4QFY2011 Result Update | Infrastructure

April 23, 2011

Sadbhav Engineering A CCUMULATE CMP `143 Performance Highlights Target Price `161

Y/E March (` cr) 4QFY11 4QFY10 % chg (yoy) 3QFY11 % chg (qoq) Investment Period 12 Months Net sales 1,047 457.2 128.9 476.2 119.8 Stock Info Operating profit 90.8 54.4 67.1 52.9 71.8 Sector Infrastructure Net profit 53.9 18.0 199.3 26.4 104.4 Market Cap (` cr) 2,140 Source: Company, Angel Research Beta 0.5 For 4QFY2011, Sadbhav Engineering (SEL) posted numbers much higher than our and street expectations both on the top-line and bottom-line fronts. We are 52 Week High / Low 164/94 revising our estimates for FY2012 and FY2013, given the higher-than-expected Avg. Daily Volume 19,468 top-line performance and pressure on EBITDA margins. We believe SEL has Face Value (` ) 1 posted consistent growth over the last few quarters and is appropriately rewarded BSE Sensex 19,602 on the bourses with great outperformance over its peers. Hence, we are Nifty 5,885 recommending an Accumulate view on the stock, given the recent sharp run up in the stock price and lower growth expected going ahead. Reuters Code SADE.BO Bloomberg Code SADE@IN Outstanding quarterly performance: For 4QFY2011, SEL reported staggering 128.9% yoy top-line growth to `1,047cr (`457.2cr) vs. our estimate of `603.6cr. Ramp-up in execution of captive road BOT projects led to this stupendous growth Shareholding Pattern (%) in revenue. On the EBITDA margin front, SEL posted a decline of 320bp to 8.7% (11.9%) below our estimates of 11.5%, owing to high subcontracting, increased Promoters 47.6 contribution from the low-margin irrigation segment and change in cost MF / Banks / Indian Fls 26.7 escalation policy. Interest and depreciation cost came in line with our estimates. FII / NRIs / OCBs 22.6 On the earnings front, SEL reported stunning 199.3% yoy growth to `53.9cr Indian Public / Others 3.1 (`18.0cr), substantially higher than our expectations of `36.4cr, mainly due to higher revenue.

Outlook and valuation: With the pick-up in award activity from NHAI, we are Abs. (%) 3m 1yr 3yr optimistic on the road segment, given the quantum of opportunities lined up in Sensex 3.1 12.2 17.1 the sector. We expect the company to log a CAGR of 13.9% and 10.3% in its top Sadbhav 37.3 13.1 25.1 line and bottom line, respectively, over FY2011–13 on the back of high base created in FY2011. We believe SEL will take a breather to consolidate before the next leap. At current levels, the stock is trading at valuations of 7.1x FY2013E EPS (adjusted for BOT investments). Owing to the sharp run up in the stock price, we recommend Accumulate on the stock with a revised SOTP-based target price of `161(`171) to factor in EBITDA margin pressures. Key financials (Standalone) Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E Net sales 1,257 2,209 2,602 2,865 % chg 17.0 75.8 17.8 10.1 Adj. net profit 53.8 119.6 126.2 145.5 % chg (28.6) 122.1 5.5 15.3 EBITDA (%) 11.0 10.2 9.8 10.4 FDEPS (`) 3.6 8.0 8.4 9.7 P/E (x) 39.7 17.9 17.0 14.7 Shailesh Kanani P/BV (x) 5.5 3.4 2.9 2.4 022-39357800 Ext: 6829 RoE (%) 14.7 23.5 18.4 17.9 [email protected] RoCE (%) 16.4 21.3 18.4 17.8 Nitin Arora EV/Sales (x) 2.0 1.1 1.0 0.9 022-39357800 Ext: 6842 EV/EBITDA (x) 18.3 10.9 10.5 9.0 [email protected] Source: Company, Angel Research; Note: Price as on April 21, 2011

Please refer to important disclosures at the end of this report 1

Sadbhav Engineering | 4QFY2011 Result Update

Exhibit 1: 4QFY2011 performance Y/E March (` cr) 4QFY11 4QFY10 % chg (yoy) 3QFY11 % chg (qoq) FY2011 FY2010 % chg Net Sales 1,046.7 457.2 128.9 476.2 119.8 2,209.2 1,256.9 75.8 Total Expenditure 955.9 402.9 137.3 423.3 125.8 1,983.4 1,119.3 77.2 Operating Profit 90.8 54.4 67.1 52.9 71.8 225.8 137.7 64.0 OPM (%) 8.7 11.9 (320)bp 11.1 (240)bp 10.2 11.0 (80)bp Interest 11.3 (1.1) - 9.7 16.9 28.4 33.1 (14.2) Depreciation 6.9 7.5 (8.3) 6.8 0.7 26.9 23.3 15.5 Non Operating Income 3.4 (5.2) - 4.3 (21.2) 5.2 16.6 (68.7) Non-recurring items ------Profit Before Tax 76.0 42.7 77.8 40.6 87.1 175.7 98.0 79.4 Tax 22.0 24.7 (10.8) 14.2 54.9 56.2 44.1 27.3 Reported Profit After Tax 53.9 18.0 199.3 26.4 104.4 119.6 53.8 122.1 PAT (%) 5.2 3.9 130bp 5.5 (30)bp 5.4 4.3 110bp EPS (`) 3.6 1.2 199.3 1.8 104.4 8.0 3.6 122.1

Source: Company, Angel Research

Exhibit 2: Actual vs. Estimates Estimates Actual Variation (%) Revenue (` cr) 604.0 1,046.7 73.3 EBITDA margin (%) 11.5 8.7 (280)bp PAT (` cr) 36.4 53.9 48.2

Source: Company, Angel Research Result above expectations

For 4QFY2011, SEL reported a staggering 128.9% growth yoy on the top-line front to `1,047cr (`457.2cr) vs. our estimate of `603.6cr. Ramp-up in execution of captive road BOT projects via sub-contracting (KNR Construction and GKC Projects) on Bijapur – Hungund, Hyderabad – Yadgiri and Ranchi ring road projects led to this stupendous growth in revenue. Moreover, the pick-up in execution in the irrigation segment boosted the company’s revenue.

SEL is executing its captive projects at a fast pace and the company is expecting to complete Hyderabad – Yadgiri project by May 2012. Further, Bijapur – Hungund and Dhule – Palasner projects are expected to be substantially completed in FY2012 and start generating tolls. Going ahead, SEL is banking on winning projects from NHAI, but it is currently staying away from stiff competition in the road segment. We believe winning projects would play a key role to maintain growth and act as catalyst for the stock price, although the current order book of ~`6,965cr (3.2x FY2011 revenue) provides enough revenue visibility for the next couple of years.

On the toll collection front, Ring Road reported a jump of 19.1% yoy for 4QFY2011 to `17.8cr (`14.9cr). For FY2011, toll collections stood at `63.4cr (`52.2cr), a yoy jump of 21.6%. Traffic growth for Ahmedabad Ring Road came in at 16.2% for FY2011. Aurangabad – Jalna witnessed healthy growth of 31.4% yoy to `6.3cr (`4.8cr) for the quarter. For FY2011, toll collections stood at `23.7cr (`12.1cr), yoy growth of 95.2%. Traffic growth for the same came in at 10.8%.

April 23, 2011 2

Sadbhav Engineering | 4QFY2011 Result Update

Exhibit 3: Expect the execution momentum to continue Exhibit 4: Road segment – Lion’s share of overall revenue (%)

1200 128.9 140.0 100 3 10 10 11 14 16 13 120.0 90 1000 10 11 14 80 14 6 100.0 800 70 80.0 60 600 51.7 51.2 60.0 50 42.1 40.8 86 400 40 78 77 79 75 22.9 40.0 72 19.9 30 10.5 14.5 11.4 14.7 200 20.0 20 0 - 10 - FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

2QFY09 3QFY09 4QFY09 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 Road BOT Irrigation Mining Sales (Rs cr, LHS) Growth (yoy %, RHS)

Source: Company, Angel Research Source: Company, Angel Research

On the EBITDA front, SEL posted a fall of 320bp for 4QFY2011 to 8.7% (11.9%), below our estimates of 11.5%, owing to high subcontracting and increased contribution from the low-margin irrigation segment (6–7%).

Further, as per management, another reason for compression in margins is change in the cost escalation policy for road BOT projects. Previously, cost escalation was equally spread over a project life; but as per the new policy, only ~4% of cost escalation is passed in the first year and 17–18% in the second year and third year. SEL has kept low provision of escalation for earthwork (first year), while it has kept high provision for the second and third year, where structure and bitumen work happens – this will enable the company to have uniform margins throughout the project. However, we expect SEL’s margin to remain under pressure on account of high subcontracting and are factoring in the same for FY2012E (9.8%) and FY2013E (10.4%).

On the earnings front, for 4QFY2011, SEL reported stunning 199.3% growth yoy to `53.9cr (`18.0cr), substantially higher than our expectations of `36.4cr, mainly due to higher revenue. Tax rate for FY2011 came in at 29%, owing to adjustment for excess tax provision in the earlier year. Going ahead, we are estimating EPS of `8.4 for FY2012 and `9.7 for FY2013, a more sedate growth on the bottom-line front, as we expect some consolidation before the next leap.

Exhibit 5: EBITDAM falls in line with high subcontracting Exhibit 6: Robust top line led to healthy NPM

100.0 11.9 11.9 12.0 14.0 60.0 7.3 8.0 11.4 90.0 11.1 11.1 7.0 10.1 12.0 50.0 6.0 6.0 80.0 5.5 9.3 9.0 9.1 5.3 5.2 6.0 8.7 10.0 4.8 70.0 40.0 4.5 5.0 60.0 8.0 50.0 30.0 3.0 4.0 6.0 2.6 40.0 3.0 20.0 2.0 30.0 4.0 2.0 20.0 10.0 2.0 1.0 10.0 - - 0.0 - 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 EBITDA (Rs cr, LHS) EBITDAM (%, RHS) PAT (Rs cr, RHS) PATM (%, RHS)

Source: Company, Angel Research Source: Company, Angel Research

April 23, 2011 3

Sadbhav Engineering | 4QFY2011 Result Update

Order book analysis

SEL’s order book stood at an impressive `6,965cr, (3.2x FY2011 revenue) as of March 31, 2011, owing to which we expect it to post robust numbers in the ensuing quarters. SEL’s order book is majorly dominated by the road segment (73.6%), followed by the irrigation (13.8%) and mining (12.7%) segments. During the quarter, SEL secured irrigation orders worth `869cr in a JV with GKC projects. SEL has a 60% share in the same.

Exhibit 7: Order book break-up (` cr) Exhibit 8: Order book – Peer comparison

4.5 25,000 4.1 4.0 4.0 3.2 3.2 3.5 20,000 2.9 3.0 15,000 2.5 2.0 10,000 1.5

5,000 1.0 0.5 - - HCC IVRCL NCC Simplex Sadbhav Infra Order backlog (LHS, Rs cr) OB/Sales (x)

Source: Company, Angel Research Source: Company, Angel Research; Note: OB/Sales calculated using

estimated Sales of FY2011

Improvement in working capital

SEL reported a significant improvement in net working capital days (ex-cash) to 68 days for FY2011 vs. 103 days in FY2010, owing to higher revenue from captive road BOT projects and reduction in debtor days to 93 days in FY2011 from 104 days in FY2010. However, going ahead, we expect SEL’s working capital to marginally increase and are factoring in net working capital days (ex-cash) at 70 and 71 for FY2012 and FY2013, respectively. Revision in estimates We are revising our revenue estimates upwards to `2,602cr (`2,330cr) for FY2012 and to `2,865cr (`2,715cr) for FY2013, as we expect execution in captive road BOT projects to remain on fast lane. On the margins front, we expect 9.8% (10.8%) for FY2012 and 10.4% (11.0%) for FY2013, owing to subcontracting on road BOT projects. SEL’s earnings for FY2012 are estimated at `126.2cr (`123.8) and for FY2013 at `145.5cr (`150.3cr).

Exhibit 9: Change in estimates FY2012 FY2013

Earlier estimates Revised estimates Variation (%) Earlier estimates Revised estimates Variation (%)

Revenues (` cr) 2,330 2,602 11.6 2,715 2,865 5.5 EBITDA margin (%) 10.8 9.8 (100bp) 11.0 10.4 (60bp) PAT (` cr) 123.8 126.2 2.0 150.3 145.5 (3.2)

Source: Company, Angel Research

April 23, 2011 4

Sadbhav Engineering | 4QFY2011 Result Update

Outlook and valuation

The lull in the awarding activity in the last few quarters had negatively affected the infra sector’s performance on the bourses. However, the awarding activity has picked up in the last couple of months, thus presenting opportunities for road developers and contractors such as SEL. We are optimistic on the road segment, given the quantum of opportunities lined up in the sector. We expect the company to log a CAGR of 13.9% and 10.3% in its top line and bottom line, respectively, over FY2011–13 on the back of high base created in FY2011. We believe SEL will take a breather to consolidate before the next leap. At current levels, the stock is trading at valuations of 7.1x FY2013E EPS (adjusted for BOT investments). Owing to the sharp run up in the stock price, we recommend an Accumulate view on the stock with a revised SOTP-based target price of `161 (`171) to factor in EBITDA margin pressures.

Exhibit 10: SOTP break-up Business Segment Methodology Remarks ` cr `/share Construction (a) P/E 9x FY2013E earnings 1,310 87.4 SIPL - Road BOT Projects 1,415.8 94.5

A’bad Ring Road (SIPL's share 80%) NPV CoE -14%, Traffic & Toll increase 5% each 216 14.4 Aurangabad - Jalna (SIPL's share 51%) NPV CoE -14%, Traffic 5% & Toll increase 18.5% (every 3 years) 69 4.6 Mumbai - Nasik (SIPL's share 20%) NPV CoE -14%, Traffic & Toll increase 5% each 110 7.3 Nagpur - Seoni (SIPL's share 51%) NPV CoE -14%, Traffic & Toll increase 5% each 36 2.4 Dhule - Palasner (SIPL's share 27%) NPV CoE -14%, Traffic & Toll increase 5% each 102 6.8 Maharashtra Border (SIPL's share 90%) NPV CoE -14%, Traffic & Toll increase 5% each 342 22.9 Rohtak - Panipat (SIPL's share 100%) NPV CoE -14%, Traffic & Toll increase 5% each 253 16.9 Bijapur - Hungund (SIPL's share 77%) NPV CoE -14%, Traffic & Toll increase 5% each 89 5.9 Hyderabad - Yadgiri (SIPL's share 60%) NPV CoE -14%, Traffic & Toll increase 5% each 71 4.7 Value of Incremental Projects - 10% 128.7 8.6

SEL holds 77.8% stake in SIPL (b) PE investors have bought 22.2% stake for Rs400cr valuating SIPL at `1,800cr 1,102 73.5 Total (a+b) 160.9

Source: Company, Angel Research

Exhibit 11: Key assumptions FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

Order Inflow 1,183 2,649 2,912 1,913 4,090 4,386 Revenue 899 1,074 1,257 2,209 2,602 2,865 Order backlog (Y/E) 2,764 4,339 5,994 5,697 7,186 8,706 Order book–to-sales ratio (x) 3.1 4.0 4.8 2.6 2.8 3.0

Source: Company, Angel Research

April 23, 2011 5

Sadbhav Engineering | 4QFY2011 Result Update

Exhibit 12: BOT assumptions Project ARRIL AJIT MNEL NSEL DPTL MBCPNL RPTL BHTL HYTL Type Toll Toll Toll Annuity Toll Entry Fees Toll Toll Toll Status Oper. Oper. Oper. Under Dev. Under Dev. Under Dev. Under Dev. Under Dev. Under Dev. KM 76 66 100 57 97 - 66 100 35 Issuing Auth. AUDA MSRDC NHAI NHAI NHAI MSRDC NHAI NHAI NHAI State Mah. Mah. MP Mah./MP Mah. Karnataka AP Concession (Yrs) 20 24 20 20 18 25 25 20 23 Con. Start Jan-07 Jan-07 Dec-09 May-07 Dec-09 Apr-12 Sep-10 Mar-13 Aug-10 Con. End Jan-27 Jul-30 Dec-29 Nov-27 Dec-27 Aug-34 Sep-35 Sep-30 Aug-33 TPC (` cr) 515.0 277.0 753.0 489.0 1,420.0 1,426.4 1,213.6 1,257.1 480.2 Equity (` cr) 74.0 83.0 52.0 106.9 355.0 285.4 242.8 137.0 100.0 Debt (` cr) 405.0 194.0 650.0 382.1 1,065.0 1,141.0 970.8 846.5 380.2 Grant (` cr) 36.0 - 51.0 - - - - 273.6 - Traffic Growth (%) 5.0 5.0 5.0 - 5.0 5.0 5.0 5.0 5.0 Toll inc (%) 5.0 5.0 5.0 - 5.0 5.0 5.0 5.0 5.0 Interest Rate (%) 11.0 11.0 11.0 11.3 11.3 11.3 11.3 11.3 11.3

Source: Company, Angel Research

Exhibit 13: Angel EPS forecast vs. consensus Angel Forecast Bloomberg consensus Variation (%)

FY2012E 8.4 9.0 6.5 FY2013E 9.7 10.3 5.7

Source: Company, Angel Research

Investment arguments

Aggressive ramp up of road BOT portfolio, leveraging on EPC competence: SEL has slowly and steadily moved up the value chain from being a cash contractor to becoming an asset owner. The company is leveraging its core competence in the EPC business to encash on the upcoming opportunities in the road BOT space. This not only serves to shore up its EPC order book but also ensures consistent revenue stream for SEL in the long run.

Strong order book renders top-line visibility: As of 4QFY2011, SEL had a robust order book of `6,965cr (3.2x FY2011 revenue), owing to healthy order booking witnessed in the road segment. SEL’s order book is spread across segments, including road (73.6%), irrigation (13.8%) and mining (12.7%), with an average execution period of 24–30 months. Pertinently, the robust order book continues to provide top-line visibility for the company.

April 23, 2011 6

Sadbhav Engineering | 4QFY2011 Result Update

Key concerns

Interest rate: Road BOT projects are vulnerable to interest rate fluctuations, and any hike in interest rates would increase SEL’s interest costs.

Commodity risks: Road players are facing pressures from the recent price inflation in commodities such as cement and steel, which have a direct impact on margins.

Awarding from NHAI: Slowdown in awarding activity by NHAI would hit order inflow for road-focused players such as SEL.

Exhibit 14: Recommendation summary Company CMP TP Rating Top line (` cr) EPS (`) Adj. P/E OB/ FY10 FY11E FY12E CAGR (%) FY10 FY11E FY12E CAGR (%) FY10 FY11E FY12E Sales(x)

CCCL 52 64 Buy 2,276 2,635 3,091 16.5 4.6 5.3 6.4 18.0 11.2 9.8 8.1 1.9 HCC 38 - Neutral 4,084 4,722 5,485 15.9 1.2 1.1 1.6 16.2 6.9 7.6 5.1 4.0 IRB Infra 196 242 Buy 2,460 3,331 4,320 32.5 14.2 13.4 16.8 8.9 4.6 4.8 3.8 - IVRCL 89 108 Buy 6,031 6,775 8,244 16.9 7.0 7.5 9.3 14.9 7.9 7.4 6.0 4.0 JP Assoc. 102 119 Buy 12,460 15,528 17,706 19.2 3.8 5.7 6.8 33.4 26.6 17.7 14.9 - Punj Lloyd 73 - Neutral 8,129 10,048 11,362 18.2 (1.0) 3.1 3.8 - - 23.9 19.2 3.4 NCC 110 150 Buy 5,365 6,192 7,439 17.8 7.7 8.8 9.6 12.0 9.8 8.5 7.8 3.2 SEL 143 161 Accu. 2,209 2,602 2,865 13.9 8.0 8.4 9.7 10.3 8.5 8.1 7.0 3.2 Simplex In. 333 438 Buy 4,842 5,370 6,909 19.5 25.9 24.9 39.8 23.8 12.8 13.4 8.4 2.8 Patel Engg 175 - Neutral 2,428 2,776 3,248 15.7 15.9 15.0 18.3 7.4 3.9 4.2 3.4 4.1 Madhucon 105 138 Buy 1,690 2,050 2,630 24.8 6.4 7.0 9.5 21.7 6.7 6.1 4.5 2.5 L&T 1,704 2,034 Buy 44,267 56,115 67,811 23.8 56.1 68.3 83.0 21.7 22.2 18.2 15.0 2.0 ITNL 226 318 Buy 3,204 4,664 6,588 43.4 20.4 21.7 27.5 16.1 11.1 10.4 8.2 8.9

Source: Company, Angel Research

Exhibit 15: SOTP break-up Company Core Const. Real Estate Road BOT Invst. In Subsidiaries Others Total ` % to TP ` % to TP ` % to TP ` % to TP ` % to TP `

CCCL 64 100 ------64 HCC 13 30 23 55 6 15 - - - - 43 IRB Infra 111 46 - - 127 52 5 2 - - 242 IVRCL 74 69 - - - - 33 31 - - 108 JP Assoc. 40 33 31 26 - - - - 48 40 119 Punj Lloyd 94 100 ------94 NCC 116 77 2 1 8 6 - - 25 16 150 Sadbhav 87 53 - - 73 47 - - - - 161 Simplex In. 438 100 ------438 Patel Engg 110 49 61 27 16 7 - - 36 16 222 Madhucon 76 55 4 3 33 24 - - 25 18 138 L&T 1,577 78 - - - - 458 22 - - 2,034 ITNL 112 35 - - 172 54 - - 34 11 318

Source: Company, Angel Research

April 23, 2011 7

Sadbhav Engineering | 4QFY2011 Result Update

Profit & loss statement (Standalone) Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E Net Sales 899 1,074 1,257 2,209 2,602 2,865 Other operating income ------Total operating income 899 1,074 1,257 2,209 2,602 2,865 % chg 84.1 19.5 17.0 75.8 17.8 10.1 Total Expenditure 798 954 1,119 1,983 2,347 2,568 Net Raw Materials 233.9 276.4 210.7 - 720.7 779.4 Other Mfg costs 524 625 843 1,867 1,517 1,667 Personnel 39.5 51.3 66.3 116.4 109.8 121.2 Other 1.5 1.2 (0.6) - - - EBITDA 100.2 120.0 137.7 225.8 254.4 297.7 % chg 65.8 19.7 14.7 64.0 12.7 17.0 (% of Net Sales) 11.2 11.2 11.0 10.2 9.8 10.4 Depreciation& Amortisation 13.9 15.7 23.3 26.9 34.7 42.6 EBIT 86.4 104.3 114.4 198.9 219.8 255.1 % chg 89.5 20.8 9.7 73.9 10.5 16.1 (% of Net Sales) 9.6 9.7 9.1 9.0 8.4 8.9 Interest & other Charges 15.7 21.4 33.1 42.7 54.5 63.3 Other Income 3.9 11.7 16.6 19.5 21.5 23.6 (% of PBT) 5.2 12.4 17.0 11.1 11.5 11.0 Share in profit of Associates ------Recurring PBT 74.5 94.6 98.0 175.7 186.8 215.4 % chg 79.4 27.0 3.5 79.4 6.3 15.3 Extraordinary Expense/(Inc.) ------PBT (reported) 74.5 94.6 98.0 175.7 186.8 215.4 Tax 23.6 19.2 44.1 56.2 60.6 69.9 (% of PBT) 31.7 20.3 45.0 32.0 32.4 32.4 PAT (reported) 50.9 75.4 53.8 119.6 126.2 145.5 Add: Share of earnings of asso ------Less: Minority interest (MI) ------Prior period items ------PAT after MI (reported) 50.9 75.4 53.8 119.6 126.2 145.5 ADJ. PAT 50.9 75.4 53.8 119.6 126.2 145.5 % chg 72.5 48.0 (28.6) 122.1 5.5 15.3 (% of Net Sales) 5.7 7.0 4.3 5.4 4.8 5.1 Reported EPS (`) 4.1 6.0 4.3 8.0 8.4 9.7 Adj. EPS (`) 3.4 5.0 3.6 8.0 8.4 9.7 % chg 72.5 48.0 (28.6) 122.1 5.5 15.3

April 23, 2011 8

Sadbhav Engineering | 4QFY2011 Result Update

Balance sheet (Standalone) Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E SOURCES OF FUNDS

Equity Share Capital 12.5 12.5 12.5 15.0 15.0 15.0 Preference Capital ------Reserves& Surplus 273.6 331.0 379.0 610.8 728.9 866.5 Shareholder’s Funds 286.1 343.5 391.5 625.7 743.9 881.5 Minority Interest ------Total Loans 150.3 211.1 424.2 396.1 594.1 611.9 Deferred Tax Liability 9.7 11.0 14.1 16.1 16.1 16.1 Total Liabilities 446 566 830 1,038 1,354 1,509 APPLICATION OF FUNDS

Gross Block 241.4 260.6 332.2 378.8 458.8 563.8 Less: Acc. Depreciation 98.4 106.1 122.1 149.0 183.6 226.2 Net Block 143.0 154.5 210.1 229.8 275.1 337.5 Capital Work-in-Progress ------Goodwill ------Investments 120.5 124.6 144.1 326.4 425.1 573.9 Current Assets 434 592 1,009 1,434 1,690 1,739 Inventories 85.0 27.6 54.0 69.2 88.0 104.7 Debtors 154 278 441 687 849 888 Cash 10.3 10.0 44.8 84.6 56.5 86.0 Loans & Advances 168.5 275.7 466.8 586.1 690.3 653.3 Other 16.1 0.5 2.8 7.3 5.8 6.4 Current liabilities 253 306 534 952 1,036 1,141 Net Current Assets 181 286 476 482 654 598 Misc. Exp. not written off 1.7 0.8 - - - - Total Assets 446 566 830 1,038 1,354 1,509

April 23, 2011 9

Sadbhav Engineering | 4QFY2011 Result Update

Cash flow statement (Standalone) Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E Profit Before Tax 75 95 98 176 187 215 Depreciation 14 16 23 27 35 43 Change in Working Capital 127 105 155 (34) 200 (85) Less: Other income 6 - 17 20 21 24 Direct taxes paid 24 19 44 56 61 70 Cash Flow from Operations (68) (14) (95) 161 (61) 250 (Inc.)/ Dec. in Fixed Assets (39) (19) (72) (47) (80) (105) (Inc.)/ Dec. in Investments (74) (4) (20) (182) (99) (149) Other income 6 - 17 20 21 24 Cash Flow from Investing (108) (23) (74) (209) (157) (230) Issue of Equity 90 - - 124 - - Inc./(Dec.) in loans 77 61 213 (28) 198 18 Dividend Paid (Incl. Tax) 6 6 6 8 8 8 Others - (18) (3) - - - Cash Flow from Financing 161 37 204 89 190 10 Inc./(Dec.) in Cash (15) (0) 35 40 (28) 29 Opening Cash balances 25 10 10 45 85 57 Closing Cash balances 10 10 45 85 57 86

April 23, 2011 10

Sadbhav Engineering | 4QFY2011 Result Update

Key Ratios Y/E March FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E Valuation Ratio (x)

P/E (on FDEPS) 42.0 28.4 39.7 17.9 17.0 14.7 P/CEPS 33.0 23.5 27.8 14.6 13.3 11.4 P/BV 7.5 6.2 5.5 3.4 2.9 2.4 Dividend yield (%) 0.3 0.3 0.3 0.4 0.4 0.4 EV/Sales 2.5 2.2 2.0 1.1 1.0 0.9 EV/EBITDA 22.7 19.5 18.3 10.9 10.5 9.0 EV / Total Assets 5.1 4.1 3.0 2.4 2.0 1.8 Per Share Data (`)

EPS (Basic) 4.1 6.0 4.3 8.0 8.4 9.7 EPS (fully diluted) 3.4 5.0 3.6 8.0 8.4 9.7 Cash EPS 4.3 6.1 5.1 9.8 10.7 12.6 DPS 0.4 0.4 0.4 0.5 0.5 0.5 Book Value 19.1 22.9 26.1 41.8 49.6 58.8 DuPont Analysis

EBIT margin 9.6 9.7 9.1 9.0 8.4 8.9 Tax retention ratio 0.7 0.8 0.5 0.7 0.7 0.7 Asset turnover (x) 2.8 2.2 1.9 2.5 2.3 2.1 ROIC (Post-tax) 18.5 16.8 9.4 15.6 13.2 12.7 Cost of Debt (Post Tax) 9.6 9.4 5.7 7.1 7.4 7.1 Leverage (x) 0.4 0.5 0.8 0.7 0.6 0.7 Operating ROE 22.1 20.7 12.2 21.8 16.7 16.3 Returns (%)

ROCE (Pre-tax) 25.6 20.6 16.4 21.3 18.4 17.8 Angel ROIC (Pre-tax) 27.0 21.0 17.1 22.9 19.5 18.8 ROE 23.5 23.9 14.7 23.5 18.4 17.9 Turnover ratios (x)

Asset Turnover (Gross Block) 4.1 4.3 4.2 6.2 6.2 5.6 Inventory / Sales (days) 22 19 12 10 11 12 Receivables (days) 58 73 104 93 108 111 Payables (days) 104 89 128 125 144 154 W.cap cycle (ex-cash) (days) 43 76 103 68 70 71 Solvency ratios (x)

Net debt to equity 0.5 0.6 1.0 0.5 0.7 0.6 Net debt to EBITDA 1.4 1.7 2.8 1.4 2.1 1.8 Interest Coverage 5.5 4.9 3.5 4.7 4.0 4.0

April 23, 2011 11

Sadbhav Engineering | 4QFY2011 Result Update

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

DISCLAIMER

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so.

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Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement Sadbhav Engg 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies' Directors ownership of the stock No 4. Broking relationship with company covered No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)

April 23, 2011 12