12 Feb 2013 / Company Report

Buy
Target Price: Rs 1,886
CMP Potential Upside Relative to Sector MARKET DATA No. of Shares Market Cap Free Float Avg. daily vol (6mnth) 52-w High / Low Bloomberg Promoter holding FII / DII PRICE PERFORMANCE
180 160 140 120 Sensex Index L&T

: Rs 1,495 : 26% : Neutral

Larsen & Toubro

ENGINEERING

: 615 mn : Rs 919 bn : 100% : 1.6 mn shares : Rs 1,720 / Rs 1,106 : LT IB Equity : 0% : 17% /37%

Capex cycle turning

100
80 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13

COMPANY FINANCIALS (Standalone)

Y/E Marc h
2012 2013 E 2014E 2015E

KEY DRIVERS
Adj. EPS
73.9 76.6 87.1 100.8

S al es (R s mn)
525,451 601,636 700,533 811,814

Adj. PAT C onsensus (R s mn)

45,230 46,919 53,345 61,704

C hg
33.8 3.7 13.7 15.7

PE # (x)
15.9 14.3
15.7 13.8 13.7 12.1 12.0 10.5

R oE (x)
19.2 17.3 17.1 17.3

R oC E (% )
18.6 16.3 16.4 18.0

EV/E (x)
14.9 14.6 12.7 10.7

DPS (R s)
14.5 15.0 17.1 19.8

(Rs bn)
Order inflow Backlog Working Cap/Sales

FY12 FY13E
703 800

FY14E FY15E
904 1,040 1,919 2,163 15% 14%

EPS (R s)
78.5 86.4 97.6 -

(R s) YoY (% )

1,457 1,701 8% 17%

Source: *Consensus broker estimates, Company, Axis Capital, Bhavin Vithlani Executive Director - Power & Cap Goods bhavin.vithlani@axiscap.in 91 22 4325 1144

# Core PE excluding dividend income from subs and adjusted for VoI of Rs 441/ shr
Charanjit Singh VP - Cap Goods charanjit.singh@axiscap.in 91 22 4325 1123

What will result in re-rating of L&Ts stock price

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

Key concerns were:

Concerns on order inflow growth and mix (rising low margin orders) Exit of A M Naik Higher equity in BOT projects Investments shipyard, power equipment could be initially loss making, impacting RoICs

What will re-rate L&T stock price to Rs 1,886

Order inflow growth of 15% in FY14 and FY15 Asset sale in IDPL to finance equity investments Reduction in working capital to 13-15% on improving liquidity Improving RoCE trend

2,000

(Rs)

1,600

1,200

L&T management addressing concerns

KV new CEO; A M Naik continues as Chairman No fresh investments in BOT; lower capex Plans stake sale in IDPL/ asset sale On track to achieve 15-20% FY13 order inflow growth guidance
Sep-12 Oct-12
Dec-12 Nov-12 Aug-12

800

Jul-11

May-12

Mar-12

Sep-11

Oct-11

Feb-12

Jul-12

Dec-11

Source: Bloomberg, Axis Capital

Nov-11

Aug-11

Apr-12

Feb-13

Jan-12

Jan-13

Jun-12

Managements 2016 transformation strategy

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

RoCEs to improve from current 16% to 20% by FY16

Intensive cash flow focus; monetizing existing assets to make L&T asset-light

Increasing proportion of global revenue to 25% from15%

Value unlocking through listing at least four companies from present two

New capex drivers to revive L&Ts domestic order book

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

Our confidence on 15% CAGR in orders for L&T emanates from strong rebound in domestic business, even assuming muted exports, and decline in realty and road orders
From FY14, based on our channel checks, we expect demand to emanate from sectors where L&T has been

traditionally strong such as Oil & Gas, Fertilizers and Railways (having better margins)

These sectors will account for 30% of total order intake from FY14 vs. 10% currently Domestic order inflow (down 19% YoY in FY12) has turned around from FY13, driven by real estate and roads Our forecast of 15% order inflow CAGR is conservative as: (1) we have assumed flat orders from international (20%

of orders), (2) decline in realty (30% of 9MFY13 orders) and roads (12% of 9MFY13 orders), and (3) not factored in orders from Indian Navy (potential of USD 10bn)

While improving order mix may reduce concerns on long term margin, reported margins would be lower by 50 bps to 11% in FY14-15E vs. 11.5% in FY13E (as low margin orders taken during FY12-13 get executed)
~80% of realty orders are on negotiated basis and L&T enjoys 200-300 bps premium pricing Limited competition in Dedicated Freight Corridor orders expected in FY14 (USD 1.5 bn) with only 2 bidders

Right-sizing the balance sheet

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

Despite lower margins, RoCE to improve by 200 bps by FY15 on right sizing of balance sheet
Management has stated that it will NOT take additional BOT assets (30% of consolidated capital employed) Will monetize BOT assets for further investments in under construction assets to lower strain on parents balance sheet Reportedly, Adani Ports is keen to buy L&Ts Dhamra port at P/B of >3x, which could fetch L&T Rs 10-15 bn

equivalent to FY14E investment required in BOT assets

Additionally, lowered capex to ~Rs 10 bn p.a. vs. ~Rs 15 bn p.a. over FY08-12

L&Ts operating cash flow will turn positive to Rs 46 bn in FY14 (vs. negative Rs 11 bn in FY13) on improving working capital cycle to 13-15% vs. 17% currently

What will re-rate L&Ts P/E

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

L&Ts PE has a high correlation to order inflow growth, as its business is deep cyclical. Hence valuation gets re-rated ahead of improvement in business dynamics (refer Page 13) Historically, L&T has traded in a forward P/E band of 10 20x, and long term average of 15x Current RoE at 17% (vs. peak of 26%) is depressed due to under utilization of investments over FY07-12 We believe the gap between L&Ts current PE at 15x and RoE would diminish on: (1) sustained order inflow growth of 15%, (2) improving order mix indicating margins to improve to 12% from FY16 (11.6% in FY13), and (3) balance sheet comfort through asset sales Re-iterate BUY with SoTP-based target price of Rs 1,886

SoTP Valuation
F air Val ue (R s) 1,445 187 86 157 8 3 1, 886 Basis 16x PE FY15E core EPS excluding dividend income from subsidiaries 1.2x est P/B of FY12 8x PE FY14E 83% stake; 20% Hold co discount on current market cap 2x equity investment

L&T Core business L&T IDPL L&T InfoTech L&T Finance Holding L&T's equity investment in BTG L&T's stake in Satyam T arget p ric e
Source: Axis Capital

Contribution from Oil & Gas, Metals has halved in last 10 years

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

L&Ts order inflow composition has been changing

Process
100%
90%

Oil & Gas

Power

Infrastructure

Others

CAGR
14%

CAGR 0.2%
20%
8%

30%

8%

Others segment declined post reclassification of metals and minerals to process segment Strong growth in Buildings and factories and railways/metro rail projects

80% 70% 60%

50%

40%

35%

27%
33%

38%
53%

Strong growth in Power Transmission projects from domestic and international markets. Also, booking of Power generation projects L&T lost market share in Oil & Gas sector due to aggressive competition from Koreans. Also, reduced ordering from ONGC Weak capex in metals and mining sector due to mining ban and environment clearance issues

40% 30% 20% 10% 0%

18%

34%
42%

13%

26%

28%

17%

21%

-7% 5%

25%
13%

12% FY01-04

26%

13% FY05-08

14% FY09-12

11% 3% FYTD

With expected pick up in Railways and Oil & Gas capex, contribution from these high margin businesses is expected to increase significantly in FY14 and FY15
Process: Minerals, Metals & Bulk Material Handling; Oil & Gas: Upstream, Mid & Downstream, Pipelines, Fertilizer; Power: Generation, Transmission, Distribution & Industrial; Infra: Roads, Ports, Railways, Urban Infra, Water; Others: Shipbuilding, Defense, Construction & Mining, Electrical & Electronics

Oil & Gas, Railways, Power Equipment to drive future order growth

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

Expect order inflow growth to sustain in FY14 and FY15 on increasing orders from Railways and Oil & Gas

(Rs bn) Power Powergen/BOP T&D Nuclear+Hydro+Solar Infrastructure Road Port/Airport Metro Railway/DFCC Building-Industrial /comm Water Process Hydrocarbons Refinery/ Petchem Platforms Fertilizer Others Total Growth (YoY)
Source: Company, Axis Capital

FY12 148 34 114 0 339 100 0 35 169 34 78 78 14 43 11 60 703

FY13 E 214 88 80 46 400 90 0 50 230 30 30 80 30 50 0 75 799 14

FY14E 279 129 80 70.75 3 90 30 20 120 170 50 30 13 0 55 50 25 75 904 14

FY15E 3 14 136 88 90 425 30 55 130 160 50 60 155 55 50 50 86 1,040 15

Increasing market share in Powergen on cost competitiveness. BOP orders for NTPC bulk tenders

Orders from Metro, Dedicated Freight Corridor and Indian Railways

RIL petchem capex and revival of orders from ONGC New Urea Policy

We have not considered upside from orders from Navy, Exports and Buildings segments. Key risk to our inflow assumption could be delays in ordering for Railways, Metro, ONGC and Powergen
8

Weakening competition = Advantage L&T but short-term margin concerns

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

Competitors unable to execute projects due to high leverage

F Y12 o rder book to Networth (x)

But L&T to see margin contraction of 150 bps over FY12-15 on adverse mix
14

16 14
12
IVRCL Ramky Simplex HCC

(%) 12.4
11.4

13.6

13.2
12.6

13 12
11
L&T

10 8
6

11.8

NCC Punj Lloyd

11.6

11.2

11.1

4
0

Ashoka buildcon

10
12

10

9
FY07 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E

F Y12 Interest cover (x)

Source: Bloomberg; Axis Capital

Source: Company; Axis Capital

Adverse mix due to rising proportion of export orders (low margin)

100%

Export

Domestic

Competition has weakened hence L&T gained market share in Buildings & Factories (B&F) segment and roads B&F a better margin business contrary to Street perception as 80% of the orders are on negotiated basis

80% 60% 40% 20% 0% FY07 FY08 FY09 FY10 FY11 FY12 FYTD

However, L&Ts export orders tend to be low margin

Hence we are factoring in 150 bps margin decline over FY12-15 Margin to rebound to 12% from FY16 on execution of high margin orders (to be received from FY14)

Source: Company; Axis Capital

Capital allocation concerns being addressed

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

RoCE declined as capital was employed on developmental projects

Capital Employed 700 600
500 400

Capital employed in developmental projects rose to 30% in FY12

30
25 100%

ROCE (RHS) (%) 442 351 274

575

(Rs bn)

Engineering & Construction Developmental Projects

Financial Services Others

20 15
10

80%
60%

300 200 100 0 50

48 62

187 75 115

40%
20%

5 0

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Source: Company, Axis Capital

0% FY04
Source: Company, Axis Capital

FY08

FY12

Reduction in incremental IDPL investments

Loans to subs and associates Strategic Investments in new businesses
50 (Rs bn)

RoCE to move up with lower investments in developmental projects

Development Projects Maintenance Capex 24
22

RoCE (%)

RoIC

40 30
20 10

20 18 16 14
12

FY13E

FY14E

(10)
FY09 FY10 FY11 FY12 FY13E FY14E FY15E

Source: Company, Axis Capital

Source: Company, Axis Capital

FY15E

FY10

FY11

FY12

FY07

FY08

FY09

10

Reducing working capital, lower investments to lead to positive FCF

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

FCF positive from FY14 E on reduction of working capital, lower capex and investments in BOT
(Rs b n) PBT Depreciation Net Interest (Income) / Paid Tax Change in Working Capital CFO Capex Investments in subs/ associates & JV FCF FY11 59.0 6.0 (7.6) (19.4) (2.0) 42.1 (15.0) (25.4) 1.8 FY12 63.1 7.0 (10.5) (18.5) (34.6) 3.2 (16.5) (13.9) (27.2) FY13E 65.2 8.0 (12.8) (18.2) (59.7) (17.6) (10.0) (10.0) (37.6) FY14E 74.1 9.2 (14.1) (20.7) (1.6) 46.8 (10.0) (20.0) 16.8 FY15E 88.1 10.0 (15.4) (26.4) (8.2) 48.1 (10.0) (10.0) 28.1

Management has lowered capex to maintenance capex of Rs 10 bn p.a.

Also, expects to lower equity commitments to existing BOT projects through stake sale to strategic investor

Rise in working capital mainly due to drop in creditor days to support suppliers
Da ys Inventory days Debtor days Creditor days OCA, L&A days Net Working Ca p ita l Da ys (ex Ca sh) Ma r- 11 13 194 213 29 5 Sep - 11 14 196 197 35 39 Ma r- 12 12 209 206 29 28 Sep - 12 13 195 181 27 46 Ma r- 13E 14 195 166 29 66 Ma r- 14E 14 195 178 29 55 Ma r- 15E 14 195 182 29 49

11

Improving order inflow growth to drive PE re-rating

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

Improvement in order inflow growth to result in PE re-rating

120 100 80 60 40 20 0 -20 -40 15 10 5 0 (%) Order Inflow Growth PE Forward (RHS) (x) 35 30 25 20

Jul-03

May-04

Jul-08

May-09

Mar-05

Mar-10

Feb-03

Oct-04

Feb-08

Sep-02

Sep-07

Oct-09

Dec-03

Dec-08

Nov-06

Nov-11

Aug-05

Source: Bloomberg, Company, Axis Capital

Though earnings may not excite in the near term, we believe the market is bound to take cognizance of improving order flow mix and balance sheet (reducing working capital and RoCE at 18% in FY15 vs. 16% currently) This, along with diminishing concerns on leadership and capital allocation would drive L&Ts re-rating. Accordingly, we have assigned 16x core FY15E EPS of Rs 90 to arrive at our SOTP-based target price of Rs 1,886

Aug-10

Sep-12

Jan-06

Jan-11

Jun-06

Apr-07

Apr-02

Jun-11

Apr-12

12

Relative valuation

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

M k t c ap C o mp any Name Asia E&C Hyundai Development Co Doosan Heavy Industries & Construction Co Ltd Daewoo Engineering & Construction Co Ltd Hyundai Engineering & Construction Co Ltd Samsung Engineering Co Ltd China Railway Construction Corp Ltd Asia Av erage US E&C Fluor Corp Jacobs Engineering Group Inc Shaw Group Inc/The Foster Wheeler Ag US Av erage India E&C Larsen & Toubro Ltd Bharat Heavy Electricals Ltd Crompton Greaves Ltd Thermax Ltd Cummins India Ltd India Av erage
Source: Bloomberg, Axis Capital

EBIT DA margin (% ) F Y14 e 7.6 8.8 5.9 7.0 6.8 4.7 6. 3 F Y15e 8.1 9.0 5.9 7.2 6.9 4.9 6. 4 4.7 6.6 5.8 7.9 5. 8 11.1 14.2 7.3 9.8 19.4 12. 5

PE (x) F Y14 e 13 10 12 11 11 9 10 16 14 25 13 16 14 10 14 16 18 13 F Y15e 9 8 9 9 9 8 9 14 13 18 11 14 12 14 12 13 17 13

PB (x) F Y14 e 0.7 0.8 1.0 1.4 2.8 1.0 1. 4 2.4 1.5 2.8 2.7 2. 3 2.8 1.6 1.6 3.2 5.2 2. 6 F Y15e 0.7 0.8 0.9 1.3 2.3 0.9 1. 2 2.1 1.3 2.4 2.2 1. 9 2.4 1.5 1.4 2.9 4.4 2. 3

EV/S (x) F Y14 e 0.9 0.8 0.5 0.5 0.5 0.2 0. 4 0.3 0.5 0.6 0.5 0. 4 1.0 1.0 0.6 0.9 2.7 1. 1 F Y15e 0.8 0.7 0.5 0.4 0.4 0.2 0. 4 0.3 0.4 0.6 0.4 0. 3 1.1 0.9 0.5 0.7 2.3 1. 1

R OE (% ) F Y14 e 6 8 9 14 29 12 14 15 11 15 22 15 17 17 12 22 29 18 F Y15e 7 10 10 14 27 12 14 14 10 13 22 14 17 11 13 23 28 16

(US Dm) 1,578 3,987 3,336 6,770 5,741 12,175

10,773 6,259 3,185 2,764

4.6 6.7 5.4 8.4 5. 7

17,445 9,586 1,242 1,312 2,634

11.2 17.8 7.0 9.4 19.4 13. 6

13

Key risks

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

Delays in finalization of orders due to earlier than expected elections could lead to lower than expected inflow (expectation of 15% growth) resulting in lower visibility for FY15 Inability to get a strategic investor could force L&T management to increase investments in development projects requiring equity investments higher than our forecasted Rs 10 bn p.a., resulting in lower RoCE Intense competition from both domestic and international players could result in pricing pressure, thereby eroding margin in FY14 and FY15 Rise in working capital cycle due to higher receivables and lower advances could result in balance sheet stress Lower than expected execution due to project specific issues may result in lower revenue

14

Company Financials (Standalone)

Profit & Loss (R s mn)
Y/E M arc h
Net sales Other operating income Tot al op e r at in g in com e Cost of goods sold Gross profit

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

Balance Sheet (R s mn)

F Y12
525,451 7,567 5 3 3 ,0 1 8 -403,814 129,204

F Y13 E
601,636 7,945 6 0 9 ,5 8 2 -465,939 143,643

F Y14 E
700,533 8,343 7 0 8 ,8 7 5 -544,122 164,754

F Y15E
811,814 8,760 8 2 0 ,5 7 4 -630,618 189,955

Y/E M arc h
Paid-up capital Reserves & surplus Net worth Borrowing Other non-current liabilities Tot al l i ab i l i t i e s Gross fixed assets Less: Depreciation Net fixed assets Add: Capital WIP Total fixed assets Total Investment Inventory Debtors Cash & bank Loans & advances Current liabilities Net current assets Other non-current assets Tot al asse t s

F Y12
1,225 251,005 252,230 98,958 1,333 6 7 6 ,9 3 0 105,884 -29,223 76,661 6,975 83,637 0 17,766 305,113 19,053 40,912 324,410 59,796 209,087 6 7 6 ,9 3 0

F Y13 E
1,225 288,712 289,937 123,958 1,333 7 1 0 ,5 5 8 115,859 -37,221 78,638 7,000 85,638 0 23,076 324,892 10,064 46,153 295,330 110,503 219,087 7 1 0 ,5 5 8

F Y14 E
1,225 331,585 332,809 103,958 1,333 7 9 6 ,8 4 9 127,859 -46,377 81,482 5,000 86,482 0 26,870 378,298 10,454 53,739 358,749 112,531 239,087 7 9 6 ,8 4 9

F Y15E
1,225 381,175 382,399 78,958 1,333 8 8 6 ,4 1 0 137,859 -56,358 81,501 5,000 86,501 0 31,138 438,391 16,793 62,276 423,720 127,102 249,087 8 8 6 ,4 1 0

Gross margin (% )
Total operating expenses EB I TDA

24.6
-62,282 6 6 ,9 2 2

23.9
-73,039 7 0 ,6 0 4

23.5
-85,414 7 9 ,3 4 0

23.4
-98,899 9 1 ,0 5 6

EBITDA margin (% )
Depreciation EB I T Net interest Other income P r ofit b e for e t ax Total taxation

12.7
-7,014 5 9 ,9 0 8 -6,661 10,521 6 3 ,7 6 8 -18,538

11.7
-7,999 6 2 ,6 0 5 -10,243 12,802 6 5 ,1 6 5 -18,246

11.3
-9,156 7 0 ,1 8 4 -10,186 14,092 7 4 ,0 9 1 -20,745

11.2
-9,981 8 1 ,0 7 5 -8,323 15,397 8 8 ,1 4 9 -26,445

Tax rate (% )
Profit after tax Minorities Profit/ Loss associate co(s) Adjusted net profit

29.1
45,230 0 0 45,230

28.0
46,919 0 0 46,919

28.0
53,345 0 0 53,345

30.0
61,704 0 0 61,704

Adj. PAT margin (% )

Net non-recurring items Reported net profit

8.6
-665 44,565

7.8
0 46,919

7.6
0 53,345

7.6
0 61,704

15

Company Financials (Standalone)

Cash Flow (Rs mn)
Y/E M arc h
Profit before tax Depreciation & Amortisation

12 Feb 2013 / Company Report

Larsen & Toubro

Engineering

K ey R atios
F Y12
63,768 -7,014

F Y13 E
65,165 -7,999

F Y14 E
74,091 -9,156

F Y15E
88,149 -9,981

Y/E M arc h
OP ERA TI ONA L FDEPS (Rs) CEPS (Rs) DPS (Rs) Dividend payout ratio (% ) GROWTH Net sales (% ) EBITDA (% ) Adj net profit (% ) FDEPS (% ) P ERFORM A NC E RoE (% ) RoCE (% )

F Y12
73.9 84.2 14.5 19.9 20.7 15.4 34.5 33.8 19.2 18.6 1.7 0.8 0.0 211.9 13.9 235.4 0.4 0.3 1.2 9.0

F Y13 E
76.6 89.7 15.0 19.6 14.5 5.5 3.7 3.7 17.3 16.3 1.6 0.9 0.1 197.1 15.6 187.6 0.5 0.4 1.4 6.1

F Y14 E
87.1 102.1 17.1 19.6 16.4 12.4 13.7 13.7 17.1 16.4 1.7 0.9 0.1 197.1 15.6 200.5 0.3 0.3 1.3 6.9

F Y15E
100.8 117.1 19.8 19.6 15.9 14.8 15.7 15.7 17.3 18.0 1.9 1.0 0.1 197.1 15.6 204.3 0.2 0.2 1.3 9.7

Chg in working capital

C ash fl ow fr om op e r at i on s

-34,642
3 ,1 9 6

-59,696
- 1 7 ,5 8 1

-1,638
4 6 ,7 7 1

-8,232
4 8 ,0 5 6

Capital expenditure
C ash fl ow fr om i n ve st i n g

-16,496
- 1 9 ,9 1 4

-10,000
- 7 ,1 9 8

-10,000
- 1 5 ,9 0 8

-10,000
- 4 ,6 0 3

Equity raised/ (repaid) Debt raised/ (repaid) Dividend paid

C ash fl ow fr om fi n an ci n g Net chg in cash

0 27,347 -8,880
1 8 ,4 5 9 1,741

0 25,000 -9,211
1 5 ,7 8 9 -8,989

0 -20,000 -10,473
- 3 0 ,4 7 3 390

0 -25,000 -12,114
- 3 7 ,1 1 4 6,339

Valuation Ratios
Y/E M arc h
PE (x) EV/ EBITDA (x) EV/ Net sales (x) PB (x) Dividend yield (% ) Free cash flow yield (% )

EFFI C I ENC Y

F Y12
14.3 14.9 1.9 3.6 1.0 -1.5

F Y13 E
13.8 14.6 1.7 3.2 1.0 -3.0

F Y14 E
12.1 12.7 1.4 2.8 1.1 4.0

F Y15E
10.5 10.7 1.2 2.4 1.3 4.2

Asset turnover (x) Sales/ total assets (x) Working capital/ sales (x) Receivable days Inventory days Payable days FI NA NC I A L STA B I LI TY Total debt/ equity (x) Net debt/ equity (x) Current ratio (x) Interest cover (x)

16

Axis Capital Limited

Axis House, C2, Wadia International Centre, P.B Marg, Worli, Mumbai 400 025, India. Tel:- Board +91-22 4325 2525; Dealing +91-22 2438 8861 - 69; Fax:- Research +91-22 4325 1100; Dealing +91-22 4325 3500
CONFLICT OF INTEREST DISCLOSURE We, at Axis Capital, are committed to providing the most honest and transparent advice to our clients. However, given the nature of the capital markets, from time to time we are faced with situations that could give rise to potential conflict of interest. In order to provide complete transparency to our clients, before we make any recommendations, we are committed to making a disclosure of our interest and any potential conflict IN ADVANCE so that the interests of our clients are safe- guarded at all times. In light of this policy, we have instituted what we believe to be the most comprehensive disclosure policy among leading investment banks/brokerages in the world so that our clients may make an informed judgment about our recommendations. The following disclosures are intended to keep you informed before you make any decision- in addition, we will be happy to provide information in response to specific queries that our clients may seek from us. Disclosure of interest statement (As of February 13, 2013) 1. Analyst ownership of the stock 2. Investment Banking mandate No No

We are committed to providing completely independent and transparent recommendations to help our clients reach a better decision.

This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document. The intent of this document is not in recommendary nature

Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors
Axis Capital Limited has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval Axis Capital Limited, its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of Axis Capital Limited. The views expressed are those of analyst and the Company may or may not subscribe to all the views expressed therein This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Copyright in this document vests exclusively with Axis Capital Limited.

17