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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 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 leading manufacturer of lighting products (CFL & LED), FPD TVs and semi-automatic washing machines with market share of 39%, 50% and 43% respectively in India. Dixon is one of the most profitable companies in the domestic consumer durable manufacturing industry. In FY17, its revenues/EBITDA/PAT was Rs 24.5bn/922mn/504mn, with strong balance sheet (D/E 0.2x) and cash flow – having ROCE and ROE of 32% /26% with FCF generation of Rs 170mn.

About company Incorporated in January 15, 1993, Dixon – is fully integrated end to end product and solution. Its services range from global sourcing, manufacturing, quality testing and 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 Dixon is raising Rs 6.0bn through this IPO offer from sale by Strategic investors & promoter (Rs 5.4bn), to meet part of its capex requirement (Rs 271mn) and repayment of debt (Rs 220mn). At the IPO price band of Rs 1760‐1766, the stock trades at 40x FY17 PE. Key strengths:

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 in consumer durables and appliances. We recommend “Subscribe”.

SUBSCRIBE COMPANY DATA ISSUE OPENS 06-September-2017 ISSUE CLOSES 08-September-2017 PRE- ISSUE EQUITY SHARES 11.0mn - LOWER BAND Rs 1760 - 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 EMPL SHARE (%) 35% ISSUE SIZE Rs 5.97-6bn POST- ISSUE EQUITY SHARES 11.3mn MKT CAP Rs 19.9-20bn

Consolidated Financials Y/E Mar, Rs mn FY14 FY15 FY16 FY17

Net Sales 10,937 12,013 13,894 24,568 Operating Profit 260 322 588 907 PAT 136 119 427 504 RoCE(%) 13.7 15.4 24.8 32.1 ROE(%) 18.4 14.0 34.7 25.5 P/E@Rs 1,766 147.2 168.7 46.9 39.7

Deepak Agarwal (+ 9122 6246 4112) [email protected]

mailto:[email protected]


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


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

Promoters 46%

Strategic invetors

29%

Management & others

25% Promoters 39%

Strategic invetors

11%

Management & others

18%

Other public 32%



About - Dixon Technologies Ltd Company incorporated in 1993, in 1994, commenced manufacturing of consumer electronics such as colour televisions. In 2007, commenced manufacturing of LCD TVs and subsequently progressed into manufacturing of LED TVs in 2010. Dixon entered 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 manufacturing of semi-automatic washing machines. Company also started providing reverse logistics services in 2008. Recently entered into manufacturing of mobile phones through a JV. Company has continuously diversified its product portfolio to keep pace with changing consumer trends and development in technology. Company’s diversified product portfolio includes (i) consumer electronics (like LED TVs); (ii) home appliances (like washing machines); (iii) lighting products (like LED bulbs and tubelights, downlighters and CFL bulbs); and (iv) mobile phones. 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) Ltd., Mitashi Edutainment Pvt. Ltd., Dish Infra Services Private Limited. Dixon majorly operates under 2 business model: 1. OEM – Original Equipment Manufacturers 2. ODM – Original Design Manufacturer In OEM, the company is fully integrated end-to-end product and solution provider. Ranging from global sourcing, manufacturing, quality testing, assembling and packaging to logistics. This segment contributes to ~78% of revenue and has an EBITDA margin of ~2%. Dixon is a leading (ODM) for lighting products, LED TVs and semi-automatic washing machines in India. As an ODM, Company develop & design products in-house (has strong R&D team of 27 employees), manufacture and supply these products to well-known companies in India who in turn distribute these products under their own 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


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

3,981 6,382 7,428 7,000 7,449

2,614

2,969 2,632 2,568

3,010 200

8,107

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

FY13 FY14 FY15 FY16 FY17

Consumer electronics Lighting products

Mobile phones

534 601 327 701 996 108 374

1,727

2,498

516 849 1,067

1,306

1,880

0

1,000

2,000

3,000

4,000

5,000

6,000


Home appliances Lighting products

Consumer electronics

Indian EMS/ODM Market

0

100

200

300

400

500

600

FY1

3

FY1

4

FY1

5

FY1

6

FY1

7

FY1

8e

FY1

9e

FY2

0e

FY2

1e

EMS/ODM (Rs bn)

Dixon – has highest market share in Indian EMS:

Source: RHP, PhillipCapital India Research Note:

EMS - Electronic Manufacturing Services

Others 66%

Jabil 13%

Dixon 9%

SFO 7%

Elin 3%

PG Electrop

last 2%



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:

19” to 65”

4K2K

Home Theatres:

2.1 channel

4.1 channel

Semi-automatic

washing machine:

6.2

kg to 8.0 kg

LED Products:

LED bulbs 0.5W to 20 W

Down lighters 5W to

15W

Battens

T- LEDs 20W to 24W

CFL Lamps:

CFL Lamps 5W to 27W

Lamp Drivers:

Indoor LED drivers 5W

to 20W

Outdoor LED drivers

20W to 150W

Electronics lamp driver

10W to 40W

feature phones and

smart phones

(2G, 3G, 4G/LTE,

VoLTE and CDMA).

Repair &

Refurbishment:

Set top boxes

Repair:

Mobile phones

LCD &

LED TVs

LED panel

Home theatres

(2.1 channel

and 4.1

channel)

Computer

peripherals and

other devices such

as printers, CCTVs

and speakers

Customers & Revenue Share

FY17 (%)

Panasonic I P LTD

(65.2% )

Reliance Retail Ltd

(9.54%)

Intex Technologies (I)

Ltd. (9.23%)

Haier Appliance (I)

Pvt. Ltd (3.15%)

Others:

Vijay Sales,

Mitashi, Abaj

Panasonic India

Private Limited

(21.0%)

Haier Appliance (I)

Pvt. Ltd. (16.16%)

Intex Technologies (I)

Ltd (16.17%)

Philips Lighting India

Limited (90.1%)

Surya Roshni Limited

Bajaj Electricals

Panasonic India

Private Limited

(43.72%)

Gionee (50.21%)

Jaina Marketing and

Associates (6.05%)

Intex Technologies (I) Ltd.

Dish Infra Services Private

Limited

Airtel – setupbox

Sony – LEDs

Manufacturing Facility LED TVs at Dehradun washing machines at

Dehradun

Dehradun & Nodia Nodia Noida + 17 service centers in

major cities in

India


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

Product Industry Size (mn units)

Expected Industry CARG

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



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)

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



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



0

5

10

15

20

25

30

0

100

200

300

400

500

600

700

800

900

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Revenue (Rs bn)

Volume (mn)

CAGR: FY16-FY21 Vol: 16.9%

0

50

100

150

200

250

300

350


Others CFL LED

CAGR: FY16-FY21 Total Mkt 16.6% LED: 59.2%

0

2

4

6

8

10

12

0

20

40

60

80

100

120

140

160

180


Revenue (Rs bn)

Volume (mn)

CAGR: FY16-FY21 Vol: 14.6%

OEP by EMS, 85%

OEP by OEM, 15%

50%

9%8%

8%

8%

17%

Dixon

MEPL

SVL

Videotex

Noble

Others

Tier 1, 48%

Tier II, 30%

EMS, 22%

39%

30%

28%

3%

Dixon

NTL

Compact Lamps

Others

OEP by EMS, 87%

OEP by OEM, 13%

43%

28%

29%

Dixon

Noble

Others



Strong revenue visibility

The company has reported revenue CAGR of 34% over FY13 to FY17. 1) New product addition 2) New customer addition 3) Increasing geography, gives company a strong growth visibility. Adding New products: Company is planning to increase its offerings in existing product as well as diversify into new verticals. Over last 6 years, Company has added LED lighting, washing machines, mobile phones and reverse logistics. In 2017 company will be entering into a manufacture of “security systems” including “CCTVs” & “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%


24 28

184

391

627

0

100

200

300

400

500

600

700


5 6

35

71

123

0%

5%

10%

15%

20%

25%

0

20

40

60

80

100

120

140


EBITDA

OPM (%) (RHS)

Dixon – Product Portfolio

Year Products

1994 Colour TV

2007 LCD TV

2008 CFL Lighting, Reverse logistics

2010 LED TV, Washing Machines

2016 Phones

2017 CCTV, Digital Video Recorder Source: RHP, PhillipCapital India Research



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


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


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.

Consumer electronics

27%

Lighting products

20%

Home appliances

34%

Mobile phones

5%

Reverse logistics

14%

201 260

322

588

907

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%

0

100

200

300

400

500

600

700

800

900

1,000


EBITDA (Rs mn)

OPM (%) (RHS)

1,050

1,558 1,768

3,734

5,374

0%

5%

10%

15%

20%

25%

30%

0

1000

2000

3000

4000

5000

6000


Rev. (Rs mn)

As % of Rev. (RHS)

516

849

1,067

1,306

1,880

0%

3%

6%

9%

12%

15%

18%

0

400

800

1200

1600

2000


Revenue OPM (%)



Dixon - Strong Financial Performance

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

Debt/Equity at 0.2x in FY17 Lower working capital cycle – days @ 16 in 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


7,669

10,937 12,013

13,894

24,568

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

5,000

10,000

15,000

20,000

25,000

30,000


Revenue (Rs mn)

Growth (%) (RHS)

50

136 119

427

504

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

100

200

300

400

500

600


PAT (Rs mn)

Margin (%) (RHS)

943 936

823 796

466

0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

0

100

200

300

400

500

600

700

800

900

1,000

1 2 3 4 5

Debt Debt/Equity 29

28

21 23

16

-

5

10

15

20

25

30

35


0

5

10

15

20

25

30

35

40


ROCE (%) ROE (%)

0

100

200

300

400

500

600


FCO FCF



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

Indian Consumer Electricals & Appliance (CEA) market (Rs bn)

Source: RHP, Frost & Sullivan analysis, CEAMA

Indian Consumer Electricals break up: Higher contribution from Mobile

FY13 – Rs2,364 bn FY21e – Rs 5,236 bn


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)


1,6

21

1,7

91

2,1

65

2,3

64

2,7

18

3,0

55

3,6

15

4,3

26

5,2

36

306 338 370

407 450

504

563

628

703

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e FY21e

Appliances Consumer Electronics

Mobiles 67.0%

TV 15.8%

Set top Boxes (STB) 7.1%

Digital Cameras

5.5%

Washing Machines

3.3%

Others 1.3%

Mobiles 75.4%

TV 14.8%

Set top Boxes (STB) 3.3%

Digital Cameras

2.7%

Washing Machines

3.1% Others 0.7%

0

1000

2000

3000

4000

5000


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

Indian CEA Market: CAGR FY13 to FY17 FY17 to FY21e

CE 14% 18% Appliances 10% 12% Total 13% 17%

OEP by EMS, 40%

OEP by OEM, 60%

8%

35%

22%

15%

20%

Dixon

Foxconn

Flextronics

BGM

Others



Financials Income Statement Y/E Mar, Rs mn FY14 FY15 FY16 FY17

Net Sales 10,937 12,013 13,894 24,568

Growth (%) 42.6% 9.8% 15.7% 76.8%

Expenditure 10,677 11,691 13,306 23,660

Inc/dec. 7 -109 -161 -255

Cost of Material Consumed 9,955 10,953 12,284 22,056

Personnel Cost 323 369 550 640

Other Op. Costs 393 479 634 1,219

Operating Profit 260 322 588 907

OPM (%) 2.4% 2.7% 4.2% 3.7%

Growth (%) 29.2% 23.9% 82.5% 54.4%

(+) Other income 34 18 18 15

EBDIT 294 340 605 922

( - ) Depreciation 53 69 84 106

EBIT 240 271 521 816

( - ) Interest & Finance charges 112 98 131 128

PBT & exceptional items 128 173 390 688

( - ) Taxes 34 42 80 185

Net Profit 148 130 427 504

Share of Associates 2 3 0 0

Minority Interest 10 9 0 0

PAT 136 119 427 504

Growth (%) 172.8 -12.8 259.8 18.1

Balance Sheet Y/E Mar, Rs mn FY14 FY15 FY16 FY17

Equity Share Capital 31 31 31 110

Stock Option Outstanding 19 19 20

Reserves & Surplus 687 799 1,179 1,867

Net worth 737 849 1,230 1,977

Total Debt: 936 823 796 466

Deferred Tax Liability 60 62 72 98

Minority Interest 21 30 0 0

Capital Employed 1,753 1,764 2,097 2,542

Gross Block 1,175 1,339 1,562 1,891

Less : Accumulated Depn 332 369 437 520

Net Block 842 970 1,125 1,371

Capital WIP

0 20

Fixed Assets 842 970 1,125 1,391

Goodwill on Consolidation - - 111

Current Assets 2,008 2,214 2,937 6,599

Cash & Bank Balances 46 69 75 153

Receivables 481 562 900 2,802

Inventories 933 1,130 1,363 2,822

Loans, Adv & Deposits: 529 442 594 810

Other Current Assets 19 10 6 12

Current Liabilities & provisions 1,160 1,481 2,077 5,449

Sundry Creditors & other liab 1,100 1,420 1,955 5,229

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

Cash Flow Y/E Mar, Rs mn FY14 FY15 FY16 FY17

PBT 182 173 507 688

Operating Profit before W.Cap 275 341 617 935

(Increase)/Decrease in W Cap -196 145 -108 -235

Trade & Other Receivables -55 -85 -337 -1,925

Inventories -47 -197 -232 -1,459

Loans & Advances -65 103 -87 -152

Trade & Other Payables & Provisions -29 324 549 3,302

Net Cash from Op Activities (I) 104 445 423 546

Net addition to Fixed Assets 4 -213 -263 -379

(Purchase)/Sales of Investments 1 -18 36 -67

Other Income 8 9 11 15

Net Cash from Inv Activities (II) 13 -223 -216 -431

Increase in Share Capital

61

Interest Paid -113 -99 -131 -127

Dividend Paid & Other Adjustments -7 -11 -42 -84

Increase in Borrowings -8 -113 -27 46

Net Cash used in Fin Activities (III) -128 -223 -201 -104

Net Increase/ Decrease in

Cash & Cash Equivalents (I+II+III) -11 -0 6 10

Cash & Cash Equivalents (Op Bal) 58 46 69 75

Other Balance -1 23 68

Cash & Cash Equivalents (Cl Bal) 46 69 75 153

Valuation Ratios

FY14 FY15 FY16 FY17

OPM (%) 2.4 2.7 4.2 3.7

RoCE(%) 13.7 15.4 24.8 32.1

ROE(%) 18.4 14.0 34.7 25.5

Return on Assets (%) 7.8 6.7 20.3 19.8

Sales/Total Assets (x) 6.2 6.8 6.6 9.7

Sales/Gross Block (x) 9.3 9.0 8.9 13.0

Debt: Equity (x) 1.3 1.0 0.6 0.2

Current Ratio (x) 1.7 1.5 1.4 1.2

Quick ratio (x) 0.9 0.7 0.8 0.7

Working capital/Sales (x) 0.1 0.1 0.1 0.0

Interest Cover (x) 2.7 2.9 4.9 5.8

Debtors (days) 33.2 30.1 38.7 52.9

Inventory (days) 31.5 34.8 36.9 42.9

Loans & Advances (days) 17.4 13.3 15.4 11.9

Creditors (days) 37.1 43.7 52.9 79.6

Working Capital (days) 10.2 7.9 7.3 4.4

EV/Sales (x) 0.6 0.5 0.4 0.8

EV/EBIDT (x) 21.7 18.3 10.2 21.4

EV/EBIT (x) 26.5 23.0 11.9 24.2

P/E (x) 147.2 168.7 46.9 39.7

P/BV (x) 27.1 23.5 16.3 10.1


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



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

250 North Bridge Road, #06-00 RafflesCityTower,

Singapore 179101

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

www.phillip.com.sg

MALAYSIA: Phillip Capital Management Sdn Bhd

B-3-6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur

Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG: Phillip Securities (HK) Ltd

11/F United Centre 95 Queensway Hong Kong

Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN: Phillip Securities Japan, Ltd

4-2 Nihonbashi Kabutocho, Chuo-ku

Tokyo 103-0026

Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141

www.phillip.co.jp

INDONESIA: PT Phillip Securities Indonesia

ANZTower Level 23B, Jl Jend Sudirman Kav 33A,

Jakarta 10220, Indonesia

Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809

www.phillip.co.id

CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd.

No 550 Yan An East Road, OceanTower Unit 2318

Shanghai 200 001

Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940

www.phillip.com.cn

THAILAND: Phillip Securities (Thailand) Public Co. Ltd.

15th Floor, VorawatBuilding, 849 Silom Road,

Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921

www.phillip.co.th

FRANCE: King & Shaxson Capital Ltd.

3rd Floor, 35 Rue de la Bienfaisance

75008 Paris France

Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017

www.kingandshaxson.com

UNITED KINGDOM: King & Shaxson Ltd.

6th Floor, Candlewick House, 120 Cannon Street

London, EC4N 6AS

Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835

www.kingandshaxson.com

UNITED STATES: Phillip Futures Inc.

141 W Jackson Blvd Ste 3050

The Chicago Board of TradeBuilding

Chicago, IL 60604 USA

Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA: PhillipCapital Australia

Level 10, 330 Collins Street

Melbourne, VIC 3000, Australia

Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899

www.phillipcapital.com.au

SRI LANKA: Asha Phillip Securities Limited

Level 4, Millennium House, 46/58 Navam Mawatha,

Colombo 2, Sri Lanka

Tel: (94) 11 2429 100 Fax: (94) 11 2429 199

www.ashaphillip.net/home.htm

INDIA

PhillipCapital (India) Private Limited

No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

http://www.phillip.com.sg/

http://www.poems.com.my/

http://www.phillip.com.hk/

http://www.phillip.co.jp/

http://www.phillip.co.id/

http://www.phillip.com.cn/

http://www.phillip.co.th/

http://www.kingandshaxson.com/

http://www.kingandshaxson.com/

http://www.phillipcapital.com.au/

http://www.ashaphillip.net/home.htm

http://www.phillipcapital.in/



Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in

this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:

Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report 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 company(ies) covered in the Research report

No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.



Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

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

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

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

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

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

This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by the U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated, and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain

business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker-dealer, Decker & Co, LLC. Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer.

If Distribution is to Australian Investors This report is produced by PhillipCapital (India) Pvt Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services Licence No. 246827).

This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with

these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.

PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

http://www.phillipcapital.in/

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