Result Update

February 9, 2015
Rating matrix
Rating : Buy AIA Engineering (AIAENG) | 1045
Target : | 1154
Target Period
Potential Upside
:
:
12-15 months
12%
Superior margin offsets topline miss…
• AIA Engineering (AIA) reported a 12.3% YoY decline in volumes at
What’s changed? 44200 tonnes vs. our estimate of 55725 tonnes mainly on the back of
Target Changed from | 1170 to | 1154 stock in transit (~3000 tonnes) and stocking of ~3000 tonnes for a
EPS FY16E Changed from | 47.4 to |44 client in Africa. Consequently, the topline came in at | 514.3 crore vs.
EPS FY16E Changed from | 58.5 to |57.7 our estimate of | 626 crore
Rating Unchanged
• However, strong margins at 29.6% vs. our estimates of 24% offset
Quarterly performance
the topline miss. Consequently, the bottomline at | 115 crore was
largely in line with our estimates of | 115.7 crore
Q3FY15 Q3FY14 YoY (%) Q2FY15 QoQ (%)
Revenue 514.3 526.2 -2.3 572.4 -10.1
• The management commentary suggests they would be adding an
EBITDA 152.2 120.3 26.6 147.8 3.0 incremental volume of at least 25000 tonnes in FY16E. The company
EBITDA (%) 29.6 22.9 675 bps 25.8 377 bps currently has | 845 crore of cash and | 116 crore of debt on the
PAT 115.0 97.5 94.7 108.3 6.2 balance sheet
Opportunity in mining segment 4x that of cement for AIA
Key financials
Current global consumption of high chrome mill internals (HCMI), which
| Crore FY14 FY15E FY16E FY17E
is equally applied in the cement and the mining space, is at ~6,00,000
Net Sales 2,080.1 2,179.1 2,477.5 3,319.3
tonnes per annum (TPA). With almost 80% penetration achieved for
EBITDA 502.1 556.9 625.2 821.4
HCMI in cement space, the mining segment provides next leg up for
Net Profit 325.0 411.8 415.4 544.4
HCMI players. It is estimated that at least 1.2 MTPA mining segment
EPS (|) 34.5 43.7 44.0 57.7
volumes for mill internals can be converted from forged media to HCMI,
Valuation summary going ahead. Hence, we believe this will create an opportunity 4x that of
FY14 FY15E FY16E FY17E current HCMI consumption of 3,00,000 TPA for HCMI players in mining.
P/E 30 23.9 23.7 18.1 The key focus areas in mining for AIA will be gold and copper metal.
Target P/E 33.6 26.5 26.3 20.0 Greenfield capex on track; AIA to be largest HCMI player by FY16E
EV / EBITDA 5.7 16.8 14.7 11.2 Successful penetration in the mining segment (51% volume CAGR over
P/BV 18.7 4.7 4.1 3.5 FY10-14) and presence of strong conversion opportunity (80% of 1.5-2
RoNW (%) 25 19.8 17.4 19.3
MT global opportunity per annum from forged media to HCMI still
RoCE (%) 24.8 22.8 21.6 24.3
remains unexploited) has prompted AIA to undertake an aggressive
capacity expansion plan. From a capacity of 2,60,000 tonnes in FY14E
Stock data
(60,000 tonne brownfield capacity already added in Q4FY14), AIA plans
Particular Amount
to add another 1,80,000 tonnes of greenfield capacity in Gujarat by
Market Capitalization | 9856.5 Crore
FY16E. This will make AIA the largest HCMI player globally as the current
Total Debt (FY14) | 120.6 Crore
capacity of 260,000 tonnes (as of Q3FY15) will grow 2.1x to 440,000
Cash and Investments (FY14) | 749.1 Crore
tonnes by FY16E. AIA will then overtake the current market leader
EV | 9228 Crore
Magotteaux (Belgium). The capex funding is planned via internal
52 week H/L 2.3
accruals as AIA has a cash balance of | 845 crore as of Q3FY15 coupled
Equity capital | 18.9 Crore
Face value |2
with strong cash flow generation expected in FY15E and FY16E. AIA will
incur capex of | 200 crore and | 400 crore during FY15E and FY16E,
respectively.
Price performance
Strong growth expected in FY17E; maintain BUY
1M 3M 6M 12M
Cummins India (0.0) 9.3 36.1 104.0
We believe AIA has made strong/profitable inroads into the global
Greaves Cotton (1.1) 21.9 32.8 106.8 mining space. The same is reiterated by the massive capacity addition
VA Tech Wabag (1.1) 1.8 27.8 134.0 programme that it has taken and continued traction in the mining
AIA Engineering (2.7) (5.7) 7.7 171.8 segment on a quarterly basis. Coupled with this, AIA has been
consistently surprising on the positive side. Going ahead, we expect AIA
to report a strong 17% revenue CAGR, backed by 18.8% volume CAGR,
over FY14-17E coupled with ~18.8% PAT CAGR. We value the stock at
Research Analyst
20x FY17E EPS to arrive at a target of | 1154/share. We maintain our
Chirag J Shah BUY recommendation on the stock.
shah.chirag@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q3FY15 Q3FY15E Q3FY14oY (Chg %) Q2FY15oQ (Chg %) Comments
Sales 514.3 626.5 526.2 -2.3 572.4 -10.1 Volume disappointment led to lower-than-expected topline
Other Income 23.3 18.8 12.8 81.9 20.1 16.1

Raw Materials Expenses 143.5 213.0 191.2 -25.0 229.7 -37.5

Employee Cost 24.0 28.2 28.9 -16.9 23.2 3.3
Other Expenditure 194.6 222.4 207.3 -6.2 176.4 10.3

EBITDA 152.2 150.4 120.3 26.6 147.8 3.0

EBITDA Margin (%) 29.6 24.0 22.9 675 bps 25.8 377 bps Margins expansion on the back of lower raw material cost and other
expenses
Depreciation 18.1 14.0 9.3 94.7 21.8 -16.8
Interest 0.9 0.0 0.4 103.7 1.1 -16.0

PBT 156.5 167.7 123.3 26.9 145.0 7.9

Taxes 41.5 52.0 25.8 60.8 36.8 12.9
PAT 115.0 115.7 97.5 18.0 108.3 6.2 Margins beat offset the topline miss

Key Metrics
Volume (in tonnes) 44,200 55,725 41,900 5.5 50,400 -12.3 Voumes were lower on the back of stock in transit (~3000 tonnes) and
stocking of ~3000 tonnes for a client in Africa
Net Realisation (|/tonne) 110,000 109,200 120,000 -8.3 109,000 0.9
Source: Company, ICICIdirect.com Research

Change in estimates
FY16E FY17E
(| Crore) Old New % Change Old New % Change Comments
Revenue 2,788.9 2,477.5 -11.2 3,459.3 3,319.3 -4.0 We have revised our topline estimates lower for FY15E, FY16E, FY17E
EBITDA 681.6 625.2 -8.3 838.1 821.4 -2.0
EBITDA Margin (%) 24.4 25.2 80 bps 24.2 24.7 52 bps We have revised our margins higher for FY15E, FY16E, FY17E
PAT 446.9 415.4 -7.1 552.0 544.4 -1.4
EPS (|) 47.4 44.0 -7.1 58.5 57.7 -1.4
Source: Company, ICICIdirect.com Research

Assumptions
Current Earlier Comments
FY13 FY14 FY15E FY16E FY15E FY16E
Overall Volumes (tonnes) 160,800 176,400 190,512 219,089 209,916 251,899 We have revised our volumes estimates lower as guided by management
Mining Volumes (tonnes) 73,500 96,000 106,980 128,874 126,384 163,724
Capacity 200,000 200,000 260,000 300,000 260,000 300,000
Net Realisations 108,912 117,918 114,380 113,082 112,686 111,942 We have assumed realisations around | 110000/tonne
Source: Company, ICICIdirect.com Research

Company Analysis
Company Analysis

ICICI Securities Ltd | Retail Equity Research Page 2

 Strong volume growth to drive 17% revenue CAGR over FY14-FY17E
On the back of robust volume CAGR of 18.8% driven mainly by the
mining segment, we expect AIA to post revenue CAGR of ~17% over
FY14-17E. Hence, revenues are expected to reach | 3319 crore in FY17E
from | 2080 crore in FY14.

In terms of segmental volume growth, the mining segment is expected to

lead the pack as it is expected to witness 27.4% volume CAGR over FY14-
17E as cement and utilities segments are expected to post moderate
CAGR of 6.3% and 8%, respectively, over the same period.

Exhibit 1: Trend in revenues Exhibit 2: Share of mining segment to rise to 67% by FY17E
3800 40 100 7.7 6.1
3319 8.2 8.5 8.7 8.2 8.2
35 90
3300
30 80
2800 2477 25 70 35.8
45.1 45.7
2179 54.4 56.2 58.8
2300 2080 20 60 67.1
(| crore)

1751 15 (%) 50

(%)
1800 1417 10 40
1172 30
1300 973 5 55.6
20 46.5 45.4
0 37.4 35.7 33.5
800 10 26.8
-5
300 -10 0
FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E FY11 FY12 FY13 FY14 FY15E FY16E FY17E
Revenues Growth in revenues Cement Mining Utilities

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Going ahead, we expect volumes to be at 219089 tonnes and 295770

tonnes for FY16E and FY17E, respectively.

Exhibit 3: Trend in volume growth Exhibit 4: Trend in capacity

350000 40
35 470000
300000 420000
30
250000 25 370000
320000
(Tonnes)

20
(Lakh Tonnes)

200000
(%)

15 270000
150000 10 220000
5 170000
100000 120000
0
50000 -5 70000
20000
FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14E

FY15E

FY16E

FY17E

Production Sales Growth in sales

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

We do like the quality of revenue growth that AIA has posted historically
and also that it is likely to register, going ahead. In any given fiscal,
revenue growth is mainly explained by volume growth rather than
realisation growth. On an average, over FY10-13, ~78% of the revenue
growth is explained by volume growth. Even going ahead, over FY14-
16E, our expectation is that revenue growth will be mainly volume driven
as compared to flattish realisation.

Our forecasts assume flattish realisations, at | 110000/tonne over FY15E-

17E. The realisations for FY14 stood at |117000/tonne.

ICICI Securities Ltd | Retail Equity Research Page 3

 Exhibit 5: Trend in realisation

120000
115000
110000
105000

(|/tonne)
100000
95000
90000
85000
80000
FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

Source: Company, ICICIdirect.com Research

Exhibit 6: Volume growth to lead revenue CAGR for AIA over next couple of years

40
34.035.0
35
30
22.2 23.6
25 20.4 20.9
18.8
20
12.9 13.2 13.715.0
15
9.1 9.7 8.3
10 7.2 8.0
4.8
5 0.0
0
-5 FY11-1.4 FY12 FY13 FY14 FY15E FY16E-1.1 FY17E
-3.0
Growth in Sales Growth in volumes sold Growth in realisations

Source: Company, ICICIdirect.com Research

Margin recovery commences in FY14; seen stabilizing in ~24-25% levels

We believe most of the margin pressure is a thing of the past and AIA
would be able to claw back to its previous margin range of 24-25%. In
order to make inroads into the mining segment, AIA had to take price cuts
in order to win clients. The same was reflected in EBITDA margins, which
fell from 23% in FY10 to 17.7% in FY13. However, given the successful
entry of AIA in the mining segment, margins have started clawing back to
historical levels of over 20%. The same is reiterated by the fact that FY14
EBITDA margins of AIA have been at 24%. Even in Q1FY15 and Q2FY15,
AIA consistently reported robust margins of 26% and 25.9%, respectively.
The Q3FY15 margins at 29.6% were aided by lower raw material cost and
currency benefits. Going ahead, given better mix of products and strong
volume growth, we have revised our margin estimates estimate the same
at 25.6%, 25.2%, 24.7% for FY15E, FY16E, FY17E, respectively.
Exhibit 34: Exiting lower margin projects to help drive margins

ICICI Securities Ltd | Retail Equity Research Page 4

Exhibit 7: Trend in EBITDA margins
28

26 25.6 25.2 24.7

24 24.1
23.4
22.6
22

20 19.8
(%)

19.2
18 17.7
16

14

12
FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

Source: Company, ICICIdirect.com Research

Volume traction, margin restoration to drive PAT at ~18.8% CAGR in

FY14-17E
We expect AIA’s profitability to witness strong trends on the back of
robust 18.8% volume CAGR and return to historical margin level of 24-
25% over FY14-17E. Hence, PAT is expected to grow at a CAGR of
~18.8% over FY14-17E to | 547 crore vs. | 325 crore in FY14.

Exhibit 8: PAT to rise on back of strong volume and margins

600 544.4 25

500 20
411.8 415.4
400
325.0 15
(| crore)

300
210.8 10
183.2
(%)

164.5 179.7
200

100 5

0 0
FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

PAT PAT Margins (RHS)

Source: Company, ICICIdirect.com Research

Minuscule leverage, strong CFO to ensure smooth capex execution

The greenfield capex of 180,000 tonnes involves an expenditure of | 650
crore, which will be executed across FY15E-16E. AIA expects to fund the
capex through internal accruals. We believe the mode of capex
commitment will not create any kind of pressure on AIA’s balance sheet
as the company currently has a cash balance of | 845 crore and debt of
| 116 crore. The current debt/equity ratio at the end of FY14 is expected
at 0.1x. The company expects to fund the capex via internal accruals.
Historically, AIA has been able to generate cash flows from operations
(CFO) in the range of | 100 crore over FY10-13. With an improvement in
volume growth in FY15 and resurrection of EBITDA margins in the range
of 24-25% over FY14E-16E, we expect AIA’s CFO to average at | 303
crore over FY15E-FY16E.

ICICI Securities Ltd | Retail Equity Research Page 5

 Exhibit 9: Trend in cash flows

600.0

500.0

400.0

(| crore)
300.0

200.0

100.0

0.0
FY11 FY12 FY13 FY14 FY15E FY16E FY17E

Source: Company, ICICIdirect.com Research

Strong performance to improve RoE to 18-20% by FY14-FY17E

AIA’s RoEs had hit a low of 14.5-14.8% over FY12-13 given margins have
taken a hit in those fiscals owing to its penetrating strategy in the mining
segment coupled with strong cash reserves sitting on the balance sheet.
However, as the financial performance is getting back to a strong growth
path from FY14 onwards, we expect AIA to report RoEs of ~18-20% over
FY14-17E.

Exhibit 10: Return ratios to bounce back strongly

30

26.5
25 24.8 24.3
22.8
20.8 21.5 21.6
20 19.8 19.3
18.0 18.2 18.8 18.7
(%)

17.2 17.4 17.4

15 14.5 14.9

10

5
FY09

FY10

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E
ROE ROCE

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

 Outlook and Valuation
We believe AIA has made strong/profitable inroads into the global mining
space. The same is reiterated by the massive capacity addition
programme that it has taken and continued traction in the mining
segment on a quarterly basis. Coupled with this, AIA has been
consistently surprising on the positive side. Going ahead, we expect AIA
to report a strong 17% revenue CAGR, backed by a 18.8% volume CAGR,
over FY14-17E coupled with ~18.8% PAT CAGR. We value the stock at
20x FY17E EPS to arrive at a target of | 1154 per share. We maintain our
BUY recommendation on the stock.

Exhibit 11: One year forward P/E multiple for AIA

35

30

25

20
(x)

15

10

5
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 7

Key events

1,200

1,000

800 Target Price | 1154

600

400

200

0
Jan-10

Jul-10

Oct-10

Jul-11

Oct-11

Jul-12

Oct-12

Oct-14
Apr-10

Jan-11

Apr-11

Jan-12

Apr-12

Jan-13

Jul-13

Oct-13

Jul-15

Oct-15
Apr-13

Jan-14

Jul-14
Apr-14

Jan-15

Apr-15

Jan-16
Source: Company, ICICIdirect.com Research

Company snapshot
Date Event
Apr-09 AIA enhances capacity by 50000 tonnes to 115000 tonnes
Mar-10 Sensing the saturation in the cement space in India, AIA forays into mining segment. In the first year of operation, AIA garners mining volumes to the tune of 18000
tonnes or 10% of overall volumes
Mar-11 Share of mining segment rises to 36% in overall volumes. Volumes in the segment stood at 45000 tonnes vs. 18000 tonnes in FY10
Mar-12 Though AIA witnesses traction in mining volumes at the cost of pricing as an entry strategy, consequently, EBITDA margins took a plunge from 26% in FY11 to
22.8% in FY12
Sep-12 AIA suffers its worst ever margins of 12% in Q3FY13 as the mining share had risen to 50% in overall volumes
Dec-13 AIA's financial performance witnesses turnaround as of 9MFY14. It clawes back to its normalised margin range of 22-23%, coupled with more than 50% share of
mining volumes
Jan-14 AIA announces aggressive capex plans of | 600 crore for setting up a greenfield capacity of 180000 tonnes. AIA plans to have a capacity of 440000 tonnes by
FY16E. On commissioning the same, AIA would be the world's largest player in the HCMI segment by FY16E
Apr-14 AIA commissions 60000 tonnes of brownfield capacity, thereby taking the total capacity to 260000 tonnes
Source: Bloomberg, Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Dec-13 Mar-14 Jun-14 Sep-14 Dec-14
1 Shah (Bhadresh K) 31-Dec-14 61.6 58.1 0.0 Promoter 61.65 61.65 61.65 61.65 61.65
2 Nalanda Capital Pte Ltd 31-Dec-14 8.4 7.9 0.0 FII 26.62 27.55 24.59 24.51 23.53
3 HDFC Asset Management Co., Ltd. 31-Dec-14 3.2 3.0 0.0 DII 5.59 5.65 7.44 7.50 7.07
4 HSBC Global Asset Management (India) Private Limited 31-Dec-14 2.8 2.7 0.0 Others 6.14 5.15 6.32 6.34 7.75
5 Matthews International Capital Management, L.L.C. 31-Dec-14 2.5 2.3 -0.8
6 SBI Funds Management Pvt. Ltd. 30-Sep-14 1.2 1.1 0.0
7 PineBridge Investments (Taiwan) 31-Dec-14 1.1 1.0 0.0
8 Burgundy Asset Management Ltd. 30-Sep-14 1.1 1.0 -0.1
9 IDFC Asset Management Company Private Limited 31-Dec-14 0.6 0.6 0.0
10 William Blair & Company, L.L.C. 31-Dec-14 0.5 0.5 0.1
Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys Sells
Investor name Value Shares Investor name Value Shares
Grandeur Peak Global Advisors, LLC 2.20m 0.14m Shah (Bhadresh K) HUF -280.94m -18.50m
Excel Funds Management Inc. 1.78m 0.12m Matthews International Capital Management, L.L.C. -13.43m -0.78m
William Blair & Company, L.L.C. 1.13m 0.07m Capital Research Global Investors -2.94m -0.19m
L&T Investment Management Limited 0.77m 0.04m Burgundy Asset Management Ltd. -1.22m -0.07m
PineBridge Investments (Taiwan) 0.67m 0.04m Ashmore Equities Investment Management (US) LLC -1.09m -0.07m
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 8

Financial summary
Profit and loss statement | Crore Cash flow statement | Crore
(Year-end March) FY14 FY15E FY16E FY17E (Year-end March) FY14 FY15E FY16E FY17E
Total operating Income 2,080.1 2,179.1 2,477.5 3,319.3 Profit after Tax 325.0 411.8 415.4 544.4
Growth (%) 18.8 4.8 13.7 34.0 Add: Depreciation 38.1 50.4 72.5 89.6
Raw Material Expenses 796.4 783.8 860.7 1,153.1 (Inc)/dec in Current Assets -32.6 -142.2 2.1 -529.8
Employee Expenses 88.8 91.5 109.8 149.8 Inc/(dec) in CL and Provisions 135.9 -97.0 26.9 64.4
Other expenses 692.7 746.8 881.8 1,194.9 Others 3.3 3.0 5.0 5.0
Total Operating Expenditure 1,577.9 1,622.1 1,852.3 2,497.8 CF from operating activities 466.4 223.0 516.9 168.7
EBITDA 502.1 556.9 625.2 821.4 (Inc)/dec in Investments 7.4 0.0 0.0 0.0
Growth (%) 61.9 10.9 12.3 31.4 (Inc)/dec in Fixed Assets -117.9 -333.7 -258.9 -80.0
Depreciation 38.1 50.4 72.5 89.6 Others 0.0 0.0 0.0 0.0
Interest 6.4 5.6 6.4 0.0 CF from investing activities -446.4 -353.7 -278.9 -100.0
Other Income 33.4 84.2 57.0 57.0 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
PBT 459.9 585.1 603.3 788.8 Inc/(dec) in loan funds -40.3 20.0 20.0 20.0
Others 0.0 0.0 0.0 0.0 Dividend paid & dividend tax -66.5 -77.2 -99.3 -110.4
Total Tax 134.2 173.3 187.9 244.4 Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0
PAT 325.0 411.8 415.4 544.4 Others 0.0 7.6 0.0 0.0
Growth (%) 54.1 26.7 0.9 31.1 CF from financing activities -52.7 -52.8 -79.3 -90.4
EPS (|) 34.5 43.7 44.0 57.7 Net Cash flow -32.7 -183.5 158.6 -21.7
Source: Company, ICICIdirect.com Research Opening Cash 240.1 220.1 36.6 195.2
Closing Cash 220.1 36.6 195.2 173.5
Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(Year-end March) FY14 FY15E FY16E FY17E (Year-end March) FY14 FY15E FY16E FY17E
Liabilities Per share data (|)
Equity Capital 18.9 18.9 18.9 18.9 EPS 34.5 43.7 44.0 57.7
Reserve and Surplus 1,720.0 2,058.9 2,375.0 2,809.1 Cash EPS 38.5 49.0 51.7 67.2
Total Shareholders funds 1,738.8 2,077.8 2,393.9 2,827.9 BV 184.4 220.3 253.8 299.8
Total Debt 120.6 140.6 160.6 180.6 DPS 6.0 7.0 9.0 10.0
Deferred Tax Liability 20.0 20.0 20.0 20.0 Cash Per Share 23.3 3.9 20.7 18.4
Minority Interest / Others 0.0 0.0 0.0 0.0 Operating Ratios (%)
Total Liabilities 1,887.2 2,276.2 2,642.2 3,126.3 EBITDA Margin 24.1 25.6 25.2 24.7
PBT / Total Operating income 22.8 27.9 25.2 24.4
Assets PAT Margin 15.6 18.9 16.8 16.4
Gross Block 570.2 853.6 1,162.5 1,322.5 Inventory days 68.2 68.0 66.0 67.0
Less: Acc Depreciation 205.0 253.5 324.1 411.8 Debtor days 78.1 75.0 75.0 75.0
Net Block 365.2 600.1 838.4 910.7 Creditor days 39.5 24.0 24.0 24.0
Capital WIP 99.8 150.0 100.0 20.0 Return Ratios (%)
Total Fixed Assets 464.9 750.1 938.4 930.7 RoE 18.7 19.8 17.4 19.3
Investments 529.1 579.1 629.1 679.1 RoCE 24.8 22.8 21.6 24.3
Inventory 350.8 432.0 434.0 752.3 RoIC 44.7 33.5 32.2 32.5
Debtors 431.5 431.7 492.0 664.0 Valuation Ratios (x)
Loans and Advances 212.1 271.1 207.8 244.6 P/E 30.3 23.9 23.7 18.1
Other Current Assets 1.0 2.8 1.5 4.3 EV / EBITDA 18.4 16.8 14.7 11.2
Cash 220.1 36.6 195.2 173.5 EV / Net Sales 4.6 4.5 3.8 2.8
Total Current Assets 1,215.4 1,174.1 1,330.6 1,838.7 Market Cap / Sales 4.9 4.7 4.1 3.1
Creditors 218.4 138.1 157.4 212.5 Price to Book Value 5.7 4.7 4.1 3.5
Provisions 127.3 110.5 118.1 127.5 Solvency Ratios
Total Current Liabilities 345.7 248.6 275.5 339.9 Debt/EBITDA 0.2 0.3 0.3 0.2
Net Current Assets 869.7 925.4 1,055.0 1,498.7 Debt / Equity 0.1 0.1 0.1 0.1
Others Assets 0.0 0.0 0.0 0.0 Current Ratio 3.5 4.7 4.8 5.4
Application of Funds 1,887.2 2,276.2 2,642.2 3,126.3 Quick Ratio 2.9 4.6 4.1 4.9
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 9

ICICIdirect.com coverage universe (Capital Goods)
CMP M Cap EPS (|) P/E (x) RoCE (%) RoE (%)
(|) TP(|) Rating (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E
AIA Engineering 1045 1154 Buy 9614 34.5 43.7 44.0 30.3 23.9 23.7 24.8 22.8 21.6 18.7 19.8 17.4
Thermax (THERMA) 1101 1183 Hold 13157 25.5 26.6 32.3 44.8 42.9 35.4 17.7 16.7 17.7 15.0 13.6 14.7
KEC International (KECIN) 81 89 Hold 1285 3.5 5.1 7.4 23.2 15.9 10.9 13.1 11.2 15.2 7.1 9.5 12.5
Kalpataru Power(KPP) 229 213 Buy 2343 8.9 9.8 12.3 7.4 6.7 5.4 11.2 11.2 11.8 7.4 7.6 8.8
L&T (LARTOU) 1572 2206 Buy 144624 50.6 50.1 58.2 31.1 31.4 27.0 14.8 14.5 15.7 16.2 15.0 15.8
Bhel (BHEL) 259 239 Hold 41608 27.1 16.8 12.1 9.5 15.4 21.4 26.8 12.4 17.7 22.3 12.0 8.8
Greaves Cotton (GREAVE) 142 175 Buy 3459 4.6 4.0 7.9 30.8 35.4 17.9 22.9 18.0 12.6 13.8 11.9 21.3
SKF 1366 1568 Buy 7767 31.6 42.4 50.0 46.6 34.8 29.5 16.6 18.9 20.2 13.1 15.9 16.7
VaTech Wabag 1462 1725 Buy 4224 40.3 56.6 65.2 36.2 25.8 22.4 17.8 18.5 18.7 12.7 16.7 16.8
Source: Company, ICICIdirect.com Research

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RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research Page 11

ANALYST CERTIFICATION
We /I, Chirag Shah PGDBM, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the
subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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ICICI Securities Ltd | Retail Equity Research Page 12