Gujarat Gas Company Limited Initiating Coverage -...

Gujarat Gas Company Limited

Investment Rationale

Strong presence in Surat, Ankleshwar and Bharuch: GGCL operates in Surat, Ankleshwar and Bharuch with an extensive pipeline network of 3700 km providing PNG to industrial retail, domestic household and commercial segments and CNG as a trans-portation fuel to the vehicles through its 42 CNG stations. We expect the overall volume growth to grow by 9% in CY11 led by high single digit growth in industrial and commer-cial/domestic segment and a 30% growth in CNG volumes. Changing Business Mix augurs well going forward: In CY10, Industrial Retail seg-ment contributed ~83% of the company’s volume and 75% to revenues. In CY13 we expect Industrial retail segment to contribute 78% to volumes and 71% to revenues due to increasing contribution from the CNG segment. Industrial Retail segment is a low mar-gin segment as well as resistant to price hikes to a certain extent. A change in business mix in favour of CNG augurs well for the company. Ability to pass on high input costs: GGCL recently raised its prices in industrial retail segment by over 24% from `13.36 per SCM to `16.64 per SCM to maintain its margins due to the increasing sourcing of the relatively high cost R-LNG. In CNG segment, GGCL hiked prices twice this year. GGCL has consistently been able to maintain its mar-gins and increase its gross gas spread over the years. Going forward we see gross gas spread to increase from `4.35 per SCM in CY10 to `5.50 per SCM mainly on account of expected decline in the price of R - LNG. Fuel Economics still in favour of Natural Gas: Compared to alternative fuels in industrial retail segment, natural gas still offers substantial savings to the natural gas us-ers. In automotive fuels CNG has an advantage over petrol (45% savings) and diesel (14% savings). This coupled with CNG being an environmental friendly fuel should result in increasing demand going forward. In commercial segment, the LPG available at mar-ket rates (`1100/cylinder) is way expensive than the rates offered by GGCL in PNG seg-ment. Outlook & Valuation: Driven by robust demand in the CNG segment and industrial retail segment, we expect GGCL’s revenues to grow at a CAGR of 21% over CY10-13E. The company’s strategy to consolidate its presence in its operational areas, focus on new geographies as well as changing business mix in favour of CNG should reap rich divi-dends going forward. At current market price of `391, the stock trades at a P/E of 20.6x and 15.0x for CY11E and CY12E respectively. We initiate coverage on the company with Accumulate recommendation and price target of `442/share.

Nifty and Stock Movement

Accumulate GGASIN, GGAS.BO

CMP: `391 Price Target: `442

Durgesh Poyekar (91-22) 3028-4714

[email protected] ULJK Financial Services Private Limited

ULJK research reports are available on Bloomberg (ULJK <Go>

Near term pain but long term gain

June 30, 2011

Initiating Coverage

City Gas Distribution

Please refer to the important disclo-sures and analyst certifications at the end of the document

Source: Company, ULJK Research

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GGCL NIFTY

Market DataMarket Cap. (` Mn) 50146Outstanding Shares (Mn) 128.352 Week High/Low (`) 454/289Avg. Volume 44965Face Value 2.0

Shareholding %Promoter 65.12MF/ Banks/ Indian Fis 7.60FII/ NRIs/ OCB 15.77Indian Public/ Others 11.51

Particulars CY09 CY10 CY11E CY12E CY13ENet Sales (` Mn) 14,197 18,493 23,892 29,082 33,185Growth 9.1% 30.3% 29.2% 21.7% 14.1%EBIDTA Margins 20.2% 22.9% 17.2% 19.3% 20.9%PAT (` Mn) 1,742 2,577 2,439 3,338 4,128PAT Margins 12.6% 14.2% 10.5% 11.8% 12.8%EPS 13.6 20.1 19.0 26.0 32.2P/E 28.8 19.5 20.6 15.0 12.1P/BV 6.4 5.8 4.8 4.0 3.3

Investment Thesis Strong presence in Surat, Ankleshwar and Bharuch Surat, the second largest city in Gujarat is a thriving industrial hub and home to number of capital inten-sive industries at Hazira and a number of industrial estates with small and medium scale industries. In the small scale sector, diamond cutting and polishing and textile dominate. Due to rapid urbanization, com-mercialization and population growth demand has also been increasing in the commercial segment. As per industry data, the demand for natural gas in Surat is over 5.2 MMSCMD. Ankleshwar, a city and a municipality in Bharuch District is known for its industrial township. It has over 5000 big and small chemical plants producing pesticides, pharmaceuticals, specialty chemicals and paints. There are more than 250 small and medium sized commercial establishments in the city. Bharuch is one of the most heavily industrialized states not only in Gujarat but India as a whole with many large chemical plants producing fertilizers, paints, dyes, cotton, textiles. There are close to 1000 small and medium scale industries in Bharuch. There are more than 250 commercial establishments in the city. As per industry data, estimated demand is more than 0.17 MMSCMD. GGCL operates in Surat, Ankleshwar and Bharuch with an extensive pipeline network of 3700 km pro-viding PNG to industrial retail, domestic household and commercial segments and CNG as a transporta-tion fuel to the vehicles through its 42 CNG stations. In last few years GGCL has expanded its network prudently from 2100 km in Q4CY06 to 3700 in Q1CY11 and currently caters to 317,000 industrial/ commercial/ domestic customers as compared to 190,000 customers in Q4CY06. Being present in one of the most industrialized state ensures that the demand for natural gas is robust in the operational areas of GGCL.

At present GGCL has approximately 900 industrial retail customers, 7000 commercial customers, and 300,000 domestic customers. Over 135,000 vehicles are running on CNG in its operational areas. The company expects to add 70 industrial retail customers, 700 commercial customers and 30000 domestic customers in CY11 as well as CY12. This coupled with the incremental demand of 10% of natural gas from the existing industrial customers should drive strong growth going forward.

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Benefitting from strong industrial and commer-cial demand in Surat, Ankaleshwar and Bha-ruch

Gujarat Gas Co. Ltd


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Industrial/ Commercial/ Domestic Customers Pipeline (km) (LHS)

GGCL Pipeline network and Customer base

Pipeline infrastructure development helping GGCL to build cus-tomer base

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Over the years, GGCL’s natural gas volumes have grown at a CAGR of 8% from 813 MMSCM in CY05 to 1212 MMSCM in CY10. We expect the overall volume growth to grow by 9% in CY11 led by high sin-gle digit growth in industrial and commercial/domestic segment and a 30% growth in CNG volumes. Industrial Retail Industrial Retail volumes has grown at a CAGR of 11% over CY06-CY10 driven by strong demand in GGCL’s operational areas. We expect volume growth to moderate to 7% in CY11 due to recent revision in prices (due to the increase in LNG costs). However, we expect the volumes to grow by 10% from CY12 onwards led by softening of LNG costs and inherent demand. Although we expect GGCL to keep on hiking industrial retail prices to pass on the increasing gas costs, we believe the company would be unable to pass on the entire incremental costs of importing LNG to the industrial customers in the near term. Recently textile units (48% of the industrial retail volumes of GGCL) went on strike to protest against the steep hike in prices. Even the Government of Gujarat has asked CGD companies not to increase prices without seeking the approval of the state government. Accordingly we assume that the company will hike its prices for the industrial retail customer only by a marginal amount in Q3CY11. We expect revenues from Industrial Retail segment to grow from approximately `13,427 Mn in CY10 to `23,096 Mn in CY13 at a CAGR of 20%. We expect the spread between the Industrial Retail Prices and average cost of gas to steadily increase as GGCL passes on the cost of high cost LNG gas to these con-sumers going forward.

Gujarat Gas Co. Ltd

GGCL’s volume to grow at a CAGR of 11% over CY10-CY13


GGCL Volumes (MMSCM)

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Industrial Retail Domestic/ Commercial CNG Industrial bulk


Volume and Sales trend for Industrial Retail Segment


Industrial Retail Prices vis-à-vis Cost of Gas (` per SCM)

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Industrial Retail segment volume to grow at a CAGR of 9 % over CY10-CY13

Gross Gas Spread to improve from `2.75/SCM in CY10 to `3.95/SCM

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Commercial Segment GGCL has over the years succeeded in raising prices in the commercial segment without taking a hit on the volumes. Accordingly, the commercial segment remains one of the most profitable categories for GGCL and we expect the trend to continue going forward. Considering the historical hike in prices in commercial segment and alternative fuels being very expensive, we believe GGCL to keep on raising the prices in this segment. We expect revenues from Commercial segment to grow from approximately `632 Mn in CY10 to `1181 Mn in CY13 at a CAGR of 23% with volumes expected to grow from 33 MMSCM in CY10 to 45 MMSCM in CY13 at a CAGR of 10%.

Domestic Segment The domestic segment remains the most price sensitive; hence the scope for price increase is limited. How-ever considering the recent increase in the prices of LPG cylinder (`400 per cylinder), the cost differential between PNG and LPG has widened offering savings of ~34% in favour of PNG. Hence, we expect vol-umes to pick up. We expect revenues from Domestic segment to grow from approximately `906 Mn in CY10 to `1136 Mn in CY13 at a CAGR of 8% with volumes expected to grow from 52 MMSCM in CY10 to 64 MMSCM in CY13 at a CAGR of 7%.

Gujarat Gas Co. Ltd

Commercial segment volumes to grow at a CAGR of 10 % and revenue at 23% over


Volume and Sales trend for Domestic Segment


Domestic Prices vis-à-vis Cost of Gas (` per SCM)


Volume and Sales trend for Commercial Segment


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Domestic segment vol-umes to grow at a CAGR of 7% and reve-nue at 8% over CY10-CY13

Gross Gas spread will improve to `12/SCM over next 3 years

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CNG Segment CNG volumes have grown at an impressive CAGR of 27% from CY06 to CY10. We expect the relatively high cost of petrol and diesel to result in increasing demand for CNG going forward. Recently GGCL raised the price for CNG from `35.25 per kg to `36.75 per kg. We do not expect any significant price increases in the near term. We have assumed a `0.50/kg hike in prices in Q4 CY10. Considering the spread between the CNG prices and average cost of gas coupled, the strong volume growth expected in this segment would increasingly contribute towards GGCL’s profitability. We expect revenues from CNG segment to grow from approximately `2867 Mn in CY10 to `7457 Mn in CY13 at a CAGR of 38% with volumes expected to grow from 122 MMSCM in CY10 to 268 MMSCM in CY13 at a CAGR of 30%.

Changing Business Mix augurs well going forward

In CY10, Industrial Retail segment contributed ~83% of the company’s volume and 75% to revenues. In CY13 we expect Industrial retail segment to contribute 78% to volumes and 71% to revenues due to in-creasing contribution from the CNG segment. Industrial Retail segment is a low margin segment as well as resistant to price hikes to a certain extent. A change in business mix in favour of CNG augurs well for the company. GGCL expects to add 10 CNG stations in CY11 and CY12 and expects 30% growth in its CNG segment over next 2 years. We expect CNG segment to contribute 15% towards volumes and 21% towards reve-nues in CY13 from 10% and 16% respectively in CY10. Being a high margin segment (Gross Gas Spread is approximately `14/SCM), a higher growth in CNG segment will help sustain/improve GGCL’s margins.

CNG segment vol-umes to grow at a CAGR of 30% and revenue at 38% over CY10-CY13.

Gujarat Gas Co. Ltd

Volume Mix Trend


Sales Mix Trend



Volume and Sales trend for CNG Segment


CNG Prices vis-à-vis Cost of Gas (` per SCM)

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Supply concerns easing with BG Gas contract

Currently GGCL has a diversified mix of natural gas supply from various sources such as PMT, GAIL - APM, Niko, Cairn and R - LNG. In CY10 ~74% of the supply came from domestic sources and the rest from R-LNG. We believe going forward incremental demand will be met from R-LNG as PMT and Niko are declining fields. GGCL has a contract of 0.60 MMSCMD of gas with RIL; however it will come into effect only when RIL ramps up its volume above 72 MMSCMD which we believe would be difficult to achieve in the near term. GGCL has a contract with BG Gas India Energy Solutions Pvt. Ltd. (BGIESPL) to purchase 0.50 MMSCMD of gas on a firm basis from October 2010 to December 2013. It has also recently entered in a contract with BGIESPL to purchase additional 0.70 MMSCMD of gas till December 2011. Effectively GGCL will get 1.2 MMCSCMD of assured gas from April 2011 to December 2011 to meet the incremental demand in its operational areas. Additionally GGCL also has an option to purchase spot LNG from Petronet LNG and Shell Hazira Terminals. With a strong parentage of BG Group, we believe sourcing LNG in future should not pose a problem for GGCL. Accordingly we expect the R-LNG in GGCL’s supply portfolio to increase from 315 MMSCM in 2010 to 805 MMSCM in 2013 at a CAGR of 37%.

Well diversified supply sources of natural gas supply with six differ-ent supply sources

Gujarat Gas Co. Ltd

Source of Gas Supply Contract (MMSCMD)

PMT 2.13 GAIL - APM 0.14

Niko 0.24

Cairn 0.43

RIL KG-D6 0.60

BG Gas LNG contract 1.20

Spot LNG - Source: Company, ULJK Research


GGCL’s Gas Sourcing Portfolio

Strong parentage will help GGCL to source R-LNG to ensure fu-ture volume growth

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We expect the proportion of R-LNG in GGCL’s supply portfolio to increase from 26% in 2010 to 48% in 2013. As the proportion of R-LNG in GGCL’s portfolio increases, the average price of gas will show an upward bias. Going forward, GGCL’s price hikes would depend a lot on the proportion of RLNG in its supply portfolio and also the price at which it was purchased. Due to the earthquake in Japan in Mar 2011, spot LNG prices has seen a sharp spike in recent months (See chart below). We believe the current high LNG prices are not sustainable and expect prices to cool off in the near term and settle at levels of 10-12$ per MMBTU.

GGCL to depend in-creasingly on R-LNG over the years. In CY13, R-LNG will contribute ~48% to its supply portfolio as compared to 26% in CY10

Gujarat Gas Co. Ltd

Supply Mix for GGCL


Spot LNG Price Trend

Source: Company, CRISIL, ULJK Research

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Due to Japanese earthquake there was sharp increase in Spot LNG prices recently.

We expect Spot LNG price to remain in 10-12$/MMBTU range in CY12 and CY13

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Gujarat Gas Co. Ltd

Capital Expenditure Plans to be funded from internal accruals GGCL plans to incur capital expenditure of approximately `1600 Mn annually over the next 3 years. The company plans to add 10 CNG stations annually till CY13. Approximately `300 Mn to `500 Mn will be spent each year on building CNG stations while the rest of the capex would be incurred on augmenting pipeline infrastructure and spending on IT infrastructure. Since CY07 GGCL has funded its capex plans from internal accruals and we expect the trend to continue going forward considering the strong internal cash flows (See chart below).

IGL’s Capex and Funding requirement (` Mn)


GGCL to fund its ex-pansion plans from internal accruals go-ing forward

Fuel Economics still in favour of Natural Gas Compared to alternative fuels in industrial retail segment, natural gas still offers substantial savings to the natural gas users. In automotive fuels CNG has an advantage over petrol (45% savings) and diesel (14% savings). This coupled with CNG being an environmental friendly fuel should result in increasing demand going forward. In commercial segment, the LPG available at market rates (`1100/cylinder) is way expen-sive than the rates offered by GGCL.

Source: Company, Industry data, ULJK Research

Comparison of Natural gas with alternative fuels

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Natural gas offers substantial savings to industrial/commercial customers and CNG users

Fuel Unit Price GCV GCV UnitEnergy Cost (` per '000 Kcal) CGD Fuel Unit GGCL Price

Energy Cost (` per '000 Kcal) Savings

Petrol ` per litre 68.33 15231 Kcal per litre 4.49 CNG ` per kg 36.75 3.09 45%HSD ` per litre 45.84 13006 Kcal per litre 3.52 CNG ` per kg 36.75 3.09 14%

Auto LPG ` per litre 41.34 6456 Kcal per litre 6.40 CNG ` per kg 36.75 3.09 107%LPG ` per Cylinder (14.2 kg) 400.00 11750 Kcal per kg 2.40 PNG Domestic ` per SCM 17.50 1.94 23%

Bulk LPG ` per Cylinder (20.0 kg) 1100.00 11750 Kcal per kg 4.68 PNG Commercial ` per SCM 25.00 2.78 69%LDO ` per litre 52.05 12618 Kcal per litre 4.13 PNG Commercial ` per SCM 25.00 2.78 49%LSHS ` per litre 40.88 10773 Kcal per litre 3.79 PNG Industrial ` per SCM 16.64 1.85 105%

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Ability to pass on high input costs

GGCL recently raised its prices in industrial retail segment by over 24% from `13.36/SCM to `16.64 / SCM to maintain its margins due to the increasing sourcing of the relatively high cost R-LNG. In CNG seg-ment, GGCL hiked prices twice this year. GGCL has consistently been able to maintain its margins and increase its gross gas spread over the years. Going forward we see gross gas spread to increase from `4.35/SCM in CY10 to `5.50/SCM mainly on account of expected decline in the price of R - LNG.

We expect GGCL’s EBIDTA and PAT margins to fall to 17% and 11% respectively in CY11; however, im-prove to 21% and 13% respectively in CY13. EBIDTA/SCM which measures operational efficiency is set to grow from `3.43 per SCM in CY10 to `4.03 in CY13.

Gujarat Gas Co. Ltd

GGCL has demon-strated its ability to maintain margins by hiking prices.

GGCL’s Average Realization and Cost of Gas (` per SCM)

Source: ULJK Research

GGCL’s EBITDA, PAT Margins and EBITDA/SCM

Source: ULJK Research

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Units Current Last revised on Previous Price

Industrial Retail (` per SCM) 16.64 1st April 2011 13.36

Commercial (` per SCM) 25.00 Jan 2011 19.00

Domestic (` per SCM) 17.50 Jan 2011 14.75

CNG (` per kg) 36.75 28th May 2011 35.25

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Potential Upside Triggers According to recent media reports, the high-powered committee headed by former Finance Secretary Ashok Chawla in its draft report suggested that subsidized gas should not be provided as an input (feedstock) for power plants since most of the output (electricity) is sold at market price. The committee recommends use of gas as an industrial fuel and for cooking and transport purposes instead of burning it in power and fertilizer plants. If the suggestions by the panel are implemented, then it would be a huge impetus to the CGD sector in India and consequently benefit GGCL as well. In the third round of CGD bidding, GGCL has submitted its bid for Bhavnagar. PNGRB is likely to an-nounce the result in Q3CY11. Any positive development on this front can provide a further boost to GGCL’s growth beyond its current operational areas.

Gujarat Gas Co. Ltd

Peer Comparison The only listed company in India that can be chosen for meaningful peer comparison with GGCL is Indra-prastha Gas Ltd (IGL) which is in the CGD business in the NCT of Delhi and NCR towns of Ghaziabad, Noida & Greater Noida. Historically GGCL has always traded at a premium to IGL due to the higher re-turn ratios..

Source: Bloomberg, ULJK Research *BB= Bloomberg Consensus Estimates for IGL are for FY12 and FY13

Key Risks & Concerns R-LNG supply important for further growth of the company In CY10, 74% of supply came from domestic sources while for the rest GGCL had to depend on R-LNG. Going forward, the incremental gas supply has to come from R-RLNG. GGCL has entered into a contract with BG-Gas till December 2011 for purchase of 1.2 MMSCMD of R-LNG and contract of 0.5 MMSCMD from January 2012 till December 2013. GGCL would have to depend on spot LNG for incremental vol-ume growth if it is unable to tie up more R-LNG contracts. Any adverse impact on sourcing of R-LNG can derail the volume growth plans of GGCL. If the global LNG prices firm up further, it could lead to very significant increase in input costs. Unable to hike prices in future The average cost of gas will rise further as GGCL continues to source more of R-LNG for its incremental volume growth in its current operational areas. To maintain its margins GGCL has to gradually pass on the incremental gas costs to its consumers. Any failure to do so can significantly affects its margins. Government interference could pose a possible threat Recently Government of Gujarat asked the City Gas Distributors operating in Gujarat to seek its permis-sion before raising prices of consumers. Although CGD companies come under the regulations of PNGRB and not state government, any such interference by government can prove to be a hindrance to the growth of the company.

Any positive develop-ment in allotting more domestic gas to CGD players will give huge impetus to GGCL.

Unable to source requisite amount of R-LNG in future is a key concern for the company.

CY11E CY12E CY11E CY12E CY11E CY12E CY11E CY12E CY11E CY12EIndraprastha Gas 19.6 25.0 19.4 15.3 4.4 3.6 23.3 22.3 22.8 23.6Gujarat Gas Company (BB est) 22.8 25.6 17.2 15.3 4.7 3.9 21.1 20.8 29.6 28.2Gujarat Gas Company 19.0 26.0 20.6 15.0 4.8 4.0 17.2 19.3 23.5 26.6

EPS P/E P/BV EBIDTA Margins (%) ROE (%)

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GGCL 1-Yr Forward P/E Bands

Outlook & Valuation Driven by robust demand in the CNG segment and industrial retail segment, we expect GGCL’s revenues to grow at a CAGR of 21% over CY10-13E. The company’s strategy to consolidate its presence in its operational areas, focus on new geographies as well as changing business mix in favour of CNG should reap rich dividends going forward. At current market price of `391, the stock trades at a P/E of 20.6x and 15.0x for CY11E and CY12E re-spectively. We initiate coverage on the company with Accumulate recommendation and price target of `442/share.

Source: Company, Capital-line , ULJK Research

Gujarat Gas Co. Ltd

GGCL 1-Yr Forward PBV Bands

Source: Company, Capital-line , ULJK Research

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Company Overview Gujarat Gas Company Ltd is India’s largest player in City Gas Distribution business and supplies Natural Gas to industrial retail customers as well as domestic/commercial customers and CNG (Compressed Natural Gas) to automobiles in Surat, Ankleshwar and Bharuch in the state of Gujarat. BG Group (British Gas) holds 65.12% stake in the company. With a network of more than 3500 km of pipeline infrastructure and 42 CNG stations, GGCL currently supplies 3.36 MMSCMD of natural gas in its operational areas. At end of CY10, GGCL had a base of 900 industrial retail, 7000 commercial, 300000 domestic customers and more than 135000 vehicles plying on CNG. Industrial Retail segment is the main segment for the company and almost 83% of volumes came from it.

Industrial Retail Customer Profile

Source: Company , ULJK Research

Gujarat Gas Co. Ltd


GGCL Business Model

GGCL’s Business

Gas Transportation Gas Distribution

Bulk Market Retail Distribution

CNG 135000+

Domestic 300000+

Industrial 900+

Commercial 7000+

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100%

CY07 CY08 CY09 CY10

Textiles Chemicals Dyes & Intermediaries Pesticides

Pharmaceuticals Glass & Ceramics Others

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Returns of CGD business is a function of margins on commodity, infrastructure and overall volumes. There are significant external factors such as crude prices, regulation/ policies that can impact the overall returns.

Gujarat Gas Co. Ltd

CGD Business Dynamics

Source: CRISIL, ULJK Research

Profitability

Volumes

Commodity Prices

Pricing (Alternate Fuels)

Margins Infrastructure

Margins Commodity

Asset Utilization

Demand of Natu-

Supply of Natural

Operational Costs

Management Team

Name Designation

Mr. Shaleen Sharma Managing Director

Mr. Rajeshwari Sharma Company Secretary

Mr. Hasmukh Shah Chairman (Non-Executive)

Mr. Derek Alan Fisher Director (Non-Executive)

Source: Company

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Financial Statements


` in Millions

Gujarat Gas Co. Ltd

Income Statement Cash Flow Statement Particulars CY09 CY10 CY11E CY12E CY13E Particulars CY09 CY10 CY11E CY12E CY13E

Income from Operations 14,197 18,493 23,892 29,082 33,185 Profit before Tax 2586 3833 3714 5083 6286

Growth 9.1% 30.3% 29.2% 21.7% 14.1% Depreciation 474 542 621 709 806

Total expenditure 11,402 14,337 19,887 23,619 26,423 Change in Working Capital (364) (140) 285 (54) (6)

EBITDA 2,795 4,156 4,006 5,463 6,763 Direct Taxes (778) (1236) (1263) (1728) (2137)

EBITDA Margins 20.2% 22.9% 17.2% 19.3% 20.9% Cash Flow from Operations 1782 2874 3028 3681 4619

Depreciation 474 542 621 709 806 Capital Expenditure (1553) (1152) (1400) (1700) (1700)

EBIT 2,321 3,614 3,385 4,754 5,957 Change in Investments (657) (1232) 0 0 0

EBIT Margins 16.7% 19.9% 14.5% 16.8% 18.4% Cash Flow from Investing (1966) (2164) (1071) (1371) (1371)

Other income 266 224 329 329 329 Equity Raised 0 0 0 0 0

Interest 1 5 0 0 0 Debt Raised 280 520 125 125 125

PBT 2,586 3,833 3,714 5,083 6,286 Dividend Paid (240) (1210) (1802) (583) (1184)

Total Tax 1,750 2,590 2,451 3,355 4,149 Cash Flow from Financing 39 (695) (1677) (458) (1059)

PAT before Minority Interest 1,750 2,590 2,451 3,355 4,149 Net Change in Cash (146) 15 281 1851 2189

Minority Interest 9 13 12 16 20 Opening Cash & Cash Eq 225 79 94 374 2226

Profit attributable to Group 1,742 2,577 2,439 3,338 4,128 Closing Cash & Cash Eq 79 94 374 2226 4415

PAT Margins 12.6% 14.2% 10.5% 11.8% 12.8% EPS 13.6 20.1 19.0 26.0 32.2 Balance Sheet Key Ratios Particulars CY09 CY10 CY11E CY12E CY13E Particulars CY09 CY10 CY11E CY12E CY13E

SOURCES OF FUNDS Profitability Ratios (%) Equity Share Capital 401 401 401 401 401 EBITDA Margin 20.2 22.9 17.2 19.3 20.9

ESOPs 21 38 38 38 38 Net Profit Margin 12.6 14.3 10.5 11.8 12.8

Reserves & Surplus 7,375 8,153 10,009 12,163 14,829 ROE 22.4 30.1 23.5 26.6 27.2

Shareholders Funds 7,797 8,591 10,447 12,601 15,268 ROCE 33.1 41.4 36.5 42.7 44.1

Minority Interest 52 63 75 91 112 Growth Ratios (%)

Deferred Tax Liability (Net) 560 669 669 669 669 Sales 8.9 30.8 28.5 21.7 14.1

Total Debt 0 0 0 0 0 PAT 8.4 48.0 -5.4 36.9 23.7

Deposit from customers 1,554 2,074 2,199 2,324 2,449 Per Share Data

Total Liabilities 9,963 11,397 13,390 15,685 18,497 EPS 13.6 20.1 19.0 26.0 32.2

BVPS 60.8 67.0 81.5 98.3 119.0

APPLICATION OF FUNDS CEPS 17.3 24.4 24.0 31.7 38.6

Gross Block 9,140 10,191 11,591 13,291 14,991 DPS 8.0 12.0 3.8 7.8 9.7

Less: Acc Depreciation 3,331 3,832 4,453 5,162 5,968 Valuation Ratios (x)

Net Block 5,809 6,359 7,138 8,129 9,023 PE 28.8 19.5 20.6 15.0 12.1

Capital WIP 1,356 1,298 1,298 1,298 1,298 Price to cash earnings 22.5 16.0 16.3 12.3 10.1

Investments 4,238 5,488 5,488 5,488 5,488 P/BV 6.4 5.8 4.8 4.0 3.3

Amt Reco from ESOP trust 243 343 343 343 343 EV/EBIDTA 18.5 12.5 13.0 9.2 7.1

Net Current Assets (1,683) (2,091) (877) 427 2,345 EV/Sales 3.7 2.9 2.2 1.8 1.5

Misc Expenditure 1 0 0 0 0 Debt to Equity Ratio (x) - - - - -

Total Assets 9,963 11,397 13,390 15,685 18,497

Research Desk Tel: 022 - 3028 4719

Disclosure Appendix

General Disclaimer This report has been prepared by the research department of ULJK Financial Service Pvt Ltd., is for information purposes only. This report is not construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We have exercised due diligence in checking the correctness and authenticity of the information contained herein, so far as it relates to current and historical information, but do not guarantee its accuracy or completeness. The opinions ex-pressed are our current opinions as of the date appearing in the material and may be subject to change from time to time. Prospective investors are cautioned that any forward looking statement are not predictions and are subject to change without prior notice. ULJK Group or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. ULJK Group or any of its affili-ates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter per-taining to this report, including without limitation the implied warranties of merchantability, fitness for a particular pur-pose, and non-infringement. The recipients of this report should rely on their own investigations. ULJK Group and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This report is not directed to or intended for display, downloading, printing, reproducing or for distribution to or use by any person in any locality, state and country or other jurisdiction where such distribution, publication or use would be contrary to the law or regulation or would subject to ULJK Group or any of its affiliates to any registration or licensing requirement within such jurisdiction.

Corporate Office: # 1802, Stock Exchange Towers, Dalal Street, Fort, Mumbai - 400001 Telephone: 3028 4702/03, 2272 1687/88 Fax:022-2272 1686 Website: www.uljk.in

Institutional Sales Desk Tel: 022 - 2272 1687

Analyst Certification The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issu-ers and their securities; and no part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

Analyst(s) holding in the Stock : Nil

ULJK Financial Services Pvt Ltd: (Time range– 12 months) BUY: Returns>20%; ACCUMULATE: 5%<Returns<20% ; HOLD: -5%<Returns<5%, REDUCE -20%<Returns<-5% and SELL: Returns<-20%

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