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PGCIL order inflow analysis and a comparative study on Transmission EPC players

Ordering activity broadly on par with last year; substation ordering stays firm; Techno Electric

remains our top pick

Ordering activity stays flat y-o-y till Mid-March – Ordering activity by Power Grid (PGCIL) in FY16 (till mid-march, Rs.155bn)

has been broadly on par with FY15. This is inspite of weaker ordering in 2HFY16 which witnessed a decline of ~50% y-o-y.

Ordering pace in the transmission line segment registered a decline of 40% y-o-y. Substation and transformers ordering

remained healthy at Rs.40bn (flat yoy) and Rs. 7.4bn (15% yoy increase) respectively

TLT ordering see decline y-o-y, KECI, KPP win sizeable market share – Transmission line tower (TLT) ordering had

witnesses a y-o-y decline of 40% to Rs. 46bn in FY16 (till mid-march). Core TLT contractors – KEC (KECI), Kalpataru Power

(KPP)- secured a healthy share of ~40% of the overall TLT ordering during the period. We believe recent weakness in TLT

ordering to be only a near term concern (timing issue) and should pick-up as Rs. 40bn worth of PGCIL TLT tenders are in the

immediate pipeline. Competitive intensity has stabilized at ~6 bidders per TLT contract over the past 3-4 quarters. We expect

EBITDA margin for TLT contractors to be ~9-10% going forward.

Substation ordering momentum continues, Chinese/Korean players dominate GIS, TEEC wins sizeable share in AIS –

Substation orders remained healthy at Rs. 40bn in FY16 (vs. Rs. 44bn in FY15 and Rs. 26bn in FY14). Chinese/Korean players

continued to dominate the Gas Insulated Substation (GIS) segment by bidding for/winning majority of the GIS orders inspite of

competition from MNC players (ABB, ATD and SIEM). In Air insulated substation (AIS) orders, Techno Electric (TEEC) had

registered sizeable orders Rs. 4.2bn (22% market share). It has also won a STATCOM order with Rongxin (Rs. 4.8bn order).

Robust substation ordering by PGCIL, improved ordering by SEBs and new STATCOM orders (2-3 orders in the next 12

months) should improve the order inflow prospects for TEEC

International opportunity large, KECI,KPP to benefit given their presence – Transmission and distribution (T&D) spend by

international regions is expected to be strong inspite of global headwinds. Latest reports suggest MENA region is likely to spend

~USD 50bn in T&D spend over the next five years. Already ~$8bn has been spent in 2015 in the region. Similarly, top five

African countries are expected to spend ~USD 30bn over the next 4-5 years. Given KECI and KPP’s sizeable presence (~50%

of TLT order book in international markets), we expect ordering momentum to sustain.

Comparative Analysis: Prefer Techno among the trio followed by KECI and KPP – We remain positive on KECI, KPP and

TEEC given the increasing transmission spend in both domestic and international markets. We prefer TEEC given the high

quality management, conservative approach, strong order book position (2x book-to-bill) and possible triggers from wind power

asset sale. Assign 16x FY18E earnings and Rs. 131/share for other assets to arrive at a TP of Rs. 585. Maintain ‘Buy’

KECI should register strong order inflow growth (17% CAGR) driven by increased traction from international transmission

orders (EPC orders from Brazil for SAE towers), ordering from substation and railway segments. Turnaround in SAE Towers

should lead to higher margins. Assign 12x FY18E multiple to arrive at a TP of Rs. 150. Maintain ‘Buy’

KPP should register healthy growth (13% yoy growth) driven by healthy order inflow in FY16E and a low base. EBITDA margin

(standalone) should sustain at ~10.7% as the margin in infrastructure segment improves. Improvement in operational

performance in JMC projects and sale of real estate projects in Thane and Indore should lead to improved overall performance.

Assign 12x FY18E earnings multiple to arrive at a TP of Rs. 257. Maintain “Buy”

Executive Summary

VIJAYARAGHAVAN SWAMINATHAN [email protected] +91 44 4344 0022

RAVI SWAMINATHAN [email protected] +91 44 4344 0058 Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

Performance (%)

1m 3m 12m

Sensex 7% -2% -11%

BSE CG Index 7% -10% -25%

KECI 12% -25% 50%

KPP 14% -23% -10%

TEEC 9% -8% 22%

Market data

BSE SENSEX 25285

Nifty 7704

Date Mar 22, 2016

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Ma

r-1

5

Ma

y-1

5

Ju

l-1

5

Se

p-1

5

No

v-1

5

Ja

n-1

6

Ma

r-1

6

(%)

CG Index Sensex

BSE CG Index vs Sensex - Relative performance


PGCIL ordering to be on par with last year; Transmission line spend witnesses a decline

Average number of bidders for TLT orders remain low relative to

historical level

Source: PGCIL, Spark Capital Research

Transformers and substation continue to constitute bulk of the orders

Source: PGCIL, Spark Capital Research; * - till Mid-March

PGCIL ordering in FY16 is broadly on par with FY15 spend


Transmission line orders have been lower than last year


221

139

109

169 155

0

50

100

150

200

250

FY12 FY13 FY14 FY15 FY16 (Till Mid-March)

PGCIL - Overall Ordering (Rs. bn) ex- HVDC

Overall Ordering (Rs. bn) ex- HVDC

Transmission line 30%

Substation 26%

Others 21%

Conductor 12%

reactor 5%

Transformer 5%

Insulator 1%

PGCIL -FY16* Order Break up - Rs. 155bn

98

69

42

77

46

0

20

40

60

80

100

120

FY12 FY13 FY14 FY15 FY16 (Till Mid-March)

Transmission Line Orders (Rs. bn)

Transmission Line Orders (Rs. bn)

7.1

8.6

6.0 6.0

5.7

6.2

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

FY11 FY12 FY13 FY14 FY15 FY16 (Till Mid-March)

TLT - Average No. of bidders

Average No. of bidders


KECI, KPP wins sizeable orders from PGCIL, SEBs

In the 13th plan sizeable portion of the transmission spend should

come from the SEBs

Source: Ministry of Power, Spark Capital Research

Overall PGCIL ordering in FY16 (till mid-March) has been at a similar run-

rate as FY15. Ordering for substations has continued to remain high at ~Rs.

40bn worth of orders. Orders in the transmission line towers (TLT) segment

witnessed a decline of 40% y-o-y which, we believe is due to the shift in

focus of PGCIL towards execution of existing projects already awarded vis-a-

vis award of new orders. Order inflow momentum in TLT segment should

pick up from FY17E onwards given ~Rs. 40bn worth of orders are in pipeline.

Competitive intensity in TLT ordering has remained low at a historical level

due to the stringent pre-qualification norms insisted by PGCIL.We believe the

elimination of fringe players in the TLT market has improved the margin

profile of orders in the segment.

KECI (~27% market share) and KPP (13% market share) have continued to

win sizeable portion of the TLT orders. KPP has secured sizeable contracts

from SEBs also. We believe KECI and KPP would benefit from any pick up in

TLT ordering from both PGCIL and SEBs from FY17E

KPP has won sizeable SEB orders

Source: KECI, KPP exchange filings, Spark Capital Research

KECI has won a sizeable portion of the PGCIL TLT orders


Date State Order Winner Value

(Rs. Mn)

Jun-15 Karnataka Transmission line and

Substation KECI 860

Oct-15 Telengana 400kV Transmission Line KECI NA

Mar-16 West Bengal Transmission line KECI 830

Dec-15 Tamil Nadu Transmission line KPP 7700

Aug-15 Karnataka Transmission line KPP 3420

KEC 27%

L&T 18%

EMC 14%

KPP 13%

Skipper 6%

Tata Projects 3%

Others 19%

PGCIL - FY16 TLT orders - Market Share (%) - Rs.46bn

PGCIL 1

SEBs 1.6

13th Plan Transmission Spend (Rs. tn)


International transmission spend likely to be robust

Ordering activity in the MENA region is likely to remain high inspite of the

recent fall in crude oil prices. The governments have continued to focus on

basis infrastructure spend which includes transmission related expenditure.

About ~USD 50bn worth of transmission spend is expected over the next 5

years. Already ~8bn worth of expenditure was incurred in 2015 in this region

Similarly, key African countries are also having sizeable plans to increase

their spend on transmission and distribution over the next 4-5 years. About

~USD 25-30bn is expected to be spent by the top five countries in this

region. Both, KECI and KPP have sizable presence in Africa.

For KECI, ordering opportunity is expanding in the Latin American countries.

It has started to secure EPC orders in Brazil (so far they have been

executing only tower supply contracts). EPC contracts are thrice the size of

pure supply contracts.

Sizeable opportunity in the international markets should sustain growth in

international segment and mitigate geographical concentration risks for both

KECI and KPP

MENA region spend should remain firm inspite of fall in crude prices

Source: MEED, Spark Capital Research

KECI and KPP have >50% of their TLT order book in overseas markets

Source: KECI and KPP Q3FY15 investor presentation, Spark Capital Research

African countries – Commentary on T&D spend- Robust outlook

s

Source: Online report and articles, Spark Capital Research

Transmission Line Towers (TLT) Order book (Rs. bn)

Region KEC KPP

India 35.6 27.7

Africa 11.2 11.9

MENA 15.0 9.2

CIS 0.9 2.6

SAARC 7.5 2.6

Americas 9.4 1.3

Total 79.6 55.4

Country Commentary

Ghana

Requires USD4bn in investment over the next 10 years in

generation, transmission & distribution; power demand growing at

12% pa

Nigeria Transmission Company of Nigeria (TCN) has revealed plans to

stimulate its operations with USD8bn in next few years

South Africa South Africa's electricity transmission grid plans investment of

USD15bn by 2022

Kenya Plans to spend USD1bn over the next four years in its national grid

Ethiopia Ethiopia plans to invest USD3 to 5bn in transmission and

distribution infrastructure in the next few years.

MENA region Transmission and distribution spend (2016-2022)

Region Generation

(USD bn)

Transmission

(USD bn) Distribution

Transmission +

Distribution

(USD bn)

Total

(Generation +

Transmission +

Distribution

(USD bn)

North Africa 37.3 8 .1 24.7 32.8 70.1

Palestine,

Lebanon, Syria,etc 74 .9 14.5 34.2 48.7 123.6

GCC 3.9 19.2 36.6 55.8 149.7

Rest of Arab world 2.6 0.5 0.8 1.3 3.9

Iran 38.4 8.4 22.3 30.7 69.1

MENA Total 247.1 50.7 118.6 169.3 416.4


Expanding substation market to accommodate increased competition

Ordering activity in the substation market has remained strong from

PGCIL. ~Rs. 40bn worth of orders have been tendered out of which Rs.

21bn is for Gas Insulated Substation (GIS)

Chinese players have continued to dominate the GIS and Extra high

voltage (EHV) market. Among air insulated substation (AIS) orders,

TEEC and Alstom have secured sizeable orders. STATCOM order has

been secured by Rongxin (in a tie-up with TEEC).

While we acknowledge the increased competition in the substation

market – Hyosung setting up manufacturing facility in India, TLT players

foraying into substation EPC and domestic MNC players getting

aggressive - we believe an expanding market should provide comfortable

opportunity for TEEC.

GIS continues to command high share in overall ordering


Substation ordering has remained firm in FY16


TEEC and Alstom have done well in AIS; Rongxin (with TEEC) has won

the STATCOM order

s


3.4

10.8

16.6

31.3

20.8

0

5

10

15

20

25

30

35

FY12 FY13 FY14 FY15 FY16

GIS substation orders (Rs. bn)

GIS substation orders

29 26 26

44 40

0

5

10

15

20

25

30

35

40

45

50

FY12 FY13 FY14 FY15 FY16

Substation order value (Rs. bn)

Substation order value (Rs. bn)


KECI – Bid pipeline strong, turnaround in SAE, new segments to improve margins

Order inflow momentum for KECI should sustain given the strong bid

pipeline across geographies, verticals and foray into EPC contracts in

Brazil (through SAE Towers). We expect order inflow to grow by 17%

CAGR in FY16E-FY18E

KECI margins in the new segments (substation, railways) have improved

as a few low margin orders are completed. We expect EBITDA margin

should sustain at higher levels driven by turnaround in SAE Towers

operations (especially Mexico) and improved margin in the new

segments (substations, railways)

KECI has reduced its interest cost from 3.7% of FY15 sales to ~3.5% in

9MFY16 through monetization of assets (land and telecom assets).

Interest cost should decrease further to ~3% of FY17E revenue on the

back of improved credit rating (improved to A1+ from A1 in Nov’15) and

better mix of relatively low cost debt vs. high interest cost bearing

acceptances

…should lead to strong order inflow over the next 1-2 years

Source: Company, Spark Capital Research

KECI has a strong bid pipeline …

Source: Spark Capital Research

Turnaround in SAE Towers should lead to margin improvement

s


SAE

Towers

(Rs.mn)

FY12 FY13 FY14 FY15 FY16E

Revenue 9,130 10,320 8,630 8,030 8,030

PBT 1,325 1,108 658 -543

To Break-

even at

PBT level PAT 913 755 473 -577

Middle East 41%

Others International

18%

PGCIL 18%

SEB 10%

Railways 13%

KEC - Bid Pipeline - Rs. 200bn

85 82 84

98

115

-5%

0%

5%

10%

15%

20%

0

20

40

60

80

100

120

140

FY14 FY15 FY16E FY17E FY18E

KEC International Order Inflow (Rs. bn)

KEC Intl Order inflow (Rs. bn) YoY Growth (%)


KPP – Strong order inflow momentum to lead to growth recovery

KPP has registered strong order inflow in FY16E (~Rs. 61bn so far vs.

Rs. 31bn in FY15). This has been largely due to two large orders from

Tamil Nadu and Karnataka SEBs (~Rs. 11bn worth of orders) and EPC

contracts worth Rs. 8.5bn for the transmission BOT project KPP had

secured in West Bengal

EBITDA margin for KPP has seen an increase to 10.7% in FY16E (vs.

9.6% in FY15) driven by benefits from fall in commodity prices (for fixed

price contracts) and turnaround in the infrastructure segment. We expect

margin to stabilize at these levels over the next two years

JMC Projects margin should sustain higher at ~8.4% (vs. 6.8% in FY15)

as higher share of the order book carry price variation clause. Stabilizing

operations in infrastructure segment, staggered sale of real estate

investments should be additional triggers.

…driven by large orders from SEBs


KPP has registered strong order inflow in FY16E…


17 20

39 35 39

20 11

24 22

24

0

10

20

30

40

50

60

70


KPP - Order Inflow (Rs. bn)

Domestic International

1.2 1.4 1.1 0.9

0.1 0.1

0.5

1.7 0.1

0.2 0.1

0.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

4QFY15 1QFY16 2QFY16 3QFY16

KPP - Domestic TLT order book (Rs. bn)

PGCIL SEB Private

KPP - SoTP Valuation

Standalone Business

FY18E EPS (Rs.) 16.5

Multiple 12

Standalone Business value per share (Rs.) 198

JMC Projects

FY18E EPS (Rs.) 24.0

Multiple 10

JMC value per share (Rs.) 41

Holding company discount (%) 40%

JMC value per share (Rs.) post discount 25

Other assets

KPP transmission BOT investment (Rs. Mn) 947

KPP transmission BOT per share value @0.5x multiple 3

JMC road BOT investment (Rs. Mn) 6000

JMC road BOT per share value @0.3x multiple 12

Shubham investment (Rs. Mn) 1970

Shubham value per share @ 0.5x multiple 6

Real estate investment (Rs. Mn) 3926

Real Estate value per share @ 0.5x multiple 13

Total Value (Rs.) 257


TEEC – Strong order book position to drive growth, further wind asset sale to act as near term trigger

TEEC’s order inflow in FY16E should be on-par with FY15 (Rs. 14bn) on

the back of better ordering traction in Jan-Mar’16. Current order book of

~Rs. 20bn (2x FY16E book-to-bill) provides sufficient revenue visibility

and should lead to 17-18% revenue CAGR over the next two years

We expect order inflow momentum to continue in the medium term driven

by robust substation ordering sustained by PGCIL and increased by

SEBs. Further STATCOM orders in the pipeline (2-3 orders expected in

the next12 months) should drive order inflow

Possible sale of remaining wind power assets (162MW) should reduce

the current net debt of Rs. 2bn and lead to net cash scenario. TEEC is

expected to invest in substation BOT based projects going forward. We

believe TEEC is likely to have a cautious approach towards solar EPC

projects given the volatility in this segment

…should be driven by a strong order book (~2x FY16E book-to-bill)


Strong EPC segment revenue growth…


5.7 6.7

10.1

11.5

13.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0


TEEC - EPC Revenue (Rs. Mn)

Revenue (Rs. Mn)

Techno Electric – Order book (as on 31st Dec 2015)

Name of the Client Amount (INR Mn) %

Power Grid Corporation Ltd. 8,900 46.72

North Bihar Power Distribution Co Ltd 2,825 14.83

NTPC Ltd. 2,130 11.18

Rajasthan Rajya Vidyut Prasaran Nigam Ltd. 1,545 8.11

Bihar State Electricity Board 1,510 7.93

Patran Transmission Co Ltd 780 4.09

APTRANSCO 505 2.65

Meja Urja Nigam ltd 320 1.68

Others 535 2.81

Total 19,050 100.00

TEEC - SoTP Valuation

EPC Business

FY18E EPS (Rs.) 28

Multiple 16

EPC Business value per share (Rs.) 454

Wind Power

Investment in Simran Wind (Rs. mn) 2,581

Investment in Super Wind (Rs. mn) 2,500

Total Investment (Rs. mn) 5,081

Book value (x) 1.0

Wind assets value per share (Rs.) 89

BOOT Assets (DCF Valuation)

Haryana transmission (Rs. mn) 701

Patran Transmission (Rs. mn) 463

Total Value (Rs. mn) 1,164

BOOT Asset value per share (Rs. ) 20

Cash from wind power sale proceeds (Rs. mn) 1,206

Cash from wind power sale proceeds per share (Rs.) 21

Total Value (Rs.) 585


KECI, KPP,TEEC Comparison

KECI (Consolidated) KPP (Standalone) TEEC (Standalone)

Parameters FY14 FY15 FY16E FY14 FY15 FY16E FY14 FY15 FY16E

Revenue 100 100 100 100 100 100 100 100 100

RM 75.4 76.2 73.5 71.7 69.7 68.5 71.7 72.9 75.0

Employee

Cost 7.2 6.9 7.4 6.4 7.1 7.8 4.7 3.8 2.9

Other Costs 11.2 10.8 11.5 12.4 13.5 13.0 9.5 7.4 8.0

EBITDA

Margin 6.2 6.0 7.6 9.5 9.6 10.7 14.1 15.9 14.1

Depreciation 0.9 1.0 1.1 1.7 1.9 2.2 2.5 2.0 1.4

Other Income 0.2 0.1 0.2 1.2 1.2 1.3 3.5 3.5 2.4

Interest Cost 3.3 3.6 3.3 3.6 3.2 2.9 2.6 2.4 1.1

PBT 2.2 1.5 3.4 5.4 5.7 6.9 12.4 15.0 14.0

PAT 1.1 0.6 2.1 3.6 3.7 4.5 11.8 12.3 11.2

Order Inflow

(Rs. Mn) FY12 FY13 FY14 FY15 FY16E FY17E FY18E

CAGR

(FY12-

FY16E)

CAGR

(FY16E-

FY18E)

TEEC -EPC 2,520 5,659 7,705 14,931 14,931 17,171 19,746 56% 15.0%

KECI 65,870 78,770 84,820 82,230 83,998 98,454 1,15,450 6% 17.2%

KPP –

Standalone 35,647 41,234 37,352 30,723 63,649 58,190 64,009 16% 0.3%

Revenue

(Rs. Mn) FY12 FY13 FY14 FY15 FY16E FY17E FY18E

CAGR

(FY12-

FY16E)

CAGR

(FY16E-

FY18E)

TEEC - EPC 7,041 5,158 5,705 6,681 11,834 14,397 17,212 14% 20.6%

KECI 58,147 69,795 79,018 84,678 85,307 95,129 1,06,975 10% 12.0%

KPP -

Standalone 30,327 33,354 40,552 44,223 39,318 44,319 50,775 7% 13.6%

TEEC carries better EBITDA margin due to

its asset light business model and low cost

of operations. KECI and KPP carry

relatively lower margin due to higher fixed

costs

KECI has the highest leverage with a debt-

to-equity ratio of 1.6x and interest cost of

~3.3% FY16E. Scope for interest cost

reduction is high given recent improved

credit rating and stable debt position

Order inflow growth scope is high for both

KECI and TEEC given their expanding

addressable markets (for KECI – Brazil

EPC projects and substations). Order

inflow for KPP should moderate due to a

high base (doubling of order inflow yoy in

FY16E)

Execution growth should remain healthy

for all the players given – low base, strong

order inflow visibility and stabilization of

commodity prices (for KECI and KPP).

TEEC should grow by ~20% CAGR given

strong order book position


KECI, KPP,TEEC Comparison

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

KECI

RoE (%) 20.5 5.8 7.3 4.2 12.5 16.1 18.0

RoCE(%) 13.0 5.7 6.8 5.3 9.5 11.7 12.6

KPP

–

Stand

alone.

RoE (%) 15.7 13.1 12.9 13.8 14.0 15.3 17.1

RoCE(%) 12.6 11.3 10.5 9.9 10.4 11.1 12.2

TEEC

-

Stand

alone.

RoE (%) 18.8 11.0 11.8 12.9 15.0 15.5 17.3

RoCE(%) 16.3 10.8 10.8 12.2 13.8 14.6 16.8

FY12 FY13 FY14 FY15 FY12-FY15

KECI

OCF (Pre-tax) 6,413 108 1,034 2,749 10,304

EBITDA 4,713 3,814 4,933 5,118 18,579

OCF/EBITDA 136% 3% 21% 54% 55%

KPP

OCF (Pre-tax) 2,192 2,764 1,608 915 7,479

EBITDA 3,293 3,222 3,863 4,267 14,644

OCF/EBITDA 67% 86% 42% 21% 51%

TEEC

OCF (Pre-tax) 813 535 1,074 -92 2,330

EBITDA 1,401 964 838 1,096 4,299

OCF/EBITDA 58% 56% 128% -8% 54%

Parameter KECI KPP TEEC Comments

Order Inflow

Momentum 1 3 2

Order inflow traction for KECI should remain strong given sustained ordering in Middle East, EPC orders in Brazil and Railways, Substation

contracts. Ordering for KPP should be flat over the next two years given the high base created in FY16E

Execution Pace 3 2 1 Execution pace for TEEC should remain strong given the strong order book (book to bill of ~2x)

Scope for margin

Expansion 1 3 2 For KECI, Turnaround in SAE Towers, and improving margins in new segments (railways, water,etc) should lead to margin expansion

Working Capital 1 2 3 KECI continues to have a relatively lower working capital requirement. KPP has maintained working capital position over the past few

years.TEEC’s working capital has deteriorated the most

Management Quality 2 3 1 We believe TEEC’s management has a more prudent and conservative approach in picking orders with strong execution

Overall Ranking 2 3 1 We prefer TEEC due to its focused, selective approach towards picking orders, asset light operations and a strong balance sheet

position (with low leverage ~0.2x debt-to-equity)

KECI (Consolidated) KPP (Standalone) TEEC (Standalone)

FY12 FY13 FY14 FY15 FY12 FY13 FY14 FY15 FY12 FY13 FY14 FY15

Inventory days 28 21 23 21 31 39 49 49 1 1 7 3

Debtor days 230 227 248 249 247 250 227 209 153 205 159 202

Creditor days 192 171 180 174 155 173 152 127 107 122 104 101

Cash Conversion

Cycle (in days) 66 76 91 95 123 116 123 130 47 85 62 105

KPP has the highest cash

conversion cycle on the back of

higher inventory levels (bulk

buying of raw material). KECI and

TEEC’s cycle has deteriorated

over the past few years

OCF/EBITDA metrics has been

broadly similar to all three players


Financial Summary - KECI

Rs. mn FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E

Profit & Loss Growth ratios

Revenues 84,678 85,307 95,129 1,06,975 Sales 7.2% 0.7% 11.5% 12.5%

EBITDA 5,118 6,481 7,619 8,774 EBITDA 3.7% 26.6% 17.6% 15.2%

Other Income 116 133 146 161 PAT -37.3% 228.6% 43.6% 27.4%

Depreciation 881 913 979 1,045 Margin ratios

EBIT 4,353 5,701 6,787 7,890 EBITDA 6.0% 7.6% 8.0% 8.2%

Interest 3,088 2,783 2,917 2,962 PAT 0.6% 2.1% 2.6% 3.0%

PBT 1,264 2,918 3,870 4,928 Performance ratios

PAT 533 1,751 2,515 3,203 RoE 4.2% 12.5% 16.1% 18.0%

Balance Sheet RoCE 5.3% 9.5% 11.7% 12.6%

Net Worth 13,298 14,640 16,569 19,025 RoA 0.7% 2.3% 3.1% 3.6%

Deferred Tax 527 527 527 527 Fixed asset turnover (x) 6.2 6.2 6.4 6.8

Total debt 21,892 20,810 21,844 22,421 Total asset turnover (x) 1.1 1.1 1.1 1.1

Total Networth and liabilities 35,717 35,978 38,940 41,972 Financial stability ratios

Gross Fixed assets 13,639 13,839 14,839 15,839 Net Debt to Equity (x) 1.5 1.3 1.1 1.0

Net f ixed assets 8,646 7,933 7,953 7,908 Current ratio (x) 1.6 1.6 1.6 1.6

CWIP 164 0 0 0 Inventory and debtor days 269 271 271 271

Investments 0 0 0 0 Creditor days 174 172 172 172

Inventories 4,763 5,142 5,734 6,448 Working capital days 95 99 99 99

Sundry Debtors 40,458 41,602 46,392 52,169 Interest cover (x) 1.4 2.0 2.3 2.7

Cash and bank balances 2,063 2,416 2,826 2,983 Valuation metrics

Loans and advances 17,232 16,557 18,442 20,702 Fully Diluted Shares (mn) 257.1 257.1 257.1 257.1

Current liabilities 41,552 41,614 46,350 52,180 Market cap (Rs.mn) 30,852 30,852 30,852 30,852

Net current assets 22,964 24,103 27,044 30,122 EPS (Rs.) 2.1 6.8 9.8 12.5

Total assets 35,717 35,978 38,940 41,972 P/E (x) 57.9 17.6 12.3 9.6

Cash Flows EV (Rs.mn) 50,681 49,247 49,870 50,290

Cash flow s from Operations 1,529 4,661 3,881 4,290 EV/ EBITDA (x) 9.9 7.6 6.5 5.7

Cash flow s from Investing 1,248 -36 -1,000 -1,000 BV/ share (Rs.) 51.7 56.9 64.4 74.0

Cash flow s from Financing -2,157 -4,273 -2,470 -3,133 Price to BV (x) 2.3 2.1 1.9 1.6

Key metricsAbridged Financial Statements (Consolidated)


Financial Summary - KPP



Revenues 71,982 66,111 74,043 84,001 Sales 1.5% -8.2% 12.0% 13.4%

EBITDA 7,043 7,033 8,149 9,349 EBITDA 19.4% -0.1% 15.9% 14.7%

Other Income 251 276 303 333 PAT -6.8% 12.8% 38.9% 26.6%

Depreciation 1,683 1,835 2,059 2,287 Margin ratios

EBIT 5,611 5,473 6,393 7,396 EBITDA 9.8% 10.6% 11.0% 11.1%

Interest 3,370 3,500 3,652 3,924 PAT 1.6% 2.0% 2.4% 2.7%


PAT 1,204 1,159 1,628 2,084 RoE 5.3% 5.7% 7.6% 9.0%


Net Worth 22,166 23,176 24,643 26,520 RoA 1.4% 1.5% 2.0% 2.3%






CWIP - - - - Inventory and debtor days 264 271 271 269

Investments 113 113 113 113 Creditor days 146 153 153 150

Inventories 12,176 11,230 12,577 14,269 Working capital days 117 117 118 120


Cash and bank balances 1,381 1,584 1,993 2,585 Valuation metrics




Total assets 58,089 57,953 62,416 67,829 P/E (x) 25.0 26.0 18.5 14.4


Cash flow s from Operations 3,616 8,691 5,007 4,993 EV/ EBITDA (x) 9.0 8.8 7.9 7.2

Cash flow s from Investing -7,134 -3,550 -3,600 -3,600 BV/ share (Rs.) 144.4 151.0 160.6 172.8

Cash flow s from Financing 3,452 (4,937) (998) (802) Price to BV (x) 1.4 1.3 1.2 1.1

Key metricsAbridged Financial Statements (Consolidated)


Financial Summary - TEEC



Revenues 7,939 13,223 15,787 18,602 Sales 12.1% 66.6% 19.4% 17.8%

EBITDA 2,082 2,616 2,967 3,366 EBITDA 8.0% 25.7% 13.4% 13.5%

Other Income 202 314 376 452 PAT 26.9% 35.9% 14.5% 22.4%

Depreciation 603 492 500 508 Margin ratios

EBIT 1,681 2,438 2,843 3,309 EBITDA 26.2% 19.8% 18.8% 18.1%

Interest 431 443 372 284 PAT 13.4% 10.9% 10.5% 10.9%


PAT 1,064 1,446 1,656 2,027 RoE 12.1% 14.8% 15.0% 16.3%


Net Worth 9,147 10,407 11,677 13,231 RoA 6.5% 7.7% 7.7% 8.8%






CWIP 0 0 0 0 Inventory and debtor days 229 216 216 216

Investments 1,347 3,347 3,347 3,347 Creditor days 119 110 110 110

Inventories 64 217 260 306 Working capital days 110 106 106 106


Cash and bank balances 247 247 365 380 Valuation metrics




Total assets 14,077 15,538 16,107 16,661 P/E (x) 27.1 19.9 17.4 14.2


Cash flow s from Operations 438 923 1,776 1,972 EV/ EBITDA (x) 16.0 12.8 11.0 9.4

Cash flow s from Investing 658 -297 -200 -200 BV/ share (Rs.) 160.3 182.4 204.7 231.9

Cash flow s from Financing -1,330 -626 -1,458 -1,756 Price to BV (x) 3.1 2.8 2.5 2.2

Abridged Financial Statements (Consolidated) Key metrics


Recommendation History

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150

200

Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16

Rs.

Price Target

KEC International – 3 Year Price and Rating History

0

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100

150

200

250

300

350

Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16

Rs.

Price Target

Kalpataru – 3 Year Price and Rating History

0

100

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300

400

500

600

700

Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15

Rs.

Price Target

Techno Electric – 3 Year Price and Rating History

Report Date Price Target Reco.

08/Feb/16 118 150 Buy

30/Oct/15 140 112 Sell

29/Jul/15 151 136 Sell

08/May/15 100 86 Sell

06/Feb/15 88 80 Sell

04/Nov/14 104 96 Sell

09/Sep/14 107 116 Add

04/Aug/14 112 116 Add

05/May/14 77 88 Buy

13/Feb/14 54 67 Buy

28/Oct/13 33 62 Buy

05/Aug/13 26 61 Buy


09/May/13 49 67 Buy

09/Apr/13 55 77 Buy

31/Jan/13 60 77 Buy

10/Jan/13 69 84 Buy


15/Feb/16 170 250 Buy

09/Nov/15 259 295 Buy

11/Aug/15 276 325 Buy

02/Jun/15 223 252 Buy

10/Feb/15 224 249 Buy

12/Nov/14 169 223 Buy

09/Sep/14 168 235 Buy

05/Aug/14 166 212 Buy

04/Jun/14 180 214 Buy

03/Feb/14 77 103 Buy

05/Nov/13 79 113 Buy

30/Jul/13 63 100 Buy


20/May/13 78 103 Buy

09/Apr/13 77 116 Buy

29/Jan/13 99 117 Buy


09/Feb/16 491 579 Buy

13/Nov/15 511 604 Buy

12/Aug/15 522 594 Buy

24/May/15 432 466 Buy

10/Feb/15 393 431 Buy

12/Nov/14 300 404 Buy

23/Sep/14 283 376 Buy

Disclaimer

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Absolute

Rating

Interpretation

BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year

horizon

ADD Stock expected to provide positive returns of >5% – <15% over a 1-year

horizon SELL Stock expected to fall >10% over a 1-year horizon

Disclaimer (Cont’d)

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Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

Disclosure of interest statement Yes/No

Analyst financial interest in the company No

Group/directors ownership of the subject company covered No

Investment banking relationship with the company covered No

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Managing/co-managing public offering of securities

Investment banking/merchant banking/brokerage services

products or services other than those above

in connection with research report

No

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