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1/14www.morganmarkets.
Asia Pacific Equity Research16 February 2012
Gateway Distriparks LtdNot CoveredGATE.NS, GDPL IN
Company Visit Note: Right Side of the TracksPrice: Rs143.85
India
Indian Autos
Aditya MakhariaAC
(91-22) 6157-3596
Ritesh Gupta
(91-22) 6157 3585
J.P. Morgan India Private Limited
YTD 1m 3m 12mAbs 11.7% 9.7% 7.2% 26.6%
See page 13 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 ththe firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a singfactor in making their investment decision.
100
110
120
130
140
150
Rs
Feb-11 May-11 Aug-11 Nov-11 Feb-12
Price Performance
GDPL is an operator focused on the high margin EXIM container railwaysegment, which has been investing in building an ICD network across
northern India. The railway segment turnover almost doubled over FY09-11
as EXIM revenues now account for over 85% of turnover. Management hashighlighted that they are expanding capacity by c.33% as their new terminals
come onstream.
Focused operator in the EXIM segment: GDPL has focused on the highmargin EXIM segment, which accounts for c.85% of its rail segmentturnover. The company has invested in setting up ICD terminals in northernIndia including Garhi, Ludhiana and the soon to be commissioned terminalat Faridabad. Besides, the company has tied up ICD facilities in Rajasthan
and Gujarat recently, which will deepen their service network. Healthy growth in turnover: The railway segment turnover almost
doubled over FY09-11, despite slowing industry growth - driven by a lowbase and market share gains. Management highlighted that they areexpanding capacity by 33% to 28 rakes over the next 15 months asutilization levels are currently at c.90%. In Ludhiana, Gateways marketshare has risen to c.45% in the EXIM business. However, in the NCRmarket, their market share is at 8% - as the new terminal commencesoperations in 2QFY13, the management is expecting to gain share.
EXIM trade likely to benefit from improving global sentiment: J.P.Morgans global PMI has recorded strong gains recorded in January. Oureconomics team is forecasting a broader underlying shift in growth
momentum and the risks to 1H global growth forecast have shiftedsignificantly to the upside. (Please refer to Global Data watch, Kasman etal, 3 February 2012). In India, we believe that the industrial cycle willrevive from hereon given expectations of monetary easing, which should
benefit container TEU volumes.
CFS segment could benefit from terminal expansions: The managementhighlighted that they will be expanding facilities in Chennai and Kochi aswell as de-bottlenecking facilities at Mumbai CFS II, which could partiallyoffset slowing growth at the JNPT facility.
Currently, consolidated debt:equity ratio of 0.6x as the companygenerates significant cash from its CFS facilities. The company offers adividend yield of 4%
NOTE: THIS DOCUMENT IS INTENDED AS INFORMATIONONLY AND NOT AS A RECOMMENDATION FOR ANY STOCK.
IT CONTAINS FACTUAL INFORMATION, OBTAINED BY THE
ANALYST DURING MEETINGS WITH MANAGEMENT. J.P.
MORGAN DOES NOT COVER THIS COMPANY AND HAS NO
RATING ON THE STOCK.
Figure 1: Gateway Distriparks Rail TE
Source: Company
36,700
66,500
112,444
131,337124,9
-
40,000
80,000
120,000
160,000
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Asia Pacific Equity Research
16 February 2012Aditya Makharia(91-22) [email protected]
Table 1: Gateway Distriparks Consolidated Financial Snapshot (Rs. In M)
FY08 FY09 FY10 FY11
Net sales 2,714 4,520 5,166 5,991 52-week range (Rs) 106.3-153.5Net profit 736 796 791 968 Market cap (Rs B) 15,538EPS (Rs) 6.4 7.4 7.3 9.0 Market cap (US$ B) 317DPS (Rs) 2.0 2.0 3.5 6.0 Shrs outsting (MM) 107.9Net sales growth (%) 68.6 66.6 14.3 16.0 Free float (%) 50EPS growth (%) -24.5 16.1 -0.7 22.2 Avg daily value (Rs MM) 23.8ROE (%) 11.4 12.8 11.9 14.1 Avg daily value (US$ MM) 0.5BVPS (Rs) 55.9 57.9 61.6 63.7 Avg dly volume (MM shs) 0.7P/E (x) 22.6 19.5 19.6 16.1 BSE sensex 18,109Div. Yield (%) 1.4 1.4 2.4 4.2 Exchange rate (Rs/US$) 49.0
Source: Company Reports
Operator in the EXIM segment: GDPL is among the few private railway operators
that has focused on the high margin EXIM segment, which accounts for c.85% of its
turnover. The company has invested in setting up ICD terminals in northern India,
including Garhi, Ludhiana and a soon-to be-commissioned terminal at Faridabad.Besides, the company has tied up ICD facilities in Rajasthan and Gujarat recently,
which will deepen their service network.
Figure 2: Gateway Rail Freight Segment Mix (%) FY12YTD
Source: Company
Healthy growth in turnover: The railway segment turnover almost doubled in
FY09-11, despite slowing industry growth - driven by a low base and market share
gains. As the contribution of the railway business has grown, it now accounts for
50% of Gateways consolidated turnover.
Table 2: Gateway Rail Freight P&L Statement (in Rs. M)
FY09 FY10 FY11 FY12 YTD
TEU's 66,500 112,444 131,337 124,913
Sales 1,838 2,906 3,226 2,869
EBITDA 145 302 438 494Margin (%) 7.9 10.4 13.6 17.2
PAT (262) (127) (39) 147
Source: Company
EXIM, 87%
Domestic,13%
GDPL is focusing on the high
margin EXIM segment
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Asia Pacific Equity Research
16 February 2012Aditya Makharia(91-22) [email protected]
Figure 3: Revenue Breakup
Source: Company
Figure 4: EBITDA Breakup
Source: Company
The company is expanding capacity by 33% to 28 rakes over the next 15 months as
utilization levels are currently at c.90%. In Ludhiana, Gateways market share has
risen to c.45% in the EXIM business. However, in the NCR market, their market
share is at 8% - as the new terminal commences operations in 2QFY13, the
management is expecting to gain share.
Figure 5: Rail Business Segment Annual TEUs
Source: Company.
53%38% 40% 43%
40%55% 53% 51%
8% 7% 8% 6%
FY09 FY10 FY11 FY12YTD
CFS Business Rail Business Snowman
88%72% 68% 70%
9%
22% 25% 26%
3% 6% 6% 4%
FY09 FY10 FY11 FY12YTD
CFS Business Rail Business Snowman
36,700
66,500
112,444
131,337 124,913
0%
20%
40%
60%
80%
100%
-
50,000
100,000
150,000
FY08 FY09 FY10 FY11 FY12YTD
TEUs Growth (%)
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Asia Pacific Equity Research
16 February 2012Aditya Makharia(91-22) [email protected]
Figure 6: Rail Business Segment PAT (Rs Mn)
Source: Company.
EXIM trade likely to benefit from improving global sentiment: J.P. Morgans
global PMI has recorded strong gains recorded in January. Our economics team is
forecasting a broader underlying shift in growth momentum and the risks to 1H
global growth forecast have shifted significantly to the upside. (For more
information please refer to Global Data watch, Kasman et al, 3 February 2012). In
India, we believe that growth rates will revive from hereon, given expectations of
monetary easing ahead.
Sou
Source: J.P. Morgan Economic Research (forecast for the rest for FY12)
(43) (34)
338 46
51 5111.6%12.8% 13.0%
17.6% 17.8% 17.1% 16.8%
0%
5%
10%
15%
20%
(60)
(40)
(20)
-
20
40
60
1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12
PAT (LHS) EBITDA Margin (%, RHS)
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Asia Pacific Equity Research
16 February 2012Aditya Makharia(91-22) [email protected]
Figure 7: Container Traffic at Major Ports (in 000 TEUs)
Source: GoI.
Figure 8: Mundra Port Container Traffic (in 000 TEUs)
Source: Company.
CFS segment could benefit from terminal expansions: The managementhighlighted that they will be expanding facilities in Chennai and Kochi as well as de-
bottlenecking facilities at Mumbai CFS II, which could partially offset slowinggrowth at its Mumbai CFS facility.
Table 3: CFS Business P&L Statement (Rs Mn)
FY09 FY10 FY11 FY12YTD
TEUs (in units) 324,400 303,963 333,422 257,096
Sales 2,443 2,015 2,418 2,463
EBITDA 1,384 994 1174 1,348
EBITDA Margin (%) 56.70% 49.30% 48.60% 54.70%
PAT 1,063 897 973 827
Source: Company reports
The growth in the CFS segment has been impacted by lower volumes in the Mumbai
CFS due to sedate growth in port volume at JNPT, lower utilization rates at Punjab
Conware (due to a fire) as well as market share losses.
16%
7%9%
7%
4%5%
5%
0%
4%
8%
12%
16%
1,680
1,800
1,920
2,040
Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12
TEU (in '000 nos) - LHS Growth (%) - R HS
278
314325
312
343365
391
28%
38%
44%
23% 23%
16%20%
0%
10%
20%
30%
40%
50%
200
250
300
350
400
450
1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12
TEU (in '000 nos) - LHS % Growth - RHS
Given the high growth in Mundra
Port, the railway mix is tilting -
with exports growing from JNPT
and imports growing from
Mundra.
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Asia Pacific Equity Research
16 February 2012Aditya Makharia(91-22) [email protected]
Figure 9: CFS Business Segment Annual TEUs
Source: Company.
Figure 10: Contribution of Mumbai in Overall TEUs
Source: Company Data.
However, realizations have benefited given longer dwell times as well as price hikes.
This has driven revenues and profitability.
Figure 11: CFS Business Segment Realisations (Rs/TEU)
Source: Company
Figure 12: Gateways CFS Business Segment Revenues (Rs Mn) and EBITDA margin trend
Source: Company.
The Snowman Cold Chain operations have benefitted from market share gains
from the unorganized segment the organized segment accounts for just 20% of the
330,800 324,400 303,963 333,422
257,096
0%-2%
-6%
10%
5%
-10%
10%
30%
-
100,000
200,000
300,000
400,000
FY08 FY09 FY10 FY11 FY12YTD
CFS TEUs Growth (%)
76% 76%
71%69%
65%
50%
70%
90%
FY08 FY09 FY10 FY11 FY12YTD
6,291 6,6537,770 8,193
9,146 9,45210,221
-
4,000
8,000
12,000
1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12
477 556673 717
831 821 811
44.3% 46.2%48.7%
52.3% 55.8% 54.3% 54.1%
0.0%
20.0%
40.0%
60.0%
0
250
500
750
1000
1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12
CFS Revenues (Rs Mn) EBITDA Margin
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16 February 2012Aditya Makharia(91-22) [email protected]
overall volumes. Thus, management expects to gain share from the unorganized
market, given its superior product offering.
Table 4: Snowman Logistic Limited P&L Summary
FY09 FY10 FY11 FY12YTD
Sales 348 369 475 447
EBITDA 51 78 114 118
Margin (%) 14.7 21.1 24.1 26.3
PAT (6) 22 34 26
Source: Company
Gearing Ratios under check: Currently, the consolidated debt:equity ratio is at 0.6x
as the company generates significant cash from its CFS facilities. While Gateway
Rail has debt on its books, it includes the Rs.3B infusion from Blackstone privateequity, which is issued in the form of compulsory convertible bonds, with a
conversion that will take place in five years. The infusion will give Blackstone a
stake of between 37.3% - 49.9% in the rail subsidiary, based on certain milestones.
The company offers a dividend yield of 4%.
Table 5: Gateway Distriparks Consolidated Balance Sheet as of Dec11 (Rs Mn)
BALANCE SHEET CFS Rail Snowman Consolidated
Equity Capital 1,082 1,082
Reserves 2,909 2,861 670 6,440
Net Worth 3,990 2,861 670 7,521
CCPS in GRFL 2,958 - 2,958
Debt 104 1,049 1,153
Minority Interest 43 40 521 604
Deferred Tax 116 35 151
Liabilities 4,253 6,908 1,226 12,388
Fixed Assets (Net) 2,500 6,616 899 10,014
Liquid Funds 1,292 102 204 1,598
Current Assets (Net) 461 191 124 776
Capital Employed 4,253 6,909 1,226 12,388
Source: Company
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16 February 2012Aditya Makharia(91-22) [email protected]
Company Profile
Gateway Distriparks has three verticals Container Freight Stations (CFS), InlandContainer Depots (ICD) with rail movement of containers to major maritime ports,and Cold Chain Storage and Logistics.
GDL operates two Container Freight Stations at Navi Mumbai, one at Chennai andone at Visakhapatanam.. A new CFS at Kochi will be operational by FY12.
GDLs rail operations are handled by a subsidiary, Gateway Rail Freight Limited(GatewayRail) in which The Blackstone Group of USA has made a private equityinvestment.
Gateway Rail provides inter-modal logistics and operates its own Inland ContainerDepots/Dry Ports. GatewayRail operates rail linked facilities at Garhi-Harsaru
(Gurgaon, Haryana), Ludhiana (Punjab) and Kalamboli (Navi Mumbai). Itsupcoming terminal at Asaoti (Faridabad, Haryana) will be operational by FY12E aswell. Gateway Rail owns and operates a fleet of 21 trains at its rail linked terminals.
Gateway Rail operates regular container train service from these ICDs / Dry Ports toNhavaSheva, Mundra and Pipavav, transporting import and export as well asdomestic containers.
The third vertical consists of cold chain logistics solutions out of 19 locations inIndia through the subsidiary, Snowman Logistics Limited in which Mitsubishi,
Nicherei and IFC (World Bank) are investors. Snowman is a leading LogisticsServices Provider and Indias first cold supply chain company with a nationwidenetwork connecting more than 100 cities and more than 4,400 outlets. Snowman has
a pan-India presence that offers comprehensive warehousing, transportation anddistribution services.
Figure 13: Gateway Distriparks Shareholding Pattern
Source: BSE India
Total Promoters,40.5
DIIs, 15.5
FIIs, 27.7
Non-Ins titutions, 16.4
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Asia Pacific Equity Research
16 February 2012Aditya Makharia(91-22) [email protected]
Figure 14: Gateway Distriparks Limited Holding Structure
Source: Company reports
Gateway Distriparks
Limited
Gateway Distriparks (Kerala)
Limited
60%
Gateway Distriparks (South)
Private Limited100%
Gateway East India Private
Limited
100%Snowman Logistics Limited
52.2%
Gateway Rail Freight Limited
97.3%
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16 February 2012Aditya Makharia(91-22) [email protected]
Figure 15: Segmental Quarterly Earnings Summary (Rs Mn)
Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11
GDLSales 477 556 673 717 831 821 811
% Growth 0% 12% 27% 40% 74% 48% 20%
EBITDA 211 257 328 375 464 446 438
Margin (%) 44.3 46.2 48.7 52.3 55.8 54.3 54.1
PBT 166 221 283 330 416 399 390
PAT after MI 175 233 267 307 281 276 270
Grail
Sales 720 742 808 849 903 960 1,006
% Growth 3% -2% 21% 8% 26% 29% 24%
EBITDA 83 95 105 150 161 165 169
Margin (%) 11.6 12.8 13.0 17.6 17.8 17.1 16.8 PBT (45) (35) 3 42 47 53 52
PAT after MI (43) (33) 3 38 46 51 51
Snowman
Sales 105 106 120 144 139 142 167
% Growth 34% 14% 32% 23% 32% 33% 39%
EBITDA 23 23 34 31 36 36 46
Margin (%) 22.2 21.4 28.2 21.8 25.8 25.6 27.5
PBT 15 13 23 22 23 31
PAT after MI 8 5 10 5 8 8 11
Consolidated
Sales 1,301 1,404 1,601 1,710 1,873 1,923 1,983
% Growth 4% 5% 24% 21% 44% 37% 24%
EBITDA 318 374 467 556 661 647 653
Margin (%) 24.4 26.7 29.2 32.5 35.3 33.6 32.9
PBT 135 199 309 372 485 474 473
PAT after MI 140 205 280 350 334 335 331
Source: Company
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16 February 2012Aditya Makharia(91-22) [email protected]
Gateway Distriparks Ltd: Summary of Financials (Consolidated)
Profit and Loss statement Cash flow statement
Rs in millions, year-end Mar FY08A FY09A FY10A FY11A Rs in millions, year-end Mar FY08A FY09A FY10A FY11A
Revenues 2,714 4,520 5,166 5,991 EBIT 732 1,027 794 1,094% change Y/Y 69% 67% 14 16% Depreciation & amortisation 292 445 455 502
Dec/(Inc) in Working Capital 202 (223) 55 (681)EBITDA 1,024 1,471 1,249 1,597 Taxes (118) (143) 82 (92)
% change Y/Y 26% 44% -15 28% Cash flow from operations 1,108 1,105 1,386 824EBITDA Margin (%) 37.7% 32.6% 24.2 26.7% Extra ordinary Items - - - -
Other Income 144 109 125 129 Net Capex (2,180) (1,926) (1,025) (1,632)Depreciation 292 445 455 502EBIT 876 1,135 919 1,223 Net Interest (Paid)/ Recd (20) (202) (195) (182)Interest Charges 20 202 195 182 Free cash flow (1,092) (1,022) 165 (989)Earnings before tax 856 934 724 1,041
% change Y/Y -6% 9% -22 44% Income from Investments 144 109 125 129Tax 136 159 (79) 44 (Inc) / Dec in LT Investment - (230) 80 20
as % of EBT 15.9% 17.0% -11.0 4.2% Equity raised/ (repaid) (156) (740) 55 25Net Income (After MI) 736 796 791 968 Debt raised/ (repaid) 141 1,829 55 (945)
% change Y/Y -5% 8% -1 22% Other 168 (9) 8 2,913Shares Outstanding 116 108 108 108 Dividends paid (316) (300) (286) (442)
EPS (pre exceptional) 6.4 7.4 7.3 9.0Cash generated during theyear (1,111) (364) 202 710
% change Y/Y -24% 16% -1 22% Beginning cash 2,068 957 593 795DPS (Rs) 2 2 3 6 Ending cash 957 593 795 1,505
Balance sheet Ratio Analysis
Rs in millions, year-end Mar FY08A FY09A FY10A FY11A %, year-end Mar FY08A FY09A FY10A FY11A
Cash 957 593 795 1,506Accounts receivable 317 529 682 624 EBITDA margin 37.7 32.6 24.2 26.7Others 207 280 531 754 Net profit margin 26.5 17.1 15.5 16.6Current assets 1,481 1,402 2,008 2,884LT investments 0 230 150 130 Sales growth 69 67 14 16Net fixed assets 6,651 8,132 8,703 9,832 Net profit growth -5 8 -1 22Total assets 8,132 9,764 10,860 12,846 EPS growth -24 16 -1 22
Dividend Payout Ratio 42 37 55 76Dividend Yield 1.4 1.4 2.4 4.2
Liabilities EBITDA margin 37.7 32.6 24.2 26.7Payables 363 377 1,019 672 Net profit margin 26.5 17.1 15.5 16.6Others 282 315 287 433Total current liabilities 645 692 1,307 1,105 Price to Book Value (x) 2.6 2.5 2.3 2.3Total debt 215 2,045 2,099 1,154Deferred Tax 169 185 187 140 Net debt to total capital 0.0 0.2 0.2 0.1Total liabilities 1,030 2,922 3,593 2,399 Sales/assets 0.4 0.5 0.5 0.5Shareholders' equity 6,467 6,237 6,642 6,878 Assets/equity 1.2 1.5 1.4 1.7Minority Interest 636 606 625 3,568Networth 7,103 6,842 7,267 10,446 ROE 11.4 12.8 11.9 14.1BVPS (Rs. per share) 56 58 62 64 ROCE 11.7 12.5 9.6 10.4
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Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple researchanalysts 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 viewsexpressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part ofany of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or viewsexpressed by the research analyst(s) in this report.
Important Disclosures
Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Gateway Distriparks Ltd.
Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgancovered companies by visiting https://mm.jpmorgan.com/disclosures/company , calling 1-800-477-0406, or [email protected] with your request.
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 entireperiod.J.P. Morgan ratings: OW = Overweight, N= Neutral, UW = Underweight
Explanation of Equity Research Ratings 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 theaverage 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) coverageuniverse.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocksin the analyst's (or the analyst's team's) coverage universe.] In our Asia (ex-Australia) and UK small- and mid-cap equity research, each
stocks expected total return is compared to the expected total return of a benchmark country market index, not to those analystscoverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analysts coverage universe can
be found on J.P. Morgans research website, www.morganmarkets.com.
Coverage Universe: Makharia, Aditya: Ashok Leyland (ASOK.BO), Bajaj Auto (BAJA.BO), Bosch Limited (BOSH.BO), ContainerCorporation of India Ltd (CCRI.BO), Hero Motocorp Ltd. (HROM.BO), Mahindra & Mahindra (MAHM.BO), Maruti Suzuki India Ltd(MRTI.BO), Tata Motors (TAMO.BO)
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Gateway Distriparks Ltd (GATE.NS, GDPL IN) Price Chart
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
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16 February 2012Aditya Makharia(91-22) [email protected]
J.P. Morgan Equity Research Ratings Distribution, as of January 6, 2012
Overweight(buy)
Neutral(hold)
Underweight(sell)
J.P. Morgan Global Equity Research Coverage 47% 42% 12%IB clients* 52% 45% 36%
JPMS Equity Research Coverage 45% 47% 8%IB clients* 72% 62% 58%
*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 holdrating category; and our Underweight rating falls into a sell rating category.
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U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMSL.Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of
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Asia Pacific Equity Research
16 February 2012Aditya Makharia(91-22) [email protected]
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