IEA Report

3rd Feb 2017

GODREJCP "BUY" 3rd Feb 2017
Company's resilient performance in spite of tough demand scenario and company thrust of innovation gives us confidence about better growth
going forward. Although Indonesian business was subdued in this quarter but company has improved Market share in home insecticide (HI)
segment and grew double digit in non HI. Management sees better traction from Indonesian business next year. Going forward, managements
initiatives for expanding direct reach will only strengthen brand further and improve Market share in less penetrated market. Management
indicated that there is more headroom of margin improvement from international market in medium to long term is also positive for the company.
Considering strong innovation pipeline, companys thrust on EBITDA growth better than sales growth and expectation of improvement in
international business, we still hold positive view on GODREJCP and recommend BUY with a target price of Rs 1760. ............................................(
Page : 2-4)

MARUTI "BUY" 3rd Feb 2017

We expect capacity expansion in Gujarat, stability in Japanese Yen, increasing finance penetration and new model launches can pave the way of
future growth prospects for Maruti. Higher sales of premium segment cars will further increase the realization per car, which will in turn maintain
the margins going ahead despite the rising commodity prices. We expect ROE to improve by 370 bps to 21% in FY17. Earlier we recommended this
stock at Rs.5466 for a target price of Rs.6100 and the stock has achieved the target. But we still see a lot of potential going ahead and maintain our
rating as 'BUY' and upgrade our target price to Rs.6450. ................................... ( Page : 5-7)

EICHERMOT "BUY" 2nd Feb 2017

Going forward, capacity addition in line with demand(RE), seventh pay commission payout, expectation of pre-buying on new emission norms,
improving infrastructure activities in the country and expanding footprints in the international markets will lead to higher volumes and margins for
the company. We expect Eicher Motors to report 35% RoE in FY17E. Considering the strong order book in the Royal Enfield and better traction
from commercial vehicle business, we recommend 'BUY' and upgrade our target price to Rs.26600 from our previous target price of Rs.26000.
................................................... ( PAGE : 8-10)

VGUARD "Neutral" 2nd Feb 2017

Demonetization had some impact on some product segment and sales growth of some of the products had come down from earlier quarters. Sales
in Tamil Nadu Region were affected due to the socioeconomic situation prevalent in the State and because of cyclone affecting many parts of
Chennai and suburban areas. But as per the management the business outlook remains positive considering upcoming summer season. We have
positive view on this stock in long term but considering demonetization impact and high valuation we maintain "NEUTRAL" rating on this stock.
............................................. ( Page : 11-14)

KEC "BUY" 1th Feb 2017

Revenue growth during the 9 months was in turmoil due to lower commodity price and demonetization. But the operating margin continuous to
accretive during the period. We expect 5% and 15% revenue growth in FY17E and FY18E based on the strong traction in Transmission and railway
business with strong operating margin. We anticipate boost in the bottom line on account of strong AR collection which will result into lower
interest cost going ahead. At current price of Rs. 148 stock is trading at 2.2x P/B and 5.8X of EV/EBITDA. Considering the strong operating margin
and healthy order book we are bullish on the stock. Hence, we upgrade our target price to Rs. 185 from Rs.165 and recommend to BUY.
....................................... ( Page : 15-20)

IOC "HOLD" 1th Feb 2017

Indian Oil Corporation has equipped with BS VI standard HSD and BS VI standard motor spirit and by October 2017, a new unit will go on stream at
the refinery, where only BS VI standard HSD and high quality motor spirit will be produced on a mass scale. This will help the company to provide
fuel to the nation as per the fuel standards provided by the government. In the month of December 2016, the International crude oil prices have
soared up which is offset by increasing the realization of petroleum products. Despite short term uncertainties, we are optimistic in the long term.
Considering above arguments we recommend HOLD rating in this stock while maintaining the previous target price of Rs. 410 .
..................................................... ( Page : 21-23)

Narnolia Securities Ltd IEA Edition No.- 946

 BUY
GODREJ CONSUMER PRODUCTS LTD 3rd Feb. 2017

Company Update Gross Margin expanded, improvement in India business

CMP 1596 GODREJCPs result for Q3FY17 was largely in line with our estimate
Target Price 1760 considering demonetization impact. Major positive for this quarter remained
improvement in gross margin of the company. Overall Gross margin for this
Previous Target Price 1760
quarter improved by 88 bps to 57.5%led by improvement in domestic
Upside 10% business Gross margin. Domestic business gross margin expanded by 150
Change from Previous NA bps led by of lower consumer offers, price initiatives taken in home
insecticide (HI) segment (in Q2 FY17) and different cost efficiency
Market Data measures. Overall sales grew by 9% YoY to Rs 2486 cr. EBITDA
expanded by 14% YoY to Rs 517 cr. Adj. PAT for this quarter grew by
BSE Code 532424 approx. 5% to Rs 349 cr. GODREJCP witnessed improvement in sales in
NSE Symbol GODREJCP the month of Oct but after demonetization sales declined for few weeks in
52wk Range H/L 1710/1138 Nov due to lower wholesale activities. Now company is witnessing recovery
Mkt Capital (Rs Cr) 54,401 in demand and confident of better growth going forward.
Av. Volume(,000) 200
Nifty 8,745 International Business
Indonesian business posted flat YoY constant currency (CC) growth for
Stock Performance Q3FY17. HI growth impacted due to seasonality and relatively higher
1M 3M 12M competitive intensity. Africa business (including Strength of Nature)
delivered a strong CC growth of 54% with temporary decline of 160 bps
Absolute 5.5 1.4 30.3
margin driven by currency depreciation. For Latin American business, CC
Rel.to Nifty -1.2 0.1 14.8 growth remained robust 24%. Europe business delivered strong CC growth
of 16% in Q3FY17.
Share Holding Pattern-% Outlook and Valuation
3QFY17 2QFY17 1QFY17 Company's resilient performance in spite of tough demand scenario and
Promoters 63.3 63.3 63.3 company thrust of innovation gives us confidence about better growth going
forward. Although Indonesian business was subdued in this quarter but
Public 36.7 36.7 36.7
company has improved Market share in home insecticide (HI) segment and
Others -- -- -- grew double digit in non HI. Management sees better traction from
Total 100 100 100 Indonesian business next year. Going forward, managements initiatives for
expanding direct reach will only strengthen brand further and improve Market
share in less penetrated market. Management indicated that there is more
Company Vs NIFTY headroom of margin improvement from international market in medium to
150 GODREJCP NIFTY long term is also positive for the company. Considering strong innovation
140 pipeline, companys thrust on EBITDA growth better than sales growth and
expectation of improvement in international business, we still hold positive
130
view on GODREJCP and recommend BUY with a target price of Rs 1760.
120
110 Rs,Cr
100 Financials 3QFY17 2QFY17 (QoQ)-% 3QFY16 (YoY)-%
90 Sales 2486 2439 2% 2286 9%
80 EBITDA 517 466 11% 455 14%
Net Profit 352 318 11% 368 -4%
EBITDA% 21% 19% 169 Bps 20% 91 Bps
Rajeev Anand PAT% 14% 13% 111 Bps 16% (194 Bps)
rajeev.anand@narnolia.com
Narnolia Securities Ltd 2
Please refer to the Disclaimers at the end of this Report
 Concall Highlights(Q3FY17)
Positive growth in Dec and build momentum from here. Confident to outpace industry growth going forward.
Indonesian business: Management is hopeful for better growth from Indonesia next year.
African business grew by double digit. Facing headwind in terms of currency devaluation in Nigeria. Management is planning to
localize production facility in CY17.
Management is confident of EBITDA growth ahead of the sales growth.
After demonetization, recovery is much faster than what was expected. It will be back to normal in couple of months.
A&P Expenses will be in the range of 11% of the sales.
Modern Trade (MT) grew by 33% in this quarter.
Going forward, the company will maintain innovation, launch new products, intensify introduction on LUP(Lower Unit Pack),
expand direct reach and work for brand building.
Soap volume growth will be better in Q4FY17 than Q3FY17.
Major Margin Drivers GCPL: Product portfolio, Launch of premium products and cost cutting measure.
International Business( Volume growth): Indonesia(3.5%), Africa( early double digit),Latin America (dip ),Europe( early double
digit). Approx. 66% of growth from International business came by volume.
Gained market share in Cinthol.

Net Sales and PAT(in cr.)

3000 400
Sales(in cr) 368 PAT(in cr)
352350
2500
310 318
290 300
2000 277
252 244 250
222
1500 200
157 150
1000
117
100
500
1889

2060

2236

2092

1988

2197

2286

2269

2123

2439

2486

50

0 0

EBITDA and NPM (%)

25% EBITDA Margin% PAT Margin%
20.8%
19.9% 19.8%
19% 19% 19.1%
20% 18% 17.9%
16% 16% 16%
14% 14%
15% 13% 13% 13% 13%
12%
12%
10%
10% 8%
6%
5%

0%
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

Narnolia Securities Ltd 3

Please refer to the Disclaimers at the end of this Report

 Financials Snap Shot
INCOME STATEMENT RATIOS
FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Revenue 7602 8276 8968 9610 EPS 22.3 26.6 32.9 38.5
Other Income 63 92 67 66 Book Value 110.9 126.6 149.7 179.7
Total Revenue 7665 8368 9035 9675 DPS 5.8 6.2 6.9 7.2
COGS 3555 3842 3846 4194 Payout (incl. Div. Tax.) 26% 23% 21% 19%
GPM 53.2% 53.6% 57.1% 56.4% Valuation(x)
Other Expenses 2149 2293 2523 2520 P/E 38 30 44 38
EBITDA 1150 1365 1639 1894 Price / Book Value 7.7 6.4 9.7 8.1
EBITDA Margin (%) 15.1% 16.5% 18.3% 19.7% Dividend Yield (%) 0.7% 0.8% 0.5% 0.5%
Depreciation 82 91 103 139 Profitability Ratios
EBIT 1068 1275 1536 1755 RoE 20.1% 21.0% 22.0% 21.4%
Interest 107 100 100 141 RoCE 19.9% 20.1% 20.4% 17.0%
PBT 1024 1266 1503 1679 Turnover Ratios
Tax 210 272 317 370 Asset Turnover (x) 0.9 0.9 0.9 0.7
Tax Rate (%) 20.5% 21.5% 21.1% 22.0% Debtors (No. of Days) 34 35 46 52
Reported PAT 760 907 1119 1311 Inventory (No. of Days) 111 102 124 130
Dividend Paid 199 211 235 245 Creditors (No. of Days) 59 48 42 42
No. of Shares 34 34 34 34 Net Debt/Equity (x) 0.4 0.5 0.5 0.7

BALANCE SHEET CASH FLOW STATEMENT

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Share Capital 34 34 34 34 OP/(Loss) before Tax 1,024 1,266 1,503 1,680
Reserves 3741 4277 5064 6083 Depreciation 82 91 103 139
Net Worth 3775 4311 5098 6117 Direct Taxes Paid (238) (257) (336) (370)
Long term Debt 1590 2023 2449 4227 O.Profit. befor WC changes 1,162 1,400 1,678 1,960
Short term Debt 111 147 182 207 CF from Op. Activity 1,129 1,005 839 1,179
Deferred Tax 5 3 2 2 Non Current investments 34 34 34 34
Total Capital Employed 5366 6334 7547 10344 Capex (133) (190) (208) (2,109)
Net Fixed Assets 1736 1732 1780 3750 CF from Inv. Activity (495) (1,214) (495) (2,410)
Capital WIP 167 225 41 0 Repaym. of LT Borrowings
Debtors 711 805 1118 1356 Interest Paid (113) (119) (119) (141)
Cash & Bank Balances 705 894 746 931 Divd Paid (incl Tax) (199) (211) (225) (245)
Trade payables 1234 1087 1037 1106 CF from Fin. Activity (633) (12) (187) 1,416
Total Provisions 80 124 100 115 Inc/(Dec) in Cash 1 (221) 157 185
Net Current Assets 652 230 624 1244 Add: Opening Balance 624 625 404 746
Total Assets 8325 9142 10153 13059 Closing Balance 625 404 561 931

Narnolia Securities Ltd 4

Please refer to the Disclaimers at the end of this Report
 BUY
MARUTI SUZUKI INDIA LIMITED 2-Feb-17

Result Update
Premiumisation led to double digit revenue growth
CMP 6144
Target Price 6450 Maruti once again reported a strong quarterly performance. Net revenue
Previous Target Price 6100 stood at Rs.16865 crore with a growth of 12% YoY. Domestic volumes grew
Upside 5% by 4%YoY on account of higher sales of premium segment cars (Baleno
Change from Previous - and Brezza) despite the demonetisation issue during the quarter. Exports
have shown 1% of de-growth YoY primarily led by currency issue in various
countries and higher import duty imposition by Sri-Lankan government on
Market Data 800-1000 cc cars. Realization improved by 8.5%YoY on account of better
BSE Code 532500 product mix and price increase during the quarter. Management has stated
NSE Symbol that the first phase of the Gujarat plant will begin its commercial production
MARUTI
in February 2017 and this plant will take care of new models and the
52wk Range H/L 6195/3202 exports. There will be some cost pressure going ahead due to higher
Mkt Capital (Rs Cr) 185624 depreciation and fixed cost on new plant, but we expect that higher volumes
Av. Volume 54630 will protect the margins.
Nifty 8,734
Robust volume growth in tough environment
Stock Performance
1Month 3Month 1Year Maruti Suzuki clocked 27%YoY sales growth to 144396 units in January
2017. Mini segment reported a growth of 11%YoY which was under stress
Absolute 11.5 5.8 58.5 due to demonetisation issue. Compact segment posted 25%YoY growth on
Rel.to Nifty 4.9 2.9 41.4 account of higher sales of Baleno, which enjoys a waiting period of 24
weeks. Utility vehicle space posted robust 101%YoY growth because of
Share Holding Pattern-% higher sales of Brezza and Ertiga models. Brezza has a waiting period 18
weeks. Exports also grew by 45%YoY on account of increased likeliness of
3QFY17 2QFY17 1QFY17
Wagon R, Celerio and Baleno in export markets.
Promoter 56.2 56.2 56.2
Public 43.8 43.8 43.8
Outlook
Others -- -- --
Total 100.0 100.0 100.0 We expect capacity expansion in Gujarat, stability in Japanese Yen,
increasing finance penetration and new model launches can pave the way
of future growth prospects for Maruti. Higher sales of premium segment cars
Company Vs NIFTY
will further increase the realization per car, which will in turn maintain the
150 MARUTI NIFTY margins going ahead despite the rising commodity prices. We expect ROE
140 to improve by 370 bps to 21% in FY17. Earlier we recommended this stock
at Rs.5466 for a target price of Rs.6100 and the stock has achieved the
130
target. But we still see a lot of potential going ahead and maintain our rating
120 as 'BUY' and upgrade our target price to Rs.6450.
Rs. In crore
110

100
Financials 3QFY17 2QFY17 3QFY16 QoQ YoY

90
Sales 16865 17843 15013 -5% 12%
EBITDA 2489 3037 2145 -18% 16%
80
Net Profit 1745 2398 1183 -27% 47%
Jul-16
Feb-16

Sep-16
Jan-16

Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16
Mar-16

EBIDTA% 14.8% 17.0% 14.3%

Naveen Kumar Dubey PAT % 10.3% 13.4% 7.9%
naveen.dubey@narnolia.com
Narnolia Securities Ltd 5

Please refer to the Disclaimers at the end of this Report

 MARUTI
Investment Arguments
Segment focused launches to propel demand- In the recent past a series of new product launches have been successful for
the company. It was a strategic decision to enter in those segments where it has very few or no products. The same way the
company is planning to launch 15 new products till 2020.
Unleashing the potential in the international business- Maruti is onset to unleash the potential in the international business
by targeting European and Latin American markets. Recently launched and upcoming new products are technologically sound
and competent to the export markets.
Gujarat plant to deliver high margin products- It will begin its commercial production in 4QFY17 and this plant will take care
of new models and the exports. It will take 6 months to ramp up the production and there will be some cost pressure going ahead
due to higher depreciation and fixed cost on new plant.
Reducing dependency on Yen to improve profitability- Maruti is also aggressively working towards bringing down the import
content in its cars from an average 16% at the end of FY16 to 10% as part of its vision 2.0 plan. Currently about 14 percent of
imports are yen denominated. Management expects to bring it down to 5 percent and typically, 1% movement in yen leads to
around 1% change in the operating profit of Maruti.

Management Highlights
Lower double digit growth guidance for FY17 due to current demonetisation issue. 25% decline in retail sales in rural areas and
25% enquiries have been impacted in urban areas.
Maximum impact on taxi part, specially Ola and Uber. They contributes to 30% of the volumes.
Export may remain flat in FY17
Management expects 50000 Baleno's to be exported to Japan. Apart from Japan, the vehicle is being exported to Europe,
Australia, New Zealand and Latin America.
Maruti's newly launched light commercial vehicle, Super Carry, is also exported to South Africa and Tanzania and will be
exported to SAARC countries in the future.
Gujarat plant will be commissioning in Q4FY17. Management expects it will take 6 months to ramp up.
Steel prices have started going up and some of its impact can be seen in 4QFY17.
Margins can come under pressure once the Gujarat plant becomes operational due to higher fixed cost and depreciation.
Capex- Rs.3500 crore, large chunk of it would be for new model and rest would be for R&D and maintenance of old plants.
Royalty rate for the quarter stood at 5.5%.
The waiting period for Brezza is 18 weeks and for Baleno 24 weeks. Maruti has increased the production for Baleno by 25% to
meet customer requirements.Ignis has also waiting period of 8-10 weeks.
The company has 15 new models in the pipeline, which will come out by 2020.

Volumes Trend

Volume Volume Growth

450,000 17% 18% 20%
400,000 16% 18%
350,000 14% 16%
12% 14%
300,000 13%
10% 12%
418,470

250,000
360402

387251
374182

10%
353335

348443
341329
323,911
321,898

200,000 7%
299,894

8%
150,000 6%
4%
346712

3%
100,000 2% 4%
50,000 2%
- 0%

Narnolia Securities Ltd 6

Please refer to the Disclaimers at the end of this Report

 MARUTI

Financials Snap Shot

INCOME STATEMENT RATIOS
FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Net Revenue 44,451 50,801 58,612 66,012 EPS 94 126 156 224
Other Income 831 865 472 2,241 Book Value 712 805 919 1,086
Total Revenue 45,281 51,666 59,084 68,253 DPS 14.0 29.3 41.0 55.5
COGS 31,853 35,615 39,318 44,931 Payout (incl. Div. Tax.) 15% 23% 26% 25%
GPM 28% 30% 33% 32% Valuation(x)
Other Expenses 5,970 6,741 8,115 8,521 P/E 24.0 29.3 23.9 26.6
EBITDA 5,204 6,844 9,119 10,177 Price / Book Value 3.2 4.6 4.0 5.5
EBITDA Margin (%) 12% 13% 16% 15% Dividend Yield (%) 0.62% 0.79% 1.10% 0.93%
Depreciation 2,116 2,515 2,867 2,972 Profitability Ratios
EBIT 3,088 4,329 6,252 7,205 RoE 13% 16% 17% 21%
Interest 185 218 94 67 RoCE 14% 18% 22% 22%
PBT 3,734 4,976 6,630 9,379 Turnover Ratios
Tax 902 1,185 1,999 2,682 Asset Turnover (x) 1.4 1.5 1.5 1.4
Tax Rate (%) 24% 24% 30% 29% Debtors (No. of Days) 12.2 8.2 8.6 9.7
Reported PAT 2,855 3,807 4,699 6,766 Inventory (No. of Days) 20.2 27.4 29.7 25.8
Dividend Paid 424 884 1,237 1,676 Creditors (No. of Days) 41.1 40.6 44.4 42.5
No. of Shares 30 30 30 30 Net Debt/Equity (x) 0.0 0.0 0.0 0.0

BALANCE SHEET CASH FLOW STATEMENT

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Share Capital 151 151 151 151 OP/(Loss) before Tax 3,734 4,976 6,630 9,379
Reserves 21,345 24,167 27,598 32,640 Depreciation 2,116 2,515 2,867 2,972
Net Worth 21,496 24,318 27,749 32,791 Direct Taxes Paid (858) (1,075) (1,948) (2,682)
Long term Debt 627 278 147 118 OP before WC changes 5,111 6,779 9,089 12,488
Short term Debt 1,238 53 91 102 CF from Op. Activity 4,995 6,539 8,584 10,365
Deferred Tax 596 484 475 475 Purchase of investments (13,100) (17,354) (12,189) (437)
Total Capital Employed 22,124 24,597 27,896 32,909 Capex (3,545) (3,279) (2,443) (8,526)
Net Fixed Assets 13,673 14,380 13,989 19,543 CF from Inv. Activity (4,997) (4,581) (7,319) (5,545)
Capital WIP 2,640 1,890 1,013 1,013 Repayment of Borrowings (22) (211) (292) (29)
Debtors 1,489 1,144 1,387 1,754 Interest Paid (170) (222) (104) (67)
Cash & Bank Balances 649 43 77 3,041 Divd Paid (incl Tax) (283) (424) (909) (1,724)
Trade payables 5,000 5,657 7,127 7,689 CF from Fin. Activity (74) (2,004) (1,239) (1,809)
Total Provisions 873 1,652 2,137 1,959 Inc/(Dec) in Cash (76) (45) 26 3,010
Net Current Assets 7,561 (234) (3,965) (1,094) Add: Opening Balance 165 89 43 77
Total Assets 31,411 34,479 40,270 46,674 Closing Balance 89 43 69 3,087

Narnolia Securities Ltd 7

Please refer to the Disclaimers at the end of this Report

 BUY
Eicher Motors Limited 2-Feb-17

Result Update .
Strong growth momentum maintained
CMP 24007
Target Price 26600 Eicher Motors net sales surged by 43%YoY to Rs.1835 crore in 3QFY17.
Previous Target Price 26000 Domestic two wheeler volumes grew by 37%YoY and Exports grew by
163% YoY owing to the huge demand from Bangkok and Jakarta. The
Upside 11%
demand for Royal Enfield motorcycles remain robust despite the
Change from Previous - demonetisation issue in the country during 3QFY17. The company
continues to have healthy order book with a waiting period of 3 months. The
Market Data investment in international markets has also started giving results in terms
BSE Code of high volumes. Realization improved by 3%YoY due to increase in sales of
505200
500cc vehicles. On the commercial vehicle front, VECV reported 7% de-
NSE Symbol EICHERMOT growth due to demonetization issue in the country. From 1st April 2017, the
52wk Range H/L 26602/16657 BS-III compliant vehicles will not be sold in the country, so the management
Mkt Capital (Rs Cr) 65,310 expects pre-buying to happen in 4QFY17 because 8-10 percent of price
increase after the implementation of BS-IV norms.
Av. Volume 4621
Nifty 8716
3QFY17 Result Update

Stock Performance Net revenue stood at Rs.1835 crore in 3QFY17, a growth of 43%YoY.
1Month 3Month 1Year Volumes grew by 39%YoY and Realization grew by 3.5%YoY.
Absolute 6.7 0.2 39.6 Gross Margin increased by 110 bps YoY to 47.2% majorly due to better
Rel.to Nifty 0.3 -3.1 22.7 product mix.
EBITDA Margin expanded by 350 bps YoY to 31.4% driven by benefit of
Share Holding Pattern-% operating leverage. .
3QFY17 2QFY17 1QFY17 PAT Margin increased by 110 bps YoY to 22.8% in 3QFY17.
Promoter 50.6 50.6 50.7
Public 49.4 49.4 49.3 Outlook and Valuation
Others -- -- --
Total 100.0 100.0 100.0 Going forward, capacity addition in line with demand(RE), seventh pay
commission payout, expectation of pre-buying on new emission norms,
improving infrastructure activities in the country and expanding footprints in
Company Vs NIFTY
the international markets will lead to higher volumes and margins for the
160
EICHERMOT NIFTY company. We expect Eicher Motors to report 35% RoE in FY17E.
150 Considering the strong order book in the Royal Enfield and better traction
140 from commercial vehicle business, we recommend 'BUY' and upgrade our
130
target price to Rs.26600 from our previous target price of Rs.26000.

120

110 Rs. In crore

100 Financials 3QFY17 2QFY17 3QFY16 QoQ YoY
90 Sales 1835 1755 1284 5% 43%
80 EBITDA 577 542 358 6% 61%
Jul-16
Feb-16

Sep-16
Jan-16

Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16

Nov-16
Apr-16
Mar-16

Net Profit 418 413 279 1% 50%

EBIDTA% 31% 31% 28%
Naveen Kumar Dubey PAT % 23% 24% 22%
naveen.dubey@narnolia.com
Narnolia Securities Ltd 8
Please refer to the Disclaimers at the end of this Report
 EICHERMOT
Investment Arguments
Capacity addition in-line with demand- Considering the 3 months waiting period the company increased the capacity from
600000 units to 720000 units per annum looking at the demand scenario. We expect that the Eicher will enjoy the benefit of
operating leverage with increasing volumes going ahead.
Expanding footprints in export markets- RE has expanded its footprint in the exports by opening up stores in the various
export markets like; Latin America, Paris, London, indonesia, bangkok and Madrid. The investments are becoming fruitful in terms
of higher volumes from exports.
Seventh Pay commission payout- The payout will increase the income level and living standard, so we expect that the
demand for premium segment vehicles will surge and Eicher Motors will be one of the bigger beneficiaries of seventh pay.
BS-IV norms to drive CV demand- From 1st April 2017, the BS-III compliant vehicles will not be sold in the country, so
management expects demand for BS-III vehicles to surge in 4QFY17 because 8-10 percent of price increase after the
implementation of BS-IV norms.

Management Highlights
Management said that the out look for RE is strong backed by healthy order book.
Higher growth potential markets for exports are Latin America, Jakarta and Bangkok.
Production is 60000 units per month and average waiting period is 3 months for classic models.
Orgadam plant to be commissioned by the end of 2017.
Currently RE has 640 retail outlets covering around 400 cities.
Capex is Rs.600 crore for RE and Rs.400 crore for VECV towards setting up technical centers and capacity enhancement.
Spare parts stands around 5-6 percent of total revenue.
No BS-III compliant vehicles can not be sold after 1st April 2017.

About The Company

Incorporated in 1982, Eicher Motors Limited is the flagship company of the Eicher Group in India and a leading player of the Indian
automobile industry. The company is mainly engaged in the business of high end motorcycles (350cc & above) under the brand 'Royal
Enfield' and Commercial Vehicles business segment under 'Volvo Eicher Commercial Vehicles'.

EML Business Details

Eicher Motors Ltd.

(EML)

Royal Enfield
Eicher Polaris (50%) VECV (54.4%)
(100%)

Key Risks

>> Company have plans to increase its capacity to 9 Lakh units per annum by the end of 2018. Rise in demand may increase the
waiting period for the bikes in short term, which is 3-4 months.
>> In the US market the company can face stiff competition from Harley Davidson.
>> Bajaj Auto's Avenger can be potential threat for Royal Enfield in Indian market.

Narnolia Securities Ltd 9

Please refer to the Disclaimers at the end of this Report

 EICHERMOT

Financials Snap Shot

INCOME STATEMENT RATIOS
CY13 CY14 FY16 FY17 CY13 CY14 FY16 FY17
Net Revenue 6810 8738 15689 6942 EPS 146 227 470 597
Other Income 95 107 112 222 Book Value 760 928 1275 1727
Total Revenue 6905 8846 15801 7165 DPS 35 59 117 148
COGS 4639 5766 10121 3657 Payout (incl. Div. Tax.) 24% 26% 25% 25%
GPM 32% 34% 35% 47% Valuation(x)
Other Expenses 925 1198 2063 745 P/E 34 66 41 42
EBITDA 713 1115 2447 2141 Price / Book Value 7 16 15 14
EBITDA Margin (%) 10% 13% 16% 31% Dividend Yield (%) 0.7% 0.4% 0.6% 0.6%
Depreciation 130 220 452 146 Profitability Ratios
EBIT 583 895 1996 1995 RoE 19% 24% 37% 35%
Interest 8 10 9 3 RoCE 27% 36% 58% 43%
PBT 671 993 2099 2213 Turnover Ratios
Tax 145 291 647 701 Asset Turnover (x) 1.3 1.4 1.9 0.9
Tax Rate (%) 22% 29% 31% 32% Debtors (No. of Days) 27 23 19 19
Reported PAT 394 615 1278 1618 Inventory (No. of Days) 41 41 37 37
Dividend Paid 95 159 318 402 Creditors (No. of Days) 64 63 58 58
No. of Shares 3 3 3 3 Net Debt/Equity (x) 0.04 0.00 0.00 0.00

BALANCE SHEET CASH FLOW

CY13 CY14 FY16 FY17 CY13 CY14 FY16 FY17
Share Capital 27 27 27 27 OP/(Loss) before Tax 671 993 2099 2213
Reserves 2028 2489 3437 4653 Depreciation 130 220 452 146
Net Worth 2055 2516 3464 4680 Direct Taxes Paid (150) (281) (634) (701)
Long term Debt 84 0 0 0 Op before WC 718 1126 2460 2469
Short term Debt 84 58 86 38 CF from Op. Activity 716 1047 2282 814
Deferred Tax 180 239 338 338 0 (150) (869) 0
Total Capital Employed 2139 2516 3464 4680 Capex (712) (972) (1070) (557)
Net Fixed Assets 2120 2728 3314 3724 CF from Inv. Activity (790) (1087) (1481) (732)
Capital WIP 125 236 118 118 Repayment of debt (1) 0 0 0
Debtors 513 562 834 369 Interest Paid (8) (10) (9) (3)
Cash & Bank Balances 683 380 476 596 Divd Paid (incl Tax) (88) (115) (486) (344)
Trade payables 1191 1513 2509 1110 CF from Fin. Activity (47) (162) (563) (454)
Total Provisions 170 265 99 53 Inc/(Dec) in Cash (121) (202) 238 (372)
Net Current Assets 1008 614 353 848 Add: Opening Balance 804 683 353 591
Total Assets 5337 6408 8479 7732 Closing Balance 683 481 591 220

Narnolia Securities Ltd 10

Please refer to the Disclaimers at the end of this Report

 NEUTRAL
V-GUARD Industries Ltd. 2-Feb-17

Result Update 3QFY17_Performance Highlights:

CMP 205 Net Revenue from operations for the Third Quarter, ending December 31, 2016-
Target Price 206 17 fiscal, was Rs.460cr; an increase of 10.40% over corresponding period of' last
financial year (Rs.416cr). Profit after Tax for the Quarter, ending December 31,
Previous Target Price
2016-17 fiscal, was Rs. 28cr; showing an increase of 30% over corresponding
Upside 0% period of last financial year (Rs. 21cr). Pumps have driven growth for the quarter
Change from Previous - under review along with Fans and Solar Water Heaters.

Market Data 3QFY17 Concall Highlights:

BSE Code 532953
NSE Symbol In FY18 management expects 15% growth and 13-15% growth in next couple
VGUARD
of years.
52wk Range H/L 226/78.66
Mkt Capital (Rs Cr) 6,218 Tax rate for Q4FY17 will same as Q3FY17 i.e. 25% and for FY18 it will be
Av. Volume('000) 750 around 25-26%.
Nifty 8554 South market was affected by demonetization specially Kerala. As per the
management thing are coming back to normal in Q4FY17.
Stock Performance Total capex for Sikkim expansion plant is Rs 40cr for manufacturing Stabilizer
1Month 1Year YTD and Electric water heater and both are expected to commence in March 2017.
Absolute 20.9 121.7 11.3
Rel.to Nifty 15.3 107.1 11.6 Tax benefit in Himachal Pradesh plant will be till 2019 and in Sikkim plant will
be for 8 years.
Share Holding Pattern-% There is some price hike in Q3FY17 and management expects Fan, Pump and
3QFY17 2QFY17 1QFY17 Stabilizer price will increase by 3-7% and price of wire will be increase by 7-8% in
Promoter 65.4 65.5 65.7 coming quarters.
Public 34.6 34.5 34.3 Outlook and Valuation
Others -- -- --
Total 100.0 100.0 100.0 Demonetization had some impact on some product segment and sales growth of
some of the products had come down from earlier quarters. Sales in Tamil Nadu
Region were affected due to the socioeconomic situation prevalent in the State
Company Vs NIFTY
and because of cyclone affecting many parts of Chennai and suburban areas. But
220 VGUARD NIFTY as per the management the business outlook remains positive considering
200 upcoming summer season. We have positive view on this stock in long term but
180 considering demonetization impact and high valuation we maintain "NEUTRAL"
rating on this stock.
160
140
120 Rs in Cr
100 Financials FY13 FY14 FY15 FY16 FY17E
80
Sales(Cr) 1360 1518 1746 1837 2047
EBITDA 110 123 133 178 225
Net Profit 63 70 71 112 169
Bibha Kashyap EBIDTA% 8.1% 8.1% 7.6% 9.7% 11.0%
bibha.kashyap@narnolia.com PAT % 4.6% 4.6% 4.1% 6.1% 8.3%
Narnolia Securities Ltd 11

Please refer to the Disclaimers at the end of this Report

 Product wise segmental performance:

Key developments:
A new manufacturing unit at Sikkim is being setup with an investment outlay of Rs 12.50cr (excluding land and building) with
built up area of 60,000 sq. ft. for increasing the capacity of Stabilizer and the unit is expected to commence commercial
production in March, 2017.

Manufacturing unit for Electric water heater at Sikkim with an investment of Rs 25cr (excluding land) with built up area of 80000
sq. ft. is being set up and would commence commercial production in March, 2017.

Backward Integration:

Set up in-house PVC compounding unit at Chavadi, Coimbatore.

Unit expected to commence commercial production from August, 2016

Geography wise performance Copper Prices:

South(Cr) Non south(Cr) Copper price (Indian Rupee per Metric Ton)
1,600,000
356
347

400
340
314

1,400,000
309

306
302

300
296

350
291
291
289

271

1,200,000
250
243

300
217

1,000,000
250
193
167

167

800,000
155

154
149

200
140

134
129

125

125

125

1,199,891
1,323,078
1,334,270

1,219,040
1,272,040
1,231,624

1,153,332
1,026,405

1,068,264
1,303,774

1,088,589

600,000
107

150
965,400

960,237
946,938
950,208
96

400,000
100
200,000
50
-
-

Narnolia Securities Ltd 12

Please refer to the Disclaimers at the end of this Report

 Total Debt(Cr): Expanding Geographic Presence
Working capital Term loan
100 100% South Non South
77 71 77 77 79%
80 66 78% 75%
80% 70% 67% 67% 66%
60 41 4438
38 36 34 3731 60%
31
40 2429 2429 26 24
20 13 9 8 7 7 33% 33% 34%
0 2 - 0 40% 30%
22% 25%
- 21%
20%

0%
FY11 FY12 FY13 FY14 FY15 FY16 9MFY17

Strong growth in distributor Network( Nos): In-house Manufacturing Vs. Outsourcing

South Non South In-House Outsourced

500 80%
408 60% 59% 60% 57% 60% 60%
400 328 60%
40% 41% 40% 43% 40% 40%
300 220 216 40%
187 208
200 167 20%
11095 134
10397
100 0%
0 FY11 FY12 FY13 FY14 FY15 FY16
FY11 FY12 FY13 FY14 FY15 FY16

Investment Arguments:

Company's Non- South market is growing fast so management is expecting 15% growth in FY17 and on a long run
company is expecting ~50% sales in the next 3-4 years.
Company's new manufacturing plant sikkim is having income tax & Excise duty exemption for next 8 years. And
having the potential to generate sales of 100 Cr per annum after a year.
Strong construction demand driven by Government ambitious target of housing for all by 2022 will require 111 million
housing units, and will lead to increased demand for electrical goods.
The solar water heater segment is expected grow at a healthy rate going forward as technological advancements
have brought down initial capital costs and considerably reduced the payback period.
Increasing market share across all product lines-Leadership position in its flagship product, voltage stabilizers, with
over 51% market share.
Company will be expanding to the north markets and expand their range in the Kitchen and home appliances range
to cater to a wider audience.

About the Company:

V-Guard Industries Limited is an India-based consumer electrical and electronics company. The company is engaged
in manufacturing, trading and selling a range of products, including voltage stabilizers, polyvinyl chloride (PVC), cables,
pumps and motors, electric water heaters, digital uninterruptible power supply (UPS), fans, ups, solar water heaters,
switchgears and induction cooktops. It operates in three segments: Electronic Products, Electrical / Electro Mechanical
Products and Others. Its manufacturing facilities are located at K.G. Chavady, Coimbatore, Tamil Nadu; at Kashipur,
Utharakhand; at Kala Amb, Himachal Pradesh and at SIPCOT Industrial growth center, Perundurai, Tamil Nadu.

Narnolia Securities Ltd 13

Please refer to the Disclaimers at the end of this Report

 Financials Snap Shot
INCOME STATEMENT RATIOS
FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Revenue 1518 1746 1837 2047 EPS 23 24 37 56
Other Income 5 4 7 11 Book Value 107 126 156 205
Total Revenue 1522 1750 1845 2058 DPS 8 10 15 10
COGS 1131 1290 1312 1390 Payout (incl. Div. Tax.) 32% 41% 41% 17%
GPM 1 1 1 1 Valuation(x)
Other Expenses 178 213 236 303 P/E 20 39 23 21
EBITDA 123 133 178 225 Price / Book Value 4 7 5 6
EBITDA Margin (%) 8% 8% 10% 11% Dividend Yield (%) 1.6% 1.1% 1.8% 0.8%
Depreciation 12 15 15 17 Profitability Ratios
EBIT 111 118 163 208 RoE 22% 19% 24% 27%
Interest 21 21 9 2 RoCE 32% 29% 34% 34%
PBT 94 101 161 217 Turnover Ratios
Tax 24 31 49 48 Asset Turnover (x) 2 2 3 2
Tax Rate (%) 26% 30% 31% 22% Debtors (No. of Days) 51 51 55 58
Reported PAT 70 71 112 169 Inventory (No. of Days) 82 74 57 70
Dividend Paid 23 29 46 29 Creditors (No. of Days) 42 40 30 28
No. of Shares 3 3 3 3 Net Debt/Equity (x) 0 0 0 0

BALANCE SHEET CASH FLOW STATEMENT

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Share Capital 30 30 30 30 OP/(Loss) before Tax 94 101 161 217
Reserves 289 348 441 587 Depreciation 12 15 15 17
Net Worth 318 378 471 617 Direct Taxes Paid (19) (31) (50) (48)
Long term Debt 31 21 6 0 OP before WC changes 132 140 192 236
Short term Debt 68 37 2 2 CF from Op. Activity 111 88 131 79
Deferred Tax 10 9 7 7
Total Capital Employed 349 399 476 617 CAPEX (33) (12) (15) (45)
Net Fixed Assets 170 164 161 189 CF from Inv. Activity (28) (15) (32) (45)
Capital WIP 3 1 0 0 Repayment of LTB (8) (9) (22) 0
Debtors 212 244 279 325 Interest Paid (24) (21) (7) (2)
Cash & Bank Balances 3 2 8 11 Divd Paid (incl Tax) (12) (16) (16) (29)
Trade payables 175 193 151 157 CF from Fin. Activity (93) (74) (94) (37)
Total Provisions 35 44 40 41 Inc/(Dec) in Cash (10) (1) 5 (2)
Net Current Assets 261 281 322 436 Add: Opening Balance 12 2 2 8
Total Assets 679 725 717 858 Closing Balance 2 2 7 5

14
Narnolia Securities Ltd

Please refer to the Disclaimers at the end of this Report

 BUY
KEC International 31-Jan-17

Result Update
CMP 148 KEC has reported mix set of numbers in Q3FY17. Net income has come
Target Price 185 down by 6.5% YoY to Rs. 1965 Cr to Rs. 2101 Cr on back of
Previous Target Price 165 demonetization, delay in conversation of L1 orders into firm order and land
Upside 25% acquisition issue at Jammu and Kashmir project. But on the contrary
EBITDA margin has improved by 135 bps to 9.3%, which is the highest in
Change from Previous 12%
last 21 quarters. KEC faced some serious issue on logistic & subcontracting
front due to demonization in November and December but now situation is
Market Data under control and land acquisition issue has also been resolved.
BSE Code 532714 Management is confident to achieve 5% revenue growth in FY17E despite
NSE Symbol KEC 3% negative revenue growth during the 9 months of the current year and 10-
52wk Range H/L 156/97 15% revenue growth in FY18E.
Mkt Capital (Rs Cr) 3,809
Av. Volume 59620 Healthy Order Book:-
Nifty 8561
Current order book stands at Rs. 11175 Cr i.e. 1.3x of the trailing twelve
Stock Performance months revenue with Rs. 3800 Cr of orders in L1 position. Order intake
1Month 3 Month 1Year during the 9 months stood at Rs. 8634 Cr, up by 26% YoY. Management
Absolute 6.1 19.7 20.3 expects healthy orders from SEBs and railways which will provide robust
revenue visibility going ahead. Currently, SEA plant (Brazil) is running at
Rel.to Nifty 0.4 20.6 5.0
100% capacity utilization with 2 years orders in hand.
Share Holding Pattern-%
Operating Margin continues to be strong:-
3QFY17 2QFY17 1QFY17
Promoters 51% 51% 51% EBITDA margin in Q3FY17 has improved by 135 bps YoY to 9.3%. The
Public 49% 49% 49% Improvement in EBITDA margin was attributable to strong performance by
SAE (500 bps up YoY), railway business (negative in Q3FY16) and cable
business (negative in Q3FY16). Management is working on cost front in
cable business to improve margin and we expect margin improvement in
railway business as the revenue increase. Management has guided 9%
Company Vs NIFTY EBITDA margin in FY17 and improves further in FY18. KEC has bring down
140 KEC NIFTY account receivables days from 246 days in FY16 to 218 days at the end of
130 the Q3FY17 and we anticipate it to improve further based on retention
money release from Saudi project which result into improvement in bottom
120
line going forward.
110
In Rs. Cr.
100
Financials Q3FY16 Q2FY17 Q3FY17 YoY % QoQ %
90
Sales 2101 2121 1965 -7% -7%
80 EBITDA 167 185 182 9% -2%
Jul-16
Feb-16

Sep-16
Jan-16

Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16
Mar-16

Net Profit* 23 72 47 102% -35%

EBIDTA% 8.0% 8.7% 9.3% 130 bps 60 bps
Sandip Jabuani PAT 1.2% 3.1% 3.2% 200 bps 10 bps
* Net profit is excluding other comprehensive income
sandip.jabuani@narnolia.com
Narnolia Securities Ltd 15
Please refer to the Disclaimers at the end of this Report
 Railway :- Strong Revenue growth driver
Management has cut down the revenue growth to 5% in FY17. But maintain the railway top line guidance of 450-500 Cr in FY17
and Rs.1000 Cr for the FY18E based on the huge opportunity in railway electrification project. Railway Ministry has set target to
award 2000 Km, 4000 Km and 6000 km of overhead electrification orders in FY17, FY18 and FY19 respectively. In railways, KEC
commands 20% market share, which may translate into approx.2400 Cr of expected new orders in FY18E. Railway ministrys
focus on execution helps contractor to execute project smoothly and timely. We expect improvement in EBITDA margin based on
incremental volume and speedy execution.

Result Highlights of Q3FY17

Net sales de grew by the 6.5% YoY to Rs. 1965 Cr in Q3FY17 as compared to Rs. 2101 Cr in Q3FY16
EBITDA margin has improved by 135 bsp to Rs. 182 Cr as against Rs 167 Cr on account of 10% plus margin in T&D and
improved performance of railway and SAE business.
KEC has reported 102% YoY growth in PAT with 200 bps improvement on back of higher EBITDA
During the quarter KEC has secured Rs.2706 Cr of new orders in Q3FY17 (up by 20% YoY) and Rs. 8634 Cr in 9 months of
FY17, which is up by 26% YoY
Order book as on 31st December stands at Rs.11175 Cr, ie. 1.3x of TTM revenue.

Managment / Concall Update

Demonetization, delay in conversation of L1 orders into firm order and land acquisition issue at Jammu and Kashmir project led
to de growth in revenue
Management has guided 5% and 10-15% revenue growth in FY17 and FY18 respectively.
EBITDA margin in FY17 will be 9% and it will improve further in FY18
EBITDA margin of SAE tower was 8-9% in Q3FY17
Faced some serious issue in logistic in November and December month due to demonization but now situation is under control.
Losses in Cable segment has come down significantly on YoY
Revenue loss of 50-60 Cr due to demonization
Maintain revenue guidance in railway segment of Rs. 450-500 Cr and Rs.1000 cr in FY18
Interest cost as % of sales will be 2.7% in FY18
Significant improvement in solar business from next year as the KEC is in L1 position of large project. EBITDA margin is slightly
below than normal margin but cash generating on PBT level
Expect to bring down AR collection days to 180 from 218 days based on the release of retention money from Saudi projects
Land acquisition issue at Jammu and Kashmir project has been resolved
Expect more orders from SEBs compare to PGCIL

Outlook and Valuation:-

Revenue growth during the 9 months was in turmoil due to lower commodity price and demonetization. But the operating margin
continuous to accretive during the period. We expect 5% and 15% revenue growth in FY17E and FY18E based on the strong
traction in Transmission and railway business with strong operating margin. We anticipate boost in the bottom line on account of
strong AR collection which will result into lower interest cost going ahead. At current price of Rs. 148 stock is trading at 2.2x P/B
and 5.8X of EV/EBITDA. Considering the strong operating margin and healthy order book we are bullish on the stock. Hence, we
upgrade our target price to Rs. 185 from Rs.165 and recommend to BUY.

Narnolia Securities Ltd 16

Please refer to the Disclaimers at the end of this Report

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

Margin Profile YoY (+/-) QoQ (+/-)

Gross Margin 40.5% 46.7% 47.7% 53.9% 49.3% 57.0% 47.0% 54.0% 51.8% 57.1% 10 530
EBIDTA 5.6% 5.1% 7.3% 7.3% 7.7% 7.8% 8.7% 8.4% 8.7% 9.3% 150 60
EBIT 4.5% 4.0% 6.4% 5.8% 6.6% 6.7% 7.9% 6.8% 7.3% 7.7% 100 40
PAT 0.9% 3.2% 2.5% 0.9% 2.2% 1.8% 3.1% 1.7% 3.1% 3.2% 140 10

Order Book 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Transmission 7,356 6,921 7,131 7,903 7,207 7,028 7,087 7,334 7,442 8,054 15% 8%
SAE 931 876 951 948 1,086 937 1,134 1,769 1,510 1,342 43% -11%
Cables 279 263 570 632 592 469 472 104 216 224 -52% 4%
Railways 279 263 475 738 691 562 567 936 1,186 1,342 139% 13%
Water 466 438 380 316 - 281 189 208 216 112 -60% -48%
Solar 9 9 - - 296 75 38 52 183 101 34% -45%
Total 9,320 8,770 9,508 10,537 9,872 9,351 9,487 10,403 10,753 11,175 20% 4%

Order Intake
Transmission 583 1,478 1,909 2,375 1,024 1,595 1,370 1,469 1,738 1,651 4% -5%
SAE 231 485 421 123 181 247 206 678 465 298 20% -36%
Cables 253 412 393 309 181 270 206 198 279 244 -10% -13%
Railways - 48 84 278 90 90 56 424 528 460 412% -13%
Water - - - - - - - - - -
Solar 11 5 3 - 30 45 38 57 93 54 20% -42%
Total 1,078 2,428 2,811 3,085 1,506 2,246 1,877 2,825 3,103 2,706 20% -13%

Narnolia Securities Ltd

Please refer to the Disclaimers at the end of this Report 17

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

Order Book Order Intake

Order Book Book to bill Order Intake Growth YoY%

12,000 2.00 10000 0.3
1.80 9000
10,000 0.25
1.60 8000
8,000 1.40 7000 0.2
1.20 6000 0.15
6,000 1.00 5000
0.80 4000 0.1
4,000 0.60 3000 0.05
2,000 0.40 2000
0.20 0
1000
- - 0 -0.05
FY12 FY13 FY14 FY15 FY16 Till FY12 FY13 FY14 FY15 FY16 Till
Q3FY17 Q3FY17

Strong Growth in Railway Segment :- Margin Trend :-

Railway Order Book Growth YoY%

EBITDA M % PAT M %
1,600 160%
1342 140% 10%
1,400
1,186 120% 9%
1,200 8%
100%
1,000 936 7%
80%
800 738 691 60% 6%
562 567 40% 5%
600 475
20% 4%
400 279 263 3%
0%
200 2%
-20%
1%
- -40%
0%
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

Narnolia Securities Ltd 18

Please refer to the Disclaimers at the end of this Report

 About the Company :-

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

Power Transmission
Cabels Railways Water
& Distribution

Transmission Lines Substations Power Cabels

Civil & Track Work Water Resource
LT/HT/EHV
Managment
Lattice Distribution Platforms &
Network Telecom Cabel : Buildings
Towers/Poles
Optical Fiber and Water & Waste
Telecom/Tower/ Jelly filled Signalings Water Treatment
Hardware EPC/OPGE

Electrification

Supply EPC

Manufacturing Facilities

Tower Manufacturing
India, Brazil and Vadodara (Gujarat)
Mexico Mysore (Karnataka)
(SAE Annual Silvassa (Union
production capacity Territory)
100000 MTs)

Narnolia Securities Ltd 19

Please refer to the Disclaimers at the end of this Report

 Financials Snap Shot
INCOME STATEMENT RATIOS
FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Revenue 7902 8468 8516 8943 EPS 2.6 6.3 7.4 11.5
Other Income 14 146 10 10 Book Value 46.3 51.7 58.8 66.9
Total Revenue 7916 8614 8527 8954 DPS 0.6 0.7 2.2 3.4
EBITDA 493 512 679 760 Payout (incl. Div. Tax.) 23% 11% 30% 30%
EBITDA Margin (%) 6% 6% 8% 9% Valuation(x)
Depreciation 71 88 88 84 P/E 26.0 12.8 16.4 16.0
EBIT 423 424 592 676 Price / Book Value 1.5 1.5 2.1 2.8
Interest 263 309 277 274 Dividend Yield (%) 0.87% 0.88% 1.82% 1.86%
PBT 173 261 325 412 Profitability Ratios
Tax 88 100 133 144 RoE 6% 12% 13% 17%
Tax Rate (%) 1 0 0 0 RoCE 24% 20% 28% 31%
Reported PAT 67 161 192 268 Turnover Ratios
Dividend Paid 15 18 57 80 Asset Turnover (x) 1.1 1.1 1.0 1.1
No. of Shares 26 26 26 26 Debtors (No. of Days) 176 166 193 193
Inventory (No. of Days) 45 38 38 38
Creditors (No. of Days) 148 143 126 126
Net Debt/Equity (x) 0.51 0.55 0.40 0.35

BALANCE SHEET CASH FLOW

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Share Capital 51 51 51 51 OP/(Loss) before Tax 155 261 325 412
Reserves 1140 1278 1460 1648 Depreciation 71 88 88 84
Net Worth 1192 1330 1512 1700 Direct Taxes Paid 113 122 135 144
Long term Debt 603 737 602 602 Op. before WC Change 499 596 853 770
Short term Debt 1207 1308 1723 1723 CF from Op. Activity (9) 153 (51) 478
Deferred Tax 73 70 66 66 Capex 161 90 78 0
Total Capital Employed 1794 2067 2114 2302 CF from Inv. Activity (136) 125 18 0
Net Fixed Assets 992 881 860 860 Repayment of LTB 305 640 264 0
Capital WIP 18 16 12 0 Interest Paid 263 309 277 274
Debtors 3808 3853 4495 4729 Divd Paid (incl Tax) 15 17 58 80
Cash & Bank Balances 144 206 111 0 CF from Fin. Activity 132 (216) (63) (354)
Trade payables 3213 3325 2939 3087 Inc/(Dec) in Cash (14) 62 (96) 124
Total Provisions 125 122 114 114 Add: Opening Balance 146 132 194 111
Net Current Assets 1374 1668 2151 2187 Closing Balance 132 194 98 235
Total Assets 7411 7745 8138 8322

Narnolia Securities Ltd 20

Please refer to the Disclaimers at the end of this Report

 Hold
INDIAN OIL CORPORATION LTD. 01-Feb-17

Company Update Indian Oil Corporation has reported revenue growth of 13% YoY to Rs.
CMP 370 93117 Cr as compared to Rs. 82676 Cr in the corresponding quarter of
Target Price 410 FY16. EBITDA margin has also improved by 190bps to 8% in 3QFY17.
Previous Target Price 410 The average GRM for period April to Dec 2016 is USD 7.36 per BBL as
compared to USD 5.83 per BBL in the same period of FY16. The increased
Upside 11%
GRM is the result of higher capacity utilization in Paradip refinery. During
Change from Previous - the quarter,Refinery throughput has increased from 14.42 MMT to
16.37MMT YoY and pipeline throughput has slightly declined from 20.49
Market Data MMT to 20.23 MMT YoY.
BSE Code 530965
Q3FY17_Result Update
NSE Symbol IOC
52wk Range H/L 392/172 Profit after tax has increased by 29% to Rs. 3995 Cr in 3QFY17 as
Mkt Capital (Rs Cr) 1,79,668 compared to Rs. 3096 Cr in the same quarter in FY16.
Av. Volume(,000) 311 Revenue from sale of Petroleum products has increased from Rs. 93261
Nifty 8,585 Cr to Rs. 111212 Cr in 3QFY17.
Revenue from sale of Petrochemicals has increased from Rs. 4205 Cr to
Stock Performance Rs. 4714 Cr in 3QFY17.
1M 3M 12M Revenue from Other business activities has increased from Rs. 2758 Cr
Absolute 15.4 90.2 85.3 to Rs. 2940 Cr in 3QFY17.
Rel.to Nifty 9.9 74.2 75.9 The effective tax rate for 3QFY17 is 35.5% and the company pays total
tax of Rs. 2196 Cr.

Share Holding Pattern-%

3QFY17 2QFY17 1QFY17 Outlook
Promoters 58.3 58.3 58.3
Public 41.7 41.7 41.7 Indian Oil Corporation has equipped with BS VI standard HSD and BS VI
Others standard motor spirit and by October 2017, a new unit will go on stream at
Total 100 100 100 the refinery, where only BS VI standard HSD and high quality motor spirit
will be produced on a mass scale. This will help the company to provide
fuel to the nation as per the fuel standards provided by the government. In
Company Vs NIFTY the month of December 2016, the International crude oil prices have
180 IOC NIFTY soared up which is offset by increasing the realization of petroleum
170
products. Despite short term uncertainties, we are optimistic in the long
160
term. Considering above arguments we recommend HOLD rating in this
150
140
stock while maintaining the previous target price of Rs. 410
130
120
Rs,Cr
110 Financials 2012 2013 2014 2015 2016
100
Sales 408924 461780 488345 449509 355927
90
80 EBITDA 19450 13800 17141 10550 23197
Jul-16
Feb-16

Sep-16
Jan-16

Jan-17
Dec-16
Jun-16

Aug-16

Net Profit 10914 4449 7086 4912 11219

May-16

Oct-16
Nov-16
Apr-16
Mar-16

EPS 45 18 29 20 46
Aditya Gupta P/E 5.8 15.4 9.7 18.2 8.5
aditya.gupta@narnolia.com
Narnolia Securities Ltd 21
Please refer to the Disclaimers at the end of this Report
 Recent Events
30 Jan 2017- Odisha government has slapped a notice seeking withdrawal of fiscal incentives given to the PSU's Rs 34,555 crore
Paradip refinery in the state.As per the IOC management, the board had approved investments only in 2009 and the withdrawal of
the VAT concession will reduce by 2 per cent the rate of return it considered for working out the investment.
27 Dec 2017- IOC's Mathura refinery has despatched BS VI high-speed diesel (HSD) to two auto companies to test viability and
compatibility as part of its efforts to provide cleaner fuel for an eco-friendly environment. Though the government has set a very
stringent target of April 2017 for meeting BS IV and April 2020 for BS VI standard fuel quality, the Mathura refinery has completed
the target ahead of the set deadline
7 Dec 2017- IOC, BPCL, HPCL sign deal to set up India's biggest oil refinery. The three firms signed the pact for the 60-million tonne a
year refinery in Maharashtra with IOC as leader of the consortium

Gross Refining Margin

IOC GRM Singapore GRM

9.1 8.7 8.6 8 8.00 7.70

6.7 6.6 6.6 6.2 5.8 6.3 6.3 6.70
5.4 4.7 10.80 5.00 5.10
4.3 9.98
8.80
6.60 7.36
5.20 6.20 4.80 2.30
6.00
4.30
2.40 1.70 2.20 3.00
0.90

(2.00)
(4.80)
(7.70)

Business Model
Indian Oil Corporation Limited is an India-based oil company.
The Companys segments include Sale of Petroleum Products,
Sale of Petrochemicals and Other businesses, which consist of
sale of gas, explosives and cryogenics, wind mill and solar power
generation and oil and gas exploration activities.The Companys
subsidiaries include Indian Oil (Mauritius) Ltd, IOC Middle East
FZE, IOC Sweden AB, IOCL (USA) INC., Chennai Petroleum
Corporation Ltd and Lanka IOC PLC.It is the largest refining and
marketing company in India. It operates 8 refineries (incl BRPL)
with a capacity of 54.2mmtpa and has a 52% stake in CPCL
(11.5mmt refining capacity). The company controls a refining
capacity of 65.7 mmtpa. It has a pipeline network of >10,300km
(62mmtpa capacity), has 22,372 petrol/diesel outlets and has
interests in petrochemicals and upstream oil and gas. IOC is a
Public Sector Company with 78.9% Government stake.

Narnolia Securities Ltd 22

Please refer to the Disclaimers at the end of this Report
 Financials Snap Shot
INCOME STATEMENT RATIOS
FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16
Net Revenue 461780 488345 449509 355927 EPS 18.32 29.19 20.23 46.21
Other Income 3512 3442 4204 2246 Book Value 260 280 283 313
Total Revenue 465291 491787 453713 358173 DPS 5 6 9 12
COGS 414541 432541 399121 289225 Payout (incl. Div. Tax.) 27% 21% 43% 26%
GPM 10% 11% 11% 19% Valuation(x)
Other Expenses 25655 31525 32175 35277 P/E 15 10 18 9
EBITDA 13800 17141 10550 23197 Price / Book Value 1.1 1.0 1.3 1.3
EBITDA Margin (%) 3% 4% 2% 7% Dividend Yield (%) 2% 2% 2% 3%
Depreciation 5692 6360 5219 5919 Profitability Ratios
EBIT 8108 10781 5331 17278 RoE 7% 10% 7% 15%
Interest 7119 5908 4175 3630 RoCE 9% 10% 5% 16%
PBT 4504 8232 5346 15894 Turnover Ratios
Tax 877 3,011 2,143 5,653 Asset Turnover (x) 4.92 4.42 3.84 2.77
Tax Rate (%) 19% 37% 40% 36% Debtors (No. of Days) 10 9 6 9
Reported PAT 4449 7086 4912 11219 Inventory (No. of Days) 53 54 41 43
Dividend Paid 1492 1850 2471 3437 Creditors (No. of Days) 27 30 26 26
No. of Shares 243 243 243 243 Net Debt/Equity (x) 0 1 1 0

BALANCE SHEET CASH FLOW STATEMENT

FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16
Share Capital 2428 2428 2428 2428 OP/(Loss) before Tax 4504 9978 7014 17259
Reserves and surplus 60608 65485 66404 73566 Depreciation 5710 6369 5190 5865
Shareholders' funds 63036 67913 68832.3 75994 Direct Taxes Paid 1169 1896 2344 3250
Long term Debt 35865 36796 30367 42367 OP before Wc 14961 20649 13425 26295
Total Borrowings 88933 58154 50850 71622 CF from Op. Activity 9340 24204 45976 27020
Non Current liabilities 18206 20592 22814 30112 Current investments 784 1120 587 629
Long term provisions 421 443 476 2476 Capex -4178 -8865 -4627 -4183
Short term Provisions 21913 26661 27601 29633 CF from Inv. Activity -9294 -18594 -10177 -13805
Current liabilities 72430 88071 82870 83614 Repayment of Debt 3958 14543 1268 -3309
Total liabilities 241725 266679 233743 241984 Interest Paid -7824 -6872 -5188 -4661
Net Fixed Assets 93927 110527 117088 128434 Divd Paid (incl Tax) -1492 -1850 -2609 -3590
Non Current Investments 3694 8566 8761 8667 CF from Fin. Activity 352 -3125 -38283 -12426
Other non Current assets 1282 1353 202 146 Inc/(Dec) in Cash 398 2485 -2483 789
Current assets 137383 141166 101086 94474 Add: Opening Balance 822 1220 3705 1225
Total Assets 241725 266679 233743 241984 Closing Balance 1220 3705 1221 2014

Narnolia Securities Ltd 23

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