INSTITUTIONAL EQUITY RESEARCH Consumer Electricalsbackoffice.phillipcapital.in/Backoffice/Research... · Channel partners started stocking products such as washing machines, water

INSTITUTIONAL EQUITY RESEARCH

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH Please see penultimate page for additional important disclosures. PhillipCapital (India) Private Limited. (“PHILLIPCAP”) is a foreign broker-dealer unregistered in the USA. PHILLIPCAP research is prepared by research analysts who are not registered in the USA. PHILLIPCAP research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities Inc, an SEC registered and FINRA-member broker-dealer.

Consumer Electricals

A really hot summer = strong Q1

INDIA | MIDCAP-ELECTRICALS | Q1FY20 Results Preview

4 April 2019

We see overall yoy revenue growth of 12% and expect Voltas, Orient Electric, BJE (consumer business), KEI and VGRD to outperform the industry. Key highlights: Strong summer resulted in healthy growth for ACs, air cooler, fans, and invertors.

Channel partners started stocking products such as washing machines, water heater, and room heater ahead of the next season.

Q1FY20 was an election quarter. This led to a slowdown in construction activity and delays in projects, thus impacting cables and switchgear volumes.

Softening qoq copper prices (by c.12%) will lead to lower volume growth in wires and cables (as the channel stocked less in anticipation of price reductions), but will lead to improvement in margins; W&C companies have cut prices by c.4% in Q1FY20.

NBFC-led liquidity issues are hurting channel partners, which is leading to lower stocking and primary sales.

Strong summer led to double-digit volumes in cooling products. Liquidity issues hurt primary sales of other electrical products. An extensive summer with higher temperatures than normal resulted in strong secondary sales of ACs, air coolers, and fans, and also helped channel partners ship out their March 2019 inventory. Despite this, higher competition capped price hikes. Liquidity problems let to lower channel stocking in Q1, depressing primary sales for seasonal and non-seasonal products. Detailed update on page 2.

Correction in copper prices and lower execution, mainly because of elections, led to lower volumes for wires & cables (W&C), but improved margins: A large portion of electrical companies in our universe are manufacturers of electrical W&C. Global copper prices are down 12% qoq and have been falling for a while now. The channel had stocked less anticipating an even greater fall in prices, leading to lower volumes. May 2019 was an election month, so the industry saw lower project execution, resulting in lower growth in cables. In Q1FY20, Polycab (86% W&C), Finolex (79%), KEI (80%), Havells (31%), and V-Guard (33%) cut W&C prices by 3-4%, which we believe will translate into some margin improvements.

Companies to watch – Q1FY19 expectations Voltas: A strong summer will lead to double-digit growth in ACs. Window ACs and fixed

speed saw stronger than expected traction, mainly because they are cheaper than split ACs (recent update here).

Orient Electric: While fans category saw strong growth in general (we see +15% in Q1) premium fans continued to see traction. A strong summer and increasing penetration will result in 30% growth in appliances. In lighting, improving product mix and increasing penetration will lead to 18% growth.

VGRD: Rising penetration in the non-south market and rebuilding of Kerala will result in strong growth of 19% (recent update here).

Bajaj Electric: Strong distribution network (BJE reached 200,000 touch-points) will result in strong growth of 20% in consumer durables. Q1 was an election quarter, so we expect E&P revenue of Rs 4bn (-30% yoy).

Outlook remains intact: Consumption fundamentals remain intact. Increasing power availability, improving demographic profile, and increase in housing stock are structural demand drivers. Shrinking presence of the unorganised sector also acts as a stimulus. Additionally, an excellent cash-conversion cycle and expanding product basket bode well for incumbents. In the short term, we see liquidity issues impacting primary sales and resulting in lower stocking by channel partners. Maintain Buy on Orient Electric, Bajaj Electric, KEI, Finolex Cables, and VGRD; Neutral on Voltas, and Sell on Havells.

Companies Orient Electric

Reco BUY CMP, Rs 164 Target Price, Rs 190

Bajaj Electricals Ltd Reco BUY

CMP, Rs 504 Target Price, Rs 660

V-Guard Industries Ltd Reco BUY CMP, Rs 234

Target Price, Rs 250 KEI Industries


Finolex Cables Reco BUY

CMP, Rs 400 Target Price, Rs 538

Havells Ltd Reco NEUTRAL CMP, Rs 747

Target Price, Rs 660 Voltas Ltd

Reco NEUTRAL CMP, Rs 603 Target Price, Rs 550

Polycab India Ltd.


PC: Q1FY20 results preview

Rs mn Revenue EBITDA PAT

Orient Electric 5,121 161 161

Bajaj Electricals 699 699 188

V-Guard Inds 7,142 615 443

KEI Inds 10,542 1,100 396

Finolex Cables 8,289 1,391 976

Havells Ltd 29,664 2,480 2,480

Voltas 24,364 2,144 1,634

CG Consumer 18,509 1,943 997

Source: Company, PhillipCapital India Research

Deepak Agarwal, Research Analyst (+ 9122 6246 4112) [email protected]

http://backoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_Bajaj_Electricals_Co_Update_-_Dec_2018_20181210084055.pdf

http://backoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_V-Guard_Q2FY19_Results_-_Oct_2018_20181026200951.pdf

Page | 2 | PHILLIPCAPITAL INDIA RESEARCH

MIDCAP-ELECTRICALS Q4FY19 RESULTS PREVIEW

Key takeaways from our channel checks

In April 2019, the industry saw double-digit growth, but in May unseasonal rain impacted sales in north and west India. In June, secondary sales were strong, but channel stocking decreased as the season was about to end.

Despite a strong season, AC companies saw pricing pressure; no price hikes.

South and east market saw strong growth in Q1 in cooling products. Channel partners talked about increasing competition in all product segments,

which has capped price hikes and also about liquidity issues impacting primary sales and leading to lower stocking.

Key takeaways from call with Mr. Nilesh Gupta, MD, Vijay Sales Q1FY20 saw +15% growth because on a strong season.

ACs performed well (yoy) due to a hot and long summer. Voltas and Daikin are leading.

Amstrad, a new player with ex-Llyod management, is doing fairly in the AC space, but too early to comment.

The ACs replacement cycle has shortened, leading to continuous growth.

Window ACs are slowly fading from the market, except in the North where they have seen some growth.

Lloyd, a Havells brand, is moving to premium products. It is going in the right direction and will soon turn profitable.

In ACs, higher competition capped prices, but in refrigerators, brands have hiked prices.

In white goods, refrigerators and washing machine did better in Q1. Whirlpool and Samsung are doing quite well in appliances while Haier was (sparingly) better than the rest.

Haier’s bottom-mounted refrigerators led its growth. Other players are not present in this category. Haier’s brand acceptance is very strong.

Voltas – Beko products are equal to other brands in terms of quality. It is increasing its product visibility in the market by increasing its channel.

Service provided by players has been a key differentiator; quality is more or less similar across brands.

Ecommerce will stabilize at 20-25% market share, just like mobile markets. Consumers prefer a touch and feel buying experience and talking with sellers.

General trade vs. modern trade price difference: June 2019 Brand #MT

Prices #GT

Prices GT Prices

(Incl Installation fees) Price

diff (%)

Voltas 39,190 35,000 35,499 -9% Blue Star 44,990 37,500 39,000 -13% Lloyd 41,990 33,900 35,400 -16% Whirlpool 36,990 35,800 37,300 1% Samsung 46,290 37,000 38,500 -17% Daikin 38,990 39,000 39,000 0% Carrier 42,990 39,000 40,500 -6% Mitsubishi 52,500 42,500 42,500 -19% Fujitsu 57,200 56,000 56,000 -2% O-General

Hitachi * 41,690 - - - Note: *Hitachi mostly available with modern traders #Modern Trade (MT) & General Trade (GT) Source: PhillipCapital India Research, Channel checks

Wires and Cables Co Name Sqmm March May % Cut

Polycab

1 1,055 1,025 -2.80%

1.5 1,580 1,535 -2.90%

2.5 2,540 2,465 -3.00%

Finolex

1 970 940 -3.10%

1.5 1,440 1,395 -3.10%

2.5 2,360 2,290 -3.00%

Havells 1 1,160 1,125 -3.00%

1.5 1,725 1,675 -2.90% 2.5 2,785 2,700 -3.10%

V-Guard 1 1,210 1,150 -4.96%

1.5 1,815 1,725 -4.96% 2.5 2,910 2,765 -4.98%

Source: PhillipCapital India Research, Channel checks



Key takeaways for companies from channel checks Voltas

o Overall, Voltas has seen stronger growth in ACs in Q1FY20. o North performed better than last year, mainly because of a strong summer

and increasing penetration in tier-2 and 3 markets. In the north, products such as window ACs and fixed speed have also seen strong growth, mainly because of a higher price difference.

o In the Western region, Voltas has lost shelf space due to higher competition and new players (Amstred, Forbes, and Panasonic’s inverter models).

o Voltas has increased Beko’s visibility in modern trade by adding some product range. It has also increased its visibility in the dealer network.

o Beko reduced its prices this season; in Q4, its prices were at par with LG, but in June, its prices were lower.

o At the end of June 2019, some channel partners started offering discounts, mainly in the south and west and mainly to clear inventory.

o Current channel inventory has reduced to c.20 days in ACs. o Air coolers have also seen strong traction in the channel; the company is

increasing the visibility of this product in the channel. o Our recent analyst meet takeaways are here. o In the FY20 Union Budget, customs duty on ACs (indoor and outdoor units)

was increased to c.20% from 10% earlier. To compensate, Voltas has increased prices by c.5% with effect from 8

th July 2019.

Orient Electric o April saw double-digit volume growth, but due to elections, non-seasonal

rainfall, and intense competition, May volumes slowed. June volumes picked up. Fan industry to see double-digit growth in Q1FY20.

o Rajasthan, Ahmedabad, and Mumbai saw some volume pressure in May. South saw a strong traction in April and May. North performed comparatively better than last year.

o Premium products continued to see strong traction from customers resulting in strong growth for OEL in April and May while OEL saw market-share gains.

o In mass fans segment, OEL did not cut prices while its competitor CG did, mainly to push volumes, and also gave higher credit to the channel.

o OEL recently launched new variants in its table pedestal and wall (portable) fans. This led to better traction and growth in June 2019.

o In Q1, Orient Air Coolers grew well. Its visibility in the distribution network is rising.

o OEL remains aggressive in new product launches. It launched “EyeLuv” series in lighting in June – which is 30-40% costlier than other LEDs.

VGRD o Increasing product offerings and touch points in non-south markets. o Increasing its focus on new product launches in the existing products basket.

Launched 5-star-rated water heaters (competition has only 4 stars). In fans, channel expects c.30 new models in October 2019.

o Strong season has resulted in strong growth in stabilisers, but market has seen higher competition. VGRD’s stabilisers are priced c.15% higher than CG’s.

o W&C: VGRD has cut prices by c.5% in June 2019. Channel expects a price hike mainly because of increases in copper prices in the last two weeks.

o In the south, companies remained leaders in stabilisers in the non-south market this season. It has seen strong growth for this product.

Price difference between - Voltas (Window, fixed speed and inverter)

Voltas (1.5 Ton, 3 Star) Price

Window 25,600

Split (Fixed Speed) 33,200

Split (Inverter) 38,100

Source: PhillipCapital India Research, Channel checks

http://backoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_Voltas_Mgnt_Takeaways_-_June_2019_20190620111448.pdf



Havells o Seasonal products such as fans and ACs grew well. New products such as

personal grooming and water heaters have seen strong traction. o Has been consistent in delivering quality products to its customers and has

enhanced its quality by doubling the ball-bearings in its fans for maintaining consistent speed. No other competitor has this feature.

o Havells is still struggling to make its presence in water heaters. It provides less margins to dealers in this segment, so they sell other brands.

o In water heaters, channel partners started stocking in June 2019 ahead of the rainy season. Havells hike prices in July 2019 of 5%.

o In kitchen appliances, Havells is mostly present in and focused on the premium segment (c.15% costlier than Bajaj and V-Guard).

o Lloyd has performed well on a good summer. Its target to move from the mass segment to the premium segment has slowed down its growth a bit; It is still is in the transition phase.

Bajaj Electricals o BJE: Has expanded its retail network to 202,000, which helped growth. o Healthy growth in fans in April and May, slightly weaker growth in June.

Channel expects double-digit growth in fans in Q1. o BJE is improving its existing product-basket offerings – it launched 6-7 new

models in fans and 2-3 new models in air coolers. It is also aggressively increasing its product offerings in lighting. It launched panel, down-lighters, and new batons.

o Price hike: 3-8% on all products in May 2019. o Started placing water heaters in the channel to attract retailers and

customers. o Provides free installations for all products, including 1-litre heaters. o Bajaj's RREP (Reach Range Expansion Program) strategy is more effective

than Crompton's GTM (Go to Market). Its distributors are not facing any competition from wholesalers.

o Nirlep and Morphy Richard's products are not able to get traction in Jaipur mainly due to their high prices and low availability.

Symphony o Strong volume growth on a good summer. o Market leader in air coolers even when competitors such as Orient, Voltas

and Bajaj offer better profit margins to dealers. o Due to poor sales in previous quarters, dealers held low inventories. This got

cleared out in Q1FY20.

CG Consumer o Strong growth in Q1 in fans, mainly due to a good season. In April 2019, it

saw higher secondary sales. o In May 2019, unseasonal rains and election period resulted in lower

secondary sales. To push primary sales, CG cut prices by Rs 30-40 per fan and gave higher credit to channel partners, resulting in strong off-take.

o Water heaters were doing considerable well; dealers are stocking CG products in their inventory.

o Go To Market strategy was slowly implemented in certain regions where distributors maintain more than a month of inventory. The strategy will help them to reduce their inventory.

o CG is focusing on building its distribution model and has assured distributors that business through the wholesale channel will end gradually; it is giving better pricing to distributors.

o Crompton has recently launched fans that run on 110 volts, which will be mostly sold to rural consumers where the supply of electricity is dim.



Electricals (our coverage) in 1QFY20 – growth trends


PC Coverage Q1FY20 performance (Rs mn) Q1FY20 Q1FY20 YoY growth (%) Q4FY19 QoQ growth (%)

Revenue 115,333 103,125 11.8% 124,917 -7.7%

EBITDA 12,106 10,970 10.4% 11,739 3.1%

PAT 7,255 6,792 6.8% 7,549 -3.9%

*Note: Excluding CG Consumer


W&C company margins and copper-price movement Copper prices trend over the last eight years (USD/mt)

Source: Company, Bloomberg, PhillipCapital India Research

Copper Prices (USD/mt) 1QFY19 4QFY19 1QFY20 YoY QoQ

High 7,332 6,509 6,556 -11% 1%

Average 6,904 6,219 6,138 -11% -1%

Low 6,623 5,736 5,799 -12% 1%

Source: Bloomberg

13%

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22% Revenue growth (%)

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35% EBITDA growth (%)

-54% -13%

8% 18% 26% 34% 29% 32%

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40% PAT growth (%)

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3

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-14

Ap

r-1

5

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-16

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-16

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8

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LME COPPER 3 Month rolling forward

5500

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7500

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Au

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Au

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LME COPPER 3 Month rolling forward

From Q4FY19 to Q1FY20, copper prices corrected c.12%



KEI – Gross margin and copper prices Finolex – Gross margin and copper prices

W&C segment EBIT margin – copper prices

Polycab EBITDA margins / copper prices

Note: We have adjusted Polycab margins factoring high inventory (four months)

Source: Company, Bloomberg, PhillipCapital India Research

Valuation summary

___EPS (Rs)___ EPS Growth (%) ___PE (X)___ EV/EBITDA (X) ___ROE (%)___ CAGR Reco. TP %

FY19e FY20e FY19e FY20e FY19e FY20e FY19e FY20e FY19e FY20e EPS (%) (RS) Upside

Orient Electric

5.3 7.5 63% 40% 29.8 21.3 16.9 12.5 32.3 34.4 51% BUY 190 19%

Bajaj Electricals Ltd

19.2 27.7 17% 44% 26.5 18.3 13.5 10.6 15.9 19.3 30% BUY 660 30%

V-Guard Inds

5.0 6.6 28% 32% 48.3 36.5 34.1 26.0 19.9 21.9 30% BUY 250 4%

KEI Industries

30.2 37.3 31% 23% 15.2 12.3 8.2 6.9 23.7 22.8 27% BUY 490 7%

Finolex Cables

26.5 29.9 18% 13% 15.1 13.4 8.5 7.3 15.6 15.6 15% BUY 538 35%

Havells Ltd

15.7 18.9 24% 20% 49.2 41.1 31.5 25.8 21.6 22.5 22% SELL 663 -14%

Voltas Ltd.

13.1 15.8 16% 21% 36.0 30.9 25.3 22.3 12.9 13.7 12% NEUTRAL 550 -9%

Polycab India Ltd.

38.5 44.6 9% 16% 15.7 13.6 7.9 6.9 15.5 15.6 12% BUY 734 21% Source: Company, PhillipCapital India Research Estimates

0%

5%

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2,000

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Avg Copper prices (USD/mt) (lhs)

KEI - Gross Margin (%)

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Finolex - Gross Margin (%)

-4%

1%

6%

11%

16%

21%

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Havells - Wire & Cables PBIT Margin

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V-Guard - Electrical PBIT Margin

9.0% Q3FY18

17.2% Q4FY18

11.6% Q1FY19

11.7% Q2FY19

17.2% Q3FY19

12% 1QFY20

6%

8%

10%

12%

14%

16%

18%

5500

5900

6300

6700

7100

7500

Apr-17 Oct-17 Apr-18 Oct-18 Apr-19

Copper Prices (US$ mt) Polycab EBITDA margin (rhs)



Earnings Estimates –Q1FY20

(Rs mn) Jun-19E Mar-19 qoq (%) Jun-18 yoy (%) Key expectations

Havells

Revenues 29,664 27,519 7.8% 25,963 14.3% Havells S.A. to report a growth of 13% yoy, majorly driven by fans and

new products. We expect a margin of 14.1% in 1Q

In Lloyd, we expect a very strong revenue growth of 17% mainly driven

by a favourable season. We expect Lloyd’s margins of 7.7%, -164bps yoy

mainly because of higher advertisement cost

EBITDA 3,646 3,229 12.9% 3,123 16.8%

EBITDA margin (%) 12.3 11.7 12.0

PAT 2,480 2,068 19.9% 2,104 17.9%

EPS (Rs) 4 3 19.9% 3 17.9%

Finolex Cables

Revenues 8,289 8,231 0.7% 7,912 4.8% In electrical cables, lower commodity prices (-12%) resulted in volume

growth (PC estimate: 7%). In communication cables, we see a decline of

11% yoy mainly because of lower orders from the government and

private companies

Fall in copper prices will lead to margin improvement (company has

taken a price cut of c. 3% in Q1)

EBITDA 1,391 1,263 10.1% 1,298 7.2%

EBITDA margin (%) 16.8 15.3 16.4

PAT 976 849 15.0% 903 8.0%

EPS (Rs) 6 6 15.0% 6 8.0%

Bajaj Electricals

Revenues 12,049 17,729 -32.0% 11,399 5.7% Strong distribution network (BJE reached 202,000 touch points) will

result in strong growth of 20% in consumer durables. E&P – revenue of

Rs 4.9bn; -10% yoy on lower execution, election period.

Lower margin in E&P to dent overall margins

Higher E&P debt to result in higher interest costs, hurting profitability

EBITDA 699 694 0.7% 798 -12.4%

EBITDA margin (%) 5.8 3.9 7.0

PAT 188 285 -34.0% 405 -53.5%

EPS (Rs) 2 3 -34.0% 4 -53.5%

V-Guard

Revenues 7,142 7,397 -3.4% 6,349 12.5% Increasing penetration in the non-south market and touch points will

result in strong growth of 12.5%.

Lower advertisement and tight control on other costs will improve

margins yoy

EBITDA 615 781 -21.3% 465 32.3%


PAT 443 592 -25.3% 344 28.7%

EPS (Rs) 1.0 1.4 -25.3% 0.8 28.7%

KEI

Revenues 10,542 12,588 -16.3% 8,839 19.3% Higher revenue from the B2B segment and LT will lead to growth

Improving product mix and softness in copper prices to result in better

margins yoy

EBITDA 1,100 1,376 -20.1% 861 27.7%

EBITDA margin (%) 10.4 10.9 9.7

PAT 405 599 -32.5% 322 25.8%

EPS (Rs) 5 8 -32.5% 4 25.8%

Orient Electric

Revenues 5,121 6,377 -19.7% 4,355 17.6% Favourable season has resulted in double-digit volume growth (in ECD we

expect growth of 17% yoy and in L&S a growth of 19%). Premium products

to continue seeing strong attraction resulting in market share gain.

Tight control on costs to result in strong OPM. Reduction in debt to

result in lower interest cost

EBITDA 335 707 -52.6% 265 26.2%


PAT 161 386 -58.3% 120 33.9%

EPS (Rs) 0.8 1.8 -58.3% 0.6 33.9%

Kajaria Ceramics

Revenues 7,294 8,153 -10.5% 6,570 11.0% NGT’s orders on Morbi companies resulted in strong growth for

organised branded players. Industry has also taken a price hike of c. 5%

Price hike and improvement in product mix resulted in margin

improvement

EBITDA 1,118 1,229 -9.0% 968 15.5%

EBITDA margin (%) 15.3 15.1 14.7

PAT 560 689 -18.6% 456 22.9%

EPS (Rs) 3.5 4.3 -18.6% 2.9 22.9%

Orient Paper

Revenues 1,473 1,981 -25.7% 1,355 8.7% Softness in pulp prices resulted in a fall of paper prices in Q1 impacting

volume of writing and printing. In tissues we expect revenue growth of

c. 17%

Falling pulp prices impacted margins

EBITDA 266 369 -28.1% 245 8.4%

EBITDA margin (%) 18.0 18.6 18.1

PAT 152 324 -53.0% 187 -18.4%

EPS (Rs) 0.7 1.5 -53.0% 0.9 -18.4%

Somany Ceramics

Revenues 3,963 5,188 -23.6% 3,807 4.1% NGT’s orders for Morbi players resulted in strong growth for organised

branded players and improvement in the south market resulted in

growth

Improvement in realisation and product mix improved margins yoy

EBITDA 384 705 -45.5% 314 22.5%


PAT 134 417 -67.9% 87 53.5%

EPS (Rs) 3 10 -67.9% 2 53.5%

Voltas Ltd

Revenues 24,017 20,628 16.4% 21,481 11.8% Revenue growth is likely to be strong across the UCP segment, mainly

because of a strong season. Penetration from tier-2 and tier-3 market

aided growth

EBITDA margin to contract 140bps yoy resulting in a 2% yoy decline in

EBITDA

PAT to fall by 13% yoy due to losses in the consumer JV

EBITDA 2,378 1,443 64.8% 2,432 -2.2%


PAT 1,604 1,396 14.9% 1,839 -12.8%

EPS (Rs) 5 4 14.9% 6 -12.8%



(Rs mn) Jun-19E Mar-19 qoq (%) Jun-18 yoy (%) Key expectations

Polycab India Ltd

Revenues 18,509 24,448 -24.3% 16,826 10.0% Growth will be majorly driven by wires; Q1 was an election quarter and

softening of copper prices impacted cable sales

Softness in copper prices will lead to healthy margins

Reduction in debt to lead to earnings growth

EBITDA 1,943 2,247 -13.5% 1,728 12.5%

EBITDA margin (%) 10.5 9.2 10.3

PAT 997 1,373 -27.4% 754 32.2%

EPS (Rs) 7 10 -27.4% 5 32.2% Source: Company, PhillipCapital India Research



Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.

Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%

SELL <= -15% Target price is less than or equal to -15%.

Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in

this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:

Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No

4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report

No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the



securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.

Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

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Kindly note that past performance is not necessarily a guide to future performance.

For Detailed Disclaimer: Please visit our website www.phillipcapital.in IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report is a product of PhillipCapital (India) Pvt. Ltd. which is the employer of the research analyst(s) who has prepared the research report. PhillipCapital (India) Pvt Ltd. is authorized to engage in securities activities in India. PHILLIPCAP is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor.

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The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account. Ownership and Material Conflicts of Interest Rosenblatt Securities Inc. or its affiliates does not ‘beneficially own,’ as determined in accordance with Section 13(d) of the Exchange Act, 1% or more of any of the equity securities mentioned in the report. Rosenblatt Securities Inc, its affiliates and/or their respective officers, directors or employees may have interests, or long or short positions, and may at any time make purchases or sales as a principal or agent of the securities referred to herein. Rosenblatt Securities Inc. is not aware of any material conflict of interest as of the date of this publication Compensation and Investment Banking Activities Rosenblatt Securities Inc. or any affiliate has not managed or co-managed a public offering of securities for the subject company in the past 12 months, nor received compensation for investment banking services from the subject company in the past 12 months, neither does it or any affiliate expect to receive, or intends to seek compensation for investment banking services from the subject company in the next 3 months. Additional Disclosures This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. Neither PHILLIPCAP nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report.

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