Motilal oswal jain_07july_2015

Atul Mehra ([email protected])+91 22 3982 5417

Niket Shah ([email protected]); +91 22 3982 542

6 July 2015

Corner Office

the

Interaction with the CEO

Investors are advised to refer through disclosures made at the end of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

PMKSY sets stage for multi-year growth Higher growth along with financial de-leveraging to drive EPS growth

Our meeting with Mr. Anil Jain, MD of Jain Irrigation (JI) reaffirms our view on Jain

Irrigation’s growth—especially in the light of government’s announcement to spend INR500b under Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) over next five years.

Mr. Jain opined that directionally the government is focused on improving farm productivity; while exact contours of the program are still unknown (exact allocation toward building water sheds, transporting water from the sheds to villages, drip irrigation), he believes PMKSY would strongly benefit JI’s MIS and piping businesses.

For FY16, the management is confident of 10-15% growth and INR3b debt reduction. Food processing stake sale will be concluded over the next two quarters. We maintain ‘Buy’ with a price target of INR100, valuing the stock at 12x FY17 EPS.

Pradhan Mantri Krishi Sinchai Yojana to drive growth for MIS and Piping businesses The Cabinet Committee on Economic Affairs (CCEA) has approved the Pradhan

Mantri Krishi Sinchayee Yojana which entails INR500b spend over next five years. The allocation for the current financial year is INR53b, which would increase

substantially (~100b annually) over the next four years to meet the planned outlay. Mr. Jain believes the government’s emphasis will help grow MIS and Piping

businesses and can double the drip irrigation business over the next five years.

Domestic MIS to post 10-15% growth; targeting 130 gross receivable days in FY16 Mr. Jain expects domestic MIS business to post ~10-15% growth with current

expectations of monsoons, and 15-20% growth if monsoons are above normal. Management expects 2HFY16 to post higher growth than 1HFY16. Gross receivable days in the MIS segment currently stand at ~188, and the management is confident of

reducing it to 130 by FY16-end with the implementation of new business model across states. The management suggests the incremental business is being conducted with 90 receivable days.

Food processing business stake sale likely in next the two quarters With subsidiarization of food processing business likely to be concluded in 1HFY16, the management believes

25% stake sale will be concluded over the next two quarters. JI is looking forward to raise USD100m through a minority stake sale, and will be most likely closing the deal

with a financial investor as against the earlier plans of inducting a strategic partner. Consolidated debt to reduce by INR3b annually Consolidated net debt for 4QFY15 stood at INR39.3b. The management maintains its target to reduce debt by INR3.0b, majority of which is expected in 2HFY16. Valuation and view We expect strong free cash generation over FY15-17E (led by domestic MIS business), which should reduce

debt/equity from 1.6x in FY15 to 1.1x in FY17E. We expect 15% revenue CAGR and 18% EBITDA CAGR over FY15-17, with financial de-leveraging ensuring EPS

expansion from INR1.9 in FY15 to INR8.3 in FY17. We maintain Buy with a TP of INR100 (12x FY17E EPS).

Jain Irrigation

Mr Anil Jain

Managing Director

Mr. Anil Jain has been the

Managing Director of Jain

Irrigation since 1993. He has a

commerce degree from Pune

University and Law Degree

from Mumbai University. Mr.

Anil Jain has an extensive

background and experience in

Finance, Banking, Mergers &

Acquisitions, Strategic

Planning, Restructuring

Operations, Export Marketing,

International Business

Relations, Collaborations and

Joint Ventures.

http://www.motilaloswal.com/Institutional-Equities�

Corner Office

6 July 2015 2

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Pradhan Mantri Krishi Sinchai Yojana sets stage for multi-year growth The Cabinet Committee on Economic Affairs (CCEA) has approved the Pradhan

Mantri Krishi Sinchayee Yojana (PMKSY). PMKSY will have an outlay of INR500b over the next five years (FY16 to FY20).

The allocation for the current financial year is INR53b, which would increase substantially (~100b annually) over the next four years to meet the planned outlay.

The three areas that PMKSY will address: Building water sheds Transporting water from the sheds to villages Drip and sprinkler Irrigation

Mr. Jain believes execution of PMKSY will be effective as its implementation will be monitored at multiple levels through: An Inter-Ministerial National Steering Committee (NSC) under the

Chairmanship of the Prime Minister. A National Executive Committee (NEC) to be constituted under the

Chairmanship of the Vice Chairman, NITI Aayog. A State Level Sanctioning Committee (SLSC) to be chaired by the Chief

Secretary of the respective states. Center will bear 75% of the project expenses, and states share will be 25%. PMKSY to drive growth in Jain Irrigation’s piping and MIS business Mr. Anil Jain opined that directionally the new government is focused on

improving farm productivity. While the exact contours of the program are still unknown (exact allocation toward building water sheds, transporting water from the sheds to villages, drip and sprinkler irrigation), Mr. Jain believes PMKSY would benefit Jain Irrigation in the following two areas: Piping segment (transporting water from the sheds to villages) Drip irrigation segment (implementation of drip irrigation at farm level)

The management believes the government’s emphasis can double the drip irrigation business over the next five years.

Exhibit 1: Consolidated revenue trend (INR m)

Source: Company, MOSL

14,09412,171 13,746 18,333

15,534 12,70212,919

20,425

11.5

22.326.6

9.0 10.2 4.4

-6.0

11.4

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Consolidated Revenue (INR m) Growth (YoY) %

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6 July 2015 3

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Exhibit 2: EBITDA trend (INR m)


Exhibit 3: PAT trend (INR m)


Domestic MIS to post 10-15% growth in FY16 The management expects domestic MIS business to post ~10-15% growth with

current expectations of monsoons, and 15-20% growth if monsoons are above normal.

Growth is expected to be back-ended, with 2HFY16 expected to post higher growth than 1HFY16.

The management believes growth will be led by projects business (current order book of ~INR2b, with orders from Karnataka, HP, MP and Rajasthan), with new orders inflows expected shortly.

With project business margins similar to retail EBITDA margins of ~20%, the management believes a shift in favor of project business will not impact margins.

With ~55% capacity utilization currently, there should be no capex in the MIS business over the next two years.

Exhibit 4: MIS business growth by segment MIS business contribution by segment

Segment 4QFY14 4QFY15 YoY Segment 4QFY14 4QFY15 YoY

Retail 3,684 3,427 -7% Retail 59% 53% -6%

Project 1,903 2529 33% Project 31% 39% 9%

Export 638 507 -21% Export 10% 8% -2%

Total 6,225 6,463 4% Total 100% 100% 0%


Targeting 130 days of gross receivable days in MIS business in FY16 Gross receivable days in the MIS segment currently stand at ~188, and the

management is confident of reducing it to 130 by FY16-end with the implementation of new business model across states. The management suggests the incremental business is being conducted with 90 receivable days.

The management is confident of further reduction in receivable days for the project business (stood at 201 days in FY15) on the back of milestone-based payment mechanism.

The management believes net reduction in receivable days will flow down to net improvement in working capital going forward (unlike past), thus leading to 50-60 days improvement in MIS net working capital.

2,0861,523 1,710

2,562

2,006 1,572 1,492

2,806

14.812.5 12.4

14.0 12.9 12.4 11.5

13.7

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

EBITDA Margins (%)

-603 -807259

753

203-235

-396

985

0.0

-93.7

1.5

-1.5 NM NM 0.0

38.6

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

PAT Growth (%)

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6 July 2015 4

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Government subsidy receivables have been reduced from INR9.7b in FY12 to INR2.6b in 4QFY15. The management believes that of the total subsidy receivables, ~INR1.5b are legacy receivables and the balance from states like Gujarat and Andhra Pradesh (which are part of the ongoing business).

The management is of the view that NBFC model is an enabler for farmers, but most of the new business is being conducted irrespective of NBFC financing. Thus, even as NBFC loan book size currently stands at INR1.5b, most of the new business in MIS is conducted on credit period of 90 days.

Exhibit 5: MIS revenue trend


Exhibit 6: MIS networking capital reducing


Exhibit 7: MIS debtors decreased by 69 days YoY


Exhibit 8: MIS inventory days reduced by 13 days YoY


Exhibit 9: Break-up of MIS receivables (INR b) MIS -Receivables FY12 FY13 FY14 1QFY15 2QFY15 3QFY15 4QFY15

Dealer 2.5 1.7 2.2 2.1 1.7 1.5 1.6

Institutional 1.8 1.1 1.3 1.2 1.2 1.3 1.2

Project 3.1 2.4 3.4 4.0 4.4 3.4 2.9

Govt. Subsidy 9.7 7.1 3.9 3.4 2.6 2.7 2.6

Export 0.6 0.4 1.0 0.8 0.6 0.7 0.8

Total 17.7 12.7 11.9 11.5 10.5 9.6 9.1


3,855 2,933

4,074 6,225 4,248 3,801 3,647 6,462

16.5 17.225.7

24.8

10.2

29.6

-10.5

3.8

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

MIS revenue (INR M) Growth (YoY %)

296 317 306255 235 255 245

217

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Net Working Capital

308279 265 257 243

211 197 188

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Debtor days (Gross)

116 113 11398 103 102 101

85

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Inventory days

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6 July 2015 5

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Piping business growth to recover in FY16 Piping business de-grew 7% in FY15 on the back of raw material supply issues.

However, the management is confident that growth will recover going forward and expects 10-15% growth for the division.

Margins in this division can improve from 5% to 6-7% going forward.

Exhibit 10: PVC Piping revenue trend


Exhibit 11: Piping net working capital days negative


Exhibit 12: Piping inventory days up nine days YoY


Exhibit 13: Piping receivable days up 39 days YoY


Exhibit 14: PE piping revenues trend (INR m)


Exhibit 15: PVC Sheets revenues trend (INR m)


3,2471,089 1,976

2,440 2,578 1,323

1,757 2,738

36.5

1.6 3.0-8.3 -20.6

21.5

-11.1

12.2

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

PVC Pipes Revenue (INR m) Growth (YoY %)

-11

-16

-7 -8

-20

-11

-31

-1

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Net Working Capital

58 6054

35 37 37 40 44

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Inventory days

6758

3951

44 4961

90

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Debtor days (Gross)

752 1,688 1,479 1,259 696 753

1,044 2,126

-3.3

197.7

95.9

22.8-7.5 -55.4

-29.4

68.9

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

PE Piping Revenue Growth (YoY %)

342 539 604 676 407 377 367 398

-17

65

22

117

19.1-30.0

-39.2 -41.1

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

PVC Sheets revenue Rev. YoY

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6 July 2015 6

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Food processing business stake sale likely in the next two quarters With subsidiarization of food processing business likely to be concluded in

1HFY16, the management believes 25% stake sale will be concluded over the next two quarters.

JI is looking forward to raise USD100m through a minority stake sale, and will be most likely closing the deal with a financial investor as against the earlier plans of inducting a strategic partner.

Food processing to post 15-20% growth in FY16 The mango business is expected to post ~20% growth (with unseasonal rains

impacting volume growth). Pricing growth is expected to be higher in FY16, which will drive ~20% overall growth.

Onion dehydration business growth is expected to moderate to ~10-15% in FY16; (growth in FY15 at 37% was supernormal due to expanded capacities).

The management expects the inventory levels to decline towards the end of the year for food processing, resulting in better working capital in FY16.

Exhibit 16: Dehydrated Onions growth trend


Exhibit 17: Fruit processing growth trend


Exhibit 18: FP inventory days down 33 days YoY


Exhibit 19: FP receivable days up 45 days YoY


495 439172 920 652 616 272

1,231

74.9

8.9-29.5

19.331.7 40.4

58.3

33.8

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Onion Dehydration revenue (INR m) Rev. YoY

881 913 963 1,946 1300 802 1,200

2,324 -16.3

50.7 49.139.6

47.6

-12.2

24.6 19.4

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Fruit Processing revenue (INR m) Rev. YoY

345315

286

190

264 276246

157

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Inventory days

66 6648

88 87102 98

133

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15Debtor days (Gross)

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6 July 2015 7

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Exhibit 20: FP net working capital days up 119 days YoY


Consolidated working capital to improve by 56 days over FY15-17

Exhibit 21: Net working capital to improve by 56 days


Exhibit 22: C/L inventory days up three days YoY


Exhibit 23: C/L receivable days declined 14 days YoY


Exhibit 24: C/L net working capital days increased two days YoY


162 155135

78

176195

226197

1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15

Net Working Capital

108 125 115 110 108 108

168142 113 116 103 92

-121 -117 -109 -96 -104 -105

211 232 206 205 173

149

FY12 FY13 FY14 FY15 FY16E FY17E

Inventory Days Debtor Days Creditor Days Cash Conversion Cycle

137 135 126104

119 121 124107

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Inventory days

137 141123 129 122 115 106 115

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Debtor days (Gross)

162 174 161142 145 158 154 144

1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15

Net Working Capital

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Consolidated debt to reduce by INR3b annually Consolidated net debt for 4QFY15 stood at INR39.3b. The management maintains its target to reduce debt by INR3.0b, majority of

which is expected in 2HFY16.

Exhibit 25: Standalone net debt


Exhibit 26: Consolidated net debt


Exhibit 27: Debt/Equity to decline from 1.6x in FY15 to 1.1x in FY17


29.930.8 31.1

28.229.4

31.6 31.7

28.6

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Standalone Net Debt (INR b)

40.1

41.9 42

38.939.8

42.4 42.9

39.3

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Consolidated Net Debt (INR b)

34,442 35,65438,601 38,649

35,590

32,336

2.01.6 1.8

1.6 1.41.1


Net Debt (INR m) Net DER (x)

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Valuation and view We value JI at a multiple of 12x FY17E EPS (discount to long-term average multiple of 20x), which we believe is justified considering: India’s largest MIS player with a dominant market share of 55% JI is the largest player in India's organized micro irrigation sector, with a dominant market share of 55% (much higher than the second largest player Netafim’s 20% share). The potential for micro irrigation in India is immense as out of the total irrigation potential of ~140 Mha and MIS potential of ~69.5 Mha, only 5 Mha (~3.5% of the total irrigation potential) is covered under MIS currently. JI, with its dominant market leadership, is best placed to capture this growth potential. Change in business model to drive de-leveraging JI has changed its business model to ensure that the company is not exposed to payment delays associated with subsidy receivables. The management is targeting to reduce gross receivable days to 130 in FY16, which should ensure annual debt reduction of INR3b (purely due to better working capital management). The company is also looking to raise INR5b in FY16 from 25% stake sale in its food processing business, proceeds of which would go toward further debt retirement. Our forecasts do not factor this scenario, which can potentially reduce debt by another INR5b in FY16. We expect strong free cash generation, which should reduce debt/equity from 1.6x to 1.1x over FY15-17E. Strong leadership in the high-growth food processing business JI is India’s largest player in the food processing sector (~30% market share) and the third largest globally. Only 2% of India’s total produce is processed compared with ~60-80% in some developed countries (80% in the US and Malaysia). India's share in the global food trade is also miniscule (1.5%). Given the growing demand for processed food due to lifestyle changes and storage advantages, the segment is expected to be a strong growth driver for the company.

Exhibit 28: 15-year P/E band


Exhibit 29: 15-year P/B band


We value the stock at 12x FY17E EPS and arrive at a target price of INR100—39% upside. Maintain Buy rating.

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6 July 2015 10

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Story in charts

Exhibit 30: JI is the market leader in MIS business in India


Exhibit 31: MIS penetration in India is lowest in the world


Exhibit 32: Gross debtors set to decline


Exhibit 33: Hence, debt/equity to decline from 1.6x to 1.1x


Exhibit 34: Food processing is another key opportunity for JI


Exhibit 35: RoE to improve


55%

20%25%

Jain Irrigation Netafim Others

Market share of key players in micro irrigation systems in India 90%78%

65%55% 52%

10%3%

Israel Russia Spain US Brazil China India

MIS penetration across countries (%)

369 343 334

257

188150 130

FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Gross Sundry Debtors

34,442 35,654 38,601 38,649 35,304

31,423

2.01.6 1.8

1.6 1.41.1


Net Debt (INR m) Net DER (x)

80% 80%70%

30%

2%

USA Malaysia France Thailand India

% of food processing 13.5

2.4 3.1 3.8

8.4

14.2


RoE (%)

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6 July 2015 11

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Key assumptions

Exhibit 36: Key assumptions

Assumptions FY13 FY14 FY15 FY16E FY17E

1. Micro Irrigation Systems 14,040 17,087 18,158 20,800 24,339

% growth (YoY) -26% 22% 6% 15% 17%

% of net sales 27% 29% 29% 29% 29%

2. Plastic Piping Systems 11,157 13,929 13,015 15,117 17,439

% growth (YoY) 13% 25% -7% 16% 15%

% of net sales 22% 23% 21% 21% 21%

3. Agro Processing 5,399 6,729 8,397 9,910 11,946

% growth (YoY) 4% 25% 25% 18% 21%

% of net sales 11% 11% 13% 14% 14%

4. Others 3,039 2,675 2,465 2,778 3,141

% growth (YoY) 35% -12% -8% 13% 13%

% of net sales 6% 4% 4% 4% 4%

5. Net Subsidiary Sales 16,156 17,277 19,562 21,909 25,196

% growth (YoY) 33% 7% 13% 12% 15%

% of net sales 31% 29% 31% 30% 30%

Total Gross Sales 51,334 59,859 63,147 72,178 83,861

Less: Excise Duty 1,117 1,578 1,566 1,790 2,080

Net Sales 50,217 58,281 61,581 70,388 81,781

% growth (YoY) 2% 16% 6% 14% 16% Source: Company, MOSL

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Financials and valuations

Consolidated - Income Statement (INR Million) Y/E March FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Gross Revenues 34,864 42,436 50,112 51,334 59,859 63,146 72,178 83,861

Less: Excise Duty 664 908 906 1,117 1,578 1,566 1,790 2,080

Net Sales 34,200 41,528 49,206 50,217 58,281 61,579 70,388 81,781

Change (%) 19.6 21.4 18.5 2.1 16.1 5.7 14.3 16.2

EBITDA 6,698 7,480 8,155 7,253 7,700 7,876 9,324 11,078

Margin (%) 19.6 18.0 16.6 14.4 13.2 12.8 13.2 13.5

Depreciation 1,020 1,222 1,441 1,696 2,045 2,441 2,546 2,675

EBIT 5,679 6,258 6,714 5,558 5,654 5,435 6,778 8,403

Int. and Finance Charges 2,194 3,270 4,768 4,855 4,676 4,693 4,555 3,994

Other Income - Rec. 197 1,106 345 668 463 331 352 409

PBT bef. EO Exp. 3,682 4,094 2,290 1,370 1,441 1,074 2,575 4,818

EO Expense/(Income) 0 0 0 1,245 2,300 763 0 0

PBT after EO Exp. 3,682 4,094 2,290 125 -860 311 2,575 4,818

Current Tax 979 1,177 -419 175 233 -239 515 964

Deferred Tax 224 37 422 -95 -695 0 0 0

Tax Rate (%) 32.7 29.6 0.2 63.9 53.7 NM 20.0 20.0

Reported PAT 2,478 2,881 2,286 45 -398 550 2,060 3,854

PAT Adj for EO items 2,478 2,881 2,286 495 667 859 2,060 3,854

Change (%) 85.6 16.2 -20.6 -78.4 34.9 28.8 139.8 87.1

Margin (%) 7.2 6.9 4.6 1.0 1.1 1.4 2.9 4.7

Consolidated - Balance Sheet (INR Million) Y/E March FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Equity Share Capital 760 772 810 910 925 925 925 925

Total Reserves 11,384 14,439 16,378 20,608 20,831 22,690 24,484 28,074

Net Worth 12,167 15,558 17,537 21,680 21,755 23,615 25,409 28,999

Deferred Liabilities 1,024 1,239 1,755 1,841 1,412 1,201 1,201 1,201

Total Loans 24,448 29,842 37,986 38,051 40,583 42,311 38,311 34,311

Capital Employed 38,210 47,164 57,775 61,572 63,955 67,127 64,921 64,511

Gross Block 23,266 28,467 33,528 37,726 41,514 44,316 46,616 48,916

Less: Accum. Deprn. 6,667 8,050 9,793 11,640 13,742 16,183 18,729 21,404

Net Fixed Assets 16,599 20,417 23,735 26,086 27,771 28,133 27,887 27,512

Capital WIP 1,324 956 1,980 749 807 0 0 0

Total Investments 211 211 236 38 14 621 621 621

Curr. Assets, Loans&Adv. 29,672 41,396 48,180 50,405 52,258 53,687 55,659 59,324

Inventory 10,638 14,864 14,614 17,231 18,364 18,566 20,914 24,106

Account Receivables 10,099 16,924 22,712 19,547 17,994 19,541 19,824 20,628

Cash and Bank Balance 5,053 4,144 3,308 2,359 1,968 3,041 2,386 2,267

Loans and Advances 3,883 5,463 7,546 11,269 13,932 12,539 12,535 12,323

Curr. Liability & Prov. 10,011 16,394 17,073 16,636 18,089 16,672 20,605 24,304

Account Payables 7,045 12,696 13,692 13,379 13,433 13,568 17,080 20,236

Other Current Liabilities 2,279 2,977 2,673 2,716 4,040 2,575 2,893 3,361

Provisions 687 720 708 541 617 529 632 708

Net Current Assets 19,662 25,002 31,107 33,770 34,169 37,015 35,055 35,020

Deferred Tax Assets 414 577 718 929 1,194 1,358 1,358 1,358

Appl. of Funds 38,210 47,164 57,775 61,572 63,955 67,127 64,921 64,511

E: MOSL Estimates

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Financials and valuations

Ratios

Y/E March FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Basic (INR)

EPS 6.5 7.5 5.6 1.1 1.4 1.9 4.5 8.3

Cash EPS 9.2 10.6 9.2 4.8 5.9 7.1 10.0 14.1

BV/Share 32.0 40.3 43.3 47.7 47.0 51.1 54.9 62.7

DPS 0.8 1.0 1.0 0.6 0.6 0.6 0.6 0.6

Payout (%) 16.3 15.6 20.6 588.3 -68.0 49.2 13.1 7.0

Valuation (x)

P/E 49.9 38.8 16.2 8.6

Cash P/E 12.3 10.1 7.2 5.1

P/BV 1.5 1.4 1.3 1.1

EV/Sales 1.2 1.2 1.0 0.8

EV/EBITDA 9.3 9.2 7.4 5.9

Dividend Yield (%) 0.8 0.8 0.8 0.8

Return Ratios (%)

RoE 23.3 20.2 13.5 2.4 3.1 3.8 8.4 14.2

RoCE 18.4 18.0 14.0 10.8 10.0 9.0 11.0 13.9

Working Capital Ratios

Asset Turnover (x) 0.9 0.9 0.9 0.8 0.9 0.9 1.1 1.3

Inventory (Days) 113.5 130.6 108.4 125.2 115.0 110 108.5 107.6

Debtor (Days) 108 149 168 142 113 116 103 92

Creditor (Days) 75 112 102 97 84 80 89 90

Working Capital Turnover (Days) 156 183 206 228 202 201 169 146

Leverage Ratio (x)

Current Ratio 3.0 2.5 2.8 3.0 2.9 3.2 2.7 2.4

Debt/Equity 2.0 1.9 2.2 1.8 1.9 1.8 1.5 1.2

Consolidated-Cash Flow Statement (INR Million) Y/E March FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Net Profit / (Loss) Before Tax 3,682 4,094 2,286 125 -860 1,074 2,575 4,818

Depreciation 1,020 1,222 1,441 1,696 2,045 2,441 2,546 2,675

Interest & Finance Charges 2,194 2,717 4,157 4,855 4,676 4,361 4,203 3,585

Direct Taxes Paid 706 1,047 938 295 41 -239 515 964

(Inc)/Dec in WC -2,408 -6,069 -6,166 -3,127 -1,551 -1,383 1,305 -84

CF from Operations 3,781 916 781 3,254 4,270 6,732 10,114 10,031

CF from Operating incl EO 3,932 1,059 850 4,275 5,731 5,969 10,114 10,031

(inc)/dec in FA -4,646 -4,930 -5,270 -2,943 -2,615 -1,996 -2,300 -2,300

Free Cash Flow -714 -3,871 -4,420 1,333 3,116 3,973 7,814 7,731

CF from Investments -4,569 -5,007 -5,330 -3,383 -2,885 -1,664 -1,948 -1,891

Issue of Shares 435 780 14 3,903 0 0 0 0

(Inc)/Dec in Debt 6,693 5,507 8,143 -586 1,216 1,728 -4,000 -4,000

Interest Paid -2,232 -2,717 -4,051 -4,843 -4,638 -4,693 -4,555 -3,994

Dividend Paid -219 -355 -448 -469 -265 -270 -270 -270

Others -39 -62 16 162 485 4 5 6

CF from Fin. Activity 4,637 3,153 3,674 -1,832 -3,202 -3,231 -8,821 -8,259

Inc/Dec of Cash 4,000 -796 -805 -939 -356 1,073 -655 -119

Add: Beginning Balance 1,053 4,940 4,114 3,298 2,324 1,968 3,041 2,386

Closing Balance 5,053 4,144 3,308 2,359 1,968 3,041 2,386 2,267

E: MOSL Estimates

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