Plastics Technology (SINTEX IN) Uncertainty priced inbackoffice.phillipcapital.in/Backoffice/Researchfiles/PC... · 2017-12-19 · Sintex Plastics Technology (SINTEX IN) Uncertainty

INSTITUTIONAL EQUITY RESEARCH

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Sintex Plastics Technology (SINTEX IN) Uncertainty priced‐in INDIA | MIDCAP | Initiating Coverage

19 December 2017

Sintex Industries demerged its custom moulding and prefab businesses into Sintex Plastics Technology Ltd – as wholly owned subsidiaries. This strategic move is positive for the growth of these individual businesses that have different characteristics. We believe the demerger will lead to a rerating because of: (1) superior focus on businesses, (2) better free cash‐flow generation, and (3) improved return ratios. We initiate coverage on Sintex Plastics with a BUY rating. Custom moulding: Stable and sustainable growth Custom molding (CM) provides 66% of Sintex Plastic’s revenue (60% overseas, 40% India) while 34% comes from building material, including pre‐fabricated plastics and monolithic. CM mainly caters to auto, electrical, aerospace, and defense sectors. Overseas business has expanded through acquisitions, giving Sintex Plastics access to both technology and global clients. Sintex Plastics has successfully transferred overseas technology to India, which is evolving and growing at faster rate of ~15% CAGR compared to global growth of 8‐10%. Domestic CM is benefiting from growth in the automobile, electrical, and defense segments, along with an upcoming capacity expansion. Carmakers and two‐wheeler companies in India have lined up investments of about US$ 5bn (Rs 310bn) and Rs 85bn respectively, over the next five years – which provides a long‐term growth trajectory for the business. Retail to provide higher growth because of GST Sintex Plastics is a market leader in storage tanks in India (60% market share) and has built a strong product portfolio in plastic (3,500+ products, eight technologies) over 30 years. The company has expanded its product portfolio in retail with doors, insulated boxes, bio‐gas plants, composite sandwich panels, and waste‐management products. We expect its retail segment to see a CAGR of 20% over FY18‐20, based on its pan‐India network and emerging demand from cold‐chain investments for sandwich panels. Strong execution capability in prefab Sintex Plastics’ prefab business is driven by spending on healthcare, education, and sanitation. It builds schools, healthcare centres, and enclosure for RO water purifiers out of prefabs. It is a pan‐India player in prefabs with five plants across India. In this segment, it reported a revenue CAGR of 22% over FY10‐16 to Rs 18.5bn, with EBITDA margins of 18‐26%. Its FY17 and 1HFY18 performance in prefab was dented by demonetisation and GST implementation. Increased outlay towards addressing drinking water and sanitation issues is creating demand for prefab products. A large outlay from the corporate kitty is available to boost the government’s campaign and Rs 70‐80bn per annum is likely to be spent through CSR for education, healthcare, sanitation, and environmental products. Improvement in financials We expect FY17‐20 revenue CAGR at 9% because of a muted FY18, and controlled growth in monolithic and infra. Custom moulding should grow at 11% CAGR over FY17‐20 (14% India business, 10% overseas business). We estimate EBITDA and profit CAGR at 6% and 10% and asset turnover to increase to 1.1x in FY20 from 0.9x in FY17, resulting in ROCE improvement of about 200bps to touch 14% by FY20. Sintex Plastics should generate a cash profit of Rs 21.5bn over FY18‐20, which will help to deleverage its balance sheet bringing its D/E to 0.8x in FY20 from 1.2x in FY17. Outlook and valuation: At CMP, Sintex Plastics is trading at 8x our FY20 earnings and 5.9x EV/EBITDA. We expect a rerating in its valuation, considering its leadership in plastics and custom‐moulding and its sharper focus after the demerger. We have valued the company at 15x our FY20 EPS to arrive at a price target of Rs 145.

BUY CMP RS 78 TARGET RS 145 (+85%) COMPANY DATA O/S SHARES (MN) : 590MARKET CAP (RSBN) : 46MARKET CAP (USDBN) : 0.752 ‐ WK HI/LO (RS) : 137 / 67LIQUIDITY 3M (USDMN) : 1.9PAR VALUE (RS) : 10 SHARE HOLDING PATTERN, % Sep 17PROMOTERS : 29.4FII / NRI : 24.0FI / MF : 5.4NON PRO : 7.5PUBLIC & OTHERS : 33.7 PRICE PERFORMANCE, %

1MTH 3MTH 1YRABS ‐1.0 ‐23.1 naREL TO BSE ‐2.5 ‐27.5 na PRICE VS. SENSEX

Source: Phillip Capital India Research KEY FINANCIALS Rs mn FY17 FY18E FY19ENet Sales 59,947 59,967 67,573EBIDTA 10,132 8,972 10,413Net Profit 4,196 3,323 4,495EPS, Rs 7.0 5.5 7.5PER, x 11.2 14.1 10.4EV/EBIDTA, x 7.7 9.0 7.2P/BV, x 1.5 1.4 1.2ROE, % 13.5 9.8 12.0Debt/Equity (%) 119 104 78

Source: PhillipCapital India Research Est. Vikram Suryavanshi (+ 9122 6246 4111) [email protected]

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SINTEX PLASTIC TECHNOLOGY INITIATING COVERAGE

Custom moulding: Stable and sustainable growth Custom moulding involves manufacturing of composite materials (plastics + metal) by processes such as compression, injection machining, and wire forming. Sintex Plastics works with all thermoplastic grades PE (Polyethylene) to PEEK# (Polyether ether ketone), composite grades used in aeronautics (with precision cutting of ferrous and non‐ferrous metals), wire forming with steel, stainless steel using SMD ( surface‐mount device) or through‐hole mounting (TH) technology, and wiring harnesses. It has developed expertise in a wide range of plastic technologies such as injection moulding, gas assist injection moulding, blow moulding, vacuum forming, PU foaming, vibration welding, ultra‐sonic welding, three‐coat PU painting. Composites are resistant to high temperatures – they offer a high strength‐to‐weight ratio, increase fuel efficiency, and provide enhanced structural stability. In custom molding, Sintex Plastics derives 60% revenue from its overseas markets and 40% from India. This is a long‐term and sticky business, in which the company works with customers (like car or equipment manufactures) almost two years before production – right from designing to prototype. The company’s focus is on composites material and it continues to expand its product range and the sectors that it caters to with new technologies and processes. It has access to global technologies through acquisitions. Sintex Plastics’ domestic business is focused mainly on automotive, electrical, and defence sectors. It has a strong portfolio of OEMs such as Maruti Suzuki, Hyundai Motors, TATA Motors, Mahindra & Mahindra, Mahindra Navistar, General Motors, Force Motors, Honda Scooters, and TVS Motors. Domestic custom moulding will benefit from strong growth in the automobile segment along with upcoming capacity expansion. Carmakers and two‐wheeler companies in India have lined up investments of ~US$ 5bn (Rs 310bn) and Rs 85bn respectively over the next five years, providing long‐term growth prospects for Sintex Plastics’ CM business. New technologies and pollution norms will drive further growth in cars and commercial vehicles, and demand from other emerging sectors such as medical imaging, defence, electrical, and marine sector will also increase. Overseas business has expanded through acquisitions, giving Sintex Plastics access to both technology and global clients. Its overseas business group operates in France, Germany, Eastern Europe (Poland, Hungary and Slovakia), USA and North Africa (Tunisia and Morocco). It works with industries in a wide range of areas including automotive, electrical & electro‐mechanical equipment, aeronautics and defence, household appliances, medical, construction, and sports and leisure. It has a strong base of 15 manufacturing plants: 9 in France and one each in Hungary, Slovakia, Germany, Poland, Tunisia, and Morocco. It has strong relationship with large international companies such as Schneider Electric, Legrand, ABB, Alstom, Valeo, Airbus, Safran, Stelia, and Faurecia which also help to expand business in India. Company Country Cost DateZeppelin Mobiles India Rs 190mn May‐06Wasaukee Compo USA US$ 20.5mn May‐07Bright Brothers (Auto division) India Rs 1470mn Sep‐07Nief Plastics Europe‐ France Euro 43mn Oct‐07Nero Plastics USA US$ 4.77mn Dec‐07Digvijay Communication & Network India Rs 540mn May‐08Poshmann Holdings (CM Overseas) Germany & Poland Rs 1500mn Mar‐13Groupe Somonin France Euro 21mn Aug‐14

Source: Company, PhillipCapital India Research

Sintex is among the top‐20 global companies in custom moulding products and solutions for plastics and composite materials

CM business is OEM driven and Catering for Fortune 500 OEM’s both in India as well as abroad. It works with vendor start from product design. Diversifies and balanced business mix with no large dependence on any customer or technology or division.

# Note: Polyether ether ketone (PEEK) is a high‐performance engineered polymerwith excellent heat tolerance and one of the highest strength‐to‐weight ratios of any thermoplastic. This material can be used as an alternative to other materials such as aluminum, steel, glass, and other polymers.

It has created a global footprint across USA and Europe through strategic acquisitions



Retail to provide higher growth with GST Sintex is a pioneer in water storage solutions since 1975 with a varied portfolio of products and market leadership with more than 60% share across India. Currently, major brands in water storage solutions in India include Sintex, Reno, Renotuf, and Titus. Sintex is expanding its portfolio with its new range of “Euroline” dustbins and containers and affordable, quick‐to‐construct and low maintenance plastic products such as false ceilings, doors, and cabinets aimed at low‐cost, mass‐housing solutions. Other products in the retail segment include sandwich panels, biogas chambers, water‐treatment equipments, and material‐handling products for pharma, textiles, and other industries. We expect Sintex Plastics’ retail segment to report 20% CAGR to Rs 1.4bn over FY18‐20. (See annexure for product details)

Strong execution capability in prefab Sintex started its prefabricated business in 2000 and monolithic business in 2007. It has emerged as one of the leading companies for prefab and monolithic construction in India. Its prefabricated structures are completely knocked‐down kits that can be assembled at the site by trained professionals, thereby minimising wastage and improving their cost effectiveness. These structures are now a preferred solution for strengthening social infrastructure. Monolithic construction offers various benefits such as time and cost saving, strength, and eco‐friendliness as compared to traditional techniques. Sintex is the first company in India to receive an ISO 9001:2000 standard for prefab structures. The prefab business is driven by spending on healthcare, education, and sanitation. Sintex Plastics builds schools, healthcare centres, and enclosures for RO water purifiers out of prefabs. Private‐sector CSR initiatives will also drive its revenue. Increased outlay towards addressing drinking water and sanitation issues is creating demand for prefab products. A large outlay from the corporate kitty is available to boost the government’s campaign and Rs 70‐80bn per annum is likely to be spent through CSR initiatives for education, healthcare, sanitation, and environmental products. Freight‐economics logistics require prefabricated product assembly units to be located within a close radius of the site of installation in order to be economically viable. The company has five plants covering 80% of geography for execution. Sintex Plastics’ geographical spread of manufacturing locations ensures faster delivery of turnkey solutions. It has developed project management and expertise over time, which helps its business.

Strong demand drivers According to a paper released by the Ministry of State for Chemicals and Fertilisers, the Indian plastics‐processing industry will grow at 10% CAGR and is valued currently at Rs 1.37tn. Growth will come from acceleration in end‐user industries, and greater penetration of plastics in the existing and ever‐growing range. The Indian plastic industry has set a ‘20‐20‐20’ vision. According to this, plastic processing in India could reach 20mt by 2020 from current 12mt. The government’s “Swacch Bharat Mission” aims to address open defecation, and disposal of solid and liquid waste through recycling. As per a circular of the Ministry of Urban Development and Drinking Water and Sanitation, it would cover 10.4mn households, provide 0.25mn seats of community toilets and 0.26mn public toilets, and solid waste management for 4,041 statutory towns. The total cost of the programme over five years is estimated at Rs 620bn with the central outlay earmarked at Rs 146bn. Apart from this, the private sector is rising to the social cause in a big way through CSR initiatives to address drinking water and sanitation issues.

Sintex has a strong distribution model across India and implementation of GST will reduce competition from unorganized small players.



There is a strong unmet demand in India for affordable housing. India needs 7mn houses every year, almost 75% of which constitute affordable housing. The qualification with the governments is the primary entry barrier for monolithic construction and prefabs. However, Sintex Plastics is pre‐qualified with 17 state governments for its prefabs and monolithic construction panels.

Reducing exposure to high working capital business Sintex Plastics has reduced its exposure to the monolithic and infra business since 2011 – as of FY17 it was ~Rs 5bn (or 20% of building products revenue) from Rs 13bn (60% of building products revenue). Monolithic is focused on low‐cost housing business projects and depends on state government investments and policies. Though outlook for business is good, it has high working capital requirement (~120 days). The company has moved to asset light business with controlled exposure in monolithic. Improvement in financials We expect revenue CAGR of 9% over FY17‐20 because of a muted FY18 and controlled business in monolithic and infra. Custom moulding will grow at 11% CAGR (14% India, 10% overseas). EBITDA and profit CAGR should be 6% and 10% for FY17‐20. Asset turnover will increase to 1.1x in FY20 from 0.9x in FY17, resulting in ROCE improvement of 200bps to 14% by FY20. Sintex Plastics should generate cash profit of Rs 21.5bn over FY18‐20, which would deleverage its balance sheet bringing down the D/E ratio to 0.8x in FY19 from 1.2x in FY17. Revenue growth driven by custom moulding and retail Margin to recover after the impact of demonetisation/GST


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Outlook and valuation Pre de‐merger, Sintex industries valuations were impacted due to economic cycles, stretched working capital, and higher leverage. De‐leverage has created focused entity with value added products with strong balance sheet. The company is free cash positive and expected to generate free cash of ~Rs 4‐5bn per annum post capex and working capital requirements. The company is in a strong position to capitalize on economic recovery and growth in retail, warehousing and cold chain post GST. Improvement in working capital management, its well‐established distribution network with strong brand name and integration of its overseas subsidiaries will support valuation rerating. The company had FCCB of USD 110mn issued pre demerger (May 2016) to finance textile expansion. The FCCB holders are entitled to get shares of Sintex plastic as per de‐merger agreement and ~USD 20mn FCCB are outstanding, representation 2% of post diluted equity of 604mn shares. We have factored equity dilution in our estimates. At CMP, Sintex Plastics is trading at 8x our FY20 earnings and 5.9x EV/EBITDA. We expect a rerating in its valuation, considering its leadership in plastics and custom‐moulding and its sharper focus after the demerger. We have valued the company at 15x our FY20 EPS to arrive at a price target of Rs 145.

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Business risks • The company report earnings in Indian rupee while ~35% of consolidated

revenue in FY17 was earned in foreign currency mainly in Euro and USD. Foreign currency fluctuations could affect the financials.

• Prefabricated structures and monolithic construction business are capital

intensive and are significantly depend on policies of various state govern and demand from low cost public housing , construction of social infrastructure and urban redevelopment.

• Raw material cost is the largest component of operating cost with 56% share of

operating cost in FY17. The major raw material are LLDPE, HDPE, cement and PVC and mostly buy from spot market and financials are vulnerable to volatility in raw material prices. Oil based raw material such as PVC, LLDPE and HDP and plastic resins and granules constitute ~18% of expenses.

• Increase in Interest cost would impact the negatively due to high debt and

working capital need. The company is planning to refinance debt in custom molding business (~Rs 18bn) at lower interest cost by ~200bps with longer tenure.

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Financials

Income Statement Y/E Mar, Rs mn FY17 FY18e FY19e FY20eNet sales 59,947 59,967 67,573 77,351Growth, % 0 13 14Total income 59,947 59,967 67,573 77,351Raw material expenses ‐32,243 ‐33,582 ‐36,490 ‐41,770Employee expenses ‐7,406 ‐7,702 ‐8,318 ‐9,150Other Operating expenses ‐10,166 ‐9,712 ‐12,352 ‐14,411EBITDA (Core) 10,132 8,972 10,413 12,020Growth, % (11.4) 16.1 15.4Margin, % 16.9 15.0 15.4 15.5Depreciation ‐2,303 ‐2,367 ‐2,487 ‐2,637EBIT 7,829 6,605 7,926 9,383Growth, % (15.6) 20.0 18.4Margin, % 13.1 11.0 11.7 12.1Interest paid ‐2,633 ‐2,986 ‐2,356 ‐1,966Other Non‐Operating Income 350 385 424 466Pre‐tax profit 5,546 4,003 5,994 7,883Tax provided ‐1,350 ‐681 ‐1,498 ‐1,971Profit after tax 4,196 3,323 4,495 5,913Others (Minorities, Associates) 0 0 0 0Net Profit 4,196 3,323 4,495 5,913Growth, % #DIV/0! (20.8) 35.3 31.5Net Profit (adjusted) 4,196 3,323 4,495 5,913Unadj. shares (m) 545 604 604 604Wtd avg shares (m) 604 604 604 604 Balance Sheet Y/E Mar, Rs mn FY17 FY18e FY19e FY20eCash & bank 1,744 1,139 1,033 979Debtors 12,459 13,144 14,440 15,894Inventory 5,473 5,750 7,035 8,477Loans & advances 107 118 130 143Other current assets 3,402 4,762 5,715 6,857Total current assets 23,185 24,913 28,353 32,350Investments 6,312 6,312 4,593 3,790Gross fixed assets 62,852 64,852 67,252 70,252Less: Depreciation ‐4,000 ‐6,367 ‐8,855 ‐11,492Add: Capital WIP 291 800 500 800Net fixed assets 59,143 59,285 58,898 59,560Total assets 88,640 90,510 91,843 95,701Current liabilities 17,772 18,072 20,365 23,311Provisions 1,444 2,166 2,816 3,380Total current liabilities 19,217 20,239 23,181 26,691Non‐current liabilities 38,266 36,466 31,081 26,597Total liabilities 57,483 56,705 54,262 53,288Paid‐up capital 555 600 600 600Reserves & surplus 30,587 33,190 36,965 41,798Shareholders’ equity 31,157 33,805 37,581 42,413Total equity & liabilities 88,640 90,510 91,843 95,701 Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY17 FY18e FY19e FY20ePre‐tax profit 5,546 4,003 5,994 7,883Depreciation 2,303 2,367 2,487 2,637Chg in working capital ‐2,224 ‐1,311 ‐604 ‐541Total tax paid ‐217 ‐480 ‐1,199 ‐1,577Cash flow from operating activities 5,409 4,579 6,679 8,403Capital expenditure ‐61,446 ‐2,509 ‐2,100 ‐3,300Chg in investments ‐6,312 0 1,720 802Cash flow from investing activities ‐67,758 ‐2,509 ‐380 ‐2,498Free cash flow ‐62,350 2,070 6,298 5,905Equity raised/(repaid) 555 45 0 0Debt raised/(repaid) 37,133 ‐2,000 ‐5,684 ‐4,879Dividend (incl. tax) 0 ‐720 ‐720 ‐1,080Cash flow from financing activities 37,703 ‐2,675 ‐6,404 ‐5,959Net chg in cash ‐24,647 ‐605 ‐106 ‐54 Valuation Ratios

FY17 FY18e FY19e FY20ePer Share data EPS (INR) 7.0 5.5 7.5 9.9Growth, % (20.8) 35.3 31.5Book NAV/share (INR) 51.9 56.3 62.6 70.7FDEPS (INR) 7.0 5.5 7.5 9.9CEPS (INR) 10.8 9.5 11.6 14.2CFPS (INR) 8.4 7.0 10.4 13.2DPS (INR) ‐ 1.0 1.0 1.5Return ratios Return on assets (%) 13.2 5.8 6.5 7.6Return on equity (%) 13.5 9.8 12.0 13.9Return on capital employed (%) 8.5 6.2 9.3 12.1Turnover ratios Asset turnover (x) 1.9 0.9 1.0 1.2Sales/Total assets (x) 1.4 0.7 0.7 0.8Sales/Net FA (x) 2.0 1.0 1.1 1.3Working capital/Sales (x) 0.1 0.1 0.1 0.1Fixed capital/Sales (x) 1.0 1.0 0.9 0.8Liquidity ratios Current ratio (x) 1.3 1.4 1.4 1.4Quick ratio (x) 1.0 1.1 1.0 1.0Interest cover (x) 3.0 2.2 3.4 4.8Dividend cover (x) 5.5 7.5 6.6Total debt/Equity (%) 119.2 104.0 78.4 57.9Net debt/Equity (%) 113.6 100.6 75.6 55.6Valuation PER (x) 11.2 14.1 10.4 7.9PEG (x) ‐ y‐o‐y growth n/a (0.7) 0.3 0.3Price/Book (x) 1.5 1.4 1.2 1.1Yield (%) ‐ 1.3 1.3 1.9EV/Net sales (x) 1.3 1.3 1.1 0.9EV/EBITDA (x) 7.7 9.0 7.2 5.9EV/EBIT (x) 9.9 12.2 9.5 7.5



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%.

Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919 Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6246 4101 Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735 Research Automobiles Engineering, Capital Goods Pharma & Specialty Chem Dhawal Doshi (9122) 6246 4128 Jonas Bhutta (9122) 6246 4119 Surya Patra (9122) 6246 4121 Nitesh Sharma, CFA (9122) 6246 4126 Vikram Rawat (9122) 6246 4120 Mehul Sheth (9122) 6246 4123 Banking, NBFCs IT Services & Infrastructure Strategy Manish Agarwalla (9122) 6246 4125 Vibhor Singhal (9122) 6246 4109 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Pradeep Agrawal (9122) 6246 4113 Shyamal Dhruve (9122) 6246 4110 Neeraj Chadawar (9122) 6246 4116 Paresh Jain (9122) 6246 4114 Logistics, Transportation & Midcap Telecom Consumer & Retail Vikram Suryavanshi (9122) 6246 4111 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Media Preeyam Tolia (9122) 6246 4129 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Technicals Vishal Gutka (9122) 6246 4118 Vishal Gutka (9122) 6246 4118 Subodh Gupta, CMT (9122) 6246 4136 Cement Metals Production Manager Vaibhav Agarwal (9122) 6246 4124 Dhawal Doshi (9122) 6246 4128 Ganesh Deorukhkar (9122) 6667 9966 Economics Vipul Agrawal (9122) 6246 4127 Editor Anjali Verma (9122) 6246 4115 Mid-Caps Roshan Sony 98199 72726 Shruti Bajpai (9122) 6246 4135 Deepak Agarwal (9122) 6246 4112 Sr. Manager – Equities Support

Oil & Gas Rosie Ferns (9122) 6667 9971

Sabri Hazarika (9122) 6246 4130 Sales & Distribution Corporate Communications Ashvin Patil (9122) 6246 4105 Asia Sales Zarine Damania (9122) 6667 9976 Kishor Binwal (9122) 6246 4106 Dhawal Shah 8522 277 6747 Bhavin Shah (9122) 6246 4102 Sales Trader Ashka Mehta Gulati (9122) 6246 4108 Dilesh Doshi (9122) 6667 9747 Execution Archan Vyas (9122) 6246 4107 Suniil Pandit (9122) 6667 9745 Mayur Shah (9122) 6667 9945

Contact Information (Regional Member Companies)

SINGAPORE: Phillip Securities Pte Ltd 250 North Bridge Road, #06‐00 RafflesCityTower,

Singapore 179101 Tel : (65) 6533 6001 Fax: (65) 6535 3834

www.phillip.com.sg

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No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

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Tokyo 103‐0026 Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141

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Shanghai 200 001 Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940

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Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 www.phillip.co.th

FRANCE: King & Shaxson Capital Ltd. 3rd Floor, 35 Rue de la Bienfaisance

75008 Paris France Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017

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UNITED KINGDOM: King & Shaxson Ltd. 6th Floor, Candlewick House, 120 Cannon Street

London, EC4N 6AS Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835

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AUSTRALIA: PhillipCapital Australia Level 10, 330 Collins Street

Melbourne, VIC 3000, Australia Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899

www.phillipcapital.com.au

SRI LANKA: Asha Phillip Securities Limited Level 4, Millennium House, 46/58 Navam Mawatha,

Colombo 2, Sri Lanka Tel: (94) 11 2429 100 Fax: (94) 11 2429 199

www.ashaphillip.net/home.htm INDIA

PhillipCapital (India) Private Limited No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2483 1919 Fax: (9122) 6667 9955 www.phillipcapital.in



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 No4 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.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.

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

For Detailed Disclaimer: Please visit our website www.phillipcapital.in

For U.S. persons only: 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. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.‐regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.

This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by the U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). 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. In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Decker & Co, LLC. Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer. If Distribution is to Australian Investors This report is produced by PhillipCapital (India) Pvt Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services Licence No. 246827). This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately. PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

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