Result Update May 31, 2016

Rating matrix Rating : Hold (BAJELE) | 236 Target : |245 Target Period : 12 months Consumer segment remains a drag… Potential Upside : 4% • Bajaj Electricals (BEL) recorded revenues of | 1357 crore, 3.1% YoY

What’s Changed? growth led by 18% growth in the lighting segment supported by Target Changed from | 230 to | 245 sales from LED segment under EESL’s scheme. Consumer durable EPS FY17E Changed from | 12.7 to | 11.8 (CD) segment again witnessed a lacklustre performance largely due EPS FY18E Changed from | 14.9 to | 15.8 to the company’s strategy to reduce inventory at the dealer level. We Rating Changed from Buy to Hold believe this has resulted in BEL losing market share of consumer

appliances with the competition. Engineering & project (E&P) Quarterly Performance segment sales recorded decline of 1.5% YoY largely due to the Q4FY16 Q4FY15 YoY (%) Q3FY16 QoQ (%) company’s effort to focus only on quality projects Revenue 1,357.2 1,316.1 3.1 1,146.6 18.4 • As per the management, rationalisation of inventory at the dealer’s EBITDA 74.4 76.7 -2.9 78.6 -5.3 level hurt CD sales in FY16. However, implementation of the theory EBITDA (%) 5.5 5.8 -34bps 6.9 -137bps of constraint (ToC) would benefit the company in the long run. We PAT 34.7 46.1 -24.8 29.3 18.4 have modelled topline CAGR 10% for FY16-18E led by lighting and E&P segments CAGR of ~12% each. However, we have modelled CD Key Financials sales CAGR of 9% for FY16-18E driven by a slow recovery in sales | Crore FY15 FY16E FY17E FY18E volume Net Sales 4,263 4,612 5,108 5,621 EBITDA 88.4 259.4 262.5 311.8 Short-term hiccups for consumer segment…betting on long term growth Net Profit (13.9) 95.6 117.3 157.6 The core business of BEL (CD, lighting contribute ~69% to topline) EPS (|) (1.4) 9.6 11.8 15.8 recorded a subdued performance in FY15 and FY16 as ToC implementation continued hurt consumer durable sales growth. This, in Valuation summary turn, resulted in muted offtake of kitchen appliances & fans. However, FY15 FY16E FY17E FY18E under the appliances category, BEL’s premium brand Morphy Richards P/E (168.8) 24.6 20.1 14.9 (MR) recorded strong growth (on a low base). We have modelled CD Target P/E (256.1) 25.5 20.8 15.7 sales CAGR of 9% for FY16-18E (Vs 9.4% CAGR FY11-16) driven by slow EV / EBITDA 30.6 9.6 9.4 7.8 P/BV 3.4 3.2 2.8 2.5 recovery in sales volume. With the entry into the LED lighting segment, RoNW (%) (2.0) 12.8 14.2 16.6 BEL will benefit from new government orders and rising trend of LED RoCE (%) 7.7 26.6 25.6 28.1 products in the domestic market. We expect lighting segment revenue to Mcap/sales 0.6 0.5 0.5 0.4 witness CAGR of 12% in 2016-18E.

Execution of higher margin projects to drive overall margin FY16 onwards Stock data The E&P segment remained a laggard in the last three years despite sales Particular Amount CAGR of ~11% in FY13-15, due to sharp cost overruns on legacy Market Capitalization (| Crore) 2,354.2 projects. During FY14, BEL completed 40 legacy loss making sites and Total Debt (FY16) (| Crore) 196.9 Cash and Investments (FY16) (| Crore) 51.1 recorded a loss of | 103 crore. However, the company witnessed a revival EV (| Crore) 2,500.0 in Q4FY15 with profit of | 23.2 crore in the segment given execution of 52 week H/L 308 / 155 newer high margins orders. The current order book of ~| 2480 crore Equity capital (| Crore) 20.2 consists of high margin orders of FY15-16. In the absence of any loss Face value (|) 2.0 making order, we expect BEL to achieve an operating profit of | 87 crore

from the segment with margins of 5% in FY17 led by new orders flowing Price performance (%) in the P&L from FY16 onwards. Continuous order inflow has improved the 1M 3M 6M 12M visibility of revenue booking from the E&P segment. We believe BEL will V-Guard 30.0 58.2 40.2 37.6 9.0 37.7 28.4 39.6 benefit from the government’s thrust to improve power infrastructure in Bajaj Electricals 11.8 56.3 9.6 (1.7) India. We expect the E&P segment to record ~12% sales CAGR in FY16- Symphony (7.1) 16.3 10.1 (1.2) 18E with positive EBIT margin of ~5% in FY17E, FY18E, respectively.

Underperformance of core business weighs on valuation BEL being a strong brand in the CD segment is well positioned to reap the benefits of a revival of Indian economy. Though the E&P division turned positive, the CD segment underperformed due to implementation of ToC, Research Analyst which translated to lower volume growth. With the conservative Sanjay Manyal estimates of FY17E for CD sales, we expect profitability of this segment to [email protected] remain under pressure in near term. Under our SOTP based valuation, we Hitesh Taunk value the CD segment 9x FY18E EV/EBITDA and 7x FY18E EV/EBITDA [email protected] each for lighting and E&P segment, respectively. We have a HOLD recommendation on the stock with a revised target price of | 245.

ICICI Securities Ltd | Retail Equity Research

Variance analysis Q4FY16 Q4FY16E Q4FY15 YoY (%) Q3FY16 QoQ (%) Comments Net sales growth was largely driven by sharp growth in the lighting by ~18 YoY. However, CD segment revenue witnessed muted performance w Revenue 1,357.2 1,407.0 1,316.1 3.1 1,146.6 18.4 segment revenue degrew by ~0.4% YoY due to rationalisation in deale inventories. Other Income 7.8 5.0 9.3 -16.1 4.9 59.0

Raw Material Exp 103.3 120.7 94.2 9.7 14.0 637.4 Benign raw material prices helped in saving raw material cost Employee Exp 80.6 68.5 51.8 55.5 68.1 18.3 Sharp growth in employee expenses attributable to increase in headcount coupled with higher incentive led provisioning Admin & Other exp 211.7 154.6 174.0 21.6 166.6 27.1 Other expenses increased notably mainly due to higher promotional and advertisement cost Erection & Subcont Exp 161.9 84.3 141.9 14.1 44.7 262.4 Purchase of Traded goods 725.4 878.5 777.5 -6.7 774.7 -6.4 EBITDA 74.4 100.4 76.7 -2.9 78.6 -5.3 EBITDA Margin (%) 5.5 7.1 5.8 -34.3 6.9 -20.0 Sharp increase in operating margin was on lthe back of improved profitability i the lighting segment and turnaround of E&P segment Depreciation 6.9 8.6 6.5 5.5 7.0 -2.1 Interest 22.1 29.3 27.5 -19.7 29.4 -24.8

PBT 53.2 67.5 51.9 2.5 47.1 13.1 Total Tax 18.6 19.2 5.8 219.8 17.8 4.3 Better sales growth coupled with improved profitability helped in driving PAT o PAT 34.7 48.3 46.1 -24.8 29.3 18.4 the company during the period

Key Metrics Lighting segment revenues driven by sales from LED segment by executi Lighting 327 306 276 18.2 293 11.6 order from EESL. CD sales remained muted through out the year mainly due to decline in prima Consumer Durable 544 559 546 -0.4 535 1.7 sales (inventory rationalisation at dealers level) as company has taken step increase the coverage of ToC E&P segment witnessed lower than expected sales growth attributable to execution of quality orders, which helped in increasing profitability of the Engineering & Project 486.3 542.7 493.5 -1.5 318.6 52.7 segment

Source: Company, ICICIdirect.com Research

Change in estimates FY17E FY18E Comments (| Crore) Old New % Change Old New % Change We have marginally tweaked our revenue estimate downside for FY17E and FY18E considering a slow pick-up in sales of consumer products due to various initiatives taken Revenue 5,197.8 5,107.9 (1.7) 5,785.4 5,620.8 (2.8) by the company to focus much on profitability. We have modelled revenue CAGR of 11% FY16-18E, led by lighting and E&P segment revenue growth of ~12% each during the same period

EBITDA 302.7 262.5 (13.3) 338.3 311.8 (7.9)

We have revised our EBITDA margin estimate downwards considering lower profitablity EBITDA Margin % 5.8 5.1 -68bps 5.8 5.5 -30bps from lighting segment going forward. This coupled with higher employee cost and advertisement expenses would also keep EBITDA margin under check

Reduction in PAT estimate is largely attributable to lower consumer durable sales PAT 126.8 117.3 (7.5) 148.8 157.6 5.9 coupled with higher tax rate EPS (|) 12.7 11.8 (7.5) 14.9 15.8 6.0 Source: Company, ICICIdirect.com Research

Assumptions Current Earlier Comments FY15E FY16E FY17E FY18E FY17E FY18E Revenue estimates revised upside considering better sales growth of LED lights Lighting (%) -5.3 17.2 13.1 10.0 13.1 10.0

Slow pick-up in sales of consumer products due to various initiatives taken to Consumer Durable (%) 5.1 (1.0) 5.9 11.2 5.9 11.1 rationalise inventory at dealers level would keep revenue growth in check

Under the E&P segment company's strategy si to focus more on quality orders and Engineering & Project (%) 16.1 16.1 15.4 8.7 15.4 12.3 timely execution of orders Source: Company, ICICIdirect.com Research

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Company Analysis Dominant play in appliances segment BEL is a well established national brand in the kitchen & domestic appliances (KDA) and lighting segments. These two segments contribute 66% to topline with sales CAGR of ~10% in FY11-16. BEL has successfully leveraged its brand to create a huge retail network of 45,000 for appliances, 86,000 for fans and over 400,000 for lighting across India. In order to use its expertise in different product lines, BEL has also entered into various JVs in the appliances and lighting segments. Among major brands, Morphy Richards (leading brand in the UK) is a well accepted brand in India marketed by Bajaj. The JV was started in 2003 mainly to tap the market for premium products. Revenues of Morphy’s products recorded a CAGR of 28.2% in FY09-14 from | 55 crore to | 190 crore. BEL outsources its lighting products domestically while luminaries are sourced from domestic and international vendors. We have modelled CD sales CAGR of 9% for FY16-18E (Vs 9.4% CAGR FY11-16) driven by slow recovery in sales volume. With the entry into the LED lighting segment, BEL will benefit from new government orders and rising trend of LED products in the domestic market. We expect lighting segment revenue to witness CAGR of 12% in 2016-18E, supported by an un-taped rural market, rapid urbanisation and a growing middle class.

Exhibit 1: Segment wise contribution (%) Exhibit 2: Revenues to witness robust growth during FY16-18E

6,000 CAGR 10% 5,500 5,000

E&P 5,621 34% 4,500 5,108 4,000 CAGR 11% 4,612

3,500 4,263 (| crore) Consumer 3,000 4,030 Durable 43% 2,500 3,381 3,094 2,000 2,739 1,500 Lighting 23% 1,000 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

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

Recovery in engineering & project segment but at lower pace BEL entered the lighting project services in 1960 with the aim of providing lighting packages for power plants and other industrial facilities. The division got its present name in 1994-95 with the emphasis shifting to design and execution of electrical projects. In 2001-02, BEL commenced its high mast and transmission line tower (TLT) manufacturing unit at Ranjangaon near Pune. The idea behind launching this business was to diversify the business from a lighting and consumer durable player to a strong contender in the engineering and project segments to leverage the strong Bajaj brand. The business unit is divided into three segments, namely high masts, TLT and special projects. The E&P segment revenue increased four fold from | 382 crore in FY08 to | 1551 crore in FY16 while the segment contributes ~34% to the FY16 topline. The segment recorded revenue CAGR of ~13% in FY09-16. A slowdown in the industrial business and stretched working capital cycle resulted in a decline in EBIT margin from 12.6% in FY09 to -6.5% in FY15 and 6.5% in FY16. However, BEL’s order book size has more than doubled in FY15. However, continuous order inflow improved the visibility of revenue booking from the E&P segment. The current order book is at ~| 2480

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crore, which includes TLT: | 680 crore, special projects: | 1660 crore and high mast: | 140 crore. In addition, the company expects business of | 100 crore from the government business for LED in FY16.

Exhibit 3: Engineering & project revenues (| crore) Exhibit 4: Engineering & project order book (| crore) 2,500 4,000 2,000 3,500 3,000 1,500 1,947 2,500 3,401 1,791

1,000 1,551 2,000 (| crore) 2,480 1,336

(| crore) 1,500 1,150

500 830 1,000 1,667 688 1,478

500 1,237

- 1,070

- 610 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY12 FY13 FY14 FY15 FY16E FY17E FY18E

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

Pan-India presence through strong dealer network BEL, one of the oldest consumer durable companies in the country, has a pan-India presence through a strong dealer and retail network. The company has 2200+ distributors and 5000+ dealers across India. Further, Bajaj’s lighting solutions are available in over 350,000 retail stores while fans and appliances are available at over 88,000 and 45,000 retail stores across India. In order to leverage its strong brand, BEL has taken the initiative to reach directly to consumers through opening retail chain ‘Bajaj World’ (pure franchise model) for appliances and lighting products. Currently, the company has 75 exclusive Bajaj World stores. BEL also plans to expand its presence globally through franchise agreements. The company has opened stores in Nepal and plans to open stores in Ghana, Nigeria, Sri Lanka and South Africa. Margin pressure continues on lacklustre performance of core business EBITDA margins plunged sharply in FY14 and FY15 to ~2% largely due to losses in the E&P segment. BEL recorded an EBIT loss of | 103 crore in the E&P segment in FY14 and | 87 crore in FY15. Though the turnaround of the E&P segment in FY16 helped improve overall EBITDA margin, the CD segment margin declined sharply due to lower volume on account of implementation of ToC. Further, lower margin of government orders under lighting segment would keep overall margin under check. We expect operating margins of 5.1%, 5.5% for FY17E, FY18E, respectively.

Exhibit 5: EBITDA margins to improve (%)

8.4 9 8 7.3 7 5.6 5.5 6 5.1 5

(%) 4 3.0 3 2.0 2.1 2 1 - FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Source: Company, ICICIdirect.com Research

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Recovery in margin to drive profit growth We believe the sharp dip in PAT from | 144 crore in FY11 to | 51 crore in FY13 and a loss of | 14 crore in FY15, can largely be attributed to substantial losses in the E&P business. However, with the recovery in the E&P segment led by execution of quality orders helped in turn around of bottomline. Still, a decline in profitability of consumer durable segment restricted any sharp recovery in the bottomline. We believe execution of higher margin order under E&P segment and recovery in the margin under CD would help drive BEL’s bottomline, going forward. We expect the bottomline to grow to ~| 117 crore in FY17E and | 158 crore in FY18E respectively.

Exhibit 6: Net profit to recover due to reduction in E&P losses

180.0 160.0 140.0 120.0 100.0 80.0 158 144 60.0 118 117 (| crore) 96 40.0 20.0 51 - (14) (20.0) FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E (40.0) (5)

Source: Company, ICICIdirect.com Research

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Outlook and valuation Bajaj Electricals, despite being a dominant play in the lighting and consumer durable segment (contributes ~70% of topline) with a strong dealer network, has paid the price for poor execution in the E&P business and lower-than-expected performance of its core business (i.e. lighting and CD segment). Poor EBITDA margins with a rising working capital requirement (due to a delay in execution of E&P projects) resulted in sharp multiple contractions. Though the E&P division turned into positive, the CD segment underperformed due to lower volume growth and losing market share to its competitors. With the conservative estimates of FY17E for CD sales we expect profitability of this segment to remain under pressure in near term. We believe underperformance of its core business will weigh on the stock as it is trading at attractive multiples post turnaround of the E&P business and improved profitability of the lighting segment. Under our SOTP based valuation, we value the CD segment 9x FY18E EV/EBITDA and 7x FY18E EV/EBITDA each for lighting and E&P segment, respectively. We have a HOLD recommendation on the stock with a revised target price of | 245.

Exhibit 7: Sum of the part valuation (| crore) EBITDA EV/EBITDA EV Lighting 72 7 530 Consumer Durable 122 9 1119 EPC 118 7 877 Enterprise Value 2526 Debt 137 Cash 52 MCAP 2441 No of shares 10 Target price/share 245 CMP 236 Upside/(Downside) (%) 4 Source: Company, ICICIdirect.com Research

Exhibit 8: Valuation Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%) FY15 4262.5 -1.4 NM 30.6 -2.0 7.7 FY16E 4612.0 8.2 9.6 NA 24.6 9.6 12.8 26.6 FY17E 5107.9 10.8 11.8 22.7 20.1 9.4 14.2 25.6 FY18E 5620.8 10.0 15.8 34.4 14.9 7.8 16.6 28.1

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Company snapshot

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0 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date Event Mar-09 Launches high-end appliances under Platina brand to compete with Braun, Philips and Apr-09 Sharp decline in lighting revenue/EBIT during Q1FY10 Dec-09 QIP issue of | 160 crore Mar-10 Bajaj Holding & Investment raises its stake in group company Bajaj Electricals to 31.65% from earlier 12.85% Mar-10 Receives orders worth | 215 crore under the portfolio of transmission and power distribution Sep-10 Receives orders worth | 408 crore under the portfolio of transmission and power distribution, total order book size crosses | 1150 crore Oct-10 Records strong sales CAGR of 25% in FY09-11 led by strong performance by consumer durable (~30% CAGR) segment Jan-11 Company extends its product portfolio by launching pressure cookers, water purifiers and water dispensers Jul-12 Company launches premium segment of lighting range including LED lights in South India Sep-12 Company sells its entire 50% stake in Bajaj Venture to Black & Decker India Mar-13 Margin contraction due to sharp losses in E&P segment Nov-13 E&P business unit receives power distribution projects worth | 757 crore under Rajiv Gandhi Gramin Vidyutikaran Yojna (RGGVY) scheme

Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 1 Bajaj Group of Industries 31-Mar-16 0.37 37.4 -0.1 Promoter 63.1 63.0 63.6 63.6 63.6 2 Bajaj (Shekhar P) 31-Mar-16 0.07 7.4 -0.2 FII 13.614.011.611.78.7 3 Bajaj (Anant) 31-Mar-16 0.04 4.5 0.0 DII 4.9 5.0 4.8 4.4 5.9 4 Bajaj (Kiran) 31-Mar-16 0.04 4.3 0.2 Others 18.4 17.9 20.0 20.3 21.8 5 HDFC Asset Management Co., Ltd. 31-Mar-16 0.03 2.9 0.3 6 MFS Investment Management 31-Mar-16 0.02 2.2 -2.3 7 Bajaj (Niraj) 31-Mar-16 0.02 2.1 0.0 8 Bajaj (Madhur) 31-Mar-16 0.02 2.0 0.0 9 Asset Management Ltd. 31-Mar-16 0.01 1.5 1.5 10 UBS Asset Management (Singapore) Ltd. 31-Mar-16 0.01 1.5 0.0

Source: Reuters, ICICIdirect.com Research

Recent Activity Buys Sells Investor name Value (m) Shares (m) Investor name Value (m) Shares (m) Reliance Capital Asset Management Ltd. 4.3 1.5 MFS Investment Management -6.7 -2.3 HDFC Asset Management Co., Ltd. 0.8 0.3 Bajaj (Shekhar P) -0.7 -0.2 Bajaj (Kiran) 0.7 0.2 Bajaj Group of Industries -0.3 -0.1 Birla Sun Life Asset Management Company Ltd. 0.5 0.2 Patil (Mangesh Gunwanth) 0.0 0.0 UTI Asset Management Co. Ltd. 0.1 0.0 BNP Paribas Investment Partners UK Limited 0.0 0.0 Source: Reuters, ICICIdirect.com Research

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Financial summary

Profit and loss statement | Crore Cash flow statement | Crore

(Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E

Net Sales 4262.5 4612.0 5107.9 5620.8 Profit after Tax -13.9 95.6 117.3 157.6 Growth (%) 5.8 8.2 10.8 10.0 Depreciation 29.0 27.2 28.1 28.0 Raw Material Expenses 225.2 178.6 163.5 196.7 CF bef working capital changes 119.5 224.2 216.1 244.6 (Increase)/Decrease in stocks -31.7 -31.8 0.0 0.0 Net Increase in Current Assets -103.4 -29.1 -182.3 -215.1 Purchase of traded goods 2866.0 2935.0 3248.6 3631.0 Net Increase in Current Liabilities 106.4 171.7 227.1 215.2 Employee Expenses 226.3 283.7 332.0 365.4 Marketing Expenses 150.9 184.5 178.8 196.7 Net CF from operating act 122.5 366.9 260.9 244.7 Erection & subcontracting exp 222.5 294.6 340.2 278.4 (Purchase)/Sale of Fixed Assets -58.2 -46.0 -70.0 -70.0 Other expenses 515.0 508.1 582.3 640.8 Long term loans and advances -6.3 82.1 -33.0 -34.2 Total Operating Expenditure 4174.2 4352.6 4845.4 5309.0 Other non current assets 7.9 0.0 -5.0 0.0 EBITDA 88.4 259.4 262.5 311.8 Growth (%) 8.0 193.6 1.2 18.8 Other Investments 7.9 0.0 -5.0 0.0 Other Income 24.3 22.9 24.1 26.4 Deferred Tax Assets -23.6 -1.4 0.0 0.0 Interest 104.4 101.4 70.7 58.9 Net CF from Investing act -69.3 -26.6 -123.8 -120.4 PBDT 8.2 180.8 215.9 279.3 Inc / (Dec) in Equity Capital 0.2 0.0 0.0 0.0 Depreciation 29.0 27.2 28.1 28.0 Inc / (Dec) in Loan Funds 42.5 -190.0 -30.0 -30.0 PBT before Exceptional Items -20.8 153.6 187.8 251.2 Total Outflow on account of div -18.2 -35.6 -35.6 -35.6 Less: Exceptional Items 0.0 0.0 0.0 0.0 Net CF from financing act -69.9 -327.0 -136.3 -124.6 PBT -20.8 153.6 187.8 251.2 Total Tax -6.9 58.0 70.5 93.6 Net Cash flow -16.8 13.3 0.8 -0.3

PAT -13.9 95.6 117.3 157.6 Cash & Cash Equi at the beg. 54.6 37.8 51.1 51.9

Growth (%) 162.3 NA NA 34.4 Cash 37.8 51.1 51.9 51.6 EPS (|) -1.4 9.6 11.8 15.8 Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E

Equity Capital 20.2 20.2 20.2 20.2 Per Share Data Reserve and Surplus 667.0 726.9 808.6 930.6 EPS -1.4 9.6 11.8 15.8 Total Shareholders funds 687.1 747.1 828.8 950.8 Cash EPS 1.5 12.3 14.6 18.6 Total Debt 386.9 196.9 166.9 136.9 BV 68.9 74.9 83.1 95.3 Liability 1085.1 958.2 1009.8 1101.9 DPS 1.8 3.6 3.6 3.6 Operating Ratios Asset EBITDA Margin 2.1 5.6 5.1 5.5 Total Gross Block 429.4 475.9 545.9 615.9 PAT Margin -0.3 2.1 2.3 2.8 Less Total Accumulated Dep 151.7 178.9 207.0 235.1 Return Ratios Net Block 277.7 297.0 338.9 380.9 RoE -2.0 12.8 14.2 16.6 Total CWIP 3.2 2.6 2.6 2.6 RoCE 7.7 26.6 25.6 28.1 Total Fixed Assets 280.8 299.6 341.5 383.5 RoIC 6.1 22.0 20.7 22.8 Other Investments 59.4 59.4 64.4 64.4 Valuation Ratios Inventory 474.6 506.7 531.8 585.2 EV / EBITDA 30.6 9.6 9.4 7.8 Debtors 1289.6 1362.1 1511.4 1663.1 P/E NM 24.6 20.1 14.9 Loans and Advances 114.8 52.6 56.2 61.8 EV / Net Sales 0.6 0.5 0.5 0.4 Other Current Assets 52.4 39.2 43.4 47.8 Market Cap / Sales 0.6 0.5 0.5 0.4 Cash 37.8 51.1 51.9 51.6 Price to Book Value 3.4 3.2 2.8 2.5 Total Current Assets 1969.2 2011.6 2194.7 2409.5 Turnover Ratios Creditors 1174.7 1145.3 1287.5 1416.7 Asset turnover 3.9 4.8 5.1 5.1 Provisions 119.4 114.5 128.7 141.6 Debtor Days 110.4 107.8 108.0 108.0 Total Current Liabilities 1744.7 1916.4 2143.5 2358.7 Creditor Days 100.6 90.6 92.0 92.0 Net Current Assets 224.5 95.2 51.2 50.8 Solvency Ratios Deferred Tax Assets 48.9 50.3 50.3 50.3 Debt / Equity 0.6 0.3 0.2 0.1 Long term loans and advances 82.2 146.5 162.3 178.6 Current Ratio 1.5 1.6 1.5 1.5 Other non current assets 389.2 307.1 340.2 374.3 Quick Ratio 1.1 1.2 1.1 1.1

Assets 1085.2 958.2 1009.9 1101.9 Source: Company, ICICIdirect.com Research . Source: Company, ICICIdirect.com Research

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ICICIdirect.com coverage universe (Consumer Discretionery)

Sector / Company CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) (|) TP(|) Rating (| Cr) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E (ASIPAI) 984 1,020 Buy 94,385 18.0 22.3 26.5 54.7 44.0 37.1 33.3 28.7 24.9 48.3 48.3 48.8 34.4 36.0 36.9 Bajaj Electricals (BAJELE) 236 245 Hold 2,354 9.6 11.8 15.8 24.6 20.1 14.9 9.6 9.4 7.8 26.6 25.6 28.1 12.8 14.2 16.6 Havells India (HAVIND) 363 377 Buy 22,648 11.5 10.1 12.4 31.7 36.0 29.3 27.9 22.9 18.4 26.6 26.7 28.2 21.1 19.4 20.6 Kansai Nerolac (GOONER) 292 346 Buy 15,736 5.0 24.8 8.0 57.9 17.7 36.5 35.4 26.7 23.4 23.3 22.0 23.1 17.0 58.5 16.4 (PIDIND) 706 714 Buy 36,192 14.7 16.3 18.7 47.9 43.4 37.8 30.7 27.5 23.8 36.6 36.0 36.6 27.3 26.5 26.8 Essel Propack (ESSPAC) 190 198 Hold 2,984 11.6 13.6 15.8 16.4 14.0 12.0 8.3 7.5 6.6 19.5 20.6 21.2 19.0 19.0 19.0 Supreme Indus (SUPIND)* 986 924 Buy 12,525 17.4 30.0 39.6 56.6 32.9 24.9 28.6 17.2 13.2 21.6 31.0 36.8 17.2 24.6 28.3 Symphony (SYMCOM)* 2,439 2,745 Buy 8,531 35.7 56.1 73.8 68.4 43.5 33.1 60.1 33.6 26.3 42.6 51.9 49.9 36.3 41.5 41.0 V-Guard Ind (VGUARD) 1,270 1,370 Buy 3,791 37.4 44.7 53.7 33.9 28.4 23.6 21.3 18.5 15.8 34.1 32.6 32.1 23.7 23.6 23.0 Ltd (VOLTAS) 333 350 Buy 11,013 11.5 12.5 13.9 29.0 26.6 24.0 22.9 19.1 16.5 16.2 17.5 18.3 15.7 16.1 16.3 * FY16E for nine months 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) – 400 093 [email protected]

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ANALYST CERTIFICATION We /I, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts, 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 Securities 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 Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.

Compensation of our Research Analysts 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 Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts 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 Analysts 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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