Equirus Securities - Honeywell Automation - Initiating Coverage Note - 30.11.2021

Honeywell Automation
Initiating Coverage
Ushering in an era of smart manufacturing
November 30, 2021
Harshit Patel (harshit.patel@equirus.com, +91-079 6190 9522)

Mayank Chaturvedi (mayank.chaturvedi@equirus.com, +91-079 6190 9531)
India Equity Research | Industrials
November 30, 2021
Initiating Coverage
CMP Target Price
Ushering in an era of smart manufacturing; Rs 38,950 Rs 48,250

Mar 2023
Initiate with LONG Rating

LONG 24% ()
Upside
➢ The industrial world has undergone rapid changes, with requirements of the current Stock Information
decade quite different from the last one. Key industrial/infra demand trends: (a) Intelligent Market Cap (Rs Mn) 344,377
& connected assets. (b) Higher asset turns (higher throughput with same/lower usage of
52 Wk H/L (Rs) 49,990/30,600
materials, energy). (c) Remote monitoring and control of enterprise-wide operations.
Avg Daily Volume (1yr) 4,821
➢ Honeywell Automation India (HWA) is at the forefront of enabling these changes in
Avg Daily Value (Rs Mn) 2.7
India, while providing engineering and software services to the Parent in both Process
Equity Cap (Rs Mn) 25,789
Solutions and Building Technologies.
Face Value (Rs) 10
➢ We estimate HWA to clock a 13%/15%/16% sales/EBITDA/PAT CAGR over FY21-
Share Outstanding (Mn) 8.8
FY24E with FY23E RoE/core RoIC at ~18%/60%. FCF generation should amount to
Rs 4.5bn-5.0bn p.a. over the next three years. Bloomberg Code HWA IN
Ind Benchmark BSETCG
➢ Initiate with LONG and a Mar’23 TP of Rs 48,250 set at 60x Mar’24 EPS (a 20%
premium to our target multiple for ABB and relevant business of SIEM).
Ownership (%) Recent 3M 12M
➢ Promoters 75.0 0.0 0.0
Parent developing capabilities in key areas, esp. industrial software: The Honeywell Group
DII 12.4 (0.2) (1.8)
caters to a major part of the global industrial automation market of >US$ 200bn with its
offerings, more so in control & visualization and digitalization layers. It is also a leading FII 2.5 0.4 1.8
player in the ~US$ 100bn building automation space and operates in ~50% of the Public 10.1 (0.3) 0.0
market. In the last 10 years or so, the group has incurred >US$ 10bn on acquisitions to
strengthen its digitalization/software offerings, encompassing both industrial & building
automation markets. Key acquisition areas include plant monitoring, mobile computing,
thermal gas management, fire detection, supply chain & warehouse automation, quality
management and cybersecurity. It targets software sales (8-9% of overall sales) CAGR of
>20% ahead. Specifically in process automation, the Parent has expanded addressable
market in high-growth areas of healthcare, renewables and hydrogen value chain.
Strong performance to continue amid tailwinds: The domestic business is set to benefit from
(a) accelerating adoption of IIoT-enabled solutions by an expanding manufacturing
footprint of India, (b) penetration of mass mid-market ‘IMPACT’ brand (eyeing 10% of sales
from this in 2-3 years), and (c) a much stronger portfolio in life sciences and warehouse
automation. Exports will be helped by the Group’s ‘East to Rest’ strategy. India is a major
market within the Group’s High Growth Regions (HGRs) and should easily deliver a double-
digit CAGR over the long term, as per Parent. We have baked in a 13% sales CAGR over
FY21-FY24E. While HWA has remarkably expanded its EBITDA margins by ~10ppt over Relative price chart
the last decade, the expansion would now be gradual and aided by (a) a rising share of 55,125
HWA IN Nifty Index
software-related sales (b) increasing localization and (c) parent-level productivity initiatives. 49,980
We have built in a ~100bps margin expansion over the next three years, translating into 44,835
a FY21-FY24E EBITDA CAGR of ~15%. 39,690
34,545
Key risks: (a) Higher dependence on O&G segment in the process solutions. (b) Any
29,400
unfavourable change in the sourcing strategy of the Parent.
Nov-20
Nov-21
Feb-21
May-21
Aug-21
Financial Summary
EV/ Core EBITDA Source: Bloomberg
YE Mar Recurring P/E P/B ROE
Sales EBITDA EPS (Rs) EBITDA ROIC Margin Analysts
Rs mn PAT (x) (x) (%)
(x) (%) (%)
FY21A 30,428 5,889 4,600 520.3 74.9 13.4 55.6 19.3 47.6 19.4 Harshit Patel
FY22E 32,253 5,627 4,431 501.2 77.7 11.7 57.4 16.0 43.0 17.4 harshit.patel@equirus.com
+91-079 6190 9522
FY23E 37,973 7,344 5,810 657.1 59.3 10.0 43.3 18.2 59.8 19.3
Mayank Chaturvedi
FY24E 43,713 8,912 7,108 803.9 48.4 8.6 35.1 19.1 72.8 20.4
mayank.chaturvedi@equirus.com
Source: Company, Equirus Securities +91-079 6190 9531
Refer to important disclosures at the end of this report November 30, 2021| 1
Honeywell Automation (HWA IN) India Equity Research | Initiating Coverage
Industrial Automation: An Overview

Evolution and need for Industry 4.0/Industrial IoT (IIoT)
While the emergence of Industry 1.0 helped develop mass production capabilities in the early 19th
While advanced economies have Century, Industry 2.0 introduced electrical equipment that enhanced manufacturing process efficiencies
begun transition from Industry 3.0 to in the 20th Century. Towards 20th Century end, Industry 3.0 facilitated the integration of electronic
4.0, India is yet to even fully reach 3.0 devices and computers with production machines to automate manufacturing processes. This helped
improve manufacturing speed while providing better control/visibility over the entire supply chain. Now
that output quality & consistency, and flexibility in production (varied batch sizes, large no. of SKUs)
have become critical to cater to evolving customer demands, Industry 4.0/Industrial IoT (IIoT) has
started taking shape. IIoT provides an additional layer wherein operational technology (OT) and
information technology (IT) converge.
Exhibit 1: Key drivers for Industry 4.0 evolution – Need for convergence of OT & IT, and remote monitoring and predictive maintenance
Industry 4.0
• Interconnected
Networks
Industry 3.0
• D ata Management and
• Automation of Analytics
Equipment Industrial IoT leverages
• Intersection of IT and
Industry 2.0 • C omputers and smart sensors and
OT
Electronics actuators to enhance
• Electrical Equipment Integration with • Remote Monitoring
Industry 1.0 manufacturing and
for Production Machines and Predictive
• Operation through
industrial processes by
• Steam Powered Maintenance
storing, managing, and
Equipment for Assembly Line
computing data generated
Production
by these devices
• Operations through Mass
Production
Source: BIS Research, Equirus Securities
Industry 4.0/IIoT – Key features, drivers

(a) Through sensors, IIoT has enabled collection of physical data/process parameters such as
temperature, pressure, viscosity, flow velocity, and humidity. Real-time analysis of this data
IIoT enables convergence of OT and IT on cloud provides actionable insights to (a) increase process efficiency (producing more with
to make the entire process faster and the same quantum of input), thus bringing down wastage and energy costs, (b) reduce the
more efficient downtime of machines and plants, thereby leading to savings in operating costs, and (c)
achieve consistent and superior product quality.
(b) Rising focus on improving process flexibility and reducing time-to-market has shifted the value
proposition from hardware to software solutions. Demand for Digital Twins and Product
Lifecycle Management (PLM) tools is fast increasing. Digital Twins – a virtual construct of the
product and its entire production line – helps in pilot testing before companies incur actual
capital expenditure. PLM facilitates real-time management of the product through its entire
lifecycle – from conceptualisation to design and from manufacturing to service operations.
(c) Cybersecurity has emerged as a key driver as cloud-based operations and digitalization bring
many security-related challenges.
November 30, 2021| 2

Global Industrial Automation Industry

Industrial Automation architecture: Gap between industrial and digital worlds shrinking
Industrial Automation is increasingly Lately, boundaries between OT (domain of automation equipment suppliers) and IT (domain of
becoming an overlap between independent software vendors) have started getting blurry. While in most cases, automation players have
hardware and software solutions started building their own digital products to bridge the gap between industrial and digital worlds, they
also collaborate with IT vendors to develop specific applications/solutions on their digitalization platforms.
Exhibit 2: Enterprise automation architecture takes in best of both OT and IT to provide process optimization and operational control
Enterprise X Y Z
Plant B
Cloud-based
Solutions
Plant A
OT IIoT Supply-Chain
Collaboration &
Mission Critical Edge/Fog Optimization
Solutions Solutions
Operations Process
Management & Optimization
Control & Analytics Remote Solutions
Engineering, Operations
& Maintenance
Operational Technology Information Technology

Source: Yokogawa, Equirus Securities
Exhibit 3: IIoT solutions – a harmonization between OT and IT
Customer Applications
Complex
Data
Industrial
IIoT Cloud
OT Solutions IT
Enterprises
Analytics
Information
Value Chain Infrastructure
Source: Frost & Sullivan, Equirus Securities

There are broadly 4 layers to any IIoT architecture:
(a) Electrical distribution, field devices: Plant level instrumentation – motors, drives, sensors,
valves, measurement devices, LV/MV electrification products, Robots.
(b) Control & visualization instruments: Distributed Control System (DCS), Programmable Logic
Share of Level-3 (Manufacturing IT) Controller (PLC), Supervisory Control and Data Acquisition (SCADA), and Human Machine
and Level-4 (Enterprise Platforms and Interface (HMI). While DCSs are used to control process parameters in Process Industries,
Digitalization) to increase in overall PLCs are used in discrete industries. SCADA monitors the entire system of DCSs/PLCs on
IIoT market real-time basis, and eventually displays the information on HMI.
(c) Manufacturing IT: Plant-level IT technologies – Manufacturing Execution System (MES),

Simulation and Digital Twin tools.
(d) Enterprise platforms, digitalization: Company-level IT technologies – ERP Systems,

Cloud/Digitalization Platforms, Product Lifecycle Management (PLM) Software.
Electrical and field devices constitute ~60% of the global industrial automation market
(~US$ 222bn, 2018), and the remaining 3 layers ~40%. Share of the latter to steadily increase ahead.
Exhibit 4: Industrial automation and digitalization architecture spans from sensor and edge computing to cloud computing
Enterprise Key Players: Siemens,

Platforms and ERP/Business Cloud/Digitalization ABB, Honeywell,
Level-4 PLM Software
Digitalization Systems Platforms Schneider
Key Players: Siemens,

Manufacturing
Simulation, Augmented Emerson, Yokogawa,
Level-3 Manufacturing IT Execution System
Digital Twins Reality (AR) Rockwell, Schneider,
(MES)
Honeywell
Visualization
Key Players: ABB,
Control and Distributed Control Programmable Logic Hardware and
Level-2 Siemens, Emerson,
Visualization System (DCS) Controller (PLC) Software (HMI,
Rockwell, Schneider
SCADA etc.)
Electrical LV/MV Measurement

Robotics Key Players: ABB,
Distribution Electrification & Analytics
Level-1 Siemens, Mitsubishi,
and Field
Motors Drives Sensors Valves Rockwell, Schneider
Devices
Source: Rockwell Automation, Equirus Securities
Exhibit 5: Industrial Automation architecture: Break-up of components & systems

Vision Systems
PLM Motors
Process Analysers 1%
13% 17%
1%
Valves
13%
APM
2% Sensors and
MES Transmitters
3% 25%
Flowmeters
4% VFD
4%
HMI
1% Safety Systems SCADA PLC DCS
2% 3% 5% 7%
Source: Industry, Equirus Securities

Market participants
Players collaborate with each other at There are three types of market participants: (a) OEMs and system integrators, (b) product suppliers,
a point wherein expertise of one ends (c) software, platform, and application providers. While there are niche players in each category, large
and other’s begins e.g., IIoT platform MNC players such as Siemens, ABB, Honeywell, Schneider and Emerson operate in multiple categories.
provider and cloud storage provider Besides, certain process OEMs such as Alfa Laval offer fully automated production lines; as a part of
the complete solution, they integrate automation solutions offered by pure-play automation suppliers
with their process-specific equipment.
Exhibit 6: Industry participants address the market in one or more ways; however, almost no player caters to all aspects of automation
Source: McKinsey, Equirus Securities
Market split: Type of automation, user industries

As per Frost & Sullivan, the global Industrial Automation market stood at ~US$ 222bn in 2018. The
market is broadly divided into three parts: (a) Process Automation (O&G, chemicals and
As per Siemens AG, global Process/
petrochemicals, cement, water and wastewater, power generation) (b) Discrete Automation (auto,
Discrete Automation markets are set to
aerospace and defense, electronics, machinery) and (c) Hybrid Automation, which requires both
post a 4%/6% CAGR over 2020-25
process and discrete automation solutions. For example, extraction of metal from the ore and steel
manufacturing requires Process Automation (PA), while subsequent processes (making coils, wires,
bars) require discrete automation (DA). In pharma, drug production requires PA, but its packaging in
tablet form needs DA (see infographic; Exhibit 8).
Exhibit 7: Process Automation accounts for the largest slice of the overall automation pie
Discrete
Automation, 34%
Process
Automation, 50%
Hydrid Automation,
17%

Exhibit 8: Industries such as Metals, Life Sciences, F&B, Pulp & Paper require a blend of both Process and Discrete Automation
Source: Frost & Sullivan, Equirus Securities; Other Process Industries include Cement, Glass, Textile, Metal Fabrication etc. Other Discrete Industries include Medical
Devices, Printing, Packaging etc.
Exhibit 9: Revenue break-up of end-user industries in broader categories – O&G, Chemicals, Metals, Auto and Electronics are larger end-users
Process Industries Hybrid Industries Discrete Industries
Pulp and
Others Paper Automotive
17% 14% 28%
Others
Oil & Gas Metals 35%
Water and 34% and
Wastewater Mining
8% 40%
Food &
Beverage
24% Aerospace Machinery
and 14%
Chemical & Defense Semiconductor
6% and Electronics
Petrochemical Life
Power 17%
25% Science
16% 22%

Portfolio comparison of global leaders

Siemens & Schneider Electric – most complete players; ABB & Rockwell Automation follow
closely
Exhibit 10 represents the qualitative analysis of (a) breadth of offerings, and (b) relative areas of
Robotics and PLM Software are major strengths and weaknesses for global majors across products/solutions categories. These are the same
areas where competition is still limited areas along which we had bifurcated the entire IIoT market in a previous section.
• Green colour indicates a strong presence

• Pink colour indicates a weaker/partial presence
• Blank cell represents no presence in the said area
Exhibit 10: Honeywell has some gaps to plug to provide even more comprehensive solutions, esp. towards PLC and PLM offerings
Source: Company Reports, Equirus Securities; * Includes solutions such as Human Machine Interface (HMI), Supervisory Control and Data Acquisition (SCADA) etc.
Market shares
As per industry reports, Industrial Automation is a sparsely distributed market with top-10 players
accounting for <35% of the global market share. Siemens is the market leader with a low double-digit
share. While ABB and Emerson have mid-single-digit market shares, Schneider, Honeywell, Rockwell,
Yokogawa and Mitsubishi are other prominent players with individual market shares in low-single-digits.

Digitalization: the top-most layer in the industrial automation pyramid

Digitalization of systems and processes has been one of the major trends in automation. It has started
creating incredible value for customers and has prompted creation of new business models for
Plant and enterprise transparency – a
digitalization vendors, viz. platform-based, software-as-a-service, and output-based.
cornerstone of digitalization
At present, it impossible to determine the digitalization market size because the industry is rapidly
changing and new use cases are coming up every day. That said, it is critical to first have an adequate
level of automation before taking any meaningful step towards digitalization. A classic use case is the
Digital Twins: First the product and then the production machine/line and control systems (PLC, DCS,
motors, drives) are designed virtually. The entire set up is then tested in a virtual environment to check
its workings. This enables capex savings and reduces time-to-market.
Automation players on a spree to Capability building in digitalization requires an expertise in software development and data analytics.
acquire capabilities in various areas of Consequently, automation vendors have started acquiring new-age companies in these spaces to fill
digitalization gaps in their organic capabilities and scale digitalization offerings at a faster pace. Exhibit 18 outlines
the detailed history of such acquisitions by major automation players. Also, they have started partnering
with the technology-behemoths to help with the skillset and scale that is hard to acquire. Exhibit 19
details such partner ecosystems for major vendors.
Having an IIoT platform is just one step in digitalization. While Siemens (MindSphere) has been the
pioneer, most other leading players have developed their proprietary IIoT platforms as well. Companies
(Yokogawa, Mitsubishi) who do not have own IIoT platforms use platforms from Google and Amazon.
Exhibit 11: Capabilities and features of IIoT platforms of leading vendors; digital/software sales included wherever possible
Other Information
IIoT Platform Description Software/Services
Launch Tech Partners
Sales
It combines ABB’s domain expertise with advanced connectivity and latest
digital technologies to achieve substantial improvement in operational
performance and productivity. ABB Ability™ enhances portfolio offerings of all
IBM, Microsoft,
divisions – Electrification Products, Process Automation, Discrete Automation &
CY20: Service and Hewlett Packard,
Robotics, and Motion. Digital offerings provided by ABB Ability™ include
Software ~US$ Huawei, Ericsson,
ABB Ability performance management solutions for asset intensive industries, control Mar-17
4.9bn (~18-20% of Dassault Systèmes,
systems for process industries, remote monitoring services for robots, motors
overall sales) Accenture, Mesh
and machinery, control solutions for buildings, EV charging networks and
System
offshore platforms. Some of the more specialised offerings cater to energy
management for data centres and navigation optimisation for maritime
shipping fleets, among others.
FY20: Digital
Siemens’ MindSphere is a cloud-based, open IoT operating system that helps
Business (vertical Arrow Electronics,
customers connect products, plants, systems and machines to the digital world
specific software and Atos, AWS, Bentley,
and their thermodynamic twin. It garners data from connected machines and
IoT services from HCL, Microsoft,
Siemens systems and converts that into actionable business insights; these insights are
Jul-16 Smart Infrastructure, Persistent Systems,
MindSphere used to increase productivity and efficiency across the entire value chain of
Digital Industries, TCS, Tech
businesses. Also, MindSphere – being a Platform as a Service (PASS) – lets
Mobility) ~€5.3bn Mahindra, Wipro
customers develop low-coded customized applications through Mendix – the
(~9% of overall etc.
app platform.
sales)
Honeywell Forge converts massive quantities of data from equipment,
processes and people into intuitive, actionable insights that enable monitoring
CY18:
of enterprise operations from a single screen. It leverages predictive analytics to
Software/Connected
help identify maintenance issues before they happen; enable workers to be Microsoft, Nozomi
Honeywell Forge Jun-19 Portfolio ~US$
more productive, proficient and safe; reduce costs; and increase productivity. Networks, SAP
3.0bn (~8-9% of
This helps customers optimize the efficiency, effectiveness and safety of their
overall sales)
businesses. Honeywell Forge offerings covers sectors such as Industrials,
Buildings, Airlines, Cybersecurity etc.
EcoStruxure is an IoT-enabled, plug-and-play, open, interoperable architecture
platform. It connects three core layers of Schneider Electric's technology stack:
(a) connected products, (b) edge control, (c) applications, analytics and services. CY20: Software &
Schneider It is deployable in Homes, Buildings, Data Centres, Infrastructure and Industries. Services ~€4.3bn
Nov-16 Microsoft, Intel
EcoStruxure It enables enhanced safety, reliability, efficiency, sustainability, and connectivity (~17% of overall
in businesses by using advanced IoT, sensing, cloud, analytics and cybersecurity. sales)
It can optimize up to 80% engineering cost and time, up to 75% maintenance
cost and up to 50% carbon footprint.

Plantweb digital ecosystem is a scalable portfolio of standards-based hardware,

software, intelligent devices and services for securely implementing the
Industrial IoT with measurable business performance improvement. Plantweb FY20: Software
supports enterprise-wide operations through Pervasive Sensing field Portfolio ~US$
Emerson Plantweb Oct-16 Microsoft, AWS
instruments, the Secure First Mile family of software, gateways and security 2.4bn (~14-15% of
devices, the Plantweb InsightTM and Plantweb AdvisorTM scalable suite of overall sales)
software applications, the AMS ARESTM Platform, and Microsoft-enabled,
cloud-based remote expert Connected Services.
It is a comprehensive portfolio that brings edge-to-enterprise analytics, machine
learning, industrial internet of things (IIoT) and augmented reality (AR) to FY20: Architecture
Rockwell
industrial operations. It collects and organizes data in real time and adds and Software ~US$ PTC, Microsoft,
FactoryTalk Nov-18
context to provide and recommend actionable insights. Using AI and machine 2.8bn (~44% of Cisco
InnovationSuite
learning to simplify and automate gathering and analysis of complex IT and OT overall sales)
data, it learns from and builds a knowledge base for future analyses.
Yokogawa Cloud is an industrial transformation and Internet of Things (IoT)
platform that accelerates the development and deployment of industrial cloud
applications. The platform supports the ingestion, processing, and curation of Microsoft, FogHorn,
Yokogawa Cloud – –
data from various sources, provides industry-specific algorithms and models, Bayshore, Telit
and integrates across applications to support insightful decision-making and
advanced levels of automation and autonomy.
e-F@ctory integrates Information Technology (IT) systems and Operational
Technology (OT) systems (Factory Automation). Since these are totally different
Mitsubishi e- worlds with different languages (verbal and programming), they don’t easily
CY03 – ILS Technology
F@ctory understand one another, hence a ‘translator’ layer is needed in between. e-
F@ctory utilises a refined form of ‘Edge Computing’ to easily bridge the divide
and integrate these two worlds.
Predix Platform is the IoT edge-to-cloud foundation shared by GE Digital
applications such as Asset Performance Management and Operations
Performance Management. It provides secure and scalable edge-to-cloud data
connectivity, analytics processing, and many other underlying services that Microsoft, IBM,
GE Digital - Predix power GE Digital applications and IoT initiatives. By leveraging Amazon Web Aug-15 – Apple, Cisco, Intel,
Services (AWS) while adding critical IoT functions, it provides a common AWS
application foundation, shared user experience, rapid-time-to-value, and the
customer economy of a purchase-once investment in secure and scalable IoT
software infrastructure.
Source: Company Reports, Equirus Securities

Exhibit 12: Emerson Plantweb Exhibit 13: Honeywell Forge
Source: Company, Equirus Securities Source: Company, Equirus Securities
Exhibit 14: Siemens MindSphere Exhibit 15: Mitsubishi e-F@ctory
Exhibit 16: ABB Ability Exhibit 17: Schneider EcoStruxure
November 30, 2021| 10

Exhibit 18: Key software and data analytics related acquisitions done by leading automation players in last 10-15 years
Year Acquisition Software Domain Description/Rationale
ABB
To strengthen ABB’s position in the emerging 'smart grid' market, and enable to the company
Energy Management
2010 Ventyx to become a leading provider of software solutions for managing energy networks. Acquisition
Software
Cost: >US$ 1bn.
Acquired to add a new line of high-performance liquid flow computers, SCADA and custody
2014 Spirit IT Supervisory Systems
transfer solutions for the oil and gas industry.
Siemens
Product Lifecycle UGS Corp is a leading global provider of PLM software and services; Acquired for ~US$
2007 UGS
Management 3.5bn, including assumption of existing debt.
Product Lifecycle To strengthen Siemens' Product Lifecycle Management (PLM) software especially in the
2011 Vistagy
Management aerospace industry.
Through the acquisition, Siemens will be able to further enhance the computer-aided motion
Product Lifecycle capabilities of its software and strengthen its ability to grow market share. Kineo CAM provides
2012 Kineo CAM
Management key components that are already leveraged in Siemens' core products - NX, Teamcenter and
Tecnomatix.
LMS International NV (Leuven, Belgium) is a leading provider of test and mechatronic
simulation software including model-based systems engineering to the automotive, aerospace
Product Lifecycle
2012 LMS and other advanced manufacturing industries. With this acquisition, Siemens will become the
Management
first product lifecycle management (PLM) software company to provide a closed-loop systems-
driven product development solution extending all the way to integrated test management.
Acquisition of proven leader in software integration will ensure seamless interoperability of
Product Lifecycle
2013 TESIS PLMware Siemens PLM with ERP, MES, CRM and SCM. TESIS PLMware improves efficiency and costs for
Management
manufacturers by integrating Teamcenter into the enterprise IT landscape.
Camstar is one of the proven market leaders in enterprise Manufacturing Execution Systems
Product Lifecycle (MES) software. The acquisition will build on Siemens’ industrial digitalization strategy by
2014 Camstar
Management broadening its integrated product development and production automation solutions for the
electronics, semiconductor and medical device industries.
Polarion is a leading provider of a 100% browser-based and unified platform for
Application Lifecycle Requirements, Quality, and Application Lifecycle Management (ALM). Siemens will add the
2015 Polarion
Management Polarion offerings to its Teamcenter® software, making ALM an integral part of the product
development process.
CD-adapco is a global engineering simulation company with software solutions covering a
Product Lifecycle wide range of engineering disciplines including Fluid Dynamics (CFD), Solid Mechanics (CSM),
2016 CD-adapco
Management heat transfer, particle dynamics, reactant flow, electrochemistry, acoustics and rheology.
Acquisition Cost was ~US$ 970mn.
To further strengthen Siemens' PLM Software automotive offering. TASS International is a
TASS Product Lifecycle global provider of simulation software, plus engineering and test services aimed primarily at
2017
International Management the automotive industry, and focused on autonomous driving, integrated safety, advanced
driver assistance systems (ADAS), and tyre modelling.
Mentor is now part of Siemens' PLM software business, making the combined organization the
world's leading supplier of industrial software used for product design, simulation, verification,
Product Lifecycle testing and manufacturing. Software tools such as Electrical & Wire Harness Design and
2017 Mentor Graphics
Management Electronic Systems Design perfectly complement Siemens' existing solutions, while tools for IC
Design, Verification, Test and Manufacturing expand its offerings and expertise into adjacent
segments to bring value to a new set of clients.
Extends Siemens’ open business approach with commitment to continue to provide tools for
Lightwork Product Lifecycle 3D data simplification and pre-processing to independent software vendors; Enhances existing
2018
Design Management PLM workflows with immersive and interactive photorealistic images and animations to enable
virtual product development.
Mendix is a leader in the rapidly expanding low-code segment and its platform will help
2018 Mendix Development Platform company's customers to adopt MindSphere even faster by accelerating cloud-based
application development for the Industrial Internet of Things.
November 30, 2021| 11


To expand Siemens offering with open software framework for building automation and IoT.
2018 J2 Innovations IIoT Through the acquisition the two parties are planning to further expand J2's OEM business
globally, with new hires in the U.S., and new offices in Europe and Asia.
Siemens is aiming to becoming a fully integrated provider of intermodal door-to-door travel
solutions and is continuously strengthening its portfolio in the growing area of digitized, data-
Intelligent Traffic driven mobility solutions. Aimsun develops software that (a) simulates future traffic flows in the
2018 Aimsun
Systems planning phase of construction projects and (b) uses real-time data to help to optimize traffic
flows and predict as well as prevent congestion before it occurs. Aimsun SL will complement
the existing Siemens portfolio in the Intelligent Traffic Systems (ITS) segment.
To accelerate digitalization for customers in Southern Africa and UAE. ESTEQ (headquartered
Product Lifecycle
2019 ESTEQ in Pretoria, South Africa) is a distributor of product lifecycle management, product design and
Management
simulation, and manufacturing operations software and services.
Siemens plans to integrate UltraSoC’s technology into the Xcelerator portfolio as part of
Mentor’s Tessent™ software product suite. Acquisition enables a unified data-driven
Product Lifecycle infrastructure that enhances product quality, safety and cybersecurity, and the creation of a
2020 UltraSoC
Management comprehensive solution to help semiconductor industry customers overcome key pain points
including manufacturing defects, software and hardware bugs, device early-failure and wear-
out, functional safety, and malicious attacks.
Acquisition expands Siemens’ Xcelerator portfolio, enhancing current integrated circuit design
offerings with pioneering place and route software. Avatar technology strengthens Siemens’
Place and Route
2020 Avatar leadership in Design to Silicon with place and route for advanced node design. Siemens plans
Technology
to add Avatar’s technology to the Xcelerator portfolio as part of Mentor’s IC suite of software,
capitalizing on the growing segment of place and route.
It is a SaaS organization that helps transit operators to provide more efficient transportation in
both urban and rural areas. This acquisition enhances Siemens Mobility's intelligent
2021 Padam Mobility Intermodal Mobility infrastructure portfolio focused on intermodal transportation. It supports transport operators in
their effort to integrate and coordinate different modes of transportation which seamlessly
provides travel from the first mile to the last.
Sqills is a leading Software as a Service (SaaS) provider for inventory management,
reservation, and ticketing software. The SaaS solution helps to increase capacity utilization of
2021 Sqills Inventory Management
trains through clever pricing, achieve greater utilization transparency for planning capacities,
and reduce costs.
French start-up Wattsense expands Siemens’ building automation offering for small and mid-
size buildings; Supports a wider range of buildings in reducing energy use and improving
2021 Wattsense IIoT
comfort through digitalization. Wattsense to remain a separate, standalone unit within
Siemens.
Nextflow Software will become part of Siemens Digital Industries Software, where its offering
will expand the Simcenter™ software portfolio, part of the Siemens’ Xcelerator™ portfolio of
Nextflow Computational Fluid
2021 software and services, with rapid meshless CFD capabilities to accelerate the analysis of
Software Dynamics Solutions
complex transient applications in the automotive, aerospace, and marine industries such as
gear box lubrication, tank sloshing or electric motor spray cooling.
Acquired to expand Xcelerator portfolio through development of industry-specific apps built on
2021 TimeSeries Development Platform Mendix platform. The industry-leading Mendix low-code platform is the cloud foundation for
Siemens’ Xcelerator™ portfolio of integrated software and services.
Matrikon will bring to Honeywell complementary applications that monitor oil and gas well
performance and mining equipment, as well as supply chain solutions for mining. Matrikon’s
2010 Matrikon Plant Monitoring
cyber-security and alarm management solutions also align with Honeywell’s solutions for
process safety and security. Acquisition Cost: ~US$ 142mn.
EMS is a provider of connectivity solutions for mobile networking, rugged mobile computers
and satellite communications. The acquisition will enhance Honeywell’s existing capabilities in
EMS
2011 Mobile Computing rugged mobile computing technologies within its Automation and Control Solutions business
Technologies
(ACS) and satellite communications within its Aerospace business. Acquisition Cost: ~US$
491mn.
November 30, 2021| 12


Intermec is a leading provider of mobile computing, radio frequency identification (RFID)
2013 Intermec Mobile Computing solutions, voice-enabled workflow and data-collection solutions, and printing solutions.
Acquisition Cost: ~US$ 600mn.
Aviaso offers fuel efficiency and emissions savings software to the airline industry. In addition to
strengthening Honeywell’s product portfolio, the acquisition also broadens the company’s
2015 Aviaso Aviation Software
presence in Europe and the global locations where Aviaso operates with an opportunity for
further expansion in other mature and high-growth regions.
Elster to be assigned largely to Automation and Control Solutions (ACS) for its residential and
Thermal Gas
2015 Elster building metering, and the industrial metering and software business will be integrated with
Management
Performance Materials and Technologies. Acquisition Cost: ~US$ 4.9bn.
Acquisition of Xtralis brings unique capabilities and customer solutions in remote visual
2016 Xtralis Fire Detection verification of fire and intrusion risks, advanced perimeter security technologies, and video
analytics software. Acquisition Cost: ~US$ 480mn.
Intelligrated’s supply chain automation solutions will complement Honeywell’s portfolio of
Supply Chain workflow performance solutions, including cloud-connected mobile worker applications, high-
2016 Intelligrated
Automation performance data collection hardware, and other technologies to improve worker productivity.
Acquisition Cost: ~US$ 1.5bn.
The addition of Nextnine's industry-leading security solutions and secure remote service
capabilities will enhance the Company's existing range of innovative cyber security
2017 Nextnine Cybersecurity
technologies and significantly increase Honeywell's Connected Plant cyber security customer
base.
Transnorm is a warehouse automation solutions provider that will complement Honeywell's
Warehouse
2018 Transnorm Intelligrated business (automation solutions, warehouse execution system software and
Automation
services). Acquisition Cost: ~€ 425mn.
Rebellion provides a patented gas cloud imaging system that incorporates cameras and
proprietary hyperspectral imaging technology to pinpoint the source of a leak and measure the
Rebellion
2019 Gas Monitoring volume and concentration of gases. This acquisition complements Honeywell’s strong portfolio
Photonics
of process technologies, automation and gas detection solutions and accelerates its
transformation to a software-industrial company.
Sparta Systems is a leading provider of enterprise quality management software (QMS),
including a next-generation SaaS platform, for the life sciences industry. Honeywell will
2020 Sparta Systems Quality Management leverage its global presence, Honeywell Forge and Sparta's expertise to introduce new,
integrated solutions, including QMS offerings, for life sciences and adjacent industries.
Acquisition Cost: ~US$ 1.3bn (all-cash transaction).
Sine’s expertise will help to enhance Honeywell Forge with mobile solutions that help
Mobile Workforce organizations to make their operations safer and more productive. Industries covered: Schools,
2020 Sine
Management offices, retail, industrial and mining facilities that use functionality like check-in for visitors,
contractors, staff, students and couriers.
Schneider Electric
(a) Vizelia offers real time data monitoring of energy consumption, maintenance planning and
2010 Vizelia and D5X Building Automation property management. (b) D5X offers real-time tracking of building occupancy, data network
management and lighting, blinds and ventilation control.
With the acquisition of Telvent (strong presence in North America) Schneider became a global
Advanced Distribution
2011 Telvent leader in ADMS (Advanced Distribution Management Systems) supporting the monitoring and
Management
management of large electrical distribution networks. Acquisition Cost: ~US$ 2bn.
SolveIT Software applications (specialising in integrated enterprise supply and demand
Operation planning, simulation, optimisation and predictive modelling) have been integrated into
2012 SolveIT
Optimization Schneider Electric's StruxureWare Supply Chain Operation suite to provide customers with a
unique capability in optimising complex end-to-end value chains.
The deal combine Invensys’ automation software that helps run power stations, oil refineries
and chemical plants with Schneider’s automation products for the car, aerospace, food and
2013 Invensys Process Automation beverage industries. It will bolster Schneider against larger players such as ABB and Siemens
and give it the opportunity to cross-sell its energy efficiency products to Invensys’ high energy-
using customers. Acquisition Cost: ~US$ 5.2bn.
November 30, 2021| 13


Acquisition of Instep supports Schneider Electric’s strategic direction in four key areas: (a)
additional reach into the power and energy markets; (b) stronger predictive analytics for asset-
Real-Time Performance
2014 Instep Software centric businesses; (c) improved offerings around the Internet of Things, machine-to-machine
Management
connectivity and Big Data; and (d) the knowledge and capabilities of an independent software-
focused solutions team.
System Analysis and LimeWare's foxray system management software complements the robust functionality of
2015 LimeWare
Auditing Schneider Electric Foxboro Evo and I/A Series process automation systems.
IGE + XAO produces design and simulation software for electrical installations. The deal is the
latest in a string of acquisitions by Schneider as the electrical-equipment manufacturer seeks to
2017 IGE + XAO SA Design and Simulation
pivot towards writing the software that drives its products. Acquisition Cost: ~€ 86mn, net of
acquired cash (~67.9% ownership).
Together, Schneider Electric and AVEVA create a digital transformation solution that combines
energy management, automation systems, and services with leading-edge industrial software.
2018 Aveva Industrial Software AVEVA’s industrial software extends Schneider Electric EcoStruxure™ Solutions to enable
maximization of value from assets and processes. Schneider owns ~60% of AVEVA, valued at
approximately ~£1.7bn (total valuation of ~£3bn at the time of merger).
Asco is a leader in the Automatic Transfer Switch. The acquisition enhances Schneider
Asco Power Power Source
2018 Electric’s EcoStruxure Power Platform in key markets and segments. Acquisition Cost: ~US$
Technologies Management
1.25bn.
ALPI is the European leader in calculation software for electrical installations and has been
developing Caneco solutions for >30 years. Following the acquisition of IGE-XAO, this
2019 ALPI Calculation Software
transaction reinforces the software offer of Schneider Electric in a field complementary to
products and solutions supplied for electrical distribution.
RIB’s products would help Schneider Electric enhance its capabilities in the construction phase,
2020 RIB Software Building Life Cycle which currently suffers from a high level of inefficiency due to a low adoption of digital
technologies. Acquisition Cost: ~€ 1.1bn (~88% ownership).
Combining AVEVA’s market-leading software with OSIsoft’s data management platform will
OSIsoft (through harness the power of information and artificial intelligence, enabling broader, deeper
2020 Data Management
AVEVA) optimization that drives sustainable innovation throughout the engineering and operations life
cycle. Acquisition Cost: ~US$ 5bn.
Schneider and Planon will jointly collaborate (integration of EcoStruxure™ energy management
Building & Workplace platform and Planon’s enterprise-scale solutions) to deliver a suite of software and services to
2020 Planon
Management digitize the building lifecycle for both existing and new buildings. Acquisition Cost: ~€ 113mn
(~25% stake).
The ETAP investment completes Schneider's existing software portfolio for electric power
systems. ETAP technology will be integrated with EcoStruxure to design and operate mission-
2021 ETAP Energy Management
critical power systems using vendor-agnostic digital twin driven modelling, design, operations,
and automation solutions.
Emerson
GeoFields is a leading global supplier of software and implementation services for pipeline
integrity data collection, management and risk analysis for the oil and gas industry. The
2017 GeoFields Data Management
acquisition of GeoFields helps to further position Emerson as a comprehensive solutions
provider for pipeline operations management.
Paradigm, joined with Emerson’s existing Roxar software business, creates a best-in-class, end-
Exploration &
2017 Paradigm to-end Exploration & Production (E&P) software portfolio with offerings spanning seismic
Production Software
processing and interpretation to production modelling.
MYNAH’s solutions enable plant engineers and technicians to test and improve process control
strategies, and train plant operators, in offline, real-world scenarios before implementing them
2017 MYNAH Simulation in live production. Addition of MYNAH will help support Emerson Automation Solutions and its
Operational Certainty™ program designed to help industrial companies achieve top
performance.
ProSys complements Emerson’s acquisition of MYNAH Technologies. Together, these
technologies embed expertise to help operators navigate plant systems safely and efficiently,
2018 ProSys Plant Management
and prepare customers to accommodate the changing state and age of the industrial
workforce.
November 30, 2021| 14


Aventics is among the global leaders in smart pneumatics technologies that power machine
and factory automation applications. It builds upon and strengthens Emerson’s capabilities
2018 Aventics Smart Pneumatics
and solutions in key discrete and hybrid automation markets, including food and beverage,
packaging, automotive assembly and medical equipment. Acquisition Cost: ~€ 527mn.
By interfacing GE Intelligent Platforms’ PLC technology with Emerson’s leading Distributed
GE Intelligent
2018 PLC Technology Control Systems (DCS), customers will be able to connect 'islands of automation' within the
Platforms
plant to further enhance operational performance, safety and reliability.
Verdant is a leader in energy management solutions for the hotel and hospitality industries.
2020 Verdant Energy Management The addition of Verdant broadens Emerson’s growing energy management and optimization
capabilities for residential and commercial applications.
Emerson’s Plantweb digital ecosystem and Operational Technology (OT) expertise combined
with Inmation’s integrated software platform enable real-time information management across
Inmation operations, process control and IT systems. Inmation aggregates global operational data from
2020 Development Platform
Software across the enterprise into the Plantweb digital ecosystem to create an OT data lake – a
centralized storage repository – that serves as the foundation for business intelligence and
analytics.
By combining Emerson’s domain expertise and leading technology in power generation with
OSI Inc.’s complementary software and reach within the power transmission and distribution
Open Systems Operations
2020 sectors, the acquisition will equip customers with the end-to-end ability to monitor, control and
International Technology Software
optimize real-time operations across the power enterprise through scalable, software-enabled
automation and data management. Acquisition Cost: ~US$ 1.6bn.
The addition of Progea’s capabilities in analytics, industrial visualization and IIoT will build
upon Emerson’s embedded software and control portfolio for manufacturing, infrastructure
2020 Progea Group IIoT
and building automation applications and enable customers to streamline comprehensive
machine and plant control systems to a single partner.
AspenTech will offer a highly differentiated industrial software portfolio with the capabilities to
support the entire lifecycle of complex operations across a wide range of industry verticals,
2021 AspenTech Asset Lifecycle
including design and engineering, operations, maintenance and asset optimization. Acquisition
Cost: ~US$ 6bn (55% ownership).
Rockwell Automation
vMonitor is a pioneer in Digital Oilfield implementation and remote operations worldwide.

Strategically, vMonitor’s technology and services, combined with Rockwell's comprehensive
2013 vMonitor Monitoring Systems
portfolio of solutions, strengthens its ability to deliver end-to-end projects for the oil and gas
sector.
ACP’s two core products, ThinManager® and Relevance®, provide manufacturing and
Automation Remote Desktop and
2016 industrial leaders with visual display and software solutions to manage information and
Control Products Server Management
streamline workflows for a more connected manufacturing environment.
Rockwell will apply Odos Imaging's three-dimensional, time-of-flight sensing systems
Odos Imaging technology to sensing products to deliver solutions to a broad range of demanding industrial
2017 3-D Sensing Systems
Limited applications including automotive and general assembly, packaging and material handling,
and logistics.
PTC and Rockwell Automation agreed to align their respective smart factory technologies and
combine PTC’s ThingWorx IoT, Kepware Industrial Connectivity, and Vuforia Augmented
2018 PTC IIoT Reality platforms with Rockwell Automation’s best-in-class FactoryTalk MES, FactoryTalk
Analytics, and Industrial Automation platforms. As part of the partnership, Rockwell Automation
made a ~US$ 1bn equity investment in PTC.
Rockwell Automation will add Emulate3D’s technology to its digital design portfolio to deliver
Simulating and solutions to automotive, logistics, material handling, and other industrial applications. Software
2019 Emulate3D
Emulating will be sold as Emulate3D by Rockwell Automation, as part of Rockwell Automation’s
FactoryTalk DesignSuite.
The extensive knowledge and experience of the Avnet team will support Rockwell Automation’s
strategic objective to achieve double digit growth in Information Solutions and Connected
2020 Avnet Cybersecurity
Services by expanding its IT/OT cyber and network expertise globally. Cybersecurity is one of
the fastest growing parts of Rockwell Automation’s services business.
November 30, 2021| 15


Kalypso offers a full suite of consulting, digital innovation, enterprise technology and business
2020 Kalypso Consultancy process management services. This acquisition will broaden Rockwell's enterprise software
consulting and information architecture offerings.
Oylo’s OT cybersecurity expertise complements the IT cybersecurity expertise gained through
2020 Oylo Cybersecurity
the acquisition of Avnet Data Security.
Fiix’s cloud-native computerized maintenance management system (CMMS) creates workflows
Maintenance for the scheduling, organizing, and tracking of equipment maintenance. The addition of Fiix
2020 Fiix
Management directly aligns with Rockwell Automation’s software strategy. It also enhances company's
capabilities in its Lifecycle Services business.
Plex offers the only single-instance, multi-tenant Software-as-a-Service (SaaS) manufacturing
platform operating at scale, including advanced manufacturing execution systems, quality, and
SaaS Manufacturing
2021 Plex Systems supply chain management capabilities. Plex’s software capabilities will be further differentiated
Platform
by Rockwell’s global market access, complementary industry expertise, and ability to turn real-
time data into actionable insights.
Yokogawa
Based on Industrial Evolution’s cloud business environment, Yokogawa will provide Data-as-a-
Industrial Plant Data
2016 Service (DaaS), an advanced solution that will generate new value for its global customer
Evolution Management
base.
KBC is a successful provider of software and consultancy to the global O&G industry. This will
KBC Advanced
2016 Consultancy allow Yokogawa to provide a one-stop solution to the entire spectrum, from client senior
Technologies
management to field operators, mainly in O&G industry. Acquisition Cost: ~¥ 27.9bn.
In the immediate term, SVM's advanced Visual Mesa utility optimization software combined
with KBC's premium energy consultancy will provide comprehensive and best-in-class energy
Soteica Visual
2016 Energy Management management solutions. Over the longer term, this acquisition supports KBC's vision of
Mesa
seamlessly integrating utility system and supply chain optimization into KBC's industry-leading
process simulation platform for hydrocarbon processing facilities, Petro-SIM™.
Integrating RAP's electronic risk assessment and permit to work software solutions with
RAP Field Service and Plant Yokogawa's real-time plant condition monitoring will drive safety assurance, reduce
2019
International Maintenance turnaround times, and support customers in providing enhanced protection for their people,
assets, and the environment.
Grazper has developed advanced artificial intelligence (AI) technologies for analyzing images,
2020 Grazper AI and Yokogawa aims to leverage these technologies within its various existing businesses and to
develop new industrial AI solutions.
Agreement will enable Yokogawa to expand its DX operations by leveraging Web Synergies'
2021 Web Synergies IT/OT expertise and capacity to deliver cloud services, enterprise data management and integration,
and OT / IT security enhancement to its customers.
Mitsubishi
Iconics is a US software company focussed on SCADA, IoT, mobile, analytics and cloud
2011/2019 Iconics IIoT software products for the manufacturing, industrial and building-automation markets. Addition
of Iconics allows Mitsubishi to accelerate its e-F@ctory and edge computing solutions.
Software Management
Smarter Grid SGS’ DER management system facilitates the integration of DER into markets and grids,
2021 for Distributed Energy
Solutions (SGS) including grid capacity management, interconnection, and energy as a service.
Resources (DER)
Source: Company Reports, Media Articles, Equirus Securities
November 30, 2021| 16

Exhibit 19: Partner ecosystem developed by key automation vendors to offer end-to-end digitalization solutions
Year Key Partners Software Domain Description/Rationale
ABB
Microsoft Azure intelligent cloud services serve as the underlying technology to enable the ABB
2016 Microsoft Cloud Ability™ portfolio of digital solutions, empowering insights for safer, smarter operations that
maximize resource efficiency and contribute to a low-carbon future.
ABB and HPE will deliver joint industry solutions that merge OT and IT to turn industrial data
Hewlett Packard
2017 IoT into insights and automatic action, combining widely-adopted cloud platforms like Microsoft
Enterprise
Azure with IT systems running in corporate data centers and at the edge of the network.
Joint industry solutions powered by ABB Ability and IBM Watson will bring real-time cognitive
insights to the factory floor and smart grids. For example, ABB and IBM will leverage Watson’s
2017 IBM IoT, AI
artificial intelligence to help find defects via real-time production images that are captured
through an ABB system, and then analysed using IBM Watson IoT for Manufacturing.
For Chinese customers, ABB combines its leading industrial solutions and domain know-how
2018 Huawei Cloud with Huawei’s strong capability in cloud infrastructure and platform services. China is ABB's
second largest market.
The partnership will combine the strengths of ABB Ability digital solutions and Dassault
Dassault Systèmes' 3DEXPERIENCE platform. With this partnership, ABB will develop and provide
2019 Digital Twin
Systèmes customers with advanced digital twins, enabling customers to run ABB’s solutions and their
operations with improved overall efficiency, flexibility and sustainability.
Partnership to accelerate the industrial ecosystem for flexible wireless automation, which will
2019 Ericsson Automation enable enhanced connected services, industrial IoT and artificial intelligence technologies in
the future.
2020 Accenture Digital Solutions Global development partner for ABB's digital solutions.
Core competences of Mesh Systems in the area of Azure IoT and knowledge of the ABB Ability
platform provide unique opportunities for ABB to accelerate digitalization of its offering,
2020 Mesh Systems IoT
whether through development of Ability™ applications leveraging the core principles of
Ability™ architecture or through migration of legacy systems onto the Ability™ platform.
Siemens
Atos offers a private cloud option for the MindSphere Cloud-based IoT Operating System. The
Atos Codex Private IoT Platform, Powered by MindSphere, allows customers to deploy digital-
driven business applications in a secure, managed private cloud infrastructure which ensures
2012 Atos IoT data compliance, performance and landscape integration. Industry Focus: (a) Automotive &
Transportation (b) Consumer Products & Retail (c) Electronics & Semiconductors (d) Energy &
Utilities (e) Industrial Machinery & Heavy Equipment (f) Insurance & Financial (g) Medical
Devices & Pharmaceuticals (h) Process Industry.
Siemens and Bentley Systems have formed a strategic alliance to drive new business value by
accelerating digitalisation in order to advance infrastructure project delivery and asset
performance in complementary business areas. Funding for the joint innovation investment
2016 Bentley Systems IoT
program is €100mn. In addition, Siemens' stake in Bentley Systems (through secondary
common stocks) exceeds 9%. Industry Focus: (a) Automotive & Transportation (b) Consumer
Products & Retail (c) Energy & Utilities (d) Process Industry.
Siemens and Microsoft partner to deliver secure, scalable and open Industrial IoT applications
to support industrial organizations’ digital transformation. Through Azure, Microsoft brings a
cloud platform which combined with Siemens’ deep industry expertise and MindSphere open
2016/17 Microsoft Cloud platform offering, delivers powerful solutions across industrial sectors. Industry Focus: (a)
Aerospace & Defense (b) Automotive & Transportation (c) Consumer Products & Retail (d)
Electronics & Semiconductors (e) Energy & Utilities (f) Marine (g) Medical Devices &
Pharmaceuticals (h) Process Industry (i) Insurance & Financial.
MindSphere on AWS delivered the openness and scalability needed for partners to build IIoT
applications. MindSphere customers often build complementary solutions on AWS services to
Amazon Web supplement MindSphere, leveraging an ecosystem of partners and developers from Siemens
2017 Cloud
Services and AWS to create applications. Industry Focus: (a) Automotive & Transportation (b) Consumer
Products & Retail (c) Electronics & Semiconductors (d) Insurance & Financial (e) Medical
Devices & Pharmaceuticals (f) Process Industry.
November 30, 2021| 17

Year Key Partners Software Domain Description/Rationale

Arrow's collaboration with MindSphere enables quick deployment of projects around industrial
Arrow
2019 IoT IoT, retrofit, smart cities, buildings and infrastructure, embedded sensor-to-cloud solutions or
Electronics
simply connecting things. Industry Focus: Automotive & Transportation.
The partnership combines Nozomi Networks' industry-leading OT & Internet of Things (IoT)
Nozomi
2020 Cybersecurity security and visibility capabilities with Honeywell Forge Cybersecurity software, professional
Networks
consulting and managed security services from Honeywell.
Honeywell to leverage Microsoft Azure cloud platform and connect Microsoft Dynamics 365 to
2020 Microsoft Cloud Honeywell Forge, enabling predictive maintenance applications with closed-loop maintenance
workflows in the buildings industry.
Honeywell Forge and the SAP Cloud for Real Estate solution will provide corporate real estate
2020 SAP Cloud owners and building operators with aggregated financial and operational intelligence for their
portfolios.
Schneider Electric
Schneider Electric and Microsoft have established a 30-year global partnership to build,
Microsoft Cloud
market, and sell software solutions for enriched customer value.
Intel is a member of the EcoStruxure Technology Partner Program producing robust
Intel IoT
integrations between Intel DCM and the APC Struxureware for Data Centres software suite.
Schneider and Accenture together are accelerating digital innovation for customers by directly
2016 Accenture IoT involving them in the co-innovation process through pilots and voice of customers and
methods that are brought up upfront in the lifecycle.
Emerson
The Azure IoT Suite provides Emerson with a scalable and secure cloud application
2016 Microsoft Cloud
environment as part of its Plantweb digital ecosystem.
Rockwell Automation
Together, the two companies are co-developing edge and cloud computing solutions to help
Microsoft Cloud share data from the plant across the enterprise. Organizations can access Rockwell
Automation solutions now via the Microsoft Azure Marketplace.
Together these companies are addressing industry initiatives such as Digital transformation, IT
Cybersecurity and
Cisco and OT convergence, Cybersecurity threats and attacks, Predictive analytics and maintenance,
IT/OT
Industrial IoT device proliferation etc.
Yokogawa
The cloud-based Microsoft Azure IoT Suite platform, which provides businesses with globally
2017 Microsoft Cloud scalable, pre-configured IoT solutions, will enable Yokogawa to connect its devices, analyse
previously untapped data and integrate business systems.
Fog computing is an architectural concept designed to avoid communication congestion by
2017 FogHorn Computing
establishing a 'fog' distributed computing layer between the cloud and devices in the field.
Yokogawa’s IIoT architecture will integrate Bayshore’s security technology for layer 7 (the
application layer - the top layer in the open systems interconnection reference model) of the
2017 Bayshore Security Technology OSI reference model (a model in which the functions of communication devices are divided
into seven layers, and defined by the ISO to facilitate data communication among different
communication systems).
Yokogawa’s IIoT architecture will integrate Telit’s communication modules, sensor onboarding
2017 Telit IoT
and device management.
Mitsubishi
Mitsubishi's IoT gateway e-F@ctory is powered by the deviceWISE IoT platform from ILS
2014 ILS Technology IoT
Technology for seamless and secure M2C connectivity and data transfer.
Source: Company Reports, Media Articles
November 30, 2021| 18

Indian Industrial Automation Industry

Indian market at only ~Rs 150bn – miniscule as compared to global market
Indian industrial automation market at On a normalized basis (pre-COVID), India’s industrial automation market stood at only ~Rs 150bn.
US$ 2-2.5bn vs global market of While for most industrial categories, the Indian market is 3-3.5% of the global market, it is just ~1.0%
~US$ 220bn in case of Industrial Automation. This we believe is because of the following:
a) There is still a huge import dependence in case of critical/main production machinery.
b) Customers have not been very demanding in terms of product quality; in other words, their
ability to pay for the highest quality is limited.
c) There is inadequate awareness on the cost-benefit of implementing fully automated solutions,

especially among small-scale producers.
Therefore, the usage of automation tools has been largely restricted to large corporates. However, all
the missing pieces should fall in line, now that
a) India’s manufacturing is set to gradually become more broad-based,
b) Many sectors are gearing up to increase exports share (stringent quality requirements), and
c) There is an increasing awareness among SMEs/MSMEs.
As per industry experts, COVID-disruptions have easily preponed automation adoption in India by
2-3 years.
Interactions with industry experts – Key takeaways

DA has seen higher penetration levels in India vis-à-vis PA. In many cases, DA could be done in bits
Process automation to outpace discrete and pieces, unlike PA. Consequently, typical ticket sizes for DA have been lower than for PA. However,
automation in near-to-mid-term going ahead, PA growth rates should outpace that of DA.
Exhibit 20: PA is expected to grow faster DA over the medium term
Particulars Rs bn Comments
(1) Process Automation (PA) 65.5 Process Automation market grew
▪ Core Control Market (DCS) 10.5 at a CAGR of ~13-13.5% over
CY15-CY19. PA would grow at
▪ Field Instruments (Sensors, Actuators, Measurement a faster rate than DA as DA
Instruments), Electricals, Motors, Drives, Boilers, 55.0 adoption is already at decent
Mixers, Reactors, Separators, Software levels in India.
(2) Discrete Automation (DA) 85.5
Discrete Automation market
▪ Core Control Market (PLCs, I/O Modules, HMI,
25.5 grew at a CAGR of ~10-11%
SCADA, Networking Components)
over CY15-CY19.
▪ Supporting Instruments 60.0
Total Market Size 151.0
Process Automation: Market split across key user industries in PA is as follows:

Chemicals and Pharma account for
~50% of PA market at present; Water a) Chemicals (including ethanol distilleries): 30-35%
b) Pharma: 17-18%
& Wastewater market to grow fastest
c) Water & wastewater: 10-12%
d) F&B: 8-10%
e) Minerals (including cement): 8-9%
f) Metals: 4-5%
g) Rest, others
Honeywell, ABB, Emerson, Siemens and Yokogawa are prominent players in the PA market (Exhibit
22). However, the strength of these players differs across user industries. Suppliers are restricted to
enter new markets overnight given (a) a thorough domain knowledge/sector-specific knowledge is
imperative to be successful, and (b) end users are inclined towards companies with a track record of
many projects in a given sector.
November 30, 2021| 19

Exhibit 21: Dynamics of key user industries within PA

Category Features
Top players: Siemens, Yokogawa, Rockwell, Honeywell. Honeywell has been a
late entrant in the pharma market. ABB’s presence is minimal. Pharma market was
Pharma barely affected by the pandemic and is expected to grow by 40-45% p.a. in next 3
years. Packaging solutions (DA part) are dominated by B&R (ABB company),
Siemens and Schneider.
ABB is a dominant player with comprehensive offerings of motors and drives,
Metals
which supplement process control solutions.
O&G market has been subdued for last few years, except for a temporary
demand upswing driven by safety-related automation solutions. Automation
Oil & Gas solutions are already prevalent in this industry. Honeywell is a segment leader
followed by Emerson and Yokogawa. DA part is dominated by Schneider and
Siemens.
The segment is in an upswing at present driven by a revival in smart cities projects.
This market is expected to grow at >60% p.a. in the next 3 years. Rockwell,
Siemens, Honeywell (also pitching in its building automation solutions) and
Water & Wastewater Yokogawa are prominent players in this market. Schneider is gradually venturing
into this market. Many smaller players offering Chinese and Taiwanese products
are being weeded out slowly led by strict quality adherence standards enforced by
GoI for smart cities projects.
This segment is in an upswing driven by demand for packaged foods. Rockwell,
F&B Siemens and ABB are leading players in this segment. B&R is very strong in the
packaging applications (part of DA).
Honeywell is a very strong player in this market (including sugar and distilleries).
Chemicals
Other top players are Emerson and Siemens.
Honeywell is a leader followed by Siemens and ABB. Emerson and Yokogawa
Power
have a thin presence.
Cement ABB, Siemens and Honeywell are leaders.
Discrete Automation: It plays a part in almost all industries. For instance, in Pharma, drug
Automotive account for the highest manufacturing requires PA, but its packaging in tablet form needs DA. Automotive, white goods, and
share of discrete automation market electronics are completely discrete industries. Automotive accounts for 30-35% of India’s DA market.
Siemens, Rockwell and ABB+B&R are particularly strong players in the DA market (Exhibit 23).
Exhibit 22: Approximate market shares in process automation Exhibit 23: Approximate market shares in discrete automation
Honeywell
Automation Others
Others Siemens
Mitsubishi
Yokogawa ABB
Schneider Rockwell
Siemens
Emerson ABB + B&R
Source: Industry, Equirus Securities Source: Industry, Equirus Securities
Key concern: Almost all players present in the country import core automation products. With the
current level of demand, there is a limited scope of localization ahead as well since it is economically
more viable for MNCs to expand foreign production capacities vs. replicating those capacities in India.
November 30, 2021| 20

Peer comparison – Indian market

Exhibit 24 (and comments) compares players on key financial metrics.
Exhibit 24: Honeywell Automation outperforms peers on most financial metrics
Company Sales EBITDA EBITDA Margin (%) EBIT Margin (%)
FY19/ FY20/ FY21/ FY19/ FY20/ FY21/ FY19/ FY20/ FY21/ FY19/ FY20/ FY21/
Rs Mn
CY18 CY19 CY20 CY18 CY19 CY20 CY18 CY19 CY20 CY18 CY19 CY20
Honeywell Automation 31,747 32,900 30,428 5,034 6,371 5,889 15.9% 19.4% 19.4% 15.4% 18.1% 17.8%
ABB India 17,927 18,350 14,402 NA NA NA NA NA NA 12.2% 6.5% -3.6%
Siemens Ltd 23,699 26,874 19,415 1,713 1,897 1,430 7.2% 7.1% 7.4% 6.4% 6.1% 6.0%
Emerson Process
16,346 18,207 NA -736 -223 NA -4.5% -1.2% NA -6.8% -4.1% NA
Management (India)
Rockwell Automation
8,380 9,185 NA 792 1,368 NA 9.5% 14.9% NA 7.5% 9.7% NA
India
Schneider Electric India 47,071 40,705 NA 4,396 4,043 NA 9.3% 9.9% NA 7.0% 7.0% NA
Mitsubishi Electric
5,935 5,830 NA NA NA NA NA NA NA 3.1% 2.5% NA
India
Yokogawa India 10,522 12,269 NA 681 279 NA 6.5% 2.3% NA 5.7% 1.1% NA
Company RoE (%) CFO/EBITDA (%) WC/Sales (%)

FY19/ FY20/ FY21/ FY19/ FY20/ FY21/ FY19/ FY20/ FY21/
CY18 CY19 CY20 CY18 CY19 CY20 CY18 CY19 CY20
Honeywell Automation 23% 25% 19% 61% 52% 62% 5.8% 8.8% 15.0%
ABB India NA NA NA NA NA NA NA NA NA
Siemens Ltd NA NA NA NA NA NA NA NA NA
Emerson Process
-2% -4% NA NA NA NA 23.9% 27.9% NA
Management (India)
Rockwell Automation
11% 15% NA 80% 33% NA 19.0% 26.4% NA
India
Schneider Electric
43% 21% NA -4% 21% NA 4.2% 9.3% NA
India
Mitsubishi Electric
NA NA NA NA NA NA NA NA NA
India
Yokogawa India 16% 0% NA 111% 252% NA 2.6% -5.3% NA
Company Comments
Honeywell Automation Share of domestic/exports sales at ~55%/45% over last 3 years
Numbers include two segments: (1) Process Automation (2) Robotics and Discrete Automation. Actual EBIT Margin
ABB India
would be lower as reported nos do not include 'unallocated expenses'.
Siemens Numbers represent Digital Industries segment.
Products/Solutions include (a) Field Instruments for measuring pressure, temperature, level. (b) Flow measuring devices
Emerson Process Management such as Mass Flow Meters, Mag Flow Meters, Vortex Flow Meter. (c) DCS (d) Valves of different types. It earned ~30%
(India) of FY20 sales from exports. Traded products accounted for ~17% of FY20 sales. The company has not fared well in
last few years; FY20 sales were lower than FY16 and FY20 EBITDA margins were at (1.2%) vs 10.7% in FY16.
Pure-play automation related products and services. The company posted a sales/EBITDA CAGR of ~12%/39% over
Rockwell Automation India
FY14-20. ~54% of FY20 sales came from traded goods. Exports contributed ~26% towards FY20 sales.
Financials capture both segments of the Parent's business: (a) Industrial Automation (b) Energy Management.
Schneider Electric India Sales/EBITDA have grown at a CAGR of ~4%/22% during FY15-20. Traded goods accounted for ~35% of FY20
sales. Exports contributed 35-40% of sales.
Nos include only one segment i.e., Factory Automation and Industrial Division. Other reported segments are (a) Air
Mitsubishi Electric India
Conditioners (b) Visual Imaging (c) Semiconductor and (d) Transportation Systems.
Pure-play automation related products & services. While sales have almost doubled in last 6 years, EBITDA margins
Yokogawa India have been poor in last two years; they had reached 12.2% in FY18. About 23% of FY20 sales have come from traded
goods. Exports contributed ~22% to FY20 sales.
Source: Companies, Equirus Securities
November 30, 2021| 21

Global Building Automation Industry

Building automation necessary to achieve company-level sustainability goals
Expanding infra footprint in emerging As per Frost & Sullivan, buildings account for ~40% of global energy consumption. Therefore, to
countries such as India to be a key realize global climate goals, it has become imperative to make buildings as energy efficient as possible.
driver for building automation Such buildings include (a) large infrastructure viz. malls, airports, metro/railway stations, stadiums,
hotels, offices, data centres, (b) residential complexes, (c) industrial plants. Enterprise-level sustainability
goals prompt adoption of digital solutions as fast as possible. In addition, building automation helps
enhance operational efficiency, safety, security and comfort levels inside the buildings. Just like
industrial automation, building automation also entails convergence of field devices, automation
hardware and software, and digitalization tools/IoT platforms – comprising the entire building
management system. COVID-19 has accelerated the ongoing shift towards smart buildings.
Exhibit 25: Building automation architecture broadly similar to that of industrial automation
Core building automation market or middle tier of the pyramid stands at ~US$ 5bn, as per Frost &
Sullivan. Also, unlike industrial automation, it is a fairly concentrated with top-4 players (Honeywell,
Siemens, Schneider Electric, Johnson Controls) accounting for ~60% market share (Exhibit 28).
Overall market size is as large as ~US$ 100bn if we include all layers (Exhibit 29).
Exhibit 26: Core global building automation market stands at ~US$ 5bn
Applications in (a) remote monitoring
(b) fault detection & diagnostics and (c) Revenue (US$ mn) Growth (Yoy%)
energy optimization account for bulk 5,500 4% 5%
of the market 4%
5,000
3% 3% 4%
4,500
3%
4,000 3%
3,500 2%
2%
3,000 1%
1%
2,500
1%
4,420 4,557 4,697 4,741 4,934
2,000 0%
CY17 CY18 CY19 CY20E CY21E
November 30, 2021| 22

Exhibit 27: Building Automation: end-market wise revenue break-up
Retail Buildings,
Data Centres, 11%
16%
Data centres, healthcare buildings and
industrial buildings to grow faster than Educational
other categories Buildings, 11%
Public Buildings,
11%
Hospitality and
Leisure Buildings,
11%
Office Buildings,
18%
Healthcare
Industrial Buildings, Buildings, 13%
9%
Exhibit 28: Top-4 players account for ~60% of the global core building automation market
Honeywell, 19%
In Building Automation, Honeywell is
the global market leader, followed by
Siemens
Others, 41%
Siemens, 17%
Schneider Electric,
Johnson Controls, 9%
14%
Exhibit 29: Honeywell is a leader in 4 of 6 broader market verticals; addressable market at ~US$ 100bn
Source: Company, Equirus Securities
November 30, 2021| 23

Honeywell International Inc: Overview of Parent Business

Products/solutions encompass very diverse set of end-user industries
As a diversified technology and manufacturing company, Honeywell International Inc. uniquely blends
physical products with software to serve customers worldwide. The company operates in four segments:
Honeywell Forge offers comprehensive (a) Aerospace: Products and services include auxiliary power units, propulsion engines, avionics,
software solutions for Honeywell wireless connectivity services, electric power systems, flight safety, navigation hardware, data
installed base of all four segments and software applications, radar and surveillance systems, aircraft lighting, management and
technical services, satellite and space components, aircraft wheels and brakes etc.
(b) Honeywell Building Technologies (HBT): Advanced software applications for building control
and optimization; sensors, switches, control systems and instruments for energy management;
access control; video surveillance; fire safety products; remote patient monitoring systems;
and installation, maintenance and upgrades of systems.
(c) Performance Materials and Technologies (PMT): The segment comprises Process Solutions,
UOP and Advanced Materials. (i) Process Solutions: automation control, instrumentation,
advanced software and related services for various industries. (ii) UOP: process technology,
products, including catalysts and adsorbents, equipment, and consulting services that enable
customers to efficiently produce gasoline, diesel, jet fuel, petrochemicals and renewable fuels
for the petroleum refining, gas processing, petrochemical, and other industries. (iii) Advanced
Materials: manufactures a wide variety of high-performance products, including materials
used to manufacture end products such as bullet-resistant armor, nylon, computer chips and
pharmaceutical packaging.
(d) Safety and Productivity Solutions (SPS): Safety products include PPE, apparel, gear, and
footwear designed for work, play and outdoor activities; gas detection technology; and
cloud-based notification and emergency messaging. Productivity Solutions include mobile
devices and software for computing, data collection and thermal printing; supply chain and
warehouse automation equipment, software and solutions; custom-engineered sensors,
switches and controls; software-based data and asset management productivity solutions.
On top of these four segments, Honeywell Connected Enterprise (HCE) digitally transforms the way
customers work through Honeywell Forge, an enterprise performance management Software-as-a-
Service (SaaS) offering. Honeywell Forge addresses customer challenges of siloed data, enterprise
complexity, and manual controls, enabling operations that get better over time.
Exhibit 30: Sales break-up among four segments and sub-segments
Relevant segments for Indian listed

business: (a) Process Solutions within
PMT (b) Entire HBT (all three sub-
segments) (c) Specific solutions from
SPS (both safety and productivity)
November 30, 2021| 24

Financials: India to play a key role in High Growth Regions (HGRs)

Segment Financials: Aerospace and PMT combined contributed ~65%/70% of sales/profits in CY20.
Aerospace has consistently been company’s highest-margin segment.
Exhibit 31: Sales & margins in Aerospace Exhibit 32: Sales & margins in Building Technologies
Aerospace Sales (US$ mn) Segment Profit (US$ mn) HBT Sales (US$ mn) Segment Profit (US$ mn)
Segment Margin (%) Segment Margin (%)
18,000 30% 12,000 25%
16,000 25.7% 25.2% 21.2%
10,000 20.4%
14,000 22.2% 22.6% 25% 21%
20.3% 17.1% 16.9% 17.3%
12,000 8,000
20% 17%
10,000
6,000
8,000
15% 13%
6,000 4,000
4,000 10% 9%
2,000
2,000
0 5% 0 5%
CY16 CY17 CY18 CY19 CY20 CY16 CY17 CY18 CY19 CY20
Exhibit 33: Sales & margin in Performance Materials and Technologies Exhibit 34: Sales & margins in Safety and Productivity Solutions
PMT Sales (US$ mn) Segment Profit (US$ mn) SPS Sales (US$ mn) Segment Profit (US$ mn)
Segment Margin (%) Segment Margin (%)
12,000 25% 7,000 17%
22.5%
21.3% 21.8% 15.1% 16.3%
14.7%
10,000 20.2% 6,000 14.0% 15%
19.6% 21%
12.9%
5,000
8,000 13%
17% 4,000
6,000 11%
13% 3,000
4,000 9%
2,000
9%
2,000 1,000 7%
0 5% 0 5%
CY16 CY17 CY18 CY19 CY20 CY16 CY17 CY18 CY19 CY20
Multiple margin levers: While overall segment margin stood at 20.4% in CY20, the company has set
a long-term segment margin target of ~23.0% (improvement of 30-50bps p.a.). Long-term targets for
Honeywell has laid out concrete plans segment-wise margins are: (a) Aerospace ~27% (b) HBT ~23% (c) PMT ~25% (d) SPS ~19%. Key
to improve margins by 30-50bps p.a. levers to achieve the same would be:
(a) Honeywell Connected Enterprise: Leveraging installed base to create large software business
by commercializing key IoT applications
(b) Supply Chain Transformation: Automation of core manufacturing sites using Honeywell Forge
for industrials; Vendor managed inventory and supplier rationalization
(c) Honeywell Digital: Transformation of process, data and technology to enable better decisions
(d) Fixed Cost Reduction: 100bps
High Growth Regions (HGRs): The company derived ~25% of CY18 sales from its HGRs namely
India is one of the key markets within China, India, LATAM, CEE (Central Eastern Europe), ASEAN and MERTA (Middle East, Russia, Turkey
HGRs; could easily grow at a double- & Africa). India accounted for ~8% of HGR sales. It has chalked out plans to aggressively expand
digit CAGR over the long-term sales footprint in these regions. To this end, it has launched a new brand 'IMPACT by Honeywell' in
India. It leverages the parent’s technological prowess to offer affordable solutions for mass mid-market.
November 30, 2021| 25

Segment-wise commentary for HGRs: (a) HBT: Sales to grow at a 12% CAGR over the long term. (b)
PMT: Sales to grow at an 8% CAGR over 2019-23; Aims to expand engineering centers of excellence
in India. (c) SPS: HGR sales to grow at a 15% CAGR over long term; India sales to grow at a CAGR
of ~20% and be driven by (1) New Product Introductions focused on US$ 1bn underserved mass mid-
segment, and (2) expansion of selling presence beyond tier-1 cities.
R&D expenses: Honeywell has been consistently re-investing in business as its R&D expenses have
R&D expenses averaged >7% of sales averaged >7% of sales in the last 5 years. While company-sponsored R&D has been ~4.5% of sales,
in last 5 years; company-sponsored customer-sponsored R&D is another ~2.5% of sales.
R&D at ~4.5% of sales
Exhibit 35: Overall R&D expenses have hovered around 7% of sales in last 5 years
Company-Sponsored R&D (US$ mn) Customer-Sponsored R&D (US$ mn)

3,500 % of Sales 9.0%
7.8%
3,000 7.2% 6.9% 7.2% 8.0%
6.7%
7.0%
2,500
967 876 1,069
6.0%
2,000 1,079
1,200
5.0%
1,500
4.0%
1,000 1,864 1,835 1,809 3.0%
1,556
1,334
500 2.0%
0 1.0%
CY16 CY17 CY18 CY19 CY20
Aims to become a software industrial company; fully on track

Addressable market for HCE at ~US$ Honeywell Connected Enterprise (HCE) was established in 2018 to accelerate software development
100bn in company’s target verticals and IIoT solutions. It utilizes data from Honeywell’s large installed product base to deliver valuable
software solutions.
Exhibit 36: HCE was found to drive digital transformation in advanced industries; it works through Honeywell Forge
Honeywell’s We build tools for those who make, so that every day is their best day of Performance Reinventing the way
Software Vision industries measure, analyze, and run their complex operations
Connected
Enterprise 3,500+ Global
Employees 1,800+
Software
Engineers 150+ Data Scientists and
AI Experts
Progress To Date Plant Building Aerospace Worker OT Cyber Life Sciences Warehouse
(Installed Base)
51K managed ~1M connected 14K connected 78K connected 5K+ projects 42 of the top 26K total sites,
assets buildings aircrafts frontline across 50 pharma 4.4K large U.S.
workers from thousands of companies customers
1.7K customers sites
Customer Base Over 8,000 customers with 95%+ retention
November 30, 2021| 26

As per Honeywell’s estimates, addressable market for HCE is ~US$ 100bn in its target verticals of
energy, refining, petrochemical, industrial, aerospace & defense and building infrastructure.
While HCE-driven sales were ~US$ 1.5bn in 2018, overall Software/Connected Portfolio sales stood
Software/Connected Portfolio sales at at ~US$ 3.0bn (~8-9% of overall sales). Software sales grew only at a ~5% CAGR during 2014-16;
~8-9% of 2018 sales; targets >20% however, growth accelerated to 23%/14% in 2017/2018. The company has targeted software sales
software sales CAGR ahead CAGR of >20% ahead. It is also one of the major margin expansion drivers for the company.
Please refer to Exhibit 18 for software-related acquisitions done by Honeywell International Inc over the
last 10 years. Total cost of these acquisitions is >US$ 10bn, as per public disclosures.
November 30, 2021| 27

Honeywell Automation India (HWA): Indian Listed Entity

Business overview: Domestic/exports constitute 55%/45% of sales
While the Honeywell Group has multiple entities in India, the listed entity – Honeywell Automation India
(HWA) – engages in three main businesses:
HWA enables customers increase (a) Industrial software applications, Honeywell Connected Enterprise, to leverage the power of
productivity of operations, optimize software and sensing, and IoT for making plants and buildings safer, more efficient/cost-
energy usage and migrate towards effective, reliable, and sustainable.
digitalization of the value chain
(b) Automation & control projects/solutions for fuel/LNG terminals, process plants, commercial
buildings, smart cities, gas and liquid pipelines for safer, reliable, and efficient operations.
(c) Lifecycle services and technology migration services and industrial cyber security services for
installed base of customers.
The business is divided into six verticals: Four focused on the domestic market (~55% of sales) and two
on overseas (~45% of sales). Exhibit 37 lists the products/solutions and segment-wise growth drivers.
Exhibit 37: Solutions portfolio, growth drivers and emerging areas for HWA’s business verticals
Vertical Products/Services Portfolio Growth Drivers/New Areas
• Has a wide portfolio of industrial automation products and

solutions that help customers operate safe, reliable, efficient,
• Apart from core markets, HWA will look to drive growth in areas
sustainable, and more profitable operations
such as pharma, specialty chemicals, personal safety and security
• Offerings include Distributed Control Systems (DCS), transmitters, and cyber security. It is also enhancing reach and coverage to
Programmable Logic Controllers (PLC), Emergency Shutdown serve the renewable energy market with some new innovative
Process Systems (ESD), Quality Controls Systems (QCS), advanced solutions
Solutions software solutions, IIoT solutions, and comprehensive lifecycle
• As many corporates shift focus to be carbon neutral and
services
environmentally compliant, HWA plans to serve these new needs
• Expertise to execute complex projects in O&G, refining, pulp &
• As India moves to build energy security and drive gas-based
paper, industrial power generation, chemicals & petrochemicals,
economy, new opportunities will unfold
biofuels, life sciences, and metals, minerals and mining
industries
• Provides automation and control technologies that help make

buildings green, safe, productive and smart in verticals like
industrial, data center, pharma, healthcare, energy, premium
commercial, transport and infrastructure • Investments in core infra such as airports, metros, railways,
• As part of its intelligent buildings suite, it provides building ports, safe cities and large-scale data centers will be a key
management systems (HVAC, lighting and utilities monitoring growth driver
Building
and control), fire detection and alarm systems, access control • Going ahead, value-added services like analytics, energy
Solutions
systems, video surveillance systems, integrated security systems, optimization, and healthcare will contribute more meaningfully
and integrated building management systems based on • HWA is positioned to drive growth in solutions like connected
Honeywell's Enterprise Buildings Integrator™ buildings and cybersecurity.
• Provides aftermarket services for various control systems as well
as comprehensive utilities’ operations and maintenance services
for mechanical and electrical systems in buildings
• Has a varied business portfolio comprising Building Control • Business will continue to focus on commercial excellence levers
Solutions (Mechanical PICVs, Variable Frequency Drives, Piston such as sales deployment, on-boarding, channel excellence and
Building
type PRVs) and Global Field Devices. pipeline management, and new product offerings.
Management
• Products & solutions are present across multiple verticals • Exciting new initiatives such as Connected Buildings and
Systems
including mission critical facilities, govt. infra, airports, stadiums, upcoming new product launches will help the company grow in
metro stations, IT, residential, industrial and hospitality buildings an evolving market
• HWA is introducing an exciting range of global and locally-

• Product portfolio includes pressure switches, airﬂow sensors, developed products (pressure sensors, temperature sensors,
Advanced humidity and temperature sensors, oxy pulse sensors, basic/limit switches, and particle sensors) in India. Also,
Sensing construction equipment shifters localization of existing products is happening at a healthy pace.
Technologies • Business has multiple diversified customer accounts in • HWA has consolidated small business accounts to Master
transportation, aerospace, healthcare, and industrial verticals distributors and directed sales team to focus on key account
management with a wider portfolio.
November 30, 2021| 28

• Global Services provides project engineering services, product

customisation, and software development across Process and
Building Automation areas to several global Honeywell entities • Business has increased its footprint globally through new
• Includes complete project management, systems design, portfolios, offerings and geographic expansion, supporting
application configuration, sourcing, manufacturing, and testing Honeywell’s global growth agenda.
Global Services
undertaken at Company’s Pune facility using virtual • It is making investments in talent development and retention
technologies. strategies in the consultancy space for accelerated growth
• Honeywell Operating System (HOS) continues to be the through newer verticals, software, Cloud and IIoT.
backbone for this business, helping drive lean operations and
efficiencies
• HWA would continue to invest in adding new manufacturing

Global • Delivers high quality products and project solutions right and fast lines, new products, acquiring new key customers and expanding
Manufacturing to global Honeywell entities as well as the Indian market footprint. It will continue localisation efforts to improve speed of
execution and cost competitiveness.
Exhibit 38: Process Solutions: Key products
ControlEdge HC900 (Hybrid Controller) ExperionLX DCS MasterLogic PLC

Exhibit 39: Building Automation: Key products
Variable Frequency Drives Pressure Reducing Valves Airflow Control Systems

Exhibit 40: Advanced Sensing: Key products
Magnetic Position Sensors Pressure Sensors Specialty Switches

November 30, 2021| 29

Honeywell Operating System (HOS): Backbone of operational excellence

HWA continues to focus on HOS to continuously improve efficiency of operations. HOS encompasses
Each business unit aspires to become end-to-end business system institutionalisation to enable exceptional growth along with productivity
even more efficient and thereby reach improvements through Total Customer Experience, New Product Introduction, and Order to Cash and
the next level of HOS maturity Integrated Business Planning. The foundation of HOS is Lean/Six Sigma, Order to Cash, Velocity
Product Development, Agile Capability Maturity Model Integration (CMMI), Honeywell User
Experience, Commercial Excellence and Working Capital.
HWA continues to aspire for higher level of HOS maturity in each business, allowing it to be globally
competitive. Pune Fulgaon Factory and Global Services business are at the Silver level.
Segment-wise performance highlights over last 10 years – Hits & misses (Exhibit 41-46)
Exhibit 41: Process Solutions: Focus on increasing (a) penetration of software solutions and (b) reach to serve rising mass mid-market
Year Segment Commentary
• Approach to digital transformation with leading industrial software applications helped provide remote engineering solutions,
FY21 remote factory acceptance testing solutions, remote commissioning solutions, and remote maintenance solutions.
• Company enhanced its reach and coverage to serve the renewable energy market with some new innovative solutions.
• Business had a strong year driven by providing customers leading technologies from the plant floor to the boardroom as well as
FY20 comprehensive lifecycle services to ensure more productive and stable operations.
• Company enhanced its reach and coverage to serve the large and growing mass mid segment in India.
• Process Solutions business had a good year.

• Business portfolio was further enhanced with new products, solutions, and services. New offerings included process control,
FY19
process safety, process optimisation, process simulation, connected IIoT solutions, and industrial cyber security.
• Apart from the core industries, HWA planned to explore the new industries such as pharmaceuticals and specialty chemicals.
• Added new offerings, incl. Honeywell Connected Plant – an IIoT-based unified suite of software applications – to its wide portfolio
FY18
• Business won several prestigious projects in a highly competitive environment.
• Greenfield opportunities, particularly in the refining sector, were fewer due to uncertainty of investments in oil and natural gas,
FY17
petrochemicals, and fertilizers
FY16 • Won several prestigious projects despite market headwinds
FY15 • Won several prestigious projects during the year
• Business won several prestigious projects as well as continued its strong position in the key vertical of Oil and Natural Gas.
CY13 • Opportunities in the green field refining sector continued to decline and Company had fewer opportunities due to limited
investments in petrochemicals/fertilizers and upgrade/expansion of oil terminals/storage projects in India.
• 2012 was a stable year as it won several prestigious projects and continued its strong position in key vertical of Oil and Natural
CY12
Gas. Some of the key wins were with BPCL, HPCL, IOCL, NTPC and Reliance Industries.
• 2011 was a good year as it won several prestigious projects and continued its strong position in key vertical of Oil and Natural
CY11
Gas. Some of the key wins were OPAL Petrochemicals, Reliance Industries and NOCL.
November 30, 2021| 30

Exhibit 42: Building Solutions: Revival in large infrastructure projects in the country to provide strong tailwinds
• Business continued to do well by securing large projects in segments like smart cities, metros and airport projects.
FY21 • It launched 'Lockdown Support Software' on priority during COVID-19 to monitor lockdowns effectively in the smart cities wherein
security cameras were installed and commissioned, and integrated with common control rooms of smart cities.
• Business continued to demonstrate good results in FY20.

FY20
• Company explored the opportunities to create India-specific integrated products to cater to different sectors.
• Business continued to demonstrate good results in FY19.

FY19 • Its track record in infrastructure, transportation, Smart Cities, information technology, pharmaceutical, and commercial space
verticals helped expand its presence in its markets of interest.
FY18 • Business continued to demonstrate strong results in FY18.
• Business continued to demonstrate strong results in FY17.

• Its track record in infrastructure, transportation, information technology, data centers, pharmaceutical, and commercial space
FY17
verticals helped expand its presence in government, telecommunication, and healthcare verticals in 2016.
• The business delivered city surveillance solutions to 11 cities in Madhya Pradesh.
FY16 • Highlight of the year was significant wins in city surveillance projects for various cities in India.
• Strong results in this business continued during FY15.

FY15
• The highlights of the year were major order wins from many large customers from Transportation, Telecommunications and IT.
• Strong results in this business continued during CY13.

• Its track record in infrastructure, IT, datacenters and office space verticals accelerated its presence in telecom, healthcare and
CY13
pharmaceutical verticals in 2013.
• Highlights of the year were major order wins from many large customers from telecommunications and IT.
• Business continued its consistent track record in Airports, IT, Datacenters and Office Space verticals and accelerated its presence
in Telecom, Healthcare and Pharmaceutical verticals in 2012.
CY12
• Major wins/customers included Bharti Airtel, Cognizant Technology Solutions, Delhi International Airport, IOCL, Kolkata Airport,
Leighton Welspun, Reliance Industries, and Tata Consultancy Services.
• Major wins/customers included Kolkata Airport, Tata Consultancy Services, Cognizant Technology Solutions, AIIMS, Sahyadri
CY11
Hospital, Dr. Reddy’s Laboratories and Royal Bank of Scotland.
November 30, 2021| 31

Exhibit 43: Building Management Systems (BMS): Product portfolio has been enhanced with newer products in recent years
• Due to the pandemic and economic situation, many of the verticals where the business operates were impacted negatively and
FY21
the Building Management Systems business had a difficult year.
• Business had a good year.

FY20
• The portfolio was enhanced with new product offerings like Mechanical PICVs, Variable Frequency Drives and Piston type PRVs.
• Business had a good year.

FY19 • A strong product portfolio coupled with extensive value chain mapping and key account management helped the Building
Management Systems business in driving high double-digit growth.
• A strong product portfolio coupled with extensive value chain mapping and key account management helped Building
FY18
Management System business to drive growth.
• FY17 was a critical year as the business witnessed sales and profit growth, despite moderate residential and commercial new
launches and a sluggish market.
FY17 • It undertook process improvement initiatives as well as an organisation realignment to ensure that the company continues to
focus on the customer as the utmost priority.
• Field devices and thermostats drove growth. New product launches and reputation with contractors helped sustain performance.
• Business witnessed strong sales and profit growth in FY16. Field devices and thermostats drove accelerated growth in a slowly
FY16 recovering real estate market.
• Segment improved profitability by implementing a smart pricing strategy.
• Commercial real estate sector (~2/3 contribution) drove good increase in sales and profitability for the business. It was primarily
attributable to continuous improvement in sales & marketing strategy for field devices and building management business.
FY15 • Company continued to strengthen its presence in the residential vertical with a strategic investment in setting up a solar water
heater factory in Vadodara.
• Combustion business witnessed some headwinds due to challenging conditions in industrial sectors.
• With softening of investments in the hospitality and commercial real estate sectors, the ECC business had a tough year as it
posted only marginal revenue growth.
CY13 • Channel volumes, distribution footprint expansion to tier-2/3 cities and key BMS project wins were highlights of the year.
• The industrial combustion control business continued to see positive trends with revival of industrial demand.
• Solar water heaters launched in 2009 continued to report strong sales.
• Business reported marginal revenue growth in CY12. Some of the major wins were Vansthali Vidyapeeth, Wipro, and Samsung.
CY12 • Business identified synergistic opportunities for a shared management and go-to-market approach with another Honeywell India
entity: Honeywell Electronic Devices and Solutions (HEDS).
• Based on rising demand in tier-2/3 cities and revival in hospitality and commercial real estate, ECC continued double-digit
growth in CY11.
CY11 • Some major wins were ITC Hotel, Formula 1 Racing Track, and ESIC hospitals.
• Industrial Combustion Control business continued to see positive trends with revival of industrial demand.
• Solar water heaters launched in early 2009 continued to report strong sales albeit on lower base.
November 30, 2021| 32

Exhibit 44: Advanced Sensing Technologies: Realignment of sales efforts and product localization to help grow the business
• Business was focused on demand generation and new segment identification.

• Sales team put in extra efforts within the healthcare vertical to drive urgent ventilator demand and supported Government’s
'Make in India' initiative for local manufacturers by delivering critical components used in ventilators.
FY21
• Company consolidated businesses accounts to master distributors allowing direct sales team to focus on key account
management with a wider portfolio.
• Sub parts like stalk controls and pressure switches for transportation accounts were localized and rolled out from Pune facility.
• Electronic Sensing portfolio which includes board mount Pressure Sensors, Airflow Sensors, Hall ICs, Temperature Sensors etc.
helped the business to win in Medical, EVs segments.
FY20
• Sales team put extra efforts within Railways and Stationary Power segment to generate long team sustainable business for
Packaged Sensors covering Pressure and other critical parameters.
• Continued growth in industrial machinery along with new opportunity wins helped drive good growth.
• Electronic Sensing portfolio and Packaged Sensors performed well in FY19 with good revenue in pressure sensors, limit switches,
FY19 construction equipment shifters, pressure switches and basic switches for vehicle body controls.
• Steady demand for gas instruments and pollution monitoring equipment drove growth for gas sensor portfolio, and growth in
automated vending machines and other automation devices drove OEM scan engine portfolio.
FY18 • Market demand for construction equipment and industrial machinery, and new wins helped drive strong growth.
• Market demand in construction equipment and defense verticals and new opportunity wins helped business to grow strongly in
FY17.
FY17 • Packaged products portfolio performed well, along with revenue upside for limit switches and construction equipment shifters.
The electronic sensing and test and measurement lines of business also grew well.
• It secured significant program wins from key customers in transportation and industrial market verticals.
• Despite limited market growth in core industrial sectors, particularly construction equipment and automotive, revenues grew
FY16 strongly in FY16.
• It secured significant program wins from key customers in transportation.
• With continued sluggishness in core industrial sectors, particularly construction equipment and automotive, segment revenues
were flat for the year.
FY15
• Electromechanical was down, but was offset by modest improvements in electro sensing and test and measurement.
• It secured significant program wins from key customers in transportation.
• On the back of strong product offerings, technology and superior services, growth remained flat in difficult market conditions
CY13 across all lines of business, viz. electromechanical, electro sensing, and test and measurement.
• An important initiative was to expand the distribution network, especially for greater coverage of industrial customers.
• Despite core industrial sectors slowing down, business managed to clock double digit growth across all lines of business viz.
CY12 electromechanical, electro sensing and test and measurement.
• During CY12, there were major wins with customers like PHA India, Caterpillar India, Voltas and Hindustan Aeronautics.
• Continued strong sales and operating margin performance in CY11 across all lines of business was due to localization and
CY11 strong demand.
• During CY11, there were major wins with customers like Mahindra and Mahindra, Kirloskar Oil Engines etc.
November 30, 2021| 33

Exhibit 45: Global Services (GS): Increasing its footprint globally through new portfolios, offerings and geographic expansion
• Business continued to deliver good results.

• It increased its footprint globally through new portfolios, offerings and geographic expansion, supporting Honeywell’s global
FY21 growth agenda.
• It continued to make investments in talent development and retention strategies in the consultancy space for accelerated growth
through newer verticals, software, Cloud and IIoT.
• Business continued to deliver good results

FY20
• No new update
• Business continued to deliver good results

FY19
• No new update
FY18 • Honeywell Operating System continued to be the backbone for the business, helping drive lean operations and efficiencies
FY17 • No new update
FY16 • No new update
• Two of the largest GS groups catering to Building and Process Solutions businesses led the way being the first Silver Certified
FY15
non-manufacturing HOS sites in their respective businesses.
• Strong and highly mature deployment of the Honeywell Operating System (HOS), a system designed to drive operational and
CY13 business excellence, helped GS to over deliver on cost control and productivity metrics, while mitigating risks and challenges of a
global economic downturn.
• With prevailing economic and competitive scenario in the rest of the world, GS was under pressure to meet productivity targets
CY12 and competitive pricing available to the Honeywell entities globally.
• GS received silver certification in Honeywell Operating Systems (HOS).
• With prevailing economic and competitive scenario in rest of the world, GS was under tremendous pressure to meet productivity
CY11 targets and competitive pricing. Company reviewed the billing rates and consequently lower billing rates came in effect from
January 2012 onwards.
November 30, 2021| 34

Exhibit 46: Global Manufacturing (GM): Continues to invest in new products for global markets and capacity expansion through automation
FY21 • Global Manufacturing continued to deliver good results in FY21.
• Global Manufacturing continued to deliver good results in FY20. Project business had a good growth while the product business
showed sustain growth.
FY20 • Company setup a line for face mask production at its Fulgaon factory in view of Covid-19 pandemic.
• It continued to invest in new product introductions, acquiring new customers and adding capacity trough automation and
digitization to support growth.
• Global Manufacturing continued to deliver good results in FY19. Project business had a good growth. Product business also
FY19
continued to show a steady growth.
• Company completed construction of phase two at Fulgaon, Pune on the adjacent plot where the Customer Integration Center
FY18
(CIC) and warehouse were consolidated under one roof. It would help improve overall operational efficiency.
FY17 • Fulgaon, Pune factory began construction of phase two on the adjacent plot.
• HOS silver certified facility at Fulgaon, Pune was declared one of the best factories for 2015. It secured approval from many
FY16
prestigious global customers.
• Global Manufacturing (GM) was transitioned to a new location Fulgaon, a state of art manufacturing set up. The new location
was accredited with HOS Silver Excellence certification in October 2014.
FY15 • In 2014, two New Product Introductions (NPIs) were launched for global consumption.
• GM’s revenue grew marginally, and margins improved significantly, partly due to favorable exchange rates. Working capital
improved significantly due to better inventory planning.
• Global Manufacturing (GM) was accredited with HOS Silver certification in August 2012 and sustained this level in 2013.
• Compared to CY12, GM's revenue grew marginally in spite of the global slowdown, and margins improved significantly, partly
CY13 due to favorable exchange rates. Working capital improved significantly due to better inventory planning.
• With Honeywell's support and sponsorship, Pune became one of the four regional factories for Honeywell Process Solutions. It
enabled Pune to supply to the Middle East and Europe.
• Global Manufacturing (GM) initiative stabilized with continued global demand from Honeywell companies.
• GM revenue growth was robust and the business made earnest efforts to sustain profitability in light of weak global economic
CY12
volumes.
• Company received orders for assembly of products for global Airport Securities Group (ASG).
• Business made earnest efforts to sustain profitability in light of weak global economic volumes.
CY11
• Certain products belonging to Airport Securities Group (ASG) were added to Company’s global manufacturing operations.
November 30, 2021| 35

Financial Forecast
We estimate a 13% sales CAGR over FY21-FY24E
The parent’s thrust on sourcing from India, chiefly on the engineering services front, has immensely
HWA’s share in overall Group sales at
helped the Indian entity over the years. Consequently, HWA’s share in global sales has risen from 0.7%
1.3% in CY20 vs. 0.7% in CY13
in CY13 to 1.3% in CY20. Overall contribution from India would be even higher on considering other
unlisted Indian entities. The parent’s focus on driving higher value addition and superior growth in
High Growth Regions (Page 26) is clearly working out well, at least for India.
Exhibit 47: Share of HWA in Honeywell Group sales on the rise
HWA's Share in Honeywell Group Sales (%)
1.5%
1.3%
1.3%
1.3%
1.1%
1.1% 1.0%
0.9%
0.8% 0.8%
0.9%
0.7%
0.7%
0.5%
0.3%
CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Overseas sales outpaced domestic HWA has clocked a healthy ~8% sales CAGR during the last 10 years. While domestic sales have
sales in last decade; trend may reverse grown at a ~7% CAGR during this time, exports have risen at ~11% CAGR; exports are mainly towards
next decade Group entities (Exhibit 49). Thereby, the share of exports has improved to 45% in the FY21 sales mix
vs. 36% a decade ago (Exhibit 48).
Exhibit 48: Share of domestic sales to inch up in the mix ahead Exhibit 49: Majority of exports go to Honeywell Group entities
Domestic (%) Exports (%) Sales from Related Parties (Rs Mn) % of Export Sales
100% 14,000 95% 95% 100%
90% 92% 91% 95%
33% 35% 32% 31% 35% 12,000 88%
80% 43% 45% 46% 44% 45% 45% 44% 44% 86% 86% 90%
84% 82%
70% 10,000 81% 85%
60% 80%
8,000
50%
75%
40% 6,000
67% 65% 68% 69% 65% 70%
30% 57% 55% 54% 56% 55% 55% 56% 56%
4,000 65%
20%
60%
10% 2,000
55%
0%
CY12
CY11
CY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
0 50%
CY11 CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21
HWA typically targets domestic sales growth at 1.5-2x of GDP growth. While we believe exports would
continue to do well for the company and Indian entity’s salience within the overall Group will increase
further, HWA might have already tasted many of its low-hanging fruits. Also, now that India seems to
be on the cusp of a fresh investment cycle, domestic sales would easily outgrow exports. We have built
in domestic/export sales CAGR of ~14%/12% over FY21-FY24E (Exhibits 50 & 51).
November 30, 2021| 36

Exhibit 50: Domestic sales to grow at a 14% CAGR (FY21-FY24E) Exhibit 51: Export sales to grow at an 12% CAGR (FY21-FY24E)
Domestic Sales (Rs Mn) Growth (%) Export Sales (Rs Mn) Growth (%)
30,000 41% 50% 24,000 50%
39%
36%
25,000 40% 20,000 40%
26%
30% 22% 30%
20,000 20% 16,000
14% 16% 15% 15% 14%
20% 12% 12% 20%
15,000 9% 7% 8% 12,000
6% 6%
10% 1% 10%
0% -1%
10,000 -4% 8,000 -4%
0% -9% 0%
-10%
5,000 -14% 4,000
-10% -10%
0 -20% 0 -20%
FY21
FY15
FY22E
FY23E
FY24E
FY22E
FY23E
FY24E
CY11
CY12
CY13
FY15
FY16
FY17
FY18
FY19
FY20
CY11
CY12
CY13
FY16
FY17
FY18
FY19
FY20
FY21
Apart from individual business-wise growth drivers (Exhibit 37), the company’s broader key drivers are
as follows:
Domestic
(a) The Indian market is gaining traction towards adopting technology-enabled solutions that
Key domestic growth drivers: (a) rising aim to digitally transform existing and upcoming infrastructure and industrial projects. HWA
adoption of digital technologies (b) is at the forefront of providing such automation technologies, IoT connected devices, cloud-
penetration of mass market IMPACT based services and industrial software solutions.
brand (c) stronger portfolio in Pharma
(b) The company has devised a mass mid-market strategy wherein it develops and offers no frills
and Life Sciences
version of standard products – launched under a new brand ‘IMPACT by Honeywell’. These are
aimed at growing SMEs (budget hotels, QSRs, tier-2/3 suppliers to large companies) and
encompass all segments, viz. Process Solutions, Building Technologies, Safety and Productivity
Solutions. HWA aims to garner 10% of India sales from this segment in the next 2-3 years.
(c) HWA, in the last few years, has systemically focused on building a differentiated portfolio
relevant to the India’s Pharma and Life Sciences industry. The parent also has done a few
acquisitions in this space which will help the Indian entity broaden its range of solutions.
Exports
Key export growth drivers: (a) traction (a) Once affordable products (mentioned in para above) are proven in India, they would be
in ‘East to Rest’ strategy (b) increasing exported to Latin America and ASEAN as requirements there are similar to India’s. It is a part
demand related to ESG agenda of Honeywell Group’s ‘East to Rest’ strategy.
(b) The pandemic has put the spotlight on the need for a sustainability agenda globally. Demand
for sustainable solutions that address energy optimisation, renewable energy integration, and
water conservation are expected to rise multi-fold. HWA is very well placed to address these
requirements.
November 30, 2021| 37

Exhibit 52: We estimate HWA’s overall sales to rise at a 13% CAGR over FY21-FY24E
Net Sales (Rs Mn) Growth (%)

50,000 50%
41%
45,000
40%
40,000
35,000 30%
19% 18% 18%
30,000 15% 20%
10% 12%
25,000
6% 10%
20,000 3% 3% 4%
15,000 0%
-8%
10,000 -9%
-10%
5,000
0 -20%
CY11 CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
We estimate operating margins to expand by ~100bps over FY21-FY24E

HWA posted a robust margin performance over the last decade, with EBITDAM expanding to 19.4%
Major part of HWA’s EBITDA margin
in FY21 from just 9.0% in CY11. Of the ~1,035bps margin expansion, ~985bps stemmed from gross
gains in the last decade stemmed from
margin expansion while other operating costs (percentage of sales) remained stable (Exhibit 53).
gross margin expansion
Exhibit 53: Operating costs & margins
RM Cost (%) Employee Cost (%) Other Expenses (%) EBITDA Margin (%)
100%
9.0% 7.4% 6.9% 8.8% 10.0% 11.9%
90% 13.5% 15.9% 19.4% 19.4%
13.3% 16.3% 17.0% 16.9% 15.3%
80% 17.0% 17.4% 15.2% 13.8% 13.1%
70% 17.6% 17.9% 17.8% 17.8% 16.4%
60% 17.2% 17.0% 17.0% 16.9% 17.2%
50%
40%
30% 60.1% 58.4% 58.3% 56.5% 58.3% 53.9% 52.1% 51.9% 49.9% 50.3%
20%
10%
0%
We believe material costs have not risen in tandem with revenue due to sales mix changes. The share
Margin expansion coincided with a rise
of services jumped from 26% in CY11 to 34% in FY21, with a major part of the increase driven by
in share of services and exports in the
exports (share up to 45% in FY21 from 33% in CY11) as they also grew rapidly during this period.
sales mix
Services contributed a lion’s share to the exports mix, while the share of products was lower. Exhibits
54-55 depict the corelation between rising share of exports & services and margins.
November 30, 2021| 38

Exhibit 54: Share of services has gradually increased in the sales mix Exhibit 55: Margins have risen in tandem with rising share of exports
Products (%) Services (%) Other Operating Income (%) Share of Exports (%) EBITDA Margin (%)
100% 48% 23%
90%
26% 28% 27% 45% 19.4% 19.4%
31% 28% 32% 31% 29% 31% 20%
80% 34%
70% 43% 15.9% 17%

60% 40% 13.5%
50% 14%
11.9%
38%
40%
74% 69% 72% 73% 72% 68% 69% 71% 68% 10.0% 11%
66% 35% 9.0% 8.8%
30%
7.4% 6.9%
20% 8%
33%
10%
30% 5%
0%
Key levers for next leg of margin expansion

(a) Rising share of digitalization and software related sales in India in both Process Solutions and
Key margin levers: (a) Rising share of Building Technologies verticals – as per management, Industrial IoT and Building Automation
software related sales across segments. markets are projected to grow a >15% CAGR over the next 4-5 years.
(b) Increasing product localization. (c)
(b) Many product groups across segments would gradually become eligible for localization in
Parent-level productivity initiatives
India as individual revenue size for such products would attain a certain scale.
(c) The company will continue to drive new productivity and cost rationalization initiatives, in line
with the global agenda to take segment margins to ~23% in the long term from 20.4% in
CY20. Performance Materials and Technologies (PMT) and Safety and Productivity Solutions
(SPS) would witness the highest margin expansion from CY20 levels.
We have baked in EBITDA margin expansion of ~100bps over FY21-FY24E as FY23E margins would
recover to FY19 and FY20 levels, and FY24E margins would post an improvement on that. It translates
into an EBITDA CAGR of 15% over FY21-24E.
Exhibit 56: We estimate HWA’s absolute EBITDA to rise at a 15% CAGR (FY21-FY24E)
EBITDA (Rs Mn) EBITDA Margin (%)

10,000 24%
20.4%
9,000 19.4% 19.4% 19.3%
17.4% 20%
8,000
15.9%
7,000
13.5% 16%
6,000 11.9%
5,000 10.0% 12%
9.0% 8.8%
4,000 7.4% 6.9%
8%
3,000
2,000
4%
1,185
1,451
1,225
2,121
2,180
2,859
3,636
5,034
6,371
5,889
5,627
7,344
8,912
1,000
0 0%
Note that for operating margins, corporate overhead allocations is a proxy for royalty expenses. This
Corporate overhead allocations at
represents the company's fair share of expenses allocated by Honeywell International Inc. to all its
3.0-4.5% of sales over last decade
affiliate companies worldwide in compliance with the global Transfer Pricing regulations. Corporate
overhead allocations have varied between 3.0-4.5% of sales over the last decade (Exhibit 57).
November 30, 2021| 39

Exhibit 57: Global overhead allocations have been in the range of 3.0-4.5% of sales over time
Corporate Overhead Allocations (Rs Mn) % of Sales

1,200 4.6% 5.0%
4.3% 4.0% 4.5%
1,000 3.6% 3.5% 3.7% 3.5% 4.0%
3.4%
3.1% 3.1% 3.5%
800
3.0%
600 2.5%
2.0%
400
1.5%
1.0%
200
1,101
1,069
1,107
1,117
507
715
617
853
810
948
0.5%
0 0.0%
HWA has posted a recurring PAT CAGR of 16% over last 10 years; most of this period was marked by
Recurring PAT to grow at a 16% CAGR
muted investment activity and large infrastructure spends in India. We estimate HWA’s recurring PAT
over FY21-FY24E
to grow at a similar 16% CAGR over FY21-FY24E, broadly in line with EBITDA growth.
Exhibit 58: Recurring PAT estimated to grow at a 16% CAGR over FY21-FY24E
Recurring PAT (Rs Mn)

8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,071
1,542
1,412
1,695
2,497
3,588
4,915
4,600
4,431
5,810
7,108
1,000
852
862
0
Working capital, cash flows, return ratios

Operating cash flow generation was weak in CY11 and CY12 as working capital needs had intensified
While OCF generation was weak in
due to: (a) large infrastructure projects having extended payment milestones and (b) constrained credit
CY11 and CY12 due to enhanced WC
markets in commercial construction. There was a substantial rise in bad debt and liquidated damages
requirements, it stabilized from CY13
as well during that period, hampering profitability. HWA recovered in CY13 and from thereon, its
onwards
execution on cash flow generation metrics have been immaculate, barring in CY14 (cumulative
CFO/EBITDA at ~63% during CY13-FY21; Exhibit 59).
Non-cash working capital (percentage of sales) averaged only ~10% over CY13-FY21 (Exhibit 60).
While FY22 might see some hiccups on that front on account of global supply chain disruptions,
working capital should revert to usual levels in FY23.
FCF generation to be strong at While management does not give any capex guidance, we have built in a capex of ~Rs 1.6bn over
Rs 4.5bn-5bn p.a. during FY21-FY24E the next three years considering a strong growth outlook for the domestic market and accelerated
product localization initiatives. HWA should be able to generate FCF of Rs 14bn-15bn over FY21-
FY24E, as per our estimates (Exhibit 61).
November 30, 2021| 40

Exhibit 59: CFO to EBITDA conversion has been healthy in recent times Exhibit 60: Working capital requirements have been moderate
CFO/EBITDA (%) Non-Cash Working Capital (Rs Mn) % of Sales

175% 162%
4,800 24%
150% 20%
4,200
20%
125% 3,600
15%
100% 14% 14% 16%
76% 75% 72% 77% 80% 3,000 13%
75% 61% 62% 67% 11% 11% 10% 10%
52% 2,400 9% 12%
9%
50% 1,800
6% 6% 8%
25% 6% 1,200
4%
0% 600
-25% -13% -14% 0 0%
FY22E
FY23E
FY24E
CY11
CY12
CY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY18
FY22E
FY23E
FY24E
CY11
CY12
CY13
FY15
FY16
FY17
FY19
FY20
FY21
Exhibit 61: FCF generation has been healthy over the years; should continue ahead as well
CFO (Rs Mn) Capex (Rs Mn)

7,000
6,000 5,860 5,928
5,000
4,313
4,000 3,644
3,088 3,300
3,000 2,629
1,915 2,152
2,000 1,664
1,000
-185 -173 130
0
-155 -94 -109 -368 -102 -125 -188 -232 -591 -473
-1,000 -400 -600 -600
FY22E
FY23E
FY24E
CY11
CY12
CY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 62: HWA remains a net cash entity Exhibit 63: Return ratios have been robust
Net D/E RoE (%) Core RoIC (%)

0.0
80% 73%
-0.1 63%
70% 60%
59%
-0.2
60%
-0.3 -0.2 48%
-0.3 50% 44% 43%
-0.4 -0.3
-0.4 40%
-0.5 -0.4 24% 26% 27%
30% 21%
-0.6 -0.6 15% 14%
20%
-0.7 -0.6 23% 25%
-0.7 -0.7 10% 18% 19% 19% 19% 19%
-0.7 -0.7 15% 15% 16% 18%
-0.8 13% 12%
-0.8 -0.8 0%
-0.9
FY23E
FY22E
FY24E
CY11
CY12
CY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
CY11
CY12
CY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
November 30, 2021| 41

Valuations & view

At CMP of Rs 38,950, HWA is trading at FY22E/FY23E/FY24E P/E of 78x/59x/48x and EV/EBITDA
of 57x/43x/35x.
While the stock traded at an avg. one-yr fwd. P/E of ~26x during FY11-FY15, it saw a substantial re-
HWA has traded at an avg. one-yr fwd. rating in the next 5-6 years backed by superior earnings growth and FCF generation. FY15 PAT was lower
P/E of ~50x during the last six years than the highs of CY09 – a period marked by muted capex in the country. However, PAT has almost
tripled over FY15-FY21. The stock has traded at an avg. one-yr fwd. P/E of ~50x over FY16-FY21.
Exhibit 64: HWA has traded at an average one-yr fwd. P/E of ~50x from FY16-FY21
P/E (1-yr fwd.) Average

120
100
80
60
40
20
0
Nov-10
Nov-20
Nov-08
Nov-09
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-21
May-15
May-09
May-10
May-11
May-12
May-13
May-14
May-16
May-17
May-18
May-19
May-20
May-21
Source: Company, Bloomberg, Equirus Securities
Exhibit 65: HWA has traded at an average one-yr fwd. EV/EBITDA of ~33x from FY16-FY21
EV/EBITDA (1-yr fwd.) Average

90
80
70
60
50
40
30
20
10
0
Nov-10
Nov-20
Nov-08
Nov-09
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-21
May-15
May-09
May-10
May-11
May-12
May-13
May-14
May-16
May-17
May-18
May-19
May-20
May-21
Source: Company, Bloomberg, Equirus Securities
Initiate coverage with LONG

We value the stock at 60x Mar’24 EPS to arrive at a Mar’23 TP of Rs 48,250 – an upside of ~24%
Initiate coverage with LONG and a
from current levels. Our target multiple is at a 20% premium to our target multiple for ABB (50x) and
Mar’23 TP of Rs 48,250 set at one-yr
ex-Energy business of SIEM. In our opinion, HWA’s premium valuations over ABB and SIEM are justified
fwd. P/E of 60x – a 20% premium to
given its superior performance on most key metrics (sales growth, margin expansion, earnings growth,
our target multiple for ABB
return ratios) over a considerable period.
We believe HWA would continue to trade at arguably rich valuations driven by:
(a) Strong earnings visibility backed by (i) an expanding addressable market both in India and
overseas, (ii) rising salience of the Indian entity in the group’s overall plans, and (iii) a revival
in large domestic investments. We have baked in a 16% EPS CAGR over FY21-FY24E.
(b) Robust return ratios (FY23 ROE/core ROIC at 18%/60%) enabled by a prudent business mix
between products and new-age engineering and digital services.
November 30, 2021| 42

(c) Disciplined approach on WC management resulting in healthy FCF. FCF generation should
aggregate to Rs 4.5bn-5.0bn p.a. over the next three years.
Exhibit 66: Target price methodology

Parameter Unit Value
Mar’24 TTM EPS Rs/Share 803.9
P/E Multiple x 60
Target Price (Mar’23) Rs/Share 48,250
Exhibit 67: Relative Valuation vis a vis Indian Peers

Price M Cap Sales EPS
Company Name Sales (Rs Mn) Sales Growth (%) EBITDA (Rs Mn) EBITDA Margin (%) EPS
(Rs) (Rs Mn) CAGR CAGR
(FY21- (FY21-
FY21 FY22E FY23E FY22E FY23E FY21 FY22E FY23E FY21 FY22E FY23E FY21 FY22E FY23E
23E) 23E)
Honeywell
38,950 3,44,377 30,428 32,253 37,973 6% 18% 12% 5,889 5,627 7,344 19.4% 17.4% 19.3% 520.3 501.2 657.1 12%
Automation
ABB India 1,863 3,94,679 58,210 68,461 82,195 18% 20% 19% 2,759 5,733 7,735 4.7% 8.4% 9.4% 8.1 19.4 26.4 81%
Siemens Ltd 2,165 7,71,000 1,37,806 1,57,060 1,77,025 14% 13% 13% 15,557 18,922 21,989 11.3% 12.0% 12.4% 30.3 39.0 45.4 23%
Price M Cap
Company Name Net D/E P/E EV/EBITDA ROE (%) ROIC (%) Div Yield (%)
(Rs) (Rs Mn)
FY21 FY21 FY22E FY23E FY21 FY22E FY23E FY21 FY22E FY23E FY21 FY22E FY23E
Honeywell
38,950 3,44,377 -0.7 75x 78x 59x 56x 57x 43x 19% 16% 18% 19% 0.3% 0.4%
Automation
ABB India 1,863 3,94,679 -0.6 230x 96x 70x 135x 65x 48x 5% 11% 13% 5% 0.4% 0.5%
Siemens Ltd 2,165 7,71,000 -0.4 72x 56x 48x 47x 38x 32x 11% 13% 13% 11% 0.5% 0.6%
Exhibit 68: Relative Valuation vis-à-vis Global Peers

M Cap Sales EPS
Company Name Price Sales (Mn) Sales Growth (%) EBITDA (Mn) EBITDA Margin (%) EPS
(Mn) CAGR CAGR
(CY20- (CY20-
CY20 CY21E CY22E CY21E CY22E 22E) CY20 CY21E CY22E CY20 CY21E CY22E CY20 CY21E CY22E 22E)
Honeywell
208 1,42,958 32,637 34,553 36,970 6% 7% 6% 7,222 8,488 9,285 22.1% 24.6% 25.1% 7.1 8.1 9.1 13%
International (USD)
ABB AB (CHF) 32 65,578 26,134 28,951 30,521 11% 5% 8% 3,802 4,822 5,323 14.5% 16.7% 17.4% 1.0 1.5 1.6 29%
Siemens AG (EUR) 145 1,23,250 62,265 66,548 70,032 7% 5% 6% 8,921 11,372 12,549 14.3% 17.1% 17.9% 6.3 8.2 9.0 19%
Emerson (USD) 91 54,053 18,236 19,425 20,495 7% 6% 6% 4,380 4,643 5,010 24.0% 23.9% 24.4% 4.1 4.8 5.2 13%
Rockwell Automation
341 39,501 6,997 8,181 8,690 17% 6% 11% 1,233 1,789 1,962 17.6% 21.9% 22.6% 9.4 10.8 12.0 13%
(USD)
Schneider Electric
151 86,061 25,159 28,669 30,377 14% 6% 10% 4,929 5,548 6,006 19.6% 19.4% 19.8% 4.5 5.9 6.5 19%
(EUR)
Mitsubishi Electric
1,426 30,61,909 41,91,433 45,17,402 46,69,962 8% 3% 6% 4,39,094 4,92,324 5,29,150 10.5% 10.9% 11.3% 90.0 108.1 119.3 15%
(JPY)
Yokogawa Electric
2,142 5,75,394 3,74,206 3,76,760 4,00,620 1% 6% 3% 49,161 48,000 57,000 13.1% 12.7% 14.2% 72.0 72.8 92.5 13%
(JPY)
M Cap
Company Name Price Net D/E P/E EV/EBITDA ROE (%) ROIC (%) Div Yield (%)
(Mn)
CY20 CY20 CY21E CY22E CY20 CY21E CY22E CY20 CY21E CY22E CY20 CY21E CY22E
Honeywell
208 1,42,958 0.4 29x 26x 23x 21x 18x 16x 30% 32% 34% 9% 1.8% 1.9%
International (USD)
ABB AB (CHF) 32 65,578 0.1 33x 22x 19x 18x 14x 12x 12% 23% 21% 9% 2.5% 2.6%
Siemens AG (EUR) 145 1,23,250 0.7 23x 18x 16x 18x 14x 12x 15% 14% 15% 5% 2.8% 3.0%
Emerson (USD) 91 54,053 0.5 22x 19x 17x 13x 12x 11x 25% 27% 27% 14% 2.3% 2.4%
Rockwell Automation
341 39,501 1.4 36x 32x 28x 35x 24x 21x 79% 43% 40% 21% 1.3% 1.4%
(USD)
Schneider Electric
151 86,061 0.1 33x 26x 23x 18x 17x 15x 14% 15% 16% 9% 1.9% 2.0%
(EUR)
Mitsubishi Electric
1,426 30,61,909 -0.1 16x 13x 12x 6x 5x 5x 10% 8% 9% 8% 2.9% 3.1%
(JPY)
Yokogawa Electric
2,142 5,75,394 -0.2 30x 29x 23x 11x 10x 9x 6% 6% 8% 6% 1.6% 1.7%
(JPY)
Source: Companies, Bloomberg; All are Bloomberg Consensus Estimates
November 30, 2021| 43

Honeywell Group: Other Indian Entities

Business overlap limited among different entities; not much impact on HWA
Apart from HWA, the Honeywell Group operates three other major entities in India: (a) Honeywell
HWA and HTSL combined account for Technology Solutions Lab (HTSL). (b) Honeywell International (India) (HII). (c) Honeywell Electrical
90-95% of Honeywell Group’s India Devices and Systems India (HEDSI).
EBITDA; other two entities are smaller
While HWA and HTSL (largest among other entities) have no business overlap, products and customers
of HII and HEDSI have some overlap with HWA. The table below throws some light on products and
solutions offered by these entities and key overlaps among them.
Exhibit 69: Largest entity i.e., HTSL has no overlap at all with the listed entity; it has no external customers and serves only the Honeywell Group
India Entities Products/Services Comments
Key products and services include • Accounts for ~45% of Indian entities' combined sales
(a) automation and control solutions for fuel terminals/LNG and 40-45% of EBITDA.
terminals, process plants, commercial buildings, smart cities, gas • Derives 35-40% sales from Honeywell Group. Procures
Honeywell
and liquid pipelines for safer, reliable, and efficient operations. 35-45% of RMs from Honeywell Group. Procurement
Automation India
(b) industrial software applications called Honeywell Connected of Goods & Services from HII has averaged ~805mn
Ltd (HWA, Listed
Enterprise to leverage the power of software and Sensing and IoT for in last 5 years (~13% of overall procurement from
Entity)
making plants and buildings safer and more efficient/cost-effective. Honeywell Group)
(c) lifecycle services and technology migration services, and • Has overlapping products/customers with HII and
industrial cyber security services for its installed base. HEDSI
• Accounts for ~40% of Indian entities' combined sales

It is the engineering and technology development arm of Honeywell and ~50-60% of EBITDA.
Honeywell Group in India and provides R&D services to the Group (including
• Has no external customers and earns all revenues from
Technology HWA). HTSL started as an off-shore development center in late
Honeywell Group only.
Solutions Lab 1994. Today, it provides Product Solutions & Analytics, New Product
(HTSL) Introduction, Advanced Research & Technology, and IT & Business • Derives almost all revenues from exports of services
Process Solutions. and does not compete with the listed entity for
business.
• Accounts for ~10-12% of Indian entities' combined
sales and ~7-9% of EBITDA.
• Derives ~95% of revenues from sale of products
HII is involved in trading and manufacturing of Life Safety Equipment
Honeywell (Traded Goods account for bulk of the revenues).
(e.g., fire & smoke detectors), Security Products (e.g., access control,
International Domestic customers account for ~85-95% of
CCTV), Home Automation Products etc. It also deals with precision
(India) (HII) revenues. Earns only ~15-25% of overall revenues
instruments & related software systems for bulk storage tanks.
from Honeywell Group.
• Has overlapping products with the listed entity's
Building Solutions vertical.
• Accounts for <2-3% of Indian entities' combined sales.
Honeywell Company is engaged in manufacturing and trading of electrical Entity has made EBITDA losses during FY18-20.
Electrical Devices devices and control systems viz. Switches, Sockets, Cable • Derives almost all revenues from sale of products to
and Systems India Management Systems, Lighting Management Systems and Other domestic customers.
(HEDSI) Wiring Devices. • Has overlapping end-customers with the listed entity's
Building Solutions vertical.
Source: Company Reports, Equirus Securities
November 30, 2021| 44

Financials: HWA and HTSL account for a majority of India sales & profits
Exhibit 70: Share in sales: HWA is the largest entity in terms of sales Exhibit 71: Share in EBITDA: HTSL contributes the highest
Honeywell Electrical Devices and Systems India Honeywell Electrical Devices and Systems India
Honeywell International (India) Honeywell International (India)
Honeywell Technology Solutions Lab Honeywell Technology Solutions Lab
Honeywell Automation India Ltd Honeywell Automation India Ltd
100% 9%
95% 7% 6% 7% 8%
13% 13% 14% 10% 11% 12% 12%
80%
75%
54% 50%
39% 44% 41% 41% 62%
60% 43% 43% 65% 64%
55% 60%
40% 35%
46% 46% 45% 39% 43%

20% 41% 41% 44% 15% 32%
28% 27% 29%
0% -5%
FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20
Exhibit 72: Key financials of (a) Honeywell Automation India (HWA) and (b) Honeywell Technology Solutions Lab (HTSL)
Honeywell Automation India Ltd Honeywell Technology Solutions Lab
Rs Mn FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20
Key Financials
Revenue 24,037 21,876 24,101 26,900 31,747 32,900 20,445 22,971 25,209 27,274 28,652 29,708
Growth (Yoy%) 41% -9% 10% 12% 18% 4% 8% 12% 10% 8% 5% 4%
EBITDA 2,121 2,180 2,859 3,636 5,034 6,371 4,632 5,167 6,344 7,018 6,901 7,292
EBITDA Margin (%) 8.8% 10.0% 11.9% 13.5% 15.9% 19.4% 22.7% 22.5% 25.2% 25.7% 24.1% 24.5%
Net Profit 1,542 1,412 1,695 2,497 3,588 4,915 3,222 3,245 3,867 4,473 4,127 4,910
Net Profit Margin (%) 6.4% 6.5% 7.0% 9.3% 11.3% 14.9% 15.8% 14.1% 15.3% 16.4% 14.4% 16.5%
CFO 130 1,664 2,152 2,629 3,088 3,300 2,501 3,538 4,692 4,063 4,991 5,687
CFO/EBITDA (%) 6% 76% 75% 72% 61% 52% 54% 68% 74% 58% 72% 78%
Free Cash Flow (FCF) -238 1,562 2,027 2,441 2,856 2,709 -1,550 1,262 1,481 -1,023 4,162 4,914
Non-Cash Working Capital 2,567 2,817 2,273 1,531 1,842 2,898 1,950 1,319 4,514 1,811 -2 -649
% of Sales 10.7% 12.9% 9.4% 5.7% 5.8% 8.8% 9.5% 5.7% 17.9% 6.6% 0.0% -2.2%
Net Fixed Asset Turnover (x) 32.1 25.9 29.6 33.1 37.5 23.4 6.3 6.2 6.4 3.3 2.4 2.5
Net Debt -2,946 -4,505 -6,612 -9,192 -12,245 -14,330 -10,265 -12,734 -15,056 -14,822 -19,846 -25,821
Net D/E -0.3 -0.4 -0.6 -0.6 -0.7 -0.7 -0.5 -0.5 -0.5 -0.5 -0.6 -0.7
ROE (%) 19% 15% 15% 19% 23% 25% 17% 15% 15% 15% 12% 13%
Core ROIC (%) (Post-tax, Ex-
26% 21% 27% 44% 59% 63% 28% 24% 24% 24% 20% 26%
cash)
Revenue Details
Revenue Break-up (%) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Products 73% 72% 68% 69% 71% 68% 0% 0% 0% 0% 0% 0%
Services 27% 28% 32% 31% 29% 31% 100% 100% 100% 100% 100% 100%
Other Operating Income 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 0% 0%
Revenue Break-up (%) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Domestic 69% 65% 57% 55% 54% 56% 1% 1% 1% 7% 2% 2%
Exports 31% 35% 43% 45% 46% 44% 99% 99% 99% 93% 98% 98%
Sales to Related Parties as a % of
28% 30% 39% 37% 38% 38% 94% 100% 99%
Overall Sales
\
November 30, 2021| 45

Exhibit 73: Key financials of (a) Honeywell International (India) (HII) and (b) Honeywell Electrical Devices and Systems India (HEDSI)
Honeywell International (India) Honeywell Electrical Devices and Systems India
Rs Mn FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20
Key Financials
Revenue 6,585 6,905 7,961 5,976 7,550 9,023 1,396 1,457 1,412 1,390 1,266 851
Growth (Yoy%) 8% 5% 15% -25% 26% 20% 6% 4% -3% -2% -9% -33%
EBITDA 890 565 587 753 1,179 1,138 52 85 72 -2 -281 -119
EBITDA Margin (%) 13.5% 8.2% 7.4% 12.6% 15.6% 12.6% 3.7% 5.8% 5.1% -0.2% -22.2% -14.0%
Net Profit 894 684 766 863 1,236 1,199 45 24 35 -2 -211 2
Net Profit Margin (%) 13.6% 9.9% 9.6% 14.4% 16.4% 13.3% 3.2% 1.7% 2.5% -0.2% -16.6% 0.2%
CFO 201 -531 592 1,338 -201 1,798 17 -7 31 99 -36 -274
CFO/EBITDA (%) 23% -94% 101% 178% -17% 158% 33% -9% 43% -3964% 13% 230%
Free Cash Flow (FCF) -527 -602 433 1,163 92 1,693 -47 -27 15 91 -86 -319
Non-Cash Working Capital 1,061 703 686 218 425 -666 315 507 391 438 66 397
% of Sales 16.1% 10.2% 8.6% 3.6% 5.6% -7.4% 22.5% 34.8% 27.7% 31.5% 5.2% 46.6%
Net Fixed Asset Turnover (x) 18.9 20.2 21.0 13.1 15.1 12.4 8.3 9.0 10.1 12.5 15.3 7.2
Net Debt -3,076 -3,867 -4,519 -5,879 -5,827 -7,895 -346 -340 -381 -493 -437 -121
Net D/E -0.7 -0.7 -0.8 -0.8 -0.8 -0.9 -0.3 -0.3 -0.4 -0.5 -0.5 -0.1
ROE (%) 22% 14% 14% 13% 17% 15%
Core ROIC (%) (Post-tax, Ex-
36% 20% 19% 28% 41% 39%
cash)
Revenue Details
Revenue Break-up (%) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Products 93% 94% 95% 95% 96% 96% 100% 100% 100% 100% 100% 100%
Services 7% 6% 5% 5% 4% 4% 0% 0% 0% 0% 0% 0%
Other Operating Income 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Revenue Break-up (%) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Domestic 93% 94% 87% 95% 96% 85% 79% 100% 100% 100% 100% 100%
Exports 7% 6% 13% 5% 4% 15% 21% 0% 0% 0% 0% 0%
Sales to Related Parties as a %
21% 15% 23% 17% 16%
of Overall Sales
November 30, 2021| 46

Milestones, Corporate Governance, Risks, Management Profile

Key Milestones
Year Milestone
Incorporated as Tata Process Controls Pvt Ltd in Maharashtra in 1984.

1984, 1987
Entered into a technical collaboration agreement with Honeywell Inc for its process control and management systems (TDC-3000).
Converted to a public limited company, Tata Honeywell Ltd jointly promoted by the Tata group and Honeywell Group for the manufacture
1988
of Honeywell's TDC-3000 Distribute Control Systems in India.
1989 Series 9000 systems were launched to meet the requirements of small control applications and the 620 LCS programmable controllers.
Established printed wire assembly facility for the manufacture of high volume PWAS of two products lines.
1991
Launched building automation systems in India.
Launched new generation Automation Platform "Total Plant" and also started marketing Building Automation Control systems for Air-
1993, 1995 Conditioning, Fire Detection and security applications.
Successfully set up the Smart Transmitter Configuration Centre for local manufacture of Honeywell S 900 Series Smart Transmitters.
Plans to expand its industrial automation and control business to the O&G industry and to new power plants being set-up in the country.
1999, 2000 Company’s Hi-spec solutions entered into an agreement with US-based PSDI for offering the latter's enterprise asset management solutions
to the process and manufacturing sector in the Indian subcontinent.
Tata group sold its shareholding in favour of Honeywell and the name was changed to Honeywell Automation India Ltd.
2004, 2005
Introduced Experion Process Knowledge System (PKS) R300; featuring a redesign of its automation and control platform hardware.
Introduced Advanced Energy Solutions for Industrial Power Generators.

2008, 2011
Launched New Remote Collaboration, Optimization and Operations Solution.
Set up facility for manufacture of Solar Water Heaters and other products at Gujarat Savli GIDC.
2013
Global Manufacturing (GM) was accredited with HOS Silver certification in August 2012 and sustained this level in 2013.
Two of the largest GS groups catering to Building and Process Solutions businesses led the way being the first Silver Certified non-
manufacturing HOS sites in their respective businesses.
2015
Global Manufacturing (GM) was transitioned to a new location Fulgaon, a state of art manufacturing set up. The new location was
accredited with HOS Silver Excellence certification in October 2014.
HOS silver certified facility at Fulgaon, Pune was declared one of the best factories for 2015. It secured approval from many prestigious
2016
global customers.
2017 Building Solutions business delivered city surveillance solutions to 11 cities in Madhya Pradesh.
It added new offerings, including Honeywell Connected Plant – an IIoT-based unified suite of software applications – to its wide portfolio.
2018 Completed construction of phase two at Fulgaon, Pune on the adjacent plot where the Customer Integration Center (CIC) and
warehouse were consolidated under one roof.
With Honeywell Asia Pacific Inc. (HAPI) merging into HAIL Mauritius Ltd (HAIL Mauritius) on reorganisation within the Honeywell group,
2019
HAIL Mauritius became the immediate holding company. Honeywell International Inc. continues to be the ultimate holding company.
Process Solutions enhanced its reach and coverage to serve the large and growing mass mid segment in India.
2020
Enhanced BMS portfolio with offerings like Mechanical PICVs, Variable Frequency drives and Piston type PRVs.
Process Solutions enhanced its reach and coverage to serve the renewable energy market with some new innovative solutions.
2021
Localised some of the ‘Advanced Sensing Technologies’ sub parts like stalk controls and pressure switches for transportation accounts.
November 30, 2021| 47

Corporate Governance
Based on HWA’s FY21 Annual Report, following are the key highlights of our preliminary assessment
of the level of corporate governance in the company:
Board of Directors: The Board has 6 Directors, including a Managing Director, three Non-Executive
Directors, and two Independent Directors (including a woman Director). None of the directors are
related to each other. All the independent directors are appointed for a period of 5 years. None of the
Directors hold independent directorships in more than 10 publicly listed companies.
Note that all directors attended last year’s AGM. During FY21, 6 board meetings were held and the
time gap between any two meetings did not exceed 120 days. All Directors attended 4 or more
meetings of these 6 meetings. In addition, one meeting of Independent Directors was also held during
the year.
Committees of the Board: There are 5 board committees – Audit, Nomination & Remuneration,
Stakeholders’ Relationship, CSR, and Risk Management. Audit and Nomination & Remuneration
committee were headed by independent directors. During FY21, meetings held by these 5 committees
were 4/4/2/2/2, respectively. During FY21, 5 investor complaints were received by the Company, all
of which were resolved during the year only.
Disclosure Norms: As per our preliminary study, we do not find any issues on this front. The company
follows disclosure norms as stipulated by the listing agreement of exchanges and is timely in coming
up with quarterly/half-yearly/annual results and annual reports. Management does not hold earnings
call after quarterly results.
Other Highlights: The Board had recommended a total dividend (including interim dividend) of Rs
85/equity share for FY21 (dividend payout ratio of ~16%) vs Rs 75/equity share in FY20 (dividend
payout ratio of ~13%).
M/s. Deloitte Haskins & Sells LLP are the auditors for the Company.
Risks & Concerns

Dependence on capital investments: Company derives a substantial part of revenues from new
capital investments by customers in manufacturing and infrastructure. While it is likely that the pace of
capital spends across most industries would rise in near-to-medium term, any delay in that could
adversely affect growth prospects of the company. Also, its seems that Company has a slightly higher
dependence on O&G vertical vis a vis other segments in Process Solutions segment. Therefore, delays
in upstream and downstream greenfield investments could play a spoilsport.
Heavy export dependence on Honeywell group: Company derives majority of its export revenues
from Honeywell group entities and affiliates (accounted for ~81% of export sales in FY21). Any change
in sourcing strategy by the group could have a material adverse impact on the revenues of the
company. Further, an increasing competitive landscape, pricing pressures on sales to the group
coupled with any future changes in order mix could hamper profitability of the company.
Rising competitive intensity in Indian market: Competitive landscape is becoming more aggressive
due to lower global volumes for most peer companies having international presence. Global
competitors have started focusing more on Indian market.
Foreign currency risk: Imports of goods and services from Honeywell Group and its affiliates forms
a significant chunk of HWA’s operating costs. Annual C.I.F value of imports has been ~Rs 8.5-11bn
in last 5 years (a major portion of that comes from Honeywell Group). However, HWA has done well
to have become a net exporter in INR terms – next exports as a % of sales stood at 14% in FY21.
Company uses forward exchange contracts to mitigate foreign currency risks to some extent.
November 30, 2021| 48

Management Profile
Name Designation Description
Dr. Natarajan has master’s degree in Industrial Engineering from NITIE Mumbai, a Ph.D. from IIT
Bombay, and has completed the Advanced Management Program from Harvard Business School. He is
also Executive Chairman and Founder of 5F World, a platform for digital start-ups, skills, and social
Dr. Ganesh Chairman of the Board
ventures in the country. He is Co-founder of Global Talent Track, Skills Alpha and Lighthouse
Natarajan of Directors
Communities Foundation and two Indo-US joint ventures – Kalzoom Advisors and the Center for AI and
Advanced Analytics. He was appointed Independent Director (Non-Executive) and Chairman of the
Board of Directors of HWA with effect from March 8, 2021.
Mr. Gaikwad holds a Bachelor of Engineering (Honors) degree in Electrical & Electronics Engineering
from Birla Institute of Technology and Science (BITS) Pilani (India). He brings close to 30 years of
experience in automation, control, and advanced software applications in the process industry to lead
Managing Director and
Mr. Ashish growth for HWA. He began his career as a software engineer with HPS in Pune, India. Over the years,
VP– GM, Honeywell
Gaikwad he has served Honeywell’s customers in multiple roles of increasing responsibility in several
Process Solutions India
geographies including India, Southeast Asia, Asia Pacific, and the USA. Mr. Gaikwad was appointed
Managing Director and Vice President – General Manager of Honeywell Process Solutions (HPS) India
in 2016.
Mr. Bellare holds bachelor’s degree in chemical engineering from the Indian Institute of Technology
(IIT) and a doctorate in Chemical Engineering from West Virginia University and is also Six Sigma Black
Belt certified. He moved to India in 2016 as Vice President and General Manager of Honeywell
Non-Executive Director Technology Solutions (HTS) India, the engineering and technology development arm of Honeywell. He
Dr. Akshay Bellare and President, was appointed President, Honeywell India, in October 2019. In this role, he is responsible for the
Honeywell India continued growth of India operations across Honeywell's four strategic business groups: Aerospace,
Honeywell Building Technologies (HBT), Performance Materials and Technologies (PMT), and Safety
and Productivity Solutions (SPS). Prior to joining Honeywell, Mr. Bellare held R&D leadership roles with
Union Carbide Corporation and Dow Chemical Company in the USA.
Mr. Modi has a B.E. in Mechanical Engineering from the National Institute of Technology, Trichy; M.S.
in Mechanical Engineering from Rensselaer Polytechnic Institute in New York; and an MBA in Finance
Non-Executive Director from The Wharton School, University of Pennsylvania. In this role, he leads the strategy and operations
and VP-GM, Honeywell for HBT in India to drive focus and attention on accelerating growth. Prior to his current role, he served
Mr. Ashish Modi
Building Technologies, OYO as their Vice President and Region Head. Earlier in his career, he has spent seven years at
India, ASEAN, Korea Honeywell in various leadership roles including Vice President and Chief Operating Officer for
Honeywell Connected Plant in Houston; Global Vice President and General Manager for Advanced
Solutions business; and LSS business Leader for both APAC and India.
Non-Executive Director Mr. Pai is a Chartered Accountant and is Six Sigma Green Belt certified. His responsibilities include
and VP, Enterprise operationalizing Honeywell’s digital journey within the finance function to improve business results by
Mr. Atul Pai Controller Operations, leveraging contemporary tools and the power of data to provide insights. Mr. Pai was named Vice
Honeywell Global President and Enterprise Controller Operations of Honeywell Global Finance Center in January 2020.
Finance Center Over the past 25+ years, he has held multiple CFO roles in India and globally.
Ms. Saggi holds an MBA from International Centre of Public Enterprise, Ljubljana in Slovenia and a
master’s degree in English Literature from Delhi University. She joined the Indian Administrative Service
Independent Non- in 1980 and for 28 years she worked in the state of West Bengal, Ministry of Commerce, Ministry of
Ms. Neera Saggi
Executive Director Textile and Ministry of Shipping, Govt. of India. Besides other assignments Ms. Saggi was the Secretary
to Governor of West Bengal, District Magistrate, Hooghly in West Bengal, Dy. Chairperson of the
Jawaharlal Nehru Port Trust (JNPT) and Development Commissioner of Special Economic Zones.
November 30, 2021| 49

Company Snapshot
How we differ from consensus
Particular (Rs Mn) Equirus Consensus % Diff Comment
FY22E 32,253 34,071 -5%
Sales
FY23E 37,973 40,595 -6%
FY22E 5,627 6,582 -15% Our estimates are lower than
EBITDA
FY23E 7,344 8,450 -13% Consensus estimates
FY22E 4,431 5,196 -15%

PAT
FY23E 5,810 6,694 -13%
Key Assumptions
Rs Mn FY19A FY20A FY21A FY22E FY23E FY24E
Revenues 31,747 32,900 30,428 32,253 37,973 43,713
India 17,133 18,475 16,634 17,632 21,159 24,544
Rest of World 14,615 14,426 13,794 14,621 16,814 19,168
Growth (Yoy%) 18% 4% -8% 6% 18% 15%
India 14% 8% -10% 6% 20% 16%
Rest of World 22% -1% -4% 6% 15% 14%
Key Triggers
• Rapid adoption of automation & digitalisation solutions across industries post the pandemic
• Rising need for cyber security solutions with increasing digitization
• A broad-based revival in private capex investments and large Govt. infrastructure projects
Risks to Our View
• Any unfavourable change in Parent’s sourcing strategies i.e., higher competition from other
low-cost locations
• Intensifying competitive landscape in India due to lower global volumes for most peers having
international presence
Company Description
Honeywell Automation India Ltd, a Honeywell International Inc (USA) group company (incorporated as
Tata Process Controls Pvt Ltd in 1984), is a provider of (a) Industrial software applications (Honeywell
Connected Enterprise) (b) Automation and control projects/solutions (for fuel terminals, process plants,
commercial buildings, smart cities, gas and liquid pipelines etc.) and (c) industrial services such as
lifecycle services and technology migration services, industrial cyber security service etc. Company
maintains a leadership position in India in Building Management Systems with wide range of building
automation offerings, including healthy buildings and HVAC applications.
While it is not involved in R&D activities in India, it leverages its strong parentage to provide robust
offerings in the Indian market. It is the first automation and control solutions company in India to
receive double certifications of ISO 9001 and OHSAS 18001.
It derives ~55%/45% sales from domestic/overseas markets. Most overseas sales are to Parent/fellow
subsidiaries.
November 30, 2021| 50

Comparable Valuation – Industrials (Equirus Coverage Universe)

December Year Ending
Div
Mkt Cap Price Target P/E EV/EBITDA P/B RoE (%)
Company Reco CMP Yield
Rs Bn Target Date
CY20A CY21E CY22E CY20A CY21E CY22E CY20A CY21E CY22E CY20A CY21E CY22E CY20A
ABB India SHORT 1,863 395 1,570 Dec'22 229.9 96.0 70.4 135.3 64.6 47.6 10.9 10.0 9.0 5% 11% 13% 0.3%
ABB Power
SHORT 2,440 103 2,070 Dec'22 76.4 67.7 42.2 40.1 35.1 23.5 11.1 9.6 7.9 15% 15% 21% 0.1%
Products
Schaeffler
ADD 7,385 231 7,845 Dec'22 79.3 40.9 36.4 40.9 24.6 21.7 7.4 6.4 5.8 10% 17% 17% 0.5%
India
September Year Ending

Div
Rs Bn Target Date
FY20A FY21E FY22E FY20A FY21E FY22E FY20A FY21E FY22E FY20A FY21E FY22E FY20A
Siemens Ltd REDUCE 2,165 771 2,225 Mar'23 71.5 55.6 47.6 46.8 38.2 32.4 7.4 6.7 6.1 11% 13% 13% 0.4%
March Year Ending

Div
Rs Bn Target Date
FY21A FY22E FY23E FY21A FY22E FY23E FY21A FY22E FY23E FY21A FY22E FY23E FY21A
Bharat
LONG 372 68 440 Sep'22 26.5 14.1 10.9 15.3 9.1 6.5 2.5 2.3 2.0 10% 17% 20% 2.0%
Dynamics
Bharat
LONG 202 491 235 Dec'22 21.2 18.8 16.8 14.2 12.3 10.7 4.0 3.5 3.1 20% 20% 20% 2.0%
Electronics
Carborundum
ADD 836 159 875 Dec'22 43.3 37.2 32.3 27.4 23.3 20.0 6.5 5.7 5.0 16% 16% 17% 0.4%
Universal
Elgi
LONG 214 68 245 Dec'22 50.8 36.1 29.3 28.4 21.5 17.8 6.9 6.0 5.2 14% 18% 19% 0.4%
Equipments
Grindwell
LONG 1,110 123 1,230 Jun'22 44.8 37.7 32.4 31.3 26.0 22.3 8.1 7.3 6.5 19% 20% 21% 0.9%
Norton
Hindustan
LONG 1,292 432 1,595 Mar'23 12.2 12.3 9.7 8.7 8.2 6.4 2.4 2.1 1.8 21% 18% 20% 2.3%
Aeronautics
Honeywell
LONG 38,950 344 48,250 Mar'23 74.9 77.7 59.3 55.6 57.4 43.3 13.4 11.7 10.0 19% 16% 18% 0.2%
Automation
KEC
LONG 475 122 565 Dec'22 23.4 14.8 12.0 13.1 9.2 7.6 3.3 2.7 2.3 15% 20% 21% 0.8%
International
SKF India LONG 3,321 164 3,815 Dec'22 42.0 34.1 29.4 29.2 23.4 20.0 8.7 7.3 6.2 23% 23% 23% 0.4%
Sterlite
ADD 280 111 305 Dec'22 39.8 24.9 17.5 16.8 13.1 10.1 5.6 4.7 3.9 14% 20% 24% 0.7%
Technologies
Triveni Turbine SHORT 212 68 170 Dec'22 55.1 43.0 36.2 37.3 30.3 25.3 8.2 7.2 6.3 17% 18% 19% 0.6%
November 30, 2021| 51

Quarterly performance
Y/E Mar (Rs mn) 1QFY21A 2QFY21A 3QFY21A 4QFY21A 1QFY22A 2QFY22A 3QFY22E 4QFY22E
Revenue 7,362 7,597 8,742 6,727 6,832 7,372 8,916 9,133
COGS 3,609 3,769 4,608 3,323 3,262 3,908 4,637 4,749
Employee Cost 1,333 1,360 1,289 1,263 1,364 1,380 1,414 1,426
Other Expenses 1,141 1,025 970 850 1,039 1,011 1,204 1,233
EBITDA 1,279 1,443 1,876 1,292 1,167 1,074 1,662 1,725

Depreciation 116 114 127 130 130 131 137 137
EBIT 1,163 1,329 1,749 1,162 1,036 942 1,525 1,588
Interest Exp. 15 18 13 17 18 14 16 16
Other Income 174 144 285 237 218 210 240 240
Profit before Tax 1,323 1,455 2,020 1,383 1,236 1,138 1,749 1,812
Tax Expenses 342 374 521 342 321 286 441 457
Profit After Tax 981 1,081 1,499 1,040 915 852 1,308 1,356
Minority Interest 0 0 0 0 0 0 0 0
Profit/(Loss) from Associates 0 0 0 0 0 0 0 0
Recurring PAT 981 1,081 1,499 1,040 915 852 1,308 1,356
Exceptional Items 0 0 0 0 0 0 0 0
Reported PAT 981 1,081 1,499 1,040 915 852 1,308 1,356
Other comprehensive income. 0 0 0 0 0 0 0 0
PAT after comp. income. 981 1,081 1,499 1,040 915 852 1,308 1,356
FDEPS 110.9 122.2 169.5 117.6 103.5 96.4 148.0 153.3
Cost items as % of sales
RM expenses 49.0 49.6 52.7 49.4 47.7 53.0 52.0 52.0
Employee expenses 18.1 17.9 14.7 18.8 20.0 18.7 15.9 15.6
Other expenses 15.5 13.5 11.1 12.6 15.2 13.7 13.5 13.5
Margin (%)
Gross Margin 51.0 50.4 47.3 50.6 52.3 47.0 48.0 48.0
EBITDA Margin 17.4 19.0 21.5 19.2 17.1 14.6 18.6 18.9
PAT Margin 13.3 14.2 17.1 15.5 13.4 11.6 14.7 14.8
YoY Growth (%)
Sales (14.1) (8.2) (3.0) (4.5) (7.2) (3.0) 2.0 35.8
EBITDA (24.2) (4.1) (0.6) 0.3 (8.8) (25.6) (11.4) 33.6
EBIT (27.4) (6.3) (1.2) (0.5) (10.9) (29.1) (12.8) 36.7
PAT (14.0) (10.1) 3.6 (6.4) (6.7) (21.1) (12.7) 30.3
November 30, 2021| 52

Key Financials (Consolidated)

Income Statement
Y/E Mar (Rs mn) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Revenue 26,900 31,747 32,900 30,428 32,253 37,973 43,713
COGS 14,005 16,487 16,429 15,309 16,556 19,290 21,966
Employee Cost 4,584 5,398 5,548 5,244 5,584 6,212 6,978
Other Expenses 4,675 4,829 4,552 3,986 4,487 5,126 5,857
EBITDA 3,636 5,034 6,371 5,889 5,627 7,344 8,912

Depreciation 152 159 414 487 536 598 673
EBIT 3,484 4,875 5,958 5,403 5,092 6,746 8,239
Interest Exp. 3 35 69 62 65 59 59
Other Income 331 709 977 840 909 1,080 1,323
Profit before Tax 3,812 5,549 6,866 6,180 5,935 7,767 9,503
Tax Expenses 1,315 1,961 1,951 1,580 1,504 1,957 2,395
Profit After Tax 2,497 3,588 4,915 4,600 4,431 5,810 7,108
Minority Interest 0 0 0 0 0 0 0
Profit/(Loss) from Associates 0 0 0 0 0 0 0
Recurring PAT 2,497 3,588 4,915 4,600 4,431 5,810 7,108
Exceptional Items 0 0 0 0 0 0 0
Reported PAT 2,497 3,588 4,915 4,600 4,431 5,810 7,108
Other comprehensive income. 0 0 0 0 0 0 0
PAT after comp. income. 2,497 3,588 4,915 4,600 4,431 5,810 7,108
FDEPS 282.5 405.9 555.9 520.3 501.2 657.1 803.9
DPS 32 45 75 85 100 164 241
BVPS 1,605 1,976 2,464 2,917 3,333 3,890 4,529
YoY Growth (%) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Sales 11.6 18.0 3.6 (7.5) 6.0 17.7 15.1
EBITDA 27.2 38.4 26.6 (7.6) (4.4) 30.5 21.3
EBIT 29.3 39.9 22.2 (9.3) (5.8) 32.5 22.1
PAT 47.4 43.7 37.0 (6.4) (3.7) 31.1 22.3
Key Ratios
Profitability (%) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Gross Margin 47.9 48.1 50.1 49.7 48.7 49.2 49.8
EBITDA Margin 13.5 15.9 19.4 19.4 17.4 19.3 20.4
PAT Margin 9.3 11.3 14.9 15.1 13.7 15.3 16.3
ROE 19.2 22.7 25.0 19.3 16.0 18.2 19.1
ROIC 19.0 22.4 24.3 18.6 15.6 17.8 18.7
Core ROIC 43.6 58.7 63.1 47.6 43.0 59.8 72.8
Dividend Payout 11.3 11.1 13.5 16.3 20.0 25.0 30.0
CAGR (%) 1 year 2 years 3 years 5 years 7 years 10 years

Revenue (7.5) (2.1) 4.2 6.8 8.6 8.4
EBITDA (7.6) 8.2 17.4 22.0 25.7 15.2
PAT (6.4) 13.2 22.6 26.6 27.0 15.9
Valuation (x) FY21A FY22E FY23E FY24E

P/E 74.9 77.7 59.3 48.4
P/B 13.4 11.7 10.0 8.6
P/FCFF 108.6 88.0 65.5 64.6
EV/EBITDA 55.6 57.4 43.3 35.1
EV/Sales 10.8 10.0 8.4 7.2
Dividend Yield (%) 0.2 0.3 0.4 0.6
November 30, 2021| 53

Balance Sheet
Equity Capital 88 88 88 88 88 88 88
Reserves 14,098 17,386 21,694 25,700 29,380 34,303 39,959
Net Worth 14,187 17,475 21,783 25,789 29,468 34,392 40,047
Total Debt 0 0 809 739 548 548 548
Other long term liabilities 140 374 460 441 441 441 441
Minority Interest 0 0 0 0 0 0 0
Account Payables 7,708 8,310 9,262 10,967 9,985 10,404 11,976
Other Current Liabilities 2,284 2,747 2,260 1,590 2,253 2,653 3,054
Total Liabilities 24,319 28,906 34,575 39,525 42,695 48,437 56,065
Gross Fixed Assets 1,266 1,395 2,651 3,074 3,259 3,644 4,029
Acc. Depreciation (427) (543) (686) (908) (1,229) (1,612) (2,070)
Net Fixed Assets 839 852 1,964 2,166 2,030 2,032 1,959
Capital WIP 11 80 139 21 21 21 21
long term investments 0 0 0 0 0 0 0
Others 2,754 2,830 2,912 2,248 2,248 2,248 2,248
Inventory 798 1,051 1,209 954 1,149 1,352 1,557
Receivables 5,911 6,224 7,431 9,267 7,953 8,323 9,581
Loans and advances 3,994 4,333 4,742 5,871 6,451 6,034 6,946
Other current assets 820 1,291 1,039 1,029 1,060 1,248 1,437
Cash & Cash Equivalents. 9,192 12,245 15,139 17,969 21,783 27,177 32,316
Total Assets 24,319 28,906 34,575 39,525 42,695 48,437 56,065
Non-Cash WC 1,531 1,842 2,898 4,564 4,374 3,901 4,491
Cash Conv. Cycle (5.1) (11.7) (9.2) (8.2) (9.2) (7.7) (6.5)
WC Turnover 17.6 17.2 11.4 6.7 7.4 9.7 9.7
Gross Asset Turnover 21.2 22.8 12.4 9.9 9.9 10.4 10.8
Net Asset Turnover 31.6 34.1 15.6 13.9 15.7 18.5 22.1
Net D/E (0.6) (0.7) (0.7) (0.7) (0.7) (0.8) (0.8)
Days (x) FY18A FY19A FY20A FY21A FY22E FY23E FY24E

Receivable Days 74 70 76 100 97 78 75
Inventory Days 12 11 13 13 12 12 12
Payable Days 91 92 97 121 119 98 93
Non-cash WC days 21 21 32 55 50 38 38
Cash Flow
Profit Before Tax 3,812 5,549 6,866 6,180 5,935 7,767 9,503
Depreciation 152 159 414 487 536 598 673
Others (247) (809) (992) (364) (844) (1,021) (1,264)
Tax paid 1,602 2,113 2,018 1,103 1,504 1,957 2,395
Change in WC 513 302 (969) (1,556) 190 473 (590)
Operating Cashflow 2,629 3,088 3,300 3,644 4,313 5,860 5,928
Capex (188) (232) (591) (473) (400) (600) (600)
Change in Invest. (1,736) (4,654) (2,411) (3,151) 0 0 0
Others 182 458 736 593 909 1,080 1,323
Investing Cashflow (1,742) (4,428) (2,266) (3,031) 509 480 723
Change in Debt 0 0 (217) (233) (191) 0 0
Change in Equity 0 0 0 0 0 0 0
Others (106) (341) (479) (662) (817) (945) (1,512)
Financing Cashflow (106) (341) (695) (895) (1,008) (945) (1,512)
Net Change in Cash 781 (1,681) 339 (282) 3,814 5,394 5,139
November 30, 2021| 54

Rating & Coverage Definitions: Registered Office:

Absolute Rating Equirus Securities Private Limited
• LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion Unit No. A2102B, 21st Floor, A Wing, Marathon Futurex,
and ATR >= 20% for rest of the companies N M Joshi Marg, Lower Parel,
• ADD: ATR >= 5% but less than Ke over investment horizon Mumbai-400013.
• REDUCE: ATR >= negative 10% but <5% over investment horizon Tel. No: +91 – (0)22 – 4332 0600
• SHORT: ATR < negative 10% over investment horizon Fax No: +91- (0)22 – 4332 0601
Relative Rating
• OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon Corporate Office:
• BENCHMARK: likely to perform in line with the benchmark 3rd floor, House No. 9,
• UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,
Investment Horizon S.G. Highway Ahmedabad-380054
Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of Gujarat
a calendar quarter. Tel. No: +91 (0)79 - 6190 9550
Fax No: +91 (0)79 – 6190 9560
© 2021 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities
Private Limited
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I, Harshit Patel/Mayank Chaturvedi, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities.
I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures
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November 30, 2021| 55

Equirus Securities - Honeywell Automation - Initiating Coverage Note - 30.11.2021

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Equirus Securities - Honeywell Automation - Initiating Coverage Note - 30.11.2021

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Honeywell Automation

Ushering in an era of smart manufacturing

November 30, 2021

Harshit Patel (harshit.patel@equirus.com, +91-079 6190 9522)

Ushering in an era of smart manufacturing; Rs 38,950 Rs 48,250

Initiate with LONG Rating

Industrial Automation: An Overview

Source: BIS Research, Equirus Securities

Industry 4.0/IIoT – Key features, drivers

November 30, 2021| 2

Global Industrial Automation Industry

Operational Technology Information Technology

Exhibit 3: IIoT solutions – a harmonization between OT and IT

Source: Frost & Sullivan, Equirus Securities

November 30, 2021| 3

There are broadly 4 layers to any IIoT architecture:

(c) Manufacturing IT: Plant-level IT technologies – Manufacturing Execution System (MES),

(d) Enterprise platforms, digitalization: Company-level IT technologies – ERP Systems,

Enterprise Key Players: Siemens,

Key Players: Siemens,

Electrical LV/MV Measurement

Source: Rockwell Automation, Equirus Securities

Exhibit 5: Industrial Automation architecture: Break-up of components & systems

November 30, 2021| 4

Source: McKinsey, Equirus Securities

Market split: Type of automation, user industries

Source: Frost & Sullivan, Equirus Securities

November 30, 2021| 5

November 30, 2021| 6

Portfolio comparison of global leaders

• Green colour indicates a strong presence

November 30, 2021| 7

Digitalization: the top-most layer in the industrial automation pyramid

November 30, 2021| 8

Plantweb digital ecosystem is a scalable portfolio of standards-based hardware,

November 30, 2021| 9

Exhibit 12: Emerson Plantweb Exhibit 13: Honeywell Forge

Source: Company, Equirus Securities Source: Company, Equirus Securities

Exhibit 14: Siemens MindSphere Exhibit 15: Mitsubishi e-F@ctory

Source: Company, Equirus Securities Source: Company, Equirus Securities

Exhibit 16: ABB Ability Exhibit 17: Schneider EcoStruxure

Source: Company, Equirus Securities Source: Company, Equirus Securities

November 30, 2021| 10

November 30, 2021| 11

Year Acquisition Software Domain Description/Rationale

November 30, 2021| 12

Year Acquisition Software Domain Description/Rationale

November 30, 2021| 13

Year Acquisition Software Domain Description/Rationale

November 30, 2021| 14

Year Acquisition Software Domain Description/Rationale

vMonitor is a pioneer in Digital Oilfield implementation and remote operations worldwide.

November 30, 2021| 15

Year Acquisition Software Domain Description/Rationale

November 30, 2021| 16

November 30, 2021| 17

Year Key Partners Software Domain Description/Rationale

November 30, 2021| 18

Indian Industrial Automation Industry

a) There is still a huge import dependence in case of critical/main production machinery.

c) There is inadequate awareness on the cost-benefit of implementing fully automated solutions,

a) India’s manufacturing is set to gradually become more broad-based,

c) There is an increasing awareness among SMEs/MSMEs.