INSTITUTIONAL EQUITY RESEARCH

Dixon Technologies Ltd

Piggybacking on the consumer durable story

INDIA | MID- CAP | IPO Note 6 September 2017

Dixon Technologies (Dixon) is the largest home-grown design-focused and solutions SUBSCRIBE company engaged in manufacturing of consumer durables, lighting and mobile phones. It also provides solutions in reverse logistics i.e. repair and refurbishment. The company is COMPANY DATA leading manufacturer of lighting products (CFL & LED), FPD TVs and semi-automatic ISSUE OPENS 06-September-2017 washing machines with market share of 39%, 50% and 43% respectively in India. Dixon is ISSUE CLOSES 08-September-2017 one of the most profitable companies in the domestic consumer durable manufacturing PRE- ISSUE EQUITY SHARES 11.0mn - LOWER BAND Rs 1760 industry. In FY17, its revenues/EBITDA/PAT was Rs 24.5bn/922mn/504mn, with strong - UPPER BAND Rs 1766 balance sheet (D/E 0.2x) and cash flow – having ROCE and ROE of 32% /26% with FCF PRICE BAND Rs 1760 - 1766 generation of Rs 170mn. - FRESH ISSUE 0.34mn - OFS 3.1mn NO OF SHARES TO BE ISSUED 3.4mn About company RETAIL AND EMPL SHARE (%) 35% Incorporated in January 15, 1993, Dixon – is fully integrated end to end product and ISSUE SIZE Rs 5.97-6bn POST- ISSUE EQUITY SHARES 11.3mn solution. Its services range from global sourcing, manufacturing, quality testing and MKT CAP Rs 19.9-20bn packaging. The company has six state-of-the-art manufacturing units in Noida and Dehradun. It has in-house capability for panel assembly, PCB assembly, wound components, sheet metal and plastic moulding.

IPO rationale: Raising funds for offer for sale & capex Consolidated Financials FY14 FY15 FY16 FY17 Dixon is raising Rs 6.0bn through this IPO offer from sale by Strategic investors & promoter Y/E Mar, Rs mn Net Sales 10,937 12,013 13,894 24,568 (Rs 5.4bn), to meet part of its capex requirement (Rs 271mn) and repayment of debt (Rs Operating Profit 260 322 588 907 220mn). At the IPO price band of Rs 1760‐1766, the stock trades at 40x FY17 PE. PAT 136 119 427 504 RoCE(%) 13.7 15.4 24.8 32.1 ROE(%) 18.4 14.0 34.7 25.5 Key strengths: P/E@Rs 1,766 147.2 168.7 46.9 39.7  Market leader in key product verticals  Healthy relationship with top-tier customers  One Stop Shop - End to End solution provider  Improving margins through 1) New product addition 2) focussing more on ODM  Increasing reverse logistics - Higher potential & healthy return ratios  Improving Product base with existing and new customers  Strong balance Sheet and Cash flows

Key risks

1) Dependency on few customers (Top two customers contribute ~59% of revenue –

Panasonic~38% & Philips~20%)

2) Low entry barriers and lower bargaining power from customer

3) Volatility in commodity prices

Our view:

The company has a strong business model with healthy balance sheet and cash flow. It has reported revenue and earning CAGR of 34% and 78% over FY13 to FY17. With increasing product portfolio and services (Camera, reverse logistics) and margin improvement (backward integration in mobile phone, increasing ODM share), we expect a revenue and PAT CAGR of 16%/33% over next 2 years (FY17 to FY19).

At upper band of the price Rs 1,766 stock is at PE of 26x/23x/ discounting FY18 and FY19 numbers and generating FCF of ~ Rs 950mn (over next 2 year) with the strong ROCE and

ROE of 30%/21% in FY19e. We like the business model (lower working capital, higher return ratios) as well as the company is well placed to capitalize the growing consumption pattern Deepak Agarwal (+ 9122 6246 4112) in consumer durables and appliances. We recommend “Subscribe”. [email protected]

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DIXON TECHNOLOGIES IPO NOTE

About the IPO  Issue size of Rs 5.9 – 6.0bn with 3.4mn shares at a price band of Rs 1760‐1766 per share.  Issue includes 3.1mn shares offered for sale by strategic investors, promoter & management and fresh issue of 0.3mn shares.  Market capitalisation at price band: Rs 19.9‐20.0bn.

Dixon - Issue details ISSUE OPENS 06-September-2017 ISSUE CLOSES 08-September-2017 PRE- ISSUE EQUITY SHARES 11.0mn - LOWER BAND Rs 1760 1 - UPPER BAND Rs 1766 PRICE BAND Rs 1760 - 1766 - FRESH ISSUE 0.34mn - OFS 3.1mn NO OF SHARES TO BE ISSUED 3.4mn RETAIL AND EMPLOYEE SHARE (%) 35% ISSUE SIZE Rs 5.97-6bn POST- ISSUE EQUITY SHARES 11.3mn MKT CAP Rs 19.9-20bn Source: RHP, PhillipCapital India Research

Share holding pattern Pre-issue Share holding pattern post-issue

Other public Management 32% & others Promoters 25% 46% Promoters 39%

Strategic invetors Management Strategic 29% & others invetors 18% 11% Source: RHP, PhillipCapital India Research

 Of the Rs 600mn proceeds from the fresh issue, Rs 220mn will be utilised for debt payment, Rs 76mn for setting up LED facility at Tirupati and Rs 106mn for upgrading IT infra.

Net proceeds will be used for Rs mn FY18 FY19 Total Repayment of borrowings 220 - 220 Manufacturing facility of LED TVs at the Tirupati 76 - 76 Enhancement lighting products at Dehradun 89 - 89 Upgrading IT infra. 53 53 106 General corporate purposes * 109 - 109 Total 547 53 600 Source: RHP, PhillipCapital India Research, Note: On Upper band of Rs 1766, * Balancing Amount

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DIXON TECHNOLOGIES IPO NOTE

About - Dixon Technologies Ltd Company incorporated in 1993, in 1994, commenced manufacturing of consumer Indian EMS/ODM Market electronics such as colour televisions. In 2007, commenced manufacturing of LCD TVs and subsequently progressed into manufacturing of LED TVs in 2010. Dixon entered 600 EMS/ODM (Rs bn) the lighting products in 2008 with the manufacturing of CFL products and gradually increased its product portfolio to LED products in 2016. In 2010, started 500 manufacturing of semi-automatic washing machines. Company also started providing 400 reverse logistics services in 2008. Recently entered into manufacturing of mobile 300 phones through a JV. Company has continuously diversified its product portfolio to keep pace with changing consumer trends and development in technology. 200

100 Company’s diversified product portfolio includes (i) consumer electronics (like LED

0

TVs); (ii) home appliances (like washing machines); (iii) lighting products (like LED

bulbs and tubelights, downlighters and CFL bulbs); and (iv) mobile phones.

FY13 FY14 FY15 FY16 FY17

FY18e FY19e FY20e FY21e

Key customers include Panasonic India P Ltd, Philips Lighting I Ltd, Haier Appliance (I) Pvt. Ltd., Gionee, Surya Roshni Limited, Reliance Retail Limited, Intex Technologies (I) Dixon – has highest market share in Ltd., Mitashi Edutainment Pvt. Ltd., Dish Infra Services Private Limited. Indian EMS:

Dixon majorly operates under 2 business model: 1. OEM – Original Equipment Manufacturers Jabil 13% Dixon 2. ODM – Original Design Manufacturer 9% Others 66% In OEM, the company is fully integrated end-to-end product and solution provider. SFO 7% Ranging from global sourcing, manufacturing, quality testing, assembling and packaging to logistics. This segment contributes to ~78% of revenue and has an Elin EBITDA margin of ~2%. 3% PG Electrop Dixon is a leading (ODM) for lighting products, LED TVs and semi-automatic washing last machines in India. As an ODM, Company develop & design products in-house (has 2% strong R&D team of 27 employees), manufacture and supply these products to well- Source: RHP, PhillipCapital India Research Note: known companies in India who in turn distribute these products under their own EMS - Electronic Manufacturing Services brands. This segment has a revenue of Rs 5.4bn (22% of sales) and has healthy EBITDA margin of 9%.

OEM - Revenue Share ODM – Revenue Share Home appliances Lighting products Consumer electronics Lighting products 20,000 6,000 Consumer electronics Mobile phones 18,000 16,000 5,000 1,880 14,000 8,107 4,000 12,000 1,306 10,000 200 3,000 3,010 2,632 2,568 8,000 2,969 2,498 2,000 6,000 2,614 1,727 4,000 1,067 7,428 7,000 7,449 1,000 849 6,382 516 2,000 3,981 108 374 701 996 534 601 327 0 0 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17

Source: RHP, PhillipCapital India Research

In line with focus to provide end to end product solutions, Company has backward integrated its major manufacturing processes by developing in-house capabilities in plastic moulding products, sheet metal products, wound components and LED panel assembly. With this company has improved its cost efficiency, reduces dependency

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DIXON TECHNOLOGIES IPO NOTE on third party suppliers and gives better control on production time and quality of critical components used in the manufacturing of products.

Dixon – Product Wise detail break up: (Home Appliances & Reverse logistics has higher profitability) Products Consumer Electronic HOME APPLIANCES LIGHTING PRODUCTS MOBILE PHONES* REVERSE LOGISTICS Installed Capacity (Units) 1,200,000 550,000 260,400,000 10,080,000 3,660,000 Sales (Units- FY17) 747,383 376,842 120,592,760 3,476,423 1,408,474 Revenue (Rs mn) 8,445 1,880 5,508 8,107 627 EBITDA (Rs mn) 250 306 179 50 123 OPM (%) 3% 16.3% 3.2% 0.6% 19.6% ODM & OEM (%) 12% /88% 100%/0% 45%/55% 0%/100% 0%/100% Products LED TVs: Semi-automatic LED Products: feature phones and Repair & 19” to 65” washing machine: LED bulbs 0.5W to 20 W smart phones Refurbishment: 4K2K 6.2 Down lighters 5W to (2G, 3G, 4G/LTE, Set top boxes Home Theatres: kg to 8.0 kg 15W VoLTE and CDMA). Repair: 2.1 channel Battens Mobile phones 4.1 channel T- LEDs 20W to 24W LCD & CFL Lamps: LED TVs CFL Lamps 5W to 27W LED panel Lamp Drivers: Home theatres Indoor LED drivers 5W (2.1 channel to 20W and 4.1 Outdoor LED drivers channel) 20W to 150W Computer Electronics lamp driver peripherals and 10W to 40W other devices such as printers, CCTVs and speakers Customers & Revenue Share Panasonic I P LTD Panasonic India Philips Lighting India Panasonic India Intex Technologies (I) Ltd. FY17 (%) (65.2% ) Private Limited Limited (90.1%) Private Limited Dish Infra Services Private Reliance Retail Ltd (21.0%) Surya Roshni Limited (43.72%) Limited (9.54%) Haier Appliance (I) Bajaj Electricals Gionee (50.21%) Airtel – setupbox Intex Technologies (I) Pvt. Ltd. (16.16%) Jaina Marketing and Sony – LEDs Ltd. (9.23%) Intex Technologies (I) Associates (6.05%) Haier Appliance (I) Ltd (16.17%) Pvt. Ltd (3.15%) Others: Vijay Sales, Mitashi, Abaj Manufacturing Facility LED TVs at Dehradun washing machines at Dehradun & Nodia Nodia Noida + 17 service centers in Dehradun major cities in India Source: RHP, PhillipCapital India Research

Market leadership in key product verticals Dixon’s experience in manufacturing, successful backward integration and design capabilities, strong relationships with global suppliers and anchor customers has resulted in achieving leading position in key verticals:

Dixon Expected Industry CARG Product Industry Size (mn units) over next 5 years Production (FY17) OPM (%) Market Share (%) FPD TVs 1.2 50% 0.6 ~3% 50% Washing machines 0.6 41% 0.3 ~16% 43% LED & CFL Lights* 227 43% 88.4 ~3% 39% Source: RHP, PhillipCapital India Research Note: FPD - Flat Panel Display

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DIXON TECHNOLOGIES IPO NOTE

Consumer Electrical – Television Market: Growing trust and confidence in EMS and ODM players, leading to outsourced manufacturing. Dixon is leader in the FPD TV with share of ~50% in Indian Market.

FPD TV market to grow @ CAGR of 16% OEP data segmented by OEM and EMS production ratio, FY16 Domestics manufacturing FY16 Production by EMS/ODM FY16 (mn units) 900 Revenue (Rs bn) 30 800 Volume (mn) 25 700 CAGR: FY16-FY21 600 Vol: 16.9% 20 Dixon 500 17% MEPL 15 OEP by 400 OEP by 8% SVL EMS, 85% OEM, 50% 300 10 15% 8% Videotex 200 8% Noble 5 9% 100 Others 0 0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Lighting Market: Currently Lighting is a small part of EMS, However EESL (led 7W/9W) LED bulb demand has seen capacity addition among EMS companies. Dixon is leader players with 39% market share.

LED lighting taking the lead in the lighting sector OEP data segmented by OEM and EMS production ratio, FY16 Domestics manufacturing FY16 Production by EMS/ODM FY16 (mn units) Others CFL LED 350 CAGR: FY16-FY21 300 Total Mkt 16.6% 3% LED: 59.2% 250 Dixon EMS, 22% NTL 200 Tier 1, 28% 39% 48% 150 Compact Lamps Tier II, Others 100 30% 30%

50

0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Source: RHP, PhillipCapital India Research

Washing Machines Market: In this segment semi-automatic WM product having limited scope for design & innovation, support increasing dependence on EMS companies. Dixon has a leadership with 43% market share.

Washing machine market to grow @ CAGR of 15% OEP data segmented by OEM and EMS production ratio, FY16 Domestics manufacturing FY16 Production by EMS/ODM FY16 (mn units) 180 Revenue (Rs bn) 12 160 Volume (mn) 10 140 CAGR: FY16-FY21 Vol: 14.6% 120 8 Dixon 100 OEP by 29% 6 43% 80 OEP by OEM, Noble EMS, 87% 13% 60 4 Others 28% 40 2 20 0 0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Source: RHP, PhillipCapital India Research

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DIXON TECHNOLOGIES IPO NOTE

Strong revenue visibility The company has reported revenue CAGR of 34% over FY13 to FY17. 1) New product Dixon – Product Portfolio addition 2) New customer addition 3) Increasing geography, gives company a strong Year Products growth visibility. 1994 Colour TV 2007 LCD TV Adding New products: Company is planning to increase its offerings in existing 2008 CFL Lighting, Reverse logistics product as well as diversify into new verticals. Over last 6 years, Company has added 2010 LED TV, Washing Machines 2016 Phones LED lighting, washing machines, mobile phones and reverse logistics. In 2017 2017 CCTV, Digital Video Recorder company will be entering into a manufacture of “security systems” including “CCTVs” Source: RHP, PhillipCapital India Research & “Digital video recorders” (DVRs), Company will be putting up this facility in Tirupati.

Going forward Company will be adding products in home appliances & lighting segments. In Lighting, Company will also be exploring export opportunities with existing customers or establishing relationships with new customers.(As In past, has exported CFL bulbs & LED bulbs - Thailand, Egypt, France, UK, Poland, Tanzania and Kenya and continues to export CFL and LED bulbs)

Expansion of industrial footprint into new geographies Expand geographical footprint by enhancing current manufacturing capacities & setting up of new manufacturing facilities, in South India. Company also seeks to further enhance manufacturing capacity across product verticals as well as CCTVs and DVRs. This will help in strengthening relationships with existing customers and gaining new customers as able to penetrate in South India. Tirupati Facility being closer to the Krishnapatnam & Chennai ports would provide easier access to the exports market and will be well placed to offer export quality products for South East Asia market.

Increasing focus on Reverse logistic (RL): In RL company offer repair & refurbishment services for STBs and repair of mobile phones, LCD and LED TVs, LED panels, home theatres, printers etc. Company is planning to further expand RL portfolio with support R&D team. RL has high potential and enjoys higher margins & return ratios. Dixon is focusing only on B2B RL and do not have consumer facing service centres which is in line with strategy of building relationships with brand owners and OEMs.( recently company has started giving RL service to “Sonay”). Company Operates with 17 centre spreads Pan India (Majorly in Metros cities).

Increasing RL revenue share (Rs mn) RL – has strong operating margin of ~20% EBITDA 700 627 140 25% OPM (%) (RHS) 123 600 120 20% 500 100 391 15% 400 80 71

300 60 10% 184 35 200 40 5% 100 20 24 28 5 6 0 0 0% FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17

Source: RHP, PhillipCapital India Research

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DIXON TECHNOLOGIES IPO NOTE

Cost effective model and Focus on High Margin business Dixon has reported a margin of 3.7% in FY17. If adjusted to actual sales (value addition revenue) company has a margin of ~13%. Dixon is most cost-efficient player in each of the product verticals. The company has achieved cost leadership through backward integration & large manufacturing capacities.

EBITDA Break up: (ODM contributes ~ 50% in EBITDA) Dixon - EBITDA & OPM trend Reverse 1,000 5% EBITDA (Rs mn) 907 logistics Consumer 900 4% 14% OPM (%) (RHS) electronics Mobile 800 phones 27% 4% 5% 700 588 3% 600 3% 500 2% 400 322 2% 300 260 201 200 1% Home 100 1% appliances Lighting 34% products 0 0% 20% FY13 FY14 FY15 FY16 FY17

Source: RHP, PhillipCapital India Research

Dixon has 2 high margin businesses, 1) ODM and 2) Reverse Logistic (RL). These business contribution have increased from 15%/1.5% in FY15 to 22%/3%/ in FY17. Company is planning to gradually expand its ODM & RL share. As an ODM, company control the entire manufacturing cycle of a product. This model requires additional investment in 1) R&D 2) working capital but provides higher margins as compared to the OEM model.

Continuously increased its share form ODM - Revenue Home Appliance – 100% from ODM, Enjoys Higher Margins Rev. (Rs mn) Revenue OPM (%) 6000 As % of Rev. (RHS) 30% 2000 1,880 18% 5,374

5000 25% 15% 1600 1,306 4000 3,734 20% 12% 1200 1,067 3000 15% 849 9% 800 1,768 2000 1,558 10% 516 6% 1,050 400 1000 5% 3%

0 0% 0 0% FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17

Source: RHP, PhillipCapital India Research

The company is moving towards the ODM model to service all major consumer requirements across the industry and product verticals. This also helps in improving overall profitability. Gradually, trend in certain product verticals wherein regional and private labels have been gaining market share and the ODM model allows servicing market as well.

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DIXON TECHNOLOGIES IPO NOTE

Dixon - Strong Financial Performance

Revenue CAGR of 34% over FY13 to FY17 PAT & PAT margin (%)

30,000 Revenue (Rs mn) 90% 600 PAT (Rs mn) 3.5% Margin (%) (RHS) Growth (%) (RHS) 24,568 80% 504 25,000 500 3.0% 70% 427 2.5% 20,000 60% 400

13,894 50% 2.0% 15,000 300 12,013 40% 10,937 1.5% 10,000 7,669 30% 200 136 1.0% 20% 119 5,000 10% 100 50 0.5% 0 0% FY13 FY14 FY15 FY16 FY17 0 0.0% FY13 FY14 FY15 FY16 FY17 Debt/Equity at 0.2x in FY17 Lower working capital cycle – days @ 16 in FY17* 35 Debt Debt/Equity 1,000 943 936 1.8 29 30 900 28 823 796 1.6 800 1.4 25 23 700 21 1.2 20 600 16 466 1 500 0.8 15 400 0.6 300 10 200 0.2 0.4 5 100 0.2 0 0 - 1 2 3 4 5 FY13 FY14 FY15 FY16 FY17

Source: RHP, PhillipCapital India Research, Note: * Include - loans & advances

Lower Working Capital requirement & asset light mode (flexibility in manufacturing lines, higher utilisation), result in higher return ratios.

Higher Return Ratios Positive FCF from last 5 years 40 600 ROCE (%) ROE (%) FCO FCF 35 500 30 400 25

20 300

15 200 10

5 100

0 0 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Source: RHP, PhillipCapital India Research

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DIXON TECHNOLOGIES IPO NOTE

Indian – Consumer Electrical & Appliance Industry at a cusp of growth

Indian Consumer Electricals & Appliance (CEA) market (Rs bn) 7,000 Appliances Consumer Electronics

6,000 703 Indian CEA Market: 5,000 CAGR FY13 to FY17 FY17 to FY21e 628 CE 14% 18% 4,000 563 Appliances 10% 12% Total 13% 17%

504 3,000 450

407 5,236

370

2,000 4,326

338

306

3,615

3,055

2,718

1,000

2,364

2,165

1,791

1,621

- FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e FY21e

Source: RHP, Frost & Sullivan analysis, CEAMA

Indian Consumer Electricals break up: Higher contribution from Mobile

FY13 – Rs2,364 bn FY21e – Rs 5,236 bn

TV 15.8% TV 14.8% Set top Boxes Set top Boxes (STB) (STB) Mobiles 7.1% Mobiles 3.3% 67.0% Digital 75.4% Digital Cameras Cameras 5.5% 2.7% Washing Washing Others Machines Others Machines 1.3% 3.3% 0.7% 3.1%

Source: RHP, Frost & Sullivan analysis, CEAMA

Mobile phones market to grow @ CAGR of 20% OEP data segmented by OEM and EMS production ratio Domestics manufacturing Production by EMS/ODM FY16 Apr 17-Dec 17 (mn) Apr 17-Dec 17 (mn)

5000 The demand for mobile phones is expected to grow from 282.2mn units in FY16 to 509mn…

4000 Dixon 8% 20% OEP by Foxconn EMS, 40% Flextronics 3000 OEP by 15% 35% OEM, BGM 60% Others 22% 2000

1000

0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Source: RHP, Frost & Sullivan analysis, CEAMA

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DIXON TECHNOLOGIES IPO NOTE

Financials

Income Statement Cash Flow Y/E Mar, Rs mn FY14 FY15 FY16 FY17 Y/E Mar, Rs mn FY14 FY15 FY16 FY17 Net Sales 10,937 12,013 13,894 24,568 PBT 182 173 507 688 Growth (%) 42.6% 9.8% 15.7% 76.8% Operating Profit before W.Cap 275 341 617 935 Expenditure 10,677 11,691 13,306 23,660 (Increase)/Decrease in W Cap -196 145 -108 -235 Inc/dec. 7 -109 -161 -255 Trade & Other Receivables -55 -85 -337 -1,925 Cost of Material Consumed 9,955 10,953 12,284 22,056 Inventories -47 -197 -232 -1,459 Personnel Cost 323 369 550 640 Loans & Advances -65 103 -87 -152 Other Op. Costs 393 479 634 1,219 Trade & Other Payables & Provisions -29 324 549 3,302 Operating Profit 260 322 588 907 Net Cash from Op Activities (I) 104 445 423 546 OPM (%) 2.4% 2.7% 4.2% 3.7% Net addition to Fixed Assets 4 -213 -263 -379 Growth (%) 29.2% 23.9% 82.5% 54.4% (Purchase)/Sales of Investments 1 -18 36 -67 (+) Other income 34 18 18 15 Other Income 8 9 11 15 EBDIT 294 340 605 922 Net Cash from Inv Activities (II) 13 -223 -216 -431 ( - ) Depreciation 53 69 84 106 Increase in Share Capital 61 EBIT 240 271 521 816 Interest Paid -113 -99 -131 -127 ( - ) Interest & Finance charges 112 98 131 128 Dividend Paid & Other Adjustments -7 -11 -42 -84 PBT & exceptional items 128 173 390 688 Increase in Borrowings -8 -113 -27 46 ( - ) Taxes 34 42 80 185 Net Cash used in Fin Activities (III) -128 -223 -201 -104 Net Profit 148 130 427 504 Net Increase/ Decrease in Share of Associates 2 3 0 0 Cash & Cash Equivalents (I+II+III) -11 -0 6 10 Minority Interest 10 9 0 0 Cash & Cash Equivalents (Op Bal) 58 46 69 75 PAT 136 119 427 504 Other Balance -1 23 68 Growth (%) 172.8 -12.8 259.8 18.1 Cash & Cash Equivalents (Cl Bal) 46 69 75 153

Balance Sheet Valuation Ratios Y/E Mar, Rs mn FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 Equity Share Capital 31 31 31 110 OPM (%) 2.4 2.7 4.2 3.7 Stock Option Outstanding 19 19 20 RoCE(%) 13.7 15.4 24.8 32.1 Reserves & Surplus 687 799 1,179 1,867 ROE(%) 18.4 14.0 34.7 25.5 Net worth 737 849 1,230 1,977 Return on Assets (%) 7.8 6.7 20.3 19.8 Total Debt: 936 823 796 466 Sales/Total Assets (x) 6.2 6.8 6.6 9.7 Deferred Tax Liability 60 62 72 98 Sales/Gross Block (x) 9.3 9.0 8.9 13.0 Minority Interest 21 30 0 0 Debt: Equity (x) 1.3 1.0 0.6 0.2 Capital Employed 1,753 1,764 2,097 2,542 Current Ratio (x) 1.7 1.5 1.4 1.2 Gross Block 1,175 1,339 1,562 1,891 Quick ratio (x) 0.9 0.7 0.8 0.7 Less : Accumulated Depn 332 369 437 520 Working capital/Sales (x) 0.1 0.1 0.1 0.0 Net Block 842 970 1,125 1,371 Interest Cover (x) 2.7 2.9 4.9 5.8 Capital WIP 0 20 Debtors (days) 33.2 30.1 38.7 52.9 Fixed Assets 842 970 1,125 1,391 Inventory (days) 31.5 34.8 36.9 42.9 Goodwill on Consolidation - - 111 Loans & Advances (days) 17.4 13.3 15.4 11.9 Current Assets 2,008 2,214 2,937 6,599 Creditors (days) 37.1 43.7 52.9 79.6 Cash & Bank Balances 46 69 75 153 Working Capital (days) 10.2 7.9 7.3 4.4 Receivables 481 562 900 2,802 Inventories 933 1,130 1,363 2,822 EV/Sales (x) 0.6 0.5 0.4 0.8 Loans, Adv & Deposits: 529 442 594 810 EV/EBIDT (x) 21.7 18.3 10.2 21.4 Other Current Assets 19 10 6 12 EV/EBIT (x) 26.5 23.0 11.9 24.2 Current Liabilities & provisions 1,160 1,481 2,077 5,449 P/E (x) 147.2 168.7 46.9 39.7 Sundry Creditors & other liab 1,100 1,420 1,955 5,229 P/BV (x) 27.1 23.5 16.3 10.1 Provisions: 60 61 122 219 Net Current Assets 848 733 860 1,151 Investments 63 60 1 - TOTAL ASSETS 1,753 1,764 2,097 2,542

Source: Company, PhillipCapital India Research Estimates

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COMPANY NAME COMPANY UPDATE

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) 6667 9764

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 Manoj Behera (9122) 6246 4118

Preeyam Tolia (9122) 6246 4129 Manoj Behera (9122) 6246 4118 Technicals

Metals Subodh Gupta, CMT (9122) 6246 4136

Cement Dhawal Doshi (9122) 6246 4128 Production Manager

Vaibhav Agarwal (9122) 6246 4124 Ganesh Deorukhkar (9122) 6667 9966

Economics Mid-Caps & Database Manager Editor

Anjali Verma (9122) 6246 4115 Deepak Agarwal (9122) 6246 4112 Roshan Sony 98199 72726

Shruti Bajpai (9122) 6246 4135 Oil & Gas Sr. Manager – Equities Support

Sabri Hazarika (9122) 6667 9756 Rosie Ferns (9122) 6667 9971

Sales & Distribution Corporate Communications

Ashvin Patil (9122) 6246 4105 Sales Trader Zarine Damania (9122) 6667 9976

Shubhangi Agrawal (9122) 6246 4103 Dilesh Doshi (9122) 6667 9747

Kishor Binwal (9122) 6246 4106 Suniil Pandit (9122) 6667 9745

Bhavin Shah (9122) 6246 4102

Ashka Mehta Gulati (9122) 6246 4108 Execution

Archan Vyas (9122) 6246 4107 Mayur Shah (9122) 6667 9945

Contact Information (Regional Member Companies)

SINGAPORE: Phillip Securities Pte Ltd MALAYSIA: Phillip Capital Management Sdn Bhd HONG KONG: Phillip Securities (HK) Ltd 250 North Bridge Road, #06-00 RafflesCityTower, B-3-6 Block B Level 3, Megan Avenue II, 11/F United Centre 95 Queensway Hong Kong Singapore 179101 No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (852) 2277 6600 Fax: (852) 2868 5307 Tel : (65) 6533 6001 Fax: (65) 6535 3834 Tel (60) 3 2162 8841 Fax (60) 3 2166 5099 www.phillip.com.hk www.phillip.com.sg www.poems.com.my JAPAN: Phillip Securities Japan, Ltd INDONESIA: PT Phillip Securities Indonesia CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd. 4-2 Nihonbashi Kabutocho, Chuo-ku ANZTower Level 23B, Jl Jend Sudirman Kav 33A, No 550 Yan An East Road, OceanTower Unit 2318 Tokyo 103-0026 Jakarta 10220, Indonesia Shanghai 200 001 Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141 Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809 Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940 www.phillip.co.jp www.phillip.co.id www.phillip.com.cn THAILAND: Phillip Securities (Thailand) Public Co. Ltd. FRANCE: King & Shaxson Capital Ltd. UNITED KINGDOM: King & Shaxson Ltd. 15th Floor, VorawatBuilding, 849 Silom Road, 3rd Floor, 35 Rue de la Bienfaisance 6th Floor, Candlewick House, 120 Cannon Street Silom, Bangrak, Bangkok 10500 Thailand 75008 Paris France London, EC4N 6AS Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017 Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835 www.phillip.co.th www.kingandshaxson.com www.kingandshaxson.com UNITED STATES: Phillip Futures Inc. AUSTRALIA: PhillipCapital Australia SRI LANKA: Asha Phillip Securities Limited 141 W Jackson Blvd Ste 3050 Level 10, 330 Collins Street Level 4, Millennium House, 46/58 Navam Mawatha, The Chicago Board of TradeBuilding Melbourne, VIC 3000, Australia Colombo 2, Sri Lanka Chicago, IL 60604 USA Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899 Tel: (94) 11 2429 100 Fax: (94) 11 2429 199 Tel (1) 312 356 9000 Fax: (1) 312 356 9005 www.phillipcapital.com.au 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) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

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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 No investment banking transaction by PCIL 2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of No the company(ies) covered in the Research report 3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No 4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the No company(ies) covered in the Research report 5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or No brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

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.

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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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