This action might not be possible to undo. Are you sure you want to continue?
MphasiS (MPHL IN)
Talk of pricing pressure is not evident from the 4Q FY11 results
Software: India R. Ravi (91) 22 6622 1014 (firstname.lastname@example.org)
Price (23 Nov)
Reuters code ADR/GDR code Shares per ADR/GDR
Target price: Rs765.00
MBFL.NS n.a. n.a.
What has changed?
• MphasiS announced a revenue increase of 5.2% QoQ and a net-profit rise of 4.7% QoQ for 4Q FY10, almost in line with our forecasts. The EBITDA margin contracted by 100 basis points QoQ as a result of increased manpower costs.
SENSEX Index Market cap EV 3-mth avg daily T/O Shares outstanding Free float Major shareholder Exchange rate 19,691.84 (US$bn) 2.84 (US$bn; 11E) 2.68 (US$m) 6.74 (m) 210 (%) 39.3 HP/EDS (60.8%) Rs/US$ 45.409 3M 1.6 (5.4) 6M (3.5) (23.3)
• Contrary to the market’s expectations, billing rates for application-service revenue were flat sequentially, and onsite rates improved from US$71/hour for 3Q FY11 to US$72/hour for 4Q FY11. This revenue stream (65% of total revenue for FY11) improved by 5.8% QoQ for the fourth quarter, and the gross-profit margin expanded by 140 basis points QoQ to 30.9%. • The gross-profit margin for business process outsourcing (BPO) expanded by 270 basis points QoQ to 17.4%, leading to a gross-profit increase of 18.2% QoQ. Infrastructure services (23% of full-year revenue) recorded a gross-profit margin decline sequentially. However, this business’s gross profit numbers are not strictly comparable as its third-quarter revenue included one-off revenue of Rs170m. • As manpower costs increased by 10.5% QoQ and administrative costs rose by Rs118m QoQ, Mphasis’s EBITDA margin declined by 90 basis points QoQ to 23.8%. In addition to increased costs, the margin contraction was attributable to the fall in the utilisation rate for the company’s offshore infrastructure-services operation to 66% for 4Q FY11, from 73% for 3Q FY11. • Mphasis recorded a forex gain of Rs130m, so other income overall rose steeply to Rs310m for 4Q FY11, from Rs174m. In addition, as the company still has tax credits, the effective tax rate rose from 7.4% for 3Q FY10 to 9.6% for FY10. • We have not revised our FY11 earnings forecasts, as we believe Mphasis is able to add clients across various revenue run-rate categories. We have revised down our FY12 EPS forecast by 3.1%, to reflect a modest upward revision to our taxrate forecast.
Performance (%)* 1M Absolute (2.2) Relative 0.1 Source: Daiwa Note: *Relative to SENSEX Index
2011E 2012E 2013E PER (x) 10.4 9.7 9.1 PCFR (x) 14.9 11.3 10.3 EV/EBITDA (x) 7.8 6.5 5.6 PBR (x) 2.9 2.3 1.9 Dividend yield (%) 0.7 0.8 1.0 ROE (%) 32.1 26.5 22.7 ROA (%) 23.8 19.9 17.3 Net debt equity (%) net cash net cash net cash Relative to peers In line Relative to history In line Source: Daiwa forecasts
Income summary (Rs m)
Yr to 31 Oct 2010 2011E 2012E Revenue 50,366 60,743 70,065 YoY (%) 18.1 20.6 15.3 EBITDA 12,650 15,550 17,446 YoY (%) 12.1 22.9 12.2 Net profit 10,910 12,398 13,292 YoY (%) 20.1 13.6 7.2 EPS (Rs) 51.969 59.060 63.316 YoY (%) 20.1 13.6 7.2 CFPS (Rs) 32.482 41.097 54.239 DPS (Rs) 3.321 4.118 4.992 Source: Company, Daiwa forecasts 2013E 76,605 9.3 18,615 6.7 14,086 6.0 67.100 6.0 59.765 5.848
Price and relative performance
(Rs) 900.0 700.0 500.0 300.0 100.0 Rel to SENSEX Index 350 275 200 125 50 07/11 08/5 08/11 09/5 09/11 10/5 10/11
• We maintain our six-month target price of Rs765, based on a target 13x PER on our FY11 EPS forecast. Mphasis trades currently at what we see as attractive PERs of 10.4x for FY11 and 9.7x for FY12 on our EPS forecasts. Our FY12 earningsgrowth forecast looks muted given the upward revision to our tax forecast.
Source: Bloomberg, Daiwa
Forecasts revisions (%)
Revenue change Net profit change EPS change Source: Daiwa forecasts FY11E FY12E FY13E 0.0 0.0 n.a. 1.5 (3.0) n.a. 1.5 (3.1) n.a.
Catalysts and action
• We maintain our 1 (Buy) rating on Mphasis. Mpahsis had cash and liquid investments of US$365m for 4Q FY11 (an increase of US$40m compared with 3Q FY11), which we believe could be used for acquisitions over the next few quarters. If these acquisitions prove earnings-accretive, we believe they could lead to a rerating. In addition, the cash could be used potentially to buy back shares equating up to 10% of its net worth. Under U/S-77A of the Indian Companies Act, shareholders’ approval is not required and a repurchase could be done with a board resolution. If the company carries out a buyback, then we believe it could buy back 2.8% of its shares at the current share price, which would be earnings-accretive.
Valuation (Rs/shr) Methodology Key assumption Source: Daiwa forecasts 765.00 - As above On FY11 EPS of Rs58.21
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED ON THE LAST TWO PAGES OF THIS REPORT.
Global Equity Research
323) (2.519) (4.737) (1.099 42.453 0 32.1 25.608 (3.627 (1.522) (2.171 55.445 23.6 7.7 21.a.930 70.728 2.195 154 0 8.6 2.8 16.367 28.981) (1.748 76.6 24.195) 11.491 2.177 18.099 30.910 10.467 1.2 21.910 51.5 26.054 9.984 2.325) (6.550 2012E 21.181 (7.1 33.760 (2.072 53.3 21.060 59.349 74.398 12. expenses EBIT Net-interest inc.615 2.386 (1.035 454 369 11.546 (1.965) 0 0 (1.316 63.615 (3.490 23.819 (4) (6.195 0 16. It derives two-thirds of its revenue from financial services.6 7.089 0 12.9 30.087 43.8 n.4 7.398 59.612) 500 (7.317 PER bands (Rs) 1.366 0 (33.500 19.590 2010 12.6 35.260 11.) Onsite based engineers (No.7 31.650 2011E 18.091 3.0 21.181 435 390 335 475 507 650 14.0x 11.) EBIT margin % (adj.1 13.991) 0 (133) (733) 1.605 0 (51.) – YoY % EPS (adj.4 48.026) 15.969 51.536 14. n.261 60.422 9.733 1.0 48.181 0 1 9.455) (2.013 1.786 0 9.0 18.639 0 (26.2 30.211 42. div.965) (2.986 68.175 18.542 3./(exp.9 17.820 (2.200 88.) Net-profit margin % (adj.587 22.a.308 32.420 17.6 2.089 222 0 50 2011E 14.6 7.0x 16.241 18.100 67.718 19.285 2.7 34.044 2.0 20.060 4.E.946 8.547) (1.487 50.041 0 3 12.267 1.453) 0 58 (418) 468 108 0 1.1 26.5 2.Company background MphasiS is a 60.992 0 45.1 38.933 980 2012E 60 7 67 19 66 24 52.a.522) 0 14.) EPS (reported) (Rs) EPS (adj.2 6.6 9.4 28.049 2013E 17.041) 1.420 810 2011E 50 6 56 20 67 25 44.706) (468) 8.7 6.0x 6. int.1 20.3 78.608 2.254 20.000 4.144 2013E 72 9 81 18 64 23 62.) 2009 12.362) 0 12.500 36.7 net cash net cash net cash net cash net cash 6.086 67.268 1.362) (4.700) 0 (3.358 23.000) 0 (3.1 23. n.8 19.820) 13.) ROAE (%) ROAA (%) ROCE (%) ROIC (%) Net debt to equity (%) Effective tax rate (%) Accounts receivable (days) Payables (days) Net interest cover (x) Net dividend payout (%) 2009 2010 2011E 2012E 2013E 123.9x 21.981 18.030) 8. MphasiS has recorded revenue in excess of Rs10bn per quarter.) – YoY % Net profit (adj.) EBITDA (adj.9 24. n.331) 2011E 2012E 2013E 7.214 19.5 76.285 43.665) (2.035 (1.030 0 14.182 2. Daiwa forecasts Daiwa Research Update 2 .185 21./others Pre-tax profit Tax Min.099 2.3 9.316 4.892 32./others Net profit (reported) Net profit (adj.347 (3.212) (4.6 20.5 25.200 17.067 867 667 467 267 67 Nov-07 Nov-08 Nov-09 25.2 6.026 (3.988) 0 (6.438 60.7 38.9 8.968 2012E 16.992 15.1x Nov-10 Source: Company.7 3.260 468 0 9.594) (6.639) (1.886 16.892 15.354 45.a.6 12.898 16.730 1.614 2.192) 0 10.102 (1.412) (24.491) 0 0 (1.667 3. MphasiS – financial summary Profit and loss (Rs m) Year to 31 Oct Application development Application maintenance Others Total revenue Other income COGS SG&A Other op.342 15.1 13.554 18.291 2.461 0 0 0 14.0 207.023 14.791) (1.0 26.851 15.268 18.065 0 (46.7 32.321 11.886 3.197) (1. Since the acquisition of EDS by HP.5 79.022 (641) (1.728 (641) 0 9.6 20.633 1.263) 1.969 3.102 1.8%-owned subsidiary of Hewlett Packard (HP) and one of the premier IT-services companies in the Tier-II space.089) 6.887 66.785 0 12.284 2.100 5.659) 2010 1.730 15.030 193 0 5.295 49.567 2.420 1.064 7.886 15.254 59.9 22.) – YoY % EBITDA margin % (adj.243 44.6 15.5 22. and we expect HP+EDS to account for 71% of its revenue over the next few years.118 13.839 2.096 21.013 12.9 12.637 (1.852) 0 0 (837) 1.323) 0 13.349 74.0 7.3 190.7 18.087 9.446 2013E 24.615 Balance sheet (Rs m) As at 31 Oct Cash & short-term investment Inventory Accounts receivable Other current assets Total current assets Fixed assets Goodwill & intangibles Other non-current assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Other non-current liabilities Total liabilities Share capital Reserves/R.7 207.753 15.7 20.635 127 632 8.192) (4.292 63.a.5 37.292 13.637) 11.9 78.314 18. n.1 22.802 24.033 642 2010 38 5 43 21 60 26 36.283 2010 14.347) 16.935 (340) (7.0 76.265 17.900 9.901) (4.022) 9.340 0 17.340) 12.799 3.086 14.3 21.) Offshore revenues (US$ m) 2009 35 4 39 19 60 23 31.200) 0 (2.950 26.512 3.848 16.219 12.0 20.3 48.2 6.4 19./pref.211 19.836 0 0 0 3 3 3 15.561) (1.342 0 0 0 59.318) (15.959 17.) Assoc/forex/extraord.652) (1.056 3.126) Cash flow (Rs m) Year to 31 Oct Profit before tax Depreciation and amortisation Tax paid Change in working capital Other operational CF items Cash flow from operations Capex Net (acquisitions)/disposal Other investing CF items Cash flow from investing Change in debt Net share issues/(repurchases) Dividends paid Other financing CF items Cash flow from financing Forex effect/others Change in cash 2009 9.099 2.7 Key assumptions Year to 31 Oct Offshore efforts (m Man-months) Onsite efforts (m Man-months) Total efforts (m Man-Months) Offshore billing rates (US$) Onsite billing rates (US$) Blended billing rates (US$) Offshore based engineers (No. 6.6 22.635 (1./others Shareholders' equity Minority interests Total equity & liabilities Net debt/(cash) 2009 1.026) (2.886 3.340 77 0 8.659 Key ratios Year to 31 Oct Sales – YoY % EBITDA (adj.200 88.760 1.743 0 (40.) (Rs) DPS (Rs) EBIT (adj.
sun@hk. China) Consumer/Retail (China) Hotels.daiwacm. Banking/Finance Automobiles.email@example.com@firstname.lastname@example.org@email@example.com@sg.daiwacm. China) Property (Hong Kong.daiwacm.daiwacm.daiwacm.com mark. Strategy Banking/Diversified Financials Consumer/Retail IT/Technology Hardware (PC Hardware) IT/Technology Hardware (PC Hardware).daiwacm. Utilities (Southeast Asia) Small/Medium Cap Telecommunications (Southeast Asia & India) Australia Banking/Diversified Financials Resources/Mining/Petroleum Japan Industrials (Regional). Pan Asia Research Regional Research Co-head Head of China Research.com jonas.com firstname.lastname@example.org@hk.daiwacm.daiwacm. Pan Asia Research Nagahisa MIYABE Craig IRVINE Mingchun SUN Kevin LAI Colin BRADBURY (Regional Chief Strategist) Mun Hon THAM Jonas KAN (Head of Hong Kong Research.email@example.com craig.com firstname.lastname@example.org. Pan Asia Research Automobiles Capital Goods.tw email@example.com firstname.lastname@example.org@hk.r@in. Small/Medium Caps Pan Asia Research Telecommunications.com david.com email@example.com eric.com Daiwa Research Update 3 .ho@hk. Pan Asia Research Materials.com danny.com (61) 3 9916 1335 (61) 3 9916 1323 (81) 3 5555 7174 (81) 3 5555 7178 firstname.lastname@example.org email@example.com mike.tw y. Regional Property Co-ordinator.com edwin.bao@hk. China) Strategy (Regional) Strategy (Regional) Property Developers (Hong Kong) All Industries (China).com amit.com jennifer.com firstname.lastname@example.org. Pan Asia Research Macro Economy (Regional) Quantitative Research Quantitative Research Quantitative Research Banking.daiwacm.com colin.com hirokazu. Taiwan.mehta@in. Renewables (Hong Kong/China) Custom Products Group Custom Products Group Custom Products Group South Korea Strategy.email@example.com@in.com daniel. Steel Banking/Finance Capital Goods (Construction and Machinery) Consumer/Retail IT/Electronics (Tech Hardware and Memory) IT Electronics (Tech Hardware) Materials (Chemicals) Pan Asia Research.com adrian.com munhon. Singapore.tw albert.com ravi. Energy.daiwacm.com hongxia.daiwacm.daiwacm.daiwacm.com grace.daiwacm.com marvin.com firstname.lastname@example.org atul.com queenie.cha@kr. Power Equipment.com taiki.daiwacm. Greater China and SG).email@example.com@daiwacm-cathay.com david.com fumio. Small/Medium Caps Pharmaceuticals and Healthcare. Software (Internet/Online Games) Taiwan Head of Research. Co-head of Hong Kong and China Property) Hongxia ZHU Grace WU (Head of Hong Kong and China Banking) Sophia HUO Queenie POON Jennifer LAW Ole HUI Peter CHU Nicolas WANG Gavin HO Pranab Kumar SARMAH (Regional Head of IT/Electronics) Eric CHEN (Co-head of Regional IT/Electronics) Joseph HO Alexander LATZER (Regional Head of Materials) Felix LAM Andrew CHAN Danny BAO (Head of Hong Kong and China Property) Yannis KUO Mark CHANG (Regional Head of Small/Medium Cap) John CHOI Marvin LO (Regional Head of Telecommunications) Jimmy LAM Kelvin LAU Edwin LEE Dave DAI Justin LAU (Head of Custom Products Group) Philip LO Jibo MA Chang H LEE (Head of Research) Sung Yop CHUNG Anderson CHA Mike OH Sang Hee PARK Jae H LEE Steve OH Daniel LEE Yumi KIM Hirokazu MIYAGI Thomas Y KWON Hirokazu MITSUDA Alex YANG Ling TANG Yoshihiko KAWASHIMA Calvin HUANG Christine WANG Chris LIN Jenny SHIH Mitsuharu WATANABE Albert HSU Jaideep GOSWAMI Punit SRIVASTAVA (Deputy Head of Research) Fumio YOKOMICHI Hitesh GOEL Jonas BHUTTA Vishal CHANDAK Atul RASTOGI Kartik A.com anderson.com daijiro. Soft Commodities.firstname.lastname@example.org. Asia Ex-JP) Deep KAPUR (Global Director of Quantitative Research) Josh CHERIAN Suzanne HO David LUM (Regional Head of Banking/Finance) Chris SANDA Adrian LOH Pyari MENON Ramakrishna MARUVADA (Head of SE Asia & India Telecommunications) Johan VANDERLUGT David BRENNAN Taiki KAJI Daijiro HATA (852) 2848 4971 (852) 2848 4485 (852) 2773 8751 (852) 2848 4926 (852) 2848 4983 (852) 2848 4426 (852) 2848 4439 (852) 2848 4460 (852) 2532 4383 (852) 2532 4380 (852) 2532 4381 (852) 2773 8745 (852) 2848 4468 (852) 2848 4430 (852) 2848 4963 (852) 2532 4384 (852) 2848 4441 (852) 2773 8702 (852) 2848 4443 (852) 2848 4463 (852) 2532 4341 (852) 2848 4964 (852) 2773 8715 (852) 2773 8735 (852) 2773 8729 (852) 2773 8730 (852) 2848 4465 (852) 2848 4024 (852) 2848 4467 (852) 2532 4349 (852) 2848 4068 (852) 2773 8741 (852) 2773 8714 (852) 2848 4489 (82) 2 787 9177 (82) 2 787 9157 (82) 2 787 9185 (82) 2 787 9179 (82) 2 787 9165 (82) 2 787 9173 (82) 2 787 9195 (82) 2 787 9121 (82) 2 787 9838 (82) 2 787 9801 (82) 2 787 9181 (886) 2 2758 8754 (886) 2 2345 3660 (886) 2 8789 5158 (886) 2 8780 5987 (886) 2 2758 8805 (886) 2 8788 1531 (886) 2 8788 1614 (886) 2 8780 1326 (886) 2 2758 9437 (886) 2 8786 2212 (91) 22 6622 1010 (91) 22 6622 1013 (91) 22 6622 1003 (91) 22 6622 1060 (91) 22 6622 1008 (91) 22 6622 1006 (91) 22 6622 1020 (91) 22 6622 1012 (91) 22 6622 1063 (91) 22 6622 8410 (91) 22 6622 1014 (65) 6321 3050 (65) 6321 3069 (65) 6321 3079 (65) 6499 6549 (65) 6499 6545 (65) 6329 2102 (65) 6321 3085 (65) 6499 6548 (65) 6499 6566 (65) 6499 6543 email@example.com kelvin. Software (Small/Medium Caps) IT/Technology Hardware (PC Hardware .daiwacm.kawashima@daiwacm-cathay.Panels) IT/Technology Hardware (PC Components) IT/Technology Hardware.daiwacm.com firstname.lastname@example.org email@example.com@firstname.lastname@example.org@daiwacm-cathay.tw m.daiwacm.daiwacm. China) Small/Medium Cap (Regional) Small/Medium Cap (Regional) Telecommunications (Regional.com jibo.daiwacm.com philip. Korea) Property Developers (Hong Kong.com email@example.com justin.com suzanne. China) Banking (Hong Kong.daiwacm.DAIWA’S ASIA PACIFIC RESEARCH DIRECTORY Hong Kong Regional Research Head. China) Insurance Capital Goods – Electrical Equipment and Machinery (China) Consumer/Retail (Hong Kong.daiwacm. Capital Goods – Conglomerate (Hong Kong) IT/Electronics – Semiconductor and Solar (Regional.com vishal.daiwacm. Hong Kong and China) IT/Electronics – Semiconductor/IC Design (Regional) IT/Electronics – Tech IT Services (Hong Kong.firstname.lastname@example.org jaideep.daiwacm.daiwacm. Shipbuilding.com punit. China) Materials/Energy (Regional) Materials (China) Oil & Gas (China. Utilities Materials Oil & Gas.email@example.com@sg. Restaurants and Leisure – Casinos and Gaming (Hong Kong). Consumer Real Estate Small/Medium Caps Software (Tech IT Services) Singapore Head of Research.daiwacm.tw alex.daiwacm.tw jenny.oh@kr. Pan Asia Research Co-head of Research.firstname.lastname@example.org@hk.daiwacm.com prakash.daiwacm.daiwacm.tw calvin. Pan Asia Research Industrials (Regional).email@example.com jimmy.com steve.com firstname.lastname@example.org@hk. Small/Medium Caps India Head of India Equities Strategy Strategy.email@example.com@firstname.lastname@example.org@email@example.com. Pan Asia Research Banking (Hong Kong.firstname.lastname@example.org@hk. Small/Medium Caps Oil and Gas.email@example.com hitesh.daiwacm. Banking/Finance All Industries.com gavin.com.lee@hk. Singapore) Transportation (Hong Kong.daiwacm.daiwacm. Construction.daiwacm.com yannis. China) Utilities.com firstname.lastname@example.org@hk.com email@example.com@firstname.lastname@example.org@kr.com email@example.com@firstname.lastname@example.org email@example.com@hk.com pyari.com h.daiwacm.com alexander.com.com peter.com sanghee.daiwacm.com mingchun.com firstname.lastname@example.org tatsuya.lau@hk. RAVI Tatsuya TORIKOSHI Prasenjit K BASU (Chief Economist.email@example.com sophia.com andrew. Internet Transportation – Land/Marine (Regional). China.firstname.lastname@example.org pranab. Chief Economist (Greater China) Macro Economy (Hong Kong.com email@example.com@sg. Capital Goods – Infrastructure Construction (China) Transportation – Aviation and Expressway (Hong Kong.tw firstname.lastname@example.org@hk. Property and REITs Conglomerates.daiwacm. China) Banking (Hong Kong.com email@example.com@jp.daiwacm.daiwacm.daiwacm. MEHTA Amit AGARWAL Prakash KAPADIA R.com firstname.lastname@example.org@email@example.com deep.mitsuda@daiwacm-cathay.
Inc Daiwa-Cathay Capital Markets Co Ltd Daiwa Securities Capital Markets Co Ltd. 3 North Avenue. 88 Queensway.Box-506657. United Kingdom TEL (81) 3 5620 5100 (81) 3 5555 7011 FAX (81) 3 5620 5603 (81) 3 5202 2021 New York Research Center London Research Centre (1) 212 612 6100 (44) 207 597 8000 (1) 212 612 8417 (44) 207 597 8550 Daiwa Research Update 4 .S. London EC4N 7JB. Seoul Branch Daiwa Securities Capital Markets Co Ltd. Moscow Representative Office Daiwa Capital Markets Europe Limited. Beijing Representative Office Daiwa SSC Securities Co Ltd Daiwa Securities Capital Markets Co. Vietnam TEL (03) 5555 3111 FAX (03) 5555 0661 Daiwa Capital Markets America Inc Daiwa Capital Markets Europe Limited Daiwa Capital Markets Europe Limited. Paris Branch Daiwa Capital Markets Europe Limited. P. Per. Bandra Kurla Complex. Marunouchi.Box 3198. Switzerland Via Senato 14/16. P. U. Hong Kong 6 Shenton Way #26-08. The Tower. Maker Maxity. Dubai. Fuyuki. Ltd. Singapore 068809. 32 Old Slip. Beijing 100022. Jersey City. Republic of Singapore Level 34. Sivtsev Vrazhek. No. 6th Floor. India Suite 405.S. Chiyoda-ku. Bahrain Branch Daiwa Capital Markets Europe Limited. 1. London. Ireland DAIWA CAPITAL MARKETS LIMITED OFFICE / BRANCH / AFFILIATE HEAD OFFICE ADDRESS Gran Tokyo North Tower. EC4N 7AX. Marunouchi. 75008 Paris. 32 Old Slip. Box 30069. Republic of the Philippines 14/F.O. Victoria 3000. United Kingdom Trianon Building. UAE. 135-8460. Russian Federation 7th Floor. Harcourt Centre.DAIWA SECURITIES GROUP INC OFFICE / BRANCH / AFFILIATE HEAD OFFICE ADDRESS Gran Tokyo North Tower. 83B. 200. Frankfurt Branch Daiwa Capital Markets Europe Limited. 5 King William Street. 60325 Frankfurt am Main. Yeongdeungpo-Gu. Taiwan. Moscow 119002. Republic of Korea Room 3503/3504. U.O. 5 King William Street. Dublin 2. Tokyo. Bandra East. Financial Square. Rialto North Tower. P. U. Taipei. Pudong New Area. Mumbai – 400051. People’s Republic of China Level 8 Zuellig House. Block 5. 1-9-1. Melbourne. Avenue des Champs-Elysées. 8741 Paseo de Roxas. 525 Collins Street. Makati City. Dubai Branch Daiwa Capital Markets Hong Kong Limited Daiwa Capital Markets Singapore Limited Daiwa Capital Markets Australia Limited DBP-Daiwa Capital Markets Philippines. Harcourt Road. Bahrain The Gate village Building 1.C. Milan Branch Daiwa Capital Markets Europe Limited. 1st floor. Japan Gran Tokyo North Tower. Chiyoda-ku. Italy 25/9. Hana Daetoo Securities Bldg 27-3. 1-9-1. Thailand 10th Floor. People’s Republic of China Room 011. Yeouido-Dong. Tokyo. 1000 Lujiazui Ring Road. DBS Building Tower Two. One Pacific Place. Unit-6. 3/F. R. Bangkok 10500. France 50 rue du Rhône. Citibank Tower. Geneva Branch Daiwa Capital Markets Europe Limited. Koto-ku. Bahrain Commercial Complex. Mainzer Landstrasse 16. Hoan Kiem Dist.S. Bangkok Representative Office Daiwa Capital Markets India Private Ltd Daiwa Securities Capital Markets Co. Manama. Level 26. Shanghai 200120. Chiyoda-ku. 5 King William Street. DIFC. 100-6756 11th Floor.O. Salcedo Village. New York.O. 1211 Geneva 3. Marunouchi. Australia 18th Floor. NJ 07302. Tokyo.6 Jia Jianguomen Wai Avenue. 1 Sliom Road. NY 10005-3504. Seoul. Tokyo.A. United Kingdom TEL (81) 3 5555 3111 FAX (81) 3 5555 0661 Daiwa Securities Trust Company Daiwa Securities Trust and Banking (Europe) PLC (Head Office) (1) 201 333 7300 (44) 207 320 8000 (353) 1 603 9900 (1) 201 333 7726 (44) 207 410 0129 (353) 1 478 3469 Daiwa Securities Trust and Banking (Europe) PLC (Dublin Branch) Level 3. 1-9-1. Capital Tower Beijing. London EC4N 7AX. Hanoi. Chaoyang District.A. 20121 Milan. Ly Thuong Kiet Street. NY10005. Sec 1. 45F HSBC Tower.A. Hanoi Representative Office (1) 212 612 7000 (44) 20 7597 8000 (49) 69 717 080 (33) 1 56 262 200 (41) 22 818 7400 (39) 02 763 271 (7) 495 617 1960 (973) 17 534 452 (971) 47 090 401 (852) 2525 0121 (65) 6220 3666 (61) 3 9916 1300 (632) 813 7344 (886) 2 2723 9698 (82) 2 787 9100 (86) 10 6500 6688 (1) 212 612 7100 (44) 20 7597 8600 (49) 69 723 340 (33) 1 47 550 808 (41) 22 818 7441 (39) 02 763 27250 (7) 495 244 1977 (973) 17 535 113 (971) 43 230 332 (852) 2845 1621 (65) 6223 6198 (61) 3 9916 1330 (632) 848 0105 (886) 2 2345 3638 (82) 2 787 9191 (86) 10 6500 3594 (86) 21 6859 8000 (66) 2 231 8381 (91) 22 6622 1000 (84) 4 3946 0460 (86) 21 6859 8030 (66) 2 231 8121 (91) 22 6622 1019 (84) 4 3946 0461 DAIWA INSTITUTE OF RESEARCH LTD OFFICE / BRANCH / AFFILIATE HEAD OFFICE MARUNOUCHI OFFICE ADDRESS 15-6. Pacific Palace Building. build. NY. Federal Republic of Germany 127. Keelung Road. 100-6753 Financial Square. 100-6753 One Evertrust Plaza. Ltd.
Neither Daiwa Securities Capital Markets Co. This publication and the contents hereof are intended for information purposes only. Ltd. printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. as it does not take into account the specific investment objectives. express of implied. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research.html.. financial situation and particular needs of any person. in evaluating the information in this document. affiliates. indirect. is made or given as to its accuracy. The following are additional disclosures. Ltd and Daiwa Securities Group Daiwa Securities Capital Markets Co. distribution. Ltd. Patel Engineering (PEC IN). Ltd. AIA Group Limited (1299 HK). Ltd. officers. distribution or use would be contrary to any statutory legislation. officers. This report is not intended or directed for distribution to. officers.. Strides Arcolab Limited (STR IN). please visit BlueMatrix disclosure Link at http://www2. an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor. Seoul Branch Hong Kong This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (“DHK”) which is regulated by the Hong Kong Securities and Futures Commission. please visit BlueMatrix disclosure Link at http://www2. disclosure. Greens Holdings Ltd (1318 HK). The information contained in this document should not be reproduced (in whole or in part) or redistributed in any form to any other person. recommendation. and/or its non-U. or regulation which would require DAIWA and its affiliates/ group companies to any registration or licensing requirements. China Kangda Food Co Ltd (CKANG SP). dissemination. copying. expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289). Daiwa Securities Capital Markets Co. International Taifeng Holdings Limited (873 HK). is or will be directly or indirectly. DAIWA prohibits its analyst and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analyst cover. subsidiaries or affiliates. holding. Ltd and Daiwa Securities Group: Daiwa Securities Capital Markets Co. This report is not to be considered as an offer or solicitation for any dealings in securities.us. and/or its non-U.S. and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Glorious Property (845 HK). Ltd.DISCLAIMER This publication is produced by Daiwa Securities Capital Markets Co. While the information in this report has been compiled by DAIWA in good faith from sources believed to be reliable. affiliates. or have other interests in the securities of the company under research including derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. By virtue of distribution to these category of investors. or based on or relating to any such information contained in or errors in or omissions in this report. tax or other advice and should rely solely on your own judgment.* has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: China Zhongwang Holdings Ltd (1333 HK). and that no part of the analyst’s compensation was. or use by any person. China Automation Group (569 HK). Agricultural Bank of China Limited (1288 HK). Sijia Group Company Limited (1863 HK). Singapore This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors. except to the extent expressly provided herein. Recipients of this research in Singapore may contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research. Fantasia Holding Group (1777 HK). Ownership of Securities For “Ownership of Securities” information. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co. Tong Yang Life (082640 KS). China High Precision Automation Group (591 HK). and distributed by Daiwa Securities Capital Markets Co. representatives and agents accept no liability whatsoever for any loss or damage whether direct. We and our group companies. Daiwa Research Update 5 . The views expressed in the report accurately reflect the analyst’s personal views about the securities and issuers that are subject of the Report. China Kangda Food Co Ltd (834 HK). or its or their respective directors. Ltd. The data contained in this document is subject to change without any prior notice DAIWA reserves its right to modify this report as maybe required from time to time. and/or its affiliates nor any of its respective directors. employees. Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). directors and employees may from time to time. review and analysis. West China Cement Limited (2233 HK). opinion or advice expressed in this publication may not necessarily reflect those of Daiwa Securities Capital Markets Co.com/report_disclosure. Taiwan This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co. please visit BlueMatrix disclosure Link at http://www2. Accordingly. Great Group Co.daiwacm.daiwacm. India This research is distributed by Daiwa Capital Markets India Private Limited (DAIWA) which is an intermediary registered with Securities & Exchange Board of India. Guotai Junan International Holdings Limited (1788 HK). Australia This research is distributed in Australia by Daiwa Capital Markets Stockbroking Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Sihuan Pharmaceutical Holdings Group Limited (460 HK).us.. have long or short positions. nor any content hereof. completeness or correctness. This report is strictly confidential and is being furnished to you solely for your information. citizen or entity which is resident or located in any state or country or jurisdiction where such publication. DAIWA is committed to providing independent recommendations to its Clients and would be happy to provide any information in response to any query from its Clients.S. any recommendation or investment opinion or advice. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research. Ltd in respect of any matter arising from or in connection with the research. as amended from time to time. you are recommended to seek your own legal.com/report_disclosure. Ltd. Hontex International Holding (946 HK). Ltd (GGH SP). subsidiaries or affiliates. Ltd. unless expressly provided.. Mingfa Group (846 HK). Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Relevant Relationship (DHK) DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. affiliates. Investment Banking Relationship For “Investment Banking Relationship”. Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co. DHK market making DHK may from time to time make a market in securities covered by this research. Ownership of Securities For “Ownership of Securities” information. Any use. or have positions in. The Affiliates of Daiwa Securities Capital Markets Co. nor any of its respective parent. its parent. and may be subject to change without further notice. constitute. for the purposes of this section shall mean any one or more of: • Daiwa Capital Markets Hong Kong Limited • Daiwa Capital Markets Singapore Limited • Daiwa Capital Markets Australia Limited • Daiwa Capital Markets India Private Limited • Daiwa-Cathay Capital Markets Co. This report does not recommend to US recipients the use of Daiwa Capital Markets India Private Limited or any of its non – US affiliates to effect trades in any securities and is not supplied with any understanding that US recipients will direct commission business to Daiwa Capital Markets India Private Limited. DAIWA its officers. Ltd is a subsidiary of Daiwa Securities Group. • Daiwa Securities Capital Markets Co.com/report_disclosure.. or are to be construed as.. Investment Banking Relationship Within the preceding 12 months. Sundart International Holdings (2288 HK). servants and employees.daiwacm. the securities mentioned.html. Neither this publication. Consequently DAIWA expressly disclaims any and all liability for. represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant.us. *Affiliates of Daiwa Securities Capital Markets Co. Ltd. related to the recommendations or views expressed in the Report. of company(ies) mentioned herein or be engaged in any other transactions involving such securities and earn brokerage or other compensation or act as advisor or have the potential conflict of interest with respect to any recommendation and related information or opinion. servants and employees except where the publication states otherwise. or dealing in. no representation or warranty.html.. in and buy sell the securities thereof. Any view. Japan Daiwa Securities Capital Markets Co.. officers and employees from time to time have trades as principals. holding. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to. nor any of its respective directors. consequential or otherwise howsoever arising (whether in negligence or otherwise) out of or in connection with or from any use of or reliance on the contents of and/or omissions from this document.
us. recipients the use of any of DCMA’s nonU. Unless applicable law permits otherwise. to the extent permitted by law. "1": the security could outperform the local index by more than 15% over the next six months. Research Analyst Conflicts For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at http://www2. by Daiwa Capital Markets America Inc. Eurex and NYSE Liffe. Dubai This document has been distributed by Daiwa Capital Markets Europe Limited. This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FSA and should not therefore be distributed to such Retail Clients in the United Kingdom. effect transactions in the Securities before this material is published to recipients. please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants. non-U. In some cases.S. commodity prices. we will collect a trading commission* for each transaction as agreed beforehand with you. Chi-X. Investment Banking Relationships For “Investment Banking Relationships” please visit BlueMatrix disclosure link at http://www2.daiwacm. Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. (DCMA). The following explains the rating system in the report as compared to relevant local indices. Before engaging in any trading. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents. Related financial products or services are intended only for professional clients and no other person should act upon it. In addition to the purchase price of a financial instrument.additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Capital Markets Co.us. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives. Japan . Ltd. Neither DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. When making an actual transaction. Regulatory disclosures of investment banking relationships are available at www2. "2": the security is expected to outperform the local index by 5-15% over the next six months. as well as a process for doing so.daiwacm. Additional information may be available upon request. DCMA Market Making For “DCMA Market Making” please visit BlueMatrix disclosure link at http://www2.. perform services for or solicit business from such issuers. * The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc. if you are a non-resident of Japan.com/report_disclosure.daiwacm. and to take responsibility for your own decisions regarding the signing of the agreement with us. employees of Daiwa Capital Markets Europe Limited and its affiliates may have positions and effect transactions in such securities or options and may serve as Directors of such issuers.us.html.S. stock prices.United Kingdom This research report is produced by Daiwa Securities Capital Markets Co.com/report_disclosure. depending on the content of the transaction. It may not be accurate or complete and should not be relied upon as such. Ownership of Securities For “Ownership of Securities” information please visit BlueMatrix disclosure Link at http://www2. and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] is named on the report) was.html. Dubai Branch.daiwacm.S.html. the benefits of the Financial Services Compensation Scheme may not be available. Financial Futures Association of Japan Japan Securities Investment Advisers Association Daiwa Research Update 6 . Daiwa Capital Markets Europe Limited is duly licensed and regulated by the Dubai Financial Services Authority.html. United States This report is distributed in the U. "4": the security is expected to underperform the local index by 5-15% over the next six months. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc. to the extent permitted by applicable UK law and other applicable law or regulation.. Iceland. and are not aware of any material relevant conflict of interest involving the analyst or DCMA. we may require collateral or margin requirements in accordance with an agreement made beforehand with you. or will be directly or indirectly related to the specific recommendations or views contained in this Research Report. entities.com/report_disclosure. This report is not an offer to sell or the solicitation of any offer to buy securities. we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities. "3": the security is expected to perform within 5% of the local index (better or worse) over the next six months. we ask you to pay close attention to the following items. but may not reflect events occurring after its preparation.S. Norway and Switzerland. In addition.S. any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Services Authority (“FSA”) and is a member of the London Stock Exchange. are not (nor are any members of their household) an officer. is. 32 Old Slip.com/report_disclosure. Ltd. Daiwa Capital Markets Europe Limited and its affiliates may. In addition. based on the beliefs of the author of the report. There may be a difference between bid price etc. exchange rates. New York. Our conflict management policy is available at http://www. Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany. in particular. Research Analyst Certification For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at http://www2. from time to time. Ltd and/or its affiliates and is distributed by Daiwa Capital Markets Europe Limited in the European Union. Financial Square.daiwacm.html.com/report_disclosure. "5": the security could underperform the local index by more than 15% over the next six months.com/about-us/corporate-governance-and-regulatory.html.us. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom. participate or invest in other financing transactions with the issuers of the securities referred to herein (the “Securities”). recipients of this report will direct commission business to such non-U. and others. This report does not recommend to U. and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions. Corporate Name: Daiwa Securities Capital Markets Co.109 Memberships: Japan Securities Dealers Association.us. and ask price etc. Ordinarily in such cases.. real estate prices. It reflects the preparer’s views at the time of its preparation. we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply. of OTC derivatives handled by us. financial situation and needs.com/report_disclosure. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.us. the loss could exceed the amount of the collateral or margin requirements. Daiwa Capital Markets Europe Limited may. and/or have a position or effect transactions in the Securities or options thereof and/or may have acted as an underwriter during the past twelve months for the issuer of such securities. affiliates to effect trades in any security and is not supplied with any understanding that U. Since commissions may be included in the purchase price or may not be charged for certain transactions. director or advisory board member of the issuer(s) covered in the report. nor does it reflect DCMA’s views at any time. Liechtenstein. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report.) If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document.daiwacm. the securities discussed in this report may not be eligible for sales in some jurisdictions. please be sure to carefully read the materials presented to you prior to the execution of agreement. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analysts[s] is named on the report). New York 10005 (telephone 212-612-7000). we recommend that you confirm the commission for each transaction. As a result. For derivative and margin transactions etc.uk. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates.S. Germany This document has been approved by Daiwa Capital Markets Europe Limited and is distributed in Germany by Daiwa Capital Markets Europe Limited. Unless this report says otherwise.daiwacm. the amount of the transaction will be in excess of the required collateral or margin requirements.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.