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1

Shaily Engineering Plastics

A leader in precision injection moulding Shaily Engineering Plastics Ltd (SHEP) is a leading manufacturer of high precision injection moulded plastic components and assemblies. SHEP’s five plants at Vadodara, with 104 injection moulding machines, operate within the three business segments: home furnishing (58% of revenue), healthcare (8% of revenue) and FMCG/others (34% of revenue). With an expertise in designing, developing and manufacturing, SHEP is a reliable and consistent supplier to Swedish home furnishing giant since 12 years. Its India foray will propel SHEP’s growth prospects (30% local sourcing). SHEP’s recent investment (March 2015) of Rs300mn in pharma packaging (CR caps and HDPE bottles) presents ample opportunity to scale up. We expect it to post a revenue/PAT CAGR of 24/43% during FY16-18e, with steady margin expansion on the back of: 1) focus on high-margin CR caps and insulin pens business from pharma clients, 2) incremental business from Swedish furniture major, post its foray into India by 2017 and 3) expertise in plastic engineering along with strong clientele. We initiate coverage on SHEP with a Buy rating and a target price of Rs680 (18x FY18e EPS of Rs38), due to its global positioning among key industry players despite a smaller size, expertise in engineering plastic which enables it to innovate and make import substitute products, and healthy financials.

India’s largest supplier to Swedish home furnishing leader, India foray plan to boost revenue

SHEP is India’s largest supplier of plastic components and assemblies to Swedish furniture major. From the dedicated plant at Rania, Gujarat it manages ~20SKUs and the entire supply chain from the factory to its stores globally. Home furnishing revenue posted a CAGR of 23% during FY12-16 due to SHEP’s operational efficiencies along with consistent/reliable supplies. Presently, Swedish furniture major sources ~Euro300mn products from India and this is expected to double (30% local sourcing as per government requirement) post its India foray in 2017. Swedish furniture major has already acquired land for its first store in Hyderabad and construction is in full swing. It has plans to open 25 home furnishing stores in India by 2025. Post it’s entry in India; we expect significant increase in business to its current suppliers in India. We estimate SHEP’s revenue to post a CAGR of 20% during FY16-18e to Rs1.9bn.

Sole supplier of AllStar insulin pens to Sanofi; pharma packaging to aid growth

SHEP’s healthcare division includes medical devices and pharma packaging. It manufactures insulin pens for Sanofi and Wockhardt and asthma inhaler body for Sun Pharma and Zydus. In March 2015, SHEP had set up a pharma packaging plant at Rania, Gujrat (outlay Rs300mn) to manufacture child-resistant (CR) caps and HDPE bottles. As many Indian generic pharma companies are validating these products, we expect revenue generation to start from 1QFY17. We estimate the revenue from healthcare division to post a CAGR of 75% during FY16-18e to Rs562mn due to: 1) SHEP being the sole supplier of AllStar insulin pens to Sanofi and 2) pick-up in volume of import substitute CR caps and HDPE bottles.

Expertise in plastic engineering along with strong clientele

Over the years, SHEP has gained the expertise to convert critical components used in complex processes to engineered plastic. For Honeywell, it has replaced the metal rods with plastic for turbo chargers being supplied to major OEMs, including BMW. SHEP has also replaced the metal bearing cage for Fag Bearing, which supplies to Maruti Suzuki. SHEP’s niche in plastic and consistency has gained customers’ trust over the years. It maintains long-term relationships with many Fortune 100 companies across the globe.

INITIATING COVERAGE

Sector: Plastics Rating: Buy

CMP: Rs540 Target Price: Rs680

Stock Info

Sensex/Nifty 26,725/ 8,178

Bloomberg SHEP IN

Equity shares (mn) 8.3

52-wk High/Low Rs704/ 300

Face value Rs10

M-Cap Rs4.5bn/ $68mn

3-m Avg volume $0.1mn

Financial Snapshot (Rs mn) Y/E Mar FY16 FY17e FY18e

Net sales 2,255 2,760 3,449

EBITDA 389 501 658

PAT 154 213 314

EPS (Rs) 18.5 25.6 37.7

PE (x) 29.2 21.1 14.3

EV/EBITDA (x) 12.1 9.6 6.9

P/B (x) 5.0 4.2 3.5

RoE (%) 18.3 21.8 26.6

RoCE (%) 14.9 18.0 20.9

D/E (x) 0.6 0.7 0.7

Shareholding pattern (%)

Mar ’16 Dec ’15 Sep ’15

Promoter 54.1 54.1 54.1

–Pledged - - -

FII - - -

DII 5.4 - -

Others 40.5 45.9 45.9

Stock Performance (1-year)

Systematix

Institutional Equities

30 May, 2016

Ankit Gor [email protected] +91 22 6704 8028

Rahul Khandelwal [email protected] +91 22 6704 8003

30 May, 2016

2 Systematix Research is also available on Bloomberg SSSL <Go>, Thomson & Reuters Systematix Shares & Stocks (I) Ltd.


2

FINANCIALS

Profit & Loss Statement

YE: Mar (Rs mn) FY14 FY15 FY16 FY17e FY18e

Net revenues 1,508 1,797 2,255 2,760 3,449

Revenue growth (%) 22.8 19.2 25.5 22.4 25.0

- Op. expenses 1,267 1,532 1,865 2,259 2,791

EBIDTA 241 265 389 501 658

EBITDA margins (%) 15.6 14.4 17.1 17.9 18.8

- Interest expenses 84 67 101 98 105

- Depreciation 60 64 103 117 123

+ Other income 6 16 28 31 35

- Tax 37 19 59 103 151

Effective tax rate (%) 36 13 28 33 33

Reported PAT 66 130 154 213 314

+/- Extraordinary items - - - - -

+/- Minority interest - - - - -

PAT 66 130 154 213 314

EPS (Rs/share) 9.0 15.6 18.5 25.6 37.7

Cash EPS (Rs/share) 17.1 23.4 30.8 39.8 52.5

Source: Company, Systematix Institutional Research

Cash flow


PAT 66 130 154 213 314

+ Non cash items 61 82 116 117 123

Cash profit 127 212 270 331 437

- Incr/(Decr) in WC 40 208 (61) 84 140

Operating cash flow 87 4 331 247 297

- Capex 45 275 332 315 315

Free cash flow 42 (271) (1) (68) (18)

- Dividend - 3 6 7 11

+ Equity raised - 10 - - -

+ Debt raised 198 181 (192) 272 130

- Investments - - (254) 240 -

- Misc. items 60 97 33 43 63

Net cash flow 181 (181) 22 (86) 38

+ Opening cash 87 268 87 108 22

Closing cash 268 87 108 22 61


Balance sheet


Share capital 73 83 83 83 83

Reserves & Surplus 352 700 814 978 1,218

Networth 426 783 898 1,061 1,301

Minority interest - - - - -

Total Debt 672 853 661 933 1,063

Def. tax liab. (net) 32 50 63 63 63

Capital employed 1,130 1,685 1,622 2,057 2,427

Net Fixed assets 473 748 978 1,175 1,367

Investments 3 256 2 242 242

- of which liquid - 254 - 240 240

Net Working capital 386 594 533 617 757

Cash and bank balance 268 87 108 22 61

Capital deployed 1,130 1,685 1,622 2,057 2,427

Net debt 405 766 552 910 1,002

WC (days) 37 54 62 60 60

Book value (Rs/sh) 58 94 108 128 156


Ratios

YE: Mar FY14 FY15 FY16 FY17e FY18e

P/E (x) 60.1 34.6 29.2 21.1 14.3

P/BV (x) 9.3 5.7 5.0 4.2 3.5

EV/EBITDA (x) 17.0 18.0 12.1 9.6 6.9

RoE (%) 16.8 21.5 18.3 21.8 26.6

RoCE (%) 14.4 11.9 14.9 18.0 20.9

Fixed Asset turnover (x) 1.5 1.5 1.5 1.5 1.6

Dividend (%) - 20 40 51 75

Dividend yield (%) - 0.4 0.7 0.9 1.4

Dividend payout (%) - 12.8 21.6 20.0 20.0

Debtors days 69 69 64 64 64

Creditor days 65 50 33 36 36

Inventory days 33 35 30 32 32

D/E ratio 1.4 0.9 0.6 0.7 0.7

PAT growth (%) 81.8 97.5 18.4 38.5 47.2

EBITDA growth (%) 41.9 10.0 47.0 28.6 31.5


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Charting the story

Chart 1: Revenue to post a CAGR of 24% over FY16-18e Chart 2: Margins to expand with better realisations in pharma

Source: Company, Systematix Institutional Research Source: Company, Systematix Institutional Research

Chart 3: Debt/equity ratio to remain under 1x Chart 4: Return ratios to expand due to higher OPM and ATR


Chart 5: Home furnishing segment is highest grosser in FY16 Chart 6: Revenue from healthcare and other segments to rise


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Home furnishing segment contributes more than 50% of revenue, to remain in focus

SHEP began its business association with Swedish home furnishing major in 2004. During this 12-year period, SHEP managed the entire supply chain of around 20 SKUs right from its dedicated factory (100% EOU facility at Rania, Gujarat) to its stores worldwide. World over this Swedish company sources various product worth 10.5bn Euro, of which plastic products accounts for 11%. From India it sources about 40mn Euro of plastic products.

Swedish furniture maker sources 25% of global need from China

The world’s largest furniture retailer is engaged in selling ready-to-assemble furniture, appliances and home accessories. It is known for its cost-effective, convenient-to-use, trend setting and eco-friendly furniture and home accessories. The company had a turnover of Euro31.9bn in 2015, with 361 stores in 45 countries and over 1,000 suppliers from 51 countries. It sources Euro10.5bn worth of products and product categories mainly from China, followed by Poland and other countries.

Chart 7: India is in top 10 suppliers’ list

Source: The Economic Times, magazine

Sourcing from India to double from Euro315mn, post setting up of first store in 2017 by Swedish company

In late 1980s, the global home furnishing player set up the first office in India mainly to source textiles, carpets and rugs for its stores across world. Currently, it sources many products (worth Euro315mn) including rugs, towels, bed linen, carpets, textile items, plastic products and lighting equipment (lamps) from ~50 suppliers in India. Over the years, it has helped suppliers to build strength, expand/diversify the product portfolio and train their employees.

Table 1: Suppliers list of various product categories from India

Product Suppliers

Home furnishing Asian Fabricx, Welspun, Trident, Jawandsons, Innotech Fitness Systems

Home Lighting Products Neokraft, Associated Lighting company

Plastic home furnishing Shaily Engg, All Time plastics, Fancy fittings, Pyramid plastics

Floral décor Ramesh Flower Pvt ltd, Sibaflor Natural decorations

Garments Alok Industries, Shrilakshmi Cotsyn

Source: Panjiva.com

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The company has ambitious plans for India and sees the country as the third-most important market, buoyed by an expanding middle class, desire for higher standard of living and willingness pay premium for quality products. In 2013, it received the Indian government’s approval for its Rs105bn proposal to open 25 retail stores (in 9 cities by 2025) under 100% FDI route.

The first store in India is expected to come up in Hyderabad in 2HCY17, followed by Mumbai (three stores) and NCR. To fulfill the government’s 30% local sourcing criteria, the home furnishing player will have to ramp up it sourcing from India. To adhere to the local sourcing guideline, it would bring its key global supplier to India or scout for new suppliers in India or increase the sourcing from existing Indian suppliers. Of these, increased sourcing from local suppliers is the preferred option, in our view.

Table 2: India vision of the Swedish furniture retailer

2016 2025

Stores - 25

Employees 200 13,000

Visitors - 100,000,000

Distribution Centers - 3

% of locally sourced Products 3% 30%

Product Categories 5 10

Source: Poster at Make in India event , BKC

Revenue from home furnishing to clock CAGR of 20% during FY16-18e

SHEP’s home furnishing segment revenues have grown at a CAGR of 23% over FY12-16 to Rs1.3bn, we expect revenue to post a CAGR of 20% during FY16-18e, on the back of record of consistent supply, increasing usage of plastic in home furnishing and decreasing sourcing from China.

Chart 8: Home furnishing revenue to post a CAGR of 20% over FY16-18e


Home furnishing products

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Pharma segment to be growth driver; set up plant for CRC caps to reduce imports by bigger Indian generic players

To package tablets, drugs and syrups, pharmaceutical companies use glass bottles, HDPE bottles and blister flexible films. Regulated markets like the US have mandatory requirement to pack certain drugs in child-resistant packaging. It consists of HDPE bottle and Child Resistant Caps (CRC) on it. CRC caped bottles are difficult to open and it gives a loud and bit annoying sound.

Why CR caps are compulsory in the US

In the US, CR packaging is the result of the Poison Prevention Act (PPA) passed by the US Congress in 1970. The purpose of the law is to decrease the opportunity of children to gain access to substances, resulting in accidental poisoning. In addition, PPA extends to all states or localities in the US and is an uniform standard applied for all applicable products. The European standard only covers packages containing paracetamol, aspirin and medicines with 24mg of iron.

How CR caps fare better compared to forms of packaging

The pharma industry requires reliable and speedy packaging solutions that can deliver a combination of product protection, quality, tamper evidence, patient comfort and security requirements. Meeting all these challenges, CR packaging is designed or constructed to be significantly difficult for children under five years of age to open within a reasonable time but not difficult for adults.

Chart 9: CRC caps and HDPE bottles manufactured by SHEP


SHEP has set up a dedicated Rs300mn CRC plant at Rania, Gujarat

In India, three to four reliable companies (including Triveni Polymer, Shriji Polymer and Gopaldas) make HDPE bottles, while majority of CRC caps used by all generic pharma players in India are imported due to the absence of credible suppliers. To bridge this gap, SHEP has set up a CR cap and HDPE bottle plant, with a total outlay of Rs300mn at Rania, Gujarat. This dedicated plant has a manufacturing capacity of 100mn CRC caps and bottles. SHEP has tied up with Global System Closure (GSC) to manufacture and market (royalty of 2.5%) these caps in India and South East Asia.

Presently, these bottles and caps are under validation process with many Indian generic pharma players, while some companies have started supply. SHEP’s production will ramp up in a year’s time as most pharma companies will include the products in their commercial production

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Sole supplier to Sanofi for AllStar insulin pen

SHEP started manufacturing insulin pens for Wockhardt in 2004 and the response was lukewarm. Revenue from Wockhardt stood at Rs20mn in FY16 and is expected to remain at this level over next few years. In 2011, it commenced production of Allstar re-usable insulin pen for Sanofi and the response is encouraging. FY16 revenue from Sanofi stood at Rs180mn. Globally, Sanofi distributes ~345mn insulin pens, 320mn disposable and 25mn re-usable (of which SHEP supplies ~1.5mn re-usable pens).

Currently, healthcare division contributes 8% (Rs184mn) to overall sales. We conservatively estimate healthcare division’s revenue to post a CAGR of 75% over FY15-18e and contribute 16% to overall sales by FY18e, on the back of consistent supply to one of the world’s largest insulin pen maker and ramp up of CR plant capacity

Chart 10: Revenue contribution from healthcare to increase in FY18


Wockhardt Insulin pen by SHEP

Sanofi Insulin pen by SHEP



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Expertise in plastic engineering enables conversion of critical metal components

Over the years, SHEP has gained the expertise to convert critical components used in complex processes to engineered plastic. It has mastered to manufacture high precision components using high-performance engineering polymers. The company has a fully equipped tool room for mold maintenance, including manufacturing of spares, and core and cavity inserts, with years of experience in handling complex moulds. An intensive fail-proof maintenance program helps extend the tools life by 4x, thus helping to keep costs low without disregard for quality. This helps the company to provide end-to-end services from conceptualising to commercialised production, which includes design, prototyping, testing, validations, compliance (in case of healthcare) to the final manufacture of components and assemblies.

For Honeywell, it has replaced the metal rods with plastic for turbo chargers being supplied to major OEMs, including BMW. SHEP has also replaced the metal bearing cage for Fag Bearing, which supplies to Maruti Suzuki. SHEP provides vital parts in automotive seat-making to Amvian India (Camaco Group, US), which supplies to GM plants across the US. Currently, SHEP is working with OEMs on similar product requirements in India and abroad. It has also developed insulin pens for Sanofi having 14 parts, ranging from 0.3bm to 300gms.

Table 3: Few success stories

Honeywell Wockhardt

Product Rod for turbo charger Insulin Pen

Application Automobile Healthcare

Previous component

Metal -

Shaily’s role Metal to plastic rod From design to development using 100% plastic components

Details

Single component injection moulded rod

Productivity increased by 300x

Cost reduced by 40%

Replacement of metal rods in BMW, Audi, MERC, Hyundai, Ford and Tata

Shaily engineered a mechanism that uses 100% plastic components, the world's first

Patented the design and all IPRs transferred to Wockhardt on project completion

2008 IDEA Innovation award winner

Pens are designed to meet UL & FDA approvals & ISO 11608 1,2&3 certification

Shaily is one of the eight manufacturers of insulin pens in the world now


Auto, FMCG and Others products

Metal-to-Plastic rod for Honeywell



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Company background

Shaily Engineering Plastics commenced operation in 1987, with two moulding machines at Halol, Gujarat, primarily to cater to OEMs’ requirements. Currently, it has five plants across Halol and Rania in Gujarat, with more than a hundred injection moulding machines. These plants cater to the home furnishing, pharmaceutical industry and others (such as home appliances, automobile and FMCG industry).

Chart 11: Strong customer base


Chart 12: SHEP’s business centres

Headquarter Export unit

Tool room Assembly


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Key concerns

Delay in production rampup of CR caps may slow down revenue from the healthcare segment.

Setting up of a plant by Swedish furniture makers’ global supplier in India to cater to its India demand.

Around 50% of the revenue comes from a single customer. Higher dependency may be a risk to overall business.

As 75% of the revenue comes from export, currency volatility may impact revenue.

Valuation and view Since inception, SHEP has specialised in manufacturing high precision components using high-performance engineering polymers. With constant innovations and investments in new technologies, it is one of the world’s few plastic companies that have gained expertise in converting metal components to plastic. After becoming a dependable supplier to Swedish furniture maker, the company has set up a plant (outlay of Rs300mn) for import substitute CR caps. At full capacity, revenue from this plant can go up to Rs550mn. With no major players in India, CR caps will be key revenue driver for the company in FY17-18. With strong expected from home furnishing segment, SHEP plans to invest over Rs500mn during FY17-18 (leading to negative FCF) towards the segment which is expected to drive sales from FY19 onwards. Given the above positives, we estimate its revenue/PAT to clock a CAGR of 24/43% during FY16-18e. We initiate coverage on SHEP with a Buy rating and a target price of Rs680 (18x FY18e EPS of Rs38), due to its global positioning with key industry players despite a smaller size, expertise in engineering plastic which enables it to innovate and make import substitute products, and healthy financials.

Chart 13: PE band


Key management team Mahendra Sanghvi (Executive Chairman): He is a chemical engineer from Wayne State University USA, plastics technologist. He was working in North America in the plastics industry before coming to India and setting up Shaily Engineering. He has 32 years of experience in plastics industry in India as well as in North America.

Amit Sanghvi (Management Director): Son of Mahendra Sanghvi, he has six years of experience in Project management, Marketing & Strategy. He has done MSc in supply Chain & Manufacturing and BASc in Electrical Engineering.

Sanjay Shah (CFO & VP-Finance): He has done his Bachelors of Commerce from HSM. He is with the company since 22 years.

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Nikhil Khandelwal Managing Director +91-22-6704 8001 [email protected]

Equity Research

Analysts Industry Sectors Desk-Phone E-mail

Jaspreet Singh Arora - Head of Research Cement, Building Material, Construction +91-22-6704 8062 [email protected]

Rahul Jain IT, E-commerce +91-22-6704 8025 [email protected]

Priya Ranjan Auto & Auto Ancs +91-22-6704 8067 [email protected]

Salil Utagi Capital Goods, Engineering, Consumer Durables +91-22-6704 8064 [email protected]

T. Ranvir Singh Pharma, Healthcare, Agrochem +91-22-6704 8016 [email protected]

Clyton Fernandes BFSI +91-22-6704 8066 [email protected]

Ankit Gor Mid Caps +91-22-6704 8028 [email protected]

Divyata Dalal Construction, Infra +91-22-6704 8059 [email protected]

Gurpreet Kaur Cement, Building Material +91-22-6704 8049 [email protected]

Bibhishan Jagtap Auto & Auto Ancs +91-22-6704 8068 [email protected]

Rahul Khandelwal Mid Caps +91-22-6704 8003 [email protected]

Birendrakumar Singh Technical Research +91-22-6704 8024 [email protected]

Equity Sales & Trading

Name Desk-Phone E-mail

Pankaj Karde Head - Institutional Sales & Sales Trading +91-22-6704 8061 [email protected]

Jitendra Marchino, CFA Asia Sales +91-22-6704 8085 [email protected]

Dhanesh Padhya Sales +91-22-6704 8090 [email protected]

Dinesh Bajaj Sales +91-22-6704 8065 [email protected]

Jigar Kamdar Sales +91-22-6704 8060 [email protected]

Bhavik Shah Sales Trading +91-22-6704 8053 [email protected]

Vinod Bhuwad Sales Trading +91-22-6704 8051 [email protected]

Amit Sawant Dealer +91-22-6704 8054 [email protected]

Vahila Thoomu Assistant Manager +91-22-6704 8055 [email protected]

Sugandha Rane Assistant Manager +91-22-6704 8056 [email protected]

Corporate Access

Shaheen Chamadia Manager +91-22-6704 8091 [email protected]

Production

Ramesh Nair Editor +91-22-6704 8071 [email protected]

Mrunali Pagdhare Production +91-22-6704 8057 [email protected]

Institutional Equities Team

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DISCLOSURES/ APPENDIX

I. ANALYST CERTIFICATION

I, Ankit Gor, Rahul Khandelwal; hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this research report, (2) No part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report by Systematix Shares & Stocks (I) Limited or its Group/associates companies. (3) has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.

Disclosure of Interest Statement Update

Analyst holding in the stock No

Served as an officer, director or employee No

II. ISSUER SPECIFIC REGULATORY DISCLOSURES, Unless specifically mentioned in Point No. 9 below:

1. The Research Analyst(s), Systematix Shares & Stocks(I) Limited (SSSIL), Associate of Analyst or his relative does not have any financial interest in the company(ies) covered in this report.

2. The Research Analyst, SSSIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the company (ies) covered in this report as of the end of the month immediately preceding the distribution of the research report.

3. The Research Analyst, his associate, his relative and SSSIL do not have any other material conflict of interest at the time of publication of this research report.

4. The Research Analyst, SSSIL and its associates have not received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in this report, in the past twelve months.

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

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

7. The Research Analyst has not served as an Officer, Director or employee of the company (ies) covered in the Research report.

8. The Research Analyst and SSSIL has not been engaged in market making activity for the company(ies) covered in the Research report.

9. Details SSSIL, Research Analyst and its associates pertaining to the companies covered in the Research report:

Sr. No.

Particulars Yes / No.

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

No

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

No

3 Whether compensation has been received by SSSIL or its associates from the company(ies) covered in the Research report No

4

SSSIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report No

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

No

10. There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities.

STOCK RATINGS

BUY (B): The stock's total return is expected to exceed 20% over the next 12 months. ACCUMULATE (A): The stock's total return is expected to be within 10-20% over the next 12 months. HOLD (H): The stock's total return is expected to be within 0-10% over the next 12 months. SELL (S): The stock's total return is expected to give negative returns over the next 12 months. NOT RATED (NR): The analyst has no recommendation on the stock under review.

INDUSTRY VIEWS

ATTRACTIVE (AT): Fundamentals/Valuations of the sector are expected to be attractive over the next 12-18 months. NEUTRAL (NL): Fundamentals/Valuations of the sector are expected to neither improve nor deteriorate over the next 12-18 months. CAUTIOUS (CS): Fundamentals/Valuations of the sector are expected to deteriorate over the next 12-18 months.

III. DISCLAIMER

The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy completeness or correctness.

This document is for information purposes only. This report is based on information that we consider reliable, but we do not represent that it is accurate or complete, and one should exercise due caution while acting on it. Descriptions of any company or companies or their securities mentioned herein are not complete and this document is not, and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. All opinions, projections and estimates constitute the judgment of the author as on the date of the report and these, plus any other information contained in the report, are subject to change without notice. Prices and availability of financial instruments also are subject to change without notice. This report is intended for distribution to institutional investors.

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and/or providing to a third party a link, is prohibited by law and will result in prosecution. The information contained in the Report is intended solely for the recipient and may not be further distributed by the recipient to any third party.

SSSIL generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, SSSIL generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein. Our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. The views expressed in this research report reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The compensation of the analyst who prepared this document is determined exclusively by SSSIL however, compensation may relate to the revenues of the Systematix Group as a whole, of which investment banking, sales and trading are a part. Research analysts and sales persons of SSSIL may provide important inputs to its affiliated company(ies).

Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. SSSIL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report including but not restricted to fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc

SSSIL and its affiliates, officers, directors, and employees subject to the information given in the disclosures may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation (financial interest) or act as a market maker in the financial instruments of the company (ies) discussed herein or act as advisor or lender / borrower to such company (ies) or have other potential material conflict of interest with respect to any recommendation and related information and opinions. The views expressed are those of the analyst and the Company may or may not subscribe to the views expressed therein.

SSSIL, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall SSSIL, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. The Company accepts no liability whatsoever for the actions of third parties. The Report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the Report refers to website material of the Company, the Company has not reviewed the linked site. Accessing such website or following such link through the report or the website of the Company shall be at your own risk and the Company shall have no liability arising out of, or in connection with, any such referenced website

SSSIL shall not be liable for any delay or any other interruption which may occur in presenting the data due to any technical glitch to present the data. In no event shall the SSSIL be liable for any damages, including without limitation, direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by SSSIL through this presentation.

Neither SSSIL, nor any of its other group companies or associates, shall be responsible for any decisions taken on the basis of this report. Investors are advised to consult their Investment and Tax consultants before taking any investment decisions based on this report.

Systematix Shares & Stocks (I) Ltd. CIN : U65993MH1995PLC268414 BSE SEBI Reg. No.: INB/F011132736 (Member Code: 182) | NSE SEBI Reg. No.: INB/F/E231132730 (Member Code: 11327) | MCX-SX SEBI Reg. No.: INB/F261132733 (Member Code: 17560) | Depository Participant: IN-DP-CDSL-246-2004 (DP Id: 34600) | PMS : INP000002692 | AMFI : ARN - 64917|Research Analyst : INH200000840 Regd. office address: 2nd floor, J. K. Somani Bldg, British Hotel Lane, Fort, Mumbai - 400001 Corporate office address: A 603-606 , The Capital, BKC, Bandra (E), Mumbai, India - 400051

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