Bharat Forge BUY

Diversification Gains
Sector: Auto components Sensex: CMP (Rs): Target price (Rs): Upside (%): 52 Week h/l (Rs): Market cap (Rscr) : 6m Avg vol (000Nos): No of o/s shares (mn): FV (Rs): Bloomberg code: Reuters code: BSE code: NSE code:
Prices as on 24 Jun, 2011

18,241 300 353 17.5 413 / 280 6,992 392 233 2 BHFC IB BFRG.BO 500493 BHARATFORG

Non-auto business to drive growth in the near term Contribution of non-auto business to Bharat Forge Ltd (BFL) standalone revenue has increased from 30% in FY10 to 37% in FY11. The segment caters to the needs of oil and gas, power, aerospace and mining sectors. With substantial capex seen across all these segments in the medium term, we expect non-auto contribution to BFL revenues to increase further to about 50% over the next couple of years. With utilization at 50% levels no major capex is envisaged for the segment in the medium term. Domestic auto business to witness a slowdown Since March 2010, Reserve Bank of India has raised the repo rate 10 times resulting in hardening of interest rates. Contribution of financed Commercial Vehicles (CV) sales to total volumes is more than 90%. Furthermore, the industrial activity in the country has not kept pace with expectations. This has resulted in a slowdown in CV volumes. If diesel prices are raised further, economics for fleet operators will worsen. We expect CV volume growth to be at 10% following 38% and 27% in FY10 and FY11 respectively. With CVs accounting for bulk of the revenues of BFLs automotive segment, domestic auto business will slow down. US and Europe auto business seeing a decent recovery Following the financial crisis in 2008, CV volumes in US and Europe witnessed a marked slowdown. CV sales in Europe declined by 10% in CY08 and 21% in CY09, while in US, the fall was steeper at 25% in CY08 and 22% in CY09. Since then volumes have recovered following some signs of economic recovery and replacement demand increasing. Foreign subsidiaries of BFL achieved break-even in FY11 and are likely to see improved profitability in FY12 and FY13. Valuations at reasonable levels, Recommend BUY BFL currently trades at EV/EBIDTA of 7x on FY13E EBIDTA of Rs11.8bn. Over the past six months, the stock has corrected by 28% owing to a slowdown in domestic CV sales and widening impact of European debt crisis. We believe the European CV volume growth recovery would continue, while domestic automotive business impact would be more than offset by the surge in non-automotive revenues. Considering a PAT CAGR of 42% during FY11-13E, we find the current valuations reasonable and recommend BUY with a 9-month price target of Rs353 (EV/EBIDTA of 8x on FY13E EBIDTA). Financial summary
Y/e 31 Mar (Rs m) Revenues yoy growth (%) Operating profit OPM (%) Pre-exceptional PAT Reported PAT yoy growth (%) EPS (Rs) P/E (x) P/BV (x) EV/EBITDA (x) Debt/Equity (x) ROE (%) ROCE (%) FY10 33,276 (30.3) 3,385 10.2 153 (634) 0.7 436.4 4.6 24.6 1.5 1.0 3.6 FY11E 50,873 52.9 7,851 15.4 2,976 2,899 12.8 23.5 3.6 10.9 1.0 17.4 14.9 FY12E 60,082 18.1 10,407 17.3 5,080 5,080 75.2 21.8 13.8 2.8 7.8 0.6 23.0 19.7 FY13E 68,233 13.6 11,793 17.3 5,839 5,839 14.9 25.1 12.0 2.7 7.0 0.6 23.2 21.9

Shareholding pattern March '11 Promoters Institutions Non promoter corp hold Public & others Performance rel. to sensex (%) BFL Bosch MSSL Amtek Auto 1m (3.1) (0.5) (4.0) (3.8) 3m (12.5) 13.7 5.2 9.5 1yr (0.8) 24.2 47.5 (9.9) (%) 42.1 32.1 10.5 15.4

Share price trend

Bharat Forge 150 125 100 75 Jun-10

Sensex

Oct-10

Feb-11

Jun-11

Research Analyst
research@indiainfoline.com

Prayesh Jain

Source: Company, India Infoline Research

June 27, 2011

Bharat Forge

We expect non-auto business contribution to BFLs standalone revenues to increase from 37% in FY11 to about 50% by FY13

Non-automotive business to gain momentum Leveraging on its technological expertise in forging components for the automotive space, BFL now has been supplying similar components for sectors such as Oil & Gas, Nuclear and Thermal power generation, Aerospace, Wind mill turbines, engine components for construction and mining equipments, marine vehicles and railways. This has resulted in further diversification of the companys revenue base. We see a strong growth in most of the segments, where BFL plans to build its presence. We expect non-auto business contribution to BFLs standalone revenues to increase from 37% in FY11 to about 50% by FY13. The first phase of the companys non-auto foray has been completed with the commercialization of the ring rolling facility and is currently operating at about 50% utilization levels. The company is taking steps to increase it by targeting new customers and product lines. As a result, BFL is witnessing significant traction globally and especially within India and has won several new orders in thermal power, nuclear power, oil & gas and rail sector. To further diversify its non-automotive business, BFL has entered into a 50:50 JV with David Brown Group, UK for gear box manufacturing. The JV will manufacture gear boxes for various industries, supplying both new build gearboxes and aftermarket services to power, mining, defense, wind, rail and steel sectors.

The company is taking steps to increase utilization in non-automotive business by targeting new customers and product lines

Further diversification with JV with David Brown Group, UK for gear box manufacturing

Outlook for BFLs non-auto business

Sector Domestic Substantial work commitments of NELP II - VIII yet to be completed, resulting in increasing pace of capex spend in the near term Oil and Gas With success of KG-D6, deepwater exploration is expected to gain momentum in India translating into huge spends With onshore and shallow water resources utilized on declining mode, efforts to explore difficult oil from deepwater and ultra-deepwater will rise Airbus expects about 25,000 new cargo and passenger planes will be bought around the world by 2028. Out of which, Asia-Pacific airlines will buy around 8,000 new planes over this period, which is worth about US$1.2trillion. World Nuclear Association expects the world to add 192GWe of Nuclear power capacity by 2030 from current levels of 367GWe. In order to honour the climate control measures, we believe major opportunities will emerge in Europe and USA as they will lead the way Huge capacity additions continues in emerging markets With global economic recovery expected to gather momentum, international trade is expected to increase substantially, requiring higher number of marine vessels. International Energy security is a key agenda for most of the developed and developing economies. With crude oil reserves from most giant blocks on a natural decline exploration activities would continue increase

Aerospace

According to a PricewaterhouseCoopers report MRO industry within India is estimated to grow at 10% and reach US$1.17bn and US$2.6bn by 2020.

Nuclear Power

India plans to add 12.8GW of nuclear capacity over the XII and XIII plan. This will be further aided by import of fuel. With the government incentivising renewable energy, we believe growth in wind energy will be highest Country plans to add over 135GW over the XII & XIII five year plans, this should translate into strong demand for power equipments Average of Indian vessels is at 18.2 years v/s 11.8 years global average. This would entail huge investments in shipbuilding.

Wind Power

Thermal Power

Shipping

Source: India Infoline Research

Company Report

Bharat Forge

JV with Alstom will design, engineer, manufacture and deliver turbine and Generator Island of 600-800 MW supercritical range

Alstom JV to commence operations in FY13E BFLs JV with Alstom will design, engineer, manufacture and deliver turbine and Generator Island of 600-800 MW supercritical range with a total installed capacity of 5GW per annum. Both the partners have agreed to explore manufacture of turbines and generators in subcritical range as well as for gas and nuclear applications. The manufacturing infrastructure will include plants for manufacturing of turbine, generators and all the auxiliaries that go into turbine generator. The arrangement between Alstom and Bharat Forge involves setting up of two companies the first JV Company for manufacturing of core turbine and generators and the other for manufacturing of all the auxiliaries. The ventures have been approved by the Government of India and the facility is being constructed at the Mundra SEZ. The JV has received a LoI (Letter of Intent) for supplying five turbine generator sets of 660MW each for NTPC and Damodar Valley Corporation. The LoA (Letter of acceptance) is expected in the near term. First of the units is expected to be delivered in FY13E. The JV expects to earn an operating profit margin of 15-16%. The JV has also bid for 9 x 800MW turbine generator sets for NTPC projects at Kudgi in Karnataka, Darlapalli in Orissa and Lara in Chhattisgarh. JV with NTPC to add to the value chain The Joint Venture will initially be engaged in manufacturing forgings, castings, casings, fittings and high pressure pipings required for Power and other industries, Balance of Plant (BOP) equipment for the power sector etc. and will induct technology-related strategic partners wherever needed. The company would also manufacture other power plant equipments & machinery, in due course. BFL has so far invested Rs1bn in the two JVs. Further investments would be made in due course. Two ventures together can set up an entire power project The three critical aspects of a power project are 1) Boiler, 2) Turbine and Generator and 3) Balance of Plant (BOP). The two JVs when operational along with Alstom will have expertise in all three aspects. Alstom will provide the boiler, BFL-Alstom JV will provide turbine and generator and BFL-NTPC JV will provide BOP services. The forging components for turbine & generator and BOP activities would be provided by BFL. Expanding into EPC projects as well In order to extend the value chain, BFL has set up a separate subsidiary for EPC projects. The company has secured orders worth Rs18bn for setting up a 3X 150 MW power plant which will be executed over a span of two years starting FY12.

The JV has received a LoI (Letter of Intent) for supplying five turbine generator sets of 660MW each for NTPC and Damodar Valley Corporation

JVs with Alstom and NTPC along with Alstoms boiler business capable of setting up an entire power plant

BFLs EPC subsidiary has secured orders worth Rs18bn for setting up a 3X 150 MW power plant executable over next two years

Company Report

Bharat Forge

Domestic automotive business to witness a slowdown CV and passenger car volume growth in India has slowed down over the past couple of months. The key triggers for the slowdown have been the rising interest rates, slowdown in infrastructure activity and weakening industrial production in the country. Furthermore, an upsurge in crude oil prices has increased the probability of a hike in diesel prices. This would weaken the economic viability for fleet operators.
We expect another 50bps interest rate hike over the next six months

1) Higher interest rates: Since March 2010, The Reserve Bank of India has raised interest rates 10 times resulting in the repo rate increasing by 275bps. With inflation not expected to cool off anytime soon, we expect another 50bps hike over the next six months. 2) Slowdown in infrastructure activity: A prominent slowdown is being witnessed in infrastructure activity, especially so in building of roads and real estate construction. One of the key reasons for the slowdown is the lack of finance availability. Considering the liquidity situation and interest rate scenario, we believe a meaningful recovery will take some time. 3) Weak industrial production: Rising interest rates and inflation have weakened the aggregate demand in the economy. We believe the trend will continue in the near term. 4) Hike in diesel prices: The government has raised the prices of diesel by Rs3/litre. This move is expected to further worsen the economic viability for CV fleet operators. Based on the above mentioned factors, we believe that domestic commercial vehicle business will see a marked slowdown in FY12 as compared to FY11. BFL derives about 11% of its consolidated revenues from the domestic CV market. The company expects about 10% growth in its domestic CV market. With 70% of the passenger car volumes also based on finance, higher interest rates would cause the growth in passenger car sales to slowdown. Higher petrol prices is among the other key headwinds. BFL derives about 9% of its consolidated revenues from the domestic passenger car market. Trend in domestic passenger car volume growth
35% 30% 25% 20% 15% 10% 5% 0% FY12E FY12E

Lack of finance availability will keep infrastructure activity muted

Higher interest rates and inflation has impacted aggregate demand in the economy Hike in diesel prices will worsen economic viability for fleet operators

The company expects 10% growth in CV market in FY12

Passenger car volumes to be impacted by higher interest rates and petrol prices

Trend in domestic CV volume growth

50% 40% 30% 20% 10% 0% -10% -20% -30% FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

Source: SIAM, Crisil, India Infoline Research

Company Report

FY11

Bharat Forge

In its latest update on World Economic Outlook, IMF has upgraded its CY11 GDP growth estimate for Euro Area from 1.6% to 2%

European automotive volumes recovering from the lows Following the financial distress of 2008, CV sales in Europe witnessed a marked slowdown with annual volumes declining by 10% in CY08 and 21% in CY09. During CY10, the volumes rose by 4% but remained way below the historical levels. During Jan-April 2011, CV volumes rose 8% on yoy basis. Correlation between European GDP growth and CV volume growth is as high as 84%. In its latest update on World Economic Outlook, IMF has upgraded its CY11 GDP growth estimate for Euro Area from 1.6% to 2%. This would translate into sustained volume growth momentum for CVs resulting in robust business opportunity for BFL as it derives 17% of its consolidated revenues from the European CV market. European passenger car market, after witnessing a fall of 7% in CY08, recovered partially in CY09 with a 3% growth (led by incentives offered by the governments). However, in CY10 the volumes fell 8%. Since then the volumes have stabilized and for 5m CY11, volumes remained flat. In fact, for May 2011 the volumes were higher by 8% on a yoy basis. If the recovery sustains, BFL European revenues would gain additional traction as it derives 13% of its consolidated revenues from the European passenger car market. Amongst European markets, the company garners maximum portion of its revenues from Germany and Sweden. These two economies have been relatively unscathed amidst the current debt turmoil in the European region.

Trend in European LCV volumes

160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 -10% -20% -30% -40% LCV Volume Nos yoy grow th 30% 20% 10% 0%

Trend in European M&HCV volumes

40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Jul-06 Jul-07 Jul-08 Jul-09 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jul-10 Jan-11 40% 30% 20% 10% 0% -10% -20% -30% Jul-06 Jul-07 Jul-08 Jul-09 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jul-10 Jan-11 M&HCV Vol Nos yoy grow th 100% 80% 60% 40% 20% 0% -20% -40% -60%

Source: Bloomberg, India Infoline Research

Correlation between Euro GDP and CV vol

GDP grow th (LHS) 5 4 3 2 1 (1) (2) (3) (4) (5) (6) Q1 CY04 Q3 CY04 Q1 CY05 Q3 CY05 Q1 CY06 Q3 CY06 Q1 CY07 Q3 CY07 Q1 CY08 Q3 CY08 Q1 CY09 Q3 CY09 Q1 CY10 Q3 CY10 Q1 CY11 (%) CV Vol grow th (RHS) (%) 20 15 10 5 (5) (10) (15) (20) (25) (30)

Trend in European passenger car volumes

1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 Pass Car vol Nos yoy grow th

Source: Bloomberg, India Infoline Research

Company Report

Bharat Forge

Ageing of CV fleet to cause sustained demand recovery in US Following sharp declines of 25% and 22% in CY08 and CY09 respectively, US CV market recovered with a 19% growth in CY10. The trajectory was maintained in 5m CY11 with a 15% growth. This has been driven by the need to replace the aging fleet profile with more modern and fuel efficient vehicles. The manufacturing data in the recent past has also shown a marked recovery. We believe the momentum would continue causing a strong revenue growth for BFL. Extract from press release of ACT Research dated June 14, 2011
ACT Research is a leading publisher of new and used commercial vehicle (CV) industry data, market analysis and forecasting services for the North American market, as well as the U.S. tractor-trailer market and the China CV market.

The June release of the ACT North American Commercial Vehicle OUTLOOK reflects solid commercial vehicle demand through 2011 and well into 2012

Despite some recent easing in freight growth and a softening in the path of the U.S. economy, demand for commercial vehicles continues to be strong. Widespread strength was apparent across all segments of the commercial vehicle market, according to the most recent data reported by ACT Research Co. (ACT). The June release of the ACT North American Commercial Vehicle OUTLOOK reflects solid commercial vehicle demand through 2011 and well into 2012; this demand reflects pent-up replacement needs and improved financial performance at the fleets, supported by improved credit availability for well-qualified customers. While we have reduced our expectations for US economic growth somewhat, we still expect the overall economy to progress close to trend over during 2011 and into 2012, stated Sam Kahan, ACTs chief economist. There might be a soft patch in freight over the next month or two, but demand for Class 8 trucks continues to be strong. We feel that the industrys ability to build might actually be a volume constraint in 2011, added Kahan.

Correlation between US GDP and CV vol

5 4 3 2 1 (1) (2) (3) (4) (5) Q1 CY01 Q3 CY01 Q1 CY02 Q3 CY02 Q1 CY03 Q3 CY03 Q1 CY04 Q3 CY04 Q1 CY05 Q3 CY05 Q1 CY06 Q3 CY06 Q1 CY07 Q3 CY07 Q1 CY08 Q3 CY08 Q1 CY09 Q3 CY09 Q1 CY10 Q3 CY10 Q1 CY11 US GDP grow th (LHS) (%) US CV vol grow th (RHS) (%) 30 20 10 (10) (20) (30) (40) (50)

Trend in US total CV volumes

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Jul-06 Jul-07 Jul-08 Jul-09 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jul-10 Jan-11 Nos Total CV vol yoy grow th 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50%

Source: Bloomberg, India Infoline Research

Company Report

Bharat Forge

BFL is investing Rs3bn to increase forging capacity by 15% and machining capacity by 35%

Expanding capacity in the domestic market BFL is currently operating at 75% utilization rate at its domestic plants catering to automotive sector. A 10% growth in FY12 would mean near peak utilization levels. Hence, BFL is investing Rs3bn in raising its capacities through by setting up a heavy press line which will increase capacity and simultaneously improve productivity by de-bottlenecking existing lines. This would lead to 15% increase in forging capacity and 35% higher machining capacity. Forging capacity is being increased at Mundra plant, while machining capacity would be added at both Mundra and Baramati plants. The expanded capacity would be available within a 2-year timeframe. The non-automotive plants are currently operating at 50% utilization levels, while the international subsidiaries are operating at about 60% utilization levels. With enough headroom for growth in production, no major incremental investments are required in these segments in the near term. Revenue growth to be driven by international automotive and domestic non-automotive segments During FY11-13E, we expect BFL to report a revenue CAGR of 15.8%. The growth would be driven by 16.4% CAGR in standalone revenues and 15% CAGR in subsidiary revenues. Surge in standalone revenues will be on the back of strong traction in the non-automotive revenues in the domestic market and near 20% CAGR in exports. The nonautomotive business currently accounts for 37% of the standalone revenues and 25% of the consolidated revenues. We expect this to increase to close to 50% in the next few years. Trend in standalone revenues
Revenues yoy grow th 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% FY12E FY13E FY06 FY07 FY08 FY09 FY10 FY11

Strong growth in domestic non-auto business and international auto volumes to drive revenue growth

Trend in consolidated revenues

Revenues 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 FY12E FY13E FY06 FY07 FY08 FY09 FY10 FY11 Rs mn yoy grow th 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40%

45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 -

Rs mn

Source: Company, India Infoline Research

Trend in non auto revenues

12,000 10,000 8,000 6,000 4,000 2,000 FY06 FY07 FY08 FY09 FY10 FY11 Rs mn

Source: Company, India Infoline Research

Company Report

Bharat Forge

Improvement in international subsidiaries performance to result in OPM increase

Operating margins to remain resilient We expect operating margins for the standalone entity to remain at the current levels as better margins in the non-automotive space will be offset by some pressures in the automotive space. On the consolidated level though, we expect a 190bps jump in OPM as increased utilization at international subsidiaries (which achieved break-even in FY11) would translate into benefits of operating leverage. Trend in consolidated OPM
30 % 25 20 15 10 5 FY12E 18x 15x 12x 9x 6x Mar-11 FY13E Mar-12 FY05 FY06 FY07 FY08 FY09 FY10 Mar-09 FY11 Mar-10

Company, India Infoline Research

Considering a PAT CAGR of 42% during FY11-13E, we find the valuations reasonable at 7x FY13E EV/EBIDTA

Valuations at reasonable levels BFL currently trades at EV/EBIDTA of 7x on FY13E EBIDTA. Valuations are currently at lowest levels in the recent past. Over the past six months, the stock has corrected by 28% due to slowdown in domestic CV sales and widening impact of European debt crisis. As mentioned above, we believe the European CV volume growth trajectory would remain strong, while domestic automotive business impact would be more than offset by the surge in non-automotive revenues. Considering a PAT CAGR of 42% during FY11-13E, we find the current valuations reasonable and recommend BUY with a 9-month price target of Rs353 (EV/EBIDTA of 8x on FY13E EBIDTA). 1-year forward EV/EBIDTA band
900 800 700 600 500 400 300 200 100 0 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Rs

Source: Company, Bloomberg, India Infoline Research

Concerns Slower than anticipated growth in the domestic CV market

Delay in setting up of new power capacities Wider than expected impact of the current European debt crisis 8

Company Report

Bharat Forge

Company background Bharat Forge Ltd, the flagship company of the US$2.4bn Kalyani Group, is a leading global supplier of forged and machined - engine & chassis components. It is the largest exporter of auto components from India and leading chassis component manufacturer in the world. With manufacturing facilities spread across 12 locations and 6 countries - four in India, three in Germany, one each in Sweden, Scotland, USA and two in China, the company manufactures a wide range of safety and critical components for 4-Ws, SUVs, light, medium & heavy CVs, tractors and diesel engines. The company also manufactures specialized components for the aerospace, power, energy, oil & gas, rail & marine, mining & construction equipment, and other industries. It is capable of producing complex large volume parts in both steel and aluminium. BFLs facilities include, fully automated forging and machining lines, the largest of its kind and comparable to the best in the industry. It has built up a strong capability in design and engineering, including a full fledged product testing and validation facility, which gives Bharat Forge a Full Service Supply Capability - from product conceptualization to designing to manufacturing and product testing and validation. Its customer base includes virtually every global automotive OEM and tier-I supplier. Daimler Chrysler, Toyota, BMW, General Motors, Volkswagen, Audi, Renault, Ford, Volvo, Caterpillar - Perkins, Iveco, Arvin Meritor, Detroit Diesel, Cummins, Dana Corporation, Honda, Scania and several others source their complex forging requirements including machined crankshafts, front axle beams and steering knuckles from Bharat Forge. Key milestones
Year 1961 1962 1966 1972 1984 1985 1986 1990-91 1991 1993 1996 1999 2000 2004 2005 2005 2005 2006 2007 2008 2009 2011 Milestone Incorporation Technical agreement with SIFCO, USA for hammer forging technology Start of hammer shop commercial production Execution of maiden export order to Greece Technical agreement with Tokyo Drop Forge, Japan Entry in the erstwhile USSR market Technical agreement with Jidosha Buhin Kogyo, Japan Major breakthrough in the developed markets of Japan, USA and UK Implementation of US$50mn forging facility up-gradation programme ISO 9002 accreditation Technical agreement with Metalart Corporation, Japan QS 9000 accreditation Implementation of US$30mn forging facility expansion programme Acquired Carl Dan Peddinghaus GmbH & Co. KG Acquired Federal Forge Acquired Imatra Kilsta, AB, Sweden along with its wholly owned subsidiary Scottish Stampings Signed a JV with FAW Corporation Joined hands with Government of Maharashtra to set up a multi-product SEZ in Pune District Centre for Advanced Manufacturing takes shape in Baramati Bharat Forge signed a MOU with NTPC BFL and AREVA sign MoU for Manufacture of Heavy Forgings in India BFL enters into a JV with David Brown Group, UK for gear box manufacturing

Source: Company

Company Report

Bharat Forge

Financials
Income statement
Y/e 31 Mar (Rs m) Revenue Operating profit Depreciation Interest expense Other income Profit before tax Taxes Minorities and other Adj. profit Exceptional items Net profit FY10 33,276 3,385 (2,451) (1,303) 511 142 (119) 130 153 (787) (634) FY11E 50,873 7,851 (2,548) (1,529) 672 4,445 (1,402) (67) 2,976 (77) 2,899 FY12E 60,082 10,407 (2,819) (1,179) 650 7,059 (2,155) 176 5,080 5,080 FY13E 68,233 11,793 (2,999) (1,179) 650 8,265 (2,602) 176 5,839 5,839

Key ratios
Y/e 31 Mar Growth matrix (%) Revenue growth Op profit growth EBIT growth Net profit growth Profitability ratios (%) OPM EBIT margin Net profit margin RoCE RoNW RoA Per share ratios EPS Dividend per share Cash EPS Book value per share Valuation ratios P/E P/CEPS P/BV EV/EBIDTA Payout (%) Dividend payout Tax payout Liquidity ratios Debtor days Inventory days Creditor days Leverage ratios Interest coverage Net debt / equity Net debt / op. profit FY10 (30.3) (19.4) (39.0) FY11E 52.9 131.9 313.5 FY12E 18.1 32.6 37.9 75.2 FY13E 13.6 13.3 14.6 14.9

Balance sheet
Y/e 31 Mar (Rs m) Equity capital Reserves Net worth Minority interest Debt Def tax liab (net) Total liabilities Fixed assets Investments Net working cap Inventories Sundry debtors Other curr assets Sundry creditors Other curr liabilities Cash Total assets FY10 445 14,185 14,630 783 22,527 971 38,911 26,060 2,737 4,132 6,575 5,044 6,576 (11,164) (2,898) 5,981 38,911 FY11E 466 19,064 19,529 1,542 18,950 1,321 41,342 27,662 3,668 6,868 8,115 7,539 9,289 (13,369) (4,706) 3,143 41,342 FY12E 466 24,144 24,610 1,742 14,734 1,321 42,406 27,856 3,668 7,056 9,547 8,889 9,578 (15,802) (5,156) 3,827 42,406 FY13E 466 25,283 25,749 1,942 14,734 1,321 43,745 29,941 3,668 7,663 10,843 10,095 10,278 (17,946) (5,606) 2,473 43,745

10.2 4.3 0.5 3.6 1.0 0.3

15.4 11.7 5.9 14.9 17.4 5.3

17.3 13.7 8.5 19.7 23.0 8.3

17.3 13.8 8.6 21.9 23.2 8.9

0.7 1.0 11.7 65.7

12.8 3.5 23.7 83.9

21.8 3.5 33.9 105.7

25.1 3.5 38.0 110.6

436.4 25.7 4.6 24.6

23.5 12.6 3.6 10.9

13.8 8.8 2.8 7.8

12.0 7.9 2.7 7.0

152.1 83.9

27.4 31.5

16.0 30.5

14.0 31.5

Cash flow statement

Y/e 31 Mar (Rs m) Profit before tax Depreciation Tax paid Working capital Operating cashflow Capital expenditure Free cash flow Equity raised Investments Debt raised/paid Dividends paid Other items Net in cash FY10 142 2,451 (119) 4,220 6,694 (616) 6,078 (938) (2,735) 618 (233) (1,700) 1,091 FY11E 4,445 2,548 (1,402) (2,736) 2,856 (4,150) (1,294) 2,815 (931) (3,577) (815) 965 (2,838) FY12E 7,059 2,819 (2,155) (188) 7,536 (3,013) 4,523 815 (4,216) (815) 376 683 FY13E 8,265 2,999 (2,602) (607) 8,055 (5,085) 2,970 (3,885) (815) 376 (1,353)

55 72 122

54 58 96

54 58 96

54 58 96

1.1 1.1 4.9

3.9 0.8 2.0

7.0 0.4 1.0

8.0 0.5 1.0

Du-Pont Analysis
Y/e 31 Mar (Rs m) Tax burden (x) Interest burden (x) EBIT margin (x) Asset turnover (x) Financial leverage (x) RoE (%) FY10 1.08 0.10 0.04 0.63 3.42 1.0 FY11E 0.67 0.74 0.12 0.91 3.29 17.4 FY12E 0.72 0.86 0.14 0.98 2.78 23.0 FY13E 0.71 0.88 0.14 1.04 2.59 23.2

Company Report

10

Recommendation parameters for fundamental reports: Buy Absolute return of over +10% Market Performer Absolute return between -10% to +10% Sell Absolute return below -10%

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