J.P. Morgan - Motherson Sumi Systems

www.jpmorganmarkets.com

Asia Pacific Equity Research23 May 2014

Motherson Sumi SystemsOverweightMSS.BO, MSS IN

4Q adjusted PAT at Rs.2.6B(+57% y/y), management's guidance for 20%+ revenue growth surprises positively, raising PT

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Price: Rs280.45

Price Target: Rs310.00Previous: Rs225.00

India

Indian Autos

Aditya Makharia AC

(91-22) 6157-3596

[email protected]

Bloomberg JPMA MAKHARIA <GO>

Arjun A Bhatia

(91-22) 6157-3312

[email protected]

J.P. Morgan India Private Limited

YTD 1m 3m 12mAbs 49.8% 14.1% 29.8% 31.7%Rel 34.9% 7.4% 12.4% 10.9%

Motherson Sumi Systems (Reuters: MSS.BO, Bloomberg: MSS IN)

Rs in mn, year-end Mar FY12A FY13A FY14E FY15E FY16ERevenue (Rs mn) 147,766 256,170 307,210 356,593 414,763DPS (Rs) 1.0 1.3 2.5 3.2 4.2Revenue growth (%) 81% 73% 20% 16% 16%EPS growth (%) 4% 40% 9% 53% 36%ROE 14% 19% 27% 34% 35%P/E (x) 43.9 31.3 28.7 18.7 13.8P/BV (x) 13.2 10.8 8.7 6.5 4.8Dividend Yield 0% 0% 1% 1% 1%Adjusted Net Profit (Rs mn) 3,752 5,260 8,633 13,195 17,970Adjusted EPS (Rs) 6.4 8.9 9.8 15.0 20.4Source: Company data, Bloomberg, J.P. Morgan estimates.

Company DataShares O/S (mn) 882Market Cap (Rs mn) 247,329Market Cap ($ mn) 4,208Price (Rs) 280.45Date Of Price 22 May 14Free Float(%) -3M - Avg daily vol (mn) 1.563M - Avg daily val (Rs mn) 393.323M - Avg daily val ($ mn) 6.7BSE30 2,4374.40Exchange Rate 58.78Price Target End Date 30-Mar-15Price Target (Rs) 310.00

See page 8 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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Price Performance

MSS.BO share price (Rs)

BSE30 (rebased)

MSSL reported 4QFY14 PAT of Rs.3.03B – adjusted for FXprovisioning, the PAT came in at Rs.2.6B (+57% y/y). Management in its post results conference call has guided for revenue growth in excess of 20% (we were building in +13% earlier), which has surprised positively. We are raising our PT to factor in the revised guidance and reiterate our OW stance.

Conference call highlights: revenue guidance: Management highlighted that revenue growth will be driven by the commissioning of its multiple plants - the most significant being SMP’s greenfield plant in Germany, which will be commissioned in October. Besides, they are upgrading the paint shops in their other facilities (Barcelona, etc.) whichwill contribute to new orders. The new orders at SMR (Eur1.6B) & SMP (Eur2.4B) received in FY14 are at Eur4B. Also, an improving demand environment across Europe/India will contribute to the top line. Margins: Consolidated 4Q margins came in at 9.5% (flat q/q) - whilethe SMR (10.6%, +50bp q/q) and India (21.8%, +280bp q/q) margins expanded, SMP margins came off sharply to 4.6% (-130bp q/q) due to expenses related to the setting up of the new plant. Margins are likely to improve in 2HFY15E, as the new plant is commissioned in Sep-Oct. Capex: The capex spend for FY15E is likely to moderate to Rs.10B (vs. Rs.13.5B y/y). Gearing: Over the year, the net debt levels have fallen to Rs.39.3B (vs. Rs 45.7B in FY13). Management expects gearing to further reduce by ~Rs.5B in FY15E.

Price target: We are raising our FY15E/16E EPS by 21% and are raising our Mar’15 PT to Rs.310. We value the stock at 15x forward P/E, which is in line with its historical average. Key risks: Key downside risks to our PT and rating include: Any further acquisitions by MSSL group, which could stretch gearing ratios, any sharp currency volatility.

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Aditya Makharia(91-22) [email protected]

Key catalysts for the stock price: Upside risks to our view: Downside risks to our view:

Execution of new orders at SMR /SMP -the new orders at SMP are likely to be executed from Oct'14 onwards

Market share gains in the domestic segment, improved demand in the European markets

Any further acquisitions by MSSL group, which could stretch gearing ratios

Key financial metrics FY13 FY14E FY15E FY16E Valuation and price target basis

Revenues (LC)256,17

0 307,210 356,593 414,763 We are raising our FY15E/16E EPS by 21% and are raising our Mar’15 PT to Rs.310. We value the stock at 15x forward P/E, (vs.14x earlier) to factor in the strong 20%+ revenue

guidance..

Revenue growth (%) 73.4% 19.9% 16.1% 16.3%

EBITDA (LC) 19,441 28,783 36,376 46,830 EBITDA margin (%) 7.6% 9.4% 10.2% 11.3%

Tax rate (%) 46% 31% 31% 31%Net profit (LC) 5,260 8,633 13,195 17,970

EPS (LC) 8.9 9.8 15.0 20.4

EPS growth (%) 40.0% 9.4% 52.8% 36.2% Quarterly Consolidated EBITDA Margin (%)

DPS (LC) 1.33 2.47 3.21 4.17BVPS (LC) 25.95 32.13 43.40 58.98

Operating cash flow (LC mn) 16,244 19,462 22,442 31,302 Free cash flow (LC mn) 3,416 8,018 13,911 20,407

Interest cover (x) 8 10 17 29Net margin (%) 2.1% 2.8% 3.7% 4.3%

Sales/assets (X) 2.06 2.20 2.22 2.25Debt/equity (%) 180.4% 136.1% 89.1% 60.0%

Net debt/equity (%) 158.3% 113.5% 64.7% 24.9%ROE (%) 19% 27% 34% 35%

Key model assumptions FY13 FY14E FY15E FY16E

Consolidated MMS margin 7.6% 9.4% 10.2% 11.3%

Standalone MSS margin 18.4% 20.0% 20.0% 20.1%SMR margin 6.5% 9.6% 10.6% 11.0%

Source: Bloomberg, Company data and J.P. Morgan estimates.

Source: Company data and J.P. Morgan estimates.

JPMe vs. consensus, change in estimates

Sensitivity analysis EBTDA EPS EPS (LC) FY15E FY16E

Sensitivity to FY14E FY15E FY14E FY15E JPMe old 13.2 16.0

2% chg in sales volume growth 2.0% 1.5% 2.0% 1.5% JPMe new 15.0 20.4 1% chg in gross margin 5.0% 4.5% 7.0% 6.5% % chg 13% 27%

Consensus 13.2 17.4

Source: Bloomberg, J.P. Morgan estimates.Source: J.P. Morgan estimates.

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Table 1: Motherson Consolidated Results (Rs. M)

4QFY13 3QFY14 4QFY14

Net Sales 65,996 78,898 82,890

Other Operating Income 762 988 1,177

Total Income 66,758 79,887 84,067

Change (%) 3.9 19.9 25.9

Total Cost 61,065 72,222 76,110

(Inc) / Dec in SIT -524 -351

Raw material 42,421 51,200 53,481

RM/Sales (%) 63.5 63.4 63.2

Staff cost 11,213 12,726 13,890

% sales 16.8 15.9 16.5

Other expenditure 7,432 8,821 9,090

Other exp. as a % of Sales 11.1 11.0 10.8

EBITDA 5,693 7,664 7,958

As % of Sales 8.5 9.6 9.5

Change (%) 33.2 50.4 39.8

Other Income 45 48 37

Interest expense (income) 578 703 814

Depreciation 1,873 2,174 2,129

Extraordinary Expense

Forex Gains 345 268 709

PBT 3,633 5,103 5,760

Tax 1,378 1,566 1,148

Effective Tax Rate (%) 37.9 30.7 19.9

PAT (Pre MI) 2,255 3,538 4,613

Minority Interest 298 1,043 1,582

PAT 1,958 2,495 3,031

Adj. PAT 1,682 2,345 2,633

Change (%) 69 52 57

Source: Company data.

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Table 2: Motherson Standalone Results (Rs. M)

4QFY13 3QFY14 4QFY14Net Sales 12,082 10,862 12,233 Other Operating Income 239 197 269Total Income 12,321 11,059 12,502 Change (%) 2 4 1Total Cost 9,615 8,959 9,773(Inc) / Dec in SITRaw material 7,030 6186 6738RM/Sales (%) 57.1 55.9 53.9Staff cost 1,117 1222 1277% sales 9.1 11.0 10.2Other expenditure 1,469 1552 1758Other exp. as a % of Sales 11.9 14.0 14.1EBITDA 2,706 2,100 2,729 As % of Sales 22.0 19.0 21.8 Change (%) 19.6 4.2 0.9Other Income 166 15 572Interest expense (income) 128 117 113Depreciation 429 396 368Extraordinary ExpenseForex Loss / (Gains ) -207 -174 -225PBT 2,521 1,776 3,045Tax 729 539 920 Effective Tax Rate (%) 28.9 30.4 30.2PAT 1,792 1,237 2,125Adj. PAT 1,585 1,115 1,900 Change (%) 30 -11 20


Table 3: SMR Results (Rs. M)

Year end Mar (Rs M) 4QFY13 3QFY14 4QFY14EUR INR exchange rate 71.3 84.2 84.3Net Sales (in EURO M) 270 285 295% change 12% 9% 9%

Net Sales (in INR M) 19,227 23,982 24,821% change 21% 30% 29%

Total expenditure 17,645 21,547 22,184

EBITDA (prior to FX effect) 1,618 2,411 2,629EBITDA Margin (%) 8.4 10.1 10.6

FX Loss/(Gain) 36 -24 -8

EBITDA (post FX effect) 1582 2435 2637Depreciation 467 580 604Interest 126 138 143ExceptionalPBT 989 1716 1891

Tax 333 465 253Tax Rate (%) 34 27 13PAT 656 1252 1638Minority Interest 327 661 852MI (as % of PAT) 50 53 52PAT after Minority Interest 330 591 785


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Table 4: SMP Results (Rs. M)

Rs. in M 4QFY13 3QFY14 4QFY14EUR INR exchange rate 71.5 84.2 84.3 Euro (in M) 450 486 504

2% 12%Net Sales 32,134 40,915 42,510 % change -5% 23% 32%

EBITDA (prior to FX effect) 1,012 2,411 1,944 EBITDA Margin (%) 3.1% 5.9% 4.6%

FX Loss/(Gain) (223) (222) (532)

Interest 314 397 523 Depreciation 856 1,047 1,005

PBT 66 1,189 948 PBT Margin 0.2% 2.9% 2.2%

Tax 254 504 (77)Tax Rate 387% 42% -8%

PAT (188) 686 1,024 PAT Margin (%) -0.6% 1.7%

Minority Interest (19) 400 784

PAT post MI (169) 286 240


Investment Thesis, Valuation and Risks

Motherson Sumi Systems (Overweight; Price Target: Rs310.00)

Investment Thesis

We remain OW on Motherson Sumi Systems given an improving demand outlook in Europe and USA, healthy order wins and improving utilization levels.

Valuation

We are raising our earnings estimates by ~21% in FY15/16 and are raising our Mar’15 PT to Rs310. We value the stock at 15x forward PE (vs. 14 x earlier), which is in line with the stock’s historical trading multiple. We are raising our multiple to factor in the healthy 20%+ revenue growth.

Risks to Rating and Price Target

Key downside risks to our PT and rating include: Any further acquisitions by MSSL group, which could stretch gearing ratios, any sharp currency volatility.

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Motherson Sumi Systems: Summary of FinancialsIncome Statement Cash flow statement

Rs in millions, year end Mar FY12 FY13 FY14E FY15E FY16E Rs in millions, year end Mar FY12 FY13 FY14E FY15E FY16E

Revenues 147,766 256,170 307,210 356,593 414,763 EBIT 5,640 12,305 20,611 27,706 37,483

% change Y/Y 81% 73% 20% 16% 16% Depr. & amortization 3,796 7,145 8,172 8,670 9,346EBITDA 9,434 19,441 28,783 36,376 46,830 Change in working capital (8,546) 2,300 (2,447) (5,801) (4,123)

% margin 6.4% 7.6% 9.4% 10.2% 11.3% Other (2,879) (5,506) (6,875) (8,133) (11,404)

Net Interest (1,649) (2,495) (2,944) (2,144) (1,612) Cash flow from operations (1,989) 16,244 19,462 22,442 31,302Other Income 1,445 170 176 264 396Depreciation (3,796) (7,145) (8,172) (8,670) (9,346) Capex (32,918) (14,279) (13,520) (10,000) (12,000)

Profit before tax 4,118 8,352 15,963 25,827 36,269 Other 960 392 176 264 396Tax (2,153) (3,835) (4,995) (8,134) (11,405) Cashflow from Investing Activities (31,958) (13,888) (13,344) (9,736) (11,604)

as % of PBT 52% 46% 31% 31% 31%Net income (Adjusted) 3,752 5,260 8,633 13,195 17,970 Cashflow from Financing Activities 34,939 (969) (4,004) (8,535) (7,102)% change Y/Y 5% 40% 64% 53% 36%

Shares outstanding (in mm) 587 588 882 882 882 Beginning cash 3,565 4,557 5,944 8,057 12,228EPS 6.4 8.9 9.8 15.0 20.4 Ending cash 4,557 5,944 8,057 12,229 24,824

% change Y/Y 4% 40% 9% 53% 36%

Balance sheet Ratio AnalysisRs in millions, year end Mar FY12 FY13 FY14E FY15E FY16E %, year end Mar FY12 FY13 FY14E FY15E FY16E

Cash and cash equivalents 4,557 5,944 8,057 12,228 24,824 P/E (x) 43.9 31.3 28.7 18.7 13.8Accounts receivable 30,127 29,400 35,350 41,033 47,726 EV/EBITDA (x) 29.2 14.2 9.5 7.3 5.4

Inventories 22,496 26,036 33,667 42,010 48,862 EV/Sales (x) 1.9 1.1 0.9 0.7 0.6Others 10,160 8,668 8,804 8,953 9,117 P/BV (x) 13.2 10.8 8.7 6.5 4.8Current assets 67,340 70,048 85,878 104,223 130,530 Dividend Yield 0% 0% 1% 1% 1%

.LT investments 938 716 716 716 716 EBITDA margin 6.4% 7.6% 9.4% 10.2% 11.3%Net fixed assets 46,922 54,655 59,810 60,938 63,379 EBIT margin 3.8% 4.8% 6.7% 7.8% 9.0%

Total Assets 119,658 129,278 150,456 170,131 199,092 Net margin 2.5% 2.1% 2.8% 3.7% 4.3%.

Liabilities Revenue growth 81% 73% 20% 16% 16%Payables 0 0 0 1 1 Net profit growth 5% 40% 64% 53% 36%Others 49,289 53,248 65,668 74,791 85,353 EPS growth 4% 40% 9% 53% 36%

Total current liabilities 49,289 53,248 65,668 74,792 85,354Debt 46,023 48,556 48,556 44,672 42,438 Interest coverage (x) 5.7 7.8 9.8 17.0 29.1Other liabilities 602 559 559 559 559 Debt to equity (x) 1.9 1.8 1.4 0.9 0.6

Total Liabilities 95,914 102,363 114,783 120,022 128,351 Sales/assets (x) 1.7 2.1 2.2 2.2 2.2Net Worth 23,744 26,915 35,674 50,110 70,741 Assets/equity (x) 4.9 6.0 5.5 4.8 4.1

BVPS (Rs) 21 26 32 43 59 ROE (%) 14% 19% 27% 34% 35%ROCE (%) 11% 17% 27% 34% 40%

Source: Company reports and J.P. Morgan estimates.

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JPM Q-ProfileMotherson Sumi Systems Limited (INDIA / Consumer Discretionary)As Of: 16-May-2014 [email protected]

Local Share Price Current: 279.80 12 Mth Forward EPS Current: 14.11

Earnings Yield (& local bond Yield) Current: 5% Implied Value Of Growth* Current: 63.41%

PE (1Yr Forward) Current: 19.8x Price/Book Value Current: 8.6x

ROE (Trailing) Current: 20.71 Dividend Yield (Trailing) Current: 0.53

Summary

Motherson Sumi Systems Limited 4071.02 As Of:

INDIA 0.5734203 SEDOL 6743990 Local Price: 279.80

Consumer Discretionary Auto Components EPS: 14.11

Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg12mth Forward PE 19.84x 7.92 21.73 15.21 15.11 20.69 9.54 -60% 10% -23% -24%P/BV (Trailing) 8.60x 0.10 10.66 5.00 4.92 10.25 -0.40 -99% 24% -42% -43%

Dividend Yield (Trailing) 0.53 0.52 50.00 1.30 6.69 34.88 -21.51 -1% 9416% 147% 1173%

ROE (Trailing) 20.71 14.92 47.49 29.90 32.17 52.13 12.20 -28% 129% 44% 55%

Implied Value of Growth 63.4% 0.00 0.63 0.46 0.44 0.69 0.19 -100% 0% -28% -31%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs * Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

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Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.

Important Disclosures

Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Motherson Sumi Systems.

Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

Date Rating Share Price (Rs)

Price Target (Rs)

09-Aug-13 OW 225.30 163.33

04-Nov-13 OW 264.95 200.00

03-Feb-14 OW 197.65 225.00

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com.

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Motherson Sumi Systems (MSS.BO, MSS IN) Price Chart

OW Rs225

OW Rs200

OW Rs163.33

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Aug 09, 2013.

mailto:[email protected]


https://jpmm.com/research/disclosures

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Coverage Universe: Makharia, Aditya: Ashok Leyland (ASOK.BO), Bajaj Auto (BAJA.BO), Container Corporation of India Ltd (CCRI.BO), Hero Motocorp Ltd. (HROM.BO), Jet Airways (India) Ltd. (JET.BO), Mahindra & Mahindra (MAHM.BO), Maruti Suzuki India Ltd (MRTI.BO), Motherson Sumi Systems (MSS.BO), Tata Motors (TAMO.BO)

J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2014

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 44% 44% 11%IB clients* 58% 49% 40%

JPMS Equity Research Coverage 45% 48% 7%IB clients* 78% 67% 60%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email [email protected].

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-USaffiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Other Disclosures

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All research reports made available to clients are simultaneously available on our client website, J.P. Morgan Markets. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your sales representative.

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http://www.optionsclearing.com/publications/risks/riskstoc.pdf


http://www.jpmorganmarkets.com/

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Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by or through J.P. Morgan Securities Singapore Private Limited (JPMSS)[MCI (P) 199/03/2014 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. This material is provided in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289. Recipients of this document are to contact JPMSS or JPMCB Singapore in respect of any matters arising from, or in connection with, the document. Japan: JPMorgan Securities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

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In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. 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Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / [email protected].

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

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"Other Disclosures" last revised April 5, 2014.

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