Research Report

10 Nov 2023

Elgi Equipments (ELEQ IN)

Strong Operational Performance
[Table_yemei1]
Investment Focus

[Table_Info] Maintain OUTPERFORM Elgi Equipments (Elgi) posted a strong Q2FY24 performance, where
results were ahead of our and streets’ estimates. Consolidated
Rating OUTPERFORM
revenue grew 9% YoY with a 250bps jump in EBITDA margin to 17.7%
Current Price Rs534.40
as PAT rose 27%. The company is witnessing some slowdown in certain
Target Price Rs605.00
geographies like Europe, South East Asia and Australia, which is likely
to impact FY24 performance. North America is back to normalized
Market cap Rs169.35bn / US$2.03bn
levels and expect H2FY24 to be better. The management indicated that
Daily traded value (3mth) US$0.18mn
while the enquiries levels remain healthy, closure is taking longer. Elgi
Shares in issue 316.91mn
remains firm on turning around its European business in FY25. We
Free float (%) 59%
have marginally increased our earnings estimates by 2-4% for FY24-
1 yr high - low Rs583.95-Rs361.90
FY26 on the back of improved H1FY24 performance and positive
Note: Current Price Rs534.40 is the close price on 9 Nov 2023
management commentary. We now expect Elgi to clock revenue and
Price Return Nifty100 earnings CAGR of 14% and 21%, respectively over FY23-26. Thus, we
maintain our Outperform rating on the stock with revised target price
140
of Rs605 (earlier Rs590) based on 40x (unchanged) our revised Sept-25
120 EPS of Rs15.1.
100
Result Highlights
80 At Rs8.1 bn, the consolidated revenue grew 9% YoY, where Air
60 Compressors saw 8.5% growth while the Auto Components business
grew 17.5% YoY. EBITDA margin improved 250bps YoY to 17.7%, aided
Volume

by 180bps jump in the gross margin to 51.8%. Thus, PAT grew 27% YoY
to Rs913 mn, driven by strong operating performance. Standalone
revenue declined 2.1% YoY even as EBITDA margin saw sharp
Nov-22 Mar-23 Jul-23 Nov-23
Source: Factset
improvement (up 450bps YoY) to 22.5%, aided by 340bps jump in gross
margin to 47.3%. Consequently, PAT jumped 15% YoY to Rs833 mn. For
1mth 3mth 12mth H1FY24, consolidated revenue grew 7% YoY with EBITDA margin
Absolute 4.2% -0.6% 3.5% expansion of 180bps to 15.1%. Thus, PAT rose 26% YoY to Rs1.5 bn
Absolute USD 4.1% -1.3% 1.9% during H1FY24. The management sees some sluggishness in demand.
Relative to Nifty100 3.8% -7.3% -23.0% While enquiries remain healthy, closure is taking longer. Europe is facing
challenges on multiple fronts and it is expected to remain subdued.
[Table_Profit]
(Rs mn) Mar-23A Mar-24E Mar-25E Mar-26E
Financials & Valuation
Revenue 30,407 35,043 40,165 44,926
While, we maintain our revenue estimates for FY24-26 we increase our
（+/-） 20% 15% 15% 12%
Net profit 2,934 3,718 4,457 5,133
EBITDA margin estimates by 70-100bps for FY24-26 factoring strong
（+/-） 64% 27% 20% 15%
operational performance during H1FY24. Consequently, we revise up
Diluted EPS (Rs) 9.30 11.70 14.10 16.20 our earnings estimates by 2-4% for FY24-26. We now expect Elgi to post
GPM 50.4% 48.5% 50.0% 50.0% consolidated revenue and earnings CAGR of 14% and 21%, respectively
ROE 24.4% 24.6% 24.5% 23.6% over FY23-26. We value the company based on 40x (unchanged) our
P/E 58 46 38 33 Sept-25 EPS estimate of Rs15.1 to arrive at our revised target price of
Source: Company data, HTI R605 (earlier Rs590). We maintain our Outperform rating on the stock.
Main Risks to our Rating and Target Price
(a) Delay or weaker than expected capex revival to impact growth, (b)
Delay in global economic revival may hamper revenue growth and (c)
Increased competitive intensity may impact profitability.

[Table_Author]
Rahul Gajare Maulik Shah
rahul.gajare@htisec.com maulik.shah@htisec.com

[Table_yejiao1]
This research report is distributed by Haitong International, a global brand name for the equity research teams of Haitong International
Research Limited (“HTIRL”), Haitong Securities India Private Limited (“HSIPL”), Haitong International (Japan) K.K. (“HTIJKK”), Haitong
International Securities Company Limited (“HTISCL”), and any other members within the Haitong International Securities Group of
Companies (“HTISG”), each authorized to engage in securities activities in its respective jurisdiction. Please refer to the appendix for the
Analyst Certification, Important Disclosures and Important Disclaimer.
 [Table_header1]
Elgi Equipments (ELEQ IN) MAINTAIN OUTPERFORM

Key Highlights from the Concall

 While all geographies witnessed growth, it didn’t meet Elgi’s internal expectation.
 Australia and South East Asia was not upto the mark. North America is back to
normalized levels and Elgi expects revenue to be stronger in H2FY24.
 India in certain segments is doing well and certain segments are slow. Enquiries are
strong but conversions are taking longer.
 Demand uptick is seen in water segment in India and textiles is picking up but at a slower
pace.
 Standalone revenue growth is slower as sales to subsidiaries in Q2 has been lower.
 The company is optimistic on India growth and is looking at strategic initiatives for
growth. Elgi expects to kick it off in Q4FY24 whose effects are likely to be visible in FY25.
 Europe is facing challenges on multiple fronts and it is expected to remain subdued.
Though the growth in Europe is in double digit, but it doesn’t meet the company’s
expectation. At the moment Elgi is still optimistic that loss will be restricted as per plan
and breakeven by FY25. They are trying to tighten up the cost as revenue growth is
slower than expected.
 Rotair sales was good in H1FY24 driven by North America and Europe. Margin too
witnessed growth.
 Pattons Q1 was bad due to ERP implementation and since its normalized, Q2 has been
better.
 The management didn’t comment on demand outside India as business is done through
distributors hence there is no visibility.
 Aftermarket revenue contributes 26% of standalone revenue and 13-14% on a
consolidated level. As the sales of compressors increases, aftermarket business is likely
to grow.
 Generally, equipments have gross margin of 30-35% and spare parts have 60% margin
and service is basically 100% margin. Thus, the company expects gross margin to sustain
as and when aftermarket business improves.
 During the quarter, other expenses were down due to lower advt. and travel expenses
and the management doesn’t expect this lower run rate to continue. This will normalize
in coming quarters.
 Net cash stands at Rs767 mn vs. net debt of Rs1.5 bn as on Sept’22.
 The company is confident to reduce inventory days over the coming quarters.
 Oil free compressors seeing good growth in all regions and have acquired good marquee
brands/ customers.
 Basically in this business there are 2 types of customers. First is Total Cost Ownership
(TCO), where the customers look at the entire lifecycle of the product and the other just
look at the pricing. Elgi believes 60-70% of customers are TCO as the lifecycle cost is high
for compressors.
 Elgi expects some reduction in employee costs to levels of 16-18% in next 2-3 years from
20% currently.
 On capex, Elgi will not exceed Rs500 mn per year. Major capex will be incurred when
they shift the campus. Entire capex would be ~Rs5 bn over next 3-4 years. This shift to
new campus will not increase capacity and no benefit to revenue growth.

10 Nov 2023 2
 [Table_header1]
Elgi Equipments (ELEQ IN) MAINTAIN OUTPERFORM

Consolidated Quarterly Performance

Consolidated P&L (Rs Mn) Q2FY24 Q2FY23 YoY (%) Q1FY24 QoQ (%) H1FY24 H1FY23 YoY (%)
Revenue 8,061 7,387 9.1 7,239 11.4 15,300 14,325 6.8
Cost of revenue 3,883 3,691 5.2 3,525 10.2 7,407 7,275 1.8
Gross Profit 4,179 3,696 13.0 3,714 12.5 7,893 7,050 12.0
Gross Margin (%) 51.8 50.0 51.3 51.6 49.2
Staff Cost 1,584 1,371 15.5 1,580 0.2 3,164 2,787 13.5
Other Exp 1,167 1,199 (2.6) 1,248 (6.4) 2,415 2,355 2.6
EBITDA 1,427 1,126 26.7 886 61.0 2,314 1,908 21.3
EBITDA Margin (%) 17.7 15.2 12.2 15.1 13.3
Depreciation 187 196 (5.0) 185 0.8 372 385 (3.4)
Interest 66 51 29.0 47 41.6 113 79 42.3
Other Income 117 147 (20.3) 175 (33.2) 292 264 10.6
Exceptional items - - - - -
PBT 1,292 1,025 26.0 830 55.7 2,121 1,708 24.2
Tax 388 321 20.6 252 53.7 640 539 18.6
Tax Rate (%) 30.0 31.3 30.4 30.2 31.6
Reported PAT 913 720 26.9 605 50.9 1,518 1,206 25.8
Adjusted PAT 913 720 26.9 605 50.9 1,518 1,206 25.8
EPS (Rs) 2.9 2.3 26.9 1.9 50.9 4.8 3.8 25.8
Source: Company Data

Segmental Perfomance (Rs Mn) Q2FY24 Q2FY23 YoY (%) Q1FY24 QoQ (%) H1FY24 H1FY23 YoY (%)
Revenue
Air Compressors 7,408 6,830 8.5 6,630 11.7 14,038 13,292 5.6
Automotive equipments 658 560 17.5 616 6.8 1,275 1,043 22.2
EBIT
Air Compressors 1,226 965 27.1 771 58.9 1,997 1,615 23.7
Automotive equipments 66 61 8.4 58 13.1 124 93 33.8
EBIT Margins (%)
Air Compressors 16.6 14.1 11.6 14.2 12.2
Automotive equipments 10.0 10.8 9.5 9.7 8.9
Capital Employed

Air Compressors 13,470 10,243 31.5 13,141 2.5 13,470 10,243 31.5
Automotive equipments 1,150 1,020 12.8 1,205 (4.6) 1,150 1,020 12.8
Source: Company Data

Subsidiaries Quarterly Performance

Subsidiaries (Rs Mn) Q2FY24 Q2FY23 YoY (%) Q1FY24 QoQ (%) H1FY24 H1FY23 YoY (%)
Revenue 3,669 2,902 26.4 3,247 13.0 6,916 5,699 21.4
Gross Profit 2,103 1,727 21.7 1,771 18.7 3,874 3,403 13.9
Gross Margin (%) 57.3 59.5 54.6 56.0 59.7
EBITDA 437 320 36.5 79 452.1 517 565 (8.6)
EBITDA Margin (%) 11.9 11.0 2.4 7.5 9.9
Reported PAT 80 (8) NA (66) NA 14 34 (58.5)
Adjusted PAT 80 (8) NA (66) NA 14 34 (58.5)
Source: Company Data, HTI

10 Nov 2023 3
 [Table_header1]
Elgi Equipments (ELEQ IN) MAINTAIN OUTPERFORM

Standalone Quarterly Performance

Standalone P&L (Rs Mn) Q2FY24 Q2FY23 YoY (%) Q1FY24 QoQ (%) H1FY24 H1FY23 YoY (%)
Revenue 4,392 4,485 (2.1) 3,992 10.0 8,384 8,626 (2.8)
Cost of revenue 2,316 2,515 (7.9) 2,049 13.0 4,366 4,979 (12.3)
Gross Profit 2,076 1,969 5.4 1,943 6.9 4,018 3,647 10.2
Gross Margin (%) 47.3 43.9 48.7 47.9 42.3
Staff Cost 513 477 7.5 532 (3.5) 1,045 965 8.3
Other Exp 573 686 (16.6) 604 (5.2) 1,176 1,340 (12.2)
EBITDA 990 806 22.9 807 22.7 1,797 1,343 33.8
EBITDA Margin (%) 22.5 18.0 20.2 21.4 15.6
Depreciation 89 97 (8.4) 85 3.9 174 189 (8.1)
Interest 10 16 (40.0) 7 36.5 17 20 (16.2)
Other Income 218 262 (16.9) 179 22.2 397 415 (4.3)
PBT 1,110 955 16.2 893 24.2 2,003 1,548 29.4
Tax 277 228 21.3 223 24.2 499 375 33.0
Tax Rate (%) 24.9 23.9 24.9 24.9 24.2
Reported PAT 833 727 14.5 671 24.2 1,504 1,173 28.2
Adjusted PAT 833 727 14.5 671 24.2 1,504 1,173 28.2
EPS (Rs) 2.6 2.3 14.5 2.1 24.2 4.8 3.7 28.2
Source: Company Data, HTI

Change in estimates
New Estimates (Rs mn) Old Estimates Change (%)
FY24 FY25 FY26 FY24 FY25 FY26 FY24 FY25 FY26
Revenue 35,043 40,165 44,926 34,997 40,115 44,870 0 0 0
EBITDA 5,256 6,145 6,964 4,900 5,817 6,641 7 6 5
Margin (%) 15.0 15.3 15.5 14.0 14.5 14.8
Ad. PAT 3,718 4,457 5,133 3,589 4,352 5,002 4 2 3
Source: Company Data, HTI

Consolidated Revenue & Growth Trend Consolidated EBITDA and EBITDA Margin Trend
10.0 40.0 1.5 20.0

8.0 1.2 16.0

30.0
6.0 0.9 12.0

0.6 8.0
4.0
20.0
0.3 4.0
2.0
- -
2Q FY21

4Q FY21

- 10.0
2Q FY22

4Q FY22

2Q FY23

4Q FY23

2Q FY24
2Q FY21

2Q FY22

2Q FY23

2Q FY24
4Q FY21

4Q FY22

4Q FY23

EBITDA (Rs bn) Margin (%, RHS)

Revenue (Rs bn) Growth (%, RHS)
Source: Company Data, HTI Source: Company Data, HTI

10 Nov 2023 4
 [Table_header1]
Elgi Equipments (ELEQ IN) MAINTAIN OUTPERFORM

Standalone Revenue & Growth Trend Standalone EBITDA and EBITDA Margin Trend
5.0 180.0 1.0 25.0
160.0
4.0 140.0 0.8
120.0 20.0
3.0 100.0 0.6
80.0
2.0 60.0 0.4
40.0 15.0
1.0 20.0 0.2
-
- (20.0) - 10.0

2Q FY22
2Q FY21

4Q FY21

3Q FY21

2Q FY22
3Q FY22
2Q FY21

4Q FY21
1Q FY22
2Q FY24
4Q FY22

2Q FY23

4Q FY23

2Q FY23

1Q FY24
2Q FY24
4Q FY22
1Q FY23

3Q FY23
4Q FY23
Revenue (Rs bn) Growth (%, RHS) EBITDA (Rs bn) Margin (%, RHS)
Source: Company Data, HTI Source: Company Data, HTI

Air compressors Revenue & Growth Trend Air Compressors EBIT and EBIT Margin Trend
9.0 90.0 1.4 20.0

1.2 16.0
7.0
60.0 1.0
12.0
5.0 0.8
8.0
30.0 0.6
3.0
0.4 4.0

1.0 - 0.2 -
4Q FY21

4Q FY22

2Q FY24
2Q FY21

2Q FY22

2Q FY23

4Q FY23

4Q FY21

2Q FY23

4Q FY23
2Q FY21

2Q FY22

4Q FY22

2Q FY24
Revenue (Rs bn) Growth (%, RHS) EBIT (Rs bn) Margin (%, RHS)
Source: Company Data, HTI Source: Company Data, HTI

Auto Comp Revenue & Growth Trend Auto Comp EBIT and EBIT Margin Trend
0.7 100.0 0.1 20.0

0.6 80.0 0.1 15.0

0.5 60.0
0.1
0.4 40.0 10.0
0.3 20.0 0.0
5.0
0.2 -
0.0
0.1 (20.0) -
-
- (40.0)
4Q FY22

2Q FY23

4Q FY23
2Q FY21

4Q FY21

2Q FY22

2Q FY24
2Q FY21

2Q FY24
4Q FY21

2Q FY22

4Q FY22

2Q FY23

4Q FY23

(0.0) (5.0)

(0.0) (10.0)
Revenue (Rs bn) Growth (%, RHS) EBIT (Rs bn) Margin (%, RHS)
Source: Company Data, HTI Source: Company Data, HTI

10 Nov 2023 5
 [Table_header1]
Elgi Equipments (ELEQ IN) MAINTAIN OUTPERFORM

Revenue Mix (%)

100%

80%

60%

40%

20%

0%
4Q FY20

2Q FY21

4Q FY21

2Q FY22

4Q FY22

2Q FY23

4Q FY23

2Q FY24
Standalone Revenue Mix (%) Subsidiary Revenue Mix (%)
Source: Company Data, HTI

Gross Margin comparison

55.0

50.0

45.0

40.0

35.0
4Q FY20

1Q FY21

2Q FY21

3Q FY21

4Q FY21

1Q FY22

2Q FY22

3Q FY22

4Q FY22

1Q FY23

2Q FY23

3Q FY23

4Q FY23

1Q FY24

2Q FY24
Cons Gross Margin (%) Std Gross Margin (%)
Source: Company Data, HTI

EBITDA Margin comparison

25.0
20.0
15.0
10.0
5.0
-
(5.0)
(10.0)
4Q FY20

1Q FY21

2Q FY21

3Q FY21

4Q FY21

1Q FY22

2Q FY22

3Q FY22

4Q FY22

1Q FY23

2Q FY23

3Q FY23

4Q FY23

1Q FY24

2Q FY24

Cons EBITDA Margin (%) Std EBITDA Margin (%)

Source: Company Data, HTI

10 Nov 2023 6
 [Table_header1]
Elgi Equipments (ELEQ IN) MAINTAIN OUTPERFORM

Shareholding Pattern (%) Company Snapshot

Q2FY24 Q1FY24 Q4FY23
Elgi Equipments (Elgi) is a complete compressed air solutions provider with 400+ air
Promoters 31.2 31.2 31.2
compressor products. Elgi manufactures a complete range of air compressors that include
DII 4.8 4.9 4.9
Oil lubricated screw compressors, oil free piston air compressors, oil free screw compressors,
FII 28.8 29.3 29.1 oil lubricated piston compressors, diesel portable air compressors, electric portable
Others 35.2 34.6 34.8 compressors, railway air compressors, heat recovery systems, medical air compressors &
Source: BSE vacuum pumps. Elgi also has a wholly owned subsidiary ATS Elgi, the largest manufacturer
and distributer of Automotive Service Equipment in India. Elgi has a 5 mn sqft of
Top Institutional Shareholding (%) manufacturing facility spread over 3 countries namely India, USA and Italy. They have a direct
Top Institutions Holding presence with 26 countries and Elgi does business in over 120 countries.
Pari Washington India Master Fund 7.9
Gagandeep Credit Capital Pvt Ltd 4.6
Application of Air Compressor
Industry Application of Air Compressor
First State Investments ICVC 3.2
Spray finishing equipment, Air operated tools, Air operated lifting equipment, Shot Blasting, Cooling & Heating,
Wasatch Advisors Inc 3.1 Manufacturing
Cleaning
SBI Funds Mgmt Ltd 3.2 Spinning & Ginning Mills, Air Jet spinning & weaving, Man made fiber production, Texturing units, winding and
Textiles
dying of non woven materials, Pneumatic transport for PET chips, Treatment of wastewater
Nalanda India Equity Fund Ltd 2.8
Pharmaceutical Tablet Coating & Drying, Bottle cleaning, Nitrogen separation
Vanguard Group Inc/The 2.7
Water pumps, Crop sprayers, Product Conveyors, Dairy machines, Greenhouse Ventilation, Silos, winterization
Agriculture
Wasatch Emerging India Fund 2.1 of Irrigation lines
AL Mehwar Commercial Investments Mining Pneumatic tools, Blasting, Material Handling, Cleaning, Ventilation systems, Methane Gas Extraction
1.8
L Healthcare Blood Analyzers, Endoscopy, Medical Gas booms, Pumping of Bandages
First Sentier Investors ICVC 1.1
Automotive Plasma Cutting, Air operated robots, Automobile finishing, Air Tools
Source: Bloomberg
Construction Pneumatic Tools, Lifting and Handling operations, Road digging, cutting and cleaning, Tunnel digging
Source: HTI
Revenue Mix % (FY23)
Elgi History Timeline
Automotive Year Event
Equipments,
8
1960 Establishment of Elgi Equipments Ltd
1975 Becomes a public ltd company
1990 Develops rotary screw type vacuum exhausters for 1st time in India
1999 Launches the Horizon series of rotary screw air compressors; makes the 1st overseas sale in Thailand
2000 Introduces new generation oil free screw air compressors
2002 Develops the world's smallest screw air compressor and becomes Debt free company
2005 Commences operations to manufacture precision engineered components
2011 Launches 1st indigenously developed oil free screw air compressor
Air 2012 Acquires Italy based Rotair SPA and US based Patton's Inc and sets up subsidiary in Australia
Compressors 2013 Opens office in US and starts subsidiary in Indonesia
, 92
2018 Acquires F.R. Pulford & Son Pty Ltd, a Sydney based distribution company for Industrial compressors
Source: Company Data
2019 Launches AB series and Acquires Michigan Air Solutions and expands its presence in North America
Source: HTI

EBIT Mix % (FY23)

Automotive SWOT Analysis
Equipments,
6
Strengths Weakness
• Strong Positon in Air Compressor • Slower GDP growth both in India/ world
• Global Presence • Low margin/ Loss making subsidiaries

Opportunities Threats
Air • Large global market • Volatility in commodities
Compressors, • Turnaround of certain subsidiaries • Competitive Intensity
94
Source: Company Data

Source: HTI

10 Nov 2023 7
 [Table_header2]
Elgi Equipments (ELEQ IN) MAINTAIN OUTPERFORM

Financials (Consolidated)
Profit & Loss (Rs Mn) FY22 FY23 FY24E FY25E FY26E
Net Revenues 25,247 30,407 35,043 40,165 44,926
Cost of Goods Sold 13,570 15,334 16,996 20,083 22,463
Gross Profit 11,677 15,073 18,047 20,083 22,463
Operating Expenses 8,753 10,745 12,791 13,937 15,500
EBITDA 2,923 4,328 5,256 6,145 6,964
Depreciation 745 777 767 812 857
Interest 111 198 227 200 152
Other Income 550 672 675 774 836
Exceptional items - 1,054 - - -
Share of P/L of JVs / associates 13 25 31 49 69
Profit Before Tax 2,630 5,104 4,969 5,956 6,860
Tax 846 1,396 1,251 1,499 1,727
Reported PAT 1,784 3,708 3,718 4,457 5,133
Adjusted PAT 1,784 2,934 3,718 4,457 5,133

Segmental Revenue
Air Compressors 23,276 28,135 32,355 37,208 41,673
Automotive equipments 1,989 2,298 2,689 2,957 3,253
Source: Company Data, HTI Estimates

Balance Sheet (Rs Mn) FY22 FY23 FY24E FY25E FY26E

Share Capital 317 317 317 317 317
Reserves and Surplus 10,008 13,395 16,183 19,526 23,376
Borrowings 3,704 5,087 4,987 3,887 2,887
Other Long Term Liabilities 626 652 639 626 614
Current Liab & Prov. 4,819 5,253 6,430 7,615 8,530
19,474 24,704 28,557 31,972 35,724
Net Block 3,456 3,793 3,527 3,215 2,858
Investments 477 414 455 501 551
Other Non Current Assets 1,983 2,060 2,062 2,063 2,065
Current Assets
Inventories 4,831 6,024 6,985 8,033 9,108
Debtors 4,719 5,507 6,347 8,803 10,093
Cash and Bank 2,783 5,702 7,795 7,675 9,045
Other Current Asset 1,226 1,203 1,387 1,681 2,004
19,474 24,704 28,557 31,972 35,724
Source: Company Data, HTI Estimates

10 Nov 2023 8
 [Table_header2]
Elgi Equipments (ELEQ IN) MAINTAIN OUTPERFORM

Cash Flow Statement (Rs Mn) FY22 FY23 FY24E FY25E FY26E
Cash flow from operating activity 686 1,659 3,903 2,852 4,368
Capital expenditure (243) (565) (501) (501) (502)
Free Cash Flow 442 1,094 3,402 2,351 3,866
Cash flow from investing activity 19 (2,173) (543) (547) (552)
Cash flow from financing activity (812) 598 (1,268) (2,425) (2,447)
Net change in cash (107) 84 2,093 (120) 1,369
Source: Company Data, HTI Estimates

Ratio Analysis FY22 FY23 FY24E FY25E FY26E

Growth YoY (%)
Revenue Growth 31.2 20.4 15.2 14.6 11.9
EBITDA Growth 35.6 48.0 21.5 16.9 13.3
PAT Growth 74.1 64.4 26.8 19.9 15.2
Gross FA Growth 6.8 14.1 6.0 5.7 5.4
Profitability (%)
Gross Margin 46.3 49.6 51.5 50.0 50.0
EBITDA Margin 11.6 14.2 15.0 15.3 15.5
PAT Margin 7.1 9.6 10.6 11.1 11.4
Ratios (%)
RoE 18.8 24.4 24.6 24.5 23.6
RoCE 19.8 24.9 24.9 26.4 27.0
ROCE post tax 13.4 18.1 18.7 19.7 20.2
ROIC 18.0 25.2 28.9 30.7 30.9
Debt-Equity Ratio (x) 0.4 0.4 0.3 0.2 0.2
Net Debt-Equity Ratio (x) 0.1 0.0 (0.1) (0.2) (0.2)
Gross Asset Ratio (x) 3.6 3.9 4.1 4.5 4.7
Valuation (x)
PE 95.0 57.8 45.6 38.0 33.0
PEG 1.3 0.9 1.7 1.9 2.2
EV / Net Sales 6.7 5.6 4.8 4.1 3.6
EV / EBITDA 58.3 39.0 31.7 27.0 23.4
Per Share Data (Rs)
EPS 5.6 11.7 11.7 14.1 16.2
BVPS 32.6 43.3 52.1 62.6 74.8
DPS 1.4 2.0 2.9 3.5 4.0
Cash operating cycle (days)
Inventory 130 143 150 146 148
Debtor 68 66 66 80 82
Creditor 128 120 90 90 90
Net Working Capital 70 90 126 136 140
Source: Company Data, HTI Estimates

10 Nov 2023 9
[Table_APPENDIX]
[Table_disclaimer]
APPENDIX
IMPORTANT DISCLOSURES
This research report is distributed by Haitong International, a global brand name for the equity research teams of Haitong International Research Limited (“HTIRL”), Haitong Securities India Private
Limited (“HSIPL”), Haitong International Japan K.K. (“HTIJKK”), Haitong International Securities Company Limited (“HTISCL”), and any other members within the Haitong International Securities Group
of Companies (“HTISG”), each authorized to engage in securities activities in its respective jurisdiction.
Analyst Certification:
I, Rahul Gajare, certify that (i) the views expressed in this research report accurately reflect my personal views about any or all of the subject companies or issuers referred to in this research and (ii)
no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report; and that I (including members of my household)
have no financial interest in the security or securities of the subject companies discussed. I and my household, whom I have already notified of this, will not deal in or trade any securities in respect
of the issuer that I review within 3 business days after the research report is published.
I, Maulik Shah, certify that (i) the views expressed in this research report accurately reflect my personal views about any or all of the subject companies or issuers referred to in this research and (ii)
no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report; and that I (including members of my household)
have no financial interest in the security or securities of the subject companies discussed. I and my household, whom I have already notified of this, will not deal in or trade any securities in respect
of the issuer that I review within 3 business days after the research report is published.

Conflict of Interest Disclosures

HTI and some of its affiliates may engage in investment banking and / or serve as a market maker or hold proprietary trading positions of certain stocks or companies in this research report. As far
as this research report is concerned, the following are the disclosure matters related to such relationship (As the following disclosure does not ensure timeliness and completeness, please send an
email to ERD-Disclosure@htisec.com if timely and comprehensive information is needed).

Ratings Definitions (from 1 Jul 2020): Rating Distribution

Haitong International uses a relative rating system using Outperform,
Neutral, or Underperform for recommending the stocks we cover to
investors. Investors should carefully read the definitions of all ratings used
in Haitong International Research. In addition, since Haitong International
Research contains more complete information concerning the analyst's
views, investors should carefully read Haitong International Research, in its
entirety, and not infer the contents from the rating alone. In any case,
ratings (or research) should not be used or relied upon as investment
advice. An investor's decision to buy or sell a stock should depend on
individual circumstances (such as the investor's existing holdings) and other
considerations.
Analyst Stock Ratings
Outperform: The stock’s total return over the next 12-18 months is
expected to exceed the return of its relevant broad market benchmark, as
indicated below.
Neutral: The stock’s total return over the next 12-18 months is expected to
be in line with the return of its relevant broad market benchmark, as
indicated below. For purposes only of FINRA/NYSE ratings distribution
rules, our Neutral rating falls into a hold rating category.
Underperform: The stock’s total return over the next 12-18 months is
expected to be below the return of its relevant broad market benchmark,
as indicated below.
Benchmarks for each stock’s listed region are as follows: Japan – TOPIX,
Korea – KOSPI, Taiwan – TAIEX, India – Nifty100, US – SP500; for all other
China-concept stocks – MSCI China.

Haitong International Equity Research Ratings Distribution, as of September 30, 2023

Outperform Neutral Underperform
(hold)
HTI Equity Research Coverage 89.3% 1.1% 9.6%
IB clients* 3.9% 5.8% 10.0%
*Percentage of investment banking clients in each rating category.

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BUY, Neutral, and SELL in the above distribution correspond to our current ratings of Outperform, Neutral, and U nderperform.
For purposes only of FINRA/NYSE ratings distribution rules, our Neutral rating falls into a hold rating category. Please note that stocks with an NR designation are not included
in the table above.
Previous rating system definitions (until 30 Jun 2020):
BUY: The stock’s total return over the next 12-18 months is expected to exceed the return of its relevant broad market benchmark, as indicated below.
NEUTRAL: The stock’s total return over the next 12-18 months is expected to be in line with the return of its relevant broad market benchmark, as indicated below. For purposes
only of FINRA/NYSE ratings distribution rules, our Neutral rating falls into a hold rating category.
SELL: The stock’s total return over the next 12-18 months is expected to be below the return of its relevant broad market benchmark, as indicated below.
Benchmarks for each stock’s listed region are as follows: Japan – TOPIX, Korea – KOSPI, Taiwan – TAIEX, India – Nifty100; for all other China-concept stocks – MSCI China.

Haitong International Non-Rated Research: Haitong International publishes quantitative, screening or short reports which may rank stocks according to valuation and other metrics or may suggest
prices based on possible valuation multiples. Such rankings or suggested prices do not purport to be stock ratings or target prices or fundamental values and are for information only.
Haitong International Coverage of A-Shares: Haitong International may cover and rate A-Shares that are subject to the Hong Kong Stock Connect scheme with Shanghai and Shenzhen. Haitong
Securities (HS; 600837 CH), the ultimate parent company of HTISG based in Shanghai, covers and publishes research on these same A-Shares for distribution in mainland China. However, the rating
system employed by HS differs from that used by HTI and as a result there may be a difference in the HTI and HS ratings for the same A-share stocks.
Haitong International Quality 100 A-share (Q100) Index: HTI’s Q100 Index is a quant product that consists of 100 of the highest-quality A-shares under coverage at HS in Shanghai. These stocks are
carefully selected through a quality-based screening process in combination with a review of the HS A-share team’s bottom-up research. The Q100 constituent companies are reviewed quarterly.

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Recommendation Chart
[Table_RecommendationChart]

Source: Company data Bloomberg, HTI estimates

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