days 23 30 24 25
Debtor days 24 37 34 42
Growth metrics (%) Payable days 28 38 29 27
Year to March FY14 FY15 FY16 FY17 Cash conversion cycle (days) 19 28 29 40
Revenues NM 59.6 29.7 24.3 Current ratio 4.6 4.2 2.3 2.0
EBITDA NM NM NM NM Gross Debt/EBITDA NM NM NM 35.9
PBT NM NM NM NM Gross Debt/Equity 0.1 0.9 0.9 0.4
Adjusted Profit NM NM NM NM Interest coverage (x) (23.4) (3.1) (0.6) (0.5)
EPS NM NM NM NM

Reported Profit (153) (1,028) (1,077) (610)
Add: Depreciation 393 475 284 326 Valuation parameters
Interest (Net of Tax) 36 214 470 300 Year to March FY14 FY15 FY16 FY17
Others 1,945 (1,429) (949) 163 Adjusted Diluted EPS (INR) (0.1) (0.5) (0.7) (0.3)
Less:Changes in WC 3,012 717 (2,067) 991 Y-o-Y growth (%) NM NM 19.2 (48.7)
Operating cash flow (791) (2,485) 795 (812) Diluted P/E ratio (x) NM NM NM NM
Less: Capex 115 592 789 1,236 Enterprise Value / Sales (x) 12.8 8.5 6.7 5.8
Free cash flow (907) (3,077) 6 (2,048) Enterprise Value / EBITDA (x) NM NM NM NM

Company Profile
FUTURE SUPPLY CHAIN SOLUTIONS

Well connected
Demand outlook: Management believes GST is the best thing for the sector. Absolute Rating NOT RATED
Inefficient tax-based supply chain planning will move to efficient outsourced
solutions-led model. The transition can take two-three years, but the transition is
imminent. Already seeing signs of same.
Customer profile: Future Group remains the single-largest customer with ~2/3 rd of
revenue share. The share has been growing due to faster growth of Furture Group;
MARKET DATA (R : FUTE.BO, B: FSCSL IN)
rising share of FSC in Future Group (accounts for ~30-35% of Future Group’s
CMP : INR 677
logistics spends) and inorganic activities by Furture Group. Outside Future Group,
Target Price : NA
not a single customer is significant. Top 20 customers account for ~22% of revenue.
52-week range (INR) : 750 / 660
Bulk of the effort from hereon is to increase the share of non-Future Group revenue.
Business segment: ~70% revenue comes from contract logistic, ~22% from express M cap (INR bn/USD mn) : 27 / 421
logistics and balance is cold chain & others. End-use segment basis: ~30-35% Avg. Daily Vol. BSE/NSE (‘000) : 307.2
revenue from fashion and food/FMCG each. E-commerce and automobiles also
have reasonable presence.
Size of contract logistic: Various estimates peg the industry at ~INR110bn.
Automobiles account for the largest part as the industry was early adopted of just
Promoters * 52.5 NA NA
in time. Having said, there are many segments/industries that are not considered MF's, FI's & BK’s 16.2 NA NA
as yet for contract logistics. FII's 5.0 NA NA
Others 26.3 NA NA
Economies of scale: Economies of scale is a very important MOAT. Technology is
the biggest enabler. For instance, for many customers, FSC has been able to increase (% of share in issue)
volume significantly, without increase in size of its warehouse.

Sensex
1 month (0.1) (0.5) (0.4)
3 months 3.5 NA NA
Financials
Year to March FY15 FY16 FY17

Revenues (INR mn) 4,080 5,199 5,612
Rev. growth (%) 84.3 86.5 86.8
EBITDA (INR mn) 640 699 743
Adjusted Profit (INR mn) 250 294 458 Chirag Shah
No. of Shares outstanding (mn) 39 39 39 +91 22 6623 3367
Adjusted Diluted EPS (INR) 6.4 7.5 11.7 chirag.shah@edelweissfin.com
EPS growth (%) 0.0 17.6 55.5
Diluted P/E (x) 107.8 91.6 58.9
EV/EBITDA (x) 43.1 39.0 36.1 February 9, 2018


As on 31st March FY15 FY16 FY17
Share capital 391 391 391
Year to March FY15 FY16 FY17 Reserves & Surplus 1,786 2,081 2,537
Income from operations 4,080 5,199 5,612 Shareholders' funds 2,178 2,472 2,928
Materials costs 2,617 3,387 3,753 Long term borrowings 137 0 244
Staff costs 387 484 501 Short term borrowings 494 361 72
S G & A expenses 436 628 615 Total Borrowings 631 361 316
Total operating expenses 3,439 4,499 4,869 Long Term Liabilities & Provisions 32 482 537
EBITDA 640 699 743 Deferred tax liability (net) 89 112 101
Depreciation and amortisation 195 207 191 Sources of funds 2,929 3,427 3,882
EBIT 445 493 551 Net Block 1,693 1,711 1,524
Less: Interest Expense 99 133 128 Capital work in progress 13 18 698
Add: Other income 23 86 158 Intangible assets 28 13 10
Profit before tax 369 446 582 Total Fixed assets 1,733 1,743 2,231
Less: Provision for Tax 119 152 124 Cash and cash equivalents 25 19 470
Reported Profit 250 294 458 Sundry debtors 1,819 2,211 2,167
Adjusted Profit 250 294 458 Loans & advances 150 750 0
No. of Shares outstanding 39 39 39 Other Current Assets 146 113 227
Adjusted Basic EPS 6.4 7.5 11.7 Total current assets (ex cash) 2,115 3,075 2,394
No. of Diluted shares outstanding 39 39 39 Trade payable 814 1,083 978
Adjusted Diluted EPS 6.4 7.5 11.7 Other Current Liabilities & Short Term Prov. 130 328 235
Adjusted Cash EPS 11.4 12.8 16.6 Total current liabilities & provisions 945 1,410 1,213
Net current assets (ex cash) 1,171 1,664 1,181
Uses of funds 2,929 3,427 3,882
Book Value per share 56 63 75

Operating expenses 84.3 86.5 86.8
Materials costs 64.1 65.2 66.9
Staff costs 9.5 9.3 8.9
S G & A expenses 10.7 12.1 11.0
Depreciation 4.8 4.0 3.4 Ratios
Interest Expense 2.4 2.6 2.3 Year to March FY15 FY16 FY17
EBITDA margins 15.7 13.5 13.2 ROE (%) 11.5 12.7 16.9
Net profit margins 6.1 5.7 8.2 Pre-tax ROCE (%) 16.5 18.8 20.0
Debtors days 162.8 141.5 142.4
Payble days 113.6 102.2 100.2
Cash Conversion Cycle 49.2 39.3 42.2
Current Ratio 2.3 2.2 2.4
Gross Debt/EBITDA 98.5 51.6 42.5
Growth metrics (%) Gross Debt/Equity 0.3 0.1 0.1
Year to March FY15 FY16 FY17 Adjusted Debt/Equity 0.3 0.1 0.1
Revenues 27.4 7.9 Net Debt/Equity 0.3 0.1 (0.1)
EBITDA 9.3 6.2 Interest Coverage Ratio 4.5 3.7 4.3
PBT 20.8 30.5
Adjusted Profit 17.6 55.5

Year to March FY15 FY16 FY17 Year to March FY15 FY16 FY17
Reported Profit 250 294 458 Adjusted Diluted EPS (INR) 6.4 7.5 11.7
Add: Depreciation 195 207 191 Y-o-Y growth (%) 0.0 17.6 55.5
Interest (Net of Tax) 67 88 100 Adjusted Cash EPS (INR) 11.4 12.8 16.6
Less: Changes in WC 0 (573) 585 Diluted P/E (x) 107.8 91.6 58.9
Operating cash flow 1,027 658 2,067 Price to Book Ratio (P/B) (x) 12.4 10.9 9.2
Less: Capex 0 0 (593) Enterprise Value / Sales (x) 6.8 5.3 4.8
Free cash flow 1,027 658 1,474 Enterprise Value / EBITDA (x) 43.1 39.0 36.1

Company Profile
GLENMARK PHARMACEUTICALS
Exciting play on novel pipeline
US Absolute Rating HOLD

• Four products bagged approval in Q3FY18 with 17 coming in H1FY18. Rating Relative to Sector Performer
Risk Rating Relative to Sector Medium
• 13% price erosion in the quarter compared to 10-12% earlier. Sector Relative to Market Equalweight
• Baddi facility: Not heard back from USFDA since the company has provided a
comprehensive response to the regulator.
MARKET DATA (R : GLEN.BO, B: GNP IN)
Product specific
CMP : INR 535
• Welcol tab and suspension: Has TAD on the product. Nothing outstanding in
terms of USFDA queries. 52-week range (INR) : 973 / 528
• Renagel: The company has been waiting for long. No clarity as yet. Share in issue (mn) : 282.2
• Voltarin: The company has TAD. Avg. Daily Vol. BSE/NSE (‘000) : 1,129.9
• Epiduo delayed approval: CR responding to the product and should get approval
in early FY19.
• Glenmark looking to file Nuvaring, Concerta, and GSP 301 in FY19. GSP 301 Share Holding Pattern (%)
filing in coming two months. Current Q1FY18 Q4FY17

Promoters * 46.5 46.5 46.5
• Zolair biosimilar: The company anticipates start of phase III trials in FY19, MF's, FI's & BK’s 6.0 5.4 6.0
assuming it completes phase I trials by July. FII's 31.0 33.5 34.8
Others 16.4 14.6 12.7
India
• India business grew 12%. Adjusted for GST, the number was 2.0-2.5% higher so (% of share in issue)
14.5%.
• Launched Apremilast during the quarter. Glenmark is the first company to
receive DCGI approval.
Guidance Index
1 month (3.4) (0.6) (7.5)
• Expects US base business erosion to remain at 13%.
3 month (8.3) 0.4 (5.2)
• INR2.5-3.0bn debt reduction in FY18. Expects to pay back INR3bn debt every 12 month (40.4) 19.3 (10.7)
year. R&D to remain at 13% of sales in FY19.
• The company believes EBITDA margin of 21-22% for FY21 is still possible.
Though Glenmark trades at a discount to peers, limited growth drivers, growing
costs, persistent pricing pressure in the US and a highly leveraged balance sheet
limit upside potential. We maintain ‘HOLD/SP’.
Deepak Malik
Financials
+91 22 6620 3147
Net revenues (INR mn) 76,496 91,857 94,050 105,202 Ankit Hatalkar
EBITDA (INR mn) 14,372 20,367 15,951 16,764 +91 22 2286 3097
Adjusted profit (INR mn) 8,854 11,689 8,322 8,594 ankit.hatalkar@edelweissfin.com
Adjusted diluted EPS (INR) 31.4 41.4 29.5 30.5
Diluted P/E (x) 17.0 12.9 18.1 17.6


Total operating expenses 62,124 71,490 75,355 87,672 Minority interest (3) (4) (4) (4)
Materials cost 23,026 26,143 29,623 35,368 Long term borrowings 24,873 45,363 45,363 45,363
Employee cost 13,782 16,408 17,064 19,112 Short term borrowings 7,874 1,872 1,872 1,872
R&D cost 7,250 10,660 11,467 13,059 Total Borrowings 32,747 47,235 47,235 47,235
Other expenses 18,067 18,278 17,200 20,133 Long Term Liabilities & Prov. 770 327 327 327
Depreciation 2,343 2,644 3,472 3,566 Deferred tax liability (net) (10,649) (13,113) (16,322) (19,340)
Operating Profit 14,372 20,367 20,203 21,153 Gross Block 47,859 54,301 64,301 74,301
EBIT 12,029 17,723 16,731 17,587 Net Block 30,789 34,153 40,681 47,114
Less: Interest Expense 1,789 2,373 2,267 2,362 Goodwill 575 479 479 479
Add: Other income 200 374 700 700 Total Fixed assets 31,363 34,632 41,160 47,593
Profit before tax 10,440 14,914 15,164 15,925 Non current investments 873 1,148 1,262 1,280
Less: Provision for Tax 3,009 3,827 3,791 3,981 Cash and cash equivalents 8,571 10,564 9,625 6,542
Less: Excep. Items (Net of Tax)(1,423) (602) 0 0 Sundry debtors 24,926 24,043 26,180 29,815
Adjusted Profit 8,854 11,689 11,373 11,944 Loans & advances 9,868 12,749 11,945 13,386
No. of Shares outstanding 282 282 282 282 Total current assets (ex cash)50,472 58,183 62,473 72,271
Adjusted Cash EPS 39.7 50.8 52.6 55.0 Ot. Cur. Liab. & Sh. Term Prov. 12,710 6,120 6,580 7,461
Dividend per share (DPS) 2.4 2.4 2.5 2.6 Total current liab. & prov. 32,118 25,155 27,682 32,655
Dividend Payout Ratio (%) 9.1 6.1 6.1 6.1 Net current assets (ex cash) 18,353 33,028 34,791 39,616
Uses of funds 59,162 79,371 86,838 95,031

Ratios
R&D costs 9.5 11.6 12.0 12.0
Staff costs 18.0 17.9 17.9 17.6 ROAE (%) 26.7 28.8 22.6 19.5
Depreciation 0.0 0.0 0.0 0.0 Pre-tax ROACE (%) 18.9 24.2 19.3 18.3
Interest Expense 3.1 2.9 3.6 3.3 Inventory days 224.8 258.8 281.8 275.6
EBITDA margins 2.3 2.6 2.4 2.2 Debtors days 119.4 97.3 95.9 93.9
Net profit margins 18.8 22.2 21.1 19.4 Payble days 316.0 268.4 247.3 238.9
Net Revenues 15.4 20.1 4.0 13.9 Net Debt/Equity 0.7 0.8 0.7 0.6
EBITDA 40.6 41.7 (0.8) 4.7 Interest Coverage Ratio 6.7 7.5 7.4 7.4
PBT 75.7 42.9 1.7 5.0
Adjusted Profit 41.7 32.0 (2.7) 5.0
EPS 41.7 32.0 (2.7) 5.0

Add: Depreciation 2,343 2,644 3,472 3,566 Y-o-Y growth (%) 41.7 32.0 (28.8) 3.3
Others (6,596) 5,753 (3,342) (3,128) Diluted P/E (x) 17.0 12.9 18.1 17.6
Less: Changes in WC 1,002 14,674 1,763 4,825 Price to Book Ratio (P/B) (x) 4.2 3.4 2.9 2.5
Free cash flow (5,438) (760) 1,440 (671) Dividend Yield (%) 0.4 0.5 0.3 0.3

Company Profile
GMR INFRASTRUCTURE
In turnaround mode
India Equity Research l Infrastructure - Construction
GMR follows the developer model for infrastructure projects across different Absolute Rating NOT RATED
verticals—airports, power, roads and urban infrastructure. The company has
identified airport segment as its growth driver going ahead. It intends to
consolidate its operations in the power segment while divesting its road assets in
the future.
The company will also continue to follow its ‘asset light, asset right’ strategy; as a
MARKET DATA (R : GMRI.BO, B: GMRI IN)
result, assets will be monetised to ensure leverage levels are contained.
CMP : INR 20
Strong traffic growth in the Indian aviation market is creating the need for Target Price : NA
expanding airport capacity. GMR is the premier airport developer in the country 52-week range (INR) : 25 / 12
and intends to maintain its leadership in this segment. The company will continue Share in issue (mn) : 6,035.9
to bid for airports which come up in the country. It won the bid to develop the M cap (INR bn/USD mn) : 118 / 1,883
greenfield Goa airport in 2016; construction is expected to commence soon. Avg. Daily Vol. BSE/NSE (‘000) : 43,495.7
While GMR’s existing airport in Delhi (DIAL) is nearing capacity, the Hyderabad
airport (HIAL) is already operating beyond capacity. Hence, the company intends Share Holding Pattern (%)
to undertake capacity expansion exercise in both these airports. It intends to
expand passenger handling capacity at DIAL from 62mn to 90mn at a cost of
Promoters * 61.7 61.7 61.7
~INR80bn, while HIAL is likely to witness capex of ~INR24bn which will expand its MF's, FI's & BK’s 7.9 6.1 7.8
capacity from 12mn to 26mn (in phases). Over the long run, while DIAL will have FII's 17.8 20.6 20.4
the capacity to handle ~119mn passengers HIAL’s capacity will stand at ~80mn. Others 12.7 11.6 10.1
GMR has already monetised 68 acres (of 232) at DIAL. Going ahead, it intends to (% of share in issue)
monetise 15-20 acres every 12-18 months at the airport.
Both of the company’s operational coal-based power projects (Warora and

Kamalanga) have fuel linkages. Hence, GMR no longer needs its two coal mines in Relative Performance (%)
Indonesia. As a result, the company intends to divest its stake in these coal mines Sensex Stock Stock over
Sensex
going ahead. Through induction of strategic partner (Tenaga), refinancing of
1 month (0.1) (7.8) (7.7)
operational assets and restructuring of Chhattisgarh & Rajahmundry plants, the
3 months 3.5 9.8 6.3
company has reduced the cash flow stress in its power portfolio.
12 months 21.5 35.8 14.3
As far as its road portfolio is concerned, GMR has already divested three of its
nine projects. It is looking to exit the segment by selling the balance projects as
well.
Financials

Revenues (INR mn) 87,095 90,228 58,487 70,057
Rev. growth (%) 4.9 3.6 (35.2) 19.8
EBITDA (INR mn) 25,654 25,599 27,577 32,200
Net profit (INR mn) (18,102) (24,239) (3,843) (3,085)
Share outstanding (mn) 3,892 4,361 6,036 6,036 Parvez Akhtar Qazi
EPS (INR) (4.7) (5.6) (0.6) (0.5) +91 22 4063 5405
parvez.qazi@edelweissfin.com
EPS growth (%) NA NA NA NA
Diluted P/E (x) NA NA NA NA
EV/EBITDA (x) 20.2 21.1 17.5 9.4
ROE (%) NA NA NA NA February 9, 2018


Equity capital 3,892 4,361 6,036 6,036
Direct costs 28,458 31,621 9,977 14,545 Secured loans 394,526 442,968 378,597 207,601
Employee costs 5,742 6,197 5,064 5,449 Minority Interest 20,086 17,655 12,595 17,136
Other expenses 27,241 26,812 15,869 17,864 Borrowings 450,407 478,079 394,443 214,840
Total operating expenses 61,441 64,629 30,910 37,857 Sources of funds 558,261 574,677 456,946 288,450
Dep. & amortisation 14,550 18,125 11,967 10,599 Depreciation 61,500 81,315 17,410 25,620
EBIT 11,104 7,474 15,610 21,601 Net block 336,393 341,828 322,537 135,580
Interest expenses 29,719 35,719 21,965 21,285 Capital work in progress 157,338 172,474 44,144 27,599
Other income 3,159 3,275 4,165 4,654 Total fixed assets 493,731 514,302 366,681 163,179
Profit before tax 2,747 (28,064) (25,839) 4,411 Investments 8,796 14,127 65,452 124,222
Provision for tax 1,663 1,528 1,815 7,370 Inventories 3,589 3,049 2,244 1,292
Core profit 1,084 (29,592) (27,655) (2,959) Sundry debtors 17,719 17,214 15,738 17,790
Extraordinary items 18,203 (3,094) (23,650) (558) Cash and equivalents 33,212 39,040 25,443 17,711
Profit after tax (17,118) (26,498) (4,004) (2,401) Other current assets 94,372 80,394 116,209 50,097
Less: Minority interests (2,389) 0 0 2,336 Total current assets 148,892 139,697 159,633 86,889
Add: Share in profits of assoc. (130) 162 (684) 749 Sundry creditors and others 88,736 89,410 131,155 78,032
PAT after minority interest (14,859) (26,336) (4,688) (3,987) Provisions 3,690 3,306 3,327 3,670
Adjusted net profit (18,102) (24,239) (3,843) (3,085) Total CL & provisions 92,425 92,715 134,482 81,702
EPS (INR) basic (4.7) (5.6) (0.6) (0.5) Net current assets 56,467 46,982 25,151 5,187
Diluted equity shares (mn) 3,892 4,361 6,036 6,036 Net deferred tax (733) (734) (338) (4,138)
Dividend payout (%) 457.9 NA 0.0 0.0 Uses of funds 558,261 574,677 456,946 288,450
Tax rate (%) NA NA NA 148.3 Adjusted BV per share (INR) 20 16 8 9

Ratios
Operating expenses 70.5 71.6 52.8 54.0 Year to March FY14 FY15 FY16 FY17
ROAE (%) (on adjusted profits) NA NA NA NA
ROACE (%) 2.6 1.9 3.8 7.0
EBITDA margins 29.5 28.4 47.2 46.0
Net profit margins (19.7) (29.5) (6.6) (4.4)
Payable days 876 771 3,125 1,924
Cash conversion cycle (759) (662) (2,925) (1,793)
Growth metrics (%) Debt/EBITDA 18.0 19.1 14.3 6.7
Year to March FY14 FY15 FY16 FY17 Interest coverage 0.4 0.2 0.7 1.0
Fixed assets t/o (x) 0.3 0.3 0.2 0.3
Revenues 4.9 3.6 (35.2) 19.8
Debt/equity 4.8 5.6 6.3 2.9
EBITDA 3.6 (0.2) 7.7 16.8
PBT (30.1) NA NA NA
Net profit NA NA NA NA
EPS NA NA NA NA

Year to March FY14 FY15 FY16 FY17 Valuation parameters
Net profit 100 (27,333) (27,493) (3,643) Year to March FY14 FY15 FY16 FY17
Depreciation 14,550 18,125 11,967 10,599 Diluted EPS (INR) (4.7) (5.6) (0.6) (0.5)
Others (16,206) 1,894 6,725 (9,018) Y-o-Y growth (%) NA NA NA NA
Gross cash flow (1,556) (7,314) (8,801) (2,061) CEPS (0.8) (1.4) 1.3 1.8
Less:Changes in WC (651) (5,342) (7,739) (13,059) Diluted P/E (x) NA NA NA NA
Operating cash flow (905) (1,972) (1,062) 10,997 Price/BV (x) 1.0 1.2 2.4 2.1
Less: Capex 52,002 37,994 24,358 6,177 EV/Sales (x) 5.9 6.0 8.2 4.3
Free cash flow (52,907) (39,966) (25,421) 4,820 EV/EBITDA (X) 20.2 21.1 17.5 9.4

Company Profile
GREENLAM INDUSTRIES
New growth avenues to boost fortunes
India Equity Research l Home Decor

Laminates segment: Management expects the laminates segment to grow at 7 8% Absolute Rating BUY
with higher growth in domestic market at 12-15%. The exports business is currently Investment Characteristics Growth
impacted by currency appreciation, GST hit on exports from Nalagarh plant &
lower sales of subsidiaries. Sales were impacted across subsidiaries and
management expects recovery in coming quarters. Further, the recently expanded
2mn sheets capacity in Q1FY18 is yet to be utilised, which will support future
growth. MARKET DATA (R : NA.BO, B: GRLM IN)
Gap between unorganised and organised players narrowing: According to CMP : INR 1,195
management post the GST rate of 18%, the price gap between unorganised and
52-week range (INR) : 1,399 / 620
organised players has narrowed to just 8-10%. Further, some of the large organised
players are also trying to work in an organised manner.
At EBITDA break even in new categories: Both the new segments—doors and Avg. Daily Vol. BSE/NSE (‘000) : 9.6
flooring—have seen improvement in utilisation rates and management expects to
break even in this segment by the year end. Further, the segments are envisaged to
reach PBT level break even at 25% utilisation rate. Going forward, Greenlam Share Holding Pattern (%)
Industries’ strategy for doors division is to focus on projects business and in Current Q1FY18 Q4FY17
flooring business to expand channel partners by adding more dealers, focus on Promoters * 54.7 54.7 54.7
projects and expand retail footprint. At 100% utilisation, flooring can clock INR2.0 MF's, FI's & BK’s 9.4 9.4 9.4
2.25bn revenues, doors INR0.8 1.0bn and veneer INR3bn. FII's 6.8 6.8 6.8
Others 29.0 29.1 29.1
Investment conclusion * Promoters pledged shares : Nil
Favourable GST rate is expected to drive market share gain for Greenlam Industries (% of share in issue)
in the domestic market. Further, the company being the largest player will benefit
from strong growth opportunity in exports market as well. The recent brownfield
capacity expansion completed in Q1FY18 is likely to aid profitable growth. We
believe Greenlam Industries is well placed to leverage its vast distribution network Index Index
and strong brand equity to successfully expand product offerings in associate 1 month (9.9) (10.6) (0.7)
categories like engineered wood flooring and doors. It has invested heavily 3 month (3.0) 16.0 19.1
(INR1.3bn comprising 24% of capital employed) in associated product categories 12 month 21.2 69.1 47.9
even as profit contribution remained negative. With these businesses now set to
hit an inflection point, we estimate earnings to accelerate at 35% CAGR over FY17-
20 and RoCE to expand to 37% from 22%. We maintain ‘BUY’.
Financials

Rohan Gupta
Net revenues (INR mn) 10,759 11,253 12,782 14,938 +91 22 4040 7416
EBITDA (INR mn) 1,413 1,642 2,022 2,507 rohan.gupta@edelweissfin.com
Adjusted profit (INR mn) 532 681 964 1,320
No. of Diluted shares OS (mn) 24 24 24 24 Sneha Talreja
sneha.talreja@edelweissfin.com
EPS 31.7 27.9 41.7 36.9
Diluted P/E (x) 54.0 42.2 29.8 21.8
EV / EBITDA (x) 21.6 18.2 14.4 11.1
RoACE (%) 21.9 26.4 32.2 36.8 February 9, 2018


Employee expenses 1,542 1,697 1,866 2,053 Short term borrowings 869 869 669 469
Other expenses 2,137 2,006 2,209 2,610 Total Borrowings 1,840 1,340 940 540
Total expenditure 9,347 9,611 10,761 12,431 Long Term Liabilities & Prov. 220 220 220 220
Dep. & amortisation 369 416 430 465 Gross Block 5,437 5,937 6,237 6,737
EBIT 1,044 1,226 1,591 2,042 Accumulated depreciation 2,103 2,519 2,949 3,414
Interest expense 284 223 160 89 Net Block 3,334 3,418 3,288 3,323
Other income 36 44 52 78 Intangible assets 74 74 74 74
Exceptional Items 34 0 0 0 Capital work in progress 54 54 54 54
Profit before tax 762 1,047 1,484 2,032 Total net fixed assets 3,462 3,546 3,416 3,451
Reported Profit 498 681 964 1,320 Cash and cash equivalents 79 132 633 1,315
Adjusted Profit 532 681 964 1,320 Inventories 2,280 2,266 2,473 2,767
No. of Shares outstanding (mn) 24 24 24 24 Sundry Debtors 1,451 1,511 1,681 1,924
Adjusted Basic EPS 22.0 28.2 40.0 54.7 Loans & Advances 519 519 519 519
No. of Diluted shares OS (mn) 24.1 24.1 24.1 24.1 Other Current Assets 7 7 7 7
Adjusted Diluted EPS 22.0 28.2 40.0 54.7 Total Current Assets (ex cash) 4,257 4,302 4,679 5,215
Dividend per share (DPS) 1.5 2.5 2.5 3.0 Trade payable 1,868 1,942 2,198 2,554
Dividend Payout Ratio (%) 8.8 10.7 7.5 6.6 Ot. Cur. Liab. & Short Term Prov. 717 717 717 782
Total Cur. Liab. & Provisions 2,584 2,659 2,914 3,335
Uses of funds 5,213 5,321 5,813 6,646
Common size metrics as % of net revenues Book Value per share (INR) 120 146 183 234
Gross margin 47.3 47.5 47.7 48.0
EBIT margin 9.7 10.9 12.4 13.7 Year to March FY17 FY18E FY19E FY20E
Interest 2.6 2.0 1.2 0.6 ROCE (%) 21.9 26.4 32.2 36.8
Net profit margin 4.9 6.1 7.5 8.8 ROAE (%) 19.9 21.2 24.3 26.3
Inventory (days) 153 140 129 123
Payables (days) 121 118 113 112
Growth metrics (%) Current ratio 1.7 1.7 1.8 2.0
Debt/EBITDA 1.3 0.8 0.5 0.1
Interest coverage 3.7 5.5 10.0 23.0
Revenues 4.5 4.6 13.6 16.9 Debt/equity 0.6 0.4 0.2 0.1
EBITDA 9.1 16.3 23.1 24.0
PBT 22.1 37.4 41.7 36.9
EPS 31.7 27.9 41.7 36.9

Reported Profit 498 681 964 1,320 Year to March FY17 FY18E FY19E FY20E
Add: Interest 190 149 107 59 Y-o-Y growth (%) 31.7 27.9 41.7 36.9
Add:Others 264 74 53 29 Adjusted Cash EPS (INR) 6.0 11.0 22.1 35.5
Less: Changes in working cap. (684) (29) 121 116 Price to Book Ratio (P/B) (x) 9.9 8.2 6.5 5.1
Less: Capex* (249) (500) (300) (500) Enterprise Value / EBITDA (x) 21.6 18.2 14.4 11.1
Free cash flow 1,756 848 1,133 1,258 Dividend Yield (%) 0.1 0.2 0.2 0.3

Company Profile
GREENPLY INDUSTRIES
Rising presence in MDF
India Equity Research l Home Decor

Plywood growth largely dependent on e-way bill implementation: Management Absolute Rating BUY
expects volume growth in plywood segment to be at 10 12% if e-way bill is Investment Characteristics Growth
implemented; pegs it at 5 6% if the bill is not in force for major part of the year.
Growth will also be supported by commissioning of new decorative veneer unit at
Gujarat and plywood plant at UP to be commissioned by July and December 2018,
respectively. Further, margins in this segment are expected to stabilise at 10.5
11.0%. MARKET DATA (R : GRPL.BO, B: MTLM IN)
Launched new low segment brand to compete with unorganised players: In Q2FY18, CMP : INR 367
the company has launched low-end plywood segment brand Jansathi. This brand
52-week range (INR) : 401 / 245
provides the company entry in the INR54bn low-end plywood segment, which
accounts for 30% of total market where only unoragnised players are present.
Demand for this product will be largely catered through by outsourcing, extending
the asset light business model in the plywood segment.
MDF plant will be commissioned by Q2FY19: The company is targeting MDF plant
commissioning in Q2FY19 itself compared to Q3FY19 estimated earlier. It is also Share Holding Pattern (%)
targeting 50% utilisation in the first year of operation, which should scale up to Current Q1FY18 Q4FY17
60% capacity utilisation by FY20 with margin of around 17%. Lower margin in new Promoters * 51.0 51.0 51.0
plant will be on account of higher share of exports (30 40% compared to 10% MF's, FI's & BK’s 20.6 20.1 20.3
currently). Margin for overall MDF segment (including the current plant) should FII's 11.6 12.1 12.2
be around 22-23%. The company will also benefit from lower cost of transportation Others 16.8 16.7 16.5
since it will service South market from the new plant. Further, with rising proportion * Promoters pledged shares : Nil
of revenue from the MDF segment, the company’s overall working capital days are
likely to fall.
We believe, the plywood industry is going through structural changes—GST Index Index
triggered shift of market share from unorganised to organised players and 1 month (9.9) (15.0) (5.1)
challenges in raw material sourcing. We envisage augmentation of MDF capacity 3 month (3.0) 4.8 7.8
and pick up in plywood demand to trigger this spurt. Moreover, with completion of 12 month 21.2 12.0 (9.2)
investment phase, we expect earnings to register 21% CAGR over FY17-20 and the
company to start generating free cash flows (post capex) from FY20. We maintain
‘BUY’.
Financials

Revenues (INR mn) 16,618 17,962 21,315 28,997 Rohan Gupta
Rev. growth (%) 1.0 8.1 18.7 36.0 +91 22 4040 7416
EBITDA (INR mn) 2,387 2,676 3,038 4,388 rohan.gupta@edelweissfin.com
No. of Shares outstanding (mn) 123 123 123 123 Sneha Talreja
EPS growth (%) (3.1) 17.1 7.7 39.3 sneha.talreja@edelweissfin.com
Diluted P/E (x) 35.9 30.6 28.5 20.4
EV/EBITDA (x) 20.0 18.9 16.8 11.1
ROAE (%) 18.1 17.4 16.1 18.9 February 9, 2018


Raw material costs 8,834 9,781 11,955 16,538 Long term borrowings 2,658 6,158 6,158 4,158
Gross profit 7,783 8,182 9,360 12,459 Short term borrowings 790 790 790 790
Employee expenses 1,772 1,949 2,144 2,359 Total Borrowings 3,448 6,948 6,948 4,948
Other expenses 3,624 3,557 4,178 5,712 Deferred Tax Liability (net) 140 140 140 140
Operating expenses 5,397 5,506 6,322 8,071 Long Term Liabilities & Prov. 530 0 0 0
EBITDA 2,387 2,676 3,038 4,388 Gross Block 7,898 8,148 17,198 17,798
Dep. & amortisation 507 546 681 1,000 Accumulated depreciation 2,660 3,206 3,887 4,887
EBIT 1,880 2,130 2,357 3,388 Net Block 5,238 4,942 13,311 12,911
Interest expense 189 171 250 416 Intangible assets 21 21 21 21
Other income 100 110 121 133 Capital work in progress 2,687 6,537 187 187
Exceptional Items 22 0 0 0 Total net fixed assets 7,946 11,500 13,519 13,119
Profit before tax 1,813 2,068 2,228 3,104 Non current investments 261 261 261 261
Provision for tax 559 600 646 900 Cash and cash equivalents 781 1,295 792 1,121
Adjusted Profit 1,255 1,469 1,582 2,204 Sundry Debtors 3,020 3,199 3,621 4,767
No. of Shares outstanding (mn) 123 123 123 123 Loans & Advances 139 139 139 139
Adjusted Basic EPS 10 12 13 18 Other Current Assets 2,050 2,050 2,050 2,050
No. of Dil. shares OS (mn) 123 123 123 123 Total Current Assets (ex cash) 6,794 7,130 7,939 9,901
Adjusted Cash EPS 14.4 16.4 18.5 26.1 Ot. Cur. Liab. & Sh. Term Prov. 766 774 890 1,157
Dividend per share (DPS) 0.6 0.6 0.6 0.6 Total Current Liab. & Prov. 3,937 3,989 4,820 6,595
Dividend Payout Ratio (%) 6.9 5.9 5.5 4.0 Net Current Assets (ex cash) 2,857 3,140 3,118 3,306
Uses of funds 11,845 16,196 17,691 17,808
Common size metrics as % of net revenues Ratios

Year to March FY17 FY18E FY19E FY20E Year to March FY17 FY18E FY19E FY20E
Gross margin 46.8 45.5 43.9 43.0 Pre-tax ROCE (%) 20.3 16.5 14.7 20.0
Operating expenses 32.5 30.7 29.7 27.8 ROAE (%) 18.1 17.4 16.1 18.9
EBITDA margins 14.4 14.9 14.3 15.1 ROA (%) 12.1 10 9 12
EBIT margin 11.3 11.9 11.1 11.7 Current ratio 1.9 2 2 2
Interest 1.1 1.0 1.2 1.4 Quick ratio 1.3 1 1 1
Net profit margin 7.5 8.2 7.4 7.6 Cash ratio 0.2 0.3 0.2 0.2
Inventory turnover (x) 5.9 6 6 7
Growth metrics (%)
Year to March FY17 FY18E FY19E FY20E Inventory (days) 61 62 59 56
Revenues 1.0 8.1 18.7 36.0 Payables (days) 117 119 109 103
EBITDA 0.5 12.1 13.5 44.4 Cash conversion cycle (days) 14 6 8 5
PBT 6.9 14.1 7.7 39.3 Debt-equity (x) 0.4 0.8 0.7 0.4
Adjusted Profit (1.5) 17.1 7.7 39.3 Debt/EBITDA 1.4 2.6 2.3 1.1
EPS (3.1) 17.1 7.7 39.3 Adjusted debt/Equity (x) 0.4 0.8 0.7 0.4
Long term debt / Cap. emp. (%) 29.1 42.9 39.3 27.8
Total debt / Cap. Emp. (%) 63.5 68.4 67.3 65.6
Interest coverage (x) 9.9 12.4 9.4 8.1
Net profit 1,255 1,469 1,582 2,204 Year to March FY17 FY18E FY19E FY20E
Depreciation 507 546 681 1,000 Adjusted Diluted EPS (INR) 10.2 12.0 12.9 18.0
Deferred tax 127 115 168 279 Y-o-Y growth (%) (3.1) 17.1 7.7 39.3
Others 190 (115) (168) (279) Adjusted Cash EPS (INR) 14.4 16.4 18.5 26.1
Less:Changes in WC 248 283 (22) 188 Price to Book Ratio (P/B) (x) 5.8 4.9 4.2 3.5
Less: Capex (2,948) (4,100) (2,700) (600) Enterprise Value / EBITDA (x) 20.0 18.9 16.8 11.1
Free cash flow (1,119) (2,369) (415) 2,416 Dividend Yield (%) 0.2 0.2 0.2 0.2

Company Profile
GULF OIL LUBRICANTS

Well oiled
India Equity Research l Lubricants

Robust volume growth led by strong demand from OEMs. Absolute Rating BUY
Investment Characteristics Growth
Chennai plant is operational now and GOLI is planning to shift ~25% of total
production to the plant as South India accounts for ~30% of volume.
The company expects initial higher fixed costs in operating from Chennai to be
offset by cost savings in logistics and hence the plant will be EBITDA neutral from
day one. MARKET DATA (R : NA, B: GOLI IN)
CMP : INR 1,060
GOLI is confident of registering at least 2x industry growth. The company is planning
to continue to invest in brand building and customer acquisition. Further, with 52-week range (INR) : 1,098 / 645
spare capacity at Chennai plant, it is confident of expanding OEM customer base Share in issue (mn) : 49.7
as it can take large orders and also supply to export markets of OEMs. M cap (INR bn/USD mn) : 53 / 818
Management is confident of sustaining growth as it expects OEM demand to be
strong in light of new policy norms.
EV impact: It expects lubricant market to continue to grow over the next 12-15 Share Holding Pattern (%)
years. The company is actively exploring other areas of application such as Current Q1FY18 Q4FY17
advanced mobility solutions in EV. Promoters * 72.9 69.9 69.9
MF's, FI's & BK’s 7.0 10.8 11.4
GOLI’s expanding market share, benefits of GST, falling costs for consumers and Others 12.4 14.1 14.4
benefits from Chennai plant imply potential upside. We maintain ‘BUY’. * Promoters pledged shares : Nil

Index Index
1 month (9.9) (7.9) 2.0
3 month (3.0) 8.4 11.4
12 month 21.2 32.0 10.8
Financials

Revenues (INR mn) 10,114 11,311 12,864 14,861
EBITDA (INR mn) 1,592 1,804 2,233 2,591
Adjusted Diluted EPS (INR) 20.2 24.4 31.1 36.0 Shradha Sheth
Diluted P/E (x) 44.5 36.9 28.9 25.0 +91 22 6623 3308
shradha.sheth@edelweissfin.com
EV/EBITDA (x) 27.8 24.2 19.4 16.4
ROACE (%) 40.4 39.9 44.4 46.8
ROAE (%) 46.1 40.2 38.4 35.5 February 9, 2018


Gross profit 4,605 5,367 6,229 7,015 Long term borrowings 1,947 1,785 1,035 635
Employee expenses 574 682 758 852 Total Borrowings 1,947 1,785 1,035 635
Advertising Expenses 672 728 888 1,025 Long Term Liabilities & Prov. 31 43 43 43
Other expenses 1,766 2,154 2,351 2,547 Deferred Tax Liability (net) 33 45 45 45
Operating expenses 3,013 3,563 3,996 4,424 Sources of funds 4,496 5,409 5,623 6,282
Total expenditure 8,522 9,507 10,631 12,270 Gross Block 1,435 1,579 1,979 2,379
EBITDA 1,592 1,804 2,233 2,591 Accumulated depreciation (375) (410) (485) (576)
Depreciation & amortisation 60 73 75 90 Net Block 1,060 1,169 1,493 1,803
EBIT 1,531 1,731 2,157 2,501 Capital work in progress 19 292 292 292
Other income 179 215 250 243 Total Fixed Assets 1,088 1,472 1,796 2,106
Provision for tax 529 638 796 920 Cash and cash equivalents 2,351 2,891 2,382 2,732
Adjusted Profit 1,003 1,211 1,545 1,786 Sundry debtors 1,064 1,023 1,303 1,384
No. of Shares outstanding (mn) 49.6 49.6 49.6 49.6 Loans and advances 360 371 371 371
Adjusted Basic EPS 20.2 24.4 31.1 36.0 Other assets 23 25 25 25
No. of Diluted shares OS (mn) 49.6 49.6 49.6 49.6 Total current assets (ex cash) 3,016 2,919 3,545 3,890
Adjusted Cash EPS 10.7 12.9 16.3 18.9 Ot. Cur. Liab. & ST Provisions 683 564 564 564
Dividend per share (DPS) 7.0 8.0 10.0 12.5 Total Current Liab. & Prov. 1,989 1,904 2,132 2,478
Dividend Payout Ratio (%) 40.5 38.4 37.6 40.7 Net Current Assets (ex cash) 1,026 1,015 1,413 1,412
Uses of funds 4,496 5,409 5,623 6,282
Gross margin 45.5 47.5 48.4 47.2 Year to March FY16 FY17 FY18E FY19E
EBITDA margins 15.7 15.9 17.4 17.4 ROAE (%) 46.1 40.2 38.4 35.5
EBIT margin 15.1 15.3 16.8 16.8 ROA (%) 23.4 24.4 28.0 30.0
Interest 1.8 0.9 0.5 0.3 Current ratio 2.7 3.1 2.8 2.7
Net profit margin 9.9 10.7 12.0 12.0 Quick ratio 1.9 2.3 1.9 1.8
Cash ratio 1.2 1.5 1.1 1.1
Inventory turnover (x) 3.7 3.9 4.0 4.0
Growth metrics (%) Payables turnover (x) 4.8 4.5 4.6 4.5
Year to March FY16 FY17 FY18E FY19E Receivables (days) 40 34 33 33
Revenues 4.5 11.8 13.7 15.5 Inventory (days) 99 94 92 92
Gross Profit 22.3 16.6 16.1 12.6 Payables (days) 75 81 80 81
EBITDA 23.0 13.3 23.8 16.1 Cash conversion cycle (days) 63 47 45 44
PBT 32.1 20.7 26.6 15.6 Gross Debt/Equity 0.8 0.5 0.2 0.1
Adjusted Profit 29.6 20.7 27.6 15.6 Gross Debt/EBITDA 1.2 1.0 0.5 0.2
EPS 29.6 20.5 27.6 15.6

Interest (Net of Tax) 119 65 45 26 Y-o-Y growth (%) 29.6 20.5 27.6 15.6
Gross cash flow 1157 1,191 1,370 1633 Diluted P/E (x) 44.5 36.9 28.9 25.0
Less: Changes in working cap. (21) (250) 398 (0) Price to Book Ratio (P/B) (x) 18.0 12.6 9.9 8.0
Operating cash flow 1,178 1,440 971 1,633 Enterprise Value / Sales (x) 4.4 3.9 3.4 2.9
Free cash flow 995 1,025 571 1,233 Dividend Yield (%) 0.8 0.9 1.1 1.4

Company Profile
HEALTHCARE GLOBAL ENTERPRISES

Singular bet on promise of oncology tertiary care
Oncology Absolute Rating BUY

Status of new centers: (i) Borivali: Largest contributor to new centre losses, expects Rating Relative to Sector Outperformer
ramp up in 12 months; (ii) Kanpur, Nagpur: Ramping up, but still incurring losses. Risk Rating Relative to Sector Medium
Sector Relative to Market Equalweight
Karnataka: 10 days’ impact of doctors’ strike, but the region has recovered.
Additionally, since HCG did not face much impact from demonetisation, base is a
little higher than peers. MARKET DATA (R : NA, B: HCG IN)
Maharashtra: Borivali center became fully functional only in October. Centre is CMP : INR 318
high cost due to rent and will continue to incur loss through the remainder of the Target Price : INR 320
year. Breakeven is expected in the next 12 months. 52-week range (INR) : 319 / 215
Gujarat: Baroda cancer center and Bhavnagar multi-specialty continue to ramp-
up strongly.
East: Strong growth across both centers in the region.
Milann
Plan to launch new center in Bengaluru to sustain leadership in the attractive
market. Promoters * 24.1 24.4 24.4
MF's, FI's & BK’s 28.1 27.8 28.3
Debt and capex
FII's 29.2 20.1 15.6
HCG has a capex pipeline of INR600mn, which is expected to be completed in Others 18.7 27.7 31.7
March 2019. 60% of this capex will be non-cash for medical equipment purchased * Promoters pledged shares : Nil
on 35 months’ credit. As of Q3FY18, the company has INR4.3bn debt on books. (% of share in issue)
Debt is expected to peak at INR5.5-5.7bn, of which half is bank debt and balance is
credit. HCG expects to service debt as and when the new facilities come online.
National Health Protection Scheme
Government announcement of NHPS is a welcome move and is in line with HCG’s Index
expansion plans. With presence in tier 2 & 3 cities, the company is ready to cater 1 month (18.7) (0.6) (7.5)
to patients on pan-India level. HCG has been looking at schemes for a while now, 3 months (17.5) 0.4 (5.2)
starting with AP. Though the scheme will be launched in October, private hospitals 12 months 23.6 19.3 (10.7)
hope that government outsources management of the scheme to a private body.
HCG is poised to benefit from strong growth in therapy. Also, its hub-and-spoke
model is on the cusp of rapid EBITDA scale up. Hence, owing to strong therapy
tailwind and EBITDA margin levers, HCG is positioned for robust EBITDA growth.
We maintain ‘BUY/SO’.
Financials Deepak Malik
+91 22 6620 3147

Ankit Hatalkar
EBITDA (INR mn) 847.6 1,050.0 1,250.2 1,741.5 +91 22 2286 3097
Adjusted Profit (INR mn) 64.9 221.8 198.5 319.3 ankit.hatalkar@edelweissfin.com
Diluted P/E (x) 418.2 122.4 136.7 85.0
EV/EBITDA (x) 34.4 27.7 24.0 17.2
ROAE (%) 3.3 2.7 4.9 4.2 February 9, 2018


Net revenues 5,781 6,948 8,727 10,994 Minority interest 327 575 590 690
Other operating income 61 54 59 65 Long term borrowings 2,458 2,834 5,084 5,084
Total operating expenses 4,994 5,951 7,530 9,321 Short term borrowings 372 416 416 416
Materials cost 1,500 1,709 2,232 2,809 Total Borrowings 2,830 3,250 5,500 5,500
Employee cost 1,005 1,219 1,402 1,612 Long Term Liabilities & Prov. 758 832 845 851
Other Expenses 2,489 3,023 3,897 4,899 Deferred tax liability (net) (158) (155) (155) (155)
Depreciation 441 568 648 739 Sources of funds 8,015 8,828 11,351 11,776
EBITDA 848 1,050 1,256 1,739 Net Block 5,194 6,170 8,022 8,583
EBIT 407 482 607 1,000 Capital work in progress 1,209 1,482 1,482 1,482
Less: Interest Expense 383 230 372 468 Intangible assets 27 68 68 68
Add: Other income 40 97 95 102 Total Fixed assets 6,429 7,720 9,572 10,133
Add: Exceptional items (61) 0 64 0 Goodwill 609 609 609 609
Profit before tax 3 348 394 634 Non current investments 36 40 40 40
Less: Provision for Tax (20) 118 134 216 Long term loans and advances 22 29 35 46
Less: Minority Interest 37 9 15 100 other non current assets 902 1,257 1,203 1,894
Reported Profit (15) 222 245 318 Cash and cash equivalents 1,176 927 1,558 628
Adjusted Profit 65 222 203 318 Inventories 134 188 232 296
No. of Shares outstanding 85 85 85 85 Sundry debtors 695 1,032 1,231 1,557
Adjusted Basic EPS 0.8 2.6 2.4 3.7 Loans & advances 19 20 29 33
No. of Dil. shares outstanding 85 85 85 85 Other Currrent Assets 249 275 253 300
Adjusted Diluted EPS 0.8 2.6 2.4 3.7 Total current assets (ex cash) 1,097 1,515 1,744 2,186
Adjusted Cash EPS 5.9 9.3 10.0 12.4 Trade payable 1,084 1,410 1,463 1,692
Others current liabilities 1,134 1,810 1,885 1,991
Short term provisions 38 49 60 78
Total current liab. & prov. 2,256 3,270 3,408 3,761
Net current assets (ex cash) (1,159) (1,755) (1,665) (1,574)
Year to March FY16 FY17 FY18E FY19E Uses of funds 8,015 8,828 11,351 11,776
Operating expenses 85.5 85.0 85.7 84.3 Book Value per share 50 51 54 57
Employee expenses 17.2 17.4 16.0 14.6
Other expenses 42.6 43.2 44.4 44.3
Interest Expense 6.6 3.3 4.2 4.2
Ratios
EBITDA margins 14.5 15.0 14.3 15.7
ROAE (%) 2.7 4.9 4.3 7.8
Pre-tax ROACE (%) 6.5 7.1 7.2 9.8
Inventory days 33.9 34.3 34.3 34.3
Growth metrics (%) Debtors days 42.1 45.4 47.3 46.3
Year to March FY16 FY17 FY18E FY19E Payble days 233.2 266.4 235.0 205.0
Net Revenues 12.1 20.2 25.6 26.0 Cash Conversion Cycle (157.1) (186.7) (153.4) (124.4)
EBITDA 11.2 23.9 19.6 38.5 Current Ratio 1.0 0.7 1.0 0.7
PBT (88.8) 12,571 13.1 60.9 Gross Debt/EBITDA 3.3 3.1 4.4 3.2
Adjusted Profit 4.6 241.7 (8.5) 57.0 Gross Debt/Equity 0.6 0.7 1.1 1.0
EPS (13.9) 241.7 (8.5) 57.0 Adjusted Debt/Equity 0.6 0.7 1.1 1.0

Reported Profit (15) 222 245 318 Year to March FY16 FY17 FY18E FY19E
Interest (Net of Tax) 3,122 152 245 309 Y-o-Y growth (%) (13.9) 241.7 (10.5) 60.8
Others (2,835) (150) (426) (490) Adjusted Cash EPS (INR) 5.9 9.3 10.0 12.4
Less: Changes in WC (19) (121) (90) (91) Diluted P/E (x) 418.2 122.4 136.7 85.0
Operating cash flow 732 913 803 967 Price to Book Ratio (P/B) (x) 6.4 6.3 5.9 5.6
Less: Capex 2,098 1,923 2,500 1,300 Enterprise Value / Sales (x) 5.0 4.3 3.5 2.8
Less: interest 3,122 152 245 309 Enterprise Value / EBITDA (x) 34.4 27.7 24.0 17.2
Free cash flow (4,488) (1,163) (1,942) (642) Dividend Yield (%) 0.0 0.0 0.0 0.0

Company Profile
HERITAGE FOODS
Leveraging moat to take the right stride
Heritage Food is planning to increase milk processing capacity from current ~14lakh Absolute Rating BUY
litre per day (llpd) to ~28llpd, sales network from the current 10.5llpd to ~21llpd over Investment Characteristics Growth
the next five years. VADP sales are expected to touch ~8llpd.
Management has guided for revenue growth in the 20-25% range over the next five
years led by strong ~30% CAGR in VADP and ~15% CAGR in liquid milk. Margins are
likely to sustain at ~7%. MARKET DATA (R : HEFI.BO, B: HTFL IN)
Reliance Dairy: The company focuses on rationalising procurement (to avoid forced CMP : INR 706
conversion of excess supply into lower margin SMP) as it closed down 10 of 30 Target Price : INR 976
chilling centers it took over. It is also moving processing and packing activities in- 52-week range (INR) : 885 / 462
house (currently, these activities are outsourced due to lack of facilities) so as to Share in issue (mn) : 46.4
maintain quality consistency. Reorganisation and rationalisation efforts are on track. M cap (INR bn/USD mn) : 33 / 509
VADP: Management still sees strong growth opportunity in packaged curd and has
added 1llpd curd manufacturing plant in Telangana and a new plant in Hyderabad
with 1.5-2.0llpd. Efforts are on selling the existing other VADP (paneer, flavoured milk Share Holding Pattern (%)
and butter milk) through other channels. It is also launching wider variants of existing Current Q1FY18 Q4FY17
VADP and is looking to revamp the entire range of ice cream portfolio from this Promoters * 39.9 39.9 39.9
summer season. MF's, FI's & BK’s 7.4 6.0 5.8
FII's 8.5 7.4 7.2
Management reiterated its target of increasing VADP contribution to 40% by 2022
Others 44.2 46.7 47.1
from current ~23%. It is confident of increasing contribution by ~3-4% every year.
We believe, the company’s effort in transitioning to a VADP dairy player is likely to
yield positive results and hence, estimate strong ~22% sales and 18% EBIT CAGR over Relative Performance (%)
FY17-20E and adjusted RoCE at ~42%. We maintain ‘BUY’.
Sensex
1 month (9.9) (15.6) (5.7)
3 month (3.0) (8.6) (5.5)
12 month 21.2 31.4 10.2
Financials

EBITDA (INR mn) 1,413 1,407 2,016 2,600
Adjusted PAT (INR mn) 817 643 999 1,358 Shradha Sheth
EV/EBITDA (x) 26.1 26.6 18.5 14.2
Adjusted RoCE (%) 39.4 32.3 38.8 41.7
RoE (%) 30.2 19.9 26.0 28.5 February 9, 2018


Year to March FY17 FY18E FY19E FY20E Reserves & Surplus 2,775 3,213 4,007 5,058
Net Revenues 26,429 24,665 29,021 34,457 Total shareholders funds 3,007 3,445 4,239 5,290
Raw Material Costs 20,628 19,502 22,614 26,713 Long term Borrowings 745 1,145 1,345 1,145
Employee costs 1,647 1,270 1,480 1,723 Short term Borrowings 840 640 640 640
EBITDA 1,413 1,407 2,016 2,600 Deferred Tax Liability (net) 198 198 198 198
EBIT 1,035 1,034 1,565 2,071 Gross Block 4441 5741 6941 8,141
Less: Interest Expense 112 161 179 161 Net Block 2966 3928 4677 5,347
Add: Other income 60 73 82 86 Capital work in progress 79 79 79 79
Profit Before Tax 983 946 1,469 1,997 Intangible Assets 5 5 5 5
Less: Provision for Tax 315 303 470 639 Total Fixed Assets 3049 4011 4760 5,431
Reported Profit 668 643 999 1,358 Non current investments 1488 1488 1488 1,488
Less: Profit from Disc. oper. (149) 0 0 0 Cash & bank balances 470 129 413 540
Adjusted Profit 817 643 999 1,358 Inventories 1227 1069 1239 1,464
No. of Shares outstanding (mn) 46.4 46.4 46.4 46.4 Sundry Debtors 156 135 159 283
Adjusted Basic EPS 17.6 13.9 21.5 29.3 Loans & Advances 160 153 169 190
No. of dil. shares OS (mn) 46.4 46.4 46.4 46.4 Other Current Assets 19 18 20 22
Adjusted Diluted EPS 17.6 13.9 21.5 29.3 Total Current Assets (Ex Cash) 1561 1375 1587 1,959
Adjusted Cash EPS 25.8 21.9 31.2 40.7 Trade payable 602 481 558 659
Dividend per share 4.0 4.0 6.0 8.0 Other Current Liab. & ST Prov. 1016 948 1115 1,324
Dividend Payout Ratio (%) 22.7 28.9 27.9 27.3 Total Current Liab. & Prov. 1617 1429 1673 1,983
Net Current Assets (ex cash) (55.9) (53.9) (85.7) (24.4)
Uses of funds 4,952 5,574 6,576 7,435
Book value per share (BV) (INR) 64.8 74.3 91.4 114.0

Gross margin 21.9 20.9 22.1 22.5
Staff costs 6.2 5.2 5.1 5.0 Ratios
S G & A expenses 10.4 10.1 10.0 9.9 Year to March FY17 FY18E FY19E FY20E
ROAE (%) 30.2 19.9 26.0 28.5
ROACE (%) 26.5 22.5 28.8 32.4
Adjusted RoCE (%)* 39.4 32.3 38.8 41.7
Adjusted EBIT Margin 6.6 4.5 5.7 6.3
Net Profit margins 3.1 2.6 3.4 3.9
Debtors Days 3 2 2 2
Payble Days 13 10 8 8
Cash conversion cycle (days) 14 14 12 12
Growth metrics (%)
Year to March FY17 FY18E FY19E FY20E Gross Debt/Equity 0.5 0.5 0.5 0.3
Revenues 11.0 (6.7) 17.7 18.7 Adjusted Debt/Equity 0.5 0.5 0.5 0.3
EBITDA 8.0 (0.4) 43.3 29.0 Net Debt/Equity 0.4 0.5 0.4 0.2
PBT 14.3 (3.8) 55.3 36.0 Interest Coverage Ratio 9.2 6.4 8.8 12.9
Adjusted Profit 15.1 (21.3) 55.3 36.0 Cash Conversion (%) 79.2 79.9 82.7 76.7
EPS 15.1 (21.3) 55.3 36.0

Reported Profit 668 643 999 1,358 Adjusted Diluted EPS (INR) 17.6 13.9 21.5 29.3
Add: Depreciation 378 373 451 529 Y-o-Y growth (%) 15.1 (21.3) 55.3 36.0
Less:Changes in WC 107 18 (39) 54 Price/BV (x) 12.4 10.8 8.8 7.0
Operating cash flow 1,119 1,124 1,667 1,994 EV/Sales (x) 1.4 1.5 1.3 1.1
Free cash flow (86) (176) 467 794 Dividend yield (%) 0.5 0.5 0.7 1.0

Company Profile
HINDUJA GLOBAL SOLUTIONS

Diversified offerings
Focusing on creating new skills within the company. Absolute Rating NOT RATED
Reasonable visibility in the current business; additional business will be a delta.
Wary of telecom vertical as it is a highly competitive space resulting in low margin.

The company has downsized telecom business and ramped up healthcare business.
Has set up new team to turnaround UK business, which is currently EBITDA negative. MARKET DATA (R : HGSL.BO, B: HGSL IN)
CMP : INR 934
Focus is on high cash generation and debt reduction.
Target Price : NA
Will look for acquisitions to gain new capabilities; mostly focused on digital and 52-week range (INR) : 1,012 / 490
healthcare verticals. Share in issue (mn) : 20.8
Healthcare is a key focus area; may eye near-shore UK acquisitions. Avg. Daily Vol. BSE/NSE (‘000) : 53.3
Targeting revenue growth of 10-11% along with improving profitability over the next
five years.
For winning new contracts, generally competing with Concentrix, Teleperformance, Current Q1FY18 Q4FY17
Cognizant, Genpact, etc. Promoters * 67.5 67.5 67.6
MF's, FI's & BK’s 2.2 2.0 3.0
FII's 7.3 7.9 7.4
Others 23.0 22.6 21.9

Sensex
1 month (0.1) (2.8) (2.7)
3 months 3.5 40.6 37.1
12 months 21.5 54.2 32.7
Sandip Agarwal
+91 22 6623 3474
Financials sandip.agarwal@edelweissfin.com

Pranav Kshatriya
Revenues (INR mn) 25,049 28,076 33,210 37,110 +91 22 4040 7495
Rev. growth (%) 26.3 12.1 18.3 11.7 pranav.kshatriya@edelweissfin.com
EBITDA (INR mn) 3,218 3,113 3,107 4,180
Net profit (INR mn) 1,696 1,650 1,009 1,795 Nikunj Mandowara
EPS (INR) 82.2 79.6 48.7 86.6 +91 22 4040 7431
EPS growth (%) 87.0 (3.2) (38.9) 77.9 nikunj..andowara@edelweissfin.com
Diluted P/E (x) 11.4 11.7 19.2 10.8
EV/EBITDA (x) 6.1 6.3 6.3 4.7
ROE (%) 12.6 13.1 8.9 14.2 February 9, 2018


Direct Costs 1,227 1,396 1,776 2,004 Minority Interest 0 0 (5) (4)
Employee costs 16,921 19,105 22,351 24,568 Borrowings 5,543 5,891 7,621 5,969
Other expenses 3,682 4,462 5,976 6,358 Non Current Liabilities 64 130 2,705 3,474
Total operating expenses 21,831 24,963 30,103 32,930 Deferred Tax Assets / Liabilities 297 (32) (34) (263)
Depreciation & amortisation 862 1,052 1,364 1,432 Gross block 15,356 13,332 10,645 11,431
EBIT 2,356 2,060 1,743 2,748 Depreciation 4,472 5,616 1,284 1,939
Profit before tax 2,309 1,934 1,602 2,547 Intangible assets under dev. 5.63 9.55 8.36 2.83
Provision for tax 614 284 598 755 Total fixed assets 10,903 7,751 9,504 9,810
Core profit 1,696 1,650 1,004 1,792 Investments 68 80 102 54
Profit after tax 1,696 1,650 1,004 1,792 Other Non Current Assets 1,442 1,866 4,375 4,559
PAT after minority interest 1,696 1,650 1,009 1,795 Sundry debtors 4,692 4,093 4,588 4,629
Adjusted net profit 1,696 1,650 1,009 1,795 Cash and equivalents 4,551 3,550 3,748 3,650
Adjusted EPS 82.2 79.6 48.7 86.6 Other current assets 2,640 3,358 4,406 4,525
Dividend payout (%) 24.3 25.1 30.8 11.6 Total current assets 11,833 11,001 12,742 12,805
Tax rate (%) 26.6 14.7 37.4 29.6 Sundry creditors 1,338 1,679 1,720 1,606
Other Current Liabilities 2,534 2,288 2,831 3,073
Total CL & provisions 3,872 3,967 4,551 4,679
Net current assets 8,011 7,034 8,190 8,126
Uses of funds 20,425 16,732 22,171 22,549
Adjusted BV per share (INR) 704.3 518.5 572.8 643.8

Net profit margins 6.8 5.9 3.0 4.8 Year to March FY14 FY15 FY16 FY17
ROAE (%) 12.6 13.1 8.9 14.2
ROACE (%) 13.9 12.2 10.7 14.8
Debt/EBITDA 1.7 1.9 2.5 1.4
Growth metrics (%)
Fixed assets t/o (x) 2.3 3.0 3.8 3.8
Debt/equity 0.4 0.5 0.6 0.4
Revenues 26.3 12.1 18.3 11.7
EBITDA 43.8 (3.3) (0.2) 34.6
PBT 69.7 (16.2) (17.2) 59.0
Net profit 76.9 (2.7) (38.9) 78.0
EPS 87.0 (3.2) (38.9) 77.9

Depreciation 862 1,052 1,364 1,432 Y-o-Y growth (%) 87.0 (3.2) (38.9) 77.9
Others 466 (569) 245 247 CEPS 124.1 130.4 114.2 155.4
Changes in WC (672) (221) (1,158) 603 Diluted P/E (x) 11.4 11.7 19.2 10.8
Less: Capex (1,532) (1,621) (2,518) (1,806) EV/Sales (x) 0.8 0.7 0.6 0.5
Free cash flow 819 292 (1,059) 2,270 EV/EBITDA (X) 6.1 6.3 6.3 4.7

Company Profile
HINDUSTAN UNILEVER
Brand power
India Equity Research l Consumer Goods

Rural growth was better than urban in Q3FY18. However, this was aided by soft Absolute Rating HOLD
base. On trend basis, it’s too early to draw a conclusion that rural growth is surpassing Rating Relative to Sector Performer
urban counterpart. Risk Rating Relative to Sector Low
Sector Relative to Market Underweight
Trade conditions have started normalising. Gradual improvement in demand seen
across all categories. Still early days to call out definite positive trend in demand.
Will continue to ensure that consumer’s price + value proposition remain.
MARKET DATA (R : HLL.BO, B: HUVR IN)
Reduction in GST rate has led to price cuts in mass products. MRP of premium CMP : INR 1,333
products has not been reduced across the board to the extent of GST rate cut. Target Price : INR 1,518
52-week range (INR) : 1,405 / 839
Indulekha brand has now been extended to include Indulekha Bringha shampoo, Share in issue (mn) : 2,164.5
an Ayurvedic Medicine for Hairfall; this category has done much better than M cap (INR bn/USD mn) : 2,885 / 44,832
expected. When HUL bought had the brand, it had decided that if the category Avg. Daily Vol. BSE/NSE (‘000) : 1,327.1
performs well only then will it venture into the shampoo category.
Lever Ayush has done well in most geographies. Performance has been encouraging.
Lever Ayush contributes minuscule proportion to overall revenue. More optimistic
on Ayush than Citra. MoM growth rate of Ayush category has been improving. Current Q1FY18 Q4FY17
Promoters * 67.2 67.2 67.2
For the past three years, HUL has been able to save cost of 6% of revenue. MF's, FI's & BK’s 6.3 5.6 5.7
FII's 12.9 13.5 13.3
Consolidation of depots will come over a period of time. Others 13.6 13.8 13.9
HUL is a play on consumption growth in India. The company has proved its ability
to effect price hikes and grow ahead of market, which, combined with improved
outlook for S&D and personal care and strong growth in processed foods & PRICE Performance (%)
beverages, boosts our positive outlook on the company. We like its revenue growth
Stock Nifty EW Consumer
from a medium to long term perspective. Commodity price correction will aid Goods Index
gross margin expansion, though we expect partial benefit to be passed on to 1 month (2.3) (0.6) (2.0)
customers through promotional offers/select price cuts. We expect higher 3 month 6.8 0.4 1.6
investment in A&P to support brand equity and counter pick up in competitive 12 month 54.0 19.3 16.9
intensity (especially from regional players). However, with an anticipated recovery
in urban demand and commodity correction to aid EBITDA margin expansion, we
expect HUL to potentially benefit. We maintain ‘HOLD/SP’.
Abneesh Roy
Financials +91 22 6620 3141
abneesh.roy@edelweissfin.com
Revenues (INR mn) 323,670 353,296 388,796 431,891 Alok Shah
Rev. growth (%) 2.9 9.2 10.0 11.1 +91 22 6620 3040
EBITDA (INR mn) 63,400 74,595 86,787 99,566 alok.shah@edelweissfin.com

Rajiv Berlia
+91 22 6623 3377
EPS growth (%) 1.8 25.3 15.1 13.7 rajiv.berlia@edelweissfin.com
Diluted P/E (x) 67.7 54.0 46.9 41.3
EV/EBITDA (x) 44.7 38.0 32.6 28.4
ROAE (%) 63.8 75.9 80.4 83.8 February 9, 2018


Share capital 2,164 2,164 2,164 2,164
Year to March FY17 FY18E FY19E FY20E Reserves 65,280 70,861 77,287 84,591
Other operating income 7,950 7,990 8,229 8,641 Minority Interest 220 346 484 638
Total operating income 331,620 361,286 397,026 440,532 Short term borrowings 2,770 2,770 2,770 2,770
Cost of materials 163,130 171,080 186,366 205,722 Total Borrowings 2,770 2,770 2,770 2,770
Gross profit 168,490 190,206 210,659 234,810 Long term liabilities & prov. 12,260 12,260 12,260 12,260
Employee costs 17,430 18,787 20,248 22,467 Deferred tax liability (net) (1,700) (1,700) (1,700) (1,700)
Advertisement costs 35,420 40,103 42,879 46,256 Sources of funds 80,994 86,701 93,265 100,723
Others 52,240 56,722 60,745 66,520 Gross Block 74,730 81,730 88,730 95,730
EBITDA 63,400 74,595 86,787 99,566 Net Block 39,680 42,143 44,199 45,850
Depreciation 4,320 4,537 4,943 5,349 Capital work in progress 2,290 2,700 2,700 2,700
Interest Expense 350 250 225 225 Total Fixed Assets 46,480 49,353 51,409 53,060
Other income 3,690 5,622 5,843 6,121 Non current investments 60 60 60 60
Minority interest 0 126 138 154 Sundry Debtors 10,850 13,858 15,228 16,897
Exceptional Items (Net of Tax) 2,370 0 0 0 Loans & Advances 4,590 4,590 4,590 4,590
Reported Profit 45,020 53,429 61,522 69,925 Other Current Assets 11,814 11,814 11,814 11,814
Adjusted Profit 42,650 53,429 61,522 69,925 Total Cur. Assets (ex cash) 52,664 58,853 63,800 68,810
No. of Shares outstanding 2,164 2,164 2,164 2,164 Trade payable 61,860 60,932 66,377 73,271
Adjusted Basic EPS 19.7 24.7 28.4 32.3 Other current liab. & prov. 12,510 12,510 12,510 12,510
No. of Dil. shares outstanding 2,165 2,165 2,165 2,165 Total Current Liab. & Prov. 74,370 73,442 78,887 85,781
Adjusted Diluted EPS 19.7 24.7 28.4 32.3 Net Current Assets (ex cash)(21,706) (14,589) (15,087) (16,971)
Dividend per share (DPS) 16.5 18.5 21.3 24.2 Book Value per share (INR) 31.2 33.7 36.7 40.1

Employee costs 5.4 5.3 5.2 5.2 Ratios
Advertising costs 10.9 11.4 11.0 10.7 Year to March FY17 FY18E FY19E FY20E
Other expenditure 16.1 16.1 15.6 15.4
ROAE (%) 63.8 75.9 80.4 83.8
Pre-tax ROCE (%) 90.9 103.3 110.4 116.1
EBITDA margin 19.6 21.1 22.3 23.1
EBIT margin 18.3 19.8 21.1 21.8
Payble Days 133 130 130 130
Growth metrics (%) Net Debt/Equity (0.8) (0.7) (0.7) (0.7)
Year to March FY17 FY18E FY19E FY20E Interest Coverage Ratio 168.8 280.2 363.8 418.7
Revenues 2.9 9.2 10.0 11.1
EBITDA 5.3 17.7 16.3 14.7
Profit Before Tax 2.8 20.8 16.0 14.5
Adjusted profit 1.8 25.3 15.1 13.7
EPS 1.8 25.3 15.1 13.7

Add: Depreciation 4,320 4,537 4,943 5,349 Y-o-Y growth (%) 1.8 25.3 15.1 13.7
Others (4,669) 198 205 221 Diluted P/E (x) 67.7 54.0 46.9 41.3
Less: Changes in WC (8,650) 7,116 (498) (1,884) Price to Book Ratio (P/B) (x) 42.8 39.5 36.3 33.3
Free Cash Flow 38,560 43,816 60,327 70,538 Dividend Yield (%) 1.2 1.4 1.6 1.8

Company Profile
ICICI PRUDENTIAL LIFE INSURANCE

First among unequals
India Equity Research l Banking and Financial Services
Operating metrics: (1) 9mFY18 APE growth was 25% with protection APE growth at Absolute Rating NOT RATED
32% YoY (good business growth across business lines). Management expects growth
in protection business to sustain; (2) NBAP margins reported for 9mFY18 @ 13.7%
were largely a reflection of product mix & cost structures; incremental levers for
margin improvement are: a) protection growing faster than savings will feed into
higher margin; b) persistency 13th month is at 86% while in assumptions it is 82%,
so as it comes for review it will boost margin; and c) also, long-term persistency MARKET DATA (R : NA, B: IPRU IN)
itself is expected to structurally improve; (3) solvency trajectory has three elements CMP : INR 415
playing out: a) dividend payout at 60%; b) savings business is gaining traction & Target Price : NA
consuming capital; c) growth in protection business - capital for whole sum assured 52-week range (INR) : 507 / 337
& since premium is low, capital for same amount of premium is high; (4) most of Share in issue (mn) : 1,435.5
the protection business comes from retail - credit linked was merely INR0.38bn, of M cap (INR bn/USD mn) : 569 / 9,258
INR2bn of protection business. Avg. Daily Vol. BSE/NSE (‘000) : 1,269.2
Overall business: Key objectives: a) Customer-centric products (ULIP+ protection

contributes 87.0% to total APE); and b) focus on retail through multi-channel
distribution architecture backed by strong technology platform. Wider direct
market operates in two segments - web aggregator (fee based model - no spend on
Promoters * 80.7 80.7 80.7
advertising) and company website (needs to do advertisements to direct traffic).
MF's, FI's & BK’s 3.5 3.4 3.3
50-60% business through web aggregators. For ICICI Prudential Life, one more
FII's 5.6 6.2 6.0
element in direct business is own direct employee selling insurance. Any cost
Others 10.2 9.6 10.0
efficiency resulting due to direct sourcing will be passed on as a benefit to the * Promoters pledged shares : Nil
customer. (% of share in issue)
Other highlights: (1) Since headline rate for insurance companies at 12.5% is
lower than prevailing corporate tax rate, the risk of increase in tax rate prevails. PRICE Performance (%)
However, how much it will be raised will depend on several factors; (2) in the short Sensex Stock Stock Over
term, insurance products are more expensive than MFs, but in the long term they Sensex
are at par or better than mutual funds; (3) 55-60% of assets get allocated to equity 1 month (0.1) 0.6 0.7
in ULIP & balance to debt funds. Insurance products help customers switch over 3 months 3.5 10.3 6.8
across asset class without tax implications. 12 months 21.5 17.1 (4.4)
Financials (INR bn) Kunal Shah

+91-22- 4040 7579
Year to March FY14 FY15 FY16 FY17 kunal.shah@edelweissfin.com
APE 33,326 46,491 51,085 64,965
APE growth (%) (21.5) 39.5 9.9 27.2 Prakhar Agarwal
Surplus 5,871 5,651 13,421 10,738 +91 22 6620 3076
PAT 15,667 16,344 16,501 16,817 prakhar.agarwal@edelweissfin.com
P/EV NA 4.3 4.3 3.7

RoEV (%) NA 17.4 0.8 16.1 February 9, 2018


Liabilities
Year to March FY14 FY15 FY16 FY17 Net worth 49,818 52,667 53,233 64,060
First year premium 32,852 45,732 49,244 63,446 Policyholders' funds: 746,242 932,657 965,784 1,148,941
Renewal premium 86,691 99,745 123,986 144,907 -Prov. for linked liab. 591,374 724,775 719,903 839,365
Single premium 4,744 7,590 18,414 15,187 Funds for future approp. 5,040 5,275 6,619 6,042
NBP 37,596 53,321 67,658 78,633 Total 801,101 990,599 1,025,637 1,219,043
APE 33,326 46,491 51,085 64,965 Assets
GWP 124,286 153,066 191,644 223,540 Investments
NWP 122,827 151,604 189,987 221,552 -Shareholders' 53,528 58,552 62,124 66,349
Income from invst. 92,082 187,244 12,084 149,769 -Policyholders' 144,567 188,580 215,156 270,674
Other Income 1,119 594 209 608 -Linked assets 603,104 747,775 752,958 878,783
Total income 216,028 339,443 202,279 371,930 Fixed assets 2,015 2,151 2,196 2,138
Commissions 6,275 5,532 6,200 7,589 Net current assets (8,136) (6,661) (7,240) 292
Operating expenses 19,265 19,652 22,526 27,860 Others 134 202 443 807
Provision for tax - FBT 437 504 704 788 De. bal. in sh.hold. a/c 5,888 0 0 0
Exp. (incl commissions) 25,978 25,688 29,430 36,238 Total 801,101 990,599 1,025,637 1,219,043
Benefits paid (net) 120,741 122,457 124,087 149,644
Interim Bonus Paid 93.77 116.391 187.411 334.664
Change in liab. (net) 56,617 179,561 35,155 174,976
Surplus 5,871 5,651 13,421 10,738
Tr. to Shareholders' a/c 12,642 11,386 12,076 11,315
Bal. being FFA-sh. holders' (42) 234 1,344 (577)
Key ratios (%) Combined ratios (%)

APE growth (21.5) 39.5 9.9 27.2 AUM (INR mn) 801,199 994,907 1,030,238 1,215,806
-FYP growth (21.5) 39.2 7.7 28.8 RONW 31.0 31.9 31.2 28.7
-Single growth (24.0) 60.0 142.6 (17.5) Invst. yield on sh/folder 7.0 9.6 10.0 10.4
GWP growth (8.2) 23.2 12.8 17.0 Ben. paid/Lagged AUM 16.4 15.3 12.5 14.5
-Renewal growth (0.7) 15.1 24.3 16.9
Conservation 67.1 83.4 85.2 83.6
Commission ratio 3.6 3.2 3.4 3.4
Opex ratio 15.5 12.8 11.8 12.5
Shareholders’ account
Tr. frm policyholders a/c 12,642 11,386 12,076 11,315
Income from invst. 3,711 5,364 6,019 6,956 Year to March FY14 FY15 FY16 FY17
Contrib. to pol.hol. fund 947 415 - 18 Price /EV (x) NA 4.3 4.3 3.7
PBT 15,292 15,854 17,713 17,844 ROEV (%) NA 17.4 0.8 16.1
Provision for taxation (374) (490) 1,212 1,028 ROA (%) NA 1.8 1.6 1.5
PAT 15,667 16,344 16,501 16,817 ROE (%) NA 31.9 31.2 28.7

Company Profile
INFO EDGE
Long-term play
Recruitment business: Naukri Absolute Rating BUY

Slowdown in IT hiring impacted hirings in Bengaluru; excluding IT, the billings Rating Relative to Sector Performer
growth in Naukri would have been 16-17%; BFSI hirings have been decent. Risk Rating Relative to Sector Medium
Naukri Gulf posted decent quarter (after long time); revenue jumped 12% and
billings grew 9% YoY.
Advertisement expense will stay high in next quarter as launched new ad campaign MARKET DATA (R : INED.BO, B: INFOE IN)
during the quarter. CMP : INR 1,294
Real estate business: 99Acres 52-week range (INR) : 1,457 / 796
Seeing traction in 99acres business as Q3FY18 billings grew 54% YoY. Share in issue (mn) : 121.5
Traffic share stood at ~48% during the quarter, 40% higher than nearest competitor
in terms of time spent. Real estate market continues to be sluggish; however, saw
some improvement on account of more clarity on RERA. The company does not
expect a hockey stick recovery, but is confident of slow and steady recovery.
Sensing slow, but sustained, recovery in all markets driven by affordable housing.
Promoters * 41.5 42.0 42.4
Other highlights
MF's, FI's & BK’s 14.9 13.4 13.0
Can become EBITDA positive in 99acres, Jeevansathi and Shiksha businesses;
FII's 32.6 33.5 33.3
however, the target is to grow these businesses. Others 10.9 11.1 11.3
Will continue to invest aggressively in 99acres, Jeevansathi and Shiksha * Promoters pledged shares : Nil
businesses to consolidate leadership position as internet business is a winner-
takes–it-all play. In Jeevansathi, though Info Edge is not the dominant player, it
has highest growth rate.
Ustraa investment: Perceives huge potential in men’s grooming industry.
Stock Nifty EW IT
Index
1 month (14.6) (0.6) 8.2
We believe, IEL is best placed to capture opportunities arising from growing digital 3 month 2.5 0.4 15.6
penetration led by burgeoning smartphone and mobile broadband penetration. 12 month 45.0 19.3 24.8
Along with leadership in online recruitment and real-estate businesses, IEL’s
diversified portfolio also mitigates risk of investing in the internet sector, where
the winner takes it all. Jeevansaathi and Shiksha have large addressable markets
and huge value unlocking potential. We maintain ‘BUY/SP’.
Financials Sandip Agarwal
+91 22 6623 3474
Year to March FY16 FY17 FY18E FY19E sandip.agarwal@edelweissfin.com
Net revenue 7,176 8,021 9,231 10,915
Rev. growth (%) 17.4 11.8 15.1 18.2 Pranav Kshatriya
EBITDA 1,355 2,275 3,236 3,875 +91 22 4040 7495
Adjusted Profit 1,251 2,045 2,923 3,460
Basic shares outstanding (mn) 121.8 120.4 122.7 122.7
Nikunj Mandowara
Adjusted diluted EPS (INR) 10.3 17.0 23.8 28.2
+91 22 4040 7431
EPS Growth (%) (24.0) 65.3 40.3 18.4 nikunj..andowara@edelweissfin.com
Diluted P/E (x) 125.9 76.2 54.3 45.9
EV/EBITDA (x) 107.6 62.0 43.4 35.6
ROAE (%) 7.5 13.2 17.3 17.9 February 9, 2018 February 9, 2018


Share capital 1,207 1,211 1,211 1,211
Net revenue 7,176 8,021 9,033 10,789 Shareholders' funds 15,416 15,924 17,927 20,226
Cost of revenues 3,584 3,924 4,134 4,909 Minority Interest (177) (154) (154) (154)
Total SG&A expenses 2,237 1,822 1,905 2,352 Total Borrowings 4 4 4 4
S&M expenses 1,318 881 931 1,165 Def. Tax Liability (net) (513) (269) (269) (269)
G&A expenses 918 941 974 1,187 Sources of funds 14,730 15,505 17,509 19,807
EBITDA 1,355 2,275 2,994 3,528 Gross Block 1,017 1,398 1,498 1,648
Depreciation 210 241 227 247 Net Block 763 626 498 401
Add: Other income 785.02 625.23 915.67 965.63 Intangible Assets 57 655 655 655
Less: Interest Expense 1 - - - Total Fixed Assets 824 1,291 1,253 1,206
Profit Before Tax 1,930 2,660 3,682 4,246 Non current investments 6,902 3,866 4,252 4,677
Less: Provision for Tax 564 575 975 1,104 Cash and Equivalents 10,464 14,052 16,094 18,399
Reported Profit 1,366 2,085 2,707 3,142 Sundry Debtors 126 85 99 118
Exceptional Items 115 40 - - Loans & Advances 239 754 754 754
Adjusted Profit 1,251 2,045 2,707 3,142 Other Current Assets 177 209 223 239
Shares o /s (mn) 121 120 121 121 Current Assets (ex cash) 542 1,047 1,074 1,109
Adjusted Basic EPS 10.3 17 22.4 26 Trade payable 366 563 607 619
Diluted shares o/s (mn) 122 120 122 122 Other Current Liab 3,636 4,188 4,558 4,966
Adjusted Diluted EPS 10.3 17 22.1 25.7 Total Current Liab 4,002 4,751 5,165 5,585
Adjusted Cash EPS 12.1 19.1 24.2 28 Net Curr Assets-ex cash (3,460) (3,704) (4,091) (4,476)
Dividend per share (DPS) 3 4.5 4.9 5.9 Uses of funds 14,730 15,505 17,509 19,807
Dividend Payout Ratio(%) 30.8 30.4 26 26.9 BVPS (INR) 126.6 132.3 146.5 165.2

Cost of revenues 49.9 48.9 45.8 45.5
Gross margin 50.1 51.1 54.2 54.5
Ratios
G&A expenses 12.8 11.7 10.8 11
S&M expenses 18.4 11.0 10.3 10.8
SG&A expenses 31.2 22.7 21.1 21.8 ROAE (%) 7.5 13.2 16.1 16.6
EBITDA margins 18.9 28.4 33.1 32.7 ROACE (%) 11.5 17.1 22.0 22.4
EBIT margins 16.0 25.4 30.6 30.4 Debtors Days 9 5 4 4
Net Profit margins 17.4 25.5 30.0 29.1 Payable Days 75 43 52 46
Growth metrics (%)

Revenues 17.4 11.8 12.6 19.4
EBITDA (25.5) 67.8 31.6 17.8
PBT (27.9) 37.8 38.5 15.3
Adjusted Profit (24.0) 63.5 32.4 16.1
EPS (24.0) 65.3 30.2 16.1

Interest (Net of Tax) (22) - - - Y-o-Y growth (%) (24.0) 65.3 40.3 18.4
Others (1,305) (436) (917) (967) Adjusted Cash EPS (INR) 12.1 19.1 25.9 30.5
Less: Changes in WC (533) (244) (387) (385) Diluted P/E (x) 125.9 76.2 54.3 45.9
Operating cash flow 782 2,133 2,405 2,808 Price to Book Ratio (P/B) (x) 10.2 9.8 8.7 7.6
Less: Capex 332 155 189 199 Enterprise Value / Sales (x) 20.3 17.6 15.2 12.6
Free Cash Flow 449 1,977 2,216 2,609 Enterprise Value / EBITDA (x) 107.6 62.0 43.4 35.6

Company Profile
INSECTICIDES INDIA
Emerging force
India Equity Research l Fertilisers
Products Absolute Rating NOT RATED

• Insecticides India is looking to launch five 9(3) products every year over the
next five-six years.
• It is also looking to launch one biological product p.a.
• The new 9(3) launches will be a combination of tie-ups and formulation mix.
MARKET DATA (R : ISIL.BO, B: INST IN)
• Glyphosate was a major technical two years ago. At its peak, it contributed CMP : INR 812
more than INR1bn. Target Price : NA
52-week range (INR) : 965 / 515
• Green Label: Currently, the company is clocking INR1bn revenue, of which
INR300-400mn is from own brands. M cap (INR bn/USD mn) : 17 / 261
Product rationalisation plans
• Currently, the company has 125 products and is looking at pruning the number
to 75 including new launches (~5 each year).
• The company currently works in some generic products where gross margins Current Q1FY18 Q4FY17
are less than 20%. It is these products that the company will first let go of. It is Promoters * 68.7 68.7 68.7
looking at a two-year time line to prune such products. MF's, FI's & BK’s 11.2 11.4 12.2
FII's 3.9 4.9 4.2
• Insecticides India has already selected 30 products which will be discontinued Others 16.1 14.9 14.9
in the next two years. * Promoters pledged shares : Nil
• On an average, it is targeting gross margin of at least 50%.
Tie-up with OAT

• In its tie up with OAT, Insecticides India will bring the process capability,
whereas OAT will bring the innovation/R&D.
Sensex
1 month (0.1) (4.1) (4.0)
Guidance:
3 months 3.5 (5.6) (9.1)
• Capex: Insecticides India has enough capacity. It can grow 50-75% without
12 months 21.5 43.3 21.8
capex.
• Formulation mixing products are medium term products.
Financials Rohan Gupta

+91 22 4040 7416
rohan.gupta@edelweissfin.com
EBITDA (INR mn) 817.6 1,110.1 919.8 1,147.2 Nihal Mahesh Jham
Adj. profit (INR mn) 399 548 396 584 +91 22 6623 3352
Adj. diluted EPS (INR) 31 43 19 28 nihal.jham@edelweissfin.com
Diluted P/E (x) 26 19 42 29
EV/EBITDA (x) 15.5 12.0 20.3 16.5
RoACE (%) 16.3 26.7 12.4 15.3 February 9, 2018


Raw material costs 5,371 5,837 6,085 6,699 Long term Borrowings 302 537 280 153
EBITDA 818 1,110 920 1,147 Deferred Tax Liability (net) 133 153 174 202
EBIT 751 964 755 983 Gross Block 1,841 2,335 2,428 2,474
Profit Before Tax 487 639 503 804 Intangible Assets 35 28 31 45
Reported Profit 399 548 396 584 Non current investments 111 31 31 31
Adjusted Profit 399 548 396 584 Cash & bank balances 90 86 121 125
No. of Shares outstanding (mn) 13 13 21 21 Inventories 3,117 3,914 3,506 4,258
Adjusted Basic EPS 31.5 43 19 28 Sundry Debtors 1,279 1,668 2,077 2,146
No. of dil. shares OS (mn) 12.7 12.7 20.7 20.7 Loans & Advances 977 959 1,049 993
Adjusted Diluted EPS 31.5 43.2 19.1 28.2 Other Current Assets 97 71 83 68
Adjusted Cash EPS 36.7 56.3 28.1 37.5 Total Current Assets (Ex Cash) 5,470 6,612 6,715 7,466
Dividend per share 3.0 3.7 2.0 - Trade payable 2,036 2,100 2,111 1,968
Dividend Payout Ratio (%) 0.1 0.1 0.1 - Other Current Liab. & ST Prov. 653 780 859 823
Total Current Liab. & Prov. 2,689 2,880 2,971 2,791
Uses of funds 5,220 6,323 6,393 7,303
Common size metrics as % of net revenues Book value per share (BV) (INR) 194 229 198 226
Staff costs 3.4 3.6 4.1 4.0
S G & A expenses 25.0 24.4 25.0 25.2
Interest Expense 3.1 3.4 2.6 1.8 Ratios
RoAE (%) 17.4 28.0 11.3 13.3
RoACE (%) 16.3 26.7 12.4 15.3
Payble Days 114 80 126 111
Growth metrics (%) Cash conversion cycle (days) 121 111 165 170
Year to March FY14 FY15 FY16 FY17 Current Ratio 2.1 2.3 2.3 2.7
Revenues 40.1 266.0 2.4 12.1 Gross Debt/EBITDA 3.2 2.9 2 2
EBITDA 19.9 314.5 (17.1) 24.7 Gross Debt/Equity 1.0 1.1 0.5 0.5
PBT 4.9 162.4 (21.2) 59.8 Net Debt/Equity 1.0 1.1 0.5 0.5
Net profit 13.1 162.6 (27.8) 47.5 Interest Coverage Ratio 2.8 2.9 2.9 4.9
EPS 13.1 162.6 (55.7) 47.5

Add: Depreciation 67 146 165 164 Y-o-Y growth (%) 13.1 162.6 (55.7) 47.5
Others (59) (38) (31) 62 Diluted P/E (x) 25.7 18.7 42.3 28.7
Operating cash flow 377 (55) 859 8 EV/Sales (x) 1.5 1.4 1.9 1.7
Less: Capex (459) 348 191 144 EV/EBITDA (x) 15.5 12.0 20.3 16.5
Free cash flow 835 (404) 668 (136) Dividend yield (%) 0.4 0.5 0.2 0.0

Company Profile
KEC INTERNATIONAL
Scaling up
Order book of INR170bn: 74% is T&D, 24% railways. INR50bn is India T&D, of Absolute Rating BUY
which 45% is PGCIL, while Essel Infra accounts for 20%. Profitability in India and Rating Relative to Sector Performer
exports is broadly same. Risk Rating Relative to Sector Medium
General retention is 5-10%, except Saudi where it is 20%.
McKenzie was roped in a few years ago to help KEC devise strong process and
mechanism. This has helped deliver most projects either ahead or on time, driving MARKET DATA (R : KECL.BO, B: KECI IN)
better profitability as well better cash flow. CMP : INR 358
Railway
52-week range (INR) : 395 / 145
• KEC’s scope includes: OHL electrification and composite projects. In INR10 Share in issue (mn) : 257.1
mn/km OHL job, KEC’s scope is 60% and the average ticket size is INR1-3bn. The M cap (INR bn/USD mn) : 92 / 1,428
company has started manufacturing towers for railways with a nominal Avg. Daily Vol. BSE/NSE (‘000) : 796.7
INR50mn capex with more than INR1.5bn revenue potential. It competes with
Kalpataru, Tata Projects, L&T and Kalindee Rail for the composite business.
• Of the total 4,500km electrification done by Indian Railways last year, KEC had Share Holding Pattern (%)
25% share. Next year target stands at 6,000km and 8,000km thereafter. Current Q1FY18 Q4FY17
Promoters * 51.0 50.9 50.9
• Railway is still a mid-single digit EBITDA margin business with revenue of
MF's, FI's & BK’s 20.4 23.6 26.4
~INR7.5bn. FY19/20 is targeted to post INR15/20bn with much better profitability
FII's 10.3 7.2 6.1
given that the company has already built competitiveness in the railway
Others 18.3 18.3 16.7
business. KEC expects railway OPMs to merge in line with T&D.
• SAE business: KEC is planning to leverage tower manufacturing and is taking (% of share in issue)
EPC jobs to tap growth potential. Given that Brazil is a closed market, the
company’s in-house plant provides significant competitive advantage.
Investment conclusion Stock Nifty EW Capital
Strong 20% EPS growth over the next two years with stable margin of 9.5%. Goods Index
1 month (6.9) (0.6) (3.5)
KEC, over the past two years, has moved from being a mere TLT EPC contractor to a 3 month 9.9 0.4 3.6
sub-station player now, thus improving its addressable market opportunity. 12 month 126.1 19.3 26.2
With strong impetus on T&D spend by select states and PGCIL, the bid pipeline for
KEC remains healthy at INR120bn over the next two-three quarters.
Moving up the scale, the company is targeting higher ticket size projects in railways
EPC, solar and civil infra space, which could help it achieve higher growth rate. Swarnim Maheshwari
We maintain ‘BUY/SP’. +91 22 4040 7418
Financials (Consolidated) swarnim.maheshwari@edelweissfin.com
Year to March FY16 FY17 FY18E FY19E Amit Mahawar

Revenues (INR mn) 85,178 85,844 97,856 112,992 +91 22 4040 7451
amit.mahawar@edelweissfin.com
Rev. growth (%) 0.6 0.8 14.0 15.5
EBITDA (INR mn) 6,923 8,179 9,786 11,641
Ashutosh Mehta
Net profit (INR mn) 1,479 3,048 4,250 5,065 +91 22 6141 2748
EPS (INR) 5.8 11.9 16.5 19.7 ashutosh.mehta@edelweissfin.com
EPS growth (%) (8.2) 106.1 39.4 19.2
P/E (x) 62.2 30.2 21.6 18.1

Financial Statements (Consolidated) Balance sheet (INR mn)

Direct costs 61,798 59,489 69,205 79,671 Secured loans 30,229 20,082 21,082 22,082
Employee costs 6,392 7,327 7,311 8,373 Long Term Liabilities & Provisions203 349 349 349
Other expenses 10,064 10,849 11,073 12,557 Sources of funds 43,335 36,295 40,526 45,598
Total operating expenses 78,255 77,665 87,589 100,602 Gross block 17,351 17,968 18,819 19,670
EBITDA 6,923 8,179 9,264 10,765 Depreciation 5,374 6,893 8,203 9,579
Depreciation & amortisation 1,318 1,297 1,310 1,376 Net block 11,977 11,075 10,616 10,091
Interest expenses 2,794 2,536 2,532 2,704 Total fixed assets 12,061 11,126 10,682 10,172
Other income 103 289 137 187 Inventories 3,602 3,947 4,397 5,027
Profit before tax 2,914 4,634 5,559 6,872 Sundry debtors 47,066 42,268 49,268 56,660
Provision for tax 1,436 1,587 1,958 2,430 Cash and equivalents 1,107 3,384 2,684 3,469
Core profit 1,479 3,048 3,601 4,443 Other current assets 23,592 25,882 30,228 35,320
Profit after tax 1,479 3,048 3,601 4,443 Total current assets 75,366 75,480 86,577 100,476
PAT after minority interest 1,479 3,048 3,601 4,443 Sundry creditors and others 34,625 38,850 43,988 50,640
Adjusted net profit 1,479 3,048 3,601 4,443 Provisions 9,489 10,410 11,695 13,358
EPS (INR) basic 5.8 12 14 17 Total CL & provisions 44,114 49,261 55,683 63,998
Diluted equity shares (mn) 257 257 257 257 Net current assets 31,252 26,220 30,895 36,477
Dividend payout (%) 20.9 12.1 10.3 8.3 Net deferred tax 22 (1,052) (1,052) (1,052)
Tax rate (%) 49.3 34.2 35.2 35.4 Uses of funds 43,335 36,295 40,526 45,598

Net profit margins 1.7 3.6 3.7 4.0 Year to March FY16 FY17 FY18E FY19E
ROAE (%) (on adjusted profits) 11.3 21.2 20.6 21.0
ROACE (%) 14.8 18.1 21.3 22.4
Debtors days 183 190 172 174
Growth metrics (%) Payable days 200 225 218 217
Year to March FY16 FY17 FY18E FY19E Cash conversion cycle 8 (12) (24) (22)
Revenues 0.6 0.8 12.8 15.0 Current ratio 1.7 1.5 1.6 1.6
EBITDA 35.3 18.1 13.3 16.2 Debt/EBITDA 4.4 2.5 2 2
PBT 11.6 59.0 19.9 23.6 Interest coverage 2.0 2.7 3.1 3.5
Net profit (8.2) 106.1 18.2 23.4 Fixed assets t/o (x) 6.9 7.4 8.9 10.8
EPS (8.2) 106.1 18.2 23.4 Debt/equity 2.3 1.3 1.1 1.0

Net profit 1,479 3,048 3,601 4,443 Year to March FY16 FY17 FY18E FY19E
Depreciation 1,318 1,297 1,310 1,376 Diluted EPS (INR) 5.8 11.9 16.5 19.7
Others 3,385 3,570 (3,432) (4,102) CEPS (INR) 10.9 17.8 21.3 24.9
Less:Changes in WC 8,352 (7,034) 1,051 (261) Price/BV(x) 7.1 5.8 4.7 3.8
Operating cash flow (753) 16,616 2,068 3,726 EV/Sales (x) 1.4 1.3 1.1 1.0
Free cash flow (988) 15,946 1,202 2,860 Dividend yield (%) 0.3 0.3 0.3 0.3

Company Profile
KEI INDUSTRIES
Potent growth catalysts intact
KEI’s average utilisation stands at 83%. Absolute Rating BUY

Rating Relative to Sector Outperformer
Retail business: Retail is targeted to reach more than 40% of sales over two-three Risk Rating Relative to Sector Low
years driving better cash flows for the company. For retail wire, KEI competes with Sector Relative to Market Overweight
Finolex, RR Kabel, Polycab, etc. The company has 7-8% retail market share retail
wire & cables market.
EHV: EHV sector is witnessing strong orders and is already running around 85% MARKET DATA (R : KEIN.BO, B: KEII IN)
capacity utilisation. KEI is L1 in a large INR1.5bn job for HPCL. EHV has INR15bn CMP : INR 382
annual market size, 50% of which is imported and most of the balance market is Target Price : INR 550
catered to by KEI and Universal Cables. KEI will get pre-qualified for 400kv once 52-week range (INR) : 423 / 133
type test approvals come by FY19E. Share in issue (mn) : 78.4
Exports: Exports market has 11-12% margin and is likely to grow 15-20% annually
over two-three years and is adding two-three new geographies p.a.
EPC: EPC business is the highest margin segment for KEI and has been built
organically with pre-qualifications built over past five-seven years. EPC business Share Holding Pattern (%)
is now well diversified across six-eight states versus only UP and Bihar historically. Current Q1FY18 Q4FY17
Annual net dealer addition is around 100 and more than 15-20% are exclusive to Promoters * 46.3 46.6 46.6
KEI. The company expects to repay INR550-600mn debt annually over next two- MF's, FI's & BK’s 13.0 18.6 18.7
FII's 6.4 4.0 4.3
three years. KEI has a strong hold in North India and is developing markets in East
Others 34.4 30.8 30.4
and West India.
Till FY10, margin in insti business was 10-11%, which has dipped due to rising (% of share in issue)
competition and low demand. With improving demand prospects, this is likely to
improve over two-three years.
Metro, railway, refinery, airport, etc., are likely to stay buoyant over three-five
years. Cables and wires has 3-4% share of overall capex in any infra job, while it Stock Nifty EW Capital
Goods Index
is 15-20% in T&D project.
1 month (99.1) (0.6) (3.5)
Investment conclusion 3 month 13.3 0.4 3.6
12 month 140.3 19.3 26.2
Housing For All and improving power availability, in our view, will be key drivers of
the domestic cables & wires industry. With the government sharpening focus on
power generation, transmission and distribution, demand for cables as part of
T&D equipment is expected to expand significantly. We maintain ‘BUY/SO’.
Amit Mahawar
+91 22 4040 7451
Financials (Consolidated) amit.mahawar@edelweissfin.com
Year to March FY16 FY17 FY18E FY19E Darshika Khemka

Revenues (INR mn) 22,929 26,312 33,069 40,707 +91 22 4063 5544
Growth (%) 13.6 14.8 25.7 23.1 darshika.khemka@edelweissfin.com
EBITDA (INR mn) 2,423 2,743 3,270 4,124

Ashutosh Mehta
Adjusted profit (INR mn) 622 986 1,321 1,758
+91 22 6141 2748
Diluted EPS ( INR) 8.1 12.8 17.1 22.8 ashutosh.mehta@edelweissfin.com
Growth (%) 96.7 58.6 34.0 33.0
Diluted P/E (x) 47.5 29.9 22.3 16.8
ROAE ( %) 18.6 23.5 24.7 25.8 February 9, 2018 February 9, 2018


Direct cost 16,743 18,855 23,264 28,683 Long term borrowings 1,881 1,641 1,641 1,641
Employee cost 828 1,109 1,408 1,672 Short term borrowings 2,490 4,898 5,048 5,198
Total operating expenses 20,506 23,569 29,798 36,583 Long Term Liab. & Provisions 40 51 51 51
EBITDA 2,423 2,743 3,270 4,124 Deferred Tax (Net) 362 427 427 427
Depreciation & amortisation 253 280 330 371 Sources of funds 8,440 11,752 13,144 14,947
EBIT 2,170 2,463 2,940 3,753 Gross block 4,995 6,082 6,732 7,132
Interest expense 1,270 1,229 1,091 1,150 Depreciation 1,716 1,996 2,326 2,697
Other income 53 104 109 41 Net block 3,279 4,086 4,406 4,435
Profit before tax 953 1,338 1,958 2,644 Capital work in progress 293 0 0 0
Provision for tax 331 351 636 886 Non Current Investments 31 31 31 31
Reported profit 622 986 1,321 1,758 Inventories 4,225 4,990 5,904 7,157
Adjusted Profit 622 986 1,321 1,758 Sundry debtors 5,674 7,392 9,150 10,930
Equity shares outstanding (mn) 7 7 77 77 77 Cash and cash equivalents 59 369 218 742
EPS (INR) basic 8 13 17 23 Loans and advances 865 945 992 1,042
Diluted shares (mn) 77 77 77 77 Other current assets 744 297 326 359
Adjusted Diluted EPS 8.1 13 17 23 Total cur. assets (ex cash) 11,508 13,624 16,373 19,487
DPS 0.5 0.6 0.9 1.1 Other Current Liab. & ST Prov. 411 53 53 53
Uses of funds 8,440 11,752 13,144 14,947
BV (INR) 47 61 77 99

EBITDA margins 10.6 10.4 9.9 10.1 Year to March FY16 FY17 FY18E FY19E
Net profit margins 2.7 3.7 4.0 4.3 ROAE (%) (on adjusted profits) 18.6 23.5 24.7 25.8
ROACE (%) 28.1 24.5 23.7 26.8
Payable days 137 122 111 112
Growth metrics (%)
Year to March FY16 FY17 FY18E FY19E Debt/EBITDA 1.8 2.4 2.0 1.7
Revenues 13.6 14.8 25.7 23.1 Fixed assets t/o (x) 7.3 7.1 7.8 9.2
EBITDA 34.7 13.2 19.2 26.1 Debt/equity 1.2 1.4 1.1 0.9
PBT 89.7 40.3 46.3 35.0
Net profit 96.6 58.6 34.0 33.0
EPS 96.7 58.6 34.0 33.0

Net profit 622 986 1,321 1,758 Diluted EPS (INR) 8.1 12.8 17.1 22.8
Depreciation 253 280 330 371 Y-o-Y growth (%) 96.7 58.6 34.0 33.0
Less:Changes in WC 509 2,588 1,224 1,249 Price/BV(x) 8.1 6.2 4.9 3.9
Operating cash flow 1,850 38 1,410 1,989 EV/Sales (x) 1.5 1.4 1.1 0.9
Free cash flow 873 (585) 760 1,589 Dividend Yield (%) 0.1 0.2 0.2 0.3

Company Profile
KOTAK MAHINDRA BANK

Firing on all cylinders

Business growth: Credit cycle is now comfortable and KMB is more confident of Absolute Rating BUY
sustaining the growth momentum of 20% over the next three years. Housing is a Rating Relative to Sector Outperformer
relatively low RoE business and does not meet the internal threshold target of 15% Risk Rating Relative to Sector Medium
RoE. Hence, it is not the bank’s key focus area. With respect to SMEs, there has not Sector Relative to Market Overweight
been any significant increase in revenue or working capital requirement. On the
contrary, management highlighted there have been instances that SMEs (especially
trader segment) are still grappling with GST implementation and hence KMB does MARKET DATA (R : KTKM.BO, B: KMB IN)
not see this as a major growth area as of now. It is also cautious in the MFI space
CMP : INR 1,032
as 2019 is an election year. Target Price : INR 1,240
Cross-selling focus has started off late (since past three years) after businesses 52-week range (INR) : 1,114 / 733
have grown in scale & size. It is using a lot of analytics to evaluate how to cross- Share in issue (mn) : 1,904.7
sell effectively. M cap (INR bn/USD mn) : 1,966 / 30,542
NIMs and savings deposits: Liquidity in the system has dipped and this is where
things start to turn around and benefit of low cost deposit starts to play through.
KMB is thus not worried on NIMs. Progress on 811 has been encouraging—the
bank’s target was that within six quarters of launch, it would expand the customer
base to 16mn and is clearly on track with 12mn currently. Average cost of savings
Promoters * 30.1 30.1 32.1
deposits is 5.58% as growth is much higher it compensates for higher rates.
MF's, FI's & BK’s 9.0 8.2 7.8
Other highlights: FII's 39.4 40.2 38.6
Others 21.6 21.5 21.5
In terms of inorganic opportunities, actively looking at across the financial
services spectrum (AMC, insurance, niche NBFCs) and not necessarily only banking.
Credit cost in FY18 will be lower than 60bps.
Promoter holding is 30% and deadline is to bring it down to 20% by December
2018. It needs to raise or dilute to the extent of USD5-7bn to reach there.
Stock Nifty EW BFSI
Significant growth in subsidiaries viz., securities, IB, asset management and life Index
insurance business; actual growth in earnings of non-financing business is 80%. 1 month 3.1 (0.6) 0.9
KMB still owns 100% of these businesses. 3 month 2.4 0.4 0.7
12 month 34.8 19.3 25.0
KMB has put in credible efforts to lay a strong foundation for a scalable and
profitable model. 9mFY18 performance reflects synergy benefits playing through
on cost as well as revenue fronts. With significant benefits likely to flow from
formalisation of financial savings, subsidiaries could see strong business
tailwinds. We maintain ‘BUY/SO’.
Financials (INR mn)
Year to March FY17 FY18E FY19E FY20E Kunal Shah

Net revenue 154,052 182,488 214,976 251,950 +91-22- 4040 7579
Net profit 46,707 59,589 74,216 90,393 kunal.shah@edelweissfin.com
Diluted EPS (INR) 25.4 31.3 39.0 47.5

Prakhar Agarwal
Adj. BV (INR) 188.5 239.7 274.9 317.9
+91 22 6620 3076
Price/ Adj book (x) 5.3 4.2 3.6 3.1 prakhar.agarwal@edelweissfin.com
Diluted P/E (x) 40.6 32.8 26.2 21.5
ROE (%) 14.4 14.8 15.0 15.9
* adj for insurance February 9, 2018 February 9, 2018


Share capital 9,205 9,515 9,515 9,515
Year to March FY17 FY18E FY19E FY20E Reserves & Surplus 346,202 457,790 524,795 606,578
Interest income 241,187 277,384 327,563 388,804 Net worth 355,407 467,304 534,310 616,092
Interest expended 139,268 155,399 182,277 216,866 Deposits 1,574,258 1,900,419 2,325,715 2,870,844
Net interest income 101,919 121,985 145,286 171,938 Total Borrowings 619,712 698,554 805,847 928,751
Non interest income 52,133 60,503 69,690 80,012 Other liabilities 3,285 3,826 4,474 5,253
- Fee & forex income 37,673 46,081 54,211 63,334 Total liabilities 2,552,662 3,070,103 3,670,346 4,420,940
- Misc. income 14,371 14,332 15,388 16,588 Loans 1,390,375 1,692,483 2,057,088 2,516,128
- Investment profits 90 90 90 90 Investments 622,843 765,844 926,452 1,129,595
Net revenue 154,052 182,488 214,976 251,950 Cash and Equivalents 183,556 203,389 218,071 236,202
Operating expense 73,075 81,671 91,608 102,745 Fixed assets 15,954 15,234 14,349 13,301
- Employee exp 33,655 37,360 41,580 46,222 Other Assets 339,933 393,153 454,385 525,715
- Other opex 39,420 44,311 50,028 56,522 Total assets 2,552,662 3,070,103 3,670,346 4,420,940
Preprovision profit 80,977 100,817 123,368 149,206
Provisions 9,299 10,344 11,383 13,105
Profit Before Tax 71,677 90,473 111,985 136,101
Less: Provision for Tax 23,670 29,734 36,769 44,708
Profit After Tax 46,707 59,589 74,216 90,393 ROA decomposition (%)
Adj. Diluted EPS (INR) 25.4 31.3 39.0 47.5 Year to March FY17 FY18E FY19E FY20E
Dividend per share (DPS) 3.4 4.1 5.2 6.4
Dividend Payout Ratio(%) 7.1 7.0 7.1 7.2 Net int. income/assets 4.2 4.4 4.3 4.3
Fees/Assets 2.1 2.2 2.1 2.0
Net revenues/assets 6.3 6.5 6.4 6.2
Operating expense/assets 3.0 2.9 2.7 2.5
Provisions/assets 0.4 0.4 0.3 0.3
Taxes/assets 1.0 1.1 1.1 1.1
Total costs/assets 4.3 4.4 4.2 4.0
ROA 2.0 2.2 2.2 2.3
Equity/assets 13.7 14.7 14.9 14.3
ROAE (%) 14.4 14.8 15.0 15.9
Growth ratios (%)
NII growth 20.0 19.7 19.1 18.3
Fees growth 19.6 22.3 17.6 16.8
Opex growth 5.1 11.8 12.2 12.2 Per share metrics
PPP growth 37.4 24.5 22.4 20.9 Year to March FY17 FY18E FY19E FY20E
Provisions growth (5.2) 11.2 10.0 15.1
EPS (INR) 49.3 56.6 71.5 87.6
EPS growth (%) 26.9 14.8 26.4 22.6
Adjusted Book Value/share 344.5 440.9 506.8 587.5
Price/Earnings (x) 22.1 19.3 15.3 12.5
Price/ BV (x) 3.1 2.4 2.1 1.8
Price/ ABV 3.2 2.5 2.2 1.9
Dividend yield (%) 0.5 0.6 0.7 0.9

Company Profile
KPIT TECHNOLOGIES
ER&D to drive growth
Engineering business: Embedded electronics for automotives Absolute Rating NOT RATED
Key focus areas in automotives vertical are: 1) electrical powertrain/ electric
vehicle; 2) infotainment/ connected cars; 3) autonomous car; 4) vehicle diagnostics;
and 5) AUTOSAR- industry standard.
Anticipates competition from Tata Elxsi in infotainment business and L&T Infotech
in powertrains. MARKET DATA (R : KPIT.BO, B: KPIT IN)
The main competition still remains from captives division of large automotives. CMP : INR 215
Target Price : NA
Volvo Eicher has announced a 9-metre long bus which will be powered by KPIT 52-week range (INR) : 213 / 104
Technologies. Share in issue (mn) : 197.5
Deal with BirlaSoft Avg. Daily Vol. BSE/NSE (‘000) : 1,841.7
The deal with BirlaSoft will focus on each business so that it can grow faster with
improving profitability.
BirlaSoft has annual revenue of ~USD140mn and posted CAGR of ~14% in past two
years.
Promoters * 18.9 18.9 18.9
Expects high single-digit growth in business IT and high double-digit growth in MF's, FI's & BK’s 8.1 2.6 2.7
engineering business. FII's 44.1 50.9 51.6
Others 28.8 27.6 26.8
Management does not perceive any need, nor is there any intention of making * Promoters pledged shares : 9.5
large acquisitions. (% of share in issue)

Sensex
1 month (0.1) 6.4 6.5
3 months 3.5 35.1 31.6
12 months 21.5 61.2 39.7
Sandip Agarwal
+91 22 6623 3474
Financials sandip.agarwal@edelweissfin.com
Year to March FY14 FY15 FY16 FY17 Pranav Kshatriya

+91 22 4040 7495
Revenues (INR mn) 26,940 29,899 32,243 33,200
Rev. growth (%) 20.3 11.0 7.8 3.0
EBITDA (INR mn) 3,776 3,244 4,342 3,153
Nikunj Mandowara
Net profit (INR mn) 2,490 2,370 2,809 2,385 +91 22 4040 7431
EPS (INR) 13.4 12.6 15.0 12.7 nikunj..andowara@edelweissfin.com
EPS growth (%) 30.0 (6.1) 18.7 (15.3)
Diluted P/E (x) 16.0 17.1 14.4 17.0
EV/EBITDA (x) 10.7 12.4 9.3 12.8
ROE (%) 21.6 18.5 21.1 16.2 February 9, 2018


Direct Costs 6,675 7,111 6,071 6,353 Borrowings 4,390 4,457 2,155 3,202
Employee costs 13,804 17,412 19,335 20,905 Non Current Liabilities 233 423 586 711
Other expenses 2,685 2,133 2,494 2,789 Deferred Tax Assets / Liab. (289) (520) (955) (963)
Depreciation & amortisation 540 851 691 827 Depreciation 3,041 3,901 674 1,482
EBIT 3,237 2,393 3,651 2,326 Net block 8,132 7,296 6,302 6,708
Interest expenses 258 260 165 136 Capital work in progress 23 34 77 738
Other income 329 352 282 540 Intan. assets under dev. 0 86 283 638
Profit before tax 3,308 2,485 3,767 2,730 Total fixed assets 8,155 7,416 6,662 8,085
Provision for tax 941 115 845 606 Investments 118 225 118 10
Core profit 2,367 2,370 2,922 2,125 Other Non Current Assets 990 1,428 1,315 1,524
Extraordinary items (122) 0 113 (261) Inventories 34 229 380 433
Profit after tax 2,490 2,370 2,809 2,385 Sundry debtors 6,743 6,979 6,861 7,843
Add: Minority interests 0 0 0 (0) Cash and equivalents 3,649 4,228 3,953 4,679
Add: Share in profits of associates 0 0 0 (0.05) Other current assets 1,471 1,714 1,588 1,675
PAT after minority interest 2,490 2,370 2,809 2,385 Total current assets 11,897 13,149 12,782 14,631
Adjusted net profit 2,490 2,370 2,809 2,385 Sundry creditors 1,021 1,332 1,184 1,311
Adjusted EPS 13.4 12.6 15.0 12.7 Other Current Liabilities 3,054 3,564 4,051 4,148
Dividend payout (%) 8.2 8.7 14.7 17.4 Total CL & provisions 4,075 4,896 5,235 5,459
Tax rate (%) 28.4 4.6 22.4 22.2 Net current assets 7,823 8,253 7,546 9,173
Uses of funds 17,085 17,322 15,641 18,792

Ratios
EBITDA margins 14.0 10.9 13.5 9.5
ROAE (%) 21.6 18.5 21.1 16.2
ROACE (%) 23.3 15.4 22.2 17.4
Year to March FY14 FY15 FY16 FY17 Fixed assets t/o (x) 3.3 3.8 4.6 4.5
Revenues 20.3 11.0 7.8 3.0 Debt/equity 0.3 0.3 0.2 0.2
EBITDA 15.6 (14.1) 33.9 (27.4)
PBT 15.6 (24.9) 51.6 (27.5)
Net profit 25.1 (4.8) 18.5 (15.1)
EPS 30.0 (6.1) 18.7 (15.3)

Depreciation 540 851 691 827 Y-o-Y growth (%) 30.0 (6.1) 18.7 (15.3)
Others (269) (693) 550 (534) CEPS 16.3 17.1 18.6 17.1
Changes in WC (1,730) 365 50 (1,047) Diluted P/E (x) 16.0 17.1 14.4 17.0
Less: Capex (684) (906) (1,237) (1,877) EV/Sales (x) 1.5 1.4 1.3 1.2
Free cash flow 346 1,988 2,863 (247) EV/EBITDA (X) 10.7 12.4 9.3 12.8

Company Profile
MAHARASHTRA SEAMLESS
In the right place, at the right time
India Equity Research l Metals & Mining
With recent order win of INR530cr, total order backlog stands at INR1,000cr. Absolute Rating NOT RATED
Ordering remains strong from PSUs like ONGC/refineries and EPC players/
equipment manufacturers like L&T, Thermax, as well as dealers of seamless tubes.
Volumes of seamless pipes grew 47% YoY to 81,700tons, taking 9mFY18 volumes to
~2.22lakh tons. The company’s guidance for FY1E and FY19 stands at 3 lakh tons
and 3.6 lakh tons, respectively.
MARKET DATA (R : MHSM.BO, B: MHS IN)
The company is running Nagothane facility at 90% utilisation and planning to CMP : INR 492
ramp up Mangaon facility to 80,000tons in FY19E. Target Price : NA
52-week range (INR) : 550 / 262
In new orders, EBIDTA/ton is expected to be close to INR1,000. Share in issue (mn) : 67.0
ERW pipes production will be closer to 60,000tons in FY18E due to capacity
constraints. The company is investing in balancing equipment to increase
production to 80,000tons in FY19E.
ERW pipes are expected to maintain EBIDTA/ton of INR4,000. Share Holding Pattern (%)
The company is hopeful of deploying a oil rig in next two months in the subsidiary.
Promoters * 60.3 59.8 59.8
Already three rigs are deployed in associate companies.
MF's, FI's & BK’s 8.2 6.4 6.2
FII's 4.4 7.0 7.6
MSL is working with lenders to restart iron ore mines in Brazil without further
Others 27.1 26.8 26.4
investments.

Sensex
1 month (0.1) (7.2) (7.1)
3 months 3.5 10.5 7.0
12 months 21.5 64.5 43.0
Financials

Revenues (INR Cr) 1,019 1,434 1,944 2,461
Rev growth (%) (24.8) 40.8 35.6 26.6
EBITDA (INR Cr) 38 225 283 449
PAT (INR Cr) (23.8) 116 154 253 Salil Utagi
EPS (INR) (3.6) 17 23 38 +91 22 4065 2319
EPS growth (%) NA NA 33.0 64.0 salil.utagi@edelweissfin.com
P/E (x) NA 28.7 21.6 13.2
EV/EBITDA (x) 67.7 14.4 11.3 6.9
RoAE (%) 0.3 4.1 5.6 8.7 February 9, 2018


Equity share capital 34 34 34 34
Year to March FY14 FY15 FY16 FY17 Preference Share Capital 0 138 63 63
Income from operations 1,209 1,355 1,019 1,434 Reserves & surplus 2,765 2,763 2,549 2,650
Direct costs 990 1,102 740 921 Shareholders funds 2,799 2,934 2,646 2,746
Employee costs 40 43 47 53 Long term borrowings 3 429 272 180
Other expenses 130 147 241 288 Short term borrowings 127 349 299 460
Total operating expenses 1,120 1,249 980 1,209 Total Borrowings 131 778 571 640
EBITDA 89 105 38 225 Def. Tax Liab. & other long term 123 121 265 252
Depreciation and amortisation 37 31 71 71 Sources of funds 3,052 3,833 3,481 3,639
EBIT 52 75 -33 154 Gross block 1,687 2,004 1,724 1,769
Other income 64 74 90 76 Depreciation 456 532 603 674
Profit before tax 111 129 31 196 Capital work in progress 34 37 31 119
Provision for tax 14 37 23 81 Total fixed assets 1,265 1,509 1,152 1,214
Core profit 97 92 8 116 Other non current assets 90 45 48 34
Extraordinary items 33 29 (32) - Investments 84 272
Profit after tax 130 120 (24) 116 Equity investments in assoc. 245 1,063 964 898
Adjusted net profit 130 120 (24) 116 Current Investments 588 311 396 359
Equity shares outstanding (mn) 7 7 7 7 Inventories 435 490 499 484
EPS (INR) basic 14.2 17.9 (3.6) 17.3 Sundry debtors 338 298 267 309
Diluted shares (Cr) 6.8 6.7 6.7 6.7 Cash and equivalents 36 40 6 7
EPS (INR) fully diluted 14.2 17.9 (3.6) 17.3 Loans and advances 274 250 173 240
Dividend per share 5.8 5.0 2.5 3.5 Other current assets 16 21 95 39
Dividend payout (%) 41.2 36.6 204.3 20.0 Total current assets 1,688 1,409 1,436 1,437
Sundry creditors and others 230 164 166 178
Provisions 6 28 37 40
Total CL & provisions 236 192 203 218
Net current assets 1,451 1,217 1,233 1,219
Common size metrics as % of net revenues Uses of funds 3,052 3,833 3,481 3,638
Year to March FY14 FY15 FY16 FY17 Book value per share (INR) 447 572 520 543
Net profit margins 10.7 8.9 (2.3) 8.1 Year to March FY14 FY15 FY16 FY17
ROAE (%) 3.4 3.2 0.3 4.1
ROACE (%) 1.7 2.2 (0.9) 4.3
RoCE( ex cash and investments) 2.3 3.2 -1.4 6.9
Debtors (days) 102 80 96 96
Growth metrics (%)
Debt/Equity 0.0 0.3 0.3 0.3
Year to March FY14 FY15 FY16 FY17 Inventory (days) 131 132 178 178
Revenues (30.1) 12.1 (24.8) 40.8 Payable (days) 67 44 74 74
EBITDA (48.0) 18.1 (63.6) 485.3 Cash conversion cycle (days) 166 168 199 199
PBT (43.5) 16.0 NA 533.3 Debt/EBITDA 1.5 7.4 19.4 3.6
Net profit (36.6) (5.3) NA 1,313.0 Adjusted debt/Equity 0.0 0.3 0.2 0.3
EPS (34.5) 26.6 NA (586.8)
Cash flow statement (INR mn) Diluted EPS (INR) (3.6) 17.3 23.0 37.7
Year to March FY14 FY15 FY16 FY17 Y-o-Y growth (%) NA (586.8) 33.0 64.0
Net profit 64 63 40 116 CEPS (INR) 12 28 34 49
Add: Depreciation 37 31 71 71 Diluted P/E (x) (139.9) 28.7 21.6 13.2
Add: Misc expenses written off (10) 36 (11) 15 Price/BV(x) 1.1 1.2 1.2 1.1
Add: Deferred tax 3 8 7 147 EV/Sales (x) 2.6 2.3 1.6 1.3
Gross cash flow 93 137 108 349 EV/EBITDA (x) 67.7 14.4 11.3 6.9
Less: Changes in W. C. (8) 31 (50) (1) Diluted shares O/S 6.7 6.7 6.7 6.7
Operating cash flow 101 105 158 351 Basic EPS (3.6) 17.3 23.0 37.7
Less: Capex (108) 275 (0) 343 Basic PE (x) NA 28.7 21.6 13.2
Free cash flow 209 (169) 158 8 Dividend yield (%) 0.5 0.7 1.2 1.9

Company Profile
MANAPPURAM GENERAL FINANCE

Picking up pace

Growth metrics: The underlying demand has improved and the company expects Absolute Rating BUY
to achieve 20% plus growth in consolidated AUM over the next three years. Within Rating Relative to Sector Outerformer
this, growth in gold loans should be around 10-15% YoY. Although MFIs and Risk Rating Relative to Sector High
personal loans are eating into some of the potential demand of gold loans, it will Sector Relative to Market Overweight
remain a steady growth product with lower delinquency and superior profitability.
Operational metrics: Yields in general have not come off and, in fact, low yielding
MARKET DATA (R : MNFL.BO, B: MGFL IN)
12% product book is only INR1bn. In Q4FY18, it will increase bank borrowings as
it will come in at a lower cost of 8.1%; in Q1FY19 will resort to CPs again, once CMP : INR 104
liquidity stabilizes. There is still a lot of potential to increase the efficiency of
current branches and hence no big branch expansion plan.
Other businesses: The new business is stablising—Ashirwad is present in 830 M cap (INR bn/USD mn) : 88 / 1,365
branches and the company has capacity to increase from 1.4mn to 2.0mn. Credit Avg. Daily Vol. BSE/NSE (‘000) : 7,017.6
cost of Ashirwad is 8% and in relation to which it has changed policies & processes.
It now disburses everything through bank accounts and since collection efficiency
for disbursements post demonetisation is more than 99%, it gives lends comfort Share Holding Pattern (%)
on growth. Growth in this segment should be ideally >25%. It plans to take housing Current Q1FY18 Q4FY17
finance business to INR10bn over the next two-three years (currently INR3.4bn). Promoters* 34.7 34.4 34.4
ATS – INR1.1mn. Loan against property is another segment which it is looking to MF's, FI's & Banks 42.7 40.3 38.1
venture into. FII's - - -
Others 22.7 25.3 27.4
Investment conclusion * Promoters pledged shares : Nil
With some green-shoots of growth seen in Q3FY18, we expect growth to pick up (% of share in issue)
pace and likely drive earnings going forward. Scale up in other businesses should
also provide a leg up. Given bottoming of gold loan portfolio, stabilising MFI book
and successful diversification, we expect MGFL’s performance to improve going PRICE Performance (%)
ahead. We maintain ’BUY/SO’. Stock Nifty EW BFSI
Index
1 month (14.5) (0.6) 0.9
3 month 0.7 0.4 0.7
12 month 11.8 19.3 25.0
Financials (INR mn)

Kunal Shah
Year to March FY16 FY17 FY18E FY19E +91-22- 4040 7579
Net revenue 13,347 20,059 21,860 24,560 kunal.shah@edelweissfin.com
Net profit 3,372 7,260 7,415 8,300
Prakhar Agarwal
Diluted EPS (INR) 4.0 8.6 8.8 9.9
+91 22 6620 3076
Adj. BV (INR) 31.9 35.5 40.6 46.1
prakhar.agarwal@edelweissfin.com
Price/ Adj book (x) 3.3 2.9 2.6 2.3
Diluted P/E (x) 26.0 12.1 11.8 10.6
ROE (%) 12.6 24.8 22.3 22.0 February 9, 2018


Share capital 1,682 1,684 1,684 1,684
Interest income 21,734 29,451 31,112 34,425 Shareholders' funds 27,368 31,218 35,661 40,714
Interest expended 8,849 10,026 9,293 9,836 Short term borrowings 81,937 77,887 82,264 97,269
Net interest income 12,885 19,425 21,819 24,589 Long term borrowings 14,460 13,745 14,517 17,165
- Fee & forex income 462 634 685 759 Total Borrowings 96,397 91,632 96,781 114,434
Net revenues 13,347 20,059 22,505 25,348 Long Term Liabilities 2,263 8,303 8,076 8,131
Operating expense 7,834 8,354 10,166 11,349 Def. Tax Liability (net) (391) (553) (300) (300)
- Employee exp 3,988 4,205 4,726 5,380 Sources of funds 125,638 130,599 140,219 162,979
- Depn /amortisation 531 583 602 676 Gross Block 4,839 5,315 6,190 7,065
- Other opex 3,315 3,567 4,838 5,293 Net Block 1,841 1,738 2,002 2,196
Preprovision profit 5,513 11,705 12,339 13,999 Capital work in progress 10 9 11 12
Provisions 324 556 516 558 Intangible Assets 48 45 52 57
Less: Provision for Tax 1,816 3,888 3,960 4,503 Non current investments 435 353 400 448
Profit After Tax 3,372 7,260 7,862 8,939 Cash and Equivalents 16,333 14,116 15,777 16,735
Reported Profit 3,372 7,260 7,862 8,939 Loans & Advances 100,807 111,245 116,852 136,927
Shares o /s (mn) 841 841 841 841 Current assets (ex cash) 8,427 11,397 13,202 14,735
Basic EPS (INR) 4.0 8.6 9.3 10.6 Trade payable 269 988 961 967
Diluted shares o/s (mn) 841 841 841 841 Other Current Liab 1,994 7,316 7,116 7,164
Adj. Diluted EPS (INR) 4.0 8.6 9.3 10.6 Total Current Liab 2,263 8,303 8,076 8,131
Dividend per share (DPS) 1.8 3.5 3.5 3.9 Net Curr Assets-ex cash 6,163 3,094 5,126 6,604
Dividend Payout Ratio(%) 44.9 40.0 37.0 37.0 Uses of funds 125,638 130,599 140,219 162,979
BVPS (INR) 32.5 37.1 42.4 48.4
Growth metrics (%)

Revenues 20.4 50.3 12.2 12.6 ROA decomposition (%)
NII growth 20.0 50.8 12.3 12.7 Year to March FY16 FY17 FY18E FY19E
Opex growth 17.2 6.6 21.7 11.6
PPP growth 25.3 112.3 5.4 13.5 Net int. income/assets 11.2 16.1 17.4 17.4
Provisions growth 18.2 71.2 (7.1) 8.0 Non int. income/assets 0.4 0.5 0.5 0.5
Adjusted Profit 24.6 115.3 8.3 13.7 Net revenues/assets 11.6 16.6 18.0 17.9
Operating expense/assets (6.8) (6.9) (8.1) (8.0)
Provisions/assets (0.3) (0.5) (0.4) (0.4)
Taxes/assets (1.6) (3.2) (3.2) (3.2)
Total costs/assets (8.7) (10.6) (11.7) (11.6)
ROA 2.9 6.0 6.3 6.3
Equity/assets 23.4 24.2 26.7 27.0
ROAE (%) 12.6 24.8 23.5 23.4-+
Operating ratios (%)
Yield on advances 22.5 27.8 27.3 27.1
Cost of funds 9.8 10.7 9.9 9.3
Net interest margins 11.2 16.1 17.4 17.4 Valuation parameters
Spread 12.6 17.1 17.4 17.8 Year to March FY16 FY17 FY18E FY19E
Cost-income 58.7 41.6 45.2 44.8 Diluted EPS (INR) 4.0 8.6 8.8 9.9
Tax rate 35.0 34.9 33.5 33.5 EPS growth (%) 24.6 115.3 2.1 11.9
Diluted P/E (x) 26.0 12.1 11.8 10.6
Price/ BV (x) 3.2 2.8 2.5 2.2
Price/ Adj. BV (x) 3.3 2.9 2.6 2.3
Dividend yield (%) 1.7 3.3 3.1 3.5

Company Profile
MAS FINANCIAL SERVICES

Gaining traction
India Equity Research l Cement
Business growth: MAS Financial (MAS) has gone for calibrated & steady growth of Absolute Rating NOT RATED
35-40% over the years. AUMs as of Q3FY18 stand at INR36.6bn, of which INR22.7bn
is micro Enterprise (up to INR0.3mn), SME loans of INR9bn (up to INR5mn), two
wheelers at INR3.5bn and CV loans of INR1.4bn. It started off as an institutional
consumer durables and then for financing tied up with cooperative banks. Later, it
transformed from a consumer durable to two-wheeler to micro enterprise company.
It is a pioneer in small business loans and later added CVs in 2003-04 in MARKET DATA (R : MASF.BO, B: MASFIN IN)
partnership with HDFC Bank. MAS is largely present in Gujarat, Maharashtra, CMP : INR 615
Rajasthan, Madhya Pradesh and is now making inroads in Tamil Nadu & Karnataka. Target Price : NA
52-week range (INR) : 701 / 564
Operational metrics: MAS is focused on efficiency with cost to AUM ratio contained
at 2.5%, which with better NIMs helps generate more than 4% RoA and around
2.75% of RoAUM. The company sources business equally between direct channel
(of 77 branches) & indirect channel (through intermediaries & 106 NBFCs as BCs).
In indirect sourcing through 106 NBFCs, it provides onward lending credit lines to
NBFCs who after adjusting their cost of sourcing, cost of servicing, delinquency
from lending rates hypothecate loans with MAS. So it’s more of a partnership
model & win-win situation for both. NBFCs get steady & consistent credit lines for Current Q1FY18 Q4FY17
their growth and MAS is able to leverage its product & assessment expertise. Asset Promoters * 73.2 NA NA
MF's, FI's & BK’s 8.8 NA NA
quality risks lie with the partner—100% recourse to them. Asset quality is holding
FII's 5.3 NA NA
in a good stead with GNPLs at 1.17% and NNPLs at 0.94%.
Others 12.6 NA NA

Sensex
1 month (0.1) (1.2) (1.1)
3 months 3.5 3.7 0.2
Financials Kunal Shah

+91-22- 4040 7579
kunal.shah@edelweissfin.com
Total Revenue 2,259 2,939 3,415
Operating Expense 429 550 604 Prakhar Agarwal
Profit After Tax 390 534 674 +91 22 6620 3076
Share Holders Fund 1,908 2,279 3,769 prakhar.agarwal@edelweissfin.com
Total Liability 14,828 18,142 20,242
Current assets 11,100 13,043 12,252
Total Assets 14,828 18,142 20,242 February 9, 2018


As on 31st March FY15 FY16 FY17
Share Capital 595 595 904
Year to March FY15 FY16 FY17 Reserves and Surplus 814 1,184 2,365
Total Revenue 2,259 2,939 3,415 Debentures (Unsecured) 500 500 500
Expenses Share Holders Fund 1,908 2,279 3,769
Finance Costs 1,055 1,340 1,513 Non-current liabilities 2,098 4,598 4,516
Operating Expense 429 550 604 Current liabilities 10,821 11,265 11,956
Provisions and Loan Losses 193 233 267 Total Liability 14,828 18,142 20,242
Profit Before Tax 582 817 1,031 ASSETS
Profit After Tax 390 534 674 Fixed assets 45 64 72
Non-current assets 3,683 5,036 7,918
Current assets 11,100 13,043 12,252
Total Assets 14,828 18,142 20,242

Company Profile
NITIN SPINNERS
Spinning the growth yarn
India Equity Research l Textiles
Despite fall in cotton prices, there has been a recent spike in cotton as there is a Absolute Rating NOT RATED
lack of availability of quality cotton
The company keeps average cotton inventory for two months; in season it is three
months (from September end).
~15-20% of the company’s cotton requirement is imported.

MARKET DATA (R : NISP.BO, B: NSPL IN)
The company expects margin to improve going forward as yarn prices have also
CMP : INR 110
increased. Target Price : NA
New project status:
Nitin Sinners will commence basic construction work on the new colony next M cap (INR bn/USD mn) : 6 / 95
week. Avg. Daily Vol. BSE/NSE (‘000) : 222.4
It is planning to install 77,000 spindles with 25,000MT capacity.
The plan is to add processing capacity of 36mn mtr. Share Holding Pattern (%)
Promoters * 53.4 64.3 64.3
MF's, FI's & BK’s 13.0 0.1 0.1
FII's 1.1 0.9 0.8
Others 32.5 34.8 34.8

Sensex
1 month (0.1) (4.9) (4.8)
3 months 3.5 (3.6) (7.1)
12 months 21.5 26.6 5.1
Financials

Revenue growth (%) 9.5 26.2 24.4 21.7
EBITDA (INR mn) 939 992 1,370 1,331 Nihal Mahesh Jham
Adj. profit (INR mn) 348 410 442 572 +91 22 6623 3352
Adj. diluted EPS (INR) 7.6 8.9 9.6 12.5 nihal.jham@edelweissfin.com
Diluted P/E (x) 14.6 12.4 11.5 8.9
EV/EBITDA (x) 7.3 8.9 6.3 8.0
ROAE (%) 29.9 27.4 23.7 24.8 February 9, 2018


Year to March FY14 FY15 FY16 FY17 Reserves & Surplus 857 1,212 1,598 2,103
Raw Material Costs 2,979 3,837 4,632 5,890 Long term Borrowings 1,307 2,942 2,409 3,894
Employee costs 224 343 431 522 Short term Borrowings 454 840 1,112 1,741
Other expenses 742 993 1,235 1,591 Total Borrowings 1,761 3,783 3,521 5,635
EBITDA 939 992 1,370 1,331 Deferred Tax Liability (net) 211 339 433 539
Dep. & amortization 249 279 396 417 Sources of funds 3,311 5,835 6,064 8,812
EBIT 691 712 975 915 Gross Block 3,787 6,211 6,249 8,977
Profit Before Tax 520 537 652 700 Intangible Assets 0 0 3 5
Reported Profit 348 410 442 572 Cash & bank balances 1 7 6 13
Adjusted Profit 348 410 442 572 Inventories 707 942 1,148 1,700
No. of Sh. outstanding (mn) 46 46 46 46 Sundry Debtors 249 404 392 483
Adjusted Basic EPS 7.6 9 10 12 Loans & Advances 347 311 497 526
No. of dil. Sh. outstand. (mn) 46 46 46 46 Other Current Assets 113 268 317 370
Adjusted Diluted EPS 7.6 8.9 9.6 12.5 Total Current Assets (Ex Cash) 1,415 1,925 2,353 3,079
Adjusted Cash EPS 13.0 15.0 18.3 21.6 Trade payable 107 94 131 182
Dividend per share 0.8 1.0 1.0 1.2 Other Current Liab. & ST Prov. 122 171 156 241
Dividend Payout Ratio (%) 9.9 11.2 10.4 9.6 Total Current Liab. & Provisions 229 264 287 423
Uses of funds 3,311 5,835 6,064 8,812
BV per share (INR) 29 36 45 56
Staff costs 4.6 5.6 5.6 5.6
S G & A expenses 15.2 16.1 16.1 17.0
ROAE (%) 29.9 27.4 23.7 24.8
ROACE (%) 22.6 17.9 17.8 13.4
Inventory Days 93.5 78.4 82 88
Debtors Days 19.8 19.3 19 17
Payble Days 9.9 9.5 9 10
Growth metrics (%) Cash conversion cycle (days) 103.4 88.2 92.4 95.7
Revenues 9.5 26.2 24.4 21.7 Gross Debt/EBITDA 1.9 3.8 3 4
EBITDA 7.7 5.6 38.2 (2.9) Gross Debt/Equity 1.3 2.3 1.7 2.2
PBT 147.7 3.4 21.3 7.4 Adjusted Debt/Equity 1.8 2.6 2.0 2.5
Adjusted Profit 44.5 17.8 7.8 29.4 Net Debt/Equity 1.3 2.3 1.7 2.2
EPS 44.5 17.8 7.8 29.4 Interest Coverage Ratio 4.0 3.1 3.0 4.1

Add: Depreciation 249 279 396 417 Y-o-Y growth (%) 44.5 17.8 7.8 29.4
Less:Changes in WC (35) 495 241 592 Price/BV (x) 3.9 3.0 2.5 2.0
Operating cash flow 866 445 1,004 592 EV/Sales (x) 1.4 1.4 1.1 1.1
Less: Capex 35 2,610 50 2,739 EV/EBITDA (x) 7.3 8.9 6.3 8.0
Free cash flow 831 (2,165) 954 (2,148) Dividend yield (%) 0.7 0.9 0.9 1.1

Company Profile
ORIENT REFRACTORIES
Opportunities galore

Exports are growing strong and expected to jump from INR1,100mn in FY17 to Absolute Rating BUY
INR1,600mn in FY18E. Investment Characteristics Growth
The parent has set a target to double sales over four-five years from INR6bn in
FY18E.
ISO products of ORL, contributing 30% to sales, have grown at ~17-18% in the past
two years. Slidegate products, which contribute ~30% to sales, has been growing MARKET DATA (R : ORRE.BO, B: ORIENT IN)
at ~7-8%. CMP : INR 167
Tundish, which contributes ~20% to sales, is ORL’s forte, wherein 2,400MT additional 52-week range (INR) : 186 / 113
capacity (9,600MT earlier capacity) at INR150mn has been set up to capitalise on Share in issue (mn) : 120.1
the outsourcing opportunity to parent. This will expand the segment’s capacity by M cap (INR bn/USD mn) : 20 / 311
25% and begin production by May 2018. ORL estimates INR500mn of incremental Avg. Daily Vol. BSE/NSE (‘000) : 93.1
sales from this segment.
The company is strong among smaller steel players and believes it is favourably
placed led by mere 30 days’ payment cycle and advances among some players
versus ~90-180 days’ receivable cycle from larger players. Current Q1FY18 Q4FY17
Promoters * 69.6 69.6 69.6
ORL hiked prices in May 2018, which covers the key raw material increase like MF's, FI's & BK’s 5.1 4.9 5.0
magnesia (up ~100%) and graphite (up 65%). FII's 4.9 5.6 5.7
Others 20.3 19.9 19.7
Management will look at incremental capacity in slide gates with INR150mn capex * Promoters pledged shares : Nil
and growth opportunity ahead. (% of share in issue)
Factoring improving domestic market share and strong exports opportunity (led PRICE Performance (%)
by rising sourcing by parent), we maintain ‘BUY. BSE Midcap Stock Stock Over
Index Index
1 month (9.9) (11.5) (1.6)
3 month (3.0) 3.7 6.7
12 month 21.2 35.0 13.8
Financials

Revenues (INR mn) 4,589 5,194 5,838 6,938
EBITDA (INR mn) 852 1,030 1,098 1,349
Adjusted PAT (INR mn) 558 686 755 924
Adjusted Dil. EPS (INR) 4.6 5.7 6.3 7.7 Shradha Sheth
Diluted P/E (x) 36.4 29.6 26.9 22.0 +91 22 6623 3308
shradha.sheth@edelweissfin.com
EV/EBITDA (x) 22.9 18.6 17.3 14.0
RoACE (%) 44.6 43.9 38.6 41.3
RoAE (%) 29.8 28.7 25.9 27.7 February 9, 2018


Raw material costs 2,539 2,906 3,385 3,998 Long Term Lia.& Provisions 32 39 39 39
Gross profit 2,050 2,288 2,454 2,939 Deferred Tax Liability (net) (7) (4) 0 0
Employee expenses 394 430 442 519 Sources of funds 2,072 2,768 3,142 3,610
Other expenses 804 828 914 1,071 Gross Block 725 807 1,007 1,207
Operating expenses 1,198 1,258 1,356 1,591 Accumulated depreciation 342 399 474 563
Total expenditure 3,737 4,164 4,741 5,589 Net Block 378 408 534 645
EBITDA 852 1,030 1,098 1,349 Capital work in progress 16 47 0 0
Depreciation & amortisation 59 64 75 89 Intangible assets 5 4 4 4
EBIT 793 966 1,023 1,260 Total Fixed Assets 399 459 538 648
Other income 54 83 103 119 Cash and cash equivalents 765 1,108 1,327 1,483
Profit before tax 847 1,049 1,127 1,379 Inventories 642 814 896 1,052
Provision for tax 288 363 372 455 Sundry debtors 1,185 1,140 1,182 1,369
Reported Profit 558 686 755 924 Loans and advances 31 41 41 41
Adjusted Profit 558 686 755 924 Other assets 31 40 40 40
No. of Sha. outstanding (mn) 120.1 120.1 120.1 120.1 Total current assets (ex cash) 1,890 2,035 2,159 2,502
Adjusted Basic EPS 4.6 5.7 6.3 7.7 Trade payable 719 776 646 759
No. of Dilu. sha. outstan. (mn) 120.1 120.1 120.1 120.1 Other CL & Short Term Provi. 263 55 235 264
Adjusted Diluted EPS 4.6 5.7 6.3 7.7 Total CL & Provisions 982 831 881 1,023
Adjusted Cash EPS 5.1 6.3 6.9 8.4 Net Current Assets (ex cash) 908 1,204 1,278 1,479
Dividend Payout Ratio (%) 37.6 52.5 50.9 49.4 Book value per share (INR) 17.0 22.7 25.8 29.7

Operating expenses 26.1 24.2 23.2 22.9 Pre-tax Return on Capital Employed (ROCE) (%)44.6 43.9 38.6
EBITDA margins 18.6 19.8 18.8 19.4 41.3
EBIT margin 17.3 18.6 17.5 18.2 Pre-tax Core RoCE (%) 57.2 66.5 60.2 65.2
Net profit margin 12.2 13.2 12.9 13.3 Return on Average Equity (ROAE) (%)29.8 28.7 25.9 27.7
ROA (%) 29.0 28.3 25.5 27.4
Quick ratio 2.0 2.8 2.9 2.9
Cash ratio 0.8 1.3 1.5 1.4
Growth metrics (%) Inventory turnover (x) 3.7 4.0 4.0 4.1
Revenues 1.7 13.2 12.4 18.8 Receivables (days) 92 82 73 67
EBITDA 6.7 20.9 6.6 22.9 Inventory (days) 98 91 92 89
PBT 6.3 23.9 7.4 22.4 Payables (days) 89 94 77 64
Adjusted Profit 5.6 22.9 10.0 22.4 Cash conversion cycle (days) 101 79 88 92
EPS 5.6 22.9 10.0 22.4 Total debt / Capital employed (%)47.1 29.9 28.1 28.3

Add: Depreciation 59 64 75 89 Y-o-Y growth (%) 5.6 22.9 10.0 22.4
Gross cash flow 610 683 726 894 Diluted P/E (x) 36.4 29.6 26.9 22.0
Less: Changes in working cap. (192) 78 74 202 Price to Book Ratio (P/B) (x) 9.9 7.4 6.5 5.7
Operating cash flow 802 604 652 692 Enterprise Value / Sales (x) 4.3 3.7 3.3 2.7
Free cash flow 714 490 499 492 Dividend Yield (%) 0.9 1.5 1.6 1.9

Company Profile
PARAG MILK FOODS

Redefining categories
India Equity Research l Aviation

Parag is expected to deliver strong growth led by: i) robust value added products Absolute Rating BUY
portfolio like cheese, paneer, whey consumer with better realisation & margin; Investment Characteristics Growth
ii) presence in high RoCE segments like whey consumer wherein management
believes it can gain ~3-5% market share of INR15-20bn market in FY19.
The company expects to grow sales by 13-15% over the next three years with ~10-
11% EBIDTA margin. Further, management expects to clock 20% plus RoCE by FY20E. MARKET DATA (R : NA.BO, B: PARAG IN)
CMP : INR 298
As the company is entering new markets, it is focusing on investing a large portion
of the reduction in procurement prices in marketing and advertisement. It is 52-week range (INR) : 318 / 203
focusing on increasing ATL (advertisement campaigns) and pruning BTL spends Share in issue (mn) : 84.1
(promotional discounts). Therefore, advertising spend as % of sales is expected to M cap (INR bn/USD mn) : 25 / 389
be same. Avg. Daily Vol. BSE/NSE (‘000) : 512.1
Avvatar
This is the first company to launch a product in whey protein powder segment with
focus on sports nutrition. The product has been well received in the market.
Market size is estimated at INR15-20bn and the company expects the market to Promoters * 48.7 48.2 47.5
grow at ~20%. Parag expects sales from the product to reach INR200mn this year MF's, FI's & BK’s 13.0 8.7 2.3
and estimates to touch market share of ~3-5% next year (potentially indicated FII's 16.0 21.2 24.4
INR700mn sales). Others 22.4 21.9 25.9
Management targets whey products to constitute 7% of sales. (% of share in issue)
With strongest position in VADP, along with strong brands and innovative portfolio,
we have valued the stock at 24x FY20E EPS. We maintain ‘BUY’. BSE Midcap Stock Stock Over
Index Index
1 month (9.9) (12.0) (2.1)
3 month (3.0) (1.4) 1.6
12 month 21.2 (4.9) (26.1)
Financials

EBITDA (INR mn) 1,082 1,715 1,984 2,466
Adjusted PAT (INR mn) 361 733 847 1,190 Shradha Sheth
EV/EBITDA (x) 23.8 15.1 12.8 10.0
RoE (%) 7.1 10.6 11.0 13.8 January 25, 2018


Raw material costs 12,588 13,442 15,519 17,900 Long term borrowings 713 713 413 13
Employee expenses 794 851 956 1,089 Total Borrowings 2,624 2,424 1,824 1,224
Other expenses 2,843 3,019 3,685 4,225 Long Term Liab. & Provisions 181 199 231 268
Depreciation & amortisation 490 528 577 619 Accumulated depreciation (2,250) (2,778) (3,354) (3,973)
EBIT 592 1,187 1,407 1,847 Net Block 3,583 3,805 3,629 3,610
Less: Interest Expense 333 308 232 155 Capital work in progress 207 207 207 207
Add: Other income 110 111 88 85 Intangible assets 5 5 5 5
Add: Exceptional items (194) 0 0 0 Total Fixed Assets 3,794 4,017 3,840 3,821
Profit Before Tax 175 990 1,264 1,777 Cash and cash equivalents 1,008 695 661 648
Less: Provision for Tax 4 257 417 586 Inventories 4,285 3,609 4,124 4,708
Reported Profit 171 733 847 1,190 Sundry debtors 2,150 2,398 2,730 3,166
Less: Except. Items (Net of Tax) (189) 0 0 0 Loans and advances 1,586 1,586 1,586 1,586
Adjusted Profit 361 733 847 1,190 Other Current Assets 475 522 554 642
No. of Shares outstanding (mn) 84.1 84.1 84.1 84.1 Total current assets (ex cash) 8,496 8,115 8,994 10,102
No. of Dil. Sh.outstanding (mn) 84.1 84.1 84.1 84.1 Other Current Liab. & ST Prov. 703 773 899 1,043
Adjusted Diluted EPS 4.3 8.7 10.1 14.2 Total Current Liab. & Prov. 3,821 2,798 3,237 3,838
Adjusted Cash EPS 10.1 15.0 16.9 21.5 Net Current Assets (ex cash) 4,675 5,317 5,756 6,264
Dividend Payout Ratio (%) 0.0 0.0 5.0 10.6 Book Value per share (INR) 78.2 86.9 96.3 108.7

Ratios
Gross margin 27.3 29.4 29.9 30.3
RoACE (%) 8.4 13.7 15.2 19.0
Staff costs 4.6 4.5 4.3 4.2
RoAE (%) 7.1 10.6 11.0 13.8
SG&A expenses 16.4 15.9 16.6 16.5
ROA (%) 4.2 7.5 8.3 11.3
Inventory (days) 102 107 91 90
Interest 1.9 1.6 1.0 0.6
Payables (days) 70 70 51 52
Cash conversion cycle (days) 80 81 82 80
EBIT margin 3.4 6.2 6.4 7.2
Current ratio (x) 2.5 3.1 3.0 2.8
Quick ratio 1.1 1.6 1.5 1.4
Cash ratio 0.3 0.2 0.2 0.2
Growth metrics (%) Receivable turnover (x) 7.7 8.4 8.6 8.7
Year to March FY17 FY18E FY19E FY20E Inventory turnover (x) 3.6 3.4 4.0 4.1
Revenues 5.2 9.9 16.4 16.0 Payables turnover (x) 5.2 5.2 7.1 7.0
Gross Profit 6.7 18.4 18.6 17.4 Gross Debt/EBITDA (x) 2.4 1.4 0.9 0.5
EBITDA (27.0) 58.6 15.7 24.3 Gross Debt/Equity (x) 0.4 0.3 0.2 0.1
PBT (73.8) 465.0 27.6 40.6 Adjusted debt/Equity (x) 0.4 0.3 0.2 0.1
Adjusted Profit (23.8) 103.2 15.5 40.6 Net Debt/Equity (x) 0.2 0.2 0.1 0.1
EPS (36.2) 103.2 15.5 40.6 Interest coverage (x) 1.8 3.9 6.1 11.9

Reported Profit 171 733 847 1,190 Year to March FY17 FY18E FY19E FY20E
Interest 333 308 232 155 Y-o-Y growth (%) (36.2) 103.2 15.5 40.6
Gross cash flow 840 1,458 1,567 1,880 Diluted P/E (x) 66.9 32.9 28.5 20.3
Less: Changes in working cap. (200) (642) (439) (508) P/BV (x) 3.7 3.3 3.0 2.6
Free cash flow (342) 65 727 772 Dividend Yield (%) 0.0 0.0 0.2 0.5

Company Profile
PERSISTENT SYSTEMS
Prescient investor
IBM IoT business grew 5% in CY17. Total CY17 revenue stood at ~USD49mn (USD15mn Absolute Rating BUY
in Q3FY18) with better profitability than last year. Management is confident of Rating Relative to Sector Performer
posting operating profit in the business going forward. Risk Rating Relative to Sector Low
Partnered IBM with an ideology of two-year of investment and eight years of
return. While two years of investments are over, return phase will commence from
CY18. Focus on penetrating digital services in European geography; PARX
MARKET DATA (R : PERS.BO, B: PSYS IN)
acquisition was to consolidate position in Europe.
CMP : INR 796
Will try to grow business in Europe riding IBM’s customer access. Target Price : INR 723
Will continue to invest in ISV market and expects positive growth therein. 52-week range (INR) : 818 / 558
Currently, has digital solutions for healthcare and finance industries. M cap (INR bn/USD mn) : 64 / 990
Till now, the focus was on developing digital solutions; now it is on sales and Avg. Daily Vol. BSE/NSE (‘000) : 162.6
marketing. Investments will yield results in long term; continues to invest in new
emerging trends, especially in healthcare and financial services.
Believes services and alliance can post growth of ~10% going forward.
Margin improvement in Q3FY18 was on account of higher IP revenue, increased Promoters * 30.6 30.7 35.0
utilisation and other operational efficiencies. Decline in margin was majorly on MF's, FI's & BK’s 14.5 14.1 14.3
account of shift to lower margin onsite business (from 8% to 18%), investment in FII's 24.0 22.3 20.8
acquisition and higher S&M expenses. Others 30.9 32.9 29.9
Has certain levers for further margin expansion, e.g., higher onsite utilisation, (% of share in issue)
traction in IP deals, normalisation of S&M expenses, etc.
Persistent has transitioned its business to enterprise and digital in just four
Stock Nifty EW IT
years. Contribution of the ISV business, which was 60.3%, is now down meaningfully
Index
to just 38.5%. We believe, now with ISV almost at par with the enterprise business 1 month 9.0 (0.6) 8.2
in revenue and higher growth trajectory sustaining in non-ISV business, Persistent’s 3 month 20.9 0.4 15.6
overall growth will jump meaningfully. Moreover, the company also expects some 12 month 30.8 19.3 24.8
growth in an otherwise falling ISV business going forward. We believe, both the
above factors—significant increase in proportion of non-ISV business and
stabilisation/some growth in ISV business—will mean good overall growth for
the company. We maintain ‘BUY/SP’.
Financials Sandip Agarwal
+91 22 6623 3474
Year to March FY16 FY17 FY18E FY19E sandip.agarwal@edelweissfin.com
Net revenue 23,123 28,784 30,953 35,103
Rev. growth (%) (19.7) 24.5 7.5 13.4 Pranav Kshatriya
+91 22 4040 7495
EBITDA 4,171 4,539 4,970 6,310
Adjusted Profit 2,974 3,015 3,401 4,123
Basic shares outstanding (mn) 79 80 80 80
Nikunj Mandowara
Adjusted diluted EPS (INR) 37.2 37.7 42.5 51.5 +91 22 4040 7431
EPS Growth (%) (1.4) 1.4 12.8 21.2 nikunj..andowara@edelweissfin.com
Diluted P/E (x) 21.4 21.1 18.7 15.5
EV/EBITDA (x) 13.6 12.7 11.5 8.9
ROAE (%) 19.5 17.0 16.8 18.0 February 9, 2018


Cost of revenues 14,305 18,518 20,407 23,100 Long term borrowings 26 41 41 41
Gross profit 8,819 10,266 11,082 13,213 Total Borrowings 26 41 41 41
Total SG&A expenses 4,647 5,727 6,018 6,900 Def. Tax Liability (net) -233 -196 -196 -196
S&M expenses 2,241 2,614 2,864 3,268 Sources of funds 16,186 18,838 21,418 24,425
G&A expenses 2,407 3,113 3,154 3,631 Gross Block 10,951 12,479 14,768 17,018
EBITDA 4,171 4,539 5,064 6,314 Net Block 3,182 2,768 3,483 3,985
Depreciation 965 1,490 1,575 1,748 Capital work in progress 265 290 250 250
Add: Other income 750.37 957.55 1,196.21 1,016.48 Total Fixed Assets 4,628 5,649 6,324 6,826
Profit Before Tax 3,956 4,007 4,686 5,582 Non current investments 1,348 2,339 2,339 2,339
Less: Provision for Tax 983 992 1,171 1,451 Cash and Equivalents 6,260 5,961 6,706 7,912
Reported Profit 2,974 3,015 3,514 4,130 Sundry Debtors 4,275 4,754 5,608 6,964
Shares o /s (mn) 79 80 80 80 Other Current Assets 2,658 998 1,123 1,263
Adjusted Basic EPS 37.7 37.7 43.9 51.6 Current Assets (ex cash) 8,597 9,208 10,532 12,409
Diluted shares o/s (mn) 80 80 80 80 Trade payable 1,651 1,209 895 1,013
Adjusted Diluted EPS 37.2 37.7 43.9 51.6 Other Current Liab 2,996 3,110 3,589 4,049
Adjusted Cash EPS 49.9 56.3 63.6 73.5 Total Current Liab 4,647 4,319 4,483 5,061
Dividend per share (DPS) 7.4 9 10 12 Net Curr Assets-ex cash 3,950 4,889 6,048 7,347
Dividend Payout Ratio(%) 23.3 27.9 26.6 27.2 Uses of funds 16,186 18,838 21,418 24,425
BVPS (INR) 204.9 237.4 269.7 307.2

Cost of revenues 61.9 64.3 64.8 63.6
Gross margin 38.1 35.7 35.2 36.4
G&A expenses 10.4 10.8 10 10
S&M expenses 9.7 9.1 9.1 9
SG&A expenses 20.1 19.9 19.1 19 Ratios
EBITDA margins 18 15.8 16.1 17.4 Year to March FY16 FY17 FY18E FY19E
EBIT margins 13.9 10.6 11.1 12.6
ROAE (%) 19.5 17.0 17.3 17.9
ROACE (%) 25.9 22.6 23.1 24.1
Debtors Days 62.0 57.0 60.0 63.0
Payable Days 28.0 28.0 19.0 15.0
Growth metrics (%)
Revenues 22.3 24.5 9.4 15.3
EBITDA 6.8 8.8 11.6 24.7
PBT 1.5 1.3 16.9 19.1
EPS 2.3 1.4 16.6 17.5
Cash flow statement (INR mn) Year to March FY16 FY17 FY18E FY19E
Year to March FY16 FY17 FY18E FY19E Adjusted Diluted EPS (INR) 37.2 37.7 42.5 51.5
Reported Profit 2,974 3,015 3,514 4,130 Y-o-Y growth (%) (1.4) 1.4 12.8 21.2
Add: Depreciation 965 1,490 1,575 1,748 Adjusted Cash EPS (INR) 49.9 56.3 62.1 73.4
Others 1,053 -702 -600 -536 Diluted P/E (x) 21.4 21.1 18.7 15.5
Less: Changes in WC 2,451 939 1,160 1,299 Price to Book Ratio (P/B) (x) 3.9 3.4 3.0 2.6
Free Cash Flow 893 695 1,080 1,793 Dividend Yield (%) 0.9 1.1 1.3 1.5

Company Profile
PRAJ INDUSTRIES
Targeting higher echelons
India Equity Research l Aviation

Feedstock continues to be a major issue for India due to which it is not able to Absolute Rating BUY
achieve 10% blending mandate (stuck at 5%). However, post successful Investment Characteristics Value
implementation of 2G technology, India can achieve 20% blending as the feedstock
will be agri residue which is abundantly available.
Praj can benefit substantially from European Union policy of converting all first
generation plants to second generation. The company has already developed a
MARKET DATA (R : PRAJ.BO, B: PRJ IN)
bolt on plant. Currently, the union has invited demo plants with wood chips at
feedstock. CMP : INR 95
Management indicated that 2G plant (INR8/ litre as feedstock) compared to 1G 52-week range (INR) : 131 / 61
plant (as low as INR2/litre depending on government policy) is still not financially Share in issue (mn) : 180.4
viable. However, sustainability of 2G programme is likely to change the equation. M cap (INR bn/USD mn) : 17 / 266
The high purity business continues to do well and expected to see 10-15% growth
over the next four–five years (current revenue of INR1.85bn).
The critical process equipment business remains healthy with Gujarat plant
running at 100% capacity utilisation and Saswad plant at 60%. Execution of Current Q1FY18 Q4FY17
Petrobras Brazil order has been further delayed by atleast two quarters. Promoters * 33.4 33.6 33.6
MF's, FI's & BK’s 19.5 22.0 20.4
Praj has diversified its revenue base over the past four-five years with core business Others 34.8 34.8 36.2
contribution moving from 100% to 72% currently; emerging businesses—critical * Promoters pledged shares : Nil
process equipment, waste water, Neela—contribute the balance. The company
aims to further improve overall revenue mix to 50:50 by FY18E led by stable growth
in conventional and high growth (25% CAGR) in emerging businesses. Led by global PRICE Performance (%)
references and ethanol blending mandates in key export regions like US, Brazil, BSE Midcap Stock Stock Over
Columbia, Peru, Thailand, Malaysia etc, Praj has sustained a steady position in Index Index
the global ethanol market. Its brewery business recently bagged two large projects 1 month (9.9) (25.4) (15.5)
overseas and expects to sustain the increased momentum. We maintain ‘BUY’. 3 month (3.0) 17.6 20.7
12 month 21.2 11.2 (10.0)
Swarnim Maheshwari
+91 22 4040 7418
Financials swarnim.maheshwari@edelweissfin.com
Year to March FY16 FY17 FY18E FY19E Amit Mahawar

Income from operations 10,158 9,150 9,875 11,375 +91 22 4040 7451
YoY growth (%) 0.4 (9.9) 7.9 15.2 amit.mahawar@edelweissfin.com
EBITDA 1,076 732 687 944
Adjusted Profit 745 446 409 565 Ashutosh Mehta
+91 22 6141 2748
EPS (INR) 4.2 2.5 2.3 3.2
ashutosh.mehta@edelweissfin.com
YoY growth (%) (2.3) (40.1) (8.3) 38.1
Diluted P/E (x) 22.6 37.8 41.2 29.8
ROAE (%) 11.2 6.5 5.8 7.9 February 9, 2018


Direct costs 4,670 4,671 4,846 5,617 Secured loans 159 43 143 243
Employee costs 1,544 1,480 1,516 1,587 Long Term Lia. & Provisions 130 158 159 159
Total operating expenses 9,082 8,418 8,855 10,100 Gross block 4,585 4,644 4,894 5,144
EBITDA 1,076 732 778 1,089 Depreciation 1,862 2,083 2,338 2,603
Depre. and amortisation 250 221 255 265 Net block 2,723 2,562 2,556 2,541
EBIT 826 511 523 823 Capital work in progress 8 315 325 335
Interest expenses 20 13 12 19 Total fixed assets 2,731 2,876 2,881 2,876
Other income 170 177 189 216 Investments 237 137 147 157
Profit before tax 976 675 700 1,020 Inventories 1,008 1,045 1,062 1,231
Provision for tax 231 229 175 286 Sundry debtors 3,671 2,949 3,279 3,808
Core profit 745 446 525 735 Cash and equivalents 2,035 2,079 2,108 2,249
Profit after tax 745 446 525 735 Other current assets 1,751 2,679 2,817 2,963
PAT after minority interest 745 446 525 735 Total current assets 8,702 8,889 9,412 10,407
Adjusted net profit 745 446 525 735 Sundry creditors and others 2,072 2,134 2,217 2,570
EPS (INR) basic 4.2 3 3 4 Provisions 2,650 2,439 2,665 2,914
Diluted equity shares (mn) 177 177 177 177 Total CL & provisions 4,721 4,574 4,883 5,484
Dividend payout (%) 46.6 82.7 77.3 60.8 Net current assets 3,981 4,315 4,530 4,923
Tax rate (%) 23.7 33.9 25.0 28.0 Net deferred tax 134 109 109 109
Uses of funds 6,845 7,300 7,520 7,908

EBITDA margins 10.6 8.0 8.1 9.7 Year to March FY16 FY17 FY18E FY19E
ROAE (%) (on adjusted profits) 11.2 6.5 7.3 10.0
ROACE (%) 14.7 9.9 9.8 13.8
Debtors days 116.3 132.0 118 116
Payable days 150.2 164.3 164 156
Cash conversion cycle 43.7 47.9 33.5 34.6
Growth metrics (%) Current ratio 1.8 1.9 1.9 1.9
Year to March FY16 FY17 FY18E FY19E Debt/EBITDA 0.1 0.1 0 0
Revenues 0.4 (9.9) 5.3 16.1 Interest coverage 40.7 39.0 42.9 42.5
EBITDA 16.2 (32.0) 6.2 40.0 Fixed assets t/o (x) 3.6 3.5 3.8 4.4
PBT 13.0 (30.8) 3.7 45.8
Net profit (2.3) (40.1) 17.7 39.9
EPS (2.3) (40.1) 17.7 39.9

Net profit 745 446 525 735 Year to March FY16 FY17 FY18E FY19E
Depreciation 250 221 255 265 Diluted EPS (INR) 4.2 2.5 2.3 3.2
Interest (Net of Tax) 15 9 9 14 Y-o-Y growth (%) (2.3) (40.1) (8.3) 38.1
Others (102) (9) (9) (14) CEPS (INR) 5.4 4.0 3.7 4.7
Gross cash flow 908 667 780 1,000 Diluted P/E (x) 22.6 37.8 41.2 29.8
Less:Changes in WC 392 407 176 243 Price/BV(x) 2.6 2.4 2.4 2.3
Operating cash flow 516 260 604 758 EV/Sales (x) 1.5 1.6 1.5 1.3
Free cash flow 391 (106) 344 498 Dividend yield (%) 1.7 1.9 2.1 2.3

Company Profile
SADBHAV INFRAPROJECTS
Road runner
India Equity Research l Infrastructure - Construction

The first three quarters of FY18 have been muted in terms of order intake. Sadbhav Absolute Rating NOT RATED
has bagged one NHAI hybrid annuity (HAM) project in FY18 till date—Jodhpur Ring
Road project worth INR9.3bn. Going ahead, the company will continue to focus on
building its portfolio by adding more HAM projects to its kitty.
Road projects worth INR1tn plus are at various stages of bidding and are expected
to be awarded over the next couple of quarters. This includes 80 plus HAM projects,
MARKET DATA (R : NA.BO, B: SINP IN)
spanning ~4,400km worth ~INR840bn. Considering such a large pipeline of projects,
management expects competitive intensity to be moderate going ahead. This is CMP : INR 136
Target Price : NA
likely to result in healthy IRRs for HAM projects.
Cash profit on the operational SPVs has increased from ~INR365mn in Q1FY18 to Share in issue (mn) : 352.2
INR418mn in Q2FY18 and INR579mn in Q3Y18. The company has already refinanced M cap (INR bn/USD mn) : 48 / 746
seven BOT projects over the past couple of years. It is in the process of refinancing Avg. Daily Vol. BSE/NSE (‘000) : 391.5
a couple of more projects; the cost of debt should dip to ~9.18%.
Management indicated that NHAI is rigorously following the practice of awarding Share Holding Pattern (%)
road projects only when 80% land has been acquired. In addition, NHAI is also
open to revision of scope of work in any project which is facing issues in acquiring
Promoters * 69.3 69.3 69.3
balance 20% land.
MF's, FI's & BK’s 6.0 6.0 6.0
FII's 10.8 10.8 10.8
All of the Sadbhav’s toll projects are already operational. Traffic on its BOT projects
Others 13.8 13.8 13.8
has improved in the current quarter. During Q3FY18, traffic growth in overall
portfolio stood at ~11.7%. (% of share in issue)
Toll rate for many of its projects will be hiked w.e.f. April 1, 2018. Importantly, the
Maharashtra Border Check Post will see an 18% toll revision. This will further PRICE Performance (%)
improve the company’s cash flow generation.
Sensex
Sadbhav has invested ~INR23bn equity in its BOT projects till date, of which
1 month (0.1) NA NA
~INR1.8bn has been infused in HAM projects. Going ahead, the company needs to
3 months 3.5 NA NA
infuse ~INR5bn equity in these HAM projects.
Financials

Revenues (INR mn) 3,744 5,106 19,710 13,480
Rev. growth (%) 30.4 36.4 286.0 (31.6)
EBITDA (INR mn) 2,442 2,841 6,493 8,689
Net profit (INR mn) (1,518) (3,549) (4,119) (3,531) Parvez Akhtar Qazi
Share outstanding (mn) 28 311 352 352 +91 22 4063 5405
parvez.qazi@edelweissfin.com
EPS (INR) (53.7) (11.4) (11.7) (10.0)
EPS growth (%) NA NA NA NA
Diluted P/E (x) NA NA NA NA
EV/EBITDA (x) 20.8 35.8 19.4 14.9
February 9, 2018
ROE (%) NA NA NA NA


Equity capital 283 3,110 3,522 3,522
Year to March FY14 FY15 FY16 FY17 Reserves & surplus 7,992 658 1,032 (2,805)
Income from operations 3,744 5,106 19,710 13,480 Shareholders funds 8,275 3,768 4,554 717
Direct costs 888 1,635 12,393 3,867 Secured loans 45,010 56,651 73,040 76,360
Employee costs 164 243 309 415 Minority Interest 1,878 50 (68) 262
Other expenses 251 387 514 510 Borrowings 49,958 62,920 80,221 83,202
Depre. and amortisation 915 1,418 1,355 2,211 Depreciation 2,457 2,455 3,824 6,034
EBIT 1,527 1,423 5,138 6,478 Net block 70,630 54,380 83,781 99,207
Interest expenses 3,552 5,259 9,773 10,562 Capital work in progress 7,822 17,294 15,790 1,831
Other income 216 286 388 559 Total fixed assets 78,452 71,673 99,571 101,038
Profit before tax (1,810) (3,433) (3,728) (3,525) Investments 1,052 1,602 244 558
Provision for tax 100 22 (10) 76 Inventories 0 0 4 0
Core profit (1,910) (3,455) (3,718) (3,601) Sundry debtors 143 8 56 5
Extraordinary items 0 117 520 0 Cash and equivalents 518 1,696 893 525
Profit after tax (1,910) (3,572) (4,238) (3,601) Other current assets 6,100 4,714 1,605 2,223
Less: Minority interests (392) (303) (119) (70) Total current assets 6,762 6,418 2,558 2,754
Add: Share in profits of asso. 0 (280) 0 0 Sundry creditors and others 25,426 12,297 15,220 16,963
PAT after minority interest (1,518) (3,549) (4,119) (3,531) Provisions 729 658 1,748 2,617
Adjusted net profit (1,518) (3,549) (4,119) (3,531) Total CL & provisions 26,155 12,955 16,967 19,581
EPS (INR) basic (54) (11) (12) (10) Net current assets (19,394) (6,537) (14,410) (16,827)
Diluted equity shares (mn) 28 311 352 352 Net deferred tax 0 0 (699) (588)
Uses of funds 60,111 66,739 84,706 84,181

Depreciation and Amortization 24.4 27.8 6.9 16.4 Ratios
Interest expenditure 94.9 103.0 49.6 78.4 Year to March FY14 FY15 FY16 FY17
EBITDA margins 65.2 55.6 32.9 64.5 ROAE (%) (on adjusted profits) NA NA NA NA
Net profit margins (40.5) (67.2) (18.3) (26.2) ROACE (%) 1.6 1.3 3.6 4.2
Payable days 990 788 108 351
Cash conversion cycle (983) (783) (107) (350)
Year to March FY14 FY15 FY16 FY17 Interest coverage 0.4 0.3 0.5 0.6
Fixed assets t/o (x) 0.1 0.1 0.2 0.1
Revenues 30.4 36.4 286.0 (31.6) Debt/equity 6.2 16.5 17.9 84.9
EBITDA 44.0 16.3 128.6 33.8
PBT NA NA NA NA
Net profit NA NA NA NA
EPS NA NA NA NA

Net profit (1,518) (3,432) (3,599) (3,531) Year to March FY14 FY15 FY16 FY17
Depreciation 915 1,418 1,355 2,211 Diluted EPS (INR) (53.7) (11.4) (11.7) (10.0)
Others (574) 3,627 (2,753) 549 Y-o-Y growth (%) NA NA NA NA
Gross cash flow (1,176) 1,612 (4,996) (771) CEPS (21.3) (6.9) (7.8) (3.7)
Less:Changes in WC (19,314) 11,679 (7,070) (2,049) Diluted P/E (x) NA NA NA NA
Operating cash flow 18,138 (10,067) 2,073 1,278 Price/BV (x) 0.6 11.2 10.5 66.9
Less: Capex 31,785 (6,780) 29,266 3,678 EV/Sales (x) 13.5 19.9 6.4 9.6
Free cash flow (13,647) (3,286) (27,193) (2,399) EV/EBITDA (X) 20.8 35.8 19.4 14.9

Company Profile
SECURITY & INTELLIGENCE SERVICES

Secured growth
In the Indian security services business, SIS is currently the second largest player Absolute Rating NOT RATED
with c4% market share, below the leader G4S Services. The latter’s market share is
at 5-6%, but it is growing at much slower rate, as per SIS management. The company
believes it can be the leader in India in the next to two-three years.
The domestic security services market is growing at 18-20% annually through a

combination of 9-10% volume growth and 8-10% wage growth. SIS has guided for
MARKET DATA (R : SECR.BO, B: SECIS IN)
sales growth of 25% as it believes that it can grow volumes at c15% via market
share gains. Note that SIS has delivered c40% CAGR in sales since FY07. The market CMP : INR 1,215
Target Price : NA
share gain is likely to be derived from larger as well as smaller unorganised
52-week range (INR) : 1,300 / 708
players.
SIS’s Australian security business is expected to clock 7-8% growth, which includes M cap (INR bn/USD mn) : 89 / 1,382
2.5% wage hike and rest from volume spurt. The Australia segment though lower Avg. Daily Vol. BSE/NSE (‘000) : 145.0
margin at c5% has higher RoCE of 65-70% as the receivable days are usually lower
at 45 days versus 60-65 days in India. FCF generation in Australia continues to be
strong due to lower WC requirements. Share Holding Pattern (%)
The Indian facility management segment should clock 25% growth in FY19 due to
Promoters * 75.5 75.5 75.5
lower base. SIS is now a large player in this category after the acquisition of MF's, FI's & BK’s 4.8 4.0 3.8
Dusters in FY17. EBITDA margin is expected to be around 6-7% in this segment. FII's 5.7 5.3 4.8
Others 14.0 15.2 15.9
Indian cash logistics, though very small in the overall context, has been suffering
due to unfavourable industry scenario as the ATM growth in India has been below (% of share in issue)
par. This continues to incur losses (cUSD3-4cr annually). Outlook remains muted.
SIS will be on the lookout for acquisition target in the Indian security services and
facility management segments and the rationale is mainly for acquiring customer Relative Performance (%)
contracts that the targets have. Sensex Stock Stock over

Sensex
Margins for the domestic security services segment are likely to be around 7% and 1 month (0.1) 3.9 4.0
these are sustainable, as per management. 3 months 3.5 43.3 39.8
Financials

Revenues (INR mn) 30,977 35,506 38,362 43,872
Rev. growth (%) 17.2 14.6 8.0 14.4
EBITDA (INR mn) 1,478 1,593 1,300 2,204
Adjusted Profit (INR mn) 687 627 433 1,127
EPS growth (%) 18.7 (8.7) (31.0) 158.1 Alok Deshpande
+91 22 6620 3163
Diluted P/E (x) 120.0 131.5 190.5 73.8
alok.deshpande@edelweissfin.com
EV/EBITDA (x) 55.4 52.4 63.8 38.6
ROACE (%) 22.9 16.8 11.7 19.0
ROAE (%) 19.0 15.9 10.2 21.8 February 9, 2018


Raw material costs 34 123 106 163 Minority interest 364 765 25 3
Employee expenses 25,383 28,920 31,446 37,039 Long term borrowings 596 2,004 1,790 3,735
Operating expenses 4,081 4,870 5,510 4,467 Long Term Liab. & Provisions 750 551 670 1,394
Total expenditure 4,115 4,993 5,616 4,630 Deferred Tax Liability (net) (379) (405) (471) (508)
Depreciation & amortisation 256 477 432 356 Gross Block 2,594 2,142 2,776 3,403
EBIT 1,222 1,116 868 1,848 Net Block 1,232 1,234 1,325 1,088
Add: Other income 100 145 139 113 Intangible assets 1,295 2,052 1,756 2,715
Profit before tax 1,017 806 484 1,193 Total net fixed assets 2,598 3,354 3,081 3,807
Less: Minority Interest (32) (142) (127) (21) Cash and cash equivalents 2,969 3,745 3,493 4,358
Add: Share of profit from assoc. 7 9 16 (60) Inventories 53 65 11 33
Reported Profit 687 627 433 1,127 Sundry Debtors 2,531 3,119 2,888 4,207
Adjusted Profit 687 627 433 1,127 Loans & Advances 314 560 695 1,615
No. of Shares outstanding (mn) 68 68 68 69 Other Current Assets 2,504 3,165 3,866 4,499
Adjusted Basic EPS 10.1 9.2 6.4 16.4 Total Current Assets (ex cash) 5,402 6,910 7,459 10,353
No. of Diluted shares OS (mn) 68 68 68 70 Trade payable 287 426 334 394
Adjusted Diluted EPS 10.1 9.2 6.4 16.4 Ot. Cur. Liab. & Sh. Term Prov. 4,146 4,854 5,097 6,110
Dividend per share (DPS) 3.2 2.4 4.0 - Net Current Assets (ex cash) 969 1,630 2,028 3,850
Dividend Payout Ratio (%) 0.3 0.3 0.6 - Uses of funds 6,650 8,833 8,723 13,004

Year to March FY14 FY15 FY16 FY17 Ratios
Gross margin 17.9 18.2 17.8 15.2 Year to March FY14 FY15 FY16 FY17
EBIT margin 3.9 3.1 2.3 4.2 ROA (%) 11.1 8.1 4.9 10.4
Interest 1.0 1.3 1.4 1.7 Current ratio 1.9 2.0 2.0 2.3
Net profit margin 2.1 1.4 0.8 2.5 Quick ratio 1.2 1.3 1.4 1.6
Cash ratio 0.7 0.7 0.6 0.7
Revenues 17.2 14.6 8.0 14.4 Inventory (days) 481 175 131 48
EBITDA 18.8 7.8 (18.4) 69.6 Payables (days) 3,091 1,054 1,307 815
PBT 24.2 (20.7) (40.0) 146.6 Cash conversion cycle (days) (2,577) (850) (1,148) (737)
Adjusted Profit 20.1 (8.7) (30.9) 160.5 Net Debt/Equity (0.2) 0.0 0.1 0.3
EPS 18.7 (8.7) (31.0) 158.1 Debt/EBITDA 1.4 2.5 3.1 2.8
Adjusted debt/Equity (x) 0.5 0.8 0.9 1.1

Reported Profit 687 627 433 1,127 Year to March FY14 FY15 FY16 FY17
Add:Interest 205 304 350 514 Y-o-Y growth (%) 18.7 (8.7) (31.0) 158.1
Add: Others (681) (1,211) (951) (1,810) Adjusted Cash EPS (INR) 12.5 15.5 9.7 16.7
Gross cash flow 466 197 264 187 Diluted P/E (x) 120.0 131.5 190.5 73.8
Less: Changes in WC (336) (515) (463) (758) Price to Book Ratio (P/B) (x) 21.0 20.8 18.3 14.2
Operating cash flow 801 713 726 944 Enterprise Value / Sales (x) 2.6 2.3 2.2 1.9
Free Cash Flow 270 254 54 298 Dividend Yield (%) 0.3 0.2 0.3 -

Company Profile
SHANKARA BUILDING PRODUCTS

Retail play in building material space
Shankara Building Products (SBPL) currently has 128 stores and is looking to add Absolute Rating NOT RATED
15-20 stores per year. Management believes this is a conservative estimate as the
format is evolving and the only challenge in growing can be execution risk.
Tiles, sanitaryware and fittings, which currently account for 10% of sales, are
gaining traction. Gross margins in these segments are also higher at 12-15%. The
company is planning to have higher number of SKUs for these categories in some
MARKET DATA (R : NA.BO, B: SHANKARA IN)
of its showrooms.
CMP : INR 1,771
Long-term sustainable SSSG can be 20% and on a conservative level it can be 10- Target Price : NA
15%. SSSG of matured stores is 12-15%. 52-week range (INR) : 2,365 / 545
The criteria before any acquisitions is geographical expansion, new category M cap (INR bn/USD mn) : 40 / 629
presence, sizeable opportunity (topline of INR300-500mn), cultural fit and less Avg. Daily Vol. BSE/NSE (‘000) : 543.8
than three years of payback.
The biggest competition still continues to be mom and pops stores. However, SBPL
differentiates itself by being a convenience store for one-stop shopping, by having
economies of scale and providing after-sales services. Current Q1FY18 Q4FY17
Promoters * 56.2 56.2 56.2
E-way bill is not expected to be a challenge for the company as it is already being MF's, FI's & BK’s 10.2 16.4 8.1
followed in Karnataka. Thus, the company does not expect any disruption with its FII's 14.3 7.3 4.7
implementation. Others 19.3 20.1 31.0
The proportion of private labels in overall sales is likely to fall as the company (% of share in issue)
will add more third party brands.
SBPL is focussed on an asset light business model that leads to higher asset
turnover & consequently RoCE (45-50% without back-end infrastructure); payback
period for new retail store is three years. Sensex
1 month (0.1) 3.3 3.4
The company expects improvement in margin going forward as change in product
3 months 3.5 21.4 17.9
mix with growing contribution of tiles, sanitaryware etc ., is expected to rise. It is
also planning to start spending on branding its stores which will attract higher
footfalls and create brand equity among customers for its stores.
Financials

EBITDA (INR mn) 885.6 894.9 1,195.7 1,543.8
Adj. profit (INR mn) 287 226 407 603 Rohan Gupta
Adj. diluted EPS (INR) 13.1 10.3 18.6 26.4 +91 22 4040 7416
Diluted P/E (x) 135.1 171.7 95.2 67.2 rohan.gupta@edelweissfin.com
EV/EBITDA (x) 47.0 46.6 34.3 27.3

RoACE (%) 16.8 15.3 20.9 25.3 February 9, 2018


Raw material costs 17,364 17,580 17,672 19,794 Long term Borrowings 58 66 53 59
Other expenses 770 977 1,079 1,270 Total Borrowings 2,840 2,933 2,227 2,236
EBIT 828 807 1,101 1,430 Gross Block 1,877 2,266 2,647 3,005
Add: Other income 9 9 7 3 Intangible Assets 150 140 140 140
Profit Before Tax 420 345 648 925 Total Fixed Assets 1,751 2,047 2,333 2,590
Less: Provision for Tax 133 120 240 322 Cash & bank balances 28 24 24 662
Reported Profit 287 226 407 603 Inventories 2,212 2,321 2,559 2,795
Adjusted Profit 287 226 407 603 Sundry Debtors 2,497 2,598 2,810 3,123
No. of Sha.outstanding (mn) 22 22 22 23 Loans & Advances 265 253 261 303
No. of dil. shares outstand. (mn) 2 2 22 22 23 Total Current Assets (Ex Cash) 4,979 5,182 5,635 6,229
Adjusted Cash EPS 16.6 15.4 24.4 32.7 Other Current Liab. & ST Prov. 298 302 378 528
Dividend per share 1.0 1.0 1.5 - Total CL & Provisions 1,508 1,683 2,716 3,138
Dividend Payout Ratio (%) 0.1 0.1 0.1 - Net Current Assets (ex cash) 3,471 3,500 2,918 3,091
Uses of funds 5,250 5,570 5,275 6,343

Staff costs 1.3 1.7 2.0 2.1
S G & A expenses 4.0 4.9 5.3 5.5 Ratios
Depreciation 0.3 0.4 0.5 0.5 Year to March FY14 FY15 FY16 FY17
Interest Expense 2.2 2.4 2.3 2.2 RoAE (%) 13.3 9.3 15.0 17.6
EBITDA margins 4.6 4.5 5.9 6.7 RoACE (%) 16.8 15.3 20.9 25.3
Debtors Days 48.3 47.0 48 47
Payble Days 24.1 26.9 38 46
Growth metrics (%) Current Ratio 3.3 3.1 2.1 2.2
Year to March FY14 FY15 FY16 FY17 Gross Debt/EBITDA 3.2 3.3 2 1
Revenues 9.1 2.7 2.9 13.5
EBITDA 2.0 1.1 33.6 29.1
PBT (12.0) (17.8) 87.5 42.8
Net profit (9.8) (21.3) 80.4 48.0
EPS (12.7) (21.3) 80.4 41.6

Add: Depreciation 58 88 95 114 Y-o-Y growth (%) (12.7) (21.3) 80.4 41.6
Free cash flow 347 381 1,213 694 Dividend yield (%) 0.1 0.1 0.1 0.0

Company Profile
SHARDA CROPCHEM
Differentiated play
India Equity Research l Midcap Agri

Sharda Cropchem (SCC) remains confident of volume growth of 15-20% over the Absolute Rating HOLD
next two-three years. Growth will primarily be driven by Europe and NAFTA markets Investment Characteristics None
(~77% of company’s revenue).
Key concerns have been on rising input cost from China as prices of many chemicals
have jumped sharply. This price increase is pressurising margin. However,
management is confident that prices will settle down going forward and supplies
MARKET DATA (R : NA, B: SHCR IN)
will resume from China in the medium term.
CMP : INR 382
SCC has higher dependency on China due to its asset-light business model and Target Price : INR 442
procures almost 100% of its input requirement from China. The key concern is that 52-week range (INR) : 567 / 419
there are no alternative suppliers for most products procured by the company, Share in issue (mn) : 90.2
except from China, which makes it more vulnerable to rising prices of such M cap (INR bn/USD mn) : 35 / 536
chemicals in China. Avg. Daily Vol. BSE/NSE (‘000) : 36.3
Due to increase in cost, margin may dip from ~22% to 18-20% over the medium
term. Share Holding Pattern (%)
SCC will continue to focus on new registrations and has spent ~INR1.7bn on Current Q1FY18 Q4FY17
registration by Dec 2017. Total spend registration for FY18/19 is likely to remain Promoters * 74.8 74.8 74.8
at ~INR2bn each year. MF's, FI's & BK’s 12.7 12.7 13.9
FII's 7.8 7.3 5.9
Given the company’s thrust on new registration, revenue contribution from top 10 Others 4.7 5.3 5.4
products has dipped to 52-55% from more than 60% earlier. * Promoters pledged shares : Nil
We believe, SCC’s business has taken a hit in the near term due to: 1) rising raw
material cost from China; and 2) inability to pass on the hike due to strong
competition from innovator companies. We maintain ‘HOLD’.
Index Index
1 month (9.9) (14.2) (4.3)
3 month (3.0) (8.1) (5.0)
12 month 21.2 (21.3) (42.6)
Financials

Revenues (INR mn) 12,221 13,992 16,471 19,201
Revenue growth (%) 15.2 14.5 17.7 16.6
EBITDA (INR mn) 2,714 3,124 3,772 4,397 Rohan Gupta
EBITDA margins(%) 22.2 22.3 22.9 22.9 +91 22 4040 7416
Adjusted Profit (INR mn) 1,664 1,903 2,192 2,563 rohan.gupta@edelweissfin.com
Adjusted Diluted EPS (INR) 18.4 21.1 24.3 28.4 Nihal Mahesh Jham
+91 22 6623 3352
EPS growth (%) 17.5 14.4 15.2 16.9
Diluted P/E (x) 20.7 18.1 15.7 13.5
EV/EBITDA (x) 12.1 10.5 8.5 7.0
ROAE (%) 22.8 21.6 20.9 20.6 February 9, 2018


Raw material costs 7,842 8,974 10,624 12,385 Minority interest 1 0 0 0
Gross profit 4,379 5,019 5,847 6,816 Short term borrowings 20 2 0 0
Employee expenses 273 289 329 384 Total Borrowings 20 2 0 0
Other expenses 1,391 1,606 1,746 2,035 Long Term Lia. & Provisions 9 12 12 12
EBITDA 2,714 3,124 3,772 4,397 Gross fixed assets 1,589 2,936 4,436 5,636
Depreciation & amortisation 351 563 821 986 Accumulated depreciation 306 851 1,672 2,658
EBIT 2,364 2,562 2,951 3,411 Intangible assets 1,288 2,089 2,768 2,982
Less: Interest Expense 6 0 0 0 Tangible assets 14 10 10 10
Add: Other income 166 157 180 250 Capital work in progress 2,098 2,324 2,100 2,100
Less: Provision for Tax 861 814 939 1,098 Cash and cash equivalents 1,551 1,686 2,531 3,787
Less: Minority Interest (1) 1 0 0 Inventories 1,598 2,878 3,202 3,732
Add: Excep. items (net of tax) 89 (0) 0 0 Sundry debtors 6,200 6,726 7,671 8,943
Reported Profit 1,752.6 1,903 2,192 2,563 Loans and advances 21 10 10 10
Less: Excep. Ite. (Net of Tax) 88.7 (0.4) 0.0 0.0 Other Current Assets 522 740 740 740
Adjusted Profit 1,664 1,903 2,192 2,563 Total current assets (ex cash) 8,341 10,354 11,623 13,426
No. of Shares outstanding (mn) 90 90 90 90 Trade payable 3,837 4,574 5,239 6,108
Adjusted Basic EPS 18.4 21.1 24.3 28.4 Other Current Liab. & ST Prov. 843 1,502 1,652 1,927
No. of Dil. shares outstan. (mn) 90 90 90 90 Total current liabilities & prov. 4,681 6,076 6,891 8,035
Adjusted Diluted EPS 18.4 21.1 24.3 28.4 Net Current Assets (ex cash) 3,661 4,277 4,732 5,391
Dividend per share (DPS) 5.5 4.0 4.0 4.0 Book value per share (INR) 89 106 126 149

EBIT margin 19.3 18.3 17.9 17.8 ROA (%) 19.3 18.3 18 18
Net profit margin 13.6 13.6 13.3 13.3 Current ratio 2.1 2.0 2 2
Quick ratio 1.8 1.5 2 2
Cash ratio 0.3 0.3 0.4 0.5
Inventory turnover (x) 5.2 4.0 3 4
Growth metrics (%) Payables turnover (x) 2.0 1.7 1.6 1.7
Year to March FY16 FY17 FY18E FY19E Debtors Days 160.4 168.6 159.5 157.9
Inventory Days 69.7 91.0 104.4 102.2
Revenues 15.2 14.5 17.7 16.6
Payable Days 186.2 218.8 222.8 219.9
EBITDA 43.3 15.1 20.7 16.6
PBT 30.1 7.7 15.2 16.9
Net profit 17.5 14.4 15.2 16.9
EPS 17.5 14.4 15.2 16.9

Interest (Net of Tax) 4 0 0 0 Y-o-Y growth (%) 17.5 14.4 15.2 16.9
Others (108) 98 0 0 Adjusted Cash EPS (INR) 24.5 30.1 33.4 39.3
Less: Changes in WC 33 749 455 658 Price to Book Ratio (P/B) (x) 4.3 3.6 3.0 2.6
Free cash flow 556 392 1,281 1,690 Dividend Yield (%) 1.4 1.0 1.0 1.0

Company Profile
SHEELA FOAMS
Home comfort
The total size of the industry is INR300bn with organised market at INR100bn. Absolute Rating NOT RATED
Sheela Foams has 20% market share.
No big shift of market share from unorganised to organised as yet. This will fructify
only post commencement of stringent implementation and tracking (along with e-
way bill).
From April 2016 till now, the company has effected 20% price hike. Last price MARKET DATA (R : NA.BO, B: SFL IN)
increase of 3.5% was in October. CMP : INR 1,604
Target Price : NA
Pricing for Sleepwell is ~5% higher than Kurl On. 52-week range (INR) : 1,850 / 926
Starlight:
Feedback from the market has been considered and the product has been Avg. Daily Vol. BSE/NSE (‘000) : 16.2
repositioned.
Introduced two models, of which one did not evince favorable feedback—INR5,000/
pair is the cheapest mattress in this category. The unorganised segment is priced Share Holding Pattern (%)
at ~3.5-4K/pair, which has increased to ~4.0-4.5K post GST. Current Q1FY18 Q4FY17
Promoters * 85.7 85.7 85.7
The company is targeting this brand to comprise 20% of revenue in a couple of MF's, FI's & BK’s 8.6 8.1 7.9
years. FII's 2.6 3.0 2.8
Others 3.1 3.1 3.6
Sheela Foams is also planning to launch a mattress only for the online channel.
The company is looking at long-term volume growth of 7-8% with price hike of ~5%.
Currently, Sheela Foams has 2,800 EBOs and is looking to increase them to 4,000.
Sensex
1 month (0.1) (5.6) (5.5)
3 months 3.5 6.5 3.0
12 months 21.5 60.3 38.8
Financials

Revenue growth (%) 10.6 11.5 9.3 12.9 Nihal Mahesh Jham
+91 22 6623 3352
EBITDA (INR mn) 847 911 1,760 1,952
Adj. profit (INR mn) 278 427 1,047 1,248
Adj. diluted EPS (INR) 17.1 26.2 21.5 25.6
EPS growth (%) (9.8) 53.3 (18.2) 19.2
ROAE (%) 15.2 19.3 35.9 31.3 February 9, 2018


Year to March FY14 FY15 FY16 FY17 Reserves & Surplus 1,803 2,288 3,222 4,432
Raw Material Costs 7,753 8,711 8,276 9,546 Long term Borrowings 866 726 346 350
Employee costs 1,194 1,285 1,394 1,540 Short term Borrowings 1,012 730 805 891
EBIT 547 631 1,467 1,648 Net Block 2,519 2,791 2,807 3,060
Add: Other income 6 106 169 219 Intangible Assets 3 72 71 71
Profit Before Tax 361 575 1,519 1,769 Total Fixed Assets 2,690 2,946 2,975 3,221
Less: Provision for Tax 83 148 472 520 Non current investments 0 0 100 100
Reported Profit 278 427 1,047 1,248 Cash & bank balances 768 1,170 2,172 3,202
Adjusted Profit 278 427 1,047 1,248 Inventories 1,241 1,182 1,046 1,242
No. of Shares outstanding (mn) 1 6 16 49 49 Sundry Debtors 1,201 1,145 1,171 1,314
Adjusted Basic EPS 17.1 26 21 26 Loans & Advances 287 285 336 368
No. of dil. shares outstand. (mn) 1 6 16 49 49 Other Current Assets 64 68 83 85
Adjusted Diluted EPS 17.1 26.2 21.5 25.6 Total Current Assets (Ex Cash) 2,793 2,679 2,636 3,009
Adjusted Cash EPS 35.571 43.4 27.5 31.8 Trade payable 989 1,140 1,126 1,289
Other Current Liab. & ST Prov. 1,098 1,348 1,753 1,912
Total CL & Provisions 2,086 2,487 2,880 3,202
Net Current Assets (ex cash) 707 192 (243) (193)
Uses of funds 4,165 4,308 5,004 6,331
Staff costs 9.4 9.1 9.0 8.8
S G & A expenses 22.9 23.1 26.3 25.5
ROAE (%) 15.2 19.3 35.9 31.3
ROACE (%) 14.4 19.0 38.8 36.0
Inventory Days 56.6 50.8 49.1 43.7
Debtors Days 32.2 30.2 27.3 25.9
Payble Days 42.3 44.6 50.0 46.2
Growth metrics (%) Cash conversion cycle (days) 46.5 36.4 26.4 23.5
Revenues 10.6 11.5 9.3 12.9 Gross Debt/EBITDA 2.2 1.6 0.7 0.6
EBITDA 3.6 7.5 93.2 10.9 Gross Debt/Equity 1.0 0.6 0.3 0.3
PBT (8.8) 59.1 164.1 16.4 Adjusted Debt/Equity 1.5 1.2 0.7 0.5
Adjusted Profit (9.8) 53.3 145.4 19.2 Net Debt/Equity 0.6 0.1 (0.3) (0.4)
EPS (9.8) 53.3 (18.2) 19.2 Interest Coverage Ratio 2.9 3.9 12.6 16.7

Reported Profit 278 427 1,047 1,248 Adjusted Diluted EPS (INR) 17.1 26.2 21.5 25.6
Add: Depreciation 300 280 293 304 Y-o-Y growth (%) (9.8) 53.3 (18.2) 19.2
Others 178 121 (49) (86) Diluted P/E (x) 93.7 61.1 74.7 62.7
Less:Changes in WC (340) (526) (392) 24 Price/BV (x) 13.3 10.6 23.1 17.0
Operating cash flow 1,244 1,473 1,762 1,512 EV/Sales (x) 2.1 1.9 5.0 4.4
Free cash flow 937 890 1,389 969 Dividend yield (%) 0.0 0.0 0.0 0.0

Company Profile
SHOPPERS STOP
Niche retailer
India Equity Research l Retail

Due to change in GST rate from 28% to 18% in November, most products (non- Absolute Rating BUY
apparel, which contribute 37% to sales) clocked 3% YoY dip in sales. Rating Relative to Sector Outperformer
Management estimates 4% SSSG in FY18. Shoppers Stop is targeting 7.5% SSSG in
FY19.
The company will incur INR1,300mn capex in FY18. Similar capex will be expended
in FY19; will open five new stores in FY19. MARKET DATA (R : SHOP.BO, B: SHOP IN)
CMP : INR 535
Hike in customs duties from 10% to 20% on imported products likely to increase Target Price : INR 733
MRP by 15-20%; impact of same will reflect after four-five months. 52-week range (INR) : 602 / 280
Private labels fetched gross margin of 46%.
Shoppers Stop is targeting private label contribution to improve to 12% by Q4FY18, Avg. Daily Vol. BSE/NSE (‘000) : 181.0
15% in FY19 and 18% in FY20.
Targeting INR400-500mn debt by Q4FY18 (currently at INR2,370mn). The company Share Holding Pattern (%)
will be completely debt free by FY19.
Investment conclusion Promoters * 63.7 67.1 67.1
MF's, FI's & BK’s 14.8 13.4 13.4
Shoppers Stop is a niche play with strong brand position in the lifestyle space.
FII's 8.0 4.3 4.2
Since 1991 it has assiduously positioned itself as a retailer of superior quality
Others 13.5 15.1 15.4
products and services, offering an international shopping experience. This strong
positioning and brand recall give the company a strategic advantage in light of (% of share in issue)
intensifying competition. With unwavering focus on systems and processes and
its ability to attract global brands as venture partners, the company is well placed
to emerge a leading departmental store player in the long run. We maintain ‘BUY/ PRICE Performance (%)
SO’.
Stock Nifty EW Retail
Index
1 month (2.6) (0.6) (9.9)
3 month (9.8) 0.4 (3.0)
12 month 78.6 19.3 21.2
Abneesh Roy
Financials +91 22 6620 3141
abneesh.roy@edelweissfin.com
Revenues (INR mn) 49,101 54,875 49,988 55,439 Rajiv Berlia
Rev. growth (%) 10.8 11.8 (8.9) 10.9 +91 22 6623 3377
EBITDA (INR mn) 1,743 2,812 4,007 4,723 rajiv.berlia@edelweissfin.com
Adjusted Profit (INR mn) (655) 156 1,139 1,539
Alok Shah
+91 22 6620 3040
Adjusted Diluted EPS (INR) (7.9) 1.8 13.0 17.5
EPS growth (%) 62.7 (122.6) 629.7 35.1
Diluted P/E (x) (68.1) 300.9 41.2 30.5


Net revenues 49,101 54,875 49,988 55,439 Shareholders funds 4,792 6,685 7,414 8,399
Cost of materials 31,892 35,436 30,835 34,195 Minority interest 52 52 52 52
Rent expense 4,285 4,664 4,249 4,712 Total Borrowings 9,327 9,327 8,618 8,618
Advertisement & sales costs 1,181 1,262 1,150 1,220 Deferred Tax Liability (net) (43) (43) (43) (43)
Electricity expenses 1,282 1,427 1,300 1,386 Sources of funds 14,129 16,021 16,041 17,026
S G &A expenses 4,833 5,158 4,699 5,100 Gross Block 8,766 10,266 11,766 13,266
Total operating expenses 15,467 16,627 15,147 16,521 Net Block 7,597 7,557 7,528 7,303
EBITDA 1,743 2,812 4,007 4,723 Capital work in progress 147 520 550 550
Depreciation & amortization 1,510 1,681 1,712 1,948 Intangible assets 1,680 1,886 2,104 2,281
EBIT 233 1,130 2,296 2,776 Total Fixed Assets 9,425 9,964 10,182 10,134
Less: Interest Expense 874 900 800 800 Non current investments 199 199 199 199
Add: Other income 251 250 150 150 Cash and cash equivalents 76 1,319 1,280 2,166
Add: Exceptional items (128) - - - Inventories 5,776 6,361 5,620 6,207
Profit before tax (518) 480 1,646 2,126 Sundry debtors 568 603 554 613
Less: Provision for Tax 203 244 426 506 Loans & advances 3,136 3,136 3,136 3,136
Add: Share of profit from asso. (63) (80) (80) (80) Other Current Assets 1,342 1,342 1,342 1,342
Reported Profit (784) 156 1,139 1,539 Total current assets (ex cash) 10,822 11,442 10,652 11,298
Less: Excep.Items (Net of Tax) (128) - - - Trade payable 4,908 5,417 4,786 5,287
Adjusted Profit (655) 156 1,139 1,539 Other CL & Short Term Provis. 1,485 1,485 1,485 1,485
No. of Shares outstanding (mn) 83 88 88 88 Total CL & provisions 6,393 6,902 6,271 6,772
Adjusted Basic EPS (7.9) 1.8 13.0 17.5 Net current assets (ex cash) 4,429 4,540 4,381 4,526
No. of Dil. shares outstanding (mn) 83 88 88 88 Uses of funds 14,129 16,021 16,041 17,026
Adjusted Diluted EPS (7.9) 1.8 13.0 17.5 Book value per share 57 76 84 96
Adjusted Cash EPS 10.2 20.9 32.5 39.7
Dividend per share (DPS) - 0.5 3.9 5.3
Dividend Payout Ratio (%) - 30.0 30.0 30.0
Common size metrics as % of net revenues Ratios

Cost of materials 65.0 64.6 61.7 61.7 ROAE (%) (13.1) 2.7 16.0 19.3
Employee expenses 7.9 7.5 7.5 7.4 ROCE (%) 3.4 9.1 15.2 17.7
Rent and lease 8.7 8.5 8.5 8.5 Inventory days 62 62 62 62
S G &A expenses 9.8 9.4 9.4 9.2 Debtors days 4 4 4 4
Total operating expenses 31.5 30.3 30.3 29.8 Payable days 52 52 52 52
Depreciation and Amortization 3.1 3.1 3.4 3.5 Cash Conversion Cycle 13 13 13 13
Interest expenditure 1.8 1.6 1.6 1.4 Current Ratio 1.7 1.8 1.9 2.0
EBITDA margin 3.5 5.1 8.0 8.5 Gross Debt/EBITDA 5 3 2 2
EBIT margin 0.5 2.1 4.6 5.0 Gross Debt/Equity 1.9 1.4 1.2 1.0
Net profit margins (1.3) 0.3 2.3 2.8 Adjusted Debt/Equity 1.9 1.4 1.2 1.0
Growth metrics (%) Interest Coverage Ratio 0.3 1.3 2.9 3.5
Revenues 10.8 11.8 (8.9) 10.9
EBITDA (2.7) 61.3 42.5 17.9
PBT (448.0) 192.6 242.6 29.2
Adjusted Profit (62.7) 123.8 629.7 35.1
EPS (62.7) 122.6 629.7 35.1
Reported Profit (784) 156 1,139 1,539 Adjusted Diluted EPS (INR) (7.9) 1.8 13.0 17.5
Add: Depreciation 1,510 1,681 1,712 1,948 Y-o-Y growth (%) (62.7) 122.6 629.7 35.1
Interest (Net of Tax) - 603 536 536 Adjusted Cash EPS (INR) 10.2 20.9 32.5 39.7
Others 1,041 47 114 114 Diluted PE Ratio (P/E) (x) (68.1) 300.9 41.2 30.5
Less: Changes in WC 463 111 (159) 146 Price to Book Ratio (P/B) (x) 9.3 7.0 6.3 5.6
Less: Capex 621 2,273 1,930 1,900 Enterprise Value / EBITDA (x) 31.0 19.6 13.6 11.3
Free cash flow 683 104 1,730 2,091 Dividend Yield (%) - 0.1 0.7 1.0

Company Profile
SINTEX PLASTICS
Value unlocking
Sintex has two subsidiaries: i) Sintex-BAPL (revenue FY17 – INR 34.4bn & EBITDA Absolute Rating NOT RATED
FY17 – INR5.0bn) includes custom moulding business; and ii) Sintex-Infra Projects
(revenue FY17 – INR33.5bn & EBITDA FY17 – INR 6.3bn) includes prefab, monolithic
and plastic business.
Custom moulding business is further split into overseas operations, domestic

operations and retail. The company increasingly wants to focus on this business
MARKET DATA (R : SNTX.BO, B: SINT IN)
as cash conversion is faster and growth levers are in place. Within custom
moulding, the company is confident of significant growth in the retail segment CMP : INR 23
Target Price : NA
(currently INR6bn), which includes products like tanks, sandwich panels, dustbins,
etc. It expects the segment to clock CAGR of 20-22% over the next few years without
having to incur any significant capital expenditure.
Focus on balance sheet strengthening: The company is consciously focusing less Avg. Daily Vol. BSE/NSE (‘000) : 25,367.9
on the prefab business, though it yields higher margin as the working capital is
huge. Sintex currently has a net debt of around 4x, which it wants to reduce to 2x
before embarking on a large capital expenditure programme. Share Holding Pattern (%)
Promoters * 28.8 30.6 31.2
MF's, FI's & BK’s 1.5 3.6 6.8
FII's 11.4 21.0 29.4
Others 58.3 44.7 32.6

Sensex
1 month (0.1) (17.4) (17.3)
3 months 3.5 (14.9) (18.4)
12 months 21.5 30.2 8.7
Financials
Year to March FY17

Net revenues (INR mn) 60,410
EBITDA (INR mn) 10,131.6
Adj. profit (INR mn) 4,203 Ankit Goel
Adj. diluted EPS (INR) 8 +91 22 4342 8064
ankit.goel@edelweissfin.com
Diluted P/E (x) 10
EV/EBITDA (x) 7.6
RoACE (%) 11.5 February 9, 2018


As on 31st March FY17
Share capital 0
Year to March FY17 Other Equity 31,142
Net revenues 60,410 Total shareholders funds 31,142
Raw material costs 34,084 Minority interest 16
Employee Benefits Expense 7,406 Long term Borrowings 25,933
Other expenses 8,789 Short term Borrowings 14,123
Total expenses 50,279 Total Borrowings 40,057
EBITDA 10,132 Long Term Liabilities & Prov. 2,380
Depreciation & amortization 2,303 Deferred Tax Liability (net) 1,882
EBIT 7,829 Sources of funds 75,476
Less: Interest Expense 2,633 Gross Block 42,359
Add: Other income 350 Net Block 41,345
Add: Exceptional items 0 Capital work in progress 291
Profit Before Tax 5,546 Intangible Assets 17,507
Less: Provision for Tax 1,350 Total Fixed Assets 59,143
Less: Minority Interest (7) Non current investments 581
Add: Share of profit from assoc. 0 Cash & bank balances 3,773
Reported Profit 4,203 Inventories 5,473
Less: Excep. Items (Net of Tax) 0 Sundry Debtors 12,459
Adjusted Profit 4,203 Loans & Advances 7,403
No. of Shares outstanding (mn) 555 Other Current Assets 559
Adjusted Basic EPS 8 Total Current Assets (Ex Cash) 25,893
No. of dil. shares outstand. (mn) 555 Trade payable 8,411
Adjusted Diluted EPS 7.6 Other Current Liab. & ST Prov. 5,502
Adjusted Cash EPS 12.8 Total Current Liab. & Provisions 13,912
Net Current Assets (ex cash) 11,980
Uses of funds 75,476
Book value per share (BV) (INR) 56

Year to March FY17 Ratios
Materials costs 56.4 Year to March FY17
Staff costs 12.3 RoAE (%) 13.5
S G & A expenses 14.5 RoACE (%) 11.5
Depreciation 3.8 Inventory Days 59
Interest Expense 4.4 Debtors Days 75
EBITDA margins 16.8 Payble Days 90
Net Profit margins 6.9 Cash conversion cycle (days) 43.8
Current Ratio 2.1
Gross Debt/EBITDA 4
Gross Debt/Equity 1.3
Net Debt/Equity 1.2
Interest Coverage Ratio 3.0

Year to March FY17 Year to March FY17
Reported Profit 4,203 Adjusted Diluted EPS (INR) 7.6
Add: Depreciation 2,303 Y-o-Y growth (%) NA
Interest (Net of Tax) 1,992 Adjusted Cash EPS (INR) 12.8
Others 717 Diluted P/E (x) 9.8
Less:Changes in WC (712) Price/BV (x) 1.3
Operating cash flow 9,927 EV/Sales (x) 1.3
Less: Capex 6,579 EV/EBITDA (x) 7.6
Free cash flow 3,348 Dividend yield (%) 0.0

Company Profile
SKF INDIA
Moving up the value chain
India Equity Research l Bearing

SKF has followed the strategy of investing in and developing new technology over Absolute Rating BUY
the recent past and started receiving approval from OEMs for new products. Investment Characteristics Growth
New products and wins:

• Greasing for life wheel bearings: SKF introduced new products providing 10x
more life like the greased for life wheels, wherein it has gained strong traction
within OEMs like Ashok Leyland. MARKET DATA (R : SKFB.BO, B: SKF IN)
• Housing for industrial applications (material handling): The company believes CMP : INR 1,801
it’s an INR4bn opportunity and high margin segment, wherein it has already Target Price : INR 1,867
clocked INR500-600mn sales, with its first contract for exports in December. 52-week range (INR) : 2,010 / 1,267
Sales for the quarter grew 5%YoY, however adjusted for CVD in cost of purchases
post GST, sales grew 9%YoY for the quarter and 7% for full year.
Margin sustainability: The current margin is amongst historic high at 17% plus.
According to management, it is sustainable led by continuous innovation with
increasing mix towards higher margin new products, operational efficiencies and Share Holding Pattern (%)
savings with increasing utilisation.
Management believes with electric vehicles transition, the number of bearings Promoters * 52.3 52.3 53.6
will fall. However, the value of bearings will remain the same with technology MF's, FI's & BK’s 23.1 21.2 20.8
upgradation and transition towards higher emission norms. FII's 10.9 12.0 11.9
Others 13.7 14.5 13.7
Demand picking up: While automotive has grown healthy, within the industrial
segment, replacement segment and certain segments within OEM like machine (% of share in issue)
tools, construction equipment and off highway are doing well.
Cost savings: The new distribution center in Pune enabled closure of 15 of 27
stocking locations across India. Also, it reduced the cycle time for customers
dramatically and led to savings with traded goods shipped directly from Europe Index Index
versus from Europe - Singapore - India earlier. 1 month (9.9) (8.0) 1.9
Railways contribute 7-9% to revenue currently (4-5% earlier). While SKF has strong 3 month (3.0) 0.8 3.8
presence in passenger vehicles, the company is strengthening its positioning in 12 month 21.2 30.5 9.2
freight.
We maintain ‘BUY’ led by SKF’s strong position fortified by new product
development, demand improvement in auto and industrial.
Financials

Revenues (INR mn) 29,973 26,314 28,423 33,063
EBITDA (INR mn) 3,615 3,362 3,983 4,860
No. of Shares outstanding (mn) 52.7 52.7 51.3 51.3 Shradha Sheth
EV/EBITDA (x) 24.7 26.3 21.1 17.0
ROACE (%) 25.1 21.0 23.3 27.0
ROAE (%) 16.6 14.0 15.4 17.9 February 9, 2018


Raw material costs 18,717 16,252 17,029 19,690 Short term borrowings 650 340 340 340
Gross profit 11,255 10,062 11,393 13,373 Total Borrowings 650 340 340 340
Employee expenses 2,541 2,222 2,412 2,770 Long Term Lia. & Provisions 275 293 293 293
Operating expenses 7,640 6,700 7,411 8,513 Gross Block 3,973 4,254 5,404 6,404
Total expenditure 26,358 22,953 24,440 28,203 Accumulated depreciation 806 1,266 1,780 2,382
EBITDA 3,615 3,362 3,983 4,860 Net Block 3,168 2,987 3,624 4,022
Depreciation & amortisation 684 479 513 602 Capital work in progress 119 352 200 200
EBIT 2,931 2,883 3,469 4,258 Intangible assets 0 2 2 2
Other income 1,014 873 818 1,009 Total Fixed Assets 3,287 3,341 3,825 4,223
Reported Profit 2,558.9 2,438.9 2,786.8 3,423.7 Sundry debtors 4,829 5,143 3,738 4,348
Adjusted Profit 2,558.9 2,438.9 2,786.8 3,423.7 Loans and advances 2,333 2,036 2,036 2,036
No. of Shares outstan. (mn) 52.7 52.7 51.3 51.3 Other Current Assets 627 836 836 836
Adjusted Basic EPS 48.5 46.3 54.3 66.7 Total curr. assets (ex cash) 11,139 12,181 9,735 10,834
No. of Dil. shares outstan. (mn) 52.7 52.7 51.3 51.3 Trade payable 2,929 3,040 3,079 3,560
Adjusted Diluted EPS 48.5 46.3 54.3 66.7 Other CL & Short Term Provisi. 986 1,255 1,255 1,255
Adjusted Cash EPS 60.6 55.0 64.3 78.4 Total CL & Provisions 3,915 4,295 4,334 4,815
Book Value per share (INR) 315.7 343.5 350.0 395.6

Gross margin 37.6 38.2 40.1 40.4 Ratios
EBITDA margins 12.1 12.8 14.0 14.7 Pre-tax (ROCE) (%) 25.1 21.0 23.3 27.0
EBIT margin 9.8 11.0 12.2 12.9 ROAE (%) 16.6 14.0 15.4 17.9
Net profit margin 8.5 9.3 9.8 10.4 ROA (%) 16.0 13.4 14.9 17.3
Quick ratio 3.8 3.6 3.7 3.7
Cash ratio 1.8 1.7 2.2 2.2
Revenues 24.2 (12.2) 8.0 16.3 Receivables (days) 52 69 57 45
EBITDA 28.6 (7.0) 18.5 22.0 Inventory (days) 61 84 78 62
PBT 28.8 (4.8) 14.1 22.9 Payables (days) 61 67 66 62
Adjusted Profit 26.2 (4.7) 14.3 22.9 Cash conversion cycle (days) 52 87 70 46
EPS 26.2 (4.7) 17.4 22.9

Add:Interest 0 0 0 0 Y-o-Y growth (%) 26.2 (4.7) 17.4 22.9
Add: Others (832) (720) (818) (1,009) Adjusted Cash EPS (INR) 60.6 55.0 64.3 78.4
Less: Changes in WC 2,150 1,048 (2,485) 618 Price to Book Ratio (P/B) (x) 5.7 5.3 5.2 4.6
Operating cash flow 262 1,150 4,967 2,399 Enterprise Value / Sales (x) 3.0 3.4 3.0 2.5
Less: Capex 304 405 998 1,000 Enterprise Value / EBITDA (x) 24.7 26.3 21.1 17.0
Free cash flow (42) 745 3,969 1,399 Dividend Yield (%) 0.8 0.6 0.8 1.0

Company Profile
SOLAR INDUSTRIES
Overseas drives growth; defence execution key

Volume growth in domestic market: Management estimates 15% volume growth Absolute Rating HOLD
in its domestic bulk business and ~20% spurt in the cartridge business—~12% Investment Characteristics Growth
growth from rise in volume from coal India and balance contributed by other
sectors on account of higher government spending on infrastructure.
Offshore market offers huge potential with 3x revenue by FY20: Solar is confident
of strong growth in offshore markets as it expands its geographical reach. The
MARKET DATA (R : SLIN.BO, B: SOIL IN)
company is planning to add Australia and Ghana next year in addition to Turkey,
Zambia, Nigeria and has recently entered South Africa. Management is confident CMP : INR 1,035
of clocking revenue of INR10bn from offshore markets by FY20 with 20-22% EBITDA
52-week range (INR) : 1,232 / 695
margin.
Defence revenue continues to remain muted, but spurt in order book: Revenue M cap (INR bn/USD mn) : 94 / 1,455
contribution from defence has been disappointing so far despite huge opportunity Avg. Daily Vol. BSE/NSE (‘000) : 44.5
in this segment due to delays in approvals from the government and lengthy
processes. However, management is confident of pick in defence revenue from
FY19 as orders have started flowing with current order book at INR1.6bn. Share Holding Pattern (%)
Management expects to achieve revenue of INR5bn by FY20 and with higher EBITDA Current Q1FY18 Q4FY17
margin of ~25%, the contribution to profitability remain significant. Promoters * 73.1 73.1 73.1
MF's, FI's & BK’s 20.0 20.7 18.3
Capex to be funded through internal cash flows: Solar expects capex of INR2bn per FII's 1.7 1.4 1.4
annum over the next two years, which includes ~INR800-1,000mn in domestic, Others 5.1 4.7 7.2
~INR500mn in overseas and INR700mn in defence. The company will continue to * Promoters pledged shares : 2.9
fund this capex through internal accrual and debt is likely to remain stable at (% of share in issue)
current level of ~INR5bn. The company has changed part of its forex loan to local
currencies (~INR2bn), which will help reduce hedging cost, but will increase interest
cost.
Investment conclusion Index Index
1 month (9.9) (13.4) (3.5)
We believe Solar has a solid business model with strong entry barriers and offers
3 month (3.0) (4.2) (1.2)
robust growth opportunity on: 1) 15-18% growth in domestic market backed by
12 month 21.2 41.4 20.2
government push on infrastructure; 2) successful entry in offshore markets and
potential entry in new geographies; and 3) pick up in defence orders. We believe,
significant capex which in defence (INR3.5bn) will start contributing to profitability
and return ratios. We maintain ‘HOLD’.
Financials

Revenues (INR mn) 14,486 15,800 19,450 23,196
Rev. growth (%) 7.2 9.1 23.1 19.3
EBITDA (INR mn) 3,042 3,239 4,191 5,108 Rohan Gupta
Adjusted Profit (INR mn) 1,637 1,865 2,440 3,045 +91 22 4040 7416
No. of Shares outstanding (mn) 90.5 90.5 90.5 90.5 rohan.gupta@edelweissfin.com
EPS growth (%) 4.0 14.0 30.8 24.8 Sneha Talreja
+91 22 4040 7417
Diluted P/E (x) 57.2 50.2 38.4 30.7
sneha.talreja@edelweissfin.com
EV/EBITDA (x) 31.8 30.0 23.1 18.8
ROACE (%) 24.8 23.2 26.1 28.0
ROAE (%) 21.8 21.4 23.9 24.7 February 9, 2018


Year to March FY16 FY17 FY18E FY19E Revenue and surplus 7,874 9,105 10,910 13,214
Net revenues 14,486 15,800 19,450 23,196 Shareholder fund 8,054 9,286 11,091 13,395
Raw material costs 8,767 9,065 11,155 13,194 Minority interest 478 403 503 621
Employee expenses 876 1,043 1,225 1,461 Short term borrowings 2,090 2,633 2,633 2,633
Depreciation & amortisation 328 387 476 532 Net block 6,977 7,697 9,221 10,189
Other income 133 132 141 170 Total Fixed Assets 7,332 8,688 9,503 10,470
Provision for tax 867 767 1,089 1,356 Cash and cash equivalents 676 891 1,476 2,217
Less: Minority Interest 138 82 101 118 Inventories 1,599 1,811 2,139 2,530
Reported Profit 1,636.6 1,865 2,440 3,045 Sundry debtors 2,710 3,138 3,744 4,466
Adjusted Profit 1,636.564 1,865.4 2,440.2 3,045.3 Loans & advances 1,115 1,031 1,031 1,031
No. of Sha. outstanding (mn) 90.490 90.5 90.5 90.5 Other assets 1,611 1,625 1,625 1,625
Adjusted Basic EPS 18.086 20.6 27.0 33.7 Total current assets (ex cash) 7,035 7,604 8,539 9,652
No. of Dilu. sha.outstan. (mn) 90.490 90.5 90.5 90.5 Trade payable 1,080 927 1,192 1,410
Adjusted Diluted EPS 18.086 20.6 27.0 33.7 Other CL and provisions 1,309 1,650 1,815 1,997
Adjusted Cash EPS 23.417 25.6 32.2 39.5 Total CL & provisions 2,389 2,577 3,007 3,406
Dividend per share (DPS) 6.300 2.0 6.0 7.0 Net current assets (ex cash) 4,645 5,027 5,533 6,245
Book value per share (INR) 89 103 123 148

Gross margin 39.5 42.6 42.6 43.1 Ratios
EBITDA margins 21.0 20.5 21.5 22.0
Depreciation & amortisation 2.3 2.5 2.4 2.3 Pre-tax (ROCE) (%) 24.8 23.2 26.1 28.0
EBIT margin 18.7 18.0 19.1 19.7 ROAE (%) 21.8 21.4 23.9 24.7
Net profit margin 12.3 12.3 13.1 13.6 ROA (%) 13.5 13.6 16 17
Current ratio 3.2 3.3 3 3
Quick ratio 2.6 2.6 3 3
Cash ratio 0.3 0.3 0.5 0.7
Growth metrics (%) Inventory turnover (x) 5.5 5.3 6 6
Revenues 7.2 9.1 23.1 19.3 Receivables (days) 61.3 67.5 64.6 64.6
EBITDA 19.8 6.5 29.4 21.9 Inventory (days) 66.8 68.6 64.6 64.6
PBT 24.3 2.7 33.7 24.5 Payables (days) 38.2 40.4 34.7 36.0
Adjusted Profit 4.0 14.0 30.8 24.5 Cash conversion cycle (days) 89.8 95.8 94.5 93.2
EPS 4.0 14.0 30.8 24.8 Gross Debt/Equity 0.4 0.4 0.4 0.3

Add: Interest 137 180 152 152 Y-o-Y growth (%) 4.0 14.0 30.8 24.8
Add: Others 586 (76) 34 23 Adjusted Cash EPS (INR) 23.4 25.6 32.2 39.5
Less: Changes in WC 255 596 506 713 Price to Book Ratio (P/B) (x) 11.6 10.1 8.4 7.0
Free cash flow 1,044 43 1,305 1,539 Dividend Yield (%) 0.6 0.2 0.6 0.7

Company Profile
STERLITE TECHNOLOGIES
Growth fiber

Long-term fiber price will be in the USD7-8 per FKM range. Absolute Rating BUY
Rating Relative to Sector Outperformer
Full capacity will come on stream in June 2019.
Risk Rating Relative to Sector Medium
Optical Fibre (OF) forecast for next two years is in the 550-650mn FKM range. Sector Relative to Market Underweight
Capacity announced so far is 100-120mn FKM.

MARKET DATA (R : STTE.BO, B: SOTL IN)
Sterlite has relationships in diverse geographical areas.
CMP : INR 346
Fibre demand from telecom operators has been weak, while that from government Target Price : INR 425
has been growing; ISPs are deploying fiber at a fast clip. 52-week range (INR) : 414 / 111
~INR4bn revenue balance from the J&K network for spectrum project; delays due M cap (INR bn/USD mn) : 139 / 2,155
to multiple reasons, many which are beyond the company’s control. Opportunities Avg. Daily Vol. BSE/NSE (‘000) : 1,898.5
for other defence orders are strong.
Looking at minimum double digit margin for services business, ideally 15-17%;
possible to clock ~25% RoCE in services business even with 120 days’ WC.
Has set up a network lab in NCR for advanced networking research. Promoters * 54.1 54.3 54.5
MF's, FI's & BK’s 12.2 12.0 11.4
We believe Sterlite will be key beneficiary of strong demand for fiber optic cables, Others 26.6 25.8 27.1
leveraging its capacity expansion. Its superior cost structure due to integrated * Promoters pledged shares : 19.4
operations will lead to high EBITDA margin improving return ratios, despite planned (% of share in issue)
capex. The company is strategically expanding its portfolio of services leveraging
its knowhow of complex network and relationships from the fiber business. We
maintain ‘BUY/SO’. PRICE Performance (%)
Stock Nifty EW IT
Index
1 month (6.1) (0.6) (16.9)
3 month 21.2 0.4 (15.0)
12 month 138.5 19.3 12.3
Sandip Agarwal
+91 22 6623 3474
Financials
Pranav Kshatriya
Revenues (INR mn) 22,749 25,936 33,780 45,609
+91 22 4040 7495
Rev. growth (%) (30.4) 14.0 30.2 35.0 pranav.kshatriya@edelweissfin.com
EBITDA (INR mn) 4,067 5,161 7,399 10,103
Adjusted Profit (INR mn) 1,505 1,985 2,843 4,325 Nikunj Mandowara
PAT growth (%) NM 31.9 43.2 52.1 +91 22 4040 7431
Adjusted diluted EPS (INR) 3.7 4.9 7.0 10.6 nikunj..andowara@edelweissfin.com
Diluted P/E (x) 92.6 70.7 49.7 32.8
EV/EBITDA (x) 35.4 28.4 20.2 15.1


Revenues 22,749 25,936 33,780 45,609 Shareholders' funds 7,546 8,801 10,794 13,820
Cost of revenues 10,926 11,420 13,761 18,608 Minority interest 312 452 618 903
Total SG&A expenses 7,756 9,355 12,621 16,898 Short term borrowings 3,542 5,910 6,501 7,151
EBITDA 4,067 5,161 7,399 10,103 Total borrowing 8,220 10,181 11,412 13,045
Depreciation & amortization 1,260 1,592 2,021 2,401 Long Term Liabilities & Prov. 1,298 1,495 1,682 1,894
EBIT 2,807 3,569 5,378 7,702 Deferred tax liability (net) 281 (34) (34) (34)
Less: Interest Expense 1,192 1,229 1,296 1,467 Sources of funds 17,658 20,894 24,471 29,628
Add: Other income (net) 635 235 299 365 Gross Block 20,176 18,006 21,128 24,928
Profit Before Tax 2,250 2,574 4,382 6,599 Net Block 9,848 11,830 13,911 16,736
Less: Provision for Tax 652 397 1,236 1,848 Capital work in progress 1,723 659 659 659
Less: Minority Interest 61 163 284 408 Intangible assets 1,522 1,206 905 678
Add: Share of profit from assoc. (32.0) (28.4) (19.6) (18.8) Total Fixed assets 13,093 13,696 15,475 18,074
Reported Profit 1,505 1,985 2,843 4,325 Non current investments 164 232 232 232
Adjusted Profit 1,505 1,985 2,843 4,325 Cash and cash equivalents 777 1,724 1,068 583
No. of Shares outstanding 393.9 397.9 401.0 402.6 Inventories 2,053 3,335 3,794 4,878
Adjusted Basic EPS 3.8 5.0 7.1 10.7 Sundry debtors 7,130 6,912 9,043 12,008
No. of Dil. shares outstanding 402.6 405.5 407.8 409.5 Loans & advances - 71 71 71
Adjusted Diluted EPS 3.7 4.9 7.0 10.6 Other assets 2,927 3,106 3,685 4,378
Adjusted Cash EPS 7.0 9.0 12.1 16.7 Total current assets (ex cash) 12,110 13,424 16,594 21,334
Dividend per share (DPS) - 1.5 1.8 2.7 Trade payable 3,722 4,486 4,484 5,321
Dividend Payout Ratio (%) - 35.7 33.1 32.9 Ot. Cur. Liab. & Sh. Term Prov. 4,764 3,695 4,413 5,274
Total current Liab. & prov. 8,486 8,181 8,897 10,595
Uses of funds 17,658 20,894 24,471 29,628
Book Value per share 18.8 22.0 27.0 34.0
Cost of revenues 48.0 44.0 40.7 40.8
Gross margin 52.0 56.0 59.3 59.2
SG&A expenses 34.1 36.1 37.4 37.0 Ratios
EBITDA margin 17.9 19.9 21.9 22.2 Year to March FY16 FY17 FY18E FY19E
EBIT margin 12.3 13.8 15.9 16.9
ROE (%) 22.0 25.1 30.3 36.2
Pre-tax ROCE (%) 20.7 19.9 25.0 29.8
Payble days 117 131 119 96
Growth metrics (%) Cash Conversion Cycle 42 54 62 73
Year to March FY16 FY17 FY18E FY19E Current Ratio 1.5 1.9 2.0 2.1
Revenues (30.4) 14.0 30.2 35.0 Gross Debt/Equity 1.1 1.2 1.1 0.9
EBITDA (10.3) 26.9 43.4 36.5 Adjusted Debt/Equity 1.1 1.2 1.1 0.9
PBT NM 14.4 70.3 50.6
Adjusted profit NM 31.9 43.2 52.1
EPS NM 31.0 42.4 51.5

Add: Depreciation 1,260 1,592 2,021 2,401 Y-o-Y growth (%) NA 31.0 42.4 51.5
Interest (Net of Tax) 847 1,040 930 1,057 Adjusted Cash EPS (INR) 7.0 9.0 12.1 16.7
Others (888) 1,858 854 1,052 Diluted P/E (x) 92.6 70.7 49.7 32.8
Less: Changes in WC 581 1,619 2,454 3,043 Price to Book Ratio (P/B) (x) 18.5 15.9 13.1 10.3
Free cash flow (2,046) 2,705 395 791

Company Profile
TATA CONSULTANCY SERVICES

A force to reckon with

Digital deal size is increasing; signing USD50mn deal is a landmark and will pave Absolute Rating HOLD
the way for more large deals. Rating Relative to Sector Performer
Customers are embracing digital at scale and will be a strong opportunity for
players like TCS.
There are only three-four global companies which can deploy digital at scale—
competitive advantage for TCS. MARKET DATA (R : TCS.BO, B: TCS IN)
CMP : INR 2,972
Margin expectation of 26-28% needs currency support; adjusted for currency,
margin are at the lower end of expectations. 52-week range (INR) : 3,254 / 2,154
Share in issue (mn) : 1,914.3
Growth is strong in all sectors, except BFSI and retail.
M cap (INR bn/USD mn) : 5,690/88,406
No immediate visibility of turnaround in BFSI and expects macro improvement to Avg. Daily Vol. BSE/NSE (‘000) : 1,180.0
lead to recovery.
Retail seems to be turning around and may clock double digit growth in FY19. Share Holding Pattern (%)
Weakness in large retail banks in North America as they are in initial phases of Current Q1FY18 Q4FY17
investment in digital technologies. In the next one-two quarters these banks will Promoters * 73.6 73.6 73.3
be clear about their technology strategy and spending; TCS expects growth to MF's, FI's & BK’s 6.1 5.5 5.4
return thereon. FII's 16.3 16.7 16.9

Others 4.0 4.2 4.4
Focused on achieving scale in all key markets in Europe. * Promoters pledged shares : 2.1
As India’s largest and most-experienced IT services firm, TCS is well-positioned to
benefit from the growing demand for offshore IT services. It is a serious contender PRICE Performance (%)
for winning large deals, as it has more experience than peers in implementing Stock Nifty EW IT
large, complex, and mission-critical projects. End-to-end full services offerings, Index
traction in emerging markets, ability to roll up large acquisitions, improving sales 1 month 11.5 (0.6) 8.2
and marketing prowess and willingness to take multiple big bets (different go-to- 3 month 12.4 0.4 15.6
market models) are among the key rationales for TCS to sustain its long term hi- 12 month 33.8 19.3 24.8
growth trajectory. We maintain ‘HOLD/SP’.
Sandip Agarwal
Financials +91 22 6623 3474
Revenues (INR mn) 1,086,416 1,181,606 1,224,865 1,336,074 Pranav Kshatriya
+91 22 4040 7495
Rev. growth (%) 14.8 8.8 3.7 9.1
EBITDA (INR mn) 306,734 325,046 322,700 360,229
Net profit (INR mn) 242,102 264,836 254,547 278,689 Nikunj Mandowara
EPS (INR) 123.2 134.8 132.3 145.6 +91 22 4040 7431
EPS growth (%) 22.8 9.4 (1.9) 10.1 nikunj..andowara@edelweissfin.com
Diluted P/E (x) 24.1 22.0 22.5 20.4
EV/EBITDA (x) 18.1 16.6 16.7 14.5
ROE (%) 36.9 32.7 29.8 30.9 February 9, 2018 February 9, 2018


Share capital 1,970 1,970 1,910 1,910
Net revenue 1,086,416 1,181,606 1,224,865 1,336,074 Shareholders' funds 731,899 883,150 819,825 982,597
Cost of revenues 595,489 650,360 693,594 747,170 Minority Interest 3,542 3,660 3,660 3,660
Gross profit 490,927 531,246 531,271 588,904 Long term borrowings 2,448 2,890 760 760
Total SG&A expenses 184,193 206,200 208,571 228,676 Total Borrowings 2,448 2,890 760 760
EBITDA 306,734 325,046 322,700 360,229 Def. Tax Liability (net) (65,726) (67,010) (67,180) (67,180)
Depreciation 18,879 19,860 20,437 21,050 Sources of funds 672,164 822,690 757,065 919,837
EBIT 287,855 305,186 302,263 339,179 Net Block 119,243 117,880 111,944 113,559
Add: Other income 30,503.00 41,890.00 33,498.05 28,253.74 Intangible Assets 38,120 37,210 38,180 38,180
Less: Provision for Tax 75,027 81,560 80,744 88,184 Non current investments 3,681 3,440 13,280 53,280
Less: Minority Interest 1,229 680 470 560 Cash and Equivalents 292,021 456,630 342,396 459,572
Reported Profit 242,102 264,836 254,547 278,689 Sundry Debtors 280,646 280,350 343,993 360,514
Shares o /s (mn) 1,965 1,965 1,924 1,914 Other Current Assets 7,767 5,460 7,860 7,860
Adjusted Basic EPS 123.2 134.8 132.3 145.6 Current Assets (ex cash) 381,136 362,170 437,593 454,114
Diluted shares o/s (mn) 1,965 1,965 1,924 1,914 Trade payable 162,037 154,640 186,328 198,867
Adjusted Diluted EPS 123.2 134.8 132.3 145.6 Total Current Liab 162,037 154,640 186,328 198,867
Adjusted Cash EPS 132.8 144.9 142.9 156.6 Net Curr Assets-ex cash 219,099 207,530 251,265 255,246
Dividend Payout Ratio(%) 41.3 40.4 42.7 41.6 BVPS (INR) 372.5 449.5 426 513.3

Cost of revenues 54.8 55 56.6 55.9
Gross margin 45.2 45 43.4 44.1
S&M expenses 17 17.5 17 17.1
SG&A expenses 17 17.5 17 17.1 Ratios
EBITDA margins 28.2 27.5 26.3 27 Year to March FY16 FY17 FY18E FY19E
EBIT margins 26.5 25.8 24.7 25.4 ROAE (%) 36.9 32.7 29.8 30.9
Net Profit margins 22.4 22.5 20.8 20.9 ROACE (%) 48.0 42.6 39.2 40.6
Debtors Days 88.0 87.0 93.0 96.0
Payable Days 98.0 89.0 90.0 94.0
Cash Conversion Cycle (10.0) (2.0) 3.0 2.0
Growth metrics (%)
Revenues 14.8 8.8 3.7 9.1
EBITDA 24.4 6.0 (0.7) 11.6
PBT 22.8 9.0 (3.3) 9.4
Adjusted Profit 23.2 9.4 (3.9) 9.5
EPS 22.8 9.4 (1.9) 10.1
Cash flow statement (INR mn) Year to March FY16 FY17 FY18E FY19E
Year to March FY16 FY17 FY18E FY19E Adjusted Diluted EPS (INR) 123.2 134.8 132.3 145.6
Reported Profit 242,102 264,836 254,547 278,689 Y-o-Y growth (%) 22.8 9.4 (1.9) 10.1
Add: Depreciation 18,879 19,860 20,437 21,050 Adjusted Cash EPS (INR) 132.8 144.9 142.9 156.6
Others 51,724 (26,345) 5,981 (27,694) Diluted P/E (x) 24.1 22.0 22.5 20.4
Less: Changes in WC 103,541 (11,569) 43,735 3,982 Price to Book Ratio (P/B) (x) 8.0 6.6 7.0 5.8
Free Cash Flow 189,492 250,390 222,349 245,399 Dividend Yield (%) 1.5 1.6 1.6 1.7

Company Profile
VEDANTA
Fecund resources
India Equity Research l Metals & Mining

Industry and macro environment Absolute Rating BUY
• Vedanta is uniquely positioned to take advantage of favourable commodity Rating Relative to Sector Outperformer
prices. The company is exposed to zinc, aluminium, copper and oil, outlook on Risk Rating Relative to Sector Low
which is quite benign over the next two years. Sector Relative to Market Equalweight
• Deleveraging and shareholders’ returns remain the company’s priority.

• Management stated that at net debt/EBITDA of 0.7x, VEDL is well placed among MARKET DATA (R : VDAN.BO, B: VEDL IN)
peers with sufficient headroom to pursue growth opportunities. CMP : INR 316
Operating leverage is key driver
52-week range (INR) : 349 / 217
• Management reiterated mined metal production and silver production at Zn Share in issue (mn) : 3,717.2
India to reach 1.2mt and 750tonnes, respectively, by FY20. M cap (INR bn/USD mn) : 1,175 / 18,251
• In the long term, management indicated zinc-lead capacity expansion to 1.5mtpa Avg. Daily Vol. BSE/NSE (‘000) : 11,478.8
and silver production at 1,000tonnes. Management mentioned that the
Gamsberg project is on target for first production by mid-2018. It will take 9-
12 months to ramp up the mine to full capacity. In the long term, Gamsberg Share Holding Pattern (%)
Phase 2 and 3 (incremental 350ktpa) and Swatberg (75ktpa) to be commenced. Current Q1FY18 Q4FY17
Promoters * 50.1 50.1 62.9
• In oil & gas, in the long term, management expects production run rate at 300-
MF's, FI's & BK’s 13.3 13.3 7.0
500kboepd accompanied by continued exploration.
FII's 17.8 17.7 16.3
• In case of aluminium, management expects to fully ramp up Jharsuguda-II Others 18.8 18.8 13.8
smelter and in the long term, expand Lanjigarh Alumina capacity to 6mtpa. * Promoters pledged shares : Nil
Debt and capital expenditure
• YTD FY18, the company generated free cash flow of INR5bn with working capital
movement of INR1.1bn. PRICE Performance (%)
Stock Nifty EW Metals &
• Consolidated debt stood at USD552bn versus cash and liquid investments of
Mining Index
USD389bn. 1 month (5.3) (0.6) 1.7
3 month (5.1) 0.4 (5.2)
12 month 28.3 19.3 (5.0)
With the highest exposure to base metals among peers, we expect VEDL to derive
the maximum benefit from current robust prices due to imminent capacity
expansion/ramp up. De-stressed balance sheet and impressive dividend yield are
additional sweeteners. We maintain ‘BUY/SO’.
Financials (Consolidated)

Revenues (INR mn) 679,927 761,713 909,158 1,012,372
Rev. growth (%) (7.8) 12.0 19.4 11.4
EBITDA (INR mn) 151,516 213,319 256,302 307,729
Net profit (INR mn) (122,705) 55,122 81,497 114,074
Share outstanding (mn) 2,965 2,965 3,717 3,717 Amit A Dixit
EPS (INR) 9.8 18.9 21.9 30.7 +91 22 6620 3160
EPS growth (%) (42.9) 92.3 16.2 40.0 amita.dixit@edelweissfin.com
Diluted P/E (x) 32.2 16.8 14.4 10.3
EV/EBITDA (x) 9.3 6.1 5.7 4.6
ROE (%) (3.2) 12.8 15.5 19.0 February 9, 2018 February 9, 2018


Share capital 2,965 3,718 3,718 3,718
Accretion to stock 3,189 (12,290) 0 0 Minority Interest 365,611 139,279 179,435 220,543
Raw material costs 217,931 231,085 326,865 365,193 Long term borrowings 493,784 302,551 182,551 149,551
SGA and other expenses 282,709 306,205 274,592 293,579 Total Borrowings 677,778 715,690 545,690 512,690
Total operating expenses 528,412 548,393 626,020 684,563 Long Term Lia. & Provisions 56,100 75,340 106,099 106,099
Other expenses 3,189 (12,290) 0 0 Deferred Tax Liability (net) 32,508 20,837 20,837 20,837
EBITDA 151,516 213,319 272,017 312,819 Sources of funds 1,572,389 1,556,147 1,451,358 1,485,743
Depre. & amortisation 85,724 62,915 78,397 84,155 Gross Block 1,386,994 1,528,301 1,678,301 1,828,301
EBIT 65,791 150,404 193,620 228,663 Net Block 662,983 758,344 829,947 895,792
Less: Interest Expense 57,781 58,550 51,183 46,055 Capital work in progress 279,260 176,709 101,878 17,878
Add: Other income 44,436 45,806 38,401 37,951 Intangible Assets 114,676 108,062 108,062 108,062
Add: Excep. ite. gain/(loss) (337,847) (1,144) 0 Total Fixed Assets 1,056,918 1,043,116 1,039,887 1,021,732
Profit Before Tax (285,402) 136,516 180,838 220,560 Non current investments 166,619 167,527 167,527 167,527
Less: Provision for Tax (106,776) 37,783 50,511 63,962 Cash and cash equivalents 570,460 610,119 539,570 550,762
Less: Minority Interest (55,919) 43,584 40,156 41,107 Inventories 80,117 96,279 153,229 125,536
Add: Sha. of pro. from asso. 2 (27) 0 Sundry Debtors 25,279 34,093 35,904 41,836
Reported Profit (122,705) 55,122 90,171 115,490 Loans & Advances 819 792 792 792
Less: Excep. (Net of Tax) (151,805) (827) 0 0 Other Current Assets 52,100 38,370 38,370 38,370
Adjusted Profit 29,100 55,949 90,171 115,490 Total Curr. Assets (ex cash) 158,314 169,534 228,295 206,534
No. of Sha. outstanding (mn) 2,965 2,965 3,717 3,717 Trade payable 161,624 184,591 305,123 242,014
Adjusted Basic EPS 9.8 18.9 24.3 31.1 Oth. CL & Sho.Term Provi. 218,299 249,558 218,799 218,799
No. of Dilu. sha. outstan. (mn) 2,965 2,965 3,717 3,717 Total CL & Provisions 379,923 434,149 523,921 460,812
Adjusted Diluted EPS 9.8 18.9 24.3 31.1 Net Curr. Assets (ex cash) (221,609) (264,615) (295,626) (254,278)
Adjusted Cash EPS 44.2 45.6 45.3 53.7 Uses of funds 1,572,389 1,556,147 1,451,358 1,485,743
Dividend per share (DPS) 4.1 17.7 20.0 20.0 BV (INR) 149 204 161 168
Dividend Payout Ratio (%) (11.8) 111.4 106.8 77.2

Ratios
ROAE (%) (3.2) 12.8 17.1 19.3
ROCE (%) 7.0 13.3 16.7 19.9
EBITDA margins 22.3 28.0 30.3 31.4
Net profit margins (3.9) 13.1 14.5 15.7
Payble Days 177 289 273 273
Growth metrics (%)
Year to March FY16 FY17 FY18E FY19E Gross Debt/Equity 0.8 1.0 0.7 0.6
Revenues (7.8) 12.0 17.9 11.1 Adjusted Debt/Equity 0.8 1.0 0.7 0.6
EBITDA (31.3) 40.8 27.5 15.0 Net Debt/Equity 0.1 0.1 0.0 (0.0)
PBT 187.6 (147.8) 32.5 22.0 Interest Coverage Ratio 1.1 2.6 3.8 5.0
Net profit (42.9) 92.3 61.2 28.1
EPS (42.9) 92.3 28.6 28.1

Reported Profit (122,705) 55,122 90,171 115,490 Year to March FY16 FY17 FY18E FY19E
Add: Depreciation 85,724 62,915 78,397 84,155 Diluted EPS (INR) 9.8 18.9 21.9 30.7
Others 127,565 1,429 9,388 16,020 CEPS 44.2 45.6 43.0 53.3
Less: Changes in W. C. (77,021) (17,959) (31,011) 41,348 Diluted P/E (x) 32.2 16.8 14.4 10.3
Less: Capex 54,119 54,360 75,169 66,000 EV/Sales (x) 2.1 1.7 1.6 1.4
Free cash flow 149,650 125,410 170,686 141,509 EV/EBITDA (X) 9.3 6.1 5.7 4.6

RATING & INTERPRETATION
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING

Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe within the sector
RELATIVE RISK RATING

Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
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Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina,

Mumbai – 400 098, Board: (91-22) 4009 4400.
Email: research@edelweissfin.com
Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe
Buy Hold Reduce Total
Rating Distribution* 161 67 11 240
* 1 stocks under review
> 50bn Between 10bn and 50 bn < 10bn
Market Cap (INR) 156 62 11

Edelweiss Securities Limited
ADITYA
Digitally signed by ADITYA NARAIN
DN: c=IN, o=EDELWEISS SECURITIES LIMITED,
Aditya Narain ou=HEAD RESEARCH, cn=ADITYA NARAIN,
serialNumber=e0576796072ad1a3266c27990f2
0bf0213f69235fc3f1bcd0fa1c30092792c20,
Head of Research
NARAIN
postalCode=400005,
2.5.4.20=6b7d777d3c8c77e0e2c454e91543f9f4
d9b8311cf0678cd975097fc645327865,
aditya.narain@edelweissfin.com st=Maharashtra
Date: 2018.02.10 02:12:02 +05'30'
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Edelweiss Research Team

1 Edelweiss Securities Limited

Advanced Enzyme Technologies ............................................................................................................................................................................ 6

APL Apollo Tubes ..................................................................................................................................................................................................... 10

Care Ratings ............................................................................................................................................................................................................. 16

Deepak Fertilisers & Petrochemicals Corp ........................................................................................................................................................ 24

Eicher Motors ........................................................................................................................................................................................................... 26

First Source Solutions ............................................................................................................................................................................................ 30

Future Supply Chain Solutions ............................................................................................................................................................................. 34

Glenmark Pharmaceuticals ................................................................................................................................................................................... 36

Greenlam Industries .............................................................................................................................................................................................. 40

Gulf O il Lubricant ................................................................................................................................................................................................... 44

Heritage Foods ........................................................................................................................................................................................................ 48

Hinduja Global Solutions ..................................................................................................................................................................................... 50

ICICI Prudential Life Insurance ............................................................................................................................................................................ 54

Insecticides India ................................................................................................................................................................................................... 58

KEC International .................................................................................................................................................................................................... 60

Kotak Mahindra Bank ............................................................................................................................................................................................. 64

Maharashtra Seamless ......................................................................................................................................................................................... 68

MAS Financial .......................................................................................................................................................................................................... 72

Nitin Spinners .......................................................................................................................................................................................................... 74

Orient Refractories ................................................................................................................................................................................................. 76

Parag Milk Foods ..................................................................................................................................................................................................... 78

Praj Industries ......................................................................................................................................................................................................... 82

Security and Intelligence Srvs India ................................................................................................................................................................... 86

Sharda Cropchem .................................................................................................................................................................................................... 90

Sheela Foams .......................................................................................................................................................................................................... 92

Sintex Industries ..................................................................................................................................................................................................... 96

Solar Industries ..................................................................................................................................................................................................... 100

Sterlite Technologies ........................................................................................................................................................................................... 102

Vedanta ................................................................................................................................................................................................................... 106

ADITYA BIRLA FASHION & RETAIL

Key takeaways EDELWEISS 4D RATINGS

Year to March FY17 FY18E FY19E FY20E Rajiv Berlia

Edelweiss Research is also available on www.edelresearch.com, Edelweiss Securities Limited

Financial Statements Balance sheet (INR mn)

Common size metrics as % of net revenues

Cash flow statement (INR mn)

5 Edelweiss Securities Limited

ADVANCED ENZYME TECHNOLOGIES

Key takeaways EDELWEISS RATINGS

Year to March FY14 FY15 FY16 FY17

Edelweiss Research is also available on www.edelresearch.com, Edelweiss Securities Limited

Financial Statements Balance sheet (INR mn)

Cash flow statement (INR mn) Valuation parameters

7 Edelweiss Securities Limited

Key takeaways EDELWEISS RATINGS

INR8-10,000 of traditional conductors to INR12-15,000/MT of HeC and further

Year to March FY17 FY18E FY19E FY20E

Edelweiss Research is also available on www.edelresearch.com, Edelweiss Securities Limited

Financial Statements Balance sheet (INR mn)

Common size metrics as % of net revenues

9 Edelweiss Securities Limited

Key takeaways EDELWEISS RATINGS

Year to March FY14 FY15 FY16 FY17

Edelweiss Research is also available on www.edelresearch.com, Edelweiss Securities Limited

Financial Statements Balance sheet (INR mn)

Common size metrics as % of net revenues

Cash flow statement (INR mn) Valuation parameters

11 Edelweiss Securities Limited

Key takeaways EDELWEISS RATINGS

Brands: Absolute Rating BUY