sector update 10 sep 2018 agro-chemicals - update - sep18 … · sector update. 10 sep 2018 ... rm...

SECTOR UPDATE 10 SEP 2018

Agro-Chemicals

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

On a recovery mode As Chinese environmental compliances get stricter, low level of RM inventory in the channels and higher RM costs are likely to pose near-term margin challenges for Indian agro-chemical manufacturers. To reduce dependency on China, Indian crop-protection companies are revisiting their sourcing options. As Industry consolidation, higher channel inventory of finished goods and the spill-over effect of 2 consecutive weak monsoons is behind us, we believe that recovery in the agro-chemical market is in the offing.

There is a gradual recovery in sowing (flat YoY), near normal rainfall (7.0% below LPA). With a strong product pipeline and an expected recovery in CRAMS/CSM (new chemistries and verticals), we believe that the Indian crop protection market is on a recovery mode.

The state-run Indian Meteorological Department (IMD) has predicted monsoon being ‘normal’ at 95% of the

long period average (LPA). Data released by the IMD on 5-Sep-18 suggests that rainfall for the country is 7% below LPA, largely due to 24% below normal rainfall in East & Northeast India. Kharif crop sowing has picked up with key agro-chemical focused crops like Paddy (up 2.3% YoY to 38.2 mn ha) and Cotton (down 2.4% YoY to 11.8 mn ha) as on 8-Sep-18.Water storage in 91 reservoirs in India is at 71% of full reservoir level (FRL) as on 8-Sep-18, which is better than the overall storage position for the country during the same period last year (68% of FRL).

We expect UPL to benefit from the acquisition of Arysta (EPS accretive by Rs 4.5/share in FY20E) while PI Industries and Insecticides are likely beneficiaries of strong product pipelines. We expect PI and Insecticides to post 3-year earnings CAGR of 13.4% and 13.5% over FY18-21E. We like Dhanuka’s asset light business model and anticipate a better 2HFY19 performance. We like Dhanuka (TP:-Rs 723/share, upside of 31%) and PI Industries (TP:-Rs 923/share, upside of 19%) in our coverage universe.

Valuation summary

MCap (Rs bn)

CMP (Rs) Reco TP

(Rs) EPS (Rs) P/E (x) EV/EBITDA (x) Core RoCE (%)

FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E UPL 358 703 NEU 719 43.0 53.3 61.0 16.6 13.4 11.7 10.0 8.2 7.3 22.6 17.6 13.1 PI Ind. 106 776 BUY 923 30.1 34.9 39.0 25.8 22.2 19.9 18.9 15.7 13.6 18.2 20.4 21.5 Rallis India 40 205 BUY 292 9.8 11.6 13.8 20.5 17.3 14.5 12.9 10.8 8.8 15.4 17.1 19.4 Dhanuka Agritech 27 538 BUY 723 28.0 30.7 35.0 19.7 18.0 15.8 13.6 11.7 9.9 25.0 25.6 27.6

Insecticides India 12 594 BUY 961 45.1 53.8 59.3 13.3 11.1 10.1 8.2 6.9 6.1 14.3 15.4 15.3

Source: Company, HDFC sec Inst Research

MCap

(Rs bn) CMP (Rs) Reco. TP

(Rs) UPL 358 703 NEU 719 PI Ind. 106 776 BUY 923 Rallis India 40 205 BUY 292 Dhanuka Agritech 27 538 BUY 723

Insecticides India 12 594 BUY 961

Archit Joshi [email protected] +91-22-6171-7316 Nilesh Ghuge [email protected] +91-22-6171-7342 Divya Singhal [email protected] +91-22-6639-3038

AGRO-CHEMICALS: SECTOR UPDATE

Page | 2

Region-Wise Distribution Of Cumulative Rainfall Northwest India East and Northeast India

Source: imd.gov.in, HDFC sec Inst Research Source: imd.gov.in, HDFC sec Inst Research

Central India Southern Peninsula

Source: imd.gov.in, HDFC sec Inst Research Source: imd.gov.in, HDFC sec Inst Research

Data released by the IMD on 5-Sep-18 suggests that rainfall for the country is 7% below LPA, led by 24% deficit in the East & Northeast India. IMD expects the monsoon to be normal in Aug-18 and Sept-18 as against Skymets prediction.

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Highest increase in MSP since FY13 On 4-July-18, Prime Minister Nardendra Modi

announced the highest single year revision of Minimum Support Prices (MSP) for 14 Kharif Crops. MSP calculation is as per the A2+FL method (which includes cost of seeds, fertilizers, manure, insecticides and other miscellaneous costs + family labor).

MSP for Paddy (common grade) has increased by Rs 200/quintal, which is up 12.9% YoY. MSP for Ragi has increased by 52.5% YoY, which is the highest percentage increase in the entire pack of Kharif crops, followed by Nigerseed, Jowar and Bajra.

Higher MSP of key kharif crops are likely to boost farm incomes subject to a normal rainfall.

Historical MSP data

MSP (Rs/Quintal) FY14 FY15 FY16 FY17 FY18 FY19 Growth over FY18-19 (%)

Paddy (Common) 1,310 1,360 1,410 1,470 1,550 1,750 12.9 Paddy (Grade A) 1,345 1,400 1,450 1,510 1,590 1,770 11.3 Jowar (Hybrid) 1,500 1,530 1,570 1,625 1,700 2,430 42.9 Jowar (Maldandi) 1,520 1,550 1,590 1,650 1,725 2,430 40.9 Bajra 1,250 1,250 1,275 1,330 1,425 1,950 36.8 Maize 1,310 1,310 1,325 1,365 1,425 1,700 19.3 Ragi 1,500 1,550 1,650 1,725 1,900 2,897 52.5 Arhar (Tur) 4,300 4,350 4,625 5,050 5,450 5,675 4.1 Moong 4,500 4,600 4,850 5,225 5,575 6,975 25.1 Urad 4,300 4,350 4,625 5,000 5,400 5,600 3.7 Cotton (Medium staple) 3,700 3,750 3,800 3,860 4,020 5,150 28.1 Cotton (Long staple) 4,000 4,050 4,100 4,160 4,320 5,450 26.2 Groundnut in shell 4,000 4,000 4,030 4,220 4,450 4,890 9.9 Sunflower seed 3,700 3,750 3,800 3,950 4,100 5,388 31.4 Soyabeen 2,500 2,560 2,600 2,775 3,050 3,399 11.4 Sesamum 4,500 4,600 4,700 5,000 5,300 6,249 17.9 Nigerseed 3,500 3,600 3,650 3,825 4,050 5,877 45.1

Source: Industry, HDFC sec Inst Research

Increase in MSP should also be supported by procurement. “MSP has a positive and statistically significant effect on retail prices of all crops, although it varies significantly across crops. In general, it has a stronger effect for those crops where procurement is substantial, such as paddy and wheat.” – RBI Annual Report 2017-18


Page | 4

Sowing picks up, reservoirs storage levels improve Sowing (mn ha) data suggests that there has been a

gradual improvement in sowing of Kharif crops till 8-Sep-18. Rice sowing which was down by 31% YoY by the end of June-18 and 8% down YoY by the end of July-18 has picked pace in Sep-18. Rice sowing is now up by 0.4% YoY as on 8-Sep-18. Currently, the area Rice sown area stands at 38 mn ha.

Cotton sowing, too, has improved from the lows of 3.2 mn ha (down 30% YoY by June end) to 11.8 mn ha (down 2.4% YoY as on 8-Sep-18).

Total Kharif sowing has picked up pace in Sep-18 and is now down by 0.1% YoY to 104.1 mn ha.

Reservoirs storage levels are above the 10-year average, total storage as on 8-Sep-18 was at 112 Billion cubic meters (BCM), which is 71% of the storage capacity at full reservoirs level (FRL) as against 68% of FRL in the same period last year.

Weekly Change (% YoY) in Sowing (mn ha) Area

Reservoir Storage Level (in BCM)

Source: agricoop.nic.in, HDFC sec Inst Research Source: agricoop.nic.in, HDFC sec Inst Research

As per the managements of Dhanuka Agritech and Insecticides India, sowing in key agricultural areas like Maharashtra, Uttar Pradesh, Bihar, Madhya Pradesh has improved in the month of Aug-18 and is likely to sustain in Sep-18.

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COMPANY UPDATE 10 SEP 2018

UPL NEUTRAL


Good from afar, but far from good UPL is set to become the 5th largest agro-chemical company by sales (~US$ 4.7bn) globally with the acquisition of Arysta Lifesciences (a subsidiary of Platform Specialty). The acquisition is likely to be EPS accretive (by Rs 4.5/share in FY20E) at 19.5% EBITDA margin (likely to sustain FY18 EBITDA margin going forward), which is at par with its global peers. Any improvement in the margins thereon would come in from backward integration and cost optimization. UPL is expected to derive post-acquisition synergies of ~USD 200mn. Having impacted by forex fluctuations, UPL and Platform Specialty have made cumulative loss of Rs 4.7bn over FY16-18 and ~USD 0.2bn over CY15-17 respectively, which could limit synergy benefits and deter incremental translation into earnings. The acquisition of Arysta is likely to complement UPL in terms of (1) Geographical (2) Segment and (3) Product mix.

India Business: The business grew by 12.8% YoY in FY18 due to better performance from key brands like Ulala, Eros, Dost Super, Saaf and Iris. The company

witnessed good traction on the newly launched Sweep Power (herbicide, competing with Glyphosate). With a pickup in sowing and expectation of a normal rainfall, India business is expected to grow at 13.0% to Rs 33.9bn in FY19E.

Latin America Business: LatAm business (contributing 32.8% of FY18 top line) started on a positive note in FY19. barring Colombia, which was adversely affected by lower acreages in key crops, Mexico, Peru, Ecuador, Brazil markets performed well with a healthy order book. Devaluation of the Mexican Peso, however, is negatively impacting the business. UPL’s tie up with Bayer in Brazil, to jointly cross-sell fungicides against Asian Rust (a Soya bean disease) bodes well for the company’s LatAm business.

We expect RoCE/RoICs to dip to 11.2%/13.0% in FY21E considering an incremental USD 3.0bn debt for Arysta’s acquisition (debt to increase from Rs 65bn in FY18 to Rs 242bn in FY20E).We value UPL on EV/EBITDA basis, at 9.0x Sept-20 EBITDA and maintain NEU with TP of Rs 719.

Consolidated Financial Summary Rs mn FY17 FY18 FY19E FY20E FY21E Net Sales 163,120 173,780 194,392 357,349 390,195 Growth (%) 16.1 6.5 11.9 83.8 9.2 EBIDTA 29,850 35,050 38,847 69,737 76,080 EBIDTA Margin (%) 18.3 20.2 20.0 19.5 19.5 APAT 17,270 20,220 21,953 27,170 31,117 EPS (Rs.) 33.9 39.6 43.0 53.3 61.0 P/E (x) 20.8 17.7 16.3 13.2 11.5 EV/EBITDA 13.2 11.4 10.0 8.2 7.3 RoE (%) 26.0 24.4 21.9 22.6 21.6 Source: Company, HDFC sec Inst Research

INDUSTRY Agro-Chemicals CMP (as on 10 Sep 18) Rs 703 Target Price Rs 719 Nifty 11,438

Sensex 37,922

KEY STOCK DATA

Bloomberg UPLL IN

No. of Shares (mn) 509

MCap (Rs bn) / ($ mn) 358/4,938

6m avg traded value (Rs mn) 1,434

STOCK PERFORMANCE (%)

52 Week high / low Rs 850/537

3M 6M 12M

Absolute (%) (1.4) (1.2) (13.6)

Relative (%) (8.3) (15.1) (33.3)

SHAREHOLDING PATTERN (%)

Promoters 27.75

FIs & Local MFs 8.41

FPIs 40.69

Public & Others 39.97 Source : BSE


UPL: COMPANY UPDATE

Page | 6

Assumptions Arysta Historical Assumptions for the combined company

(Rs mn) CY15 CY16 CY17 UPL+Arysta Estimates Sales 111,736 122,024 123,554 (Rs mn) FY19E FY20E FY21E Growth(%) - 9.2 1.3 Depreciation 4,140 5,685 7,365 COGS 61,997 72,907 73,072 Depreciation rate (%) 5.7 6.0 6.0 Gross Profit 49,739 49,117 50,482 Amortisation 3,966 17,693 17,958 Gross Profit(%) 44.5 40.3 40.9 Amortisation rate (%) 7.8 10.0 10.0 EBITDA 22,039 24,744 25,280 Interest 6,884 16,190 15,865 EBITDA (%) 19.7 20.3 20.5 Interest rate(%) 12.5 11.0 6.5 Depreciation 10,975 12,486 12,972

Growth(%) - 13.8 3.9


(Rs mn) UPL - Historical UPL+Arysta (Consoldiated)

FY16 FY17 FY18 FY19E FY20E FY21E Sales 140,480 163,120 173,780 194,392 357,349 390,195 Growth(%) 16.2 16.1 6.5 11.9 83.8 9.2 COGS 67,800 78,160 81,120 91,364 183,509 200,235 Gross Profit 72,680 84,960 92,660 103,027 173,841 189,959 Gross Profit(%) 51.7 52.1 53.3 53.0 48.6 48.7 EBITDA 23,950 29,850 35,050 38,847 69,737 76,080 EBITDA (%) 17.0 18.3 20.2 20.0 20.1 19.8 Depreciation 6,760 6,720 6,750 8,106 23,378 25,324 Interest 7,040 7,350 7,830 8,071 16,190 15,865 PAT 9,400 17,270 20,220 21,953 27,170 31,117 Growth(%) (17.8) 83.7 17.1 8.6 23.8 14.5 Debt 47,710 60,580 65,070 45,070 249,070 239,070 Source: Company, HDFC sec Inst Research

Amortization expense of Arysta in CY13 and CY14 have been at US$ 56mn and US$ 57mn respectively. We thus expect amortization of Intangible assets from Arysta to dent profitability of UPL post acquisition. We have assumed a growth rate of 4% annually for the acquired business. We have not built in post-acquisition synergy benefits in our estimates.

UPL: COMPANY UPDATE

Page | 7

Geography wise assumptions for UPL (ex-Arysta)

Revenues (Rs mn) FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E North America 21,220 22,590 26,120 28,880 30,830 33,913 37,643 41,408 India 22,450 26,220 29,920 29,630 31,890 36,036 41,441 46,828 Europe 20,160 20,330 19,250 21,480 23,050 25,355 28,651 31,803 Rest Of World 15,320 17,710 25,420 29,170 31,090 34,199 37,961 41,757 Latin America 28,560 34,060 42,730 53,960 56,920 64,889 75,271 86,562 Total 1,07,710 1,20,910 1,43,440 1,63,120 1,73,780 1,94,392 2,20,968 2,48,358 YoY Growth (%) North America 12.1 6.5 15.6 10.6 6.8 10.0 11.0 10.0 India 24.4 16.8 14.1 (1.0) 7.6 13.0 15.0 13.0 Europe 17.4 0.8 (5.3) 11.6 7.3 10.0 13.0 11.0 Rest Of World 14.1 15.6 43.5 14.8 6.6 10.0 11.0 10.0 Latin America 12.6 19.3 25.5 26.3 5.5 14.0 16.0 15.0 Total 15.9 12.3 18.6 13.7 6.5 11.9 13.7 12.4 Gross Margin (%) 49.5 50.2 51.7 52.1 53.3 53.0 48.6 48.7 Tax Rate (%) 19.2 17.3 13.7 9.7 11.5 13.0 17.0 17.0 Cash Conversion Cycle (days) 102 117 113 100 108 136 136 136 Capex (Rs bn) 5.8 4.5 10.1 12.6 13.2 10.4 175.9 18.0

Source: Company, HDFC sec Inst Research ‘Additionally, the YoY depreciation and amortization increased by $163 million, resulting primarily from newly acquired intangible and fixed assets from our acquired businesses.’ – Platform Specialty Annual Report CY15

Depreciation and Amortization expenses for Agricultural Solutions (Arysta) have been ~3x of Capital Expenditure.

We expect UPL to post a healthy performance in India and LatAm going forward. UPL’s tie up with Bayer in Brazil, to jointly cross-sell fungicides against Asian Rust (a Soya bean disease) bodes well for the company’s LatAm business. For 2017, 2016, and 2015, Platform Specialty recorded amortization expense on intangible assets of $276 million, $267 million and $202 million respectively.

UPL: COMPANY UPDATE

Page | 8

Consolidated Income Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Net Sales 140,480 163,120 173,780 194,392 357,349 390,195 Growth (%) 16.2 16.1 6.5 11.9 83.8 9.2 Material Expenses 67,800 78,160 81,120 91,364 183,509 200,235 Employee Expenses 14,340 16,270 17,130 18,843 25,487 28,036 Other Operating Expenses 34,390 38,840 40,480 45,338 76,505 84,489

EBIDTA 23,950 29,850 35,050 38,847 71,849 77,434 EBIDTA Margin (%) 17.0 18.3 20.2 20.0 20.1 19.8 EBIDTA Growth (%) 1.4 24.6 17.4 10.8 85.0 7.8 Depreciation 6,760 6,720 6,750 7,069 22,986 24,606 EBIT 17,190 23,130 28,300 31,778 48,863 52,829 Other Income 3,160 4,440 4,140 4,061 3,043 5,589 Interest & Financial Charges 7,040 7,350 7,830 8,071 15,628 15,930

Exceptional Items 1,290 810 630 567 - - PBT 12,020 19,410 23,980 27,201 36,277 42,488 Tax 1,650 1,890 2,750 3,536 6,167 7,223 RPAT 10,370 17,520 21,230 23,665 30,110 35,265 Non-Controlling Interest 120 60 80 80 593 624 Profit From Associates (850) (190) (930) (730) (730) (730) APAT 9,400 17,270 20,220 22,855 28,787 33,911 APAT Growth (%) (17.8) 83.7 17.1 13.0 26.0 17.8 AEPS 18.4 33.9 39.6 44.8 56.4 66.5 AEPS Growth (%) (17.8) 83.7 17.1 13.0 26.0 17.8 Source: Company, HDFC sec Inst Research

Consolidated Balance Sheet (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E SOURCES OF FUNDS Share Capital 860 1,010 1,020 1,020 1,020 1,020 Reserves 58,030 72,960 90,670 108,851 132,116 159,891 Total Shareholders’ Funds 58,890 73,970 91,690 109,871 133,136 160,911 Non Controlling Interest 440 330 190 270 863 1,487 Long-term Debt 22,660 53,500 58,730 39,730 243,730 238,730 Short-term Debt 25,050 7,080 6,340 5,340 4,340 3,340 Total Debt 47,710 60,580 65,070 45,070 248,070 242,070 Long-term Provisions & Others 5,020 4,040 2,520 2,520 2,520 2,520

TOTAL SOURCES OF FUNDS 112,060 138,920 159,470 157,731 384,589 406,988

APPLICATION OF FUNDS Net Block 34,450 36,520 40,050 44,653 169,929 163,323 CWIP 4,840 7,920 13,190 8,290 5,290 5,290 Net Intangible Assets 4,170 4,190 4,320 4,320 24,320 24,320 Investments 3,350 3,780 10,270 10,270 10,270 10,270 LT Loans & Advances 5,910 7,720 7,000 7,000 7,000 7,000 Inventories 37,870 41,560 45,380 50,762 93,316 101,893 Debtors 51,000 56,560 60,560 67,743 124,531 135,978 Cash & Equivalents 11,890 28,950 29,010 21,733 50,807 72,245 ST Loans & Advances 2,700 1,190 1,470 1,470 1,470 1,470 Other Current Assets 8,610 8,720 13,890 13,890 23,272 21,542 Current Assets 112,070 136,980 150,310 155,598 293,396 333,128 Creditors 39,540 48,750 56,750 63,481 116,697 127,423 Other Current Liabilities & Provisions 17,090 14,450 13,330 13,330 13,330 13,330

Current Liabilities 56,630 63,200 70,080 76,811 130,027 140,753 Net Current Assets 55,440 73,780 80,230 78,787 163,370 192,375 Net Deferred Tax Asset 3,900 5,010 4,410 4,410 4,410 4,410 TOTAL APPLICATION OF FUNDS 112,060 138,920 159,470 157,731 384,589 406,988


UPL: COMPANY UPDATE

Page | 9

Consolidated Cash Flow Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Reported PBT 13,310 20,220 24,610 26,731 34,329 39,121 Non-operating & EO Items (1,690) (2,980) (4,140) (4,061) (4,160) (4,229) Interest Expenses 7,040 7,350 7,830 8,071 16,190 15,865 Depreciation 6,760 6,720 6,750 8,106 23,378 25,324 Working Capital Change (7,040) (1,210) (6,110) (5,834) (46,127) (9,297) Tax Paid (4,420) (3,410) (2,750) (3,401) (5,836) (6,651) OPERATING CASH FLOW (a) 13,960 26,690 26,190 29,611 17,774 60,133

Capex on Tangible assets (10,140) (12,590) (13,150) (11,312) (50,000) (20,000) Capex on Intangible assets - - - - (133,185) (5,312) Free Cash Flow (FCF) 3,820 14,100 13,040 18,299 (165,411) 34,821 Investments (660) (430) (6,490) - - - Non-operating Income 3,160 4,440 4,140 4,061 4,160 4,229 Others (9,990) (1,380) - - (0) - INVESTING CASH FLOW (b) (17,630) (9,960) (15,500) (7,251) (179,025) (21,083)

Debt Issuance/(Repaid) 12,840 10,790 4,490 (19,000) 204,000 (10,000) Interest Expenses (7,040) (7,350) (7,830) (8,071) (16,190) (15,865) FCFE 9,620 17,540 9,700 (8,772) 22,399 8,956 Dividend (2,290) (2,280) (4,743) (4,490) (4,908) (5,522) Others 1,030 (830) (2,547) - 0 (0) FINANCING CASH FLOW (c) 4,540 330 (10,630) (31,561) 182,902 (31,386)

NET CASH FLOW (a+b+c) 870 17,060 60 (9,200) 21,651 7,663 Closing Cash & Equivalents 11,890 28,950 29,010 19,810 41,460 49,124


Key Ratios- Consolidated FY16 FY17 FY18 FY19E FY20E FY21E PROFITABILITY (%) GPM 51.7 52.1 53.3 53.0 48.6 48.7 EBITDA Margin 17.0 18.3 20.2 20.0 19.5 19.5 EBIT Margin 12.2 14.2 16.3 15.8 13.0 13.0 APAT Margin 6.7 10.6 11.6 11.3 7.6 8.0 RoE 16.7 26.0 24.4 21.9 22.6 21.6 Core RoCE 15.0 20.6 22.5 22.6 17.6 13.1 RoCE 15.0 19.0 18.2 18.3 15.0 11.3 EFFICIENCY Tax Rate (%) 13.7 9.7 11.5 13.0 17.0 17.0 Asset Turnover (x) 1.4 1.3 1.2 1.2 1.3 1.0 Inventory (days) 98 93 95 95 95 95 Debtors (days) 133 127 127 127 127 127 Other Current Assets (days) 29 22 32 32 32 32 Payables (days) 103 109 119 119 119 119 Other Current Liab & Provisions (days) 44 32 28 25 14 12

Cash Conversion Cycle (days) 113 100 108 111 122 123 Debt/EBITDA (x) 2.0 2.0 1.9 1.2 3.6 3.1 Net D/E 0.6 0.4 0.4 0.2 1.6 1.2 Interest Coverage 2.4 3.1 3.6 3.8 2.9 3.2 PER SHARE DATA (Rs/sh) EPS 18.4 33.9 39.6 43.0 53.3 61.0 CEPS 31.7 47.0 52.9 58.9 99.1 110.7 DPS 4.2 6.9 7.7 7.3 8.0 9.0 BV 115.5 145.0 179.8 214.0 257.7 307.9 VALUATION P/E 38.1 20.8 17.7 16.3 13.2 11.5 P/BV 6.1 4.8 3.9 3.3 2.7 2.3 EV/EBITDA 16.5 13.1 11.3 9.9 8.1 7.2 Dividend Yield (%) 0.6 1.0 1.1 1.0 1.1 1.3 OCF/EV (%) 3.5 6.8 6.6 9.5 5.8 6.5 FCF/EV (%) 1.0 3.6 3.3 6.4 3.7 4.3 FCFE/Mcap (%) (0.9) 1.9 1.5 4.6 1.3 2.2



PI Industries BUY


On a sustainable growth path PI Industries (PI) has built a differentiated business model by leveraging its niche products through an in-licensing model to grow its domestic business (38.2% in revenue mix), thereby complementing the Custom Synthesis & Manufacturing (CSM) business (61.8% share). CSM business has grown at 34.4% 10-year CAGR to Rs 14.0bn over FY08-18. However, the CSM business grew by a mere 6.6% on a CAGR basis over FY15-18. The prospects of the CSM business are dependent on a recovery in global markets and increased demand of novel agro-chem molecules by the innovators. PI Industries has a CSM order book of US$ 1.1 bn, which is expected to be executed over a span of 3-5 years.

The company delivered a strong 1QFY19 performance in the domestic business on the back of the recent product launches and a healthy growth in Nominee Gold. Management has guided for a 18% topline growth subject to a normal monsoon. Since the CSM

plants are running nearly at full utilization, the company has planned a capex of Rs 2.5bn spread across two Multipurpose plants (MPP). PI Industries is expected to introduce 4 products in the domestic business and 2-3 products in the CSM business over FY19.

The focus has been on faster execution in CSM (employee costs up 18.8% YoY in FY18, a testament to managements focus on investing in talent which is a key factor in CSM). We are expecting a 12-14% growth in CSM from FY19-21E. Domestic business is likely to show a robust performance on the back of continued growth in Nominee Gold, Osheen coupled with ramp up in new product launches. We expect PI Industries to generate strong FCFF in FY20E/FY21E to the tune of Rs 2.05/Rs 2.6bn with a healthy RoE/RoIC of 19.4/19.2% and 18.4/18.3% in FY20E and FY21E respectively. We remain positive on PI Industries and maintain buy with a TP of Rs 923.

Consolidated Financial Summary (Rs mn) FY17 FY18 FY19E FY20E FY21E Net Sales 22,768 22,771 25,155 28,206 31,515 Growth (%) 8.6 0.0 10.5 12.1 11.7 EBIDTA 5,533 4,934 5,537 6,514 7,296 EBIDTA Margin (%) 24.3 21.7 22.0 23.1 23.2 APAT 4,594 3,676 4,147 4,813 5,378 EPS (Rs.) 33.2 26.7 30.1 34.9 39.0 P/E (x) 23.4 29.1 25.8 22.2 19.9 EV/EBITDA 19.4 21.6 18.9 15.7 13.6 RoE (%) 32.8 20.7 19.8 19.7 18.9 Source: Company, HDFC sec Inst Research

INDUSTRY Agro-Chemicals CMP (as on 10 Sep 18) Rs 776 Target Price Rs 923 Nifty 11,438

Sensex 37,922 KEY STOCK DATA Bloomberg PI IN

No. of Shares (mn) 138 MCap (Rs bn) / ($ mn) 106/1,465 6m avg traded value (Rs mn) 124 STOCK PERFORMANCE (%) 52 Week high / low Rs 1,035/720 3M 6M 12M Absolute (%) (5.9) (10.6) 5.5 Relative (%) (12.9) (24.4) (14.1) SHAREHOLDING PATTERN (%) Promoters 51.43 FIs & Local MFs 17.81 FPIs 15.18 Public & Others 15.58 Source : BSE


PI INDUSTRIES: COMPANY UPDATE

Page | 11

Historical data and assumptions on a consolidated basis Revenues (Rs mn) FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E Agri-input 6,712 7,782 8,232 8,637 8,705 9,401 10,247 11,221 Custom-synthesis 9,237 11,615 12,735 14,128 14,066 15,753 17,959 20,294 Total 15,948 19,397 20,967 22,765 22,771 25,155 28,206 31,515 YoY Growth (%) Agri-input 20.0 15.9 5.8 4.9 0.8 8.0 9.0 9.5 Custom-synthesis 56.3 25.7 9.6 10.9 (0.4) 12.0 14.0 13.0 Total 38.6 21.6 8.1 8.6 0.0 10.5 12.1 11.7 EBIDTA Margin (%) 17.9 19.5 20.5 23.9 21.6 22.0 23.1 23.2 Agri-input 16.0 17.2 19.0 18.7 16.6 17.0 18.0 18.0 Custom-synthesis 19.3 21.0 21.4 27.0 24.7 25.0 26.0 26.0 Tax Rate (%) 28.8 31.0 22.8 9.7 20.9 22.0 22.0 22.0 Cash conversion cycle (days) 65 77 74 91 98 98 98 98 Inventory (days) 73 71 69 69 72 72 72 72 Debtors (days) 59 72 69 68 84 84 84 84 Creditors (days) 67 67 64 46 59 59 59 59 Capex (Rs bn) 0.5 1.1 3.3 1.5 1.5 2.5 2.5 2.3


The focus has been on faster execution in CSM (employee costs up 18.8% YoY in FY18, a testament to managements focus on investing in talent which is a key factor in CSM), we are expecting a 12-14% growth in CSM from FY19-21E. We expect EBITDA margins in CSM to expand by 110 bps in FY20 on the back of roll out of 2-3 products in CSM in FY19E. Domestic business is expected to deliver ~9% growth annually due to continued growth in Nominee gold.


Page | 12

Consolidated Income Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Net Revenues 20,963 22,768 22,771 25,155 28,206 31,515 Growth (%) 8.0 8.6 0.0 10.5 12.1 11.7 Material Expenses 11,585 11,632 11,690 12,942 14,348 16,103 Employee Expenses 1,931 2,226 2,432 2,651 2,973 3,151 Other Operating Expenses 3,135 3,378 3,715 4,025 4,372 4,964

EBIDTA 4,312 5,533 4,934 5,537 6,514 7,296 EBIDTA Margin (%) 20.6 24.3 21.7 22.0 23.1 23.2 EBIDTA Growth (%) 15.7 28.3 (10.8) 12.2 17.7 12.0 Depreciation 543 730 830 855 911 1,009 EBIT 3,770 4,802 4,104 4,682 5,603 6,287 Other Income (Including EO Items) 355 366 602 672 595 627

Interest 96 72 53 37 28 19 PBT 4,028 5,096 4,653 5,316 6,170 6,895 Tax 913 501 979 1,170 1,357 1,517 APAT 3,116 4,594 3,676 4,147 4,813 5,378 APAT Growth (%) 26.7 47.5 (20.0) 12.8 16.1 11.7 Source: Company, HDFC sec Inst Research

Consolidated Balance Sheet (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E SOURCES OF FUNDS Share Capital 137 138 138 138 138 138 Reserves 11,572 16,134 19,110 22,428 26,245 30,461 Total Shareholders’ Funds 11,709 16,272 19,248 22,566 26,383 30,599 Long-term Debt 1,224 830 463 363 263 163 Short-term Debt 291 369 371 - - - Total Debt 1,516 1,198 834 363 263 163 LT Provisions & Others 286 399 416 416 416 416 Net Deferred Tax Liability 353 (198) (267) (267) (267) (267) TOTAL SOURCES OF FUNDS 13,864 17,671 20,231 23,077 26,795 30,911

APPLICATION OF FUNDS Net Block 8,742 9,640 10,184 10,021 11,610 13,101 CWIP 713 583 691 2,500 2,500 2,250 Investments 3 9 12 12 12 12 LT Loans & Advances 39 28 39 39 39 39 Other Non-current Assets 429 377 453 453 453 453 Total Non-current Assets 9,926 10,637 11,379 13,024 14,613 15,854 Inventories 3,948 4,319 4,520 4,993 5,599 6,256 Debtors 3,978 4,237 5,268 5,819 6,525 7,290 Cash & Equivalents 560 1,326 1,307 2,968 5,192 8,193 Other Current Assets 1,075 2,296 3,523 1,932 1,932 1,932 Total Current Assets 9,560 12,179 14,618 15,713 19,249 23,671 Creditors 3,661 2,878 3,687 4,091 4,588 5,126 Other Current Liabilities & Provisions 1,961 2,267 2,079 1,569 2,480 3,489

Total Current Liabilities 5,622 5,145 5,766 5,660 7,067 8,614 Net Current Assets 3,938 7,034 8,852 10,053 12,181 15,057 TOTAL APPLICATION OF FUNDS 13,864 17,671 20,231 23,077 26,795 30,911



Page | 13

Consolidated Cash Flow Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Reported PBT 4,028 5,095 4,655 5,316 6,170 6,895 Non-operating & EO items (355) (62) (337) (672) (595) (627) Interest expenses 96 72 53 37 28 19 Depreciation 543 730 830 855 911 1,009 Working Capital Change (162) (1,235) (1,043) 89 96 125 Tax Paid (913) (1,212) (963) (1,170) (1,357) (1,517) OPERATING CASH FLOW (a) 3,238 3,388 3,194 4,456 5,252 5,904 Capex (3,278) (1,413) (1,696) (2,500) (2,500) (2,250) Free cash flow (FCF) (41) 1,976 1,498 1,956 2,752 3,654 Non-operating Income 355 366 602 672 595 627 INVESTING CASH FLOW (b) (2,924) (2,351) (1,805) (1,828) (1,905) (1,623) Debt Issuance/(Repaid) 430 (272) (364) (100) (100) (100) Interest Expenses (96) (72) (53) (37) (28) (19) FCFE 293 1,631 1,080 1,819 2,624 3,535 Dividend (511) (248) (662) (830) (995) (1,161) FINANCING CASH FLOW (c) (178) (534) (1,060) (967) (1,124) (1,281) NET CASH FLOW (a+b+c) 136 503 329 1,662 2,224 3,001 Closing Cash & Equivalents 342 844 1,173 2,968 5,192 8,193 Source: Company, HDFC sec Inst Research

Key Ratios- Consolidated FY16 FY17 FY18 FY19E FY20E FY21E PROFITABILITY (%) GPM 44.7 48.9 48.7 48.5 49.1 48.9 EBITDA Margin 20.6 24.3 21.7 22.0 23.1 23.2 EBIT Margin 18.0 21.1 18.0 18.6 19.9 19.9 APAT Margin 14.9 20.2 16.1 16.5 17.1 17.1 RoE 30.1 32.8 20.7 19.8 19.7 18.9 Core RoCE 24.8 29.7 18.1 18.2 20.4 21.5 RoCE 26.6 30.2 20.0 19.5 19.4 18.7 EFFICIENCY Tax Rate (%) 22.7 9.8 21.0 22.0 22.0 22.0 Asset Turnover (x) 1.7 1.5 1.2 1.2 1.1 1.1 Inventory (days) 69 69 72 72 72 72 Debtors (days) 69 68 84 84 84 84 Other Current Assets (days) 19 24 31 5 4 4 Payables (days) 64 46 59 59 59 59 Other Current Liab & Prov (days) 34 36 33 23 32 40 Cash Conversion Cycle (days) 74 91 98 98 98 98 Debt/EBITDA (x) 0.4 0.2 0.2 0.1 0.0 0.0 Net D/E 0.1 (0.0) (0.0) (0.1) (0.2) (0.3) Interest Coverage 43.0 71.7 88.5 143.9 219.8 360.1 PER SHARE DATA (Rs./Sh) EPS 22.5 33.2 26.7 30.1 34.9 39.0 CEPS 26.5 38.5 32.7 36.3 41.5 46.3 BVPS 84.7 117.7 139.7 163.6 191.3 221.9 DPS 3.1 3.4 4.0 5.0 6.0 7.0 VALUATION P/E 34.4 23.4 29.1 25.8 22.2 19.9 P/BV 9.2 6.6 5.6 4.7 4.1 3.5 EV/EBITDA 25.1 19.4 21.6 18.9 15.7 13.6 OCF/EV (%) 3.0 3.2 3.0 4.3 5.1 6.0 FCF/EV (%) (0.0) 1.8 1.4 1.9 2.7 3.7 FCFE/MCAP (%) 0.3 1.5 1.0 1.7 2.5 3.3 Dividend Yield (%) 0.4 0.4 0.5 0.6 0.8 0.9



Rallis India BUY


Off to a good start in FY19 FY18 has been a challenging year for Rallis due to an unfavorable product mix, higher RM prices due to import dependency on China, GST implementation and erratic monsoons with extended dry spells in the Northeast. Rallis started FY19 on a good note in an otherwise weak first quarter (due to higher placement of generic products), albeit on a lower base. Rallis commissioned a CRAMS facility in Dahej with a capex of ~Rs 300mn in 4QFY18 and is expected to add ~Rs 500 mn to its FY19 top line. Rallis is now exploring CRAMS opportunities in the pharma space through the new facility and depending on the success of the same; the management would likely announce the next leg of capex in CRAMS.

Rallis launched 5 new products, namely Pulito, Cenator, Odis, Riceup and Jashn Super in FY18 and expects to reap benefits of the same in FY19. The management has guided to launch 12 new products in

3-5 years. The seeds business (Metahelix) fared well in FY18 (with market share gains in Paddy). PBT grew by 59.1% YoY to Rs 332mn. The PAT of Metahelix has grown ~20x in the last 5 years to Rs 230mn and is expected to remain buoyant on the back of lower sales returns and a strong product pipeline.

The EPS CAGR over FY15-18 for Rallis was merely 2.2%. The stock is down 10.9% since April-15. With a strong product pipeline in the domestic and seeds business coupled with supplementary prospects in CRAMS (Pharma), Rallis is expected to generate FCFF of Rs 4.1bn over FY19-FY21E, with an expected improvement in return ratios (ROE/RoIC is expected to reach 17.4%/19.4% respectively in FY21E). We expect Rallis to deliver Sales/EBITDA/PAT CAGR 12.5/17.9/21.0% over FY18-21E. Rallis has a strong brand image, a diversified portfolio, an extensive distribution network and a strong balance sheet. We maintain BUY with a TP of Rs 292/sh (23xSep-20EEPS).

Consolidated Financial Summary Rs mn FY17 FY18 FY19E FY20E FY21E

Net Sales 16,356 17,751 19,891 22,457 25,240 Growth (%) 8.0 8.5 12.1 12.9 12.4 EBIDTA 2,357 2,486 2,935 3,442 4,073 EBIDTA Margin (%) 16.1 14.9 14.8 15.3 16.1 APAT 1,421 1,517 1,906 2,262 2,687 EPS (Rs.) 8.7 8.6 9.8 11.6 13.8 P/E (x) 23.5 23.8 20.9 17.6 14.9 EV/EBITDA 14.1 14.4 12.9 10.8 8.8 RoE (%) 17.0 14.6 15.2 16.3 17.4 Source: Company, HDFC sec Inst Research

INDUSTRY Agro-Chemicals CMP (as on 10 Sep 18) Rs 205 Target Price Rs 292 Nifty 11,438 Sensex 37,922 KEY STOCK DATA Bloomberg RALI IN No. of Shares (mn) 194 MCap (Rs bn) / ($ mn) 40/549 6m avg traded value (Rs mn) 57 STOCK PERFORMANCE (%) 52 Week high / low Rs 290/181 3M 6M 12M Absolute (%) 2.0 (10.8) (7.8) Relative (%) (5.0) (24.7) (27.4) SHAREHOLDING PATTERN (%) Promoters 50.09 FIs & Local MFs 11.82 FPIs 3.97 Public & Others 34.12 Source : BSE


RALLIS INDIA: COMPANY UPDATE

Page | 15

Historical data and assumptions on a consolidated basis Rs mn FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E Domestic - Revenues 10,511 10,476 8,618 9,084 9,762 10,666 11,871 13,012 YoY Growth (%) 21.2 (0.3) (17.7) 5.4 7.5 9.3 11.3 9.6 Exports - Revenues 4,925 5,022 4,000 4,408 4,795 5,775 6,930 8,315 YoY Growth (%) 17.3 2.0 (20.3) 10.2 8.8 20.4 20.0 20.0 Metahelix - Revenues 1,836 2,518 2,529 2,863 3,194 3,450 3,657 3,913 YoY Growth (%) 19.4 37.2 0.4 13.2 11.6 8.0 6.0 7.0 Consolidated Sales Growth (%) 19.8 4.3 (15.9) 8.0 8.5 12.1 12.9 12.4 Gross Margin (%) 41.6 45.2 43.3 42.8 43.5 43.3 42.7 42.9 Tax Rate (%) 28.8 27.9 21.0 21.8 26.4 26.4 26.4 26.4 Cash Conversion (days) 40 76 85 74 91 90 90 90 Inventory (days) 69 79 96 88 118 118 118 118 Debtors (days) 35 54 54 59 82 82 82 82 Creditors (days) 64 58 65 73 109 110 110 110 Capex 584 431 724 660 480 952 600 501 Source: HDFC sec Inst Research Innovation Turnover Index

Domestic vs Exports Contribution (%)

Source: Industry, HDFC sec Inst Research Source: Industry, HDFC sec Inst Research

77 62

77 76 69 71 71 72 74 73 73

23 38

23 24 31 29 29 28 26 27 27

0%

20%

40%

60%

80%

100%

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

Domestic (%) Exports (%)

We expect the CSM business to pick up(3 year CAGR of ~20% over FY19-21E) as Rallis is expected to add ~Rs 500 mn to its FY19 top-line from the new Pharma CSM plant. Domestic business is likely to post a steady performance on the back of new product launches. Innovation turnover index has improved from 7% in FY17 to 11% in FY18. Rallis India launched five new products and received four registrations for the domestic market.

6 6

3 4

3 3 3 10

2 1

5

3 4

5

25%28%

30%

29%

30% 31%

20%

11% 15%

15%

10%

11%

7%

11%

0%

5%

10%

15%

20%

25%

30%

35%

-

2

4

6

8

10

12

FY05

FY

06

FY07

FY

08

FY09

FY

10

FY11

FY

12

FY13

FY

14

FY15

FY

16

FY17

FY

18

Products Launched Inovation turnover index* (RHS)

No.


Page | 16

Consolidated Income Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Net Revenues 15,147 16,356 17,751 19,891 22,457 25,240 Growth (%) (15.9) 8.0 8.5 12.1 12.9 12.4 Material Expenses 7,607 8,250 8,006 9,344 10,683 11,960 Traded Goods 980 1,100 2,018 1,939 2,186 2,452 Employee Expenses 1,326 1,477 1,649 1,831 2,037 2,265 Other Operating Expenses 3,088 3,172 3,592 3,842 4,109 4,490

Operating Profits 2,146 2,357 2,486 2,935 3,442 4,073 Operating Profit Margin (%) 14.2 14.4 14.0 14.8 15.3 16.1

EBITDA 2,290 2,357 2,486 2,935 3,442 4,073 EBITDA Margin (%) 15.0 16.1 14.9 14.8 15.3 16.1 EBIDTA Growth (%) (17.4) 15.1 0.3 11.0 17.3 18.3 Depreciation 436 475 463 481 517 585 EBIT 1,854 1,881 2,023 2,454 2,925 3,488 Other Income (Including exceptional items)

143 1,712 132 150 157 170

Interest & Financial Charges 136 73 43 20 16 13

PBT 1,861 3,520 2,112 2,584 3,066 3,644 Tax (390) (829) (600) (683) (811) (963) RPAT 1,471 2,691 1,511 1,901 2,256 2,681 Minority Interest 37 (4) (6) (6) (6) (6) EO (Loss) / Profit (Net Of Tax) - 1,274.0 0.0 0.1 0.0 0.1

APAT 1,434 1,421 1,517 1,906 2,262 2,687 APAT Growth (%) (8.8) 18.6 (1.4) 13.7 18.6 18.8 Source: Company, HDFC sec Inst Research

Consolidated Balance Sheet (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E SOURCES OF FUNDS Share Capital 194 194 194 194 194 194 Reserves 8,690 10,917 11,711 12,926 14,367 16,078 Total Shareholders’ Funds 8,884 11,112 11,906 13,120 14,561 16,272 Long-term Debt 262 244 199 149 99 49 Short-term Debt 636 146 23 28 33 38 Total Debt 898 390 221 176 131 86 Minority Interest 37 4 11 11 11 11 Long-term Provisions & Others 218 224 220 220 220 220 Net Deferred Tax Liability 272 262 197 197 197 197 TOTAL SOURCES OF FUNDS 10,310 11,992 12,555 13,725 15,120 16,787

APPLICATION OF FUNDS Net Block 3,686 3,722 3,723 3,988 4,395 4,313 CWIP 405 422 473 473 473 473 Goodwill 1,958 1,958 1,958 1,958 1,958 1,958 Investments 187 244 94 94 94 94 LT Loans & Advances 803 792 810 810 810 810 Other Non Current Assets 658 364 328 328 328 328 Total Non-current Assets 7,697 7,501 7,386 7,651 8,058 7,976 Inventories 4,027 3,944 5,722 6,412 7,239 8,136 Debtors 2,278 2,637 3,997 4,479 5,056 5,683 Cash & Equivalents 171 2,299 1,252 1,462 2,119 3,199 ST Loans & Advances 12 18 67 67 67 67 Other Current Assets 655 692 1,354 1,566 1,265 1,249 Total Current Assets 7,143 9,589 12,392 13,985 15,747 18,335 Creditors 2,737 3,286 5,306 5,994 6,768 7,607 Other Current Liabilities 1,794 1,813 1,917 1,917 1,917 1,917 Total Current Liabilities 4,531 5,099 7,223 7,911 8,685 9,524 Net Current Assets 2,612 4,491 5,169 6,073 7,062 8,811 TOTAL APPLICATION OF FUNDS 10,310 11,992 12,555 13,725 15,120 16,787



Page | 17

Consolidated Cash Flow Statement Rs mn FY16 FY17 FY18 FY19E FY20E FY21E Reported PBT 1,861 3,799 2,270 2,584 3,029 3,644 Non-operating & EO Items (143) (1,712) (132) (150) (121) (170) Interest Expenses 136 73 43 20 16 13 Depreciation 436 475 463 481 517 585 Working Capital Change 307 722 (1,680) (483) (632) (675) Tax Paid (405) (855) (675) (683) (811) (963) OPERATING CASH FLOW (a) 2,322 4,077 414 1,768 1,999 2,435 Capex (724) (660) (480) (952) (600) (501) Free Cash Flow (FCF) 1,598 3,417 (66) 817 1,399 1,934 Non-operating Income 143 128 66 150 121 170 Others (888) (2,305) 1,148 - - - INVESTING CASH FLOW (b) (1,469) (2,894) 884 (801) (479) (331) Debt Issuance/(Repaid) (103) (138) (118) (45) (45) (45) Interest Expenses (136) (73) (43) (20) (16) (13) FCFE 1,359 3,206 (227) 751 1,338 1,875 Dividend (350) (584) (877) (692) (811) (975) FINANCING CASH FLOW (c) (588) (1,260) (1,057) (757) (862) (1,024) NET CASH FLOW (a+b+c) 265 (77) 240 210 658 1,079 Closing Cash & Equivalents 171 94 334 543 1,201 2,281 Source: Company, HDFC sec Inst Research

Key Ratios- Consolidated FY16 FY17 FY18 FY19E FY20E FY21E PROFITABILITY (%) GPM 43.3 42.8 43.5 43.3 42.7 42.9 EBITDA Margin 15.0 16.1 14.9 14.8 15.3 16.1 EBIT Margin 12.2 11.5 11.4 12.3 13.0 13.8 APAT Margin 9.4 10.4 9.4 9.6 10.1 10.6 RoE 16.6 17.0 14.6 15.2 16.3 17.4 Core RoCE 14.6 17.2 15.5 15.4 17.1 19.4 RoCE 15.1 15.7 13.7 14.4 15.6 16.7 EFFICIENCY Tax Rate (%) 21.0 21.8 26.4 26.4 26.4 26.4 Asset Turnover (x) 1.5 1.5 1.4 1.5 1.5 1.6 Inventory (days) 96 88 118 118 118 118 Debtors (days) 54 59 82 82 82 82 Other Current Assets (days) 16 16 29 17 17 17 Payables (days) 65 73 109 110 110 110 Other Current Liab & Prov (days) 43 40 39 35 31 28 Cash Conversion Cycle (days) 85 74 91 90 90 90 Debt/EBITDA (x) 0.4 0.1 0.1 0.1 0.0 0.0 Net D/E 0.1 (0.2) (0.1) (0.1) (0.1) (0.2) Interest Coverage 13.7 29.6 50.7 119.8 183.1 258.9 PER SHARE DATA (Rs./sh) EPS 7.4 8.7 8.6 9.8 11.6 13.8 CEPS 9.6 11.2 11.0 12.3 14.3 16.8 DPS 2.5 3.8 2.5 2.9 3.5 4.1 BVPS 45.7 57.1 61.2 67.5 74.9 83.7 VALUATION P/E 27.8 23.5 23.8 20.9 17.6 14.9 P/BV 4.5 3.6 3.4 3.0 2.7 2.5 EV/EBITDA 17.7 14.4 14.7 13.2 11.0 9.0 OCF/EV (%) 5.7 10.7 1.1 4.6 5.3 6.6 FCF/EV (%) 3.9 9.0 (0.2) 2.1 3.7 5.3 FCFE/MCAP (%) 3.4 8.0 (0.6) 1.9 3.4 4.7 Dividend Yield (%) 1.2 1.8 1.2 1.4 1.7 2.0



Dhanuka Agritech BUY


Gradual Recovery Underway Dhanuka Agritech (DAGRI IN) boasts of an asset light business model with a focus on manufacturing formulations, strong marketing network and technical collaborations for sourcing technicals/ RM. DAGRI requires relatively less incremental capex due to strict focus on formulations. DAGRI has spent Rs 1.4bn on capex cumulatively between FY11 to FY18 and has added Rs 4.7bn (3.2x of cumulative capex) to its top-line in the same period. Owing to the 2-year drought, FY16 Sales/EBITDA grew

only by 5.5/6.2% YoY while PAT de-grew by 1.4%. 1HFY17 helped DAGRI post a healthy EBITDA/PAT growth of 21.5/16.8% in FY17 on the back of higher share from Specialty products and 7 new launches. However, performance in 2HFY17 and FY18 was impacted by demonetization, GST implementation (de-stocking by dealers) and global headwinds in the crop-protection market.

1QFY19 performance was marred by the company’s inability to pass on RM inflation due to higher prices of Technicals from China (EBITDA margins dipped 435bps YoY to 7.4%). The management has taken the requisite price hikes and expects a better 2QFY19. The management has guided for a sales growth of 15% in FY19, under normal monsoon conditions. The company launched 11 new products in FY18 and the management is expecting to reap the benefits of these products in FY19.

The stock has corrected by ~35% since Jan-18 and is available at 17.5x FY20E EPS. We believe, DAGRI is at an attractive price point and deserves P/E re-rating as it is expected to generate FCFF of Rs 2.9 bn over FY19-21E while maintaining superior return ratios (ROCE/ROIC expected at 25.6/18.0% in FY20E). We maintain our Buy with a TP of Rs 723/share (22x Sep-20EPS).

Standalone Financial Summary Rs mn FY17 FY18 FY19E FY20E FY21E Net Sales 8,833 9,626 10,905 12,290 13,728 Growth (%) 6.8 9.0 13.3 12.7 11.7 EBIDTA 1,699 1,661 1,883 2,112 2,391 EBIDTA Margin (%) 19.2 17.3 17.3 17.2 17.4 APAT 1,219 1,262 1,376 1,509 1,717 EPS (Rs.) 24.8 25.7 28.0 30.7 35.0 P/E (x) 22.3 21.5 19.7 18.0 15.8 EV/EBITDA (Rs.) 15.9 15.8 13.6 11.7 9.9 RoE (%) 24.3 21.8 20.1 18.9 18.5 Source: Company, HDFC sec Inst Research

INDUSTRY Agro-Chemicals CMP (as on 10 Sep 18) Rs 538 Target Price Rs 723 Nifty 11,438 Sensex 37,922 KEY STOCK DATA Bloomberg DAGRI IN No. of Shares (mn) 49 MCap (Rs bn) / ($ mn) 27/366 6m avg traded value (Rs mn) 11 STOCK PERFORMANCE (%) 52 Week high / low Rs 804/508 3M 6M 12M Absolute (%) (3.7) (7.3) (22.4) Relative (%) (10.7) (21.2) (42.1) SHAREHOLDING PATTERN (%) Promoters 75.00 FIs & Local MFs 11.88 FPIs 0 Public & Others 13.12 Source : BSE


DHANUKA AGRITECH: COMPANY UPDATE

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Historical data and assumptions on a standalone basis Rs mn FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E Speciality 6,041 6,495 6,798 7,306 6,834 7,654 8,649 9,687 % Change 30.1 7.5 4.7 7.5 (6.5) 12.0 13.0 12.0 % Of Revenues 73.0 75.0 75.0 73.0 70.0 70.2 70.4 70.6 Generic 2,234 2,165 2,266 2,702 2,929 3,251 3,641 4,042 % Change 23.8 (3.1) 4.7 19.2 8.4 11.0 12.0 11.0 % Of Revenues 27.0 25.0 25.0 27.0 30.0 29.8 29.6 29.4 Gross Margins Total (%) 37.7 37.3 39.0 43.5 41.6 40.1 38.6 37.6 Speciality Margins (%) 40.0 40.0 41.0 45.0 45.0 44.0 43.0 42.0 Generic Margins (%) 31.6 29.3 32.9 39.6 33.6 31.0 28.0 27.0 Source: Company, HDFC sec Inst Research



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Standalone Income Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Net Revenues 8,271 8,833 9,626 10,905 12,290 13,728 Growth (%) 5.5 6.8 9.0 13.3 12.7 11.7 Material Expenses 4,018 5,621 4,981 5,802 6,732 7,653 Traded Goods 1,039 (634) 642 727 819 915 Employee Expenses 824 969 1,065 1,150 1,230 1,316 Other Operating Expenses 1,008 1,179 1,279 1,343 1,396 1,452 Operating Profits 1,381 1,699 1,661 1,883 2,112 2,391 Operating Profit Margin (%) 16.7 19.2 17.3 17.3 17.2 17.4 Other Operating Income 17 - - - - - EBITDA 1,398 1,699 1,661 1,883 2,112 2,391 EBITDA Margin (%) 16.9 19.2 17.3 17.3 17.2 17.4 EBIDTA Growth (%) 6.2 21.5 (2.2) 13.4 12.2 13.2 Depreciation 59 148 142 138 136 130 EBIT 1,339 1,550 1,519 1,745 1,976 2,261 Other Income (Including EO Items) 125 175 160 173 187 198

Interest & Financial charges 11 10 9 7 7 7 PBT 1,453 1,715 1,670 1,911 2,156 2,452 Tax 380 497 408 535 647 736 APAT 1,044 1,219 1,262 1,376 1,509 1,717 APAT Growth (%) (1.4) 16.8 3.5 9.1 9.6 13.8 AEPS 21.3 24.8 25.7 28.0 30.7 35.0 EPS Growth (%) (1.4) 16.8 3.5 9.1 9.6 13.8 Source: Company, HDFC sec Inst Research

Standalone Balance Sheet (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E SOURCES OF FUNDS Share Capital 100 98 98 98 98 98 Reserves 4,704 5,119 6,235 7,287 8,471 9,863 Total Shareholders’ Funds 4,804 5,217 6,334 7,385 8,569 9,961 Short-term Debt 77 79 47 47 47 47 Total Debt 77 79 47 47 47 47 Long-term Provisions & Others 241 330 254 254 254 254 Net Deferred Taxes 83 126 133 133 133 133 TOTAL SOURCES OF FUNDS 5,206 5,752 6,768 7,819 9,004 10,395 APPLICATION OF FUNDS Net Block 1,333 1,378 1,309 1,242 1,176 1,116 CWIP 1 4 1 1 1 1 LT Loans & Advances 290 37 39 39 39 39 Other Non-current Assets 9 204 211 211 211 211 Total Non-current Assets 1,633 1,624 1,560 1,492 1,426 1,367 Inventories 1,726 2,645 2,050 2,390 2,694 3,009 Debtors 1,858 1,838 2,080 2,390 2,694 3,009 Other Current Assets 407 333 603 603 603 603 Cash & Equivalents 943 707 1,934 2,589 3,441 4,479 Total Current Assets 4,934 5,524 6,667 7,973 9,432 11,100 Creditors 640 570 830 896 1,010 1,128 Other Current Liabilities & Provisions 721 826 629 749 844 943

Total Current Liabilities 1,361 1,396 1,459 1,646 1,854 2,071 Net Current Assets 3,573 4,128 5,208 6,327 7,577 9,029 TOTAL APPLICATION OF FUNDS 5,206 5,752 6,768 7,819 9,004 10,395 Source: Company, HDFC sec Inst Research


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Standalone Cash Flow Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Reported PBT 1,453 1,715 1,670 1,911 2,156 2,452 Non-operating & EO items (102) (117) (160) (173) (187) (198) Interest expenses 11 11 9 7 7 7 Depreciation 59 148 142 138 136 130 Working Capital Change 307 (638) 62 (464) (398) (414) Tax Paid (331) (456) (408) (535) (647) (736) OPERATING CASH FLOW (a) 1,397 665 1,314 884 1,067 1,241 Capex (271) (193) (60) (70) (70) (70) Free cash flow (FCF) 1,126 471 1,254 814 997 1,171 Investments - - - - - - Non-operating Income 61 100 160 173 187 198 INVESTING CASH FLOW (b) (210) (93) 100 103 117 128 Debt Issuance/(Repaid) (84) 2 (32) - - - Interest Expenses (11) (11) (9) (7) (7) (7) FCFE 1,031 462 1,214 807 989 1,164 Share Capital Issuance - (800) - - - - Dividend (662) - (325) (325) (325) (325) FINANCING CASH FLOW (c) (758) (809) (221) (332) (332) (332) NET CASH FLOW (a+b+c) 430 (238) 1,193 655 852 1,038 Closing Cash & Equivalents 943 707 1,934 2,589 3,441 4,479 Source: Company, HDFC sec Inst Research

Key Ratios- Standalone FY16 FY17 FY18 FY19E FY20E FY21E PROFITABILITY (%) GPM 39.0 43.5 41.6 40.1 38.6 37.6 EBITDA Margin 16.9 19.2 17.3 17.3 17.2 17.4 EBIT Margin 16.2 17.5 15.8 16.0 16.1 16.5 APAT Margin 12.6 13.8 13.1 12.6 12.3 12.5 RoE 23.4 24.3 21.8 20.1 18.9 18.5 Core RoCE (RoICE) 23.3 23.7 23.2 25.0 25.6 27.6 RoCE 21.7 22.4 20.3 18.9 18.0 17.7 EFFICIENCY Tax Rate (%) 26.2 29.0 24.4 28.0 30.0 30.0 Asset Turnover (x) 1.7 1.6 1.5 1.5 1.5 1.4 Inventory (days) 76 109 78 80 80 80 Debtors (days) 82 76 79 80 80 80 Other Current Assets (days) 1 11 10 9 8 7 Payables (days) 28 24 31 30 30 30 Other Current Liabilities & Provisions (days) 32 34 24 25 25 25

Cash Conversion Cycle (days) 130 162 125 130 130 130 Debt/EBITDA (x) 0.1 0.0 0.0 0.0 0.0 0.0 Net D/E (x) (0.1) (0.0) (0.2) (0.2) (0.3) (0.4) Interest Coverage (x) 121 157 174 247 279 320 PER SHARE DATA (Rs./Sh) EPS 21.3 24.8 25.7 28.0 30.7 35.0 CEPS 22.5 27.9 28.6 30.8 33.5 37.6 DPS 6.6 0.6 5.5 5.5 5.5 5.5 BVPS 97.9 106.3 129.1 150.5 174.6 203.0 VALUATION P/E (x) 25.3 21.7 20.9 19.2 17.5 15.4 P/BV (x) 5.5 5.1 4.2 3.6 3.1 2.7 EV/EBITDA (x) 18.6 15.5 15.3 13.2 11.3 9.6 OCF/EV (%) 5.4 2.5 5.2 3.6 4.5 5.4 FCF/EV (%) 4.3 1.8 4.9 3.3 4.2 5.1 FCFE/MCAP (%) 3.9 1.8 4.6 3.1 3.7 4.4 Dividend Yield (%) 1.2 0.1 1.0 1.0 1.0 1.0



Insecticides India BUY


Off to a great start! Insecticides India (INST IN) is in the business of manufacturing off-patent agro-chemical formulations and technicals. Despite a top-line growth of merely 3.6% CAGR over FY15-18, EBITDA has grown at 10% CAGR with a margin expansion of ~220bps over the same period. INST shifted its focus on branded/B2C business and is gradually reducing the contribution from Red Triangle (poisonous and generic) products in a phased manner. Insecticides India’s (INST) 1QFY19 revenue was Rs

3.1bn (up 2.3% YoY). Revenue growth was muted due to the lower concentration of Generic products (high volume, low value) in the mix. Change in the product mix led to strong EBITDA margin of 17.4% (up 122 bps).

In Aug-18, the Ministry of Agriculture and Farmers Welfare had passed an order to stop the manufacture, import, formulation, transport or sale of 18 pesticides. INST manufactures 4 out of these banned pesticides, namely NUVAN (Dichlorovos), THIMET (Phorateat), TITAN (Trizophosat) and SHARK (Trizophosat).

The manufacture of the aforementioned products is allowed up to 31st Dec-18 and could be used up to 31st Dec-20. These 4 products contribute ~Rs 1.6bn (14.9% of FY18 top line) to the total sales. However, INST is expecting to compensate for this loss in sales of prohibited products by launching 6-7 new products in FY19.

Although supply related challenges could pose a threat to gross margins (higher RM prices due to Chinese situation), the company’s focus on high margin branded business is likely to offset higher raw material costs. INST has significantly reduced its debt by Rs 2.0bn over FY15-18. INST is expected to incur Rs 1.5bn CAPEX cumulatively (on backward integration and new product launches) over FY19-21E and generate FCFF of Rs 1.3bn during the same period. The stock is trading at 13.0/11.0x FY19E/FY20E EPS, we maintain our BUY with a TP of Rs 961/sh (17x Sep’20 EPS).

Standalone Financial Summary (Rs mn) FY17 FY18 FY19E FY20E FY21E Net Sales 9,942 10,733 11,803 12,884 13,972 Growth (%) 0.8 8.0 10.0 9.2 8.4 EBIDTA 1,114 1,478 1,589 1,834 1,993 EBIDTA Margin (%) 11.2 13.8 13.5 14.2 14.3 APAT 594 840 933 1,111 1,225 EPS (Rs.) 28.7 40.6 45.1 53.8 59.3 P/E (x) 20.8 14.7 13.3 11.1 10.1 EV/EBITDA 13.1 9.0 8.2 6.9 6.1 RoE (%) 13.7 16.6 15.8 16.1 15.3 Source: Company, HDFC sec Inst Research

INDUSTRY Agro-Chemicals CMP (as on 10 Sep 18) Rs 594 Target Price Rs 961 Nifty 11,438 Sensex 37,922 KEY STOCK DATA Bloomberg INST IN

No. of Shares (mn) 21 MCap (Rs bn) / ($ mn) 12/170 6m avg traded value (Rs mn) 16 STOCK PERFORMANCE (%) 52 Week high / low Rs 966/583 3M 6M 12M Absolute (%) (16.3) (18.7) (34.3) Relative (%) (23.3) (32.6) (54.0) SHAREHOLDING PATTERN (%) Promoters 68.75 FIs & Local MFs 6.75 FPIs 2.79 Public & Others 21.71 Source : BSE


INSECTICIDES INDIA: COMPANY UPDATE

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Historical data and assumptions on a consolidated basis Rs mn FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E Navratna + Super 11 4,130 4,964 5,313 5,713 5,868 6,235 6,749 7,233 % YoY 42.2 20.2 7.0 7.5 2.7 6.2 8.0 7.0 Other Branded Sale 2,753 2,271 2,785 2,854 3,140 3,517 4,044 4,570 % YoY 22.3 (17.5) 22.6 2.5 10.0 12.0 15.0 13.0 Total Institutional Sales 2,342 3,078 2,374 2,195 2,056 2,051 2,091 2,169 % YoY 54.0 31.4 (22.9) (7.5) (6.3) (0.2) 2.0 3.7 Total Gross Revenues 9,225 10,313 10,472 10,763 11,064 11,803 12,884 13,972 Less: Excise Duty 585 671 604 821 331 - - - Net Revenues 8,641 9,642 9,868 9,942 10,733 11,803 12,884 13,972 Gross Profit Margins (%) 30.4 32.8 31.6 25.3 28.9 28.3 28.9 28.9 Branded Formulation (GPM %) 34.0 32.0 31.0 30.0 32.0 30.5 31.0 31.0 Institutional Sales (GPM %) 19.8 34.6 33.8 7.2 15.1 18.0 18.0 17.5 Source: Company, HDFC sec Inst Research



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Standalone Income Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Net Revenues 9,868 9,942 10,733 11,803 12,884 13,972 Growth (%) 2.3 0.8 8.0 10.0 9.2 8.4 Material Expenses 6,067 5,994 6,926 7,716 8,381 9,114 Traded Goods 679 1,429 708 743 781 820 Employee Expenses 401 455 506 552 601 656 Other Operating Expenses 1,824 951 1,114 1,203 1,287 1,390 EBITDA 898 1,114 1,478 1,589 1,834 1,993 EBITDA Margin (%) 9.1 11.2 13.8 13.5 14.2 14.3 EBIDTA Growth (%) (19.2) 24.1 32.7 7.5 15.4 8.7 Depreciation 5 160 170 202 208 217 EBIT 892 954 1,308 1,387 1,626 1,775 Other Income (Including EO Items) 6 68 32 34 36 36

Interest 259 202 159 107 96 87 PBT 639 820 1,181 1,313 1,565 1,725 Tax 106 226 341 381 454 500 APAT 533 594 840 933 1,111 1,225 APAT Growth (%) (2.8) 11.4 41.4 11.0 19.2 10.2 AEPS 25.8 28.7 40.6 45.1 53.8 59.3 AEPS Growth (%) (2.8) 11.4 41.4 11.0 19.2 10.2 Source: Company, HDFC sec Inst Research

Standalone Balance Sheet (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E SOURCES OF FUNDS Share Capital 207 207 207 207 207 207 Reserves 3,846 4,439 5,269 6,152 7,214 8,389 Total Shareholders’ Funds 4,053 4,646 5,476 6,359 7,420 8,595 Long-term Debt 564 307 176 143 128 116 Short-term Debt 1,514 2,060 968 829 746 806 Total Debt 2,077 2,366 1,144 971 874 922 Long-term Provisions & Others 6 5 6 6 6 6 Net Deferred Tax Liability 31 89 188 188 188 188 TOTAL SOURCES OF FUNDS 6,167 7,106 6,814 7,524 8,489 9,711 APPLICATION OF FUNDS Net Block 1,942 1,858 2,357 2,490 2,783 3,215 CWIP 507 569 127 250 250 250 Investments 110 111 163 163 163 163 Other Non-current Assets 102 94 159 159 159 159 Total Non-current Assets 2,661 2,632 2,806 3,062 3,355 3,787 Inventories 3,506 4,258 4,073 4,365 4,765 5,168 Debtors 2,053 2,116 2,348 2,582 2,819 3,057 Other Current Assets 640 686 573 573 573 573 Cash & Equivalents 95 92 201 371 652 1,049 Total Current Assets 6,293 7,152 7,195 7,892 8,809 9,846 Creditors 2,117 1,987 2,434 2,676 2,921 3,168 Other Current Liabilities & Provisions 671 691 753 753 753 753

Total Current Liabilities 2,788 2,678 3,187 3,430 3,675 3,922 Net Current Assets 3,505 4,474 4,008 4,462 5,134 5,924 TOTAL APPLICATION OF FUNDS 6,167 7,106 6,814 7,524 8,489 9,711



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Standalone Cash Flow Statement (Rs mn) FY16 FY17 FY18 FY19E FY20E FY21E Reported PBT 499 820 1,181 1,313 1,565 1,725 Non-operating & EO Items 1 2 (1) (34) (36) (36) Interest Expenses 205 202 159 107 96 87 Depreciation 159 160 170 202 208 217 Working Capital Change 119 (989) 582 (284) (391) (394) Tax Paid (138) (170) (262) (381) (454) (500) OPERATING CASH FLOW (a) 845 24 1,829 924 988 1,099 Capex (196) (144) (282) (500) (500) (650) Free Cash Flow (FCF) 650 (120) 1,547 424 488 449 Non-operating Income 6 68 32 34 36 36 Other 3 (61) (9) 2 - - INVESTING CASH FLOW (b) (188) (136) (258) (464) (464) (614) Debt Issuance/(Repaid) (1,120) 543 (1,095) (172) (97) 48 Interest Expenses (205) (207) (160) (107) (96) (87) FCFE (675) 216 293 144 295 410 Share Capital Issuance 808 - - - - - Dividend (112) - (50) (50) (50) (50) FINANCING CASH FLOW (c) (629) 335 (1,304) (329) (243) (89) NET CASH FLOW (a+b+c) 29 223 267 130 281 397 Closing Cash & Equivalents 95 92 201 371 652 1,049 Source: Company, HDFC sec Inst Research

Standalone Key Ratios FY16 FY17 FY18 FY19E FY20E FY21E PROFITABILITY (%) GPM 31.6 25.3 28.9 28.3 28.9 28.9 EBITDA Margin 9.1 11.2 13.8 13.5 14.2 14.3 EBIT Margin 9.0 9.6 12.2 11.7 12.6 12.7 APAT Margin 5.4 6.0 7.8 7.9 8.6 8.8 RoE 15.3 13.7 16.6 15.8 16.1 15.3 Core RoCE 12.3 10.6 13.6 14.3 15.4 15.3 RoCE 12.3 11.2 13.7 14.1 14.7 14.1 EFFICIENCY Tax Rate (%) 16.6 27.5 28.9 29.0 29.0 29.0 Asset Turnover (x) 1.6 1.5 1.5 1.6 1.6 1.5 Inventory (days) 130 156 139 135 135 135 Debtors (days) 76 78 80 80 80 80 Other Current Assets (days) 24 25 19 18 16 15 Payables (days) 78 73 83 83 83 83 Other Current Liab & Prov (days) 25 25 26 23 21 20

Cash Conversion Cycle (days) 127 161 136 132 132 132 Debt/EBITDA (x) 2.3 2.1 0.8 0.6 0.5 0.5 Net D/E 0.5 0.5 0.2 0.1 0.0 (0.0) Interest Coverage 3.4 4.7 8.2 12.9 16.9 20.5 PER SHARE DATA (Rs./Sh) EPS 25.8 28.7 40.6 45.1 53.8 59.3 CEPS 26.1 36.5 48.9 54.9 63.8 69.8 DPS 2.5 2.0 2.0 2.0 2.0 2.0 BVPS 196.1 224.8 264.9 307.7 359.0 415.9 VALUATION P/E 23.1 20.7 14.6 13.2 11.1 10.0 P/BV 3.0 2.6 2.2 1.9 1.7 1.4 EV/EBITDA 15.9 13.1 9.0 8.1 6.8 6.1 OCF/EV (%) 5.9 0.2 13.8 7.2 7.9 9.0 FCF/EV (%) 4.5 (0.8) 11.7 3.3 3.9 3.7 FCFE/MCAP (%) (5.5) 1.8 2.4 1.2 2.4 3.3 Dividend Yield (%) 0.4 0.3 0.3 0.3 0.3 0.3



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Date CMP Reco Target

30-Oct-17 823 NEU 782 9-Jan-18 784 NEU 823

26-Jan-18 769 NEU 823 13-Apr-18 748 BUY 843 30-Apr-18 754 BUY 851 9-Jul-18 621 BUY 838

31-Jul-18 643 BUY 700 10-Sep-18 703 NEU 719


28-Oct-17 755 BUY 830 10-Jan-18 985 NEU 953 6-Feb-18 822 NEU 848

13-Apr-18 850 NEU 870 16-May-18 812 NEU 885 10-Sep-18 776 BUY 923


27-Oct-17 250 BUY 290 9-Jan-18 273 BUY 303

22-Jan-18 271 BUY 313 13-Apr-18 229 BUY 329 2-May-18 220 BUY 288 9-Jul-18 184 BUY 275

18-Jul-18 188 BUY 271 10-Sep-18 205 BUY 292

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RECOMMENDATION HISTORY

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14-Nov-17 655 NEU 712 9-Jan-18 790 NEU 736

14-Feb-18 679 NEU 730 13-Apr-18 604 BUY 764 22-May-18 571 BUY 676

9-Jul-18 547 BUY 676 10-Aug-18 554 BUY 700 10-Sep-18 538 BUY 723


21-Nov-17 845 NEU 815 9-Jan-18 852 NEU 852

13-Apr-18 740 BUY 927 29-May-18 845 BUY 914

9-Jul-18 669 BUY 914 9-Aug-18 776 BUY 937

10-Sep-18 594 BUY 961

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Rating Definitions

BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period


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Disclosure: We, Archit Joshi, MBA, Nilesh Ghuge, MMS & Divya Singhal, CA, authors and the name 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 his/her relative or HDFC Securities Ltd. does not have any 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 his relative or HDFC Securities Ltd. or its associate does not have any 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. 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