jkumaric

INITIATING COVERAGE 10 SEP 2014

J. Kumar Infraprojects BUY

Quality urban infra playWe like J. Kumar Infraprojects (JKIL) given (1) established execution expertise in the urban infrastructure space, (2) strong EBITDA margin profile of over 15%, (3) high revenue visibility with Mar-14 order book of Rs 31.5bn (2.6x FY14 revenues), (4) strong balance sheet with net debt/equity of 0.5x post the recent QIP of Rs 1.4bn and (5) geographical diversification of the order book.

With an expected thrust on development of urban infrastructure over the next few years, JKIL is well placed to garner fresh orders and also maintain margins owing to its policy of minimal sub-contracting and owning machinery to execute projects. JKIL currently has a robust order book of ~Rs 31.5bn (excluding L1 orders of ~Rs 10bn) that is 2.6x FY14 revenues, with over 90% in transportation segment.

Owing to strong order book and execution visibility on large projects such as Delhi Metro and Sion-Panvel road project, we expect revenues to grow at 17% CAGR over FY14-17E to Rs 19.2bn. We estimate PAT CAGR of 20% over FY14-17E and expect JKIL to maintain healthy RoEs of ~15% in FY15-17E factoring the dilution impact of recent fund raising. We initiate coverage on JKIL with a BUY rating with TP of Rs 422/sh based on 10x P/E of average FY16-17 EPS (Sep-16) of Rs 42.2, in line with multiples of mid cap construction companies.

Strong urban transportation player JKIL is a specialised player in urban transportation

having executed more than 75 projects and currently having over 40 ongoing projects. JKIL is involved in the construction of metro, roads, flyovers, skywalks, buildings and tunnels.

Backward integration key to higher margins JKIL has been able to maintain EBITDA margins of over

15% in FY10-14 owing to a large fleet of owned modern construction equipment and 15 ready mix concrete plants catering primarily to its captive requirements.

Key Risks Key downside risks are lower than expected order

inflows, decline in EBITDA margins below 16% and concentration of over 90% order book in the transportation segment.

FINANCIAL SUMMARY (STANDALONE) (Rs mn) FY13 FY14 FY15E FY16E FY17E

Net Sales 10,011 11,871 14,246 17,095 19,231

EBIDTA 1,678 2,062 2,474 2,916 3,254

APAT 762 844 961 1,266 1,455

EPS (Rs.) 27.2 30.2 29.8 39.3 45.1

P/E (x) 11.7 10.6 10.7 8.1 7.1

EV/EBITDA 6.0 6.4 5.7 4.9 4.3

RoE (%) 16.2 15.6 14.0 14.9 15.0 Source : Company, HDFC sec Inst Research

INDUSTRY CONSTRUCTION

CMP (as on 10 Sep 2014) Rs 319

Target Price Rs 422 Nifty 8,094

Sensex 27,057

KEY STOCK DATA

Bloomberg/Reuters JKIL IN/JKIP.BO

No. of Shares (mn) 32

MCap (Rs bn) / ($ mn) 10/169

6m avg traded value (Rs mn) 32

STOCK PERFORMANCE (%)

52 Week high / low Rs 351/130

3M 6M 12M

Absolute (%) 4.3 76.6 106.4

Relative (%) (1.5) 53.2 71.1

SHAREHOLDING PATTERN* (%)

Promoters 59.16

FIs & Local MFs 4.59

FIIs 10.18

Public & Others 26.07 Source : BSE * As on Jun 14

Adhidev Chattopadhyay [email protected] +91-22-6171-7317 HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

JKIL : Strong urban transportation player Strong urban infra EPC player : JKIL is a specialised

player in urban transportation having executed more than 75 projects and currently having over 40 ongoing projects. JKIL is involved in the construction of metro, roads, flyovers, skywalks, buildings and tunnels. The company’s promoters have been in the contracting business since 1980 (starting as a maintenance contractor for PWD buildings). JKIL was originally incorporated as J. Kumar &Company (India) in December 1999. It started its operations in 2004 subsequent to the transfer of the Class 1A registration of J. Kumar & Company to JKIL.

Current order book of Rs 41.5bn : JKIL has an order book of ~Rs 41.5bn as of Jun-14 (3.5x FY14 revenues including L1 orders of Rs 10bn). Currently, over 90% of JKIL’s order book is concentrated in the transportation segment with the balance coming

from irrigation, civil construction and piling projects. Although the state of Maharashtra accounted for nearly all of JKIL’s order book up to FY10, JKIL has diversified across geographies and currently more than 50% of the order book is outside Maharashtra.

Backward integration key to higher margins : JKIL has been able to maintain EBITDA margins of over 15% in FY10-14 owing to a large fleet of owned modern construction equipment and 15 ready mix concrete plants catering primarily to its captive requirements.

JVs to augment bidding and execution : JKIL has entered into joint ventures with national and international players such as China Railway No.3 Engineering Group Co. Ltd, NCC Limited (NR) and PBA Infrastructure Limited to enable it to bid for larger projects and scale up execution capabilities.

Transportation accounts for majority of order book Transportation segment provides majority of revenues

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Currently, over 90% of JKIL’s order book is concentrated in the transportation segment with the balance coming from irrigation, civil construction and piling projects. JKIL has diversified across geographies and currently more than 50% of the order book is outside Maharashtra

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FY10 FY11 FY12 FY13 FY14

Transport Irrigation Civil Construction Piling

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JKIL’s order book has a good geographical spread across West and North India Government projects account for majority of JKIL’s order book with the Delhi Metro and Sion-Panvel being the key large projects

JKIL: DETAILS OF BUSINESS VERTICALS Transportation Engineering Civil Construction Irrigation Works Others

• Metro • Roads (rigid and flexible

pavement roads) • Flyovers • Skywalks • Pedestrian Subways • Bridges • ROB and RUB • Storm Water Drainage

Systems • Grade Separators • Airport Runways • Tunneling work

• ESIC (Hospital Cum Medical College)

• Railway Terminus / Stations • Commercial Buildings • Sports Complexes • Swimming Pools

• Earthen dams • Minor Irrigation Tanks • Spillways • Canals • Acqueducts

• Piling • RMC

Source: Company, HDFC sec Inst Research

JKIL’s order book spread across geographies Govt. projects account for majority of order book


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JKIL has a diversified mix of projects across segments and geographies The transportation segment is JKIL’s key area of expertise where it has capabilities to construct a variety of structures. JKIL has entered into joint ventures with national and international players such as China Railway No.3 Engineering Group Co. Ltd, NCC Limited (NR) and PBA Infrastructure Limited

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JKIL : MAJOR PROJECTS EXECUTED (AS OF MARCH 2014)

Segment Project Client Order Size Executed (Rs mn)

Transportation Design and Construction of Flyover on Dr Baba Saheb Ambedkar Road, Mumbai, Maharashtra

MMRDA 1,830

Transportation Augmentation of SWD system catchment No. 117 BPT Colony, Railway yard and Training of Kharoo Creek Nalla

Dy. Chief Engineer 834

Transportation Design & Construction of bridge cum flyover and approach roads near existing Holkar Bridge on Mula River, Pune

PMC 660

Transportation Draining of Mithi River (Widening and deepening, RCC retaining wall, service road) from Custom colony FOB to Pipeline Road, Powai

Dy. Chief Engineer 603

Transportation Cleaning and Improvement of SWD and nallas including reconstruction in Rajendra Nagar Nalla Dy. Chief Engineer 491

Transportation Draining/Widening/Deepening of Usha Nagar Nalla System, (D/S of Railway Line). Bhandup (E) MCGM 417

Transportation Construction of Pedestrian Skywalk Bridge (Phase II) Package-2 (Wadala Road, Sewree, Reay Road and Sandhurst Road)

MSRDC 400

Transportation Construction of Flyover near Times of India Building at Malad Junction on Western Express Highway MSRDC 345

Transportation Improvement of Kannawar Nagar Nalla system and training of Bombay Oxygen Nalla MCGM 266

Transportation Construction of Skywalk at Parel, Chinchpokali and Cotton Green MSRDC 261

Civil Construction Construction of Swimming Pool Complex at H.R. Johnson Tile Co., L.B.S. Road, Thane (W), Thane TMC 94

Civil Construction Construction of elevated Olympic size swimming pool, Diving pool, recreation pool, Health Club bldg. and Game Hall and Roads for Goregaon Sports Club

GSC 83

Irrigation Construction of Aqueduct @ R.D. 655 mtr of Bembla Main Canal Ex. Engineer, Bembla Main Canal Division, Yavatmal

82


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Backward integration has enabled JKIL to achieve superior EBITDA margins In order to ensure timely completion of projects, JKIL

owns a number of plants and equipments required for construction. This includes tunnel boring machines (TBM), hydraulic piling rigs HR 180 and HR 130, putmiester mobile boom placer concrete pump and stationery concrete pumps, RMC plants, transit mixers, various capacity cranes, poclains, front end loaders, JCBs, trucks and tippers and a large number of shuttering and centering plates. Further, the company engages in minimal sub-contracting of work.

As a result, JKIL has achieved margins of over 15% over FY09-14 as compared to the industry average of 9-12% from road projects.

JKIL has 15 RMC plants located across various parts of the country. The availability of the ready mix transit

mixers enables JKIL to service multiple locations for its contracts from a single nodal point. JKIL also sells ready mix concrete to third parties which helps in augmenting the company’s revenues and use the RMC’s to their optimum levels.

JKIL also has a work force that consists of 3,024 full-time employees out of which 761 consist of engineering staff. Hence, JKIL has a track record of timely project completion and has also received bonuses for early completion in few projects.

Going forward, we believe that JKIL’s backward integration and owned equipment will enable the company to grow its order book without substantially sacrificing margins.

EBITDA margins of over 15% owing to in-house tools Transportation accounts for majority of order book


JKIL follows a model of owning the required equipment and does minimal sub-contracting of work As a result, JKIL has achieved margins of over 15% over FY09-14 as compared to the industry average of 9-12%

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Urban Infrastructure : Strong growth prospects in India In 2011, ~31.3% of India’s population lived in urban

areas and the rate of urbanisation was expected to be ~2.47% between 2010 and 2015 (as per CIA World Factbook).

According to the High Powered Expert Committee (HPEC, set up by the Indian Ministry of Urban Development) 2011 report, there is a huge requirement of investment in urban infrastructure with Rs 40,000bn as capital expenditure and another Rs 20,000bn for operation and maintenance (O&M) expenditure (as per 2009-10 prices) required to be spent over the next 20 years.

Of this, Rs 17,300bn will be required for urban roads, Rs 8,000bn for sectors delivering urban services such as water supply, sewerage, solid waste management and

storm water drains. Further, Rs 4,000bn will be required for renewal and redevelopment including slums.

For the Twelfth Five Year Plan, the working group constituted by the Planning Commission on financing urbanisation has estimated a required investment of Rs 2,884bn for the urban transport sector. The group has also estimated a required capex of Rs 992bn for water supply/sanitation for the Twelfth Plan period.

With the formation of a new Government at the Centre in May 2014, the proposed thrust on urbanisation through the proposed development of 100 Smart Cities across India is expected to provide an additional fillip over the long term.

ESTIMATES OF CAPEX REQUIRED FOR URBAN TRANSPORT SECTOR IN XII PLAN Annual Capex (Rs bn) 2012 2013 2014 2015 2016 Total

Urban roads 298 352 416 490 579 2,135

Mass transit 78 92 108 127 150 555

Traffic management systems 17 20 24 28 33 121

Street lighting 3 4 4 5 6 23

Capacity building (urban transport) 10 10 10 10 10 50

Total 406 477 562 661 778 2,884 Source: Government Documents, HDFC sec Inst Research

For the Twelfth Five Year Plan, the working group constituted by the Planning Commission on financing urbanisation has estimated a required investment of Rs 2,884bn for the urban transport sector With the formation of a new Government at the Centre in May 2014, the proposed thrust on urbanisation through the proposed development of 100 Smart Cities across India is expected to provide an additional fillip over the long term

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With a net debt/equity of just 0.5 as of Jul-14 and capex programme nearing completion, JKIL is well positioned to bid for new projects over FY15-17E on a sustainable basis Management maintains that it will be judicious in bidding for projects and will look to maintain EBITDA margins of over 15% across its order book

JKIL’s order book provides strong revenue visibility

Current order book of Rs 41.5bn : JKIL has an order book of ~Rs 41.5bn as of Jun-14 (3.5x FY14 revenues including L1 orders of Rs 10bn). Currently, over 90% of JKIL’s order book is concentrated in the transportation segment with balance coming from irrigation, civil construction and piling projects.

Order book to drive revenue growth : JKIL’s revenues have grown at a 24% CAGR over FY09-14 driven largley by order book tripling to Rs 36.6bn as of Mar-13 from Rs 12.2bn as of FY09. As a result of the growing revenue coupled with large order book, we expect revenues to grow at 17% CAGR over FY14-17E to Rs 19.2bn. With a net debt/equity of just 0.5 as of Jul-14 and capex programme nearing completion, JKIL is well positioned to bid for new projects over FY15-17E on a sustainable basis.

Further, with an expected thrust on urban infrastructure development by the new Central Government, more orders will start flowing in at the State level across geographies that will enable the company to maintain a diversified order book.

Management maintains that it will be judicious in bidding for projects and will look to maintain EBITDA margins of over 15% across its order book, even on a higher revenue base.

As a result, we expect JKIL to maintain a healthy order book/bill ratio over FY15-17E with transportation projects having over ~80% share. Any large project wins through the JV route may provide an additional fillip to revenues.

Incremental orders to shore up order book in FY15-17E

Order book concentrated in transportation segment


JKIL has an order book of ~Rs 41.5bn as of Jun-14 (3.5x FY14 revenues including L1 orders of Rs 10bn). Currently, over 90% of JKIL’s order book is concentrated in the transportation segment with balance coming from irrigation, civil construction and piling projects

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JKIL : MAJOR PROJECTS CURRENTLY UNDER EXECUTION (AS OF MARCH 2014)

Segment Project Client Order Size (Rs mn)

Outstanding Order Value as of Mar-14

Transportation

Design and construction of tunnel by Shield TBM, Tunnels, Stations and Ramp by Cut & Cover method between Lajpat Nagar and Hazrat Nizamuddin stations for Delhi Metro Phase III

DMRC 10,109 9,343

Transportation Widening & Improvement of Sion – Panvel Special state Highway (under BOT ) from Uran Flyover ESSEL WTR 6,000 3,377

Transportation Design and Construction of Tunnel by Shield TBM, Tunnels by Cut & Cover, Underground Station at Naraina Vihar & Ramps at Mayapuri and Delhi Cantonment for Delhi Metro Phase III

DMRC 3,759 3,405

Transportation Construction of ROB at Jogeshwari (South), Mumbai MCGM 2,981 1,389

Transportation Construction of Eastern Freeway section from Panjarapol to Chembur Mankhurd Link Road MMRDA 2,938 -*

Transportation Concreting of various roads in Western Suburbs of Mumbai MCGM 2,049 2,049

Transportation Construction of Flyover at Kapurbawadi Junction on Thane Ghodbunder Road MSRDC 1,888 439

Transportation Design and Construction of 4.91 km. elevated via duct for Navi Mumbai Metro Project CIDCO 1,460 105

Transportation Design and Construction of viaduct and two Elevated stations namely Rohini Sector -18 & Badi Corridor for Delhi Metro Phase III

DMRC 1,529 530

Transportation Design & Construction of Depot-cum-Workshop at Taloja for Navi Mumbai Metro Line CIDCO 1,320 1,260

Civil Construction

Modernization of Integrated Border Check Post at 22 locations in the states of Maharashtra Check Sadbhav Engineering 623 341

Civil Construction

Construction of Building in Rajasthan from Uttar Pradesh Rajkiya Nirman Nigam Ltd. UPRNNL 5,768 2,909

Irrigation Lower Wardha Mail Canal- Construction of Barrage @ Pulgaon on Wardha River with mechanical gate erection, survey design and all work

Ex.Engineer,Bembla Main Canal Division, Yavatmal

926 898

Irrigation Dahegaon (Gargoti) M.I Tank Tq Ralegaon Dist Yavatmal Construction of earthwork of Dam, Excavation of Approach and tail channel, Construction of Waste wier

Ex.Engineer, Bembla Main Canal Division, Yavatmal

77 2

Source: Company, HDFC sec Inst Research, * Final bill is pending

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We expect 17% revenue CAGR for JKIL over FY14-17E.The revenues will be driven largely by execution on large ongoing projects such as Delhi Metro and Sion-Panvel road project We assume a similar margin trajectory of ~17% over FY15-17E owing to the company’s policy of owning machines such as TBM’s (Tunnel Boring Machines) and 15 RMC plants that will enable it to keep margins in check

Financial Analysis As highlighted earlier, JKIL’s order book largely consists

of transportation EPC projects. We expect revenues to grow at 17% CAGR over FY14-17E to Rs 19.2bn. With a book-to-bill ratio of 2.6x as of Mar-14 (excluding L1 orders of ~ Rs 10bn), JKIL has strong revenue visibility over the medium term. Revenues will be driven largely by execution on large ongoing projects such as Delhi Metro and Sion-Panvel road project.

The management expects to sustain EBITDA margins at over 15% in the medium term. With expansion in business operations, JKIL will be able to benefit from operating deleverage. Hence, we assume a similar margin trajectory of ~17% over FY15-17E owing to the company’s policy of owning machines such as TBM’s (Tunnel Boring Machines) and 15 RMC plants that will enable it to keep margins in check.

We estimate PAT CAGR of 20% over FY14-17E and expect JKIL to achieve RoEs of ~15% over FY15-17E even after taking into account the dilution impact of recent fund raising of Rs 1.4bn through QIP. Post the recent QIP issue, we expect JKIL to maintain a healthy net debt/equity ratio over FY15-17E.

In our view, the key monitorable going forward will be JKIL’s ability to execute larger and more complex projects across geographies without compromising on margins and maintain a healthy working capital cycle. Smooth execution will enable the company to bid for more projects in the long term and sustain double digit profit growth beyond FY17E.

The key risk to our assumptions is lower than estimated EBITDA margins from incremental order wins.

JKIL’s revenues to grow at 17% CAGR over FY14-17E …EBITDA margins to remain stable over FY15-17E


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We expect 20% PAT/EPS CAGR for JKIL over FY14-17E We expect JKIL to achieve RoEs of ~15% over FY15-17E led by incremental order wins and strong execution

We expect JKIL’s net working capital cycle to hover ~150 days over FY14-17E Post the recent QIP issue, we expect JKIL to maintain a healthy net debt/equity ratio over FY15-17E

JKIL’s PAT to grow at 20% CAGR over FY14-17E …we expect return ratios to remain healthy over FY15-17E


Working capital cycle to hover ~150 days …we expect gearing level to be comfortable over FY15-17E


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Valuations & views We like JKIL because (1) strong EBITDA margin profile

of over 15%, (2) high revenue visibility with Mar-14 order book of Rs 31.5bn (2.6x FY14 revenues), (3) strong balance sheet with net debt/equity of 0.5x post the recent QIP of Rs 1.4bn (4) geographical and segmental diversification of order book.

We have valued JKIL’s EPC business at Rs 422/sh on 10x P/E of average FY16-17 EPS (Sep-16) of Rs 42.2, in line with multiples of mid cap construction companies.

We initiate coverage on JKIL with a BUY recommendation and a TP of Rs 422/sh (CMP Rs 319/sh).

Key risks Slowdown in order intake : Although we believe that

the Government’s focus on infrastructure spending will sustain, any decrease in spending could affect order intake.

Profitability risk : Historically, JKIL has enjoyed EBITDA margins of over 15%. However, with a scale up in execution across geographies that involve more complex projects, JKIL may face challenges in maintaining similar margins going ahead.

Delay in execution : Project delays due to land acquisition or other regulatory bottlenecks could adversely affect JKIL’s revenues going forward.

Concentration in transportation : With over 90% of JKIL’s order book concentrated in the transportation segment, significant cost competition and slowdown in orders could affect JKIL’s revenue and margin profile in the long term.

We initiate coverage on JKIL with a BUY recommendation and a TP of Rs 422/sh (CMP Rs 319/sh) We have valued JKIL’s EPC business at Rs 422/sh on 10x P/E of average FY16-17 EPS (Sep-16) of Rs 42.2, in line with multiples of mid cap construction companies.

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INCOME STATEMENT (STANDALONE) (Rs mn) FY13 FY14 FY15E FY16E FY17E Net Sales (post JV partner share) 10,011 11,871 14,246 17,095 19,231 Growth (%) 7.4 18.6 20.0 20.0 12.5 Material Expenses 6,264 6,820 8,184 9,821 10,803 Employee Expenses 474 773 928 1,113 1,280 Other Operating Expenses 1,596 2,216 2,660 3,245 3,894 EBIDTA 1,678 2,062 2,474 2,916 3,254 EBIDTA (%) 16.8 17.4 17.4 17.1 16.9 EBIDTA Growth (%) 11.7 22.8 20.0 17.8 11.6 Other Income 89 108 119 131 144 Depreciation 244 348 395 433 470 EBIT 1,523 1,822 2,197 2,613 2,928 Interest 406 576 763 724 757 PBT 1,116 1,246 1,435 1,889 2,171 Tax 354 402 474 623 716 PAT 762 844 961 1,266 1,455 Minority Interest - - - - - EO items (net of tax) - - - - - APAT 762 844 961 1,266 1,455 APAT Growth (%) 11.4 10.8 13.9 31.7 14.9 EPS 27.2 30.2 29.8 39.3 45.1 EPS Growth (%) 11.3 11.0 (1.3) 31.7 14.9


BALANCE SHEET (STANDALONE) (Rs mn) FY13 FY14 FY15E FY16E FY17E Share Capital 278 278 322 322 322 Reserves 4,756 5,475 7,642 8,757 10,051 Total Shareholders Funds 5,034 5,753 7,964 9,079 10,373 Minority Interest - - - - - Long Term Debt 2,317 5,571 5,321 5,821 5,821 Short Term Debt 46 - - - - Total Debt 2,363 5,571 5,321 5,821 5,821 Deferred Taxes 51 71 71 71 71 Long Term Provisions & Others - - - - - TOTAL SOURCES OF FUNDS 7,449 11,395 13,356 14,971 16,265 APPLICATION OF FUNDS Net Block 2,089 3,255 3,610 3,677 3,706 CWIP 1,013 1,752 1,752 1,752 1,752 Goodwill - - - - - Investments, LT Loans & Advs 1 23 33 43 53 Inventories 3,950 5,658 6,797 7,942 8,957 Debtors 1,147 1,320 1,610 1,932 2,239 Cash & Equivalents 1,119 1,212 1,501 1,945 2,213 ST Loans & Advances, Others 789 1,420 1,610 1,932 2,239 Other Current Assets 1,476 1,890 2,390 2,890 3,390 Total Current Assets 8,480 11,500 13,907 16,641 19,038 Creditors 910 1,817 2,146 2,576 2,986 Other Current Liabilities & Provns 3,224 3,318 3,800 4,566 5,299 Total Current Liabilities 4,134 5,136 5,946 7,142 8,284 Net Current Assets 4,347 6,365 7,961 9,499 10,754 Misc Expenses & Others - - - - - TOTAL APPLICATION OF FUNDS 7,449 11,395 13,356 14,971 16,265

Source: Company, HDFC sec Inst Research `

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CASH FLOW : (STANDALONE) (Rs mn) FY13 FY14 FY15E FY16E FY17E Reported PAT 762 844 961 1,266 1,455 Non-operating & EO items 0 0 0 0 0 PAT from Operations 762 844 961 1,266 1,455 Interest expenses 406 576 763 724 757 Depreciation 244 348 395 433 470 Working Capital Change (266) (2,000) (1,308) (1,095) (987) OPERATING CASH FLOW ( a ) 1,147 (232) 812 1,328 1,695 Capex (1,280) (2,254) (750) (500) (500) Free cash flow (FCF) (133) (2,485) 62 828 1,195 Investments & Others (204) (234) (10) (10) (10) INVESTING CASH FLOW ( b ) (1,483) (2,488) (760) (510) (510) Share capital Issuance 0 0 1,372 0 0 Debt Issuance 658 3,205 (250) 500 0 Interest expenses (406) (576) (763) (724) (757) Dividend (73) (113) (122) (151) (160) FINANCING CASH FLOW ( c ) 179 2,516 237 (375) (917) NET CASH FLOW (a+b+c) (158) (204) 289 443 268 Non-operating and EO items (747) 85 1,097 0 0 Closing Cash 234 116 1,501 1,945 2,213


KEY RATIOS : (STANDALONE) FY13 FY14 FY15E FY16E FY17E PROFITABILITY (%) GPM 37.4 42.5 42.5 42.5 43.8 EBITDA Margin 16.8 17.4 17.4 17.1 16.9 EBIT Margin 15.2 15.3 15.4 15.3 15.2 APAT Margin 7.6 7.1 6.7 7.4 7.6 RoE 16.2 15.6 14.0 14.9 15.0 RoIC 23.4 20.4 18.8 19.5 19.8 RoCE 22.4 19.4 17.8 18.5 18.8 EFFICIENCY Tax Rate (%) 31.7 32.3 33.0 33.0 33.0 Asset Turnover (x) 1.3 1.0 1.1 1.1 1.2 Inventory (days) 122 148 160 157 160 Debtors (days) 37 38 38 38 40 Payables (days) 26 42 51 50 53 Cash Conversion Cycle (days) 133 144 146 145 147 Debt/EBITDA (x) 1.4 2.7 2.2 2.0 1.8 Net D/E 0.2 0.8 0.5 0.4 0.3 Interest Coverage 3.7 3.2 2.9 3.6 3.9 PER SHARE DATA EPS (Rs/sh) 27.2 30.2 29.8 39.3 45.1 CEPS (Rs/sh) 36.2 42.9 42.1 52.7 59.7 DPS (Rs/sh) 3.5 3.8 4.0 4.3 4.5 BV (Rs/sh) 181.1 206.9 247.1 281.7 321.9 VALUATION P/E 11.7 10.6 10.7 8.1 7.1 P/BV 1.8 1.5 1.3 1.1 1.0 EV/EBITDA 6.0 6.4 5.7 4.9 4.3 OCF/EV (%) 11.3 (1.8) 5.8 9.4 12.2 FCF/EV (%) (1.3) (18.8) 0.4 5.8 8.6 FCFE/Mkt Cap (%) 1.3 1.6 (9.2) 5.9 4.3 Dividend Yield (%) 1.1 1.2 1.3 1.3 1.4


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Rating Definitions

BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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