September 27, 2006

BUZZING Ceekay Daikin Ltd.

STOCK CMP – Rs.87

Analyst
Viren Bajalia Business overview
e.info@idbicapital.com
+91-22-6637 1187 Ceekay Daikin Ltd. is a well-established name in the field of automotive clutches. The
company entered into technological collaboration agreement with Exedy Corp., Japan
in 1977 (formerly known as Daikin Manufacturing Co. Ltd.). Exedy Corp. holds 32% of
Key Stock Data the equity in Ceekay.
Sensex 12321
The company produces auto ancillary like Clutch Disc Assemblies, and Clutch Cover
Nifty 3572 Assemblies. The plants are located at Aurangabad and Greater Noida.
Sector Auto Ancillaries
Bloomberg CKD@IN Figure 1: Revenue Mix Figure 2: Market Share
Reuters CKYD.BO Revenue Mix Market Share
No. of shares (m) 4 Others
Gujarat
Luke Setco
Market Cap (Rs m) 350 Tractors 10% 24% 10%
Market Cap (US$ m) 7.61 5%

52-week H/L Rs.159/77 H & MCV Ceakay

Passenger
5% Daikin
Car
50% 32%
Vabe
LCV
Shareholding Pattern (%) 34%
30%
Promoters 30.62
Source: Company reports; IDBI Capital Market Services
Mutual Funds 0.03
FIIs 32.78 Impressive clientele
Corporate Bodies 9.48 The company caters to all the leading OEM viz., Tata Motors, Maruti Udyog, M&M,
Toyota, Avtec (formerly known as Hindustan Motors), Swaraj Mazda, Eicher Motors,
Pubic & Others 27.08
Honda Siel, Bajaj Auto, etc. it also caters to aftermarket requirements – direct and via
the OEM distribution network. Ceekay Daikin has 32% market share in the OEM
passenger vehicles and LCV segments

Favorable product mix

With the excellent technology and precision engineering from Exedy Corp., Ceekay
Daikin’s product encompasses a range of clutches for a range of applications – clutch
disc assemblies, clutch cover assemblies from Coil type / Diaphragm spring / DST
type and clutch disc regular to silent type.

Ceekay’s high margin product mix will protect its margin from the rising raw-material
price pressure as a significant portion of the company’s revenue comes from the
replacement market. Replacement market generally commands higher margins as
compared to the OEM and around 55% of the company’s revenue comes from
replacement demand.

New capacities to augur growth

Looking at the present capacity utilization of 85% along with the growing demand, the
company has firmed up plans to ramp up its capacity in both its product segment –
clutch disc and clutch cover assembly. The Capex shall entail an investment to the
tune of ~Rs.75m in FY07 and ~Rs.80m in FY08.

Table 1: Capacity expansion plans

Product Present FY07 FY08
Clutch Disc 1.25m 1.35m 1.5m
Clutch Cover 1.1m 1.25m 1.5m
Source: Company reports; IDBI Capital market Services
Buzzing Stock: Ceekay Daikin Ltd. – September 27, 2006

Impressive order book size

The company has got an impressive order book size, with large orders flowing from the domestic OEMs.
• Order from Maruti for its new version Wagon R along with one more new model slated for launch in 2007-08.
• It is the second supplier to Tata Motors for its LCV Ace.
• Another big order from Honda Siel Motors for Honda Civic to supply 1 lac clutches this year.
• Orders from Bajaj and Piaggio.

Beside this, the company has its regular orders flowing from other marquee players such as M&M, Swaraj Mazda,
General Motors, Eicher Motors, Avtec Ltd., Toyota etc.

Outlook
The passenger vehicles and the LCV segments have seen a steady growth in the past few years. However, the
growth rate of passenger cars has slowed down in FY06, while the LCVs have continued the growth momentum.
Post the recent excise duty cut, the passenger car segment is expected to regain its growth momentum going
ahead with improving penetration along with new launches by market players.

With the passenger car and LCV segment together contributing ~80% to the topline, we expect strong prospects
for Ceekay Daikin.

The stock is currently trading at 8.1x its annualized Q1FY07 EPS of Rs.10.8.

Financial Snapshot
Ceekay Diakin Ltd. Rs.m Ratios (%)

1Q 1Q Chg. Chg.
FY06 FY05 FY06 FY05 Chg.(%)
FY07 FY06 (%) (%)

Net Sales 208 197 5 858 680 26 Debt -Equity 2.8 3.6 (21)
Other Income 3 4 (9) 30 31 (2) PBIDTM 13 12 6
Total Income 211 201 5 888 710 25 PBDTM 10 7 31
Total Expenditure 180 170 6 749 610 23 RoCE 15 10 44
PBIDT 31 31 1 139 100 39 RoNW 25 14 79
Interest 8 9 (9) 35 40 (13)
PBDT 23 22 5 104 61 73
Depreciation 11 9 16 38 33 16
Tax 1 1 63 9 2 330
Reported Profit After Tax 11 12 (8) 50 22 125
Extra -ordinary Items 0 0 0 0 0 0
Adj. Profit After Extra-ordinary item 11 12 (8) 50 22 125
No. of shares (m) 4 4 - 4 4 -
EPS (annualised.) (Rs.) 10.8 11.7 - 12.4 5.5 -
P/E 8.1 7.4 - 7.0 15.8 -

For further clarifications contact: Anita Bhat; anita.bhat@idbicapital.com; 91-22-6637 1187 / S. Narasimhan Rao; narasimhan.rao@idbicapital.com; 91-22-6637 1165

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