Keynote capitals stock ideas

K E Y N O T E

Keynote Capitals Research

Keynote Capitals Institutional Research –awarded “India’s Best IPO Analyst 2009” by MCX‐ Zee Business

Keynote Capitals Research January 16, 2012

Stock Ideas

Stocks Covered Page No.

Andhra Sugars Ltd. 1

Kirloskar Pneumatic Company Ltd 3

Petronet LNG Ltd. 5

Polaris Financial Technology Ltd. 7

Tata Sponge Iron Ltd. 9

1

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K E Y N O T E

Keynote Capitals Research 2

Key Financials (`Cr)

Particulars FY07 FY08 FY09 FY10 FY11 Net Revenues 576.12 463.99 571.91 551.59 468.83EBITDA 146.63 116.09 133.95 156.44 108.47Net Profit (Adj) 64.15 42.58 45.28 66.76 36.21Earnings Per Share 22.64 14.96 15.81 23.94 12.58Price Earnings 3.82 5.46 3.76 5.01 7.01EBIDTA Margin (%) 25.45% 25.02% 23.42% 28.36% 23.14%PAT Margin (%) 11.13% 9.18% 7.92% 12.10% 7.72%RONW (%) 20.53% 10.29% 15.60% 19.80% 10.89%ROCE (%) 25.37% 9.03% 14.48% 18.98% 9.36%

Sources: Keynote Capitals Ltd.

Quarterly Financials (`Cr)

During FY11, ASL posted 45.76% lower net profit (adj) of `36.21Cr on 15% lower net sales of `468.83Cr. Its EPS was `12.58 and it paid dividend of 55%. For Q2FY12, its net profit shot up 440% to `29.21Cr from `5.44Cr in Q2FY11 on 82% higher sales of `195.51Cr and the Q2FY12 EPS stands at `10.78. For H1FY12, was `47.81Cr on 78% higher net sales of `375.83Cr leading to a H1FY12 EPS of `17.6. Its equity capital stands at `27.11Cr with reserves of `467Cr and sound debt:equity ratio of 0.7:1.

ASL a six decade old company represents a relatively safe investment option for the investors. Although its sugar division continues to be a loss making units, the caustic soda & industrial chemicals divisions are doing extremely well. ASL’s segment wise revenue is sugar – 26%; caustic soda – 46%; chemicals 17% and others – 11%. At the current market cap of `314.88Cr and considering ASL’s track record and management capability indicates a scope for share price appreciation.

Particulars Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Net Sales 132.1 143.61 126.59 103.48 107.22 116.69 142.64 180.32 195.51 Other Income 9.95 5.34 6.89 8.26 13.37 15.89 14.22 9.27 17.58 Total Income 142.05 148.95 133.48 111.74 120.59 132.58 156.86 190.04 217.5 Total Expenditure 104 96.99 101.17 90.87 100.31 111.34 108.63 147.82 161.17 PBIDT 38.05 51.96 32.31 20.87 20.28 21.24 48.23 42.22 56.33 Less: Interest 5.72 4.74 4.39 4.1 3.94 4.73 6.05 6.28 4.35 PBDT 32.33 47.22 27.92 16.77 16.34 16.51 42.18 35.94 51.98 Less: Depreciation 8.68 8.72 8.81 9.17 9.4 9.6 9.79 9.85 9.47 Tax 7.85 12.95 6.5 2.5 1.5 2.3 12.17 7.5 13.3 Profit After Tax 15.8 25.55 12.61 5.1 5.44 4.61 20.22 18.59 29.21 EPS (`) 5.83 9.43 4.65 1.88 2.01 1.7 7.46 6.86 10.78 PBIDTM (%) 28.8 36.18 25.52 20.17 18.91 18.2 33.81 23.41 28.81 PBDTM (%) 24.47 32.88 22.06 16.21 15.24 14.15 29.57 19.93 26.59 PATM (%) 11.96 17.79 9.96 4.93 5.07 3.95 14.18 10.31 14.94

K E Y N O T E

3 Keynote Capitals Research

Kirloskar Pneumatic Ltd.

We recommend buying in Kirloskar Pneumatic Company Ltd. (KPCL) as a value buy.

Incorporated in 1958, KPCL provides high end integrated solutions using Compression & Transmission Technologies. The company caters to the industries like Petrochemicals, Power, Steel, Cement, Food & Beverage, Defense, Construction & Mining and many more.

KPCL derives 89% of its total revenues out of compression systems products while rest from transmission products. The company generates 60% of revenues from projects business and balance from equipment supply. The company pioneered CNG Systems, Coal Gasification compression systems etc in the country. It has supplied refrigeration system for all refineries in the country. The compressor division has just completed the coal gasification order project. It is the market leader in CNG market with 40-45% share.

In transmission products, KPCL caters to Gearboxes for Railways and Marine industries. The company does not supply to auto industry and therefore it is not vulnerable to auto industry slowdown. The company has also diversified into wind mill gear boxes, where the company manufacturers 1 MW gear boxes for MW class WTGs. This is the only company apart from Suzlon, which has captive gear box production facility that is into manufacture of MW class gear boxes.

KPCL has completed a revamp program of transmission business for which it made huge investment. The company has demolished its old plant totally to make it suitable for manufacturing large gear boxes. Replaced about 80% of the old machines with machines with latest technology and is now brand new.

The company received permission from Indian Railways for operating Road Railer trains in Delhi Chennai corridor. This is different from the roll on & rolls off service currently offered by CONCOR and other players. For example if a car loaded specialised wagon at the Gurgaon Factory of Maruti Udyog will get offloaded only in the premises of a Dealer in TN or AP without changing the wagons. The specially made bogies/wagons will be decoupled and connected to truck and taken to dealers. Manufacturing of road railers will start by Q3FY12.

The company has over `500Cr order book while the average ticket size ranges from 006020-100Cr.

KPCL is fundamentally strong company with debt to equity of just 0.14x and Return on Equity of 25.2%. The company’s stock price outperformed the Sensex over a one year period. Its share price dropped 19.3% for last one year compared to a negative return of 22.5% by the Sensex. Considering the current inexpensive valuation, 7.7x for FY12 based on annualized EPS `58.76 (5-year average forward P/e is 12.18x) and reasonable dividend yield of 2.9%, we expect the downside is limited for the stock and can be considered as a good value pick.

Key Stock Data Sector Capital Goods CMP `451.75 52wk High/Low `600 / 375 Market Cap `5.78bn

($112mn) 6m Avg. daily vol 6,192

BSE Sensex 16,154.62

Reco ‘Buy’

BSE Code 505283 NSE Code NA Face Value `10 Shareholding pattern (31th December, 2011)

Price Performance % 1 Mth 3 Mths 6 Mths 1 Yr -0.15% -7.27% -4.24% -5.78%

Stock Price Performance

Promoter 56%Forei

gn3%

nstitutions20%

Corporate6%

Public15%

70%75%80%85%90%95%

100%105%110%115%120%

KPCL BSE_SENSEX

K E Y N O T E



Particulars FY07 FY08 FY09 FY10 FY11Net Revenues 353.56 398.75 514.57 453.28 491.73

Growth (%) - 12.78% 29.05% -

11.91% 8.48%EBITDA 37.07 37.99 66.67 70.96 72.77Growth (%) - 2.48% 75.49% 6.43% 2.55%Net Profit 26.52 29.82 40.74 44.59 42.78Growth (%) - 12.44% 36.62% 9.45% -4.06%EPS (`) 33.4 22.05 30.12 35.01 31.93P/E (x) 22.8 6.2 14.1 14.8 14.1EBIDTA Margin (%) 10.5% 9.5% 13.0% 15.7% 14.8%PAT Margin (%) 7.5% 7.5% 7.9% 9.8% 8.7%RONW (%) 41.1% 36.1% 46.8% 41.2% 36.1%ROCE (%) 41.8% 32.0% 35.1% 32.9% 25.2%

Source : Company

K E Y N O T E


Petronet LNG Ltd.

Key Stock Data

Sector Gas Distrib. CMP `156.65 52wk High/Low `185.85/105.1 Market Cap `12198Cr ($2.36bn) 6m Avg. daily vol 23,06,889 BSE Sensex 16,154

Stock Codes Bloomberg Code PLNG IN Reuters Code PLNG.BO BSE Code 532522 NSE Code PETRONET Face Value `10

Shareholding Pattern (31st Dec,2011)

Price Performance (%)

1 Mth 3 Mths 6 Mths 1 Yr -0.8% 0.3% 8.5% 26.5%

Petronet LNG was incorporated in 1998 as a JV by the Govt. of India to import LNG and set up LNG terminals in the country. Its promoters are GAIL (India), ONGC, IOCL and BPCL, each having 12.5% stake in Petronet LNG. In addition, GDFI (part of GDF Suez, a French national gas company) holds a 10% stake and is a strategic partner. GDF Suez has been the largest LNG importer in Europe for the past 30 years. Asian Development Bank also has a stake of 5.2% in Petronet LNG.

The Dahej LNG terminal was started in 2004 with a capacity of 5 mmtpa. The terminal is strategically situated in the biggest gas consuming state in India and is in close proximity to Qatar, the company’s main supplier. In 2009, capacity of Dahej terminal was increased to 10 mmtpa. Currently, the company has a 25 yr LNG supply contract for 7.5 mmtpa with Rasgas of Qatar. LNG is transported via three tankers—Disha, Raahi and Aseem to the Dahej terminal. The company has back-to back off-take agreements with GAIL, IOCL and BPCL in the ratio of 60:30:10, respectively. The terminal is well connected with GAIL’s HVJ & DUPL pipelines and GSPL’s network in Gujarat. The company has recently contracted 1.5 mmtpa for 2 yrs and has entered into offtake agreements for the same. The company also provides regasification services wherein companies can use Petronet LNG’s facilities for regasifying their LNG cargoes.

Capacity Expansion: Petronet LNG is expanding its capacity in Dahej by 5 mmtpa by constructing another jetty and expanding its regas plant facilities to handle higher volume of LNG. This expansion is being done at a very competitive capital cost of `20bn. The company is also constructing a greenfield LNG terminal of 5 mmtpa at Kochi at an investment of `42 bn. The higher capex/ton reflects current costs of setting up LNG terminals and is in line with other projects scheduled to come up in the future. Kochi terminal is expected to be operational by the end of FY13, thus, contribution to topline and bottomline is expected from FY14. There is sufficient pent-up demand for natural gas in the Southern region, mainly from the industrial sector in Mangalore and Kochi. The management is confident of supplying LNG from its Kochi terminal to BPCL’s 9.5 mmt Kochi refinery and MRPL (Capacity: 11.8 mmt). Both these refineries are undergoing capacity expansion to 15 mmt, which would require additional volumes of gas.


Particulars FY07 FY08 FY09 FY10 FY11Net Sales 5508.96 6555.31 8428.70 10649.09 13197.29Y-o-Y Growth % 43.6% 19.0% 28.6% 26.3% 23.9%Total Expenditure 4860.90 5689.18 7527.43 9802.63 11981.02EBITDA 648.06 866.13 901.27 846.46 1216.27Y-o-Y Growth % 32.8% 33.6% 4.1% -6.1% 43.7%Margin 11.8% 13.2% 10.7% 7.9% 9.2%Interest 107.04 102.36 101.21 183.93 193.13Depreciation 102.03 102.18 102.52 160.86 184.67Tax 162.33 240.52 255.60 195.00 286.80PAT 313.25 474.65 518.44 404.50 619.62Y-o-Y Growth % 60.7% 51.5% 9.2% -22.0% 53.2%Margin 5.7% 7.2% 6.2% 3.8% 4.7%EPS (`) 4.18 6.33 6.91 5.39 8.26

(Source - Keynote Capitals ltd.)

Promoter 50%FII

14.55%

DII 7.92%

Public & Others 27.53%

60

80

100

120

140

160

Jan-1

1

Feb-1

1

Mar-

11

Apr-

11

May-1

1

Jun-1

1

Jul-

11

Aug-1

1

Sep-1

1

Oct

-11

Nov-1

1

Dec-

11

Jan-1

2

Petronet LNG BSE Sensex


K E Y N O T E


Demand-supply gap of natural gas in India: The Indian market for natural gas has

always suffered from a chronic shortage of supplies. This is due to limited domestic gas supplies, gas pricing & customer allocation being the prerogative of the Govt. and inadequate transmission infrastructure in the country. A study by Mercados shows that natural gas demand is expected to grow at CAGR of 21% from 179 mmscmd in FY11 to 381 mmscmd in FY15. On the other hand, the Directorate General of Hydrocarbons (DGH) estimates that supply will grow at CAGR of 8.6% only from 146 mmscmd in FY11 to 203 mmscmd in FY15. Thus, the demand-supply gap is expected to increase by more than 5 times from 33 mmscmd in FY11 to 178 mmscmd in FY15.

No regulatory threat to regas tariffs: Petronet LNG is perhaps the only player in the oil & gas industry whose margins / pricing / returns are not subject to any regulations. The company has reported ROEs in the range of 25-30% historically. This has created a concern that the regulator may bring LNG terminals and regas tariffs into its ambit. However, since the regasification tariff accounts for a small portion of the delivered price, controlling the tariff may not result in any meaningful relief to regasified liquefied natural gas (RLNG) customers.

First mover advantage at Dahej Terminal: The Dahej terminal is located in Gujarat, which accounts for 1/3rd of the total gas consumption of India. Gujarat is home to various refineries, petrochemical, fertilizer & power plants which account for the lion’s share of R-LNG consumption. The 10 mmtpa LNG terminal at Dahej will continue to be the base of Petronet LNG’s operations going forward due to its optimal location, low capital cost translating into competitive regas tariffs and tying up of 75% of its capacity at favorable long term contracts.

Valuation and Outlook

Demand for natural gas is expected to remain robust in India and domestic supply of natural gas fails to meet the shortfall, which will boost business prospects for Petronet LNG. With growing volumes and increasing revenue visibility through capacity expansions at Dahej and new capacities coming up at Kochi makes Petronet LNG as an attractive long term investment opportunity. As per the consensus estimates, Petronet LNG is trading at 12.05x FY12E EPS of `13.0 and `11.85x FY13E EPS of `13.23.

K E Y N O T E


Polaris Financial Technology Ltd.

Key Stock Data Sector IT CMP `137.80 52wk High/Low 214/113 Market Cap `1369Cr

($268mn) 6m Avg. daily vol 64829 BSE Sensex 16154.62

Reco. ‘Buy’

BSE Code 532254 NSE Code POLARIS Face Value `5

Shareholding pattern (30th Sep, 2011)

Price Performance (%) 1 Mth 3 Mths 6 Mths 1 Yr

9.9% 7.8% -24.6% -15.8%


Polaris FT was founded in 1993. It provides software services and solutions to multinational clients. The Company provides its services to companies in the banking and financial industry, which specialize in retail banking, credit cards, insurance, risk management, investment banking and a variety of telecom related activities. It is chosen outsourcing partner for 9 of the top 10 global banks and 7 of the 10 top global insurance companies. It is world's first CMMi (Capability Maturity Model Integrated) level 5 certified Company.

Revised guidance upward:- Polaris’s management has increased its revenues guidance for FY12E at `2014Cr –`2060Cr from `1968Cr – `2014Cr backed by robust volume growth and strong performance of Intellect. The EPS guidance is revised to `22.65 – `23.47 from `21.95 – `22.35.

Excellent numbers for the Q2FY12:- The Company has registered strong numbers for the quarter ending September 2011. The company has crossed `500Cr as revenues in the September quarter ended. A sharp rise of 35% in the consolidated revenues to `523.12Cr in Q2FY12 as compared with `387.95Cr in the same quarter last year. Operating profit moved up to `75.54Cr as compared to `60.24Cr Y-o-Y basis. Similarly revenues contribution from Top 5 clients increased to 43.03% against 40.81% in the same quarter last year.

Geography-wise revenues contribution:- The company received more than 67% revenues from US and Europe. The highest revenues come from US (45.43%) as compared to Europe (22.40%). Revenues contribution from Offshore stood at 59.15% in Q2FY12 as compared to 56.68% Y-o-Y. It will have positive impact on companies bottom-line.

Key Financials (`Cr) Particulars FY07 FY08 FY09 FY10 FY11Total Sales 1032.4 1099.3 1377.9 1353.8 1586.3Y-o-Y Growth % 25.1% 6.5% 25.3% -1.8% 17.2%Total Expenditure 871.8 981.1 1144.4 1131.7 1372.4EBITDA 160.6 118.2 233.5 222.0 213.9Y-o-Y Growth % 110.4% -26.4% 97.6% -4.9% -3.7%Depreciation 48.1 46.0 50.5 35.0 33.7EBIT 112.5 72.2 183.0 187.0 180.2Other income 9.3 18.1 -31.6 -7.3 59.1Interest paid 0.8 0.8 0.7 0.9 1.1PBT 121.0 89.5 150.7 178.8 238.2Tax 19.9 16.1 20.9 25.5 35.9PAT 101.1 73.4 129.8 153.3 202.3Y-o-Y Growth % 374.3% -27.4% 76.9% 18.1% 32.0%NPAT & Minority 101.2 73.2 130.7 152.8 202.5EPS(`) 10.2 7.4 13.2 15.4 20.4EBITDA Margin 15.6% 10.8% 16.9% 16.4% 13.5%PAT Margin 9.8% 6.7% 9.4% 11.3% 12.8%PE 14.7 11.0 8.1 11.2 6.8 Source: Keynote Capitals Research

Promoters29%

FII24%

DII11%

Others

36%

55

65

75

85

95

105

115

Close Price SensexBse IT

K E Y N O T E


12 Intellect wins across banking and insurance verticals: - Intellect (The flagship

product of company) suite is a set of most comprehensive pack of solutions designed for the Corporate, Retail and Investment Banking segments. Intellect is a service-enabled, component-based core banking system. Polaris is assessed at CMMI Level 5 certification offering highly repeatable, continuous-improvement processes. Intellect revenues contributed `139.28Cr in the Q2FY12, representing 27.32% of its revenues; witnessing a jump of 68% y-o-y. Services revenues contributed 72.68% at `370.46Cr to the revenues; representing a growth of 21% on y-o-y basis. Polaris has recorded 12 intellect wins across banking and insurance verticals during the quarter.

Revenues split by Products and Services `Cr

Particulars Q2FY11 Q1FY12 Q2FY12Product Revenues 83.0 105.2 139.3Services Revenues 305.3 344.9 370.5Source: Company

Quarterly performance `Cr

Particulars Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Total Sales 388.0 411.4 443.0 455.8 523.1Q-o-Q Growth % 5.0% 6.1% 7.7% 2.9% 14.8%Total Expenditure 327.7 347.5 384.8 392.3 447.6EBITDA 60.2 63.9 58.2 63.5 75.5Q-o-Q Growth % 5.7% 6.1% -9.0% 9.2% 19.0%Depreciation 8.4 8.7 8.7 9.6 11.2EBIT 51.8 55.2 49.5 53.9 64.4Other income 5.4 5.3 17.5 8.0 8.9Interest paid 0.3 0.3 0.4 0.5 0.6PBT 56.9 60.2 66.6 61.5 72.7Tax 9.0 10.1 9.0 16.9 18.9PAT 47.9 50.2 57.7 44.5 53.8Q-o-Q Growth % 3.0% 4.7% 15.0% -22.8% 20.9%Source: Company

Valuation

At current market price of `137.80 stock is trading at 6.8x FY11 and 6.3x Q2FY12 (TTM) earnings. Which is low as compared its industry PE of 14.3x (From Bloomberg). The management of Polaris has revised the revenue guidance upward and increasing deal sizes will lead to outperform going forward. Similarly Rupee depreciated against the Dollar, which will have positive impact on the company’s EBITDA margin.

K E Y N O T E


Tata Sponge Iron Ltd.

Key Stock Data Sector Metals CMP `254.7 52wk High/Low 379.0/232.6 Market Cap `389.77Cr

($74.9mn) 6m Avg. daily vol 5235 BSE Sensex 16154.6 Reco ‘Buy’

BSE Code 513010 NSE Code TATASPONGE Face Value `10

Shareholding pattern (30th Sept, 2011)

Price Performance (%) 1 Mth 3 Mths 6 Mths 1 Yr

4.6% 18.5% 19.7% 2.6%


Tata Sponge, which has its manufacturing facility at Bilaipada (in Joda Block of Keonjhar District in Orissa), was initially set up as a joint venture company between Tata Steel and the Industrial Promotion and Investment Corporation of Orissa Limited (IPICOL). It has a production capacity of 390000tpa of sponge iron. The company has also set up 26MW of captive power plants to gain from the waste hot gases released from its kilns in phases.

High Dividend yield: Over the last several years company has consistently paid dividend more than 40% of face value. Last year company paid dividend of Rs8 per share translation dividend yield of 2.33%. Average dividend yield for the last 5 years is 2.8% which is reasonably good.

Debt free: The Company is totally debt free and therefore higher cost of capital will not

affect the company’s performance.

Lower production and sales volume muted by higher realization: Despite significantly lower production and sales volumes, strong sponge iron realizations are supporting both revenue and margins. Sponge Iron production was significantly lower in H1FY12 to 143K tons from 193K tons on account of disruption in iron ore supply due to mining ban in Karnataka and regulatory rigor in the Barbil region has affected supply of iron ore to the industry. Current sponge iron prices are at a 3-year high in the domestic market and are expected to be elevated till the ban is not taken back. Currently, price of the sponge iron is `24000 per ton as compared to `17200 per ton during same period previous year.

Key Financials (`Cr) Particulars FY07 FY08 FY09 FY10 FY11Total Income 296.83 480.04 628.28 541.94 694.87Growth (%) 45.2% 61.7% 30.9% -13.7% 28.2%Total Expenditure 245.04 311.92 424.16 396.09 526.07PBIDT 51.79 168.12 204.12 145.85 168.8Growth (%) 23.5% 224.6% 21.4% -28.5% 15.7%Interest 5.36 12.03 4.64 0.25 0PBDT 46.43 156.09 199.48 145.6 168.8Depreciation 13.49 19.65 18.31 19.38 18.52Tax 2.91 19.48 60.5 46.08 55.6Fringe Benefit Tax 0.2 0.31 0 0.02 0Deferred Tax 8.6 21.12 0 -4.4 -6.66Reported PAT 21.23 95.53 120.67 84.52 101.34Extra-ordinary Items 5.37 3.17 0 0 0Adj PAT Extra-ordinary item 15.86 92.36 120.67 84.52 101.34Growth (%) -28.4% 482.3% 30.7% -30.0% 19.9% Source: Company & Keynote Capitals Research

Promoters43.7%

FIIs6.8%

DIIs7.3%

Others

42.3%

50%

60%

70%

80%

90%

100%

110%

Jan‐11

Mar‐11

May‐11

Jul‐1

1

Sep‐11

Nov

‐11

Jan‐12

Tata Sponge MetalsSensex

K E Y N O T E


Quarterly performance (`Cr)

Net sales grew 19% Q-o-Q (down 1% Y-o-Y) to `174Cr while realizations increased 23% Q-o-Q to `22397 per ton.

EBITDA decreased 10% Q-o-Q (13% Y-o-Y) to `29.9Cr while EBITDA/ton declined 8% Q-o-Q to `4206.

Radhikapur (East) coal block is on track. Coal production is likely to start in 2013. `Cr

Particulars Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Net Sales 175.3 168.38 191.64 138.09 168.02Other Income 3.8 2.89 4.14 4.48 6.22Other Operating Income 0.09 2.01 3.8 7.6 5.7Total Income 179.19 173.28 199.58 150.17 179.94Total Expenditure 159.74 135.53 131.51 112.6 143.86PBIDT 19.45 37.75 68.07 37.57 36.08Interest 0 0 0 0 0.06PBDT 19.45 37.75 68.07 37.57 36.02Depreciation 4.64 4.64 4.52 4.56 4.62PBT 14.81 33.11 63.55 33.01 31.4Tax 4.4 10.91 20.72 10.49 9.67Reported Profit After Tax 10.41 22.2 42.83 22.52 21.73EPS (`) 6.76 14.42 27.81 14.62 14.11PBIDT Margins (%) 11.1% 22.4% 35.5% 27.2% 21.5%PBDT Margins (%) 11.1% 22.4% 35.5% 27.2% 21.4%PAT Margins (%) 5.9% 13.2% 22.3% 16.3% 12.9%

TTM Profit & Loss A/C `Cr

Particulars TTM Q208 TTM Q209 TTM Q210 TTM Q211Net Sales 603.54 492.84 606.09 666.13Other Income 10.27 9.98 7.96 17.73Other Operating Income 6.26 9.93 10.84 19.11Total Income 620.07 512.75 624.89 702.97Total Expenditure 364.7 415.84 472.23 523.5PBIDT 255.37 96.91 152.66 179.47Interest 8.43 1.5 0.25 0.06PBDT 246.94 95.41 152.41 179.41Depreciation 17.89 19.2 19.02 18.34PBT 229.05 76.21 133.39 161.07Tax 65.75 26.83 43.4 51.79Reported Profit After Tax 163.3 49.38 89.99 109.28EPS (`) 106.04 32.06 58.44 70.96PBIDT Margins (%) 41.2% 18.9% 24.4% 25.5%PBDT Margins (%) 39.8% 18.6% 24.4% 25.5%PAT Margins (%) 26.3% 9.6% 14.4% 15.5%

Source: Company & Keynote Capitals Research Valuations: We expect sponge iron production to be significantly lower due to iron supply issues. However, this has been factored and the stock is available at the attractive valuations. At CMP of `254.7, company trades at the TTM PE multiple of 3.59x and P/BV multiple of 0.71x which are very low as compare to the industry peers of 10.9x and 1.68x respectively.

K E Y N O T E

Keynote Capitals Research

KEYNOTE CAPITALS LTD.

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