IEA Report 31st March

IEA Report
31th Mar 2017

COSMOFILMS : Initiating Coverage "BUY" 31th Mar 2017
At CMP of 380/- stock is available at 1.4x FY17, 1.15x FY18 and 1.0x FY19 expected book value. With growing and sustainable margins, we believe
company to post healthy ROE of 24+% and 23% in FY18 & FY19 respectuvely, improve significantly from 21% delivered in FY16. We believe Cosmo
is well positioned to see a major rerating once company start delivering sales from new capacity with improved margins and profotability. keeping
in mind above all positives, we initiate "BUY" on the stock with price target of 490/- and 570/- for FY18 & FY19 respectively, valuing stock at 1.5x
and 1.5x of its FY18 & FY19 respective expected book value. .................. ( Page : 2-15)
AUTOMOBILES 31th Mar 2017

We do not expect change in demand of Passenger vehicles due to lower BS-III inventory. On the 2W and Commercial vehicles front demand may
come down for next couple of months due to higher sales of BS-III vehicles. Eicher Motors have already upgraded itself to BS-IV. Hence we consider
Maruti and Eicher Motors as our best picks. ................................... ( Page : 16)
M&M "HOLD" 29th Mar 2017

The management expects 15-20 percent volume growth for the tractor industry in FY18. New launches in 2HFY18 in Tractor and SUV segments will
make the M&M presence further stronger in the domestic market. Expansion in the Ssangyong could lead to better margins going ahead. The stock
is currently trading at 2.5x P/B of FY17. We expect that RoE to maintain over 11%. Based on SOTP valuation method we have valued the standalone
business at Rs. 1112 per share and subsidiaries at Rs. 487 per share. Hence, we recommend HOLD on the stock with target price of Rs. 1600.
.............................................. ( Page : 17-19)
INDUSINDBK "Part Book Profit" 28th Mar 2017

Among the mid size private bank, Indusind bank remains one of the consistent performers in growth and profitability parameter. Superior loan
book growth, diversified fee income profile and low credit cost are the key drivers of the bank. We expect the IIB to maintain 25%+ loan growth in
near to mid-term backed by revival in economic environment and declining interest rate. We expect the consumer loan demand to pick up with
improving vehicle financing and card business giving the boost. Spike in CASA ratio and focus on consumer finance segment will help to maintain
the NIM at 4%. With healthy capitalization of Tier 1 at 14.7% we expect the RoA of 1.9%+, RoE of 16%-17%. Since Indusind Bank has achieved our
target price and valuation has got little stretched but based on strong fundamentals we think investors should hold the stock in their portfolio. We
recommend part book profit and hold the rest with the target price of Rs 1480. .............................................................. ( Page : 20-26)
SADBHAV "Book Profit" 27th Mar 2017

Revenue growth in 9MFY17 remain subdued due to demonetization, slow execution of irrigation projects and delay in resolution of services tax
related issue at BCCL mining project. Work commencement of 3 new HAM projects will drive the revenue growth going forward. At the current
price level (2.95x P/B) we do not see much upside here on as the stock has discounted all near to mid term positive traits. We recommended this
stock at Rs. 277 for the target price of Rs. 315 and the stock has achieved our recommended target price. So we advice our investors to Book profit
at current level. .................................................... ( Page : 27-30)
KEC Part Book Profit 24th Mar 2017

Revenue growth for 9MFY17 was subdued due to lower commodity prices and demonetization. But the operating margin continues to accretive
during the same period. We expect 5% and 15% revenue growth in FY17E and FY18E respectively based on the strong traction in Transmission and
railway business with strong operating margin. We recommended this stock at Rs. 148 for the target price of Rs. 185 and the stock has achieved our
recommended target price. So we advise our investors to Book part profit at current levels and considering the lower interest outgo, strong
revenue growth in Q4FY17 and efficient working capital management, investors may HOLD Remaining for the revised target price of Rs.217.
........................................................ ( Page : 31-35)
MARICO "BUY" 23th Mar 2017

The companys recent acquisition is small but a right step in right direction. This acquisition will expand companys product portfolio in male
grooming market and will enhance companys digital marketing capability going forward. Management is optimistic of clocking double digit volume
growth for Saffola in medium term which gives us confidence of high single to double digit overall volume growth for Marico going forward. On
margin front, management reiterated its previous guidance of 20% plus margin for domestic business and 18% for overall business. Presently
company trades at 16 times of FY17E book value with 35% of RoE. Considering improving business conditions after demonetization, better medium
term volume guidance for domestic business and expected recovery from international business going forward, we reiterate to BUY this stock with
the target price for Rs 330. ............................................................ ( Page : 36-38)
Narnolia Securities Ltd IEA Edition No.- 985
Initiating Coverage 30 March 2017
Sector: Packaging Films
Advance Strategy. Simple Solutions COSMO FILMS LTD
LEADING THE GROWTH
Narnolia Securities Ltd 1

COSMO FILMS LTD
Contents : Cosmo Films Limited
Ready for a New Growth Phase: Key Growth Drivers...3
Outlook & Recommendation......4
Capacity Expansion in BOPP to push growth...5
Focus on growing share of Speciality films : Era of Innovations......5
New BOPP Line a cost effective one: To Boost Margins..6
Improving Financial Picture and Return Ratios: A Futuristic picture.......6
Fair Pricing power with almost no commodity risk..7
Well Diversified product portfolio and markets...7
Healthy Dividend Yield with consistant payout....7
Expected turnaround in US business......7
Industry Structure & Demand Scenario : Global & Domestic......8
Cosmo's Business Matrix....10
Financials & Valuations.12
Comparison with Key Industry Players14
Key Risks to Earning Projections..15
Disclaimer..15

Initiating Coverage/Packaging Films 31-Mar-17
COSMO FILMS LIMITED CMP : 377 BUY TP: 490 (+29%)
Target Price Cosmo is a leading manufacturer of BOPP ( Biaxially Oriented

CMP 380 Polypropylene) films in India with a 20% market share. It provides cost-
Target Price 490 effective innovative packaging solutions to leading FMCG & global brands.
Previous Target Price - Company was first to manufacturer BOPP film in India. Now its products
encompass newer categories of valued added products viz: Thermal,
Upside 29%
Coating, Metalizing films besides the traditional BOPP films. Cosmo is the
Change from Previous - larget manufacturer of value added thermal films in the world with 15%
market share. It has diversified portfolio of marquee clients which like
Market Data Britannia, Cadbury, Colgate, Cipla, ITC, Parle, UB, Uniliver etc. Cosmo has
wide manufacturing footprint with 4 state of the art mfg. units in India and 2
BSE Code 508814
outside,one is situated in US and another in South Korea. Cosmo's
NSE Symbol COSMOFILMS consistent efforts towards itroducing innovative products has put it in a
52wk Range H/L 431/262 different categary of film maker with highest margins among industry peers
Mkt Capital (Rs Cr) 740 with commanding industry size.
Av. Volume 69931 READY FOR A NEW GROWTH PHASE ... Key Growth Drivers
Nifty 9,144 Cosmo has expanded its capacity in BOPP films by 60000 mt from
136000 mt/annum to 196000 mt/annum (44% increase), which is going to
Stock Performance be the next growth driver for the company.
1Month 1Year YTD Current positioning of BOPP film indust players augurs well, as there is
Absolute 5.2 15.4 40.4 no overcapacity in the industry at present and almost all the capacities in
India running at 100% utilisation level. Increasing demand of BOPP to
Rel.to Nifty 3.5 2.8 23.2
boost growth in the industry as demand for BOPP is expected to grow at
15% p.a.
Share Holding Pattern-%
3QFY17 2QFY17 1QFY17 In recent years, with launch of value added newer and speciality products
Promoter 43.5 43.5 43.5 through innovations, Cosmo has positioned itself as a leader among its
peers through growth in sales with sustainable high margins vs peers..
Public 56.5 56.5 56.5
Others -- -- --
Total 100.0 100.0 100.0 New BOPP line which has commisioned from Feb 2017, to boost margins
in BOPP film segment as new line is cost effective through higher
production with lesser manufacturing cost vs its existing line..
Company Vs NIFTY
160 COSMOFILMS NIFTY
Cosmo's focus to increase share of value added films in its total product
160
150 COSMOFILMS NIFTY
portfolio will augur well for the company in long run. By FY16 end, share of
150
140 value added films in total reveue was 49%, improved from 40% in FY14. In
140
130
volume terms speciality films contributed 40% in FY16. Management has
120
130
targeted 50% volume from speciality films in long run.
110
120
Cosmo has been working upon to improve its balance sheet and financial
100
110 dynamaics in the past, which has given favourable results. Cosmo has
90
100 positioned itself best financially structured player among its peer which will
80
90 offer benifits in future and comfortable investment opportunity for investors.
Jul-16Jul-16
Sep-16
Feb-17
Jan-17Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Mar-17
80
Cosmo is well poised to grow its sales and profitablity with changing
Sep-16
Feb-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Mar-17
consumption pattern and increasing demand for flexible packaging, which

will enhance capacity utilisation in Speciality and new added BOPP line,
thus benefit of operating leverage will arise.
Anurag Arora
anurag.arora@narnolia.com
Narnolia Securities Ltd3 3
o the Disclaimers at the end of this Report
OUTLOOK & RECOMMENDATION
Rs. In crore
Financials FY15 FY16 FY17E FY18E FY19E Commisioning of new added BOPP capacity will
boost much awaited sales growth for the company.
Sales 1647 1621 1715 2276 2461 Also added capacity will give company cost
EBITDA 104 191 183 285 314 advantage from the new line which is more efficient
EBIT 70 156 144 234 263 and productive vs older line, which will add to
PAT 28 96 95 155 169 margins. Though initially in coming 3-4 quarters
EBIDTA% 6.3% 11.8% 10.7% 12.5% 12.7% there will be contraction in margins, largely due to
PAT % 1.7% 5.9% 5.5% 6.8% 6.9% higher revenue share of BOPP films with lesser
margins vs speciality films which has higher
margins, according to management. We believe
Ratios FY15 FY16 FY17E FY18E FY19E
margins within BOPP film and overall profitability of
company will see major boost with the enhanced
EPS 14 50 49 80 87 sales from the new capacity. Cosmo's focused
BV/Share 196 235 269 325 381 strategic target of maintaining revenue share of
P/E 5 6 9 7 8 speciality films at 50% will augur well in the longer
P/B 0.4 1.2 1.6 1.7 1.8 term.
EV/EBITDA 3.5 3.8 6.1 4.4 4.5
At CMP of 380/- stock is available at 1.4x FY17,
EV/SALES 0.22 0.45 0.65 0.55 0.57
1.15x FY18 and 1.0x FY19 expected book value.
ROE 7.3% 21.1% 18.2% 25% 23% With growing and sustainable margins, we believe
ROCE 11.3% 22.9% 16.3% 26.1% 28.4% company to post healthy ROE of 24+% and 23% in
ROA 2.6% 8.4% 6.7% 10.1% 10.4% FY18 & FY19 respectuvely, improve significantly
D/E 1.1 0.8 1.0 0.7 0.5 from 21% delivered in FY16. We believe Cosmo is
ATO 1.5 1.4 1.2 1.5 1.5 well positioned to see a major rerating once
Sales/WC 9.5 11.4 11.3 12.5 12.7 company start delivering sales from new capacity
Payout 25% 20% 25% 25% 30% with improved margins and profotability. keeping in
mind above all positives, we initiate "BUY" on the
stock with price target of 490/- and 570/- for FY18 &
FY19 respectively, valuing stock at 1.5x and 1.5x of
its FY18 & FY19 respective expected book value.
INVESTMENT RATIONALE: KEY POINTS
CAPACITY EXPANSION IN BOPP TO PUSH THE GROWTH FORWARD

To cater to the growing demand of BOPP film, Cosmo has undertaken capacity expansion in its BOPP line situated at Baroda
plant. Cosmo has enhanced its BOPP capacity from 136000 mt /annum to 196000 mt /anuum, an increase of 44% and 60000
mt/annum. Currently company's BOPP capacity was running at full utilisation. Now with this new BOPP line, which has been
commisioned now from Feb 2017, Cosmo is set to realise next level of growth through sales from new BOPP line. As per
management, at full utilisation level, new line will add upto 600 cr to the topline, which is a significant revenue increase. Also
Cosmo has increased its metalised films capacvity by 7200 MTPA, which will increase revenue in speciality film segment.

As management has indicated, this line may get upto 100% utilisation level within 5-6 months of its commisioning. Though
FY17, will not see any big upmove in sales, FY18 onwards company to see big jump In sales its BOPP film segment, which In
our view may see 30%+ growth in FY18 and 8-9% revenue growth in FY19. This expansion will give major boost to company's
aspiration to become $1bn company by 2020, targeted by management. With this new expanded capacity, Cosmo has become
neck to neck player with the existed largest player in BOPP segment, which has capacity of 210000 mt/annum, giving Cosmo
enough competetive edge in terms of capacity.
FOCUS ON GROWING SHARE OF SPECIALITY FILMS IN PRODUCT PORTFOLIO- "ERA OF INNOVATION"
Cosmo films has not only grown as a Key BOPP Player within the
country with 20% market share and became the largest exporter
of BOPP film from India, also it has been able to sustain as a
value added player with launching new innovative packaging film
products through focus on R&D and technology. Now Cosmo's
value added films contribute 49% to its revenue in FY16, grown
from 40% in FY14. In value terms, speciality films now contribute
almost 40% to the total volume. In traditional commodity (BOPP)
films, industry is competetive and one could not enjoy edge over
others as prices are largely dependent on prices of
homopolymer, (key raw material) ,a derivative of crude oil;
However unlike other BOPP players, Cosmo has been able to
position and prove itself as a value added high margin packaging
film player, through consistant innovations and R&D, providing
Cosmo, big comfort on margins, generating above normal
returns on shareholder's equity.
HIGH MARGINS IN VALUE ADDED SPECIALITY FILMS
70% Continious focus on R&D and introduction of value added

speciality films has helped company to position itself from a
60% commodity film maker to value added industry player, which has
been helping company to sustain its gross margin to higher level
50% Vs. its industry peers.. Gross margins of the company has
Speciality improved consistantly over years and company has been able to
40% films sustain its margins even in the adverse quarters at much higher
levels through increasing revenue share of speciality films.
BOPP
30%
20% GM % According to management, value addition in normal BOPP films

is Rs.25-50 on PPE (Raw material) prices, whereas in Speciality
10% films, value addition is upto Rs.90-100, which improves overall
margins significantly.
0%
Due to higher share of value added films, Cosmo's gross
FY14 FY15 FY16 FY17E margins has seen significant jump from 30-32% to 38-40% from
FY13 to FY16.
Cosmo's consistent focus on R&D is giving it space to grow higher vs its peers and a reason for outperformance in adverse
and difficult times when industry is depressed.. It is evident from the fact that Cosmo has been able to deliver above average
industry margins in after FY12, when industry was going through the phase of overcapacity, low demand and adverse
commodity cycle.
Though management has indicated for comparatively lower gross margins initially after commisioning of new BOPP line, they
are also confident of achieving 50% revenue contribution back from speciality films, and 50% volume (slightly longer term
target), which will give boost ROEs of company in longer term. Till date, Speciality films capacity is running at 60% utilisation on
name plate capacity and they according to them, this is enough for next one year. After achieving 70% utilisation on name plate
capacity.(considered 100% when 70% on name plate capacity).

NEW BOPP LINE A COST EFFICIENT ONE: TO BOOST MARGINS
The new BOPP line added by Cosmo at its Vadodara Plant with the cost of INR 2 bn (80% finance by debt and 20% by internal
accruals) has started commercial production from Feb 2017. Based on the management guidance, this new line at its peak
production will add approx. 6 bn to the topline. Also management is confident of achieving full utilisation within 5-6 months from
start of commercial operations.
This new line will have 10.4 mtr width line. Currently, maximum
Sales gross Profit EBITDA Gross % EBITDA% 8.6 mtr width line is available in Indian films industry. On account
of higher width line, management has indicated there will be
3000 45%
42% 42% substantial reduction in per unit power consumtion and also
41% 40%
2500
wastage during production process. Management expects
37%
35% electricity consumption of new line to be 30% lower as compared
32% to the current most efficient line of Cosmo Films. The new line is
2000 30% 30%
likely to reduce cost of production by Rs. 3./kg from the cost it
25%
1500 currently incurs. Around 1 cr. savings on the electricity side could
20%
be seen with this new line, every quarter. Management expects
1000 15% the new line will play critical role in improvement in EBITDA
12% 13% 13%
11% 10% margins.
500 7% 6% 5% We strongly believe, with this line Cosmo will not only be able to
achieve sales growth, also it will be able to command and sustain
0 0%
higher gross and EBITDA margins, outperforming industry.
FY14 FY15 FY16 FY17E FY18E FY19E
IMPROVING FINANCIAL PICTRURE & RETURN RATIOS: A HEALTY FUTURISTIC PICTURE
On the back of strong product portfolio consisting high magin speciality films, higher bargain power, Cosmo has been able to
generate healthy operating cash flows, resultant recuction in gross debt level over year. Cosmo has stengthened its financial
health through improved balance sheet. Continious reuction in Debtor, Inventory days lead to overall reduction in working
capital requirement. This had an effect of generating higher FCFF, Return on equity and Return on capital employed, resultant
value creation for business and investors.
14.0 60
12.0
50
10.0
40
8.0
30
6.0
4.0 20
2.0 10
0.0
0
FY15 FY16 FY17E FY18E FY19E
FY12 FY13 FY14 FY15 FY16 FY17E FY18E
Interest Coverage Ratio Working Capital Turnover Ratio Debt/Equity Debtors Days Investory Days Payable Days
Cosmo's Interest Coverage Ratio has improved significantly from

30.0%
1.8 in FY15 to 5.2 in FY16 and expected to be 8.4 till by FY19
20.0% end. It's Debt to equity to improve from 0.75 in FY16 to 0.48 by
FY19 end. Working Capital to turnover ratio has improved from
10.0%
9.5 in FY15 to 11.4 by FY16 and expected to imptove further to
0.0% 12.7 by FY19. Cosmo's ROCE & ROE to show the same picture
FY14 FY15 FY16 FY17E FY18E FY19E of improvement from FY15 continiously over long term as shown
-10.0%
in graph.
Return on capital employed Return on Equity
450 10.0
400 8.8 9.0
350 7.9 8.0
-10.0% FY14 FY15 FY16 FY17E FY18E FY19E
Return on capital employed Return on Equity
450 10.0 Cosmo's improved financial health has helped

400 9.0 creating value for investor by enhancing its book
8.8
350 7.9 8.0 value per share, which was 196 and 235 in FY15 &
6.9 7.0 FY16 respectively, and further expected to reach
300
6.0 380+by FY19, thus registering CAGR of 18%.
250 5.4 5.6
5.0
200
4.0
150 3.0
On the back of improved CFO, ROE, ROCE and
100 2.0 Asset Turnover Ratio, We strongly believe the stock
1.6 1.7 1.8
50 1.2 1.0 to rerate going forward. Its P/B ratio and Price
0 0.4 0.0 Earning ratio is expetced to rerate going forward as
FY15 FY16 FY17E FY18E FY19E
shown in the chart.
Book Value Price/Book Price/Earning
FAIR PRICING POWER WITH ALMOST NO COMMODITY RISK
Polypropelene which is by product of petrochemical industry is a key raw material for the company with a strong co-relation
with crude prices. The relationship is not leniear with less volatility, however the trend in the price movement of PPE is similar
too that of the crude prices. There are about 4-5 domestic suppliers of PPE, and largest is Reliance Industries. Management
commented that sourcing of this raw material is mainly done through a major private Oil & Gas refinery company. Nominal
rebate and favourable terms are offered to the buyers of PPE who buy PPE in bulk form these suppliers.
Also there is transparent index globally known as PLATT index, which releases prices of PPE every fortnightly. Suppliers of
PPE use this data for price identification and post this they supply PPE to domestic BOPP film producers with applicable rebate
structure as discussed with each BOPP manufacturer. Cosmo films in turn revise its price list on the same day for all its
cusotmers. THis practice is followed by the entire BOPP industry in India. This there is no or minimal commodity pricing risk for
the companies and any fluctuations in te prices of PPE is fully passed-on to the customers.
WELL DIVERSIFIED PRODUCT PORTFOLIO AND MARKETS
Cosmo is fairly immune to the risk related to mamcro-economic environment of a particular country as it has strategically
diversified its presence into 80 countries across the world. It does not have exposure of more than 4% of total turnover to a
particular country except for US. Company will face minimal impact from Brexit, either directly or indirectly (through forex
fluctuations) owing to raw material imports, which nullify and provies a natural hedge for the same, as Cosmo's valu added
films contributes almost 50% of the total turnover till FY17.
HEALTHY DIVIDEND YIELD WITH CONSISTENCY IN PAYOUT
Cosmo has long history of sharing its profits with the investors in form of dividend. Cosmo has been sustaining its dividend
payout in the range of 20-30% depending on the capital which company needs from time to time for expansion and other
capital needs. At CMP Cosmo's stock price offering 3% dividend yield as distributed by the company for FY16, providing
investment opportunity with healthy dividend yield on the invested capital.
EXPECTED TURNAROUND IN US SUBSIDIARY TO HELP AVHIEVING BETTER CONSOLISATED RESULTS
In FY15, Cosmo incurred a loss of $5mn in its US subsidiary and this got reduced to $2.2 mn in FY16. Of this loss in FY16,
50% was booked in only Q1FY16. Though the whole picture of US operations is not very rosy in FY17 despite serious steps
taken by the company for turning it around through restructuring of business and launching of newer value added products
epciality for US markets, Management has guided for much better numbers and break even of US business by FY18. Cosmo is
working for making US business cost efficient through manufacturing new value added producs in US. In past, US business
loss was mainly attributed from forex losses incurred by the US Subsidiary. We believe US break even will give major boost to
company's consolidated performance which has been a drag on stock price since long, leading to rerating of stock in near
future.

INDUSTRY STRUCTURE & DEMAND POSITIONING: GLOBAL & DOMESTIC
The Size of global packaging industry is $700 bn and that of India is at $ 32bn. Te size of global packaging industry is expected
to see a CAGR of 7.5% to $ 1tn over FY15-20. Indian packaigng industry is expected to reach $73bn, to be more double over
the same period.
Both organised and unorganised industry are established in Indian Packaging industry, and also giving intense competetion to
each other.
Indian Packaging industry is divided into rigid and flexible packaging. Rigid is expected to grow at 15% whereas flexible
packaging is expected to grow at 25% annually, thereby gaining share from rigid packaging.
Growing consumption of packaged food, FMCG, personal care and other packaged products in level in Tier II and tier II cities
leading to uge demand and growth for flexible packaging. The continious improvement in lifestyle and per capital income level
will aid significant benifit to flexible packaging industry over medium to long term.
FLEXIBLE PACKAGING TAKING ON RIGID PACKAGING: BOPP EDGE
EXCELLENT CLARITY LOWEST DENSITY
Better Aesthetic Hig Gloss Higher Yield
CHEMICAL INERT BARRIER TO MOISTURE

LOW MELTING POINT &
Better Shelf Life(perishable goods) Fully Recyclable
Suitable for Food & Pharma
250000 DOMESTIC INDUSTRY SIZE
200000 Currently Indian BOPP Industry total production capacity is

560000 MTPA. Jindal Polyfilms is the largest player with total
production capacity of 210000 MTPA. After recent expansion
150000 with total 196000 MTPA capacity, Cosmo has become neck to
neck player with JindalPoly.
100000 There is balance prevailing amongst players unlike 2011-2012,
where there was sudden increase in supply on account of
50000 substantial capacity expansions by all major players in industry
at same time.
0 With the growing demand of BOPP films over years, these

excess capacities of those time got absorbed now and almost all
Jindal Poly Cosmo Max Polyplex Nahar Poly SRF
the BOPP players are running at 100% utilisation currently.
Films Speciality Polyster
DOMESTIC DEMAND SCENARIO FOR FLEXIBLE PACKAGING
The Indian Food & Beverage industry has nearly 25% yearly growth and major application of plastics in food products is in
packaging. Thus growth in food and beverage sector highlights the growth potential for plastics in packaging. Similarly,
personal care sector, which is growing at nearly 15%, will also drive demand for rigid plastics, as it is the most used material for
packaging of personal care products. Other industrial sectors such as, pharmaceutical that is proposed to grow at 13-15% over
next five years, retail industry, that is currently witnessing the shift from unorganized to organized retail; will also stimulate the
demand of plastic in packaging material. Government's current campaign on "Make in India" which aims to turn the country into
a global manufactruing hug will have positive impact on the growth packaging industry.
Narnolia Securities Ltd

KEY GROWTH DRIVERS FOR FLEXIBLE PACKAGING INDUSTRY
CHANGING PACKAGING PATTERN FOR PRODUCTS TO BOOST INDUSTRY GROWTH
Products to be packed Conventional Packaging Current Packaging Trend

Milk Glass Flexible Pouches, Tetra packs
Beverage Glass, tinplate, aluminium PET Bottle, cans
Pharmaceuticals Paper, glass, aluminium, tinplate PVC, HDPE, blister, aluminium foils
Toothpaste Aluminium tubes Laminated tube, co-extruded tube
Soap Paper cartons Laminated carbons, BOPP/PE, PET/PE
Cosmetics Metal, paper HDPE, PP, Laminated tube
Shampoo Plastic bottle HDPE container, sachets
Fertilizer Jute Woven sacks
Shopping carry bags Paper, jute LDPE, HDPE
Edible Oils Tinplate containers Flexible pouch, laminates, co-extruded
Rice Jute bags BOPP coated bags
source: IBEF
Above changing packaging trend provides enough growth opportunities to expand and grow for BOPP and flexible packaging
industry in future.
STRONG GROWTH IN INDIAN FMCG SECTOR
Key Growth Drivers

Shift to Organised market
Rising income driving purchase
Greater awareness of products and brands
Increasing consumer demand
Availability of online grocery stores
Strong distribution channels
Growth of Modern Trade
Growing Rural markets
New Product launches
Evoliving consumer lifestyle
Desire to experiment with brands
Government reforms to encourage FDI inlow
Increase in penetration
KEY POINTS
Packaging is one of the fastest growing industries stands at $700
bn globally. It has grown higher than GDP in most of countries. In
developing countries like India, it grew at a CAGR of 16% in last
five years and touched $32bn in FY15.
The Indian Packaging contributes 4% of the global packaging

industry. The per capita packaging comsumption in India is low
at 4.3 kg compared to developed countries like Germany and
Taiwan where it is 42 kg and 19 kg respectively. However in the
coming years Indian packaging industry is expected to grow at
18% p.a. , thus providing visibility and enough growth
opportunities for the industry. Within Packaging Flexible
packaging will grow almost twice the rate of rigid packaging.
BOPP players will largely be benifitted with the growing trend of
flexible packaging.
9
COSMO'S BUSINESS MATRIX : STRENGTHS & WEAKNESSES
PRODUCT PORTFOLIO
PACKAGING FILMS LAMINATION FILMS LABEL FILMS INDUSTRIAL FILMS
1. Printing & Pouching Films 1.Dry Thermal Lam.Films 1.Pressure Sensitive Label stock 1. Pressure Sensitive films
2. Barrier Films 2.Wet Print Lam. Films Films 2. Tape & textile Films
3. Overwrap Films 2. Direct Thermal Printable Film
3. In-mould films
4. Wrap around label films
REVENUE SHARE AMONG PRODUCT CATEGARIES
Chart showing export share over years Cosmo Films Limited is Pioneer of BOPP Industry in
70% India and one of the global leaders and
60% manufacturers of BOPP Films. Company is also the
largest BOPP film exporter from India.
50%
40%
Cosmo's healthy export share in overall topline is
30%
evident of its product quality and strength. Company
20% exports its products to more than 80 countries
10% worldwide.
0% Cosmo operates form its units in India, Korea and
FY12 FY13 FY14 FY15 FY16 US. Korea facility completely caters to Japanese
market. Cosmo is in process of restructuring its US
Domestic share Exports share
subsidiary business by launching new products
there.
0%
FY12 FY13 FY14 FY15 FY16
Domestic share Exports share
10
SUBSIDIARIES(WHOLLY OWNED) INFORMATION CORPORATE GOVERNANCE: BOARD
CF Global Holdings Limited GK (CGHG) (Japan) Cosmo has fairly large Board with 3/4th number of
Cosmo Films (Netherlands) Cooperatief U.A independent directors on the Board with persons
CF (Netherlands) Holdings Limited B.V. having decent qualification and rich experience in
Cosmo Films Japan, GK different industry working..
Cosmo Films Singapore Pte Limited Mr. Ashok Jaipuria, Chairman & MD
Cosmo Films Korea Limited Mr. A.K Jain, Whole time Director
Cosmo Films Inc Mr. H.K Aggarwal, Independent Director
CF Investment Holding Private (Thailand) Company Mr. Rajeev Gupta, Independent Director
Cosmo Films Inc. (US) Ms. Alpana, Non Ecex. Non Independent Director
Mr. Ashish Kumar Guha, Independent Director
Mr. Pratip Chaudhary, Independent Director
Mr. H.N. Sinor, Independent Director
COSMO FILMS: HOW COMPANY OPERATES
Purchases Homopolymer (derivative of petrochemicals) as Source from Reliance Industries, which updates
raw material for processing of BOPP & Speciality Films prices of homopolymer every fortnight or whenever
Source
any sharp movement seen in crude oil.
Manufacturing process across 6 plants. 4 situated in

Valur addition of Rs. 25-50 in making BOPP film India of which one located at Shendra (Aurangabad)
Plants
Value addition of Rs. 80-100 in making Speciality films is 100% export oriented Unit. One plant is in US and
one is in Korea.
Transparent pricing through Global PLATT Index

Sale of BOPP & Speciality products according to quality and which updates PPE Prices fortnightly, accordingly
Pricing
pricing Cosmo pass on the price increase or decrease to
customers (Industry Practice)
Britannia, Cadbury, Parle, Cipla, Colgate, Conagra,

Garnier, ITC, Microsoft, Nokia, Nestle, Mars,
60% sales to domestic clients to well known brands and Perfetti, UB, Unilover, Reckitt Benckiser, Huhtamaki,
Clients
marquee clients Altea, Amcor, Printpack, Contanstia etc.
US business is done through Cosmo Films Inc.

40% sales goes to more than 80 countries worldwide with (US), a wholly owned subsidiary.
major contribution from US and JAPAN. Not more than 4% Subsy Films manufactured in Cosmo Films Korea
sales comes from a single country expect US. Ltd(Korean Subsy)) get sold to Japan by CF Global
Holdings,GK, Japan (japanese Subsy)
`
METHODOLOGY OF CHECKING CAPACITY UTILISATION
In BOPP Industry in India and across globe, name plate ( a unit measurement) capacity is calculated based on 25 micron film
under standard 24 hour unit of production for 365 days. Based on customer requirements, Cosmo can produce different micron
films. If a company produces 70% of total name plate capacity, it is considered as 100% utilisation. In FY16, Cosmo has
produced 100000 MT on a name plate installed capacity of 136000 MT. p.a., thereby implying a 100% capacity utilisation.
Currently Cosmo is operating at 72-73% utilisation on name plate capacity which is more than 100%, as guided by
management.
under standard 24 hour unit of production for 365 days. Based on customer requirements, Cosmo can produce different micron
films. If a company produces 70% of total name plate capacity, it is considered as 100% utilisation. In FY16, Cosmo has
produced 100000 MT on a name plate installed capacity of 136000 MT. p.a., thereby implying a 100% capacity utilisation.
Currently Cosmo is operating at 72-73% utilisation on name plate capacity which is more than 100%, as guided by
management.
FINANCIALS & VALUATIONS

12
Ratios

COMPARISON WITH KEY INDUSTRY PEERS
Return on equity EV/EBITDA comparison

35
25.0
30
20.0
25
15.0 20
15
10.0
10
5.0
5
0.0 0
201209
201303
201309
201403
201409
201503
201509
201603
201609
201212
201306
201312
201406
201412
201506
201512
201606
-5.0
Jindal Poly Cosmo Polyplex

Jindal Poly Cosmo Polyplex
Asset Turnover
1.4 Price/Book
1.8
1.6
1.2
1.4 1
1.2 0.8
1
0.6
0.8
0.4
0.6
0.4 0.2
0.2 0
0 FY13 FY14 FY15 FY16
1 2 3 4 5
Jindal Poly Polyplex Cosmo Jindal Poly Polyplex Cosmo
A quick look into comparison between Cosmo ans

Return on Assets its nearest listed industry peers suggest that Cosmo
will be able to command higher valutation vis a vis
9
its peers such as JindalPoly (Highest Capacity in
8 BOPP) and Polyplex.
7
Cosmo has highest ROE, Assets Turnover, ROCE,
6 Return on Assets and Book value in comparison to
5 Jindal Poly Films and Polyplex Corp. as shown here
4
in the respective charts, however its stock price
quoting at approx. similar valuations on EV/EBITDA,
3
EV/Sales and oter valuations parameters.
2
1 With ROE to enhance further in FY18&FY19, with
0 operating leverage to come in play and higher
-1 FY13 FY14 FY15 FY16 margins management intent of consistently growing
Jindal Poly Polyplex
share of value added films in total portfolio, We
Cosmo strongly believe Cosmo will be able to command
premium valutations in future.
-1 FY13 FY14 FY15 FY16
Jindal Poly Polyplex

Cosmo
RECENT DEVELOPMENTS TOWARDS FUTURE GROWTH
Cosmo Has recently acquired 34 acres of adjoining land available for sale close to its Waluj plant. Cosmo has entered into a
definite agreement to purchase this land, for which advance has been paid and deal will be concluded by FY17 end. This land
is acquired to target future growth plans of Cosmo. Management has guided that whatever the growth plans will be, it will be in
direction to create value addition in current portfolio. New land will only be used to either to add speciality film capacity or any
related value added project complementary to packaging business, of which company Cosmo possess knowledge.
KEY RISKS TO OUR EARNING PROJECTIONS
FOREX FLUCTUATIONS
Cosmo's almost 40% sales comes from the export markets. Cosmo has been incurring huge losses in the past due to adverse
currency movements. Cosmo is being exposed to USD/INR and USD/YEN . It sells its products in US and is exposed to
USD/INR fluctuation risk. Also It sells it products manufactured in Korean plant to Japanese local markets in yen and pays to
Korean Subsidiary in USD, thus exposed to cross currency fluctiation risk. Any future adverse movement may impact Cosmo's
earnings.
THREAT OF NEW CAPACITY AND INCREASED COMPETETION
Though Cosmo's new capsacity addition will easily be get absorbed as Indian markets need 50000 MTPA additional BOPP
film. Also it takes 12-15 months for any additional capacity to come in the market and there is no expansion announced by any
other player in India till date, as per management, However any new capacity going forward may impact future sales growth in
future.
PRICING RISK
As per management there is no raw material commodity risk as far as product pricing is concerned as any increase or
decrease in raw material is passed on to customers every time whenever PPE prices are updated through Global PLATT
Index, however lots of economic conditions play role in product pricing. Thus any delay in pass on of raw material price hike
may hamper gross margins for the short duration.
DELAY IN RAMP UP OF NEWLY EXPANDED CAPACITY
As per management , within 5-6 months of the commercial production start in new capacity, Company is hopeful of achieving
100% utilisation, however any delay in ramp up of utilisation may adversly impact our revenue and profit projections.
DELAY IN TURN AROUND OF US SUBSIDIARY

Management has guided for break even in US subsidiary's business by FY18 end, however any delay in earning turnaround in
US business may impact consolidated earnings in future.

Country moves to Bharat Stage-IV Expected BS-III inventory
The Supreme Court has banned the sale of BS-III compliant

vehicles from 1st April 2017 and it has put public health over
potential commercial losses to companies. According to the
data submitted by Society of Indian Automobile Manufacturers
(SIAM), to the Apex court which states that companies were
holding a stock of around 8,20,000 such vehicles which
included 96,000 commercial vehicles, 6,70,000 two wheelers,
40,000 three wheelers and 16,000 cars. The combined value
of the stock is around Rs.12000 crore. The cost of upgrading
these vehicles to BS IV emission standards was estimated at
between Rs 1,500 crore and Rs 2,000 crore. The decision has
left the Auto manufacturers under serious pressure to
minimize their inventory within two days. The OEMs who have
strong hold on exports could have minimal impact but it would
be severe for those who does not have or very less presence
in the export market.
Major impact on 2Ws & CVs...
Within two wheeler industry the hit will be more on Hero Commercial Vehicles industry will get impacted most because
Motocorp and Honda Motorcycles because these two players it has highest inventory value wise. Majority of the OEMs have
combined holds around 80% of the total two wheeler upgraded themselves to BS-IV but they have not stopped
inventories. Bajaj Auto has an inventory of around 80000 units production of BS-III vehicles. The management of Ashok
but considering the 50% contribution from exports it will not Leyland has stated that the majority of the vehicles in pipeline
get impacted. TVS Motors does not have much BS-III have been sold and left over stock will be exported to other
inventory and it has also started selling & manufacturing BS-IV markets where they have significance presence.
vehicles.
2Ws BS-III Inventory CV BS-III Inventory

HEROMOTOCO BAJAJ-AUTO HMSI Others M&M ASHOKLEY TATAMOTORS Others
6%
45% 21% 21%

37%
32% 26%
12%
Our View Our Top Picks

We expect that it will take huge effort and time to get rid of this We do not expect change in demand of Passenger vehicles
pile up BS-III stock for all the OEMs. The dealers are due to lower BS-III inventory. On the 2W and Commercial
proposing higher discounts to minimize the inventory losses. vehicles front demand may come down for next couple of
Discounts will lead to lower realization and margins for months due to higher sales of BS-III vehicles. Eicher Motors
companies with higher inventories The companies with good have already upgraded itself to BS-IV. Hence we consider
export exposure may not have much impact but it can put auto Maruti and Eicher Motors as our best picks.
industry under stress for short term depending on the
corrective measures taken by the individual OEMs.

Please refer to the Disclaimers at the end of this Report
HOLD
MAHINDRA & MAHINDRA LIMITED 29-Mar-17
Result Update M&M, the leader in the Farm Equipment business, has geared itself to
CMP 1276 become a full-line farm machinery player under the global strategy. To exploit
Target Price 1600 the growth opportunities in segments like harvesters, tillage, haying & plant
and fertilizers, its product mix is set to see a substantial shift in the next 2
Previous Target Price
years. The geographical mix of M&M's farm machinery products stood at
Upside 25% around 30 percent in FY16 which rose to 37 percent in the FY17 YTD and the
Change from Previous - company aims to take it to 50 per cent by FY19. Launch of new vehicles by
the competitors in the fast growing UV segment led to decrease in the market
share of M&M. The company will launch a multi-utility vehicle code named
Market Data
U321 before the end of next financial year preceded by a sports utility
BSE Code 500520 vehicle code named S201 in the second half of the year. On Korean
NSE Symbol M&M subsidiary, M&M has capital expenditure plan of more than USD700 million
for the next three-four years to bring out one new product every year and this
52wk Range H/L 1509/1142
could lead further expansion in margins of the company going ahead. The
Mkt Capital (Rs Cr) 79,292 Company has built adequate manufacturing capacity for the immediate future
Av. Volume 114489 and is planning to invest in additional capacity in preparation for the mid to
Nifty 9,101 long term.
3QFY17 Result Highlights

Stock Performance
1Month 1Year YTD M&M have reported 4% QoQ growth in net revenue in 3QFY17 due to 24%
Absolute -2.3 8.8 2.2 volume growth in Farm Equipment. Auto volumes degrew by 4% QoQ. Farm
& Auto segment realization declined by 1%QoQ.
Rel.to Nifty -4.8 -4.5 -15.7
EBITDA Margin improved by 20 bps YoY to 11.8% due to higher sales of
Share Holding Pattern-% tractors during the quarter.
3QFY17 2QFY17 1QFY17 PAT Margin was increased by 250 bps YoY to 10%. Exceptional item of
Promoter 26.8 26.8 26.8 Rs.364 crore during the quarter.
Public 73.2 73.2 73.2
Outlook
Others -- -- --
Total 100.0 100.0 100.0 The management expects 15-20 percent volume growth for the tractor
industry in FY18. New launches in 2HFY18 in Tractor and SUV segments will
make the M&M presence further stronger in the domestic market. Expansion
Company Vs NIFTY
in the Ssangyong could lead to better margins going ahead. The stock is
130 M&M NIFTY currently trading at 2.5x P/B of FY17. We expect that RoE to maintain over
125
11%. Based on SOTP valuation method we have valued the standalone
120
115
business at Rs. 1112 per share and subsidiaries at Rs. 487 per share. Hence,
110 we recommend HOLD on the stock with target price of Rs. 1600.
105
100 Rs. In crore
95
Financials 3QFY17 2QFY17 3QFY16 QoQ YoY
90
85 Sales 11010 10609 11004 4% 0%
80
EBITDA 1299 1233 1280 5% 2%
Jul-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-17
Mar-16
Net Profit 1112 1163 834 -4% 33%

EBIDTA% 11.8% 11.6% 11.6%
Naveen Kumar Dubey PAT % 10.1% 11.0% 7.6%
naveen.dubey@narnolia.com
17
M&M
Investment Arguments
Monsoon has played a significant role in shaping the rural demand in favour of M&M, because about 90% of the tractors and
more than 40% of the utility vehicles have been sold in rural areas by the company. So M&M remains the big beneficiary of
improving rural demand in long run.
Recently launched "Yuvo" brand tractors have made the Farm Equipment segment portfolio stronger and M&M is all set to take
advantage of growing demand of 41-50 HP tractors. This category contributes more than 45% of total tractor sales.
The Company has built adequate manufacturing capacity for the immediate future and is planning to invest in additional
capacity in preparation for the mid to long term.
Ssangyong can be a new growth driver for M&M in utility vehicles segment and this could lead further expansion in margins of
the company going ahead.
M&M is going full-throttle on a global strategy to transform itself into a full-line farm machinery player. This should see the
contribution of non-tractor farm equipment to the product mix increasing 5-fold from 4 percent in December 2015 to 20 percent by
FY19.
Management Highlights
16-17% industry volume growth in Tractor segment for FY17. 15-20% growth in FY18.
EBITDA Margin may stay in FY17 at the similar level of FY16.
Effective Tax rate is 21-22% for FY17.
As per management there will not be significant price change in the truck segment due to GST.
Capex of around Rs.2500 crore every year.
Inventory level for Tractor is 60 days and for Auto 50 days.
The company will launch a multi-utility vehicle codenamed U321 before the end of next financial year preceded by a sports
utility vehicle codenamed S201 in the second half of the year.
Ssangyong has a capital expenditure plan of more than $700 million for the next three-four years to bring out one new product
every year.
Mahindra and the Ssangyong version of the SUV will drive the Korean brands ambitious entry into the North American market
by 2020.
M&M aims to get 50 percent of its farm equipment revenues from international markets.
Sustainable growth in Farm Equipment Segment
Farm Equipment Segment Growth
90000 36% 40%

80000 22% 30%
20%
70000 12% 20%
60000 3% 5%
0% 10%
50000
0%
40000
-16% -26% -10%
30000 -24% -30%
20000 -20%
74555
59714
38604
62358
45246
62666
43321
74595
61658
76486
61152
10000 -30%
0 -40%

M&M
Financials Snap Shot

INCOME STATEMENT RATIOS
FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17
Net Revenue 74,001 71,949 78,016 82,412 EPS 76 51 52 55
Other Income 505 525 541 541 Book Value 378 416 461 502
Total Revenue 74,506 72,474 78,557 82,953 DPS 16.4 14.0 14.0 14.0
COGS 44,893 42,850 45,340 48,211 Payout (incl. Div. Tax.) 22% 28% 27% 25%
GPM 61% 60% 58% 59% Valuation(x)
Other Expenses 12,342 13,444 15,036 15,246 P/E 6.3 12.8 23.4 23.2
EBITDA 10,120 8,793 9,647 10,714 Price / Book Value 1.3 1.6 2.6 2.5
EBITDA Margin (%) 14% 12% 12% 13% Dividend Yield (%) 3.43% 2.16% 1.16% 1.10%
Depreciation 2,170 2,124 2,582 2,555 Profitability Ratios
EBIT 7,951 6,669 7,066 8,159 RoE 20% 12% 11% 11%
Interest 2,954 3,157 3,373 3,812 RoCE 16% 14% 13% 14%
PBT 5,502 4,038 4,234 4,888 Turnover Ratios
Tax 1,496 1,720 1,864 1,466 Asset Turnover (x) 0.8 0.8 0.7 0.7
Tax Rate (%) 27% 43% 44% 30% Debtors (No. of Days) 28.2 27.8 30.0 30.0
Reported PAT 4,667 3,137 3,211 3,421 Inventory (No. of Days) 67.9 72.0 85.6 60.0
Dividend Paid 1,009 872 872 872 Creditors (No. of Days) 58.2 57.6 63.8 63.8
No. of Shares 62 62 62 62 Net Debt/Equity (x) 1.1 0.9 0.9 0.8
BALANCE SHEET CASH FLOW STATEMENT

FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17
Share Capital 295 296 296 296 OP/(Loss) before Tax 5,502 4,038 4,234 4,888
Reserves 23,012 25,561 28,323 30,873 Depreciation 2,175 2,128 2,612 2,555
Net Worth 23,307 25,856 28,620 31,169 Direct Taxes Paid (1,275) (1,701) (2,044) (1,466)
Long term Debt 25,492 22,327 25,096 25,598 OP before WC changes 8,086 6,454 7,252 10,134
Short term Debt 2,781 7,177 8,251 8,663 CF from Op. Activity (244) 1,055 971 6,924
Deferred Tax 1,202 1,287 1,552 1,552 (66,102) (80,047) (88,000) (172)
Total Capital Employed 48,799 48,183 53,716 56,767 Capex (3,665) (4,759) (4,334) (3,660)
Net Fixed Assets 19,228 21,315 24,186 25,291 CF from Inv. Activity (4,490) (4,444) (5,238) (4,706)
Capital WIP 1,244 1,273 806 806 Repayment of Long Term Borrowings
(53,265) (45,084) (94,098) -
Debtors 5,725 5,476 6,419 6,781 Interest Paid (583) (489) (541) (3,812)
Cash & Bank Balances 6,523 4,912 4,906 3,346 Divd Paid (incl Tax) (1,094) (1,200) (1,068) (872)
Trade payables 11,800 11,355 13,628 14,396 CF from Fin. Activity 5,577 1,669 3,971 (3,770)
Total Provisions 5,089 5,654 5,901 6,127 Inc/(Dec) in Cash 844 (1,720) (296) (1,552)
Net Current Assets 14,817 13,195 14,739 15,986 Add: Opening Balance 3,823 4,633 3,000 4,906
Total Assets 88,270 94,844 1,08,223 1,13,724 Closing Balance 4,633 2,720 2,792 3,019

PART BOOK PROFIT
Indusind Bank 27-Mar-17
Result Update Recent Development and Result Update

CMP 1404 Recently there was news from management stating that Indusind Bank was
Target Price 1480 in talks with multiple entities for business expansion. It also includes the
widely speculated merger of Bharat Financial Inclusion. However we wait for
Previous Target Price 1400
the confirmation on any such deal. But any such development with Bharat
Upside 5% Financial Inclusion would be synergistic and will boost earnings growth of
Change from Previous 6% Indusind Bank.
Market Data Indusind Bank posted the strong set of 3Q FY17 results. NII grew by 35%
YoY backed by healthy loan growth as well as improvement in NIM. C/I ratio
BSE Code 532187 was well within control to 47.5%. Operating Profit remained healthy with
NSE Symbol 29% YoY growth. PAT grew by 29% YoY. NIM improved by 9 bps YoY to
INDUSINDBK
52wk Range H/L 1414/912 4%, it remained flat QoQ. Sequentially assets quality saw marginal
deterioration with GNPA at 94bps against 90bps. Advances increased by
Mkt Capital (Rs Cr) 69444
25% YoY backed by growth in both consumer as well as corporate portfolio.
Av. Volume (,000) 141 Deposits Increased by 38% YoY, whereas CASA Increased by 46% YoY.
Nifty 9045 CASA ratio increased by 50 bps QoQ to 37%.
Stock Performance Advances growth remained healthy, CASA Spiked

1Month 1Year YTD Advances grew by a healthy pace of 25% YoY despite the busy quarter (on
Absolute 3.7 49.0 27.8 liability side) backed by both Consumer Finance and Corporate Bank
division. Both the segment registered 25% growth YoY. Overall vehicle
Rel.to Nifty 1.9 18.2 11.4
finance grew by 20% YoY and Non Vehicle consumer portfolio grew by 38%
YoY. Under Vehicle Finance, CV grew by 10%, SCV picked up to 18% and
Share Holding Pattern-% car loan grew by 22%. Equipment financing grew by 28% YoY, Credit card
3QFY17 2QFY17 1QFY17 business grew by 51% YoY. Management highlighted that the IIB has
Promoters 16.7 16.7 16.7 gained the market share in overall vehicle financing except in 2 wheeler
segment which remained flat QoQ.
Public 83.3 83.3 83.3
Others
Deposits grew by 38% YoY mainly due to demonetization effect. However
Total 100.0 100.0 100.0 growth was only 6% QoQ due to one off IPO deposits in 2Q FY17 got
redeem in 3Q FY17. CASA grew by 46% YoY which led the CASA ratio to
Company Vs NIFTY 37%. SA increased by 56% and CA increased by 35% YoY. Management
highlighted that the increase in CASA can be attributed equally to both-
150 INDUSINDBK NIFTY
customer acquisition as well as demonetization.
140
130
120 Operating Profit Remain Healthy.
110
Operating profit of the Indusind bank has shown a healthy growth of 29%
100 YoY backed by strong NII and other income growth of 35% and 21%
90 respectively. Other income growth was supported by 22% YoY growth in fee
80 income. Fee from investment banking grew by 41% YoY but remain flat
sequentially. Loan processing fees grew by 5% YoY. Distribution fee income
grew by 44% YoY. C/I ratio increased marginally to 47.5% from 47.3% a
year back due to 29% growth in operating expenses. Bank opened 40 new
DEEPAK KUMAR branches this quarter which led the total branches to 1075 and has the
Deepak.kumar@narnolia.com
target of 1200 in FY17.
INDUSINDBK
Demonetization led huge decline in Cost of Fund.

NIM has improved by 9bps YoY to 4% but remain flat QoQ. Improvement in NIM was backed by decline in cost of
fund. Cost of fund declined by 53bps YoY to 5.27%. Cost of deposits fall by 80 bps YoY to 6.35% as on 3Q FY17.
This 80 bps fall in cost of deposits was the highest in last 18 quarters. Decline in cost of deposits was the result of
spike in CASA ratio due to demonetization. Overall Yield of IIB declined by 44bps to 9.27%. Yield on advances
declined by 34 bps YoY to 11.73%. Yield on consumer finance division declined by 53 YoY bps whereas corporate
portfolio saw as decline of 22 bps YoY in its Yield. However sequentially yield on CFD decline marginally by 4 bps.
Most of the CFD book is on fixed rate. In the declining interest rate scenario, Yields will further taper but with the
strategy of management to shift to portfolio mix towards high yield CFD and decline in cost of fund will maintain the
NIMs at current level.
Assets Qaulity remains largely stable

Assets Quality of IIB saw marginal increase in its GNPA to 0.94% against 0.90% as on 2Q FY17. NNPA increased
by 2 bps to 0.39%. Slippages were Rs 281 Cr, increased by 8% QoQ. However slippages in CFD improved to Rs
170 Cr against Rs 188 Cr on 2Q FY17. GNPA in vehicle segment improved except in Car segment. LAP also saw
10bps increase in GNPA. Management highlighted that delinquencies and slippages in the consumer bank have
actually improved over the quarter because repayments came in faster before December 30.Bank also saw
delinquent clients as well as written-off clients end with paying up. Restructured assets declined to 41 bps against
44 bps on 2Q FY17. The decline was due to slip of 2 small accounts into NPA. PCR remained flat at 59%. Credit
cost was 15 bps for the quarter and it was 45 bps for 9 months. Management expects the credit cost to restrict to
60bps in FY17.
Quarterly Performance (Rs in Crore)

Financials 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ%
Interest Inc. 2437 2579 2724 2798 2928 3132 3292 3469 3699 26% 7%
Interest Exp. 1576 1654 1743 1703 1754 1863 1935 2009 2121 21% 6%
NII 861 925 981 1094 1173 1268 1356 1460 1578 35% 8%
Other Income 611 658 724 784 839 913 973 970 1017 21% 5%
Total Income 1472 1584 1705 1878 2012 2181 2329 2431 2595 29% 7%
Ope Exp. 698 733 782 871 951 1030 1096 1149 1232 29% 7%
PPP 774 851 923 1007 1061 1151 1234 1282 1363 28% 6%
Provisions 98 107 123 158 177 214 230 214 217 22% 1%
PBT 676 743 799 848 884 938 1003 1068 1146 30% 7%
Tax 229 248 274 288 303 317 342 364 396 31% 9%
Net Profit 447 495 525 560 581 620 661 704 751 29% 7%
Financials 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
NII Growth % (YoY) 18.0 18.4 22.5 31.3 36.2 37.1 38.3 33.4 34.5
Other Inc./Net Inc. % 41.5 41.6 42.5 41.7 41.7 41.9 41.8 39.9 39.2 (2.51) (0.74)
C/I Ratio % 47.4 46.3 45.9 46.4 47.3 47.2 47.0 47.3 47.5 0.19 0.19
Empl. Cost/ Tot. Exp. % 36.6 36.2 34.8 34.5 34.3 32.7 32.6 32.7 32.0 (2.35) (0.72)
Other Exp/Tot. Exp.% 63.4 63.8 65.2 65.5 65.7 67.3 67.4 67.3 68.0 2.35 0.72
PPP Growth % (YoY) (22.3) (10.9) 11.7 116.0 80.7 98.9 86.9 35.3 22.5
Provision/PPP % 12.7 12.6 13.4 15.7 16.7 18.6 18.7 16.7 15.9 (0.78) (0.78)
Tax % 33.8 33.3 34.3 34.0 34.3 33.8 34.1 34.0 34.5 0.26 0.48
PAT Growth % 28.9 25.1 24.7 30.2 29.9 25.3 26.0 25.8 29.2
RoE % 18.3 19.8 20.4 16.7 14.1 14.6 15.1 15.4 15.7 1.67 0.34
RoA % 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 (0.04) (0.05)

INDUSINDBK
Margins Performance 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
Yield % on Advances 13.0 12.8 12.7 12.4 12.1 12.0 12.1 11.9 11.7 (0.34) (0.13)
Yield % on Corporate Bank 10.9 10.6 10.4 10.1 10.0 10.1 10.2 9.9 9.8 (0.22) (0.16)
Yield % on Consumer Finance 15.8 15.8 15.7 15.4 15.1 14.9 14.6 14.6 14.5 (0.53) (0.04)
Overall Yield % on Total Assets 10.3 10.1 10.1 9.8 9.7 9.7 9.6 9.5 9.3 (0.44) (0.24)
Cost of Deposits % 7.8 7.7 7.6 7.4 7.2 7.1 6.9 6.6 6.4 (0.80) (0.25)
Overall Cost Of Funds % 6.6 6.5 6.4 5.9 5.8 5.7 5.7 5.5 5.3 (0.53) (0.24)
NIM % 3.7 3.7 3.7 3.9 3.9 3.9 4.0 4.0 4.0 0.09 -
NII Growth % (YoY) PAT Growth % C/I Ratio %

Overall Yield % on Total Assets Overall Cost Of Funds % NIM %
50.00 48.00
12.00
40.00 47.50
10.00
47.00
30.00 8.00
46.50
6.00
20.00
46.00 4.00
10.00 45.50 2.00
- 45.00 -
3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
(Rs in Crore)
Other Income Break Up 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ%
Trade and Remittances 62 80 56 84 85 97 109 103 106 25% 4%
Foreign Exchange Income 169 110 159 170 170 140 151 156 179 5% 15%
Distribution Fees 98 127 107 119 126 138 137 156 181 44% 16%
General Banking Fees 42 45 49 41 46 48 56 49 64 38% 29%
Loan Processing fees 91 111 104 145 185 228 215 201 195 5% -3%
Investment Banking 59 96 123 114 113 122 114 161 160 41% -1%
Total Fee-Based Income 522 569 599 673 726 774 782 826 885 22% 7%
Securities/MM/FX 88 90 125 110 113 139 191 145 132 17% -9%
Trading/Others
Total Other Income 611 658 724 784 839 913 973 970 1017 21% 5%
Other Income/Total Net Income % Fee Income/ Advances %

43.00 0.90
42.00 0.88
41.00 0.86
40.00 0.84
39.00 0.82
38.00 0.80
37.00 0.78
3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
22
INDUSINDBK
Outlook & Valuation:
Among the mid size private bank, Indusind bank remains one of the consistent performers in growth and profitability
parameter. Superior loan book growth, diversified fee income profile and low credit cost are the key drivers of the
bank. We expect the IIB to maintain 25%+ loan growth in near to mid-term backed by revival in economic environment
and declining interest rate. We expect the consumer loan demand to pick up with improving vehicle financing and card
business giving the boost. Spike in CASA ratio and focus on consumer finance segment will help to maintain the NIM
at 4%. With healthy capitalization of Tier 1 at 14.7% we expect the RoA of 1.9%+, RoE of 16%-17%. Since Indusind
Bank has achieved our target price and valuation has got little stretched but based on strong fundamentals we think
investors should hold the stock in their portfolio. We recommend part book profit and hold the rest with the target price
of Rs 1480.
Concall Highlights:
>> Bond book will do well as the rate goes down. But the issue lies in the reinvestment risk in the book of banks.
>> Credit cost is well within the guidance. May come up slightly better than the guidance of 60 Bps of full year.
>> Security Receipts is Rs 223 Cr.
>> 2 small accounts slipped from restructured book.
>> RWA to total assets declined to 79% from 83% previous quarter. Quality of book has improved.
>> Assets quality in vehicle book has improved except for Car.
>> CASA increased can be attributed 50% to demonetization effect and 50% for the customer accquisition.
>> Gained market share in vehicle finance in all segment except in 2 wheeler segment.
>> LAP was slow in the month of Nov, but the business came back in Dec.
>> MFI book is flat QoQ with Rs 3000 Cr. MFI loan book target is Rs 10000 Cr in 3 years.
Assets Quality (Rs in Crore)

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
GNPA (Rs) 673 563 570 602 681 777 861 899 971 43% 8%
GNPA % 1.05 0.81 0.79 0.77 0.82 0.87 0.91 0.90 0.94 0.12 0.04
NNPA (Rs) 202 210 225 241 273 322 356 369 401 47% 9%
NNPA % 0.32 0.31 0.31 0.31 0.33 0.36 0.38 0.37 0.39 0.06 0.02
Slippages (Rs) 161 449 133 189 252 274 253 261 281 12% 8%
Restructured Assets % 0.55 0.53 0.63 0.63 0.58 0.53 0.49 0.44 0.41 -0.17 -0.03
Total Stress Assets (Rs) 353 368 455 493 482 473 464 440 424 -12% -4%
(GNPA+Std.
Specific PCR Rest.)
% 70.1 62.6 60.6 60.0 59.9 58.6 58.7 59.0 58.7 -1.16 -0.25
GNPA Composition Consumer Finance %

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
Commercial Vehicle 1.44 1.27 1.18 1.10 1.05 1.00 1.08 1.07 1.02 -0.03 -0.05
Utility 0.97 1.08 1.06 1.03 1.00 1.21 1.27 1.17 1.07 0.07 -0.10
Construction Equipment 1.64 1.44 1.46 1.57 1.45 1.26 1.39 1.40 1.24 -0.21 -0.16
Small CV 0.90 0.92 1.04 0.84 0.81 0.98 1.05 0.97 0.83 0.02 -0.14
TW 2.36 2.53 2.65 2.83 2.95 3.02 3.15 3.62 3.60 0.65 -0.02
Cars 0.48 0.56 0.58 0.41 0.39 0.50 0.49 0.49 0.75 0.36 0.26
LAP/HL/PL 0.32 0.33 0.48 0.41 0.57 0.65 0.68 0.71 0.81 0.24 0.10
Tractor - - - - - - 0.24 0.49 0.28 N/A -0.21
Cards 1.53 1.24 1.32 1.35 1.48 1.45 1.73 1.68 1.62 0.14 -0.06
Total 1.22 1.15 1.14 1.09 1.08 1.08 1.14 1.17 1.16 0.08 -0.01
23
INDUSINDBK
GNPA % NNPA % Restructured Assets % Specific PCR %

1.20
72.00
1.00 70.00
68.00
0.80
66.00
0.60 64.00
62.00
0.40 60.00
58.00
0.20 56.00
54.00
- 52.00
Advances (Rs in Crore)

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Net Advances (Rs in Cr) 63,847 68,788 72,243 78,294 82,167 88,419 93,678 98,949 1,02,770
Adv. Growth YoY % 21.69 24.84 23.15 30.64 28.69 28.54 29.67 26.38 25.07
>> Growth QoQ % 6.53 7.74 5.02 8.38 4.95 7.61 5.95 5.63 3.86
Sectoral Breakup % 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Corporate Banking% 57.7 58.7 58.5 59.2 58.3 58.7 58.8 59.0 58.3
Consumer Finance% 42.3 41.3 41.5 40.8 41.7 41.3 41.2 41.0 41.7
Net Advances (Rs in Cr) Adv. Growth YoY % Corporate Banking % Consumer Finance %
1,20,000 35.00
60.00
1,00,000 30.00
50.00
25.00
80,000
20.00 40.00
60,000
15.00 30.00
40,000
10.00 20.00
20,000 5.00 10.00
- - -

INDUSINDBK
Consumer Finance Book Break Up (Rs in Crore)

1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
Comm. Vehicle Loans 11,405 12,360 13,204 14,101 13,847 14,208 14,569 10% 3%
>>Tractor - - - - 1,229 1,460 1,764 N/A 21%
Utility Vehicle Loans 2,043 2,037 2,041 2,058 2,097 2,157 2,237 10% 4%
Small CV 1,860 1,938 2,019 2,045 2,133 2,274 2,381 18% 5%
Two Wheeler Loans 2,829 2,857 3,034 3,045 3,076 3,134 3,323 10% 6%
Car Loans 3,293 3,539 3,754 3,917 4,076 4,324 4,570 22% 6%
Equipment Financing 2,827 2,861 3,036 3,244 3,435 3,597 3,875 28% 8%
Credit Card 786 885 1,008 1,204 1,258 1,408 1,519 51% 8%
Loan Against Property 4,032 4,331 4,759 5,248 5,585 5,872 6,429 35% 9%
Others-BL,PL,GL,etc 932 1,147 1,393 1,687 1,855 2,124 2,198 58% 3%
DEPOSITS (Rs in Crore)

Deposits (Rs in Cr) 69,376 74,134 77,693 80,841 86,423 93,000 1,01,768 1,12,313 1,19,218
>> Growth YoY % 23.3 22.5 21.6 22.5 24.6 25.4 31.0 38.9 37.9
>> Growth QoQ % 5.1 6.9 4.8 4.1 6.9 7.6 9.4 10.4 6.1
CASA (Rs) 23,634 25,300 26,945 28,085 30,232 32,724 35,043 41,034 44,162
>>CASA Growth YoY % 30.6 28.5 26.5 25.6 27.9 29.3 30.1 46.1 46.1
>> Growth QoQ % 5.7 7.0 6.5 4.2 7.6 8.2 7.1 17.1 7.6
CASA % 34.1 34.1 34.7 34.7 35.0 35.2 34.4 36.5 37.0
CA % 16.5 16.7 16.6 16.1 16.3 16.6 15.7 18.2 15.9
SA % 17.6 17.5 18.0 18.6 18.7 18.5 18.8 18.3 21.1
Credit Deposit Ratio 92.0 92.8 93.0 96.8 95.1 95.1 92.1 88.1 86.2
Deposit Growth YoY % >>CASA Growth YoY % CA % SA % CASA %

50.00
40.0
45.00
40.00 35.0
35.00 30.0
30.00 25.0
25.00 20.0
20.00
15.0
15.00
10.00
10.0
5.00 5.0
- -

INDUSINDBK

INCOME STATEMENT (Rs in Crore) RATIOS
FY14 FY15 FY16 FY17E Business Ratios FY14 FY15 FY16 FY17E
Int./disc. on advances / bills 6,627 7,717 9,245 11,643 Credit-Deposit(%) 91.1 92.8 95.1 95.0
Income on Investments 1,477 1,680 1,781 2,201 CASA % 32.5 34.1 35.2 35.5
Int. on bal.with RBI 149 277 409 341 Efficiency Ratios
Others 1 17 147 137 Emp. Cost as a % of Total Inco. (%) 16.9 16.8 15.8 15.9
Total Interest Income 8,254 9,692 11,581 14,323 Other Exp./Total Inco. (%) 28.8 30.0 31.2 32.0
Total Interest expended 5,363 6,272 7,064 8,470 Cost Income Ratio (%) 45.7 46.8 47.0 47.9
Net Interest Income 2,891 3,420 4,517 5,853 Spread Analysis As Calculated
Other Income 1,891 2,404 3,297 4,184 Yield on Advances (%) 13.6 13.2 12.3 12.2
Total Income 4,781 5,824 7,814 10,036 Yield on Investments (%) 7.9 8.0 7.3 7.1
Total Operating Expenses 2,185 2,726 3,672 4,809 Yield on Earning Assets (%) 11.5 11.2 10.7 10.6
Pre Provisioning Profit 2,596 3,098 4,141 5,228 Cost of Deposits (%) 8.2 7.9 7.3 6.9
Provisions and Contingencies 468 389 672 803 Cost of Fund (%) 8.1 7.8 7.0 6.7
Profit Before Tax 2,128 2,709 3,469 4,425 Interest Spread (%) 3.5 3.5 3.8 4.0
Tax 720 915 1,183 1,497 NIM (%) 4.0 4.0 4.2 4.3
PAT 1,408 1,794 2,286 2,928 Profitability Ratio
RoE % 17.5 19.0 16.6 16.2
RoA % 1.8 1.8 1.8 1.9
BALANCE SHEET (Rs in Crore) Int. Expended / Int. Earned (%) 65.0 64.7 61.0 59.1
FY14 FY15 FY16 FY17E Provisions/PPP (%) 18.0 12.6 16.2 15.4
Capital 526 529 595 595 Other Income/Net Income (%) 39.5 41.3 42.2 41.7
Reserves & Surplus 8517 10115 17101 19625 Tax Rate (%) 33.8 33.8 34.1 33.8
Deposits 60502 74134 93000 116341 Asset Quality Ratio
Borrowings 14762 20618 22156 25179 GNPA (%) 1.12 0.81 0.87 0.96
Other Liabilities & Provisions 2719 3719 7205 8758 GNPA(Rs) 621 563 777
Total Capital & Liabilities 87026 109116 140057 170498 NNPA (%) 0.33 0.31 0.36 0.41
NNPA (Rs) 184 210 322
Cash & Balances with RBI 4414 4035 4521 7161 PCR (%) 70 63 59 59.0
Bal. with Bank&Money at Call 2356 6744 5591 6112 Os. Std. Restr. Assets (%) 0.33 0.53 0.53 0.40
Investments 21563 22878 31214 35368
Advances 55102 68788 88419 110524 Capital Adequacy Ratio
Fixed Assets 1016 1158 1255 1386 Capital Adequacy Ratio (%) 13.8 12.1 15.5 15.3
Other Assets 2575 5513 9057 9947 Tier I Capital (%) 12.7 11.2 14.9 14.6
Total Assets 87026 109116 140057 170498 Tier II Capital (%) 1.1 0.9 0.6 0.7
Narnolia Securities
26 Ltd
BOOK PROFIT
SADBHAV ENG. 27-Mar-17
Sadbhav Eng. has reported strong numbers in Q3FY17; the top line grew by
Result Update 14.8% YoY to 864.8 Cr as compared to Rs. 753 Cr in Q3FY16 on back of
CMP 308 strong execution. EBITDA for the quarter stood at Rs. 94 Cr as against Rs.
Target Price 74 Cr in 3QFY16, 27% up YoY with 100 bps improvement in margin on
Previous Target Price - account of lower Employee and Other Expenses. PAT grew by 82.4% YoY
to Rs. 52 Cr vs Rs.29 Cr in same period last year. Higher 80 IA benefit led
Upside
to NIL effective tax rate for the quarter and it will be continue for the next 3
Change from Previous - quarters based on higher revenue contribution from road EPC and irrigation
projects. Order book stands at Rs. 7708 Cr at the end of Q3FY17 which
Market Data provides strong revenue visibility going forward. But slow execution pace of
BSE Code 532710 Irrigation projects and delay in resolution of mining project will be cause of
NSE Symbol SADBHAV concern going ahead.
52wk Range H/L 325/220
Highway & Road drives the revenue growth:-
Mkt Capital (Rs Cr) 5,295
Av. Volume 9580 Currently 5 EPC projects are under execution and another 3 HAM project
Nifty 9108 will come under execution in Q4FY17. 3 out of 5 HAM projects have
received appointment date and remaining two projects will receive by
February 2017 end. The company has already started work on these
Stock Performance
projects before getting appointment date and expects to book Rs.300 Cr
1Month 3 Month 1Year
(approx.) revenue in Q4FY17. The gross equity requirement for the HAM
Absolute 12.5 19.1 15.3 projects is 460 Cr. Management thrust on completion of lower margin
Rel.to Nifty 10.6 5.0 -2.7 irrigation projects but we do not witnessed speedy execution, irrigation
revenue has come down 26% YoY .The Service tax issue at BBCL projects
Share Holding Pattern-% has settled down for 2 blocks out of 3. Management is in talk with BCCLs
3QFY17 2QFY17 1QFY17 management and expects to reach resolution by March end. EPC (Road &
Irrigation) dominated revenue in H2FY17 will boost the bottom line by way of
Promoters 47% 47% 47%
80 IA tax benefit.
Public 53% 53% 53%
Others 0% 0% 0%
Total 100% 100% 100% Outlook and Valuation
Revenue growth in 9MFY17 remain subdued due to demonetization, slow
Company Vs NIFTY execution of irrigation projects and delay in resolution of services tax
130
related issue at BCCL mining project. Work commencement of 3 new HAM
SADBHAV NIFTY
projects will drive the revenue growth going forward. At the current price
125
level (2.95x P/B) we do not see much upside here on as the stock has
120
discounted all near to mid term positive traits. We recommended this
115 stock at Rs. 277 for the target price of Rs. 315 and the stock has
110 achieved our recommended target price. So we advice our investors to
105 Book profit at current level.
100 Financials Q3FY17 Q2FY17 Q3FY16 YoY QoQ
95 Sales 865 616 753 Change
15% 40%
90 EBITDA 94 65 74 27% 45%
Jul-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Mar-17
Net Profit 52 19 29 79% 174%

EBIDTA% 10.8% 10.6% 9.8% 100 bps 20 bps
Sandip Jabuani PAT % 6.1% 3.0% 3.8% 230 bps 310 bps
sandip.jabuani@narnolia.com

Demonetization impact on execution: NOT A MATERIAL ONE
Demonetization will not have any material impact on Sadbhavs standalone working is concerned. In concall, management has
clarified that from the raw material procurement to wages of labour and other related expense are channelized directly through
banking system. Though this currency clean up drive will surely have impact on different economic activities with different degree
in near term moving forward, management has indicated that Sadbhavs BOT business will not be spared from this, as traffic
growth may hamper.
Concall Update :-
Expect 5000-6000 Cr of new orders in FY18 from Road segment
Post demonetization toll collection is down by 1-1.15% YoY in January, but witness recovery in taffies in February
Equity requirement for 5 HAM project is 460 Cr
Company has received appointment date for 3 HAM projects in Guajarat and Puna and work will start in Q4FY17.
Mgt. expect to receive appointment date on reaming 2 HAM projects by Feb 2017
The work on BCCL project has been stopped and expect to resolve it by March end.
Loan to SIPL at the end of Q2FY17 is 300 Cr
Company has repaid mobilization advances of 109 Cr to NHAI and further looking to repay 160 Cr, which will be resulted into
increment in debt in Q4FY17
Segmental Order Book
BOT EPC Irrigation Minning
10,000
9,000
8,000 2,153
7,000 2,724 2,392 2,273 2,061
2,728
1,733 1,975 1,753
6,000 1,902
1,749 1,644 1,836
5,000 2,015 1,442 1,113
1,919 2,226
4,000 1,276
1,187
3,000 1,136 4,430 2,436
1,097 1,982 3,021
3,995
2,000 3,837 3,477 3,054
1,000 2,567 2,193 2,046
1,811 1,404 990 573
- 233 174 156
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Order book Book to Bill

3.79
9,500 4.00
3.50
9,000
2.76 3.00
8,941
8,500 2.35
2.50
8,000 8,200 2.00
1.50
7,500
7,487 1.00
7,000
0.50
6,500 -
FY14 FY15 FY16

Segmental Revenue
BOT EPC Irrigation Minning Power Generation
1,200
1,000
1
2 1 1
800 2
1 166 2 1 74
204 168
600 1 201 31 100 2
189 132
138 132 160 90
35 100
400 147 72
449 648
470 461 428 424
200 374 407 402
300
111 33 42
-
Toll Collection
250
208 214
200
200
165 173
155 162
139 147
150
100
50
-
EBITDA EBITDA M
120 11%
11% 11% 11% 11%
11%
100 11%
11%
80
10% 10%
10%
60 10%
9% 10%
40
9%
20
60 78 96 89 81 74 81 87 65 94
- 9%

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Revenue 2733 3447 3878 4487 EPS 2.9 -10.2 -2.7 3.9
Other Income 30 44 45 45 Book Value 82.4 89.6 104.8 107.9
Total Revenue 2762 3491 3922 4532 DPS 0.7 0.8 0.8 0.8
COGS 2064 2576 2730 0 Payout (incl. Div. Tax.) 24% -8% -30% 21%
GPM 1 1 1 0 Valuation(x)
Other Expenses 153 164 192 0 P/E 53.1 -15.2 -56.9 75.1
EBITDA 436 580 803 929 Price / Book Value 1.9 1.7 1.5 2.7
EBITDA Margin (%) 16% 17% 21% 21% Dividend Yield (%) 0.45% 0.53% 0.53% 0.28%
Depreciation 127 219 287 304 Profitability Ratios
EBIT 309 361 516 625 RoE 4% -11% -3% 4%
Interest 449 615 726 581 RoCE 5% 4% 5% 6%
PBT -110 -210 -165 89 Turnover Ratios
Tax -14 34 17 21 Asset Turnover (x) 0.3 0.3 0.2 0.3
Tax Rate (%) 13% -16% -10% 24% Debtors (No. of Days) 76.9 72.4 77.4 77.0
Reported PAT 44 -175 -47 67 Inventory (No. of Days) 29.0 30.2 18.9 18.9
Dividend Paid 11 14 14 0 Creditors (No. of Days) 51.8 50.1 37.5 38.0
BALANCE SHEET CASH FLOW

FY14 FY15 FY16 FY17E FY14 FY15 FY16E FY17E
Share Capital 15 17 17 17 OP/(Loss) before Tax 26 -233 -165 89
Reserves 1235 1520 1781 1848 Depreciation 130 223 287 304
Net Worth 1250 1537 1798 1865 Direct Taxes Paid 56 68 17 21
Long term Debt 4848 6256 8069 7869 Op. before WC Change 469 596 890 974
Short term Debt 468 411 601 601 CF from Op. Activity 786 385 2130 657
Deferred Tax 36 24 23 23 0 0 20 0
Total Capital Employed 6098 7793 9867 9734 Capex 225 158 7300 1417
Net Fixed Assets 6007 9598 13527 11805 CF from Inv. Activity (1441) (1357) 9330 1417
Capital WIP 1 1 0 1 Repayment of LTB 0 0 0 0
Debtors 576 684 822 951 Interest Paid 455 615 726 581
Cash & Bank Balances 128 205 126 0 Divd Paid (incl Tax) 11 13 14 0
Trade payables 388 473 399 461 CF from Fin. Activity 706 1037 1580 (781)
Total Provisions 174 271 357 332 Inc/(Dec) in Cash 52 64 13041 1294
Net Current Assets 548 760 477 435 Add: Opening Balance 58 110 205 126
Total Assets 7871 11933 15809 14132 Closing Balance 110 174 13245 1420

BOOK PART PROFIT
KEC International 24-Mar-17
Result Update
CMP 190 KEC has reduced gross debt by Rs. 562 Cr as compared to March 2016
Target Price 217 level backed by better Working capital management especially account
Previous Target Price 185 receivables. Account Receivables days went down from 246 days at the end
Upside 14% of March to 218 days at the end of Q3FY17 and further management has
guided to bring it down to 180 days level by the year end. The continuous
Change from Previous 17%
effort on improvement of working capital requirement will result into lower
interest outgo going forward. Management has guided that interest cost in
Market Data FY18 will be around 2.5% of sales as compare to 3.3% of sales in 9MFY17.
BSE Code 532714 Recently, KEC has won orders worth of Rs. 1943 Cr in transmission (1408
NSE Symbol KEC Cr), EHV Cables (85 Cr) and Solar (450 Cr), which will further strengthen its
52wk Range H/L 156/97 order book position.
Mkt Capital (Rs Cr) 4,900
Av. Volume 107057 Healthy Order Book:-
Nifty 9086
Current order book stands at Rs. 11175 Cr i.e. 1.3x of the trailing twelve
Stock Performance months revenue with Rs. 3800 Cr of orders in L1 position. Order intake
1Month 3 Month 1Year during the 9 months stood at Rs. 8634 Cr, up by 26% YoY. Management
Absolute 15.1 41.6 59.5 expects healthy orders from SEBs and railways which will provide robust
revenue visibility going ahead. Currently, SEA plant (Brazil) is running at
Rel.to Nifty 13.5 27.8 41.7
100% capacity utilization with 2 years orders in hand.
Share Holding Pattern-%
Operating Margin continues to be strong:-
3QFY17 2QFY17 1QFY17
Promoters 51% 51% 51% EBITDA margin in Q3FY17 has improved by 135 bps YoY to 9.3%. The
Public 49% 49% 49% Improvement in EBITDA margin was attributable to strong performance by
SAE (500 bps up YoY), railway business (negative in Q3FY16) and cable
business (negative in Q3FY16). Management is working on cost front in
cable business to improve margin and we expect margin improvement in
railway business as the revenue increase. Management has guided 9%
Company Vs NIFTY EBITDA margin in FY17 and improves further in FY18. KEC has bring down
160 KEC NIFTY account receivables days from 246 days in FY16 to 218 days at the end of
140 the Q3FY17 and we anticipate it to improve further based on retention
money release from Saudi project which result into improvement in bottom
120
line going forward.
100
80 In Rs. Cr.
Financials Q3FY17 Q2FY17 Q3FY16 YoY % QoQ %
60
Sales 1965 2121 2101 -7% -7%
40
EBITDA 182 185 167 9% -2%
Net Profit* 47 72 23 102% -35%
EBIDTA% 9.3% 8.7% 8.0% 130 bps 60 bps
Sandip Jabuani PAT 3.2% 3.1% 1.2% 200 bps 10 bps
* Net profit is excluding other comprehensive income
sandip.jabuani@narnolia.com

Railway :- Potential Revenue growth driver
Management has cut down the revenue growth to 5% in FY17. But maintain the railway top line guidance of 450-500 Cr in FY17
and Rs.1000 Cr for the FY18E based on the huge opportunity in railway electrification project. Railway Ministry has set target to
award 2000 Km, 4000 Km and 6000 km of overhead electrification orders in FY17, FY18 and FY19 respectively. In railways, KEC
commands 20% market share, which may translate into approx.2400 Cr of expected new orders in FY18E. Railway ministrys
focus on execution helps contractor to execute project smoothly and timely. We expect improvement in EBITDA margin based on
incremental volume and speedy execution.
Result Highlights of Q3FY17
Net sales de grew by the 6.5% YoY to Rs. 1965 Cr in Q3FY17 as compared to Rs. 2101 Cr in Q3FY16
EBITDA margin has improved by 135 bsp to Rs. 182 Cr as against Rs 167 Cr on account of 10% plus margin in T&D and
improved performance of railway and SAE business.
KEC has reported 102% YoY growth in PAT with 200 bps improvement on back of higher EBITDA
During the quarter KEC has secured Rs.2706 Cr of new orders in Q3FY17 (up by 20% YoY) and Rs. 8634 Cr in 9 months of
FY17, which is up by 26% YoY
Order book as on 31st December stands at Rs.11175 Cr, ie. 1.3x of TTM revenue.
Managment / Concall Update
Demonetization, delay in conversation of L1 orders into firm order and land acquisition issue at Jammu and Kashmir project led
to de growth in revenue
Management has guided 5% and 10-15% revenue growth in FY17 and FY18 respectively.
EBITDA margin in FY17 will be 9% and it will improve further in FY18
EBITDA margin of SAE tower was 8-9% in Q3FY17
Faced some serious issue in logistic in November and December month due to demonization but now situation is under control.
Losses in Cable segment has come down significantly on YoY
Revenue loss of 50-60 Cr due to demonization
Maintain revenue guidance in railway segment of Rs. 450-500 Cr and Rs.1000 cr in FY18
Interest cost as % of sales will be 2.7% in FY18
Significant improvement in solar business from next year as the KEC is in L1 position of large project. EBITDA margin is slightly
below than normal margin but cash generating on PBT level
Expect to bring down AR collection days to 180 from 218 days based on the release of retention money from Saudi projects
Land acquisition issue at Jammu and Kashmir project has been resolved
Expect more orders from SEBs compare to PGCIL
Outlook and Valuation:-

Revenue growth for 9MFY17 was subdued due to lower commodity prices and demonetization. But the operating margin
continues to accretive during the same period. We expect 5% and 15% revenue growth in FY17E and FY18E respectively based
on the strong traction in Transmission and railway business with strong operating margin. We recommended this stock at Rs. 148
for the target price of Rs. 185 and the stock has achieved our recommended target price. So we advice our investors to Book
part profit at current levels and considering the lower interest outgo, strong revenue growth in Q4FY17 and efficient
working capital management, investors may HOLD Remaining for the revised target price of Rs.217.

Quartely Performance 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Net Sales 2,140 2,021 2,491 1,903 1,998 2,076 2,530 1,763 2,098 1,935 -7% -8%
Other Operating Income 33 32 30 20 23 25 29 22 23 30 19% 27%
Net Sales 2,173 2,053 2,521 1,923 2,021 2,101 2,559 1,785 2,121 1,965 -7% -7%
Change in Invenotry 16 41 76 (13) (1) (39) 74 (49) 8 (11)
RM Cost 1,276 1,053 1,243 900 1,025 924 1,282 870 1,014 854 -8% -16%
COGS 1,292 1,094 1,318 887 1,024 885 1,356 821 1,022 843 -5% -18%
Employee Expenses 149 145 144 158 161 155 168 173 187 186 19% -1%
Other Expenses 225 225 275 203 260 243 279 215 238 243 0% 2%
Erection & Subcontracting 386 485 599 489 421 609 533 390 441 459 -25% 4%
Excise Duty 45 41 36 47 52 27% 11%
Total Expenditure 2,052 1,949 2,336 1,782 1,866 1,934 2,336 1,635 1,936 1,783 -8% -8%
EBITDA 121 105 185 141 155 167 223 150 185 182 9% -2%
Depreciation 22 23 22 29 21 31 22 29 31 30 -5% -4%
EBIT 99 82 162 112 134 136 201 121 154 152 12% -2%
Intreset 91 81 71 71 68 69 71 72 60 58 -16% -2%
PBT 9 136 100 44 69 69 132 54 100 101 46% 0%
Tax (12) 70 37 27 25 43 52 23 35 38 -11% 8%
PAT 20 66 63 17 44 26 80 31 65 63 139% -4%
Margin Profile YoY (+/-) QoQ (+/-)

Gross Margin 40.5% 46.7% 47.7% 53.9% 49.3% 57.0% 47.0% 54.0% 51.8% 57.1% 10 530
EBIDTA 5.6% 5.1% 7.3% 7.3% 7.7% 7.8% 8.7% 8.4% 8.7% 9.3% 150 60
EBIT 4.5% 4.0% 6.4% 5.8% 6.6% 6.7% 7.9% 6.8% 7.3% 7.7% 100 40
PAT 0.9% 3.2% 2.5% 0.9% 2.2% 1.8% 3.1% 1.7% 3.1% 3.2% 140 10
Order Book 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Transmission 7,356 6,921 7,131 7,903 7,207 7,028 7,087 7,334 7,442 8,054 15% 8%
SAE 931 876 951 948 1,086 937 1,134 1,769 1,510 1,342 43% -11%
Cables 279 263 570 632 592 469 472 104 216 224 -52% 4%
Railways 279 263 475 738 691 562 567 936 1,186 1,342 139% 13%
Water 466 438 380 316 - 281 189 208 216 112 -60% -48%
Solar 9 9 - - 296 75 38 52 183 101 34% -45%
Total 9,320 8,770 9,508 10,537 9,872 9,351 9,487 10,403 10,753 11,175 20% 4%
Order Intake
Transmission 583 1,478 1,909 2,375 1,024 1,595 1,370 1,469 1,738 1,651 4% -5%
SAE 231 485 421 123 181 247 206 678 465 298 20% -36%
Cables 253 412 393 309 181 270 206 198 279 244 -10% -13%
Railways - 48 84 278 90 90 56 424 528 460 412% -13%
Water - - - - - - - - - -
Solar 11 5 3 - 30 45 38 57 93 54 20% -42%
Total 1,078 2,428 2,811 3,085 1,506 2,246 1,877 2,825 3,103 2,706 20% -13%
Please refer to the Disclaimers at the end of this Report 31

Segment Revenue 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Transmission-Rest 1,692 1,531 1,976 1,355 1,506 1,557 1,887 1,184 1,529 1,273 -18% -17%
Transmission SAE 184 214 222 187 201 177 266 255 261 227 28% -13%
Total Transmission 1,876 1,745 2,198 1,542 1,707 1,734 2,153 1,439 1,790 1,500 -13% -16%
Cables 237 254 217 259 262 230 292 245 228 278 21% 22%
Railway 29 22 58 45 34 81 50 70 66 105 30% 59%
Water 30 32 38 32 21 13 37 18 19 20 54% 5%
Solar 9 0 - 40 52 14 26 59 48% 127%
Total 2,172 2,053 2,520 1,878 2,024 2,098 2,584 1,786 2,129 1,962 -6% -8%
Order Book Order Intake
Order Book Book to bill Order Intake Growth YoY%

12,000 2.00 10000 0.3
1.80 9000
10,000 0.25
1.60 8000
8,000 1.40 7000 0.2
1.20 6000 0.15
6,000 1.00 5000
0.80 4000 0.1
4,000 0.60 3000 0.05
2,000 0.40 2000
0.20 0
1000
- - 0 -0.05
FY12 FY13 FY14 FY15 FY16 Till FY12 FY13 FY14 FY15 FY16 Till
Q3FY17 Q3FY17
Strong Growth in Railway Segment :- Margin Trend :-
Railway Order Book Growth YoY%

EBITDA M % PAT M %
1,600 160%
1342 140% 10%
1,400
1,186 120% 9%
1,200 8%
100%
1,000 936 7%
80%
800 738 691 60% 6%
562 567 40% 5%
600 475
20% 4%
400 279 263 3%
0%
200 2%
-20%
1%
- -40%
0%

About the Company :-
KEC International Limited is an India-based company, engaged in infrastructure engineering, procurement and construction
(EPC). The Company is also a manufacturer of power cables and telecom cables in India. The Company operates in four
business verticals, which include power transmission and distribution, cables, railways and water. The Company is also a provider
of turnkey solution in the railway infrastructure EPC space. The Company has powered infrastructure development across 50
countries in developed, developing and emerging economies of South Asia, the Middle East, Africa, Central Asia, the United
States and South East Asia. The Company has eight manufacturing facilities for lattice towers, monopoles, hardware and cables.
Power Transmission
Cabels Railways Water
& Distribution
Transmission Lines Substations Power Cabels

Civil & Track Work Water Resource
LT/HT/EHV
Managment
Lattice Distribution Platforms &
Network Telecom Cabel : Buildings
Towers/Poles
Optical Fiber and Water & Waste
Telecom/Tower/ Jelly filled Signalings Water Treatment
Hardware EPC/OPGE
Electrification
Supply EPC
Manufacturing Facilities
Tower Manufacturing
India, Brazil and Vadodara (Gujarat)
Mexico Mysore (Karnataka)
(SAE Annual Silvassa (Union
production capacity Territory)
100000 MTs)

Revenue 7902 8468 8516 8943 EPS 2.6 6.3 7.4 11.5
Other Income 14 146 10 10 Book Value 46.3 51.7 58.8 66.9
Total Revenue 7916 8614 8527 8954 DPS 0.6 0.7 2.2 3.4
EBITDA 493 512 679 760 Payout (incl. Div. Tax.) 23% 11% 30% 30%
EBITDA Margin (%) 6% 6% 8% 9% Valuation(x)
Depreciation 71 88 88 84 P/E 26.0 12.8 16.4 16.0
EBIT 423 424 592 676 Price / Book Value 1.5 1.5 2.1 2.8
Interest 263 309 277 274 Dividend Yield (%) 0.87% 0.88% 1.82% 1.86%
PBT 173 261 325 412 Profitability Ratios
Tax 88 100 133 144 RoE 6% 12% 13% 17%
Tax Rate (%) 1 0 0 0 RoCE 24% 20% 28% 31%
Reported PAT 67 161 192 268 Turnover Ratios
Dividend Paid 15 18 57 80 Asset Turnover (x) 1.1 1.1 1.0 1.1
No. of Shares 26 26 26 26 Debtors (No. of Days) 176 166 193 193
Inventory (No. of Days) 45 38 38 38
Creditors (No. of Days) 148 143 126 126
Net Debt/Equity (x) 0.51 0.55 0.40 0.35
BALANCE SHEET CASH FLOW

Share Capital 51 51 51 51 OP/(Loss) before Tax 155 261 325 412
Net Worth 1192 1330 1512 1700 Direct Taxes Paid 113 122 135 144
Long term Debt 603 737 602 602 Op. before WC Change 499 596 853 770
Short term Debt 1207 1308 1723 1723 CF from Op. Activity (9) 153 (51) 478
Deferred Tax 73 70 66 66 Capex 161 90 78 0
Total Capital Employed 1794 2067 2114 2302 CF from Inv. Activity (136) 125 18 0
Net Fixed Assets 992 881 860 860 Repayment of LTB 305 640 264 0
Capital WIP 18 16 12 0 Interest Paid 263 309 277 274
Debtors 3808 3853 4495 4729 Divd Paid (incl Tax) 15 17 58 80
Cash & Bank Balances 144 206 111 0 CF from Fin. Activity 132 (216) (63) (354)
Trade payables 3213 3325 2939 3087 Inc/(Dec) in Cash (14) 62 (96) 124
Total Provisions 125 122 114 114 Add: Opening Balance 146 132 194 111
Net Current Assets 1374 1668 2151 2187 Closing Balance 132 194 98 235
Total Assets 7411 7745 8138 8322

BUY
MARICO 23rd March 2017
Company Update
Acquires 45% stake in Zed Life Style
CMP 285
Marico has recently agreed to acquire 45% stake in Zed Life Style for an
Target Price 330 undisclosed amount. Marico will gradually increase its stake in next two
Previous Target Price 330 years. Zed Life Style sells men grooming products in the brand name
Upside 16% `Beardo. `Beardo has strong presence in the online channel and salons
Change from Previous NA and 75% of its revenue comes from online channel orders. This acquisition
will give Marico a much needed diversification of products portfolio. Marico
is present in Rs3,200 cr mens grooming market with its mens hair gel and
Market Data mens deodorant under the brand name 'Set Wet'. This acquisition will help
BSE Code 531642 Marico to access the emerging niches at premium end and will enhance
NSE Symbol MARICO companys digital marketing and social media engagement capability going
forward.
52wk Range H/L 307/235
Mkt Capital (Rs Cr) 36,795 Managements short and medium term focus areas
Av. Volume(,000) 1260 Management is targeting 14-15% revenue growth from Indian business in
Nifty 9,030 next 5 years. The company is concentrating on 5 point agenda to improve
its business performance going forward which are innovation, go to the
Stock Performance market, cost management, talent & culture and IT. Immediate target for
1M 3M 12M Maricos management is to get back to 10% volume growth for Indian
business. However medium term expectation for organizations blended
Absolute 3.8 14.3 15.4
margin is 18% and Indian business margin is 20%plus.Food business is
Rel.to Nifty 2.4 2.3 -3.4 also expected to become Rs 300-500 cr in next 5 years. As far as
international business is concern, Management sees minimum15%
Share Holding Pattern-% constant currency (CC) organic growth upcoming 4-5 years.
3QFY17 2QFY17 1QFY17 Outlook and Valuation
Promoters 59.7 59.7 59.7 The companys recent acquisition is small but a right step in right direction.
Public 40.1 40.0 40.0 This acquisition will expand companys product portfolio in male grooming
market and will enhance companys digital marketing capability going
Others 0.2 0.3 0.3 forward. Management is optimistic of clocking double digit volume growth for
Total 100 100 100 Saffola in medium term which gives us confidence of high single to double
digit overall volume growth for Marico going forward. On margin front,
management reiterated its previous guidance of 20% plus margin for
Company Vs NIFTY
domestic business and 18% for overall business. Presently company trades
125 MARICO NIFTY at 16 times of FY17E book value with 35% of RoE. Considering improving
120
business conditions after demonetization, better medium term volume
115
guidance for domestic business and expected recovery from international
110
business going forward, we reiterate to BUY this stock with the target price
105
for Rs 330.
100
Rs,Cr
95
Financials 3QFY17 2QFY17 (QoQ)-% 3QFY16 (YoY)-%
90
85 Sales 1417 1443 -2% 1530 -7%
80 EBITDA 272 253 8% 290 -6%
Net Profit 192 181 6% 206 -7%
EBITDA% 19% 18% 169 Bps 19% 28 Bps
Rajeev Anand PAT% 14% 13% 100 Bps 13% 9 Bps
rajeev.anand@narnolia.com
Concall Highlights(Q3FY17)
The company sees inflation led value growth going ahead.
South and West impacted less due to demonetization.
Company sees much better traction from Bangladesh going forward.
Management expects recovery from MENA region in 2HFY18.
The company expects 18% overall margin in the medium term.
Management guided for 6-8% near term volume growth for overall business.
The company is diversifying its products portfolio.
GST will lead to improvement in market share for Marico going forward.
A&P Expenses will be in the range of 10% going forward.
In the month Jan, company witnessed 90% of its demand recovery.
The company may initiate pricing growth for Egypt.
In medium term, the company would be comfortable at 20%+ EBITDA margin.
Parachute and Nihar: Despite headwinds of demonetization and steep increase in inputs costs, near term volume growth
prospects remain promising.
Copra prices went up by 17%on sequential basis and YoY decline of 5%. The company expects the copra prices to go up further
in Q4FY17.
Company will take prices up in near term considering the inflation in commodity prices.
Net Sales and PAT(in cr.)
2000 300
Sales(in cr) PAT(in cr)
1800 268
250
1600
229
1400 206 200
185 192
1200 181
160 153
1000 150
138
800 118 110
100
600
400
50
1623
1431
1452
1226
1750
1454
1530
1307
1754
1443
1417
200
0 0
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
EBITDA and PAT Margin

25.0%
EBITDA Margin% PAT Margin%
21.3%
18.9% 19.2%
20.0% 18.2% 17.5%
16.4% 16.3% 16.6%
15.7% 15.3%
13.6% 14.0% 13.4% 13.5%
15.0% 13.1% 12.5%
11.4% 11.0% 10.5% 10.6%
9.0%
10.0% 8.3%
5.0%
0.0%
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

Revenue 4687 5733 6132 5929 EPS(adjusted) 8 9 6 6
Other Income 58 59 93 101 Book Value(adjusted) 21 28 16 18
Total Revenue 4744 5792 6225 6029 DPS 2 5 4 4
COGS 2399 3119 3061 2849 Payout (incl. Div. Tax.) 29% 52% 72% 60%
GPM 48.8% 45.6% 50.1% 51.9% Valuation(x)
Other Expenses 1255 1419 1644 1537 P/E 15.7 23.1 46.5 45.1
EBITDA 748 870 1062 1148 Price / Book Value 5.6 7.2 16.1 15.7
EBITDA Margin (%) 16.0% 15.2% 17.3% 19.4% Dividend Yield (%) 1.9% 2.3% 1.6% 1.3%
Depreciation 77 84 102 96 Profitability Ratios
EBIT 671 786 961 1052 RoE 35.7% 31.4% 34.6% 34.7%
Interest 34 23 20 15 RoCE 41.6% 39.4% 45.8% 45.3%
PBT 695 822 1034 1138 Turnover Ratios
Tax 190 237 297 328 Asset Turnover (x) 1.6 1.8 1.8 1.6
Tax Rate (%) 27.4% 28.8% 28.7% 28.8% Debtors (No. of Days) 17 11 15 20
Reported PAT 485 573 725 807 Inventory (No. of Days) 121 116 110 105
Dividend Paid 142 300 522 484 Creditors (No. of Days) 39 36 40 42
BALANCE SHEET CASH FLOW STATEMENT

Share Capital 64 65 129 129 OP/(Loss) before Tax 695 822 1,034 1,135
Net Worth 1361 1825 2097 2323 Direct Taxes Paid (181) (210) (246) (328)
Long term Debt 252 169 0 0 Op. profit bef. WC changes 754 891 1,079 1,246
Short term Debt 274 165 153 140 CF from Op. Activity 660 665 833 901
Deferred Tax 10 8 10 10 Non Current investments (155) (121) (33) -
Capital Employed 1612 1994 2097 2323 Capital expenditure (785) (48) (7) (18)
Net Fixed Assets 638 590 583 565 CF from Inv. Activity (204) (179) (235) (220)
Capital WIP 4 0 0 0 Repaym of L T Borrowings (181) (83) (168) -
Debtors 223 177 252 325 Interest Paid (35) (23) (20) (15)
Cash & Bank Balances 406 205 310 382 Divd Paid (incl Tax) (142) (300) (502) (581)
Trade payables 503 564 669 682 CF from Fin. Activity (339) (625) (580) (609)
Total Provisions 86 104 115 115 Inc/(Dec) in Cash 144 (147) 17 72
Net Current Assets 777 893 967 1149 Add: Opening Balance 105 224 77 310
Total Assets 2965 3125 3433 3668 Closing Balance 224 77 91 382

N arnolia Securities Ltd
201 | 2nd Floor | Marble Arch Bu ild ing | 236B-AJC Bose
Road | Kolkata-700 020 , Ph : 033-40501500
email: narnolia@narnolia.com,
w ebsite : w w w .narnolia.com
Risk Disclosure & Disclaimer: This report/message is for the personal information of
the authorized recipient and does not construe to be any investment, legal or taxation
advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any
action based upon it. This report/message is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or
redistributed to any other person in any from. The report/message is based upon publicly
available information, findings of our research wing East wind & information that we
consider reliable, but we do not represent that it is accurate or complete and we do not
provide any express or implied warranty of any kind, and also these are subject to change
without notice. The recipients of this report should rely on their own investigations,
should use their own judgment for taking any investment decisions keeping in mind that
past performance is not necessarily a guide to future performance & that the the value of
any investment or income are subject to market and other risks. Further it will be safe to
assume that NSL and /or its Group or associate Companies, their Directors, affiliates
and/or employees may have interests/ positions, financial or otherwise, individually or
otherwise in the recommended/mentioned securities/mutual funds/ model funds and
other investment products which may be added or disposed including & other mentioned
in this report/message.

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IEA Report 31st March

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IEA Report

31th Mar 2017

AUTOMOBILES 31th Mar 2017

M&M "HOLD" 29th Mar 2017

INDUSINDBK "Part Book Profit" 28th Mar 2017

SADBHAV "Book Profit" 27th Mar 2017

KEC Part Book Profit 24th Mar 2017

MARICO "BUY" 23th Mar 2017

Advance Strategy. Simple Solutions COSMO FILMS LTD

LEADING THE GROWTH

Narnolia Securities Ltd 1

Contents : Cosmo Films Limited

Ready for a New Growth Phase: Key Growth Drivers...3

Outlook & Recommendation......4

Capacity Expansion in BOPP to push growth...5

Focus on growing share of Speciality films : Era of Innovations......5

New BOPP Line a cost effective one: To Boost Margins..6

Improving Financial Picture and Return Ratios: A Futuristic picture.......6

Fair Pricing power with almost no commodity risk..7

Well Diversified product portfolio and markets...7

Healthy Dividend Yield with consistant payout....7

Expected turnaround in US business......7

Industry Structure & Demand Scenario : Global & Domestic......8

Cosmo's Business Matrix....10

Financials & Valuations.12

Comparison with Key Industry Players14

Key Risks to Earning Projections..15

Narnolia Securities Ltd 2

Target Price Cosmo is a leading manufacturer of BOPP ( Biaxially Oriented

consumption pattern and increasing demand for flexible packaging, which

INVESTMENT RATIONALE: KEY POINTS

CAPACITY EXPANSION IN BOPP TO PUSH THE GROWTH FORWARD

Narnolia Securities Ltd 4

FOCUS ON GROWING SHARE OF SPECIALITY FILMS IN PRODUCT PORTFOLIO- "ERA OF INNOVATION"

HIGH MARGINS IN VALUE ADDED SPECIALITY FILMS

70% Continious focus on R&D and introduction of value added

20% GM % According to management, value addition in normal BOPP films

Narnolia Securities Ltd 5

IMPROVING FINANCIAL PICTRURE & RETURN RATIOS: A HEALTY FUTURISTIC PICTURE

Cosmo's Interest Coverage Ratio has improved significantly from

Narnolia Securities Ltd 6

Return on capital employed Return on Equity

450 10.0 Cosmo's improved financial health has helped

FAIR PRICING POWER WITH ALMOST NO COMMODITY RISK

WELL DIVERSIFIED PRODUCT PORTFOLIO AND MARKETS

HEALTHY DIVIDEND YIELD WITH CONSISTENCY IN PAYOUT

EXPECTED TURNAROUND IN US SUBSIDIARY TO HELP AVHIEVING BETTER CONSOLISATED RESULTS

Narnolia Securities Ltd 7

FLEXIBLE PACKAGING TAKING ON RIGID PACKAGING: BOPP EDGE

EXCELLENT CLARITY LOWEST DENSITY

Better Aesthetic Hig Gloss Higher Yield

CHEMICAL INERT BARRIER TO MOISTURE

250000 DOMESTIC INDUSTRY SIZE

200000 Currently Indian BOPP Industry total production capacity is

0 With the growing demand of BOPP films over years, these

DOMESTIC DEMAND SCENARIO FOR FLEXIBLE PACKAGING

Narnolia Securities Ltd

CHANGING PACKAGING PATTERN FOR PRODUCTS TO BOOST INDUSTRY GROWTH

Products to be packed Conventional Packaging Current Packaging Trend

STRONG GROWTH IN INDIAN FMCG SECTOR

Key Growth Drivers

The Indian Packaging contributes 4% of the global packaging

COSMO'S BUSINESS MATRIX : STRENGTHS & WEAKNESSES

PACKAGING FILMS LAMINATION FILMS LABEL FILMS INDUSTRIAL FILMS