Amara Raja Batteries (AMARAJ) | 934 Target : | 900 Target Period : 12 Months Potential Upside : -4% Margin Declines Despite Lower Input Cost!

Result Update August 8, 2016

Rating matrix Rating : Hold Amara Raja Batteries (AMARAJ) | 934 Target : | 900 Target Period : 12 months Potential Upside : -4% Margin declines despite lower input cost!

• Amara Raja Batteries’ (ARBL) revenues (net of excise duty) came in at What’s Changed? | 1,321 crore (up 15.4% YoY), in line with our expectations of | 1,320 Target Unchanged crore. The automotive segment maintained its growth trend in all EPS FY17E Changed from | 31.4 to | 31.1 verticals of the businesses while the industrial battery posted double EPS FY18E Unchnaged digit volume growth in a challenging & competitive market condition Rating Unchanged • EBITDA margins came in at 17.2% (down 96 bps YoY but up 90 bps QoQ) marginally below our estimate of 17.3%. Despite the fall in raw Quarterly Performance material cost, (the average price of key raw material lead in Q1FY17 Q1FY17 Q1FY16 YoY (%) Q4FY16 QoQ (%) was down 6.9% YoY & 2.1% QoQ to | 115/kg). Gross margins Revenue 1,320.8 1,145.0 15.4 1,169.7 12.9 declined 201 bps YoY impacting margins. However, the same was EBITDA 227.3 208.0 9.3 190.8 19.2 partly offset by lower other expense on a YoY basis EBITDA (%) 17.2 18.2 -96 bps 16.3 90 bps • Subsequently, reported PAT increased 7% YoY to | 131 crore PAT 130.7 122.1 7.0 108.6 20.3 marginally below our estimate of | 133 crore

Duopoly battery business to benefit ARBL Key Financials | Crore FY15 FY16 FY17E FY18E According to Annual Report FY16, the Indian battery market is estimated Net Sales 4,178 4,651 5,307 6,293 to grow at a CAGR of 16.5% by FY20 (estimates by market research firm). EBITDA 709 817 900 1,090 The domestic industry is a duopoly in nature with top players, viz. Exide & Net Profit 411 489 531 664 Amara Raja controlling ~90% of the organised market. We believe the EPS (|) 24.1 28.6 31.1 38.9 implementation of GST would improve their cost competitiveness vis-à- vis unorganised player’s thereby gaining share, going forward. We Valuation summary believe ARBL has been consistent in its performance and been able to FY15 FY16 FY17E FY18E gain on all fronts ranging from market share [4W-replacement rose from P/E (x) 38.8 32.6 30.0 24.0 20-25% (FY10) to 38-40% (FY16)] to financials (RoCEs rose from 24% in Target P/E(x) 37.4 31.4 28.9 23.2 FY09 to 31% in FY16). ARBL not only has a strong foothold in the EV / EBITDA(x) 22.3 19.4 17.7 14.3 replacement market (through a pan-India retail network) but also caters to P/BV (x) 9.4 7.6 6.3 5.2 leading OEMs (Ashok Leyland, Honda, Hyundai, M&M, Maruti, etc). The RoNW (%) 24.2 23.3 21.0 21.6 company also exports to various countries, which fall under the Indian RoCE (%) 32.4 31.1 28.1 28.8 Ocean RIM through its overseas distributors. Even in the industrial battery segment, ARBL has continued to consolidate its leadership position with Stock data preferred vendor in a wide spectrum of industries like telecom, infra, Particular Amount power, Railways and others. Market Capitalization | 15953.7 Crore Total Debt (FY16) | 72.5 Crore Capacity expansion in phased manner to cater to demand Cash and Investments (FY16) | 150.2 Crore In view of the anticipated growth, the management has proposed the EV (FY16) | 15876 crore expansion of 2-W battery capacity in four phases, staggered over four 52 week H/L (|) 1132 / 773 years. This would take its capacity from the existing 11 mn units to 25 mn Equity capital (| crore) | 17.1 Crore units per annum. The first phase comprising three lines would take its Face value (|) | 1 capacity to 15 mn per annum. In FY16, the company added 4-W capacity of 2.25 mn pa taking it to 8.25 mn pa, which is further expected to Price performance (%) increase to 11 mn per annum, going forward. On the industrial side, VRLA 1M 3M 6M 12M battery capacity expansion (~1000 million Amp Hr) in FY16 is mainly to Amara Raja Batteries Ltd 5.3 -3.1 2.1 -8.2 cater to the strong demand traction in the telecom, UPS space, which Exide Industries Ltd 2.6 23.4 40.3 13.1 contributes ~40% of overall revenues. The demand revival in the auto/infra is likely to aid growth, going ahead.

Valuation looks stretched

Research Analyst ARBL’s key differentiator is that it has consistently been able to grow its

Nishit Zota presence in the battery business across OEMs and end customers in a [email protected] very smooth manner. It posted a consistent performance; strong return ratios (~23% RoE, ~31% RoCE), good earnings visibility & a strong Vidrum Mehta balance sheet (net debt negative). However, with lead prices moving [email protected] northwards may impact its margins. Also, ARBL is trading at huge premium (>30% compared to EIL). Hence, we maintain a HOLD rating on the stock with a target of | 900, valuing at 23x FY18E.

ICICI Securities Ltd | Retail Equity Research

Variance analysis- Standalone Q1FY17 Q1FY17E Q1FY16 YoY (%) Q4FY16 QoQ (%) Comments Total Operating Income 1321 1320 1145 15.4 1170 12.9 The automotive battery business continued to maintain the growth trend in all verticals of the business while the industrial battery registered double digit volume growth during the quarter Raw Material Expenses 875 833 735.3 19.0 733.0 19.3 Despite, lower average lead price (down 6.9% YoY & 2.1% QoQ) to | 115/kg, raw material cost surprisingly moved higher & came above our estimate

Employee Expenses 66 68 56 17.3 62 5.1 Other Expenses 153 190.6 145.8 5.1 183.5 -16.5 Lower other expense supported margins EBITDA 227 228 208 9.3 191 19.2 EBITDA Margin (%) 17.2 17.3 18.2 -96 bps 16.3 90 bps Higher input cost was partly offset by lower other expense thereby supporting margins Other Income 9 10 6 59.3 10 -8.1 Depreciation 44.1 42.9 32.8 34.2 37.2 18.5 Interest 1.4 0.2 0.1 2,233.3 0.1 2,700.0 Tax 60.1 62.4 56.8 5.8 54.6 10.0 Reported PAT 131 133 122 7.0 109 20.3 PAT marginally below our estimate EPS (|) 7.6 7.8 7.1 7.0 6.4 20.3 Key Metrics Sales (| crore) 1,320.8 1,319.9 1,145.0 15.4 1,169.7 12.9 Revenues came in largely in line with our estimates RM cost (% to net sales) 66.2 63.1 64.2 201 bps 62.7 356 bps Despite lower lead prices raw material cost surprisingly moved higher Other expenses (% to net sales) 11.6 14.4 12.7 -113 bps 15.7 -409 bps Other expenses reduced substantially thereby supporting margins to some extent

Employee Exp (% to net sales) 5.0 5.2 4.9 8 bps 5.3 -37 bps

Source: Company, ICICIdirect.com Research

Change in estimates FY17E FY18E (| Crore) Old New % Change Old New % Change Comments Revenue 5,359 5,315 -0.8 6,503 6,309 -3.0 Revenue estimates moderated marginally as stiff competition is likely to result into lower ASP EBITDA 908 900 -0.9 1,094 1,090 -0.3 EBITDA Margin (%) 16.9 16.9 -1 bps 16.8 17.3 46 bps Margin may contract assuming the reversing of lead prices, going ahead PAT 536 531 -0.9 665 664 -0.2 Moderation in revenue was offset by margins, leaving PAT estimates largely unchanged

EPS (|) 31.4 31.1 -0.9 38.9 38.9 -0.1

Source: Company, ICICIdirect.com Research

Assumptions Current Earlier Comments Units (mn) FY15P FY16P FY17E FY18E FY17E FY18E 13.6 15.5 17.4 20.0 17.3 19.5 Automotive volume growth increased, assuming demand recovery from the OEM as Automotive volumes well as replacement segment, going forward Industrial volumes 4.0 4.4 5.4 6.2 5.4 6.2

ASP/Battery (|) 2,393 2,353 2,323 2,401 2,460 2,564 Stiff competition to impact ASP/battery, going forward RM/Battery (|) 1,608 1,511 1,507 1,540 1,563 1,634 Lead cost (|/ Kg) 129.0 119.5 122.4 131.8 127.3 140.6 Average lead prices to remain benign

Source: Company, ICICIdirect.com Research

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Company Analysis Revenue to rise as OEM demand picks up along with replacement! We expect revenues to grow at ~16% CAGR in FY16-18E to | 6,309 crore driven by increasing share of demand from the auto OEM side as well as a gradual pick-up in the replacement battery segment (due to ARBL’s strong position in the organised market as well shortening life cycle). The company had embarked on a strong capacity addition programme over the next four years, which would aid new market growth. Capacity, on the automotive side, is expected to go up to ~36 million units by FY20 from ~19 million units in FY13 on the automotive side.

On the industrial side, large VRLA capacity is expanding to ~1000 million AmpHr from 760 million AmpHr in FY13. The small VRLA battery capacity is also expected to go up to ~5 million units from ~2.1 million units in FY13 on the back of 1.4 million capex for the tubular segment. The gradual demand recovery in the industrial segment is likely to aid growth, going forward.

ARBL benefits from strong brand equity and distribution network and now has in excess of ~30,000 touch points on the automotive side and ~100 aqua channel partners on the industrial side.

Exhibit 1: We build in revenue growth at ~16% CAGR in FY16-18E

7,000 6,309 6,000 5,315 5,000 4,691 4211 4,000 3,437 2,961 (| crore) 3,000 2,364 2,000

1,000

0 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Source: Company, ICICIdirect.com Research

EBITDA margins to remain benign! The duopoly nature of the industry lends decent pricing power to ARBL vis-à-vis EIL. However, we believe a northward movement of lead prices, going ahead, may adversely impact ARBL’s margins over the next two or three years. The smelting contribution for ARBL is ~15%, which could provide a cushion in the coming years. Also, its gradual focus on tapping the lower margin OEM segment would dent margins. Hence, we expect EBITDA to rise to ~| 1094 crore, assuming a marginal contraction of 50bps on margins to 16.8%.

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Exhibit 2: EBITDA margins to rise steadily 1,250

22 1,000

17.3 750 16.9 18 17.4

16.8 (%) 16.3

500 15.2 1090 (| crore) 14.5 900 14.4 817 14 709

250 560 452 340 255 0 10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E EBITDA - LHS Margin (%) - RHS

Source: Company, ICICIdirect.com Research

Return ratios to remain strong! Return ratios are expected to remain healthy with rising profitability. Return ratios witnessed a decline in FY11 primarily due to the significant investment to boost the manufacturing capacity. However, post the same, ratios moved higher. With new capacity coming on stream, the initial lower utilisation level is likely to result in higher overhead cost or start-up cost. Thus, it is likely to moderate return ratios marginally. Despite the same, we believe the company has maintained strong return in the past and is likely to post strong RoNW & RoCE of ~21% & ~28%, respectively, for FY18E.

Exhibit 3: Strong return ratios…

36.0 33.6 34.3 28.9 32.3 32.4 31.1 28.8 28.1 27.0 27.0 26.1 27.0 24.2 23.3 21.6 18.0(%) 22.9 21.0

9.0

0.0 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

RoCE RoNW

Source: Company, ICICIdirect.com Research

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ARBL remains a cash generating franchise, which has an annual CFO in excess of ~| 1057 crore (FY18E). PAT is expected to grow to | 664 crore at ~16% CAGR (FY16-18E). We believe ARBL could increase dividend payouts in coming years as major capex expenses for the immediate period start to get over.

Exhibit 4: Profit to continue with strong growth momentum!

700 14 11.5 600 10.7 10.4 12 9.7 9.8 10.0 664 9.1 489 500 531 10 411 400 367 8 287 300 6 215 200 4

100 2

0 0 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

PAT (crore) PAT margin (%) (RHS) Source: Company press release, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 5

Outlook and valuation Amara Raja’s financial performance has been ahead of market leader Exide Industries for quite some time. Amara Raja has been able to chip away at Exide’s market share in the replacement segment despite Exide’s early start in establishing a large penetrated dealer network. This serves to highlight the fact that the replacement market, especially the automotive replacement segment, is large enough for two players in the market to grow. Now, with ARBL’s focus on growing the OEM side of the business, we expect ARBL to further gain market share. The increase in volumes to Honda Motorcycles India (the only fast growing 2-W OEM) has also aided in higher utilisations and brings benefits of operating leverage.

We remain positive on the long-term growth prospects of the auto industry and believe the duopolistic battery segment will be a major beneficiary of the return to growth for the auto industry.

ARBL’s performance has continued to be impressive even as the industry leader struggles with consistency of profitability. ARBL has put up a consistent performance; strong return ratio (~21% RoE, ~28% RoCE), good earnings visibility and a strong balance sheet (net debt negative). However, ARBL is trading at a huge premium (>25% compared to EIL). Hence, we maintain our recommendation to HOLD on the stock with thereby maintain our target price of | 900, valuing at 23x FY18E.

Exhibit 5: Valuation Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%) FY15 4,178.2 22.8 24.1 11.9 38.8 22.3 24.2 32.4 FY16 4,651.1 11.3 28.6 19.0 32.6 19.4 23.3 31.1 FY17E 5,306.7 14.1 31.1 8.7 30.0 17.7 21.0 28.1 FY18E 6,293.0 18.6 38.9 25.0 24.0 14.3 21.6 28.8

Source: Company, ICICIdirect.com Research

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Recommended history vs consensus chart

1,200 90.0 1,100 80.0 1,000 70.0 900 60.0 800 50.0 (|) 700 40.0 (%) 600 500 30.0 400 20.0 300 10.0 200 0.0 Jun-14 Sep-14 Nov-14 Feb-15 Apr-15 Jul-15 Sep-15 Dec-15 Feb-16 May-16 Jul-16

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date Event Apr-09 ARBL reports strong EBITDA margin jump of 500 bps to ~20% for FY10 results May-09 The company undertakes new capacity expansion drive in the industrial battery side both of large VRLA and medium VRLA Nov-10 Receives best supply chain leader in the auto components business Mar-11 The company is able to gain on EIL's loss of market share in replacement market and increases replacement share by 6% QoQ Mar-12 The increase in costs of lead causes decline in gross margins for the complete battery industry Aug-12 The stock gets re-rated vis-à-vis EIL due to consistency of earnings as EIL's financial performance deteriorates Mar-12 ARBL reports strong EBITDA margins performance Mar-13 The company announces next growth capex of | 700 crore across various segments Oct-13 ARBL commissions the new two wheeler capacity aiding volume growth May-14 Surprises on the negative side on the EBITDA margins front Nov-14 ARBL announces new capacity expansion plan of | 500 crore for tubular battery with 1.4 million unit capacity Apr-15 Company commissions 4-W battery plant at Chittoor with installed capacity at 2.25 million p.a. taking total capacity to 8.25 million per annum May-15 Clocks highest ever revenue & PAT in FY15

Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 1 Johnson Controls Mauritius Pvt. Ltd. 30-Jun-16 0.3 44.4 0.00 Promoter 52.1 52.1 52.1 52.1 52.1 2 Galla (Jayadev) 30-Jun-16 0.1 12.8 0.00 FII 23.9 24.9 24.1 24.7 25.2 3 Galla (Ramachandra N) 30-Jun-16 0.1 12.8 0.00 DII 12.0 11.3 12.2 11.8 11.1 4 Gourineni (Ramadevi) 30-Jun-16 0.0 8.1 0.00 Others 12.1 11.7 11.7 11.5 11.7 5 Galla (Amara Kumari) 30-Jun-16 0.0 5.3 0.00 6 Franklin Templeton Asset Management (India) Pvt. Ltd. 30-Jun-16 0.0 4.6 0.58 7 Franklin Advisers, Inc. 30-Apr-16 0.0 3.9 -0.10 8 ICICI Prudential Asset Management Co. Ltd. 30-Jun-16 0.0 3.2 0.16 9 Amara Raja Group 30-Jun-16 0.0 3.1 0.00 10 Capital Research Global Investors 30-Jun-16 0.0 2.7 -0.30

Source: Reuters, ICICIdirect.com Research

Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Columbia Wanger Asset Management, LLC 4.81 0.36 William Blair Investment Management, LLC -7.41 -0.57 Fidelity Management & Research Company 1.88 0.14 Birla Sun Life Asset Management Company Ltd. -3.56 -0.26 J O Hambro Capital Management Limited 1.39 0.11 Driehaus Capital Management, LLC -1.40 -0.11 Newton Investment Management Ltd. 1.20 0.10 Franklin Templeton Asset Management (India) Pvt. Ltd. -1.11 -0.08 Norges Bank Investment Management (NBIM) 0.93 0.07 Franklin Advisers, Inc. -1.04 -0.08

Source: Reuters, ICICIdirect.com Research

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Financial summary

Profit and loss statement | Crore Cash flow statement | Crore

(Year-end March) FY15 FY16 FY17E FY18E (Year-end March) FY15 FY16 FY17E FY18E Profit after Tax 410.9 489.4 531.2 663.8 Total operating Income 4,211 4,691 5,315 6,293 Add: Depreciation 134.0 139.9 166.6 185.8 Growth (%) 23.7 11.4 13.3 18.4 (Inc)/dec in Current Assets -58.9 -186.6 -172.0 19.1 Raw Material Expenses 2,776.1 2,964.5 3,452.6 4,035.2 Inc/(dec) in CL and Provisions -84.5 97.8 -118.8 188.1 Employee Expenses 195.1 243.0 263.6 314.6 Other Expenses 531.0 666.3 699.2 868.4 CF from operating activities 401.5 540.5 407.0 1,056.9 Total Operating Expenditure 3,502.2 3,873.8 4,415.4 5,218.3 (Inc)/dec in Investments 0.0 0.0 -40.0 -200.0 EBITDA 709 817 900 1,090 (Inc)/dec in Fixed Assets -397.3 -545.5 -350.0 -350.0 Growth (%) 26.6 15.2 10.2 21.2 Others 6.7 22.0 0.0 0.0 Depreciation 134.0 139.9 166.6 185.8 CF from investing activities (390.5) (523.5) (390.0) (550.0) Interest 0.2 0.5 1.9 0.7 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0 Exceptional Items 7.3 0.0 0.0 0.0 Inc/(dec) in loan funds -10.1 -1.7 0.0 0.0 PBT 609.9 722.2 779.8 976.2 Dividend paid & dividend tax -74.0 -87.4 -99.6 -129.5 Total Tax 199.0 232.7 248.6 312.4 CF from financing activities (84.2) (89.0) (99.6) (129.5) PAT 411 489 531 664 Net Cash flow -73.2 -72.0 -82.6 377.4 Growth (%) 11.8 19.1 8.5 25.0 Opening Cash 295.4 222.2 150.2 67.6 Closing Cash 222.2 150.2 67.6 445.1 EPS (|) 24.1 28.6 31.1 38.9 Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios (Year-end March) FY15 FY16 FY17E FY18E (Year-end March) FY15 FY16 FY17E FY18E Liabilities Per share data (|) Equity Capital 17.1 17.1 17.1 17.1 EPS 24.1 28.6 31.1 38.9 Reserve and Surplus 1,682.6 2,084.6 2,516.2 3,050.6 Cash EPS 31.9 36.8 40.9 49.7 Total Shareholders funds 1,699.6 2,101.7 2,533.3 3,067.7 BV 99.5 122.9 148.3 179.6 Total Debt 74.1 72.5 72.5 72.5 DPS 3.6 4.2 5.0 6.5

Deferred Tax Liability 36.8 58.8 58.8 58.8 Cash Per Share 13.0 8.8 4.0 26.1

Total Liabilities 1,810.6 2,233.0 2,664.6 3,199.0 Operating Ratios (%)

Assets EBITDA Margin 16.8 17.4 16.9 17.3

Gross Block 1,432.8 1,905.0 2,255.0 2,605.0 PBT / Net sales 14.6 15.5 14.7 15.5

Less: Acc Depreciation 492.9 592.8 758.0 942.4 PAT Margin 11.4 8.4 9.1 9.7

Net Block 944.2 1,316.3 1,499.6 1,663.8 Inventory days 32.9 40.0 30.0 30.0 Capital WIP 86.2 119.7 119.7 119.7 Debtor days 48.4 46.5 44.0 44.0 Total Fixed Assets 1,030.4 1,436.0 1,619.4 1,783.5 Creditor days 22.9 25.9 20.0 20.0 Investments 16.1 16.1 56.1 256.1 Return Ratios (%) Inventory 418.1 601.6 270.7 763.8 RoE 24.2 23.3 21.0 21.6 Debtors 554.1 592.1 639.7 758.6 RoCE 32.4 31.1 28.1 28.8 Loans and Advances 139.6 100.7 557.3 -79.1 RoIC 40.3 39.3 28.2 32.8 Other Current Assets 3.3 7.2 4.3 7.7 Valuation Ratios (x) Cash 222.2 150.2 67.6 445.1 P/E 38.8 32.6 30.0 24.0 Total Current Assets 1,337.3 1,451.9 1,539.7 1,896.1 EV / EBITDA 22.3 19.4 17.7 14.3 Creditors 261.6 330.1 290.8 344.8 EV / Net Sales 3.8 3.4 3.0 2.5 Provisions 163.9 98.3 57.5 68.2 Market Cap / Sales 3.8 3.4 3.0 2.5 Other current liabilities 152.1 247.1 208.3 331.7 Price to Book Value 9.4 7.6 6.3 5.2 Total Current Liabilities 577.5 675.4 556.6 744.7 Solvency Ratios Net Current Assets 759.7 776.5 983.1 1,151.4 Debt/Equity 0.0 0.0 0.0 0.0 Other Non-Current Assets 0.1 0.3 0.0 0.0 Current Ratio 2.3 2.2 2.8 2.6 Application of Funds 1,810.6 2,233.0 2,664.6 3,199.0 Quick Ratio 1.9 1.9 2.7 2.0

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

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ICICIdirect.com coverage universe (Auto & Auto Ancillary)

CMP M Cap EPS ( |) P/ E (x ) EV/ EB ITD A (x ) R oC E ( %) RoE (%)

Sector / Company (|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E Amara Raja (AMARAJ) 934 900 Hold 15955 28.6 31.1 38.9 32.6 30.0 24.0 19.4 17.8 14.3 31.1 27.6 28.5 23.3 21.0 21.6 Apollo Tyre (APOTYR) 180 160 Sell 9079 22.0 18.9 19.7 8.2 9.6 9.2 4.4 5.7 5.5 20.9 14.6 13.6 18.1 14.3 13.2 Ashok Leyland (ASHLEY) 89 110 Hold 25157 2.5 5.8 6.8 35.1 15.4 13.1 12.9 9.8 8.1 23.0 28.1 29.2 13.1 24.3 23.6 Bajaj Auto (BAAUTO) 2660 2950 Buy 83208 126.2 148.3 175.4 21.1 17.9 15.2 15.7 13.6 11.1 35.9 34.4 34.9 29.7 29.8 30.0 Balkrishna Ind. (BALIND) 739 675 Hold 7143 55.7 45.1 56.3 12.6 15.5 12.5 7.2 8.1 6.5 18.7 15.9 18.9 19.3 15.9 18.9 Bharat Forge (BHAFOR) 826 840 Hold 19241 28.0 29.9 39.0 29.5 27.6 21.2 14.3 13.9 11.4 16.5 15.6 18.3 18.3 17.1 19.4 Bosch (MICO) 25430 24000 Buy 79850 398.7 498.5 649.8 54.6 43.7 33.5 35.6 29.7 23.1 15.1 16.6 18.7 17.8 19.0 21.6 Eicher Motors (EICMOT) 22378 25000 Buy 60443 471.5 661.4 813.2 47.5 33.8 27.5 24.4 18.9 15.3 42.4 42.5 39.7 36.9 37.4 34.2 Exide Industries (EXIIND) 175 195 Buy 14845 7.3 8.6 10.0 23.8 20.3 17.5 13.8 11.6 9.5 18.7 19.8 21.4 14.0 14.8 15.4 Hero Mototcorp (HERHON) 3457 2880 Hold 69036 119.5 156.9 168.5 28.9 22.0 20.5 12.1 11.5 10.0 45.9 50.4 43.8 36.5 39.4 35.9 JK Tyre & Ind (JKIND) 106 90 Hold 2401 20.4 20.5 22.4 5.2 5.2 4.7 3.9 3.6 3.0 21.4 20.6 21.9 26.5 21.2 19.3

M&M (MAHMAH) 1493 1500 Buy 88158 48.3 59.7 64.9 30.9 25.0 23.0 16.6 9.6 8.5 14.6 16.5 16.7 14.5 14.4 13.9 Mahindra CIE (MAHAUT) 177 225 Buy 5715 2.7 8.9 11.6 65.5 19.9 15.3 17.9 10.9 9.0 7.5 12.9 14.3 7.4 13.3 15.6 Maruti Suzuki (MARUTI) 4986 5095 Buy 150675 151.3 204.1 242.6 32.9 24.4 20.5 15.0 13.1 10.9 22.7 22.5 22.9 16.9 19.4 19.5 Motherson (MOTSUM) 350 260 Hold 46279 9.6 13.7 18.2 36.3 25.5 19.2 11.0 9.2 7.5 22.3 26.9 32.2 30.0 37.2 41.2 Tata Motors (TELCO) 455 540 Buy 140689 37.2 48.5 58.8 12.2 9.4 7.7 3.8 3.1 2.5 17.0 17.1 18.4 15.3 15.3 15.7 Wabco India (WABTVS) 6212 6400 Hold 11803 107.9 144.2 182.4 57.6 43.1 34.0 40.0 30.1 24.5 19.4 20.9 21.3 22.5 24.4 23.8 Source: Company, ICICIdirect.com Research

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RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

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ANALYST CERTIFICATION We /I, Nishit Zota, MBA & Vidrum Mehta, MBA Research Analyst, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securitiesis is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report.

It is confirmed that Nishit Zota, MBA & Vidrum Mehta, MBA Research Analyst of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.

Compensation of our Research Analyst is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.

It is confirmed that Nishit Zota, MBA & Vidrum Mehta, MBA, Research Analyst do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analyst nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

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