INSTITUTIONAL EQUITY RESEARCH Agri...

INSTITUTIONAL EQUITY RESEARCH

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Agri Inputs It’s a good start to the year! INDIA | AGRI INPUTS | Monthly Update

15 July 2015

Modestly higher monsoons, strong water table buoys crop sowings: Cumulative rainfall for the country until July was 13% higher than LPA — higher by 20%/15%/28% in central India/south Peninsula/north‐west India and 1% lower in north and east India. About 92% of the met sub‐division has received excess/normal monsoon and rest deficient/scanty. Current water table is 29% ahead of last year and 45% higher than the normal storage (10‐year average). Around 42% of the normal area (105mn hectares) under Kharif crops have been sown up to 10th July, which is 62% ahead of last year’s sowing. Rice sowing is lagging marginally (‐5% yoy) while cotton/pulses has improved by 95%/44%. Improved MSPs particularly for oilseeds/coarse cereals have led to their acreage rising 4/2‐fold. Maize sowings have also improved remarkably (up 67% yoy). As per experts, unseasonal rains in Q4FY15 and in‐time adequate rains in Q1FY16 improved soil moisture — positive for the agri‐inputs sector.

Fertiliser industry dispatches improving: Fertiliser dispatches improved 19% in Q1FY16 to 12.2mmt due to depleting inventories, rising production, and imports. Urea dispatches improved by 7% (despite higher base) to account for 57% of overall volumes. P&K manufacturing improved 11% to 3.04mmt – while Zuari Group has shown a marked improvement in production, Coromandel continues to suffer mainly due to lower phosphoric acid availability. Fertiliser imports (especially P&K) almost doubled yoy to 2.2mmt, which is a cause of concern. DAP spreads have improved by Rs 350/mt qoq mainly due to fall in ammonia costs and moderate increase in retail prices.

Q1FY16 agri inputs earnings preview: Among agri inputs, a couple of companies will show strong earnings on last year’s weak base, seeds might benefit from early sowing, and fertilisers could benefit from margin improvement and lower interest outgo. In a seasonally small quarter and going by intense competitive pressure, we see rise in interest cost for select crop‐chemical plays.

Fertilisers: Normalised inventories and improving margins (led by price hike) is positive. Higher share of low‐margin imports and lower production of high‐margin DAP will tame expectations. In FY16E we see urea companies producing beyond rated capacity (Chambal, Tata Chemicals), which should support overall earnings. Tata Chemicals and Zuari Agrochemicals should report high growth following low base last year.

Crop Chemicals: Given lower sprays and fall in acreage in H2FY15, the year started with excess channel inventory. This, along with heightened competition could adversely affect working capital and therefore earnings of select companies. We expect mixed results.

Seeds: Expect industry to benefit from early sowing and last year’s low base. Hybrid seeds, cotton/maize/rice to benefit in particular.

Read inside • Key crop sowings

• Agri valuation metrics

• Key commodity price trends

• Q1FY16E earnings estimates

• Fertiliser industry sales volume

• Global fertiliser price outlook

• Company notes: Tata Chemicals,

Deepak Fertilisers

Gauri Anand (+ 9122 66679943) [email protected]

Agri inputs comparative valuation metrics: Attractive dividend yield limits investment downside CMP __Adj. EPS (Rs) __ CAGR ___PER (x) ___ ‐‐‐‐PBR(x)‐‐‐‐ EV/Ebitda(x) Div Yield Rs FY16E FY17E FY015‐17E FY16E FY17E FY16E FY17E FY16E FY15 (%) RatingChambal Fertilizer 58 8.2 8.6 16.2 7.1 6.7 1.0 1.0 7.6 3.4 BuyCoromandel Fert. 246 19.9 24.5 32.6 12.4 10.0 3.3 3.0 8.0 1.8 BuyDeepak Fertilizer 143 15.0 25.0 ‐2.3 9.5 5.7 0.8 0.8 5.3 4.5 BuyKaveri Seeds 765 54.1 65.2 22.2 14.1 11.7 6.9 4.9 4.8 1.0 BuyMonsanto India 3200 76.2 89.6 20.4 42.0 35.7 14.8 13.2 32.5 1.1 BuyPI Industries 660 20.9 26.3 20.9 31.6 25.1 10.2 8.0 18.1 0.8 NeutralRallis India 260 10.0 12.6 24.8 25.9 20.7 6.3 5.8 15.0 1.0 NeutralTata Chemicals 457 34.9 37.6 9.5 13.1 12.1 1.9 1.7 5.6 2.2 BuyUPL 523 32.2 34.5 12.0 16.2 15.2 3.8 3.2 4.0 1.7 BuyZuari Industries 200 24.1 NA NA 8.3 NA 1.0 0.9 9.2 1.0 BuyAverage 17.4 18.0 15.9 5.0 4.2 11.0 1.9Source: Bloomberg, PhillipCapital India Research Estimates

AGRI INPUTS MONTHLY UPDATE

Key developments in the sector Kaveri Seeds – Lowers cottonseed volume guidance to 85mn packets in FY16 from 95mn packets earlier based on a faulty batch of seed inventory, disruptive trade practices by peers, and the Rs 100/packet price cut imposed in Maharashtra. Maintained that 80% of sales so far are on cash & carry. Gained market share in MP, Gujarat, Maharashtra, and partly in non‐credit part of Telengana. However, the company retains 15%+ volume growth in non‐cotton portfolio. Kaveri has cautioned and lowered guidance mainly due to (1) shortage of inventory (faulty batch of seed inventory that had germination issues and had to be discarded) and (2) its strategy to refrain from higher credit sales. In non‐credit markets such as MP, Gujarat, and Maharashtra, Kaveri expects to have gained market share in cotton in FY16. Since cotton is a relatively low‐margin product, we see earnings impact to be <5% in FY16 (thus cautious FY16, intact FY17). Valuations are attractive, visibility on growth remains. Tata Chemicals – Intends to sell its fertiliser business (press quotes a price of about US$1bn). This divestment is strategic and consistent with other periodic hive offs; it is selling assets in the same rigorous way that it acquired them in the past. A successful strategic divestment of its fertiliser business would allow it to concentrate on higher‐growth opportunities, pay down debt, help reinvest capital in core activities leading to higher long‐term growth and creating value for its stakeholders. Deepak Fertilisers – The Delhi HC ordered the government to resume gas supply (stopped in May 2014) to its P&K plant. However, the supply is expected to continue only until the government unveils a new policy. The court has also said that P&K fertiliser manufacturing companies should be treated equally with urea companies in gas allocation. The stock has been under pressure for over a year now on these concerns, despite improving opportunity for its flagship product ammonium nitrate (used in explosives for blasting in coal mines). Its fertiliser segment barely managed to breakeven at EBIT in FY15 because of the supply cut (vs. Rs1.5bn in FY14). Our rough estimates suggest that the resumption could buoy its earnings by 40% in FY16E (not in street estimates). Trades 10x FY16E PER, offers 4% yield. Key crop sowings in Kharif: Oilseeds/cereals/cotton and maize acreage picks up mn hect FY16 FY15 %Oilseeds 101.26 22.24 355%Rice 89.59 94.73 ‐5%Cotton 87.83 45.1 95%Coarse Cereals 81.8 38.36 113%Sugarcane 44.29 43.92 1%Pulses 32.61 22.71 44%Maize* 29.77 17.85 67%Jute & Mesta 7.74 8.05 ‐4%Total 445.11 275.1 62%*Maize data is as on 3rd July; whilst for all other crops it is as of 10th July. Source Ministry of Agriculture



Fertiliser sector continued to underperform due to Hybrid Seeds: Early onset of monsoon helped lack of material positive catalysts continue outperformance

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Sensex ChambalCoromandel DeepakTata Chem

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700Hybrid Seed makers

Sensex KaveriBayer Corp Monsanto

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700Large Agrochemicals

Sensex PIRallis United P

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1200Mid Size Agrochemicals

Sensex InsecticidesShardaCrop Excel CropDhanuka

Source: Bloomberg, PhillipCapital India Research Estimates




Rebounding industrial sentiment: Caprolactum‐Benzene Methanol prices improve as well spreads improve

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Spot soda ash prices moderate Henry hub gas prices cool off (in line with fall in energy prices)

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DAP spreads improve by about Rs 350/mt qoq Glyphosate prices continue to reel under pressure due to

excess supply and poor offtake Q4FY15 Q1FY16 QoQ%Ammonia $/mt 500 460 ‐8Rock Phosphate $/mt 128 129 1Phos Acid $/mt 805 805 0DAP $/mt 475 470 ‐1Urea $/mt 315 340 8Exch Rate ($/INR) 62 63 2

Cost of Material N $/mt 113 104 ‐8P $/mt 370 370 0Total raw material cost $/mt 483 474 ‐2Total costs $/mt 557 546 ‐2Cost of Prodn Rs/mt 34,675 34,648 0

Subsidy Rs/mt 12,350 12,350 0Revenue Rs/mt 35,950 36,250 1Margins Rs/mt 1,275 1,602 26

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40000 China Chemicals SunSirs Glypho

Source: Bloomberg, PhillipCapital India Research


Key commodity prices overview: Cotton/Corn prices improve whilst all else remained flat qoq

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Source: Bloomberg, PhillipCapital India Research



Sectoral outlook Sector Key observation/ outlook Earnings plays Agri Inputs Seeds: In time, adequate, and wide spread monsoons to have

improved sowings over last year (‐) Monsanto India; (+) Kaveri Seeds

Fertilisers: Higher share of low‐margin P&K traded fertilisers. Urea volumes lower. Profitability to be led by savings in interest outgo and marginal improvement in gross margins

(+) Chambal Fert; (+) Tata Chemicals

Crop‐chemicals: Improved sentiments should lift topline growth; however higher channel inventory should pressure OPM/net margins

(+) PI Ind, CSM business to aid growth

Outliers for the quarter Zuari, Tata Chemicals earnings reversing to the mean Q1FY16E earnings estimates (Rs mn) Jun‐15E Mar‐15 QoQ (%) Jun‐14 YoY (%) Result Update highlights Chambal Fertiliser Revenues 20,162 15,531 29.8% 19,966 1.0% ‐ Higher urea volumes; improved shipping freight and fertiliser trade to

support topline growth ‐ Shipping freight revival to support margins somewhat ‐ Lower interest outgo to further support earnings growth

EBITDA 2,028 450 350.7% 1,812 11.9%EBITDA margin (%) 10.1 2.9 9.1PAT 990 34 2789.4% 713 38.9%EPS (Rs) 2.1 0.1 2789.4% 1.7 23.0%Coromandel Intl. Revenues 19,760 29,976 ‐34.1% 18,807 5.1% ‐ Overall volumes improve 20%; however own manufactured volumes

estimated to have declined by about 5% ‐ Margins could improve, but higher trading is a cause of concern ‐ Lower interest outgo to support further earnings growth

EBITDA 1,265 1,597 ‐20.8% 1,220 3.7%EBITDA margin (%) 6.4 5.3 6.5PAT 434 687 ‐36.8% 326 33.3%EPS (Rs) 1.2 2.4 ‐49.0% 1.1 33.3%Deepak Fertilisers Revenues 8,946 9,310 ‐3.9% 9,454 ‐5.4% ‐ Lower chemical realisation and no gas availability for fertilisers hurts

revenue/earnings EBITDA 911 808 12.8% 1,047 ‐13.0%EBITDA margin (%) 10.2 8.7 11.1PAT 419 272 53.9% 437 ‐4.2%EPS (Rs) 4.7 3.0 53.9% 5.0 ‐4.2%Kaveri Seeds Revenues 9,577 399 2297.5% 8,269 15.8% ‐ Delayed season last year to support topline growth

‐ Margins to hold at last year levels EBITDA 2,701 84 3097.8% 2,324 16.2%EBITDA margin (%) 28.2 21.1 28.1PAT 2,649 13 21063.0% 2,304 15.0%EPS (Rs) 38.4 0.8 21063.0% 33.4 15.0%Monsanto Revenues 2,595 674 284.9% 2,648 ‐2.0% ‐ Pricing pressure on glyphosate to pull down revenue growth

‐ Higher share of high‐margin seeds ‐ Lower interest to supports further

EBITDA 830 (104) ‐900.7% 828 0.3%EBITDA margin (%) 32.0 (15.4) 31.3PAT 747 (81) ‐1023.5% 710 5.2%EPS (Rs) 43.3 (4.7) ‐1023.5% 41.1 5.2%PI Industries Revenues 5,670 5,370 5.6% 4,712 20.3% ‐ Rev mix of Agri/CSM to be at 40:60

‐ Higher share of low margin agri ‐ Higher tax outgo to weigh on profits

EBITDA 1,304 953 36.9% 1,080 20.8%EBITDA margin (%) 23.0 17.7 22.9PAT 856 646 32.4% 756 13.2%EPS (Rs) 6.3 4.7 32.4% 5.6 13.2%Rallis India Revenues 5,013 3,219 55.7% 4,685 7.0% ‐ Tepid growth largely helped by seeds

‐ Flat margins EBITDA 652 444 46.8% 589 10.7%EBITDA margin (%) 13.0 13.8 12.6PAT 450 213 111.0% 370 21.6%EPS (Rs) 2.3 1.1 111.0% 1.9 21.6%Tata Chemicals Revenues 38,900 48,205 ‐19.3% 36,950 5.3% ‐ Lower freight cost to impact soda ash revenues somewhat, fertiliser to

support topline growth ‐ Absence of loss‐making units, reversion to the mean ‐ Lower interest outgo further supports

EBITDA 5,482 5,896 ‐7.0% 3,194 71.6%EBITDA margin (%) 14.1 12.2 8.6PAT 2,055 2,409 ‐14.7% 778 164.1%EPS (Rs) 5.1 9.4 ‐14.7% 3.1 164.1%



(Rs mn) Jun‐15E Mar‐15 QoQ (%) Jun‐14 YoY (%) Result Update highlights United Phosphorus Revenues 30,875 36,243 ‐14.8% 27,567 12.0% ‐ Cross currency effects to weigh down revenue growth

‐ Higher share of high margin India ‐ Lower other income

EBITDA 5,866 7,849 ‐25.3% 5,226 12.3%EBITDA margin (%) 19.0 21.7 19.0PAT 2,865 4,401 ‐34.9% 2,575 11.2%EPS (Rs) 6.7 10.4 ‐34.9% 6.0 11.2%Zuari Agrochemicals Revenues 13,383 15,000 ‐10.8% 10,295 30.0% ‐ Volume resurgence and price growth

‐ Adhoc subsidy increase and energy savings ‐ Lower interest to supports further

EBITDA 872 717 21.6% 167 421.1%EBITDA margin (%) 6.5 4.8 1.6PAT 282 125 126.0% (379) ‐174.6%EPS (Rs) 9.1 3.0 126.0% (9.0) ‐174.6%

Source: Company, PhillipCapital India Research



Fertiliser industry dispatches (in mt) Q1FY15 Q1FY16 YoY% FY15Coromandel Fert DAP Imports 6,036 130,065 2,054.82 180,881DAP manufactured 95,440 26,045 (72.71) 265,714MOP Imports 15,951 18,148 13.77 154,044Complex Fertiliser Manufactured 324,803 337,469 3.90 2,176,061Complex Fertiliser Imports 444 287 (35.36) 3,305SSP 23,018 20,550 (10.72) 117,494SSP ‐ Liberty 57,038 94,922 66.42 442,311Urea 104,739 96,932 (7.45) 1,024,102Manufactured Vol's 500,299 478,986 (4.26) 3,001,580Total Vol's (excl Urea) 522,730 627,486 20.04 3,339,810Chambal Fert

DAP Imports 123,999 173,497 39.92 634,627NPK Imports MOP Imports 36,243 38,451 6.09 199,086SSP 41,681 43,416 4.16 187,717Urea 487,303 525,406 7.82 1,948,737GSFC DAP manufactured 56,928 42,525 (25.30) 302,666DAP Imports 28,043 4 (99.99) 52,954Complex Fertiliser Manufactured 63,235 80,488 27.28 348,823Ammonium Sulphate 65,738 72,010 9.54 315,912Urea 84,257 85,578 1.57 353,066Tata Chemicals DAP Imports 25,293 64,680 155.72 330,487DAP manufactured 48,442 2 (100.00) 82,848MOP Imports 7,764 11,616 49.61 123,206Complex Fertiliser Manufactured 62,629 84,659 35.18 509,384SSP 31,658 19,401 (38.72) 197,055Urea 306,113 289,962 (5.28) 1,243,157Zuari Industries DAP Imports 31,540 97,204 208.19 206,114DAP manufactured 50,111 19,609 (60.87) 157,448MOP Imports 43,751 14,380 (67.13) 224,016Complex Fertiliser Manufactured 64,368 135,490 110.49 487,049Complex Fertiliser Imports 14 ‐ NA 119SSP ‐ 5,356 NA 5,580Urea 70,070 120,835 72.45 360,562Industry NPK imports 50,499 98,136 94.33 327,838DAP Imports 487,896 1,632,079 234.51 4,040,178MOP Imports 432,815 455,938 5.34 2,784,095NPK Mfg 1,292,442 1,558,818 20.61 8,340,026DAP Mfg 667,954 618,290 (7.44) 3,549,096SSP 778,313 859,474 10.43 4,197,108Urea 6,564,894 7,021,370 6.95 31,907,280Total 10274813 12244105 19.2 55145621Manufactured P&K Vol's 2,738,709 3,036,582 10.88 16,086,230Traded P&K Vol's 971,210 2,186,153 125.10 7,152,111

Coromandel: Production volumes continue to suffer due to lower availability of phosphoric acid; however, improving spreads should support overall margins

Chambal: Weak base supports strong urea production growth

Zuari: Improved phosphoric acid availability, uninterrupted urea production and commissioning of SSP plants supports volume growth

Industry: Urea growth continues to be robust; P&K manufacturing should improve with higher phosphoric acid availability, but higher trading is a cause of concern

Source: Department of Fertilisers, PhillipCapital India Research



Global fertiliser price outlook timid following balanced supply: IFA reports indicate global urea market has entered an era of oversupply after 2015, led by unprecedented expansion in low‐cost ME, Africa (MEA) and US, Brazil and India. Competition among traditional exporters in the MEA, China, and FSU will intensify, resulting in price pressure. Also, Morocco, China, and Saudi Arabia are expected to see large capacity addition in phosphoric acid — as a result, prices could remain under pressure. World phosphoric acid potential supply/demand balance (in mmt) 2013 2014 2015 2016E 2017ESupply Capacity 54.6 57.2 58.7 60.3 63.7Potential Supply 45.5 46.9 48.5 50.2 52Demand Fertiliser Demand 36.1 37.1 38.1 39 39.8Non‐fertiliser Use 5.2 5.4 5.5 5.7 5.8Distribution Losses 0.8 0.8 0.9 0.9 0.9Total Demand 42.1 43.3 44.5 45.5 46.5Potential Balance 3.5 3.6 4 4.7 5.5% of Supply 8% 8% 8% 9% 10%Source: Industry, PhillipCapital India Research

World urea (potential supply/demand balance) (in mmt) 2013 2014 2015 2016E 2017ESupply Capacity 198.4 207 214.6 221.3 236.3Potential Supply 182.1 188.6 195.3 202.3 207.4Demand Fertiliser Demand 143.2 147.6 151.4 154.4 157.4Non‐fertiliser Use 28.6 30.5 33.6 36.1 37.7Total Demand 171.8 178.1 184.9 190.6 195.2Potential Balance 10.3 10.5 10.4 11.7 12.2% of Supply 5.7% 5.6% 5.3% 5.8% 5.9%Source: Industry, PhillipCapital India Research



Tata Chemicals Tata Chemicals intends selling off its fertiliser business. Media reports peg the deal consideration at US$1bn. This divestment is strategic and consistent with other periodic hive offs – it is selling assets in the same rigorous way that it focused on acquisitions in the past. A successful strategic divestment of its fertiliser business would help Tata Chemicals concentrate on higher‐growth opportunities, pay down debt, and re‐invest capital in core activities leading to higher longer‐term growth and creating value for stakeholders. In the near term, the recent restructuring initiatives in the UK should reverse earnings to its mean over the next two years. Thus, with improved cash flows, limited capex, and a consequent fall in debt, dividends should rise further. Improving capital discipline and bettering earnings mix (rising share of resilient consumer businesses) should result in higher returns and a rerating seems imminent. Reiterate Buy with a PT of Rs 530. Selling assets in the same rigorous way it focused on acquisitions: The fertiliser business includes 1.2mmt each of urea and NPK capacity and a one‐third stake in a phosphoric acid JV in Morocco. As per press reports, the deal could be worth about US$ 1bn. The divestment is strategic and consistent with other hive offs that were non‐core and less profitable, such as cessation of soda ash production in Winnington, halving of capacity in Northwich, Europe, and mothballing its soda ash plant in Kenya. It has also hived off its non‐core initiatives such as Jatropha, Khet‐Se, and its STPP plant in Haldia. The deal consideration: Its urea facility in Babrala, UP, is among the best of its kind in India and comparable to the best in the world. Tata Chemicals has an established presence in the north Indian states of Uttar Pradesh, Punjab, Haryana, Bihar, and Uttaranchal, which account for 48% of the total domestic demand for urea. Tata Chem’s phosphatic fertilisers are sold under the brand name 'Paras' which leads the market in West Bengal, Bihar, and Jharkhand. The Haldia facility has production volumes exceeding 1.2mmt. Given the strong brand recall and proximity to feed and markets, the company is bound to earn a decent valuation. While the replacement cost of a similar asset works out to Rs 100bn or US$ 1.6bn, it’s likely the company may get >US$ 1bn (also considering the one‐third stake in IMACID). In FY15, the fertiliser business earned an adjusted EBIT of Rs 3.3bn and could be servicing an interest of Rs 1.5bn (subsidy outstanding at Rs 19bn), thus accounting for 15% of overall profits. Giving the lower fertiliser profitability, the earnings (also led by pairing down of debt) could improve by 12‐15%, but the bigger leap would be on return ratios led by the immense deleveraging (about 600bps) to 22% (2x PBR bodes well with PT of Rs 530). Strategic divestment key to raising capital and deploying it to core businesses: Tata Chem has drawn up an ambitious vision called ‘Leap 2020’ where it has set a target to triple market capitalisation, grow consumer business revenues four fold (Rs12 to 50bn), enhance farm business (to Rs80bn from Rs25; non‐subsidised – largely crop chemicals and micro‐nutrients) and improve chemical revenues (to 120bn from Rs85bn). A successful strategic divestment of its fertiliser business would help Tata Chemicals concentrate on higher‐growth opportunities, pay down debt, and re‐invest capital in core activities leading to higher longer‐term growth and creating value for stakeholders. Improved capital efficiency should meaningfully drive return ratios sustainably.



Deepak Fertilisers Deepak Fertilisers: Gas supply to resume! The Delhi HC ordered the government to resume gas supply (stopped in May 2014) to its P&K plant. However, the supply is expected to continue only until the government unveils a new policy. The court has also said that P&K fertiliser manufacturing companies should be treated equally with urea companies in gas allocation. The stock has been under pressure for over a year now on these concerns, despite improving opportunity for its flagship product ammonium nitrate (used in explosives for blasting in coal mines). Its fertiliser segment barely managed to breakeven at EBIT in FY15 because of the supply cut (vs. Rs1.5bn in FY14). Our rough estimates suggest that the resumption could buoy its earnings by 40% in FY16E (not in street estimates). Trades 10x FY16E PER, offers 4% yield. At the ruling ammonia price of <US$ 440/mt, Deepak’s P&K plant is profitable. Should the government resume gas supply, the production cost of ammonia would be US$ 385/mt. Thus, under both scenarios, Deepak’s P&K plant (24:24:00) would turn profitable. As per our calculations, manufactured fertilisers, account for 25% of overall earnings of Rs25/share in FY17E. However, the important bit is the court ruling (para 53, pg 31), which says the cut was arbitrary and that it should be uniformly implemented for all P&K manufacturing units. The court order actually directs DoF to supply gas to Deepak until it decides to discontinue gas for all P&K manufacturers (such as Deepak, RCF and GSFC). Para 53 is appended below. 53. Since the respondents have adopted a policy to suspend supply of gas to P&K Fertiliser units, the said decision ought to be implemented uniformly for all P&K manufacturing units. It is not open for the respondents to suspend the supply of gas to the petitioner while continuing the same to other P&K Manufacturing units, namely, RCF or GSFC. In the circumstances, the respondents are directed to resume the supply of gas to the petitioner till the time the Government of India are in a position to implement their policy to discontinue supply of gas for manufacture of P&K Fertiliser by other units as well.

Fertilizer spreads to immensely improve on resumption of domestic gas Blended cost of gas 8.8 $/mmbtuINR/USD 63 Cost of ammonia production 367 $/mt Ammonia 387 $/mt Phos Acid 830 $/mt DAP 400 $/mt Cost of Material Total Material 304 $/mt Add: 5.15% Customs duty 16 $/mt Add: Credit (1.03%) 3 $/mt Add: Other costs incl utilities, conversion, selling&disnt 55 $/mt Total costs 378 $/mt Cost of Prodn 23,814 Rs/mt Total SP 31,893 Rs/mt Margins (before freight, interest, depn) 8,079 Rs/mt Source: Industry, PhillipCapital India Research



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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

ANZ Tower 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, Ocean Tower 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, Vorawat Building, 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 Trade Building

Chicago, IL 60604 USA Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA PhillipCapital Australia

Level 37, 530 Collins Street Melbourne, Victoria 3000, Australia

Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309 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 or may not match or may be contrary at times with the views, estimates, rating, 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 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 to future performance. This report does not have regard to 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 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 realized. In no circumstances it be used or considered as an offer to sell or a solicitation of any offer to buy or sell the Securities mentioned in it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which we believe are 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 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. The Research Analyst certifies that he /she or his / her family members does not own the stock(s) covered in this research report. Independence/Conflict: 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 employees, directors, or affiliates may hold either long or short positions in such securities. PhillipCapital (India) Pvt. Ltd may not hold more than 1% of the shares of the company(ies) covered in this 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. Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorized 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 in can be substantial. You should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. 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 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 the 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, Marco Polo Securities Inc. ("Marco Polo").Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer. PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013


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