INVESTMENT IDEA

Cochin Shipyard Nov 20, 2017

Systems
Industry CMP Recommendation Add on dips to Targets Time Horizon
Shipping / Defence Rs. 554 Buy at CMP and add on Dips Rs. 508-554 Rs. 637-745 4 - 6 Quarters

Company Background

Cochin Shipyard, a public sector enterprise, is focused on providing shipbuilding and ship repair work in the defence
sector in India and also clients engaged in the commercial sector. In addition to shipbuilding and ship repair,
HDFC Scrip Code COCSHI company offers marine engineering training. The Company’s docks include ship repair dock and shipbuilding dock.
Ship repair dock enables to accommodate vessels with a maximum capacity of 125,000 DWT (Dead Weight
BSE Code 540678
COCHINSHIP
Tonnage). In addition, ship repair dock offers a flexible range of products such as, tankers, product carriers, bulk
NSE Code carriers, passenger vessels and air defence ship. Shipbuilding dock can accommodate vessels with a maximum
capacity of 110,000 DWT. The Company has built a variety of vessels ranging from bulk carriers, tankers and
Bloomberg COCHIN passengers ships to offshore support vessels and port crafts. It is also the only shipyard in the country which can
CMP as on 17 Nov-17 554 fix vessels of up to 1,25,000 DWT, besides being the only yard that can repair an air defence ship. Company had
come out with an IPO in Jul 2017. The IPO was made at Rs 432 and raised Rs 1450cr (fresh issue of Rs 950cr and
Equity Capital (Rs cr) 135.9
offer for sale of Rs 488cr). The money would be used in the proposed expansion plans over the next three years.
Face Value (Rs) 10
Equity O/S (cr) 13.59 Investment Highlights
Market Cap (Rs Cr) 7530
Cochin Shipyard (Cochin) is one of the largest companies in the Indian shipbuilding and ship repair sector.
Book Value (Rs) 231
Avg. 52 Week Vol 222913 Over the years, the company has emerged as a premier player in the Indian shipbuilding segment with expertise
52 Week High (Rs) 597 in design, engineering and project implementation.
52 Week Low (Rs) 435
Cochin is also a market leader in the Indian ship repair segment with market share of ~39% and has undertaken
repairs of most complex ships of the country.
Shareholding Pattern (%)
Promoters 75.00 As on FY17, shipbuilding constitutes 74% of the topline while ship repair comprises the remaining 26%. We believe
strong order book (Rs 8300cr), bidding pipeline (~> Rs 10000 crore), core competency in both shipbuilding & ship
Institutions 13.70
repair (especially defence), debt-free status, best-in-class working capital cycle, reliability in execution and being
Non Institutions 11.30 a natural beneficiary of large & critical government projects places Cochin Shipyard in a sweet spot.

PCG Risk Cochin is a good proxy play on the Indian defence sector. Strong net cash balance (~Rs 2700cr at end of H1 FY18),
Yellow
Rating* strong order pipeline and order of Air craft carriers could provide multiyear visibility of earnings.
* Refer Rating explanation

Kushal Rughani
kushal.rughani@hdfcsec.com

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Key Highlights
Over the years, Cochin has emerged as a
premier player in the Indian shipbuilding
segment with expertise in design,
engineering and project implementation.
Cochin is also a market leader in the
Indian ship repair segment with market
share of ~39%. It derives ~74% revenue
from ship building and ~26% from ship
repair.
We believe strong order book (Rs 8300cr)
provides revenue visibility of next 36-48
months, bidding pipeline (~> Rs 10000
crore), core competency in both
shipbuilding & ship repair (especially
defence), debt-free status, best-in-class
working capital cycle, reliability in
execution and being a natural beneficiary
of large & critical government projects
place Cochin Shipyard in a sweet spot.
Cochin had raised Rs 950cr via fresh issue
from IPO. The money would be used in the
proposed expansion plans over the next
three years which augurs well for the
company.
Strong net cash balance (Rs 2700cr at end
of H1 FY18) (cash per share of Rs 193),
strong order pipeline and option value of
bagging further Air craft carriers could
provide multiyear visibility of earnings.
INVESTMENT IDEA
Cochin Shipyard Nov 20, 2017
Systems
Better business mix, strong revenue visibility and healthy Balance sheet
Cochin Shipyard is consciously improving its business mix by increasing the share of ship-repairs orders
(~2x profitable than shipbuilding business) in its order book. Better business mix coupled with strong
bidding pipeline of over ~Rs 11,000 crore augur well for the company. It is also likely to receive order
for phase III of IAC, which is likely to be ~Rs 10,300 crore. Even during turbulent times in the global
shipbuilding history, it has delivered revenue and PAT cagr of 11% and ~19% respectively over FY07-
17. After IPO in Jul 2017, company has cash & equivalents of Rs ~2700cr, currently which works out to
~34% of the market cap or Rs 198 per share. With capex of Rs 2,800 crore over the next three years
(FY18-21E) and superior return profile (RoE/RoCE of ~15% in FY12-17), we believe Cochin Shipyard is
a quality play in the shipping/defence segment.
Business Portfolio of the company
Shipbuilding:
Cochin is one of India's leading public‐sector shipyards catering to both commercial clients as well as
clients engaged in the defence sector with a multitude of offerings for a broad range of vessels across
life cycles. They are the largest shipyard in India in terms of dock capacity catering to Defence and
commercial orders. Shipbuilding in the defence sector is complex and time consuming, whereas
commercial shipbuilding, while relatively less complex, is subject to business cycles. They are currently
building India's first Indigenous Aircraft Carrier (IAC) for the Indian Navy and have also built two of
India’s largest double hull oil tankers, each of 92,000 DWT for Shipping Corporation of India.
Ship Repair:
In addition to Ship building, they also undertake ship repairs where the scope of work varies from normal
wear and tear to complex repairs. They have repaired about 15 Indian Naval Ships. They also recently
completed refits of INS Aditya, INS Sukanya, INS Shardul, INS Viraat and INS Vikramaditya for the
Indian Navy and have undertaken major revamping and refurbishing of oil rigs involving steel renewal,
up‐gradation of drilling, cementing, mechanical, HVAC and piping systems in almost all the major offshore
vessels and rigs of ONGC.
Competition: Key competitors in Defence Shipbuilding include Mazagon Dock Shipbuilders, Goa Shipyard,
Garden Reach Shipbuilders and Engineering, L&T Shipyard, Reliance Defence and Engineering and in
Commercial Shipbuilding are Reliance Defence and Engineering and L&T Shipyard. They also face
competition from global players like Colombo Dockyard, Dubai dry dock, Arab ship repair yard and
Keppel, Singapore.
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 INVESTMENT IDEA
Cochin Shipyard Nov 20, 2017

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Make in India campaign in defence to throw open domestic opportunities

India was the fifth largest spender in defence globally in 2016 as its military expenditure grew 8.5% yoy to US$ 53bn. Capital Budget is
going to increase as government is focused on upgrading its capability and focus more on equipment. Moreover, Government is more
committed to its make in India strategy. This would increase opportunities for domestic shipyards like Cochin Shipyard.

In Oct 2017, Cochin Shipyard has formed JV with Hooghly Dock & Port for upgradation and modernisation of shipbuilding infrastructure in
Kolkata. Cochin has plans to build Rs 100cr facility on the Hooghly in Kolkata for construction of vessels for inland water transport.

Recently, company bagged large order worth Rs 5400cr for eight vessels from Indian Navy. In this tender, both private and public sector
companies had participated. With this orders in hand surged to Rs 8300cr for the company.

Source: Company, HDFC sec Research

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Cochin Shipyard Nov 20, 2017

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Ship Repair Segment

Cochin began its ship repair operations in year 1981 and has undertaken repairs of various types of vessels including upgradation of ships
of the oil exploration industry as well as periodical maintenance, repairs and life extension of ships. Cochin’s shipyard has developed
capabilities to handle various repair jobs over the last several years. For the ship repair jobs, company has entered into MoUs with various
clients including the Lakshadweep Development Corporation (LDCL), Directorate General of Lighthouses and Lightships (DGLL) and
Dredging Corporation of India (DCI) on a bulk volume basis.

Its key ship repair clients include the Indian Navy, the Indian Coast Guard, SCI, Oil & Natural Gas Corporation (ONGC) and DCI. Company
has also partnered with Techcross Inc. for technical support, engineering, service support and sharing of information in relation to the
Ballast Water Treatment System (BWTS) products.

Company said in a release that, it would make Kochi as global ship repair hub. Company has started the work on its Rs 970cr International
Ship Repair Facility (ISRF) project on Nov 17, 2017. On completion of two years, Kochi will be a major ship repair hub in India and would
add around 1500 additional employment.

ISRF is project approved by the Government of India (GOI) in May 2016. Cochin will set up ship lift system of size 130m x 25m with lifting
capacity of 6000 Tons and 6 workstations. The facility can repair up to 85 vessels, and CSL will thereby be almost doubling the number of
ships that can be repaired per year.

Cochin is in the process of adding one more ship repair facility, international ship repairing facility (ISRF), which will enable it to undertake
repairs of vessels like LNG carriers, semi-submersibles, jack up rigs, and drill ships. Full commissioning of the international ship repairing
facility is likely to enable the company to increase its ship repair capability by 70-90 ships per annum. It currently repairs 80-100 vessels
per annum. The completion of the international ship repair facility (ISRF) is likely in 2020.

One of the largest players in Ship Repair business

Cochin Shipyard is also in the process of constructing a new dock, a ‘stepped’ dry dock. This stepped dock will enable the company to build
rigs and vessels of a larger size. It is also in the process of setting up an international ship repair facility (ISRF), which includes setting up
a ship-lift and transfer system. In the last two decades, it has built and delivered vessels across broad classifications including bulk carriers,
tankers, platform supply vessels (PSVs), barges, bollard pull tugs, passenger vessels and fast patrol vessels (FPVs). Cochin is also currently
building India's first indigenous aircraft carrier (IAC) for the Indian Navy. The company has also grown its ship repair operations and is
the only commercial shipyard to have undertaken repair work of the Indian Navy's aircraft carriers, the INS Viraat and INS Vikramaditya.

Cochin Shipyard has delivered two of India’s largest double hull oil tankers, each of 92,000 DWT to Shipping Corporation of India (SCI).
The company has evolved from building bulk carriers to building smaller and more technically sophisticated vessels such as PSVs and
AHTSs. It has also worked with several leading technology firms in this segment like Rolls Royce Marine (Norway), and Gaztransport &
Technigaz (GTT) SA. Company’s key shipbuilding clients include the Indian Navy, the Indian Coast Guard and SCI. Company has also
exported 45 ships to various commercial clients outside India like NPCC-Abu Dhabi, the Clipper Group (Bahamas), Vroon Offshore
(Netherlands).

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Cochin Shipyard Nov 20, 2017

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Expanding capacity to meet growing needs

Cochin currently has two docks – dock number one, primarily used for ship repair (Ship Repair Dock) and dock number two, primarily used
for shipbuilding (Shipbuilding Dock). The Ship Repair Dock is one of the largest in India and is capable of accommodating vessels with
maximum capacity of 1,25,000 DWT. The shipbuilding Dock can accommodate vessels with maximum capacity of 1,10,000 DWT (Dead
Weight Tonnage). Company has raised Rs 980cr through fresh issue of shares leading to 17% dilution. The money would be used to build
third dry-dock and an international ship-repair center which would cater to the future shipbuilding and ship-repair demand.

Strong Outlook from all the segments

Defence segment – Cochin Shipyard is one of the yards empanelled with the Indian Navy for order flow from the Navy & Coast Guard.
With the defence budget of the Navy on an increasing trend, we believe that the Navy and coast guard would continue to be a regular
source of orders for the company.

Commercial segment - The shipbuilding industry is linked to the growth of the shipping companies’ fortunes, which in turn depends on
global economic growth and World trade. With the upturn in trade and a subsequent improvement in freight prices across all categories,
the performance of the shipping industry is expected to improve, which augurs well for the shipbuilding companies like Cochin for orders
from the commercial segment.

Ship-repair – Ship-repair is a high margin business with high capital turnover ratio. Management of the company indicated that the
company was not able to accept many orders in this segment due to severe capacity constraints. The upcoming international ship-repair
center is expected to fill this gap and give a fillip to operating margins and return ratios of the company going forward.

Cochin Shipyard’s clientele

In its core area of expertise i.e. shipbuilding, the company has built a variety of vessels ranging from bulk carriers, tankers and passengers
ships to offshore support vessels and port craft. The company’s Indian clients include the Indian Navy, the Indian Coast Guard, SCI, ONGC,
DGLL, DCI, etc, while foreign clients include NPCC, the Clipper Group, Vroon and Sigba AS.

In the ship repair segment, Ithas developed adequate capabilities to handle complex and sophisticated repair jobs. The company has also
entered into special MoU arrangements to enhance its ship repair business. Cochin repaired LDCL and DCI vessels under such MoUs
arrangements. In FY16, major repair works for commercial clients included work on the GTV SamudraSarvekshak and the WSV
SamudraNidhi for SCI, and on the Dredge VIII and Dredge XIX for the DCI and MV Kavaratti for LDCL. In FY17, the docks were running
at almost full capacity due to which it had to turn away new requests.

In addition to the existing order book, Cochin has also bid for a tender from the Home Ministry worth ~Rs 1000 crore. These tenders are
mostly likely to be opened over the next year. The company expects healthy inflows to its order book from the same.

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Cochin Shipyard Nov 20, 2017

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H1 FY18 Results Highlights

During H1 FY18, Revenue increased 19% to Rs 1139cr led by ~70% growth from ship repair segment while shipbuilding grew ~5%.
Operating margin saw sharp dip of 650 bps yoy to 18.3% on the back of lower margin in repair business. Higher other income led to flat
PAT of Rs 191cr yoy. Other Income increased 32% yoy to Rs 104cr. After IPO in Jul 2017, company has cash & equivalents of Rs ~2700cr
while debt on books at Rs 123cr.

Set to meet future needs

Cochin Shipyard (Cochin) is a public sector shipyard with an order book of ~Rs.83 bn providing strong revenue visibility. The current
order-book comprises orders from the commercial segment, navy, coast guard and ship-repair segment. The company is also ramping up
its capacity with third dry-dock and an international ship-repair center. We are positive on the company for 1) Recurring orders from Navy
and Coast guard and 2) Improvement in the prospects of commercial shipbuilding segment. High margin ship-repairs business is value
additive for the company. Expect prospects to improve for the company going forward especially with the Make in India initiative of GOI.

View & Valuation

We expect ship repair revenues to grow at ~11% CAGR over FY17-20E. Currently, Cochin repairs ~80-100 vessels per year. By efficient
docking of vessels i.e. size of vessels vs. dimensions of the dockyard, the company plans to increase its revenue in the coming years. The
company also boasts of creating best-in-class ecosystem in this segment. This is primarily due its material procurement systems wherein
it can source the required materials in the shortest possible time. Cochin has also developed strong contactor-vendor systems, with
capabilities complimentary to that of its shipyard, helping speedy execution of contracts. As per the management, public sector shipyards
like Mazgaon Docks and Goa Shipyard have benchmarked Cochin Shipyard for improving their ecosystems.

We expect revenues to increase at 16% cagr over FY17-20E, mainly on the back of accelerated growth in the shipbuilding segment. Over
FY13-17, Cochin registered muted revenue CAGR of 7.3% on the back of growing higher share of revenues in the ship repair segment.
Contribution to revenue from the ship repair segment increased from 13.8% in FY14 to 26.4% in FY17. Accordingly, revenues from the
ship repair segment grew 17.4% CAGR in FY13-17 while it grew just 4.5% during the same period in the shipbuilding segment.

EBITDA to witness ~12% CAGR in FY17-20E; margins to remain stable

The operating EBITDA grew at 13.2% CAGR over FY13-17. This was despite subdued growth of 7.9% in revenue over the same period.
This was mainly due to accelerated growth of 17.4% in the ship repair segment. Ship repair business, depending on the vessel mix, can
earn EBITDA margins up to ~40%. The shipbuilding segment, on the other hand, earns 8-15% EBITDA margins. Higher growth in the ship
repair segment helped company to post better margins of 18.5% in FY17 vs. 14.8% in FY13.

Going forward, we expect margin to remain stable at 18-19% primarily due to increasing contribution of the shipbuilding segment. We
expect the shipbuilding segment to grow at 17% CAGR over FY17-20E and to contribute 76% to the total topline by FY20E. We have taken
14.5% increase in employee expenses in FY17-20E which would weigh on margins. We expect absolute EBITDA to grow at 17% CAGR in
FY17-20E vs. 13.4% in FY13-17.

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Cochin has posted net profit cagr of 14.9% in FY13-17. Other income grew at ~17% cagr during the same period. Higher interest income
was due to growing cash balance on the books of the company. Cash balance had surged from Rs 573 crore in FY14 to Rs 1931 crore in
FY17. After IPO in Jul 2017, company has cash & equivalents of Rs ~2700cr, currently which works out to ~34% of the market cap or Rs
198 per share. We expect this trend to reverse on account of large capital expenditure in the next three years. A reducing cash balance
scenario coupled with declining interest rate is likely to result in lower other income and consequently PAT growth of the company. We
expect PAT to see 14% CAGR over FY17-20E. At CMP of Rs 554, the stock trades at ~16x FY20E EPS which is attractive given robust
balance sheet, strong return ratios and sustainable revenue visibility. We recommend BUY on Cochin at Rs 554 and add on dips to Rs 508
with sequential TP of Rs 637 and Rs 745 over the next 4-6 quarters.

Risks and Concerns

 Delay in planned large Capital Expenditure and execution of large orders

 Fall in Crude oil price could impact the E&P capex cycle and result in reduced demand for offshore vessels.
 Delay in payment from ship-owners leading to higher working capital requirement.
 Reduced allocation to navy from the defence pie

Financial Snapshot
(Rs Cr) FY15 FY16 FY17 FY18E^ FY19E FY20E
Sales 1859 1993 2059 2341 2687 3232
EBITDA 423 468 543 602 661 765
Net Profit 235 272 323 369 417 469
EPS (Rs) 20.7 24.1 28.4 27.2 30.7 34.5
P/E 26.7 22.9 19.4 20.4 18.0 16.0
EV/EBITDA 17.6 16.4 15.3 13.7 11.8 9.6
Source: Company, HDFC sec Research, ^ post IPO

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EBITDA trend over FY17-20E
Revenues to witness strong ~16% cagr over FY17-20E
3500 25
700 26.3 30
3000
20.3 20 600 25
2500 23.2
14.8 500
15 20
2000 12.5
13.7 400
16.1 15
1500 10 300
11.4
7.2 7.4 10
1000 200
7.5
5 5
500 3.3 100
1859 1993 2059 2341 2687 3232 330 354 381 425 493 607
0 0 0 0
FY15 FY16 FY17 FY18E FY19E FY20E FY15 FY16 FY17 FY18E FY19E FY20E

Total Income Growth % EBITDA EBITDA Growth

Source: Company, HDFC sec Research

Source: Company, HDFC sec Research
Return Ratios (%)
EBITDA Margin (%) 25.0 23.2
22.2 21.9
20.0
18.8
16.1 16.2 16.7 16.7 16.4 17.0
18.5 18.3
18.1 14.3
17.7 17.8 15.0 12.7 13.1

10.0

15.8
5.0

0.0
FY15 FY16 FY17 FY18E FY19E FY20E
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
RoE RoCE

Source: Company, HDFC sec Research

Source: Company, HDFC sec Research

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Ship Repair Industry to see ~9% cagr Key Players in Ship Repair (Market share %)
1800 45
39
1600 40
35
1400
30
1200
25
1000 20
20
800
15
600 9 9
10
400 5

200 0
Hindustan L&T Goa Shipyard Cochin Ship
0 Shipyard
FY16 FY21E
Source: Company, HDFC sec Research
Source: Company, HDFC sec Research

Ship Repair Revenues

Revenue Mix (%)
800
0.6
700
23.6
600

500
Shipyard
400
Repair
300
Others
200

100 75.8

0
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Source: Company, HDFC sec Research
Source: Company, HDFC sec Research

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Income Statement (Consolidated) Balance Sheet
(Rs Cr) FY15 FY16 FY17 FY18E^ FY19E FY20E As at March FY15 FY16 FY17 FY18E^ FY19E FY20E
Net Revenue 1859 1993 2059 2341 2687 3232 SOURCE OF FUNDS
Other Income 93 114 164 177 168 157 Share Capital 113.2 113.2 113.2 135.9 135.9 135.9
Total Income 1952 2107 2223 2518 2855 3390 Reserves 1449 1701 1918 3005 3277 3585
Growth (%) 12.5 7.2 3.3 13.7 14.8 20.3 Shareholders' Funds 1562 1814 2031 3141 3413 3721
Operating Expenses 1529 1639 1680 1917 2195 2625 Long Term Debt 123 123 123 159 194 254
Long Term Provisions & Others 22 22 24 26 36 51
EBITDA 423 468 543 602 661 765
Total Source of Funds 1733 1974 2178 3326 3642 4026
Growth (%) 26.3 7.4 7.5 11.4 16.1 23.2
APPLICATION OF FUNDS
EBITDA Margin (%) 17.7 17.8 18.5 18.1 18.3 18.8
Net Block (incl CWIP) 391 395 410 746 1223 1634
Depreciation 38 37 39 45 62 80
Deferred Tax Assets (net) 43 60 60 60 60 60
EBIT 385 431 505 557 599 685
Long Term Loans & Advances 11 176 26 38 56 97
Interest expenses 18 12 11 14 15 19 Total Non Current Assets 445 631 496 844 1339 1790
PBT 367 419 495 542 582 664 Inventories 303 232 187 263 317 416
Tax 132 147 172 168 169 193 Trade Receivables 611 482 307 398 471 549
RPAT 235 272 323 369 417 469 Short term Loans & Advances 1 1 1 3 12 27
Growth (%) 20.9 16.4 18.2 15.9 10.7 14.1 Cash & Equivalents 1420 1820 1991 2736 2509 2357
EPS 20.7 24.1 28.4 27.2 30.7 34.5 Other Current Assets 81 180 320 349 398 433
Source: Company, HDFC sec Research, ^ post IPO Total Current Assets 2415 2715 2806 3749 3706 3783
Trade Payables 172 210 161 196 232 261
Other Current Liab & Provisions 759 936 767 851 919 1002
Short-Term Provisions 225 224 211 234 267 299
Total Current Liabilities 1156 1370 1139 1281 1418 1562
Net Current Assets 1259 1345 1667 2467 2288 2220
Total Application of Funds 1733 1974 2178 3326 3642 4027
Source: Company, HDFC sec Research, ^ post IPO

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Cash Flow Statement Key Ratios

(Rs Cr) FY15 FY16 FY17 FY18E^ FY19E FY20E (Rs Cr) FY15 FY16 FY17 FY18E^ FY19E FY20E
Reported PBT 367 419 495 543 584 666 EBITDA Margin 17.7 17.8 18.5 18.1 18.3 18.8
Non-operating & EO items -93 -114 -164 -177 -168 -157 EBIT Margin 20.7 21.6 24.6 23.8 22.3 21.2
Interest Expenses 18 12 11 14 15 19 APAT Margin 12.6 13.7 15.7 16.0 15.4 14.6
Depreciation 38 37 39 45 62 80 RoE 16.1 16.2 16.7 14.3 12.7 13.1
Working Capital Change 611 315 -151 -55 -49 -84 RoCE 22.2 21.9 23.2 16.7 16.4 17.0
Tax Paid -132 -147 -172 -168 -169 -193 Solvency Ratio
OPERATING CASH FLOW ( a ) 809 523 58 201 275 330 D/E 0.1 0.1 0.1 0.1 0.1 0.1
Capex -107 -29 -54 -380 -540 -490 Net D/E -0.8 -0.9 -0.9 -0.8 -0.7 -0.6
Free Cash Flow 702 494 4 -179 -265 -160 PER SHARE DATA
Investments 25 -182 150 -12 -18 -41 EPS 20.7 24.1 28.4 27.2 30.7 34.5
Non-operating income 93 114 164 177 168 157 CEPS 24.1 27.4 31.8 30.4 35.3 40.4
INVESTING CASH FLOW ( b ) 11 -97 260 -215 -390 -373 BV 138 160 179 231 251 274
Debt Issuance / (Repaid) 45 -11 -13 38 45 75 Dividend 1.5 1.5 7.5 8.3 9.0 10.5
Interest Expenses -18 -12 -11 -14 -15 -19 Turnover Ratios (days)
FCFE 729 470 -20 -155 -235 -104 Debtor days 120 88 54 62 64 62
Share Capital Issuance 0 0 0 23 0 0 Inventory days 69 49 37 41 43 47
Dividend -20 -20 -102 -130 -142 -165 Creditors days 54 63 51 55 57 55
FINANCING CASH FLOW ( c ) 7 -43 -126 -84 -113 -109 VALUATION
NET CASH FLOW (a+b+c) 827 382 192 -98 -227 -152 P/E 26.7 22.9 19.4 20.4 18.0 16.0
Source: Company, HDFC sec Research, ^ post IPO P/BV 4.0 3.5 3.1 2.4 2.2 2.0
EV/EBITDA 17.6 16.4 15.3 13.7 11.8 9.6
EV / Revenues 3.1 2.9 2.8 2.5 2.2 1.8
Dividend Payout 7.2 6.2 26.4 30.6 29.3 30.4
Source: Company, HDFC sec Research, ^ post IPO

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Rating Chart

R HIGH
E
T
U MEDIUM
R
N LOW
LOW MEDIUM HIGH
RISK

Ratings Explanation:

RATING Risk - Return BEAR CASE BASE CASE BULL CASE

IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 15%
IF RISKS MANIFEST RATIONALE
LOW RISK - LOW & IF INVESTMENT
BLUE PRICE CAN FALL FRUCTFIES PRICE
RETURN STOCKS RATIONALE
20% OR MORE CAN RISE BY 20% OR
FRUCTFIES PRICE
MORE
CAN RISE BY 15%
IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 20%
MEDIUM RISK - IF RISKS MANIFEST RATIONALE
& IF INVESTMENT
YELLOW HIGH RETURN PRICE CAN FALL FRUCTFIES PRICE
RATIONALE
STOCKS 35% OR MORE CAN RISE BY 35% OR
FRUCTFIES PRICE
MORE
CAN RISE BY 30%
IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 30%
IF RISKS MANIFEST RATIONALE
HIGH RISK - HIGH & IF INVESTMENT
RED PRICE CAN FALL FRUCTFIES PRICE
RETURN STOCKS RATIONALE
50% OR MORE CAN RISE BY 50%
FRUCTFIES PRICE
OR MORE
CAN RISE BY 30%

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Price Chart

650

550

450

350

250

150

50

Rating Definition:

Buy: Stock is expected to gain by 10% or more in the next 1 Year.

Sell: Stock is expected to decline by 10% or more in the next 1 Year.

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Disclosure:
I, Kushal Rughani, MBA, 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. HSL
has no material adverse disciplinary history as on the date of publication of this report. 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.
Research Analyst or HDFC Securities Ltd. Does not have financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or
more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or HDFC Securities Ltd. or its associate does not have material
conflict of interest.
Any holding in stock – No
HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475.

Disclaimer:
This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information
obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or
correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended
to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments.
This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction
where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction.
If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published
for any purposes without prior written approval of HSL.
Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in
securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk.
It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its
attachments.
HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other
transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.
HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not
restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc.
HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these
securities from time to time or may deal in other securities of the companies / organizations described in this report.

HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.
HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-
managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business.
HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor
Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage
service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any
compensation/benefits from the Subject Company or third party in connection with the Research Report.

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Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

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