Motilal Oswal Financial Services

Sector Update | 6 December 2019

Capital Goods

Digitalization/Automation + Exports + margin expansion:

Strong tailwinds outweigh near term blip in order inflow

Order inflows/revenue growth to rebound sharply as economy recovers

Products & services business has

grown at 11% CAGR over FY15-

19 at an aggregate basis (INRb)



Aggregate exports have risen at

CAGR of 10% over FY15-18

(INRb)



Aggregate exports as % of sales

has been on rise



Attractive digitalization/automation opportunity:

The latest financial results of

ABB, Siemens and Honeywell (not rated) reflect a slowdown in the opex

spending-related businesses. Siemens’ order inflow declined 14% YoY in 4QFY19

(year ending September), while ABB’s order inflow growth decelerated to 5%

YoY in 3QCY19 from 23% in the previous quarter. We attribute this to the

economic slowdown, which has impacted the key end-markets of auto, food and

beverages. However, the medium-term opex-related opportunities appear

promising, given the faster adoption of such products & services and cost

savings led by preventive maintenance for end-market players. Given the short

cycle nature of such orders, inflows will bounce back sharply as the economy

recovers, in our view.

Beneficiaries of rising exports:

Over the past five years or so, revenue growth

has been supported by exports for multi-national engineering companies.

(a)

ABB delivered a CAGR of 9.5% in exports (15% of CY18 revenue)

versus 7.1% in

overall revenue. Importantly, this is primarily led by external exports (20%

CAGR) rather than to related party (4.4% CAGR).

(b) Siemens’ exports (21% of

FY18 revenue)

CAGR was at 7.7% over FY13-18 v/s 1.7% in overall revenue.

Again, exports growth was primarily led by external sales (10.7% CAGR) rather

than to related party (5.9% CAGR).

revenue)

CAGR was the highest at 17.6% over FY15-19 versus 6.8% in revenue.

With the new corporate tax rates in place, MNC engineering companies are well

placed to benefit from the increasing competitiveness of their Indian entities.

Scope of margin expansion, operating leverage to play out:

A comparison of

the segmental margins for the Indian entities versus their global parents

suggests ample room for margin expansion, despite taking into account the

royalty/technical fees. Revenue growth, coupled with margin expansion, is likely

to drive 20%+ earnings growth over the near-to-medium term.

Superior cash flow generation and strong balance sheet hard to ignore:

Despite the absence of capex cycle (in particular private capex), ABB, Siemens

and Honeywell have delivered strong earnings growth, led by margin expansion.

We like the strong cash flow generation potential of these businesses, along

with the superior strength of the balance sheets and strong cash balances (for

any potential inorganic opportunity). These engineering companies enjoy high

barrier to entry, better pricing power due to access to global technologies and

thus command high valuation premium.

Upgrading ABB to Buy; maintaining Buy on Siemens:

We upgrade ABB to Buy

with a TP of INR1,660. The pending demerger of the Power Grid business (likely

by Jun’20) has led to valuation correction. We maintain our

Buy

rating on

Siemens as well with a TP of INR1,705. That said, we prefer ABB over Siemens.

Honeywell is not rated.

Nilesh Bhaiya – Research Analyst

(Nilesh.Bhaiya@MotilalOswal.com); +91 22 6129 1556

Pratik Singh – Research Analyst

(Pratik.Singh@MotilalOswal.com) +91 22 6129 1543

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on

www.motilaloswal.com/Institutional-Equities,

Bloomberg, Thomson Reuters, Factset and S&P Capital.

Capital Goods | Update

Products & services driving revenue growth in absence of broad

capex cycle



Products & services maintains double-digit growth rate:

Over the past five

years, the products & services business for ABB, Siemens and Honeywell has

delivered a CAGR of 10-13%, offsetting the weakness in the projects business.

Products & services is expected to maintain this growth rate over the next 2-3

years.

Exhibit 2:

SIEM: Product/services CAGR of 10% over FY15-19

offsets muted growth in projects business

INR b

Product/System

YoY

15%

Exhibit 1:

SIEM: Revenue composition shifts from projects to

products/services business

Project

Product/System

52%

58%

61%

65%

67%

66%

68%

10%

11%

48%

42%

40%

35%

33%

34%

32%

Source: MOFSL, Company

Exhibit 3:

ABB: Ex-Power Grid business, ABB’s revenue CAGR

stands at 11% over CY15-19

INR b

30%

ABB (ex-PG) revenue

YoY

Exhibit 4:

Honeywell: Revenue of 13% CAGR over FY16-19

INR b

14%

10%

Honeywell revenue

YoY

18%

15%

-0%

15%

16%

Source: MOFSL, Company



Source: MOFSL, Company



Only Siemens may have large exposure to capex cycle:

Post the demerger of

the Power Grid business, ABB India will have ~93% of its business from products

& services. Honeywell is anyways largely a products & services business. Thus,

we believe that only Siemens will have a large proportion of the projects

business (primarily gas & power and mobility segments).

Changing business models – order inflows to be volatile given short cycle

nature:

With the declining proportion of the projects business, order inflow of

such engineering companies is likely to remain volatile given ups and downs of

the economic cycle. Volatility is likely to remain particularly high over the near

term, given the sharp slowdown in India’s economic growth. This in fact is

reflected in the sharp decline in order inflow/revenue growth in the latest

quarterly results. However, we believe that the rebound in order

inflows/revenue growth will be sharper as the economy recovers. Over the

medium-to-long term, strong growth in products & services will likely sustain, in

our view.

6 December 2019

Capital Goods | Update

Export-led growth evident across companies



Rising exports augur well for the sector:

Exports have picked up sharply over

the past three years and now contribute ~20% of aggregate revenue for the

three companies. Honeywell has the highest export content at 46% of sales as of

end-FY19. For ABB and Siemens, the contribution stands ~15% and ~20%,

respectively.

Exhibit 6:

Aggregate exports up to 20.4% of sales in FY18

from 15.3% in FY13

ABB India

Honeywell India

Siemens India

Aggregate exports

45.0

35.0

25.0

15.0

5.0

Exhibit 5:

Aggregate exports have been on the rise

INR b

Aggregate exports

YoY growth(%)

22.8

15.3

7.2

-8.2

0.9

7.1

-5.3

Source: MOFSL, Company; Note: Above data is aggregate of

Siemens, ABB and Honeywell normalized to same reporting period



Source: MOFSL, Company

Corporate tax cuts augur well for exports growth:

The recent corporate tax cuts

augur well for export growth for the Indian engineering companies, as the

parent companies can increase utilization of Indian factories over their other

factories. ABB India has communicated the use of Indian factories for exports to

Bangladesh post the corporate tax cuts; it will likely increase exports to other

countries as well.

Export growth led by external sales rather than just to related parties:

MNCs

can procure products & services from Indian entities and supply to end

customer themselves or they can utilize Indian factories directly for customer

needs. Our analysis of exports trends and related-party transactions suggests

that exports growth is primarily led by external sales rather than to related

parties. This augurs well for the future of Indian entities as it lays the path for

using India as a manufacturing hub for global engineering companies, in our

view.



6 December 2019

Capital Goods | Update

Exhibit 7:

SIEM: Exports have been on the rise over last two

years

Total exports (INR b)

17.1

16.4

21.3

-4

26.6

YoY (%)

Exhibit 8:

SIEM: Exports as % of sales reached 21% by end-

FY18

Exports as a % of sales

18.8

15.6

15.8

14.6

20.9

-0

-7

Source: MOFSL, Company

Exhibit 9:

Siemens’ exports to related party have been

muted over past four years…

Exports to related party (INR b)

-6

-26

YoY (%)

Exhibit 10:

…however, exports to external party have

jumped sharply over last two years

Exports to external party (INR b)

YoY (%)

135

-43

-36

Source: MOFSL, Company

Exhibit 11:

ABB India exports CAGR of 6% over CY15-19

Total exports (INR b)

YoY (%)

Exhibit 12:

ABB India exports as % of sales up to 15% after a

blip in CY15

Exports as a % of sales

16.0

15.2

10.8

15.0

13.8

-10

-29

Source: MOFSL, Company

6 December 2019

Capital Goods | Update

Exhibit 13:

ABB India exports to related party

Exports to related party (INR b)

YoY (%)

Exhibit 14:

ABB India exports to external party

Exports to external party (INR b)

357

YoY (%)

-3

-2

-72

-33

Source: MOFSL, Company

Exhibit 15:

Honeywell India exports CAGR of 17.6% over

FY15-19 – the best amongst three companies

Total exports (INR b)

YoY (%)

Exhibit 16:

Honeywell India’s share of exports in total sales

has steadily risen to 46% in FY19

Exports as a % of sales

42.9

44.5

46.0

31.2

34.7

Source: MOFSL, Company

6 December 2019

Capital Goods | Update

Margins of Indian entities quite low compared to global parents



Indian entities make lower margins as services business is yet to scale up:

performed a comparative analysis of Indian entities with their corresponding

global parents. It suggests that in the growth businesses led by digitalization and

automation, the Indian entities make quite low margins compared to parent

company. This is because economies of scale are yet to kick in due to the

nascent stage of the services business in India. We note that the Indian entities

have been delivering margin expansion along with revenue growth in these

segments. We expect the trend to continue over the next 2-3 years.

Exhibit 17:

SIEM: Ample scope of margin improvement (%)

Segment

Gas & Power

Smart Infrastructure

Mobility

Digital Industries

FY18

13.7%

9.3%

10.1%

6.1%

FY21E

13.5%

10.3%

10.1%

7.1%

Global margin

8-12%

10-15%

9-12%

17-23%

Comment



In-line



Scope for margin improvement



Scope for margin improvement



Scope for margin improvement

Source: MOFSL, Company

Exhibit 18:

ABB India: Ample scope of margin improvement (%)

Segment

Electrification products

Industrial automation

Robotics and motion

CY19E

9.3%

10.0%

9.5%

CY21E

10.1%

10.3%

Global margin

(CY18)

13.9%

13.8%

15.8%

Comment



Scope for margin improvement

Source: MOFSL, Company

Exhibit 19:

Global segment margin for Honeywell Int.

Honeywell Int. operating margin (%)

17.7

14.2

15.1

17.0

15.6

16.0

Exhibit 20:

EBIT margin of Honeywell India

Honeywell India EBIT margin (%)

15.4

9.3

11.2

13.0

6.1

8.1

Source: MOFSL, Company



Expect Indian entities to make lower margins than parent companies owing to

royalty/technical fees:

While there is ample room for margin expansion given

the margin differential between the parent and Indian entities, we do consider

the royalty/technical fee as a factor for the same. Thus, to the extent of such

fees, the Indian entities are expected to have lower margins compared to their

parent companies. Among the three companies, only ABB India has a defined

royalty and technical policy in place. We believe that Siemens has a very low

royalty payout (~1%) and thus it is not disclosed separately. Note that according

to the regulations, the listed companies are required to obtain approval from

the ‘majority of minority’ shareholders if the payment toward royalty & license

fee exceeds 2% of consolidated revenue of the listed company.

6 December 2019

Capital Goods | Update



ABB India:

According to the latest policy of ABB India, royalty and technical

fee to parent has a cap at 4.2% of the total turnover of the company. In

CY18, royalty payments from ABB India stood at 3.2% of sales.

Exhibit 21:

ABB’s royalty and technical fees trend

Royalty and technical fees (INR b)

3.5

3.1

2.8

as % of sales

3.2

2.7

2.1

2.2

2.5

3.1

2.9

3.5

Source: MOFSL, Company

6 December 2019

Capital Goods | Update

Superior balance sheet led by strong cash flow generation



Net cash balance sheet provides comfort:

We derive comfort from the net cash

balance sheet positions of engineering companies. With growth being driven by

the products & services business, the balance sheets of these companies will

continue strengthening further.

RoEs depressed owning to excess cash on balance sheet:

One key argument

against the companies like Siemens and ABB is their low RoEs. However, we

note that the reason of low RoEs is excess cash on their balance sheets.

Companies have preferred higher cash balance for inorganic growth

opportunities in niche technologies. However, these companies are yet to make

any meaningful acquisitions.

Working capital cycle improving:

Siemens, ABB and Honeywell have witnessed

an improvement in the working capital cycle over the past few years. We expect

these companies to be prudent in working capital management.

Exhibit 23:

SIEM: Net D/E position expected to improve

further owing to strong cash generation

Net D/E

(0.4)

(0.5)

(0.6)

Exhibit 22:

SIEM: Working capital days expected to stabilize

at 70 days from FY20

Net Working capital days

Source: MOFSL, Company

Exhibit 24:

ABB India: Working capital days to be lower

compared to historical levels post demerger of Power Grid

business

Net working capital days

Exhibit 25:

ABB India: Net D/E expected to improve further

with ABB India remaining a net cash company

Net D/E

0.0

(0.2)

(0.4)

(0.5)

Source: MOFSL, Company

6 December 2019

Capital Goods | Update

Exhibit 26:

Honeywell India: Working capital days have

improved significantly from FY16

Net working capital days

Exhibit 27:

Honeywell India: Net D/E has further improved

owing to strong cash generation

Net D/E

(0.2)

(0.4)

(0.5)

(0.6)

(0.7)

Source: MOFSL, Company

6 December 2019

Capital Goods | Update

Maintaining Buy on Siemens; upgrading ABB to Buy

We upgrade ABB to Buy with a target price of INR1,660. Pending demerger of Power

Grid business (likely by Jun’20) has led to valuation correction. Separately, we

maintain our Buy rating on Siemens with a target price of INR1,705.

Exhibit 28:

Valuation summary - Capital Goods

Company

Mkt Cap

name

(INR b)

ABB

306

Siemens

525

Honeywell

232

Mkt Cap weighted average

CMP

(INR)

1,443

1,475

26,240

Rating

Buy

FY19

56.4

53.0

64.6

PE (x)

FY20E

45.7

41.8

47.3

FY21E

37.8

34.8

40.8

FY19

13.1

11.4

20.5

56.5

44.1

37.0

13.9

RoE (%)

FY20E

14.2

13.0

22.3

15.4

FY21E

15.0

14.1

21.0

15.9

FY19

-0.4

-0.5

-0.7

-0.5

Net D/E

FY20E

-0.4

-0.6

-0.8

-0.6

FY21E

-0.4

-0.6

-0.8

-0.6

Source: MOFSL, Company; Note: Since all the three companies have different reporting period, we have normalized their ratios for easier

comparison purpose

Exhibit 29:

Siemens trades at 1Y P/E multiple of ~40x v/s

long-term average of ~50x

90.0

70.0

50.0

30.0

10.0

25.7

49.5

35.0

P/E (x)

Min (x)

Avg (x)

+1SD

84.4

64.0

40.0

Max (x)

-1SD

Exhibit 30:

ABB trades at 1Y fwd P/E multiple of ~42x v/s

long-term average of ~65x

P/E (x)

Min (x)

Avg (x)

+1SD

115.0

95.0

75.0

55.0

35.0

15.0

65.5

50.7

41.0

80.3

Max (x)

-1SD

108.2

42.2

Source: MOFSL, Company

6 December 2019

Capital Goods | Update

Siemens

BSE SENSEX

40,794

S&P CNX

12,056

CMP: INR1,475

TP: INR1,705 (+16%)

Buy

Margin expansion-led earnings growth

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

SIEM IN

356

523.6 / 7.3

1717 / 902

-13/13/47

740

25.0



Financials Snapshot (INR b)

Y/E SEP

2019 2020E 2021E

136.8 147.9 165.7

Net Sales

14.8

17.0

19.1

EBITDA

10.9

14.2

16.0

PAT

30.5

40.0

44.9

EPS (INR)

21.6

31.0

12.2

Gr. (%)

254.0 284.4 318.5

BV/Sh (INR)

12.0

14.1

RoE (%)

12.4

14.5

RoCE (%)

48.3

36.9

32.9

P/E (x)

5.8

5.2

4.6

P/BV (x)

Shareholding pattern (%)

As On

Sep-19 Jun-19 Sep-18

Promoter

75.0

DII

11.9

11.8

9.6

FII

2.2

2.1

4.6

Others

10.9

11.1

10.8

FII Includes depository receipts

Stock Performance (1-year)

1,750

1,500

1,250

1,000

750

ABB

Sensex - Rebased



Multiple growth levers across industry segments:

The strong focus on

products & services has helped Siemens to mitigate the slowdown in industrial

capex, as it has been able to capitalize on opex-related spending. We expect

the trend to continue, driving strong growth for its products business. Any

revival in capex spending can further strengthen its revenue trajectory (not a

base-case scenario for us and consensus).

Revenue CAGR (excl. Gas & Power) estimated at 14% over FY19-22 (year

ending September):

We expect overall revenue growth to be driven by Smart

Infrastructure and Digital Industries. However, the gas & power division (37%

of revenue) is expected to be muted as the HVDC order is approaching

completion and the outlook remains weak on power capex. Thus, we expect

overall revenue CAGR of ~10% over FY19-21 but a pick up thereafter.

Margin expansion – a key driver of earnings:

We expect the EBIT margin to

expand from 9.2% in FY19 to 10.1% in FY21, as the share of the products &

services business increases further. We note that SIEM has steadily expanded

its EBIT margin from 4.7% in FY14 to 9.2% in FY19. This is attributable to (a)

the rising share of the products & services business, (b) the completion of loss-

making/low-margin projects and (c) export incentives in the services business

in the gas & power segment. A comparison of the segmental margins with the

parent company suggests a further scope of margin expansion in products &

services.

Look beyond near-term business weakness:

The recent weakness in new

order inflows (down 14% YoY in 4QFY19) has cast some doubt over an

otherwise strong structural story. We attribute this to the likely decline in the

end market of the auto industry (where Siemens has high exposure) and

slowing growth momentum in the F&B industry. Also, management let go of

certain large-ticket size orders, especially in the mobility segment, on account

of intense competition. Our revenue forecasts adequately capture the recent

weakness in the ordering environment. However, we remain positive from the

medium- to long-term perspective as we expect the company to be a key

beneficiary of Industry 4.0 and the recent cut in the corporate tax rates.

Maintain Buy with TP of INR1,705:

We assign a TP of INR1,705 to the stock

based on a target P/E multiple of 38x on Sep’21E EPS. We forecast earnings

CAGR of 19.4% over FY19-22. Maintain

Buy.

6 December 2019

Capital Goods | Update

Story in charts

Exhibit 31:

Revenue break-up (FY19) according to new

segmentation

Portfolio of

companies

Others

Gas and

Power

36%

13%

Exhibit 32:

Revenue CAGR assumption across segments

FY19-22E CAGR

15%

13%

Digital

Industries

19%

11%

Mobility

Smart

Infrastructu

27%

Source: MOFSL, Company

Exhibit 33:

We forecast revenue CAGR of 11% over FY19-22

Total Revenue (INR b)

12%

112

113

127

137

148

166

187

Growth YoY (%)

12%

13%

Exhibit 34:

EBIT and EBIT margin trend

INR b

7.2%

7.1%

Total EBIT

8.8%

EBIT margin

9.2%

10.0% 10.1% 10.3%

7.5%

-1%

105

7.6

7.9

8.5

11.2

12.6

14.7

16.8

19.3

Source: MOFSL, Company

Exhibit 35:

We forecast earnings CAGR of 19.4% over FY19-

22, aided by tax rate cuts.

Adj. PAT (INR b)

27%

22%

11%

12%

16%

31%

YoY

Exhibit 36:

Siemens enjoys net cash balance sheet

Net D/E

(0.5)

(0.4)

(0.5)

(0.6)

Source: MOFSL, Company

6 December 2019

Capital Goods | Update

Exhibit 37:

We assign TP of INR1,705 (target multiple of 38x Sep’21 EPS)

Valuation

Core business

Total

Basis

Sep'21 PE

Multiple

38.0

Sep'21 EPS

44.9

Value/share

1,705

Source: MOFSL, Company

Exhibit 38:

Siemens trades at 1Y fwd P/E multiple of ~40x v/s long-term average of ~50x

P/E (x)

90.0

70.0

50.0

30.0

10.0

25.7

49.5

35.0

64.0

Avg (x)

Max (x)

Min (x)

+1SD

84.4

-1SD

40.0

Source: MOFSL

6 December 2019

Capital Goods | Update

Financials and Valuations

Income Statement (Standalone)

Y/E September

Total Revenues

Change (%)

EBITDA

Change (%)

% of Total Rev.

Depreciation

Interest

Other Income

EO Items (net)

PBT

Tax

Rate (%)

PAT

Adjusted PAT

Change (%)

Balance Sheet (Standalone)

Y/E September

Share Capital

Reserves

Net Worth

Loans

Net Deferred Tax Liab

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Current assets

Current Liab. & Prov.

Creditors

Other Liabilities

Provisions

Net Current Assets

Application of Funds

E: MOFSL Estimates

2017

1,10,148

1.9

10,512

9.5

1,967

2,547

4,301

15,317

3,982

26.0

11,335

7,034

10.9

2018

1,27,251

15.5

13,161

10.3

1,967

2,800

13,912

4,973

35.7

8,939

27.1

2019

1,36,838

7.5

14,757

10.8

2,173

114

3,946

16,416

5,547

33.8

10,869

21.6

2020E

1,47,927

8.1

16,999

11.5

2,259

114

4,402

19,029

4,790

25.2

14,239

31.0

2021E

1,65,671

12.0

19,122

11.5

2,368

114

4,710

21,350

5,374

25.2

15,976

12.2

(INR Million)

2022E

1,87,334

13.1

21,786

11.6

2,477

114

5,521

24,715

6,221

25.2

18,494

15.8

(INR Million)

2022E

712

1,26,744

1,27,456

-2,410

1,25,046

23,137

15,337

7,800

583

550

2,00,537

14,991

53,066

80,414

11,654

40,412

84,425

45,050

23,308

16,067

1,16,113

1,25,046

2017

712

76,335

77,047

-2,442

74,605

17,502

4,158

13,344

1,430

550

1,13,465

10,165

34,725

40,713

6,216

21,646

54,184

26,556

17,377

10,251

59,281

74,605

2018

712

82,342

83,054

-2,665

80,389

19,574

6,060

13,514

624

550

1,25,139

11,389

37,250

36,457

8,733

31,310

59,438

30,303

18,123

11,012

65,701

80,389

2019

712

89,724

90,436

-2,410

88,026

20,137

8,233

11,904

583

550

1,36,657

10,950

38,762

48,913

8,513

29,519

61,668

32,907

17,025

11,736

74,989

88,026

2020E

712

1,00,546

1,01,258

-2,410

98,848

21,137

10,492

10,645

583

550

1,53,735

11,837

41,903

58,880

9,203

31,911

66,665

35,574

18,405

12,687

87,069

98,848

2021E

712

1,12,688

1,13,400

-2,410

1,10,990

22,137

12,859

9,278

583

550

1,75,242

13,257

46,929

69,009

10,307

35,739

74,662

39,841

20,612

14,209

1,00,580

1,10,990

6 December 2019

Capital Goods | Update

Financials and Valuations

Ratios

Y/E September

Basic (INR)

EPS

Growth (%)

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation (x)

P/E (Standalone)

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Profitability Ratios (%)

EBITDA Margin

Net Margin

RoE

RoCE

RoIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors. (Days)

Asset Turnover (x)

Leverage Ratio

Net Debt/Equity (x)

Cash Flow Statement

Y/E September

PBT before EO Items

Add : Depreciation

Interest

Less: Directtaxespaid

(Inc)/Dec in WC

CF from Operations

EO Income

CF from oper. Incl. EOitems

(Inc)/dec in FA

Free Cash Flow

(Pur)/Sale of Investments

CF from Investments

(Inc)/Dec in Networth

Inc/(Dec) in Debt

Less : Interest Paid

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Bal.

Closing Balance

E: MOFSL Estimates

2017

19.8

10.9

25.3

216.4

7.0

20.0

49.9

39.0

29.5

2.8

4.6

0.7

9.5

6.4

9.1

11.0

23.3

115

1.5

(0.5)

2018

25.1

27.1

30.6

233.3

7.0

20.0

39.3

32.2

23.9

2.5

4.2

0.7

10.3

7.0

10.8

11.2

20.8

107

1.6

(0.4)

2019

30.5

21.6

36.6

254.0

7.0

20.0

48.3

40.3

32.3

3.5

5.8

0.5

10.8

7.9

12.0

12.4

27.7

103

1.6

(0.5)

2020E

40.0

31.0

46.3

284.4

8.0

20.0

36.9

31.8

27.4

3.2

5.2

0.5

11.5

9.6

14.1

14.5

36.5

103

1.5

(0.6)

2021E

44.9

12.2

51.5

318.5

9.0

20.0

32.9

28.6

23.9

2.8

4.6

0.6

11.5

9.6

14.1

14.5

40.3

103

1.5

(0.6)

2022E

51.9

15.8

58.9

358.0

10.4

20.0

28.4

25.0

20.4

2.4

4.1

0.7

11.6

9.9

14.5

14.9

44.6

103

1.5

(0.6)

(INR Million)

2022E

24,715

2,477

114

-6,221

-4,128

16,957

-1,000

15,957

-1,000

114

4,439

-4,553

11,405

69,009

80,414

2017

11,016

1,967

3,982

-3,200

5,801

5,205

11,006

-2,863

8,143

-0

-2,863

496

2,990

-2,572

5,571

35,094

40,713

2018

13,912

1,967

4,973

-10,676

230

-1,554

-1,324

-1,554

2,990

-2,986

-4,310

40,713

36,457

2019

16,416

2,173

114

-6,130

4,452

17,025

-1,338

15,687

-336

15,351

235

-101

108

3,005

-3,113

12,473

36,457

48,913

2020E

19,029

2,259

114

-4,790

-2,113

14,499

-1,000

13,499

-1,000

114

3,417

-3,531

9,967

48,913

58,880

2021E

21,350

2,368

114

-5,374

-3,381

15,077

-1,000

14,077

-1,000

114

3,834

-3,948

10,129

58,880

69,009

6 December 2019

Capital Goods | Update

ABB

BSE SENSEX

40,794

S&P CNX

12,056

CMP: INR1,443

TP: INR1,660(+15%)

Upgrade to Buy

Demerger overhang provides entry point



Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

ABB IN

212

306.4 / 4.3

1669 / 1210

-2/-11/-8

178

25.0



Financials Snapshot (INR b)

Y/E DEC

2019E 2020E 2021E

Net Sales

75.1

86.2 100.1

EBITDA

6.3

7.7

9.5

PAT

4.1

5.5

6.9

EPS (INR)

19.3

25.8

32.4

Gr. (%)

61.2

33.7

25.4

BV/Sh (INR)

214.4 244.6 280.5

RoE (%)

14.0

14.9

15.5

RoCE (%)

15.0

15.8

16.4

P/E (x)

74.9

56.0

44.7

P/BV (x)

6.8

5.9

5.2

Shareholding pattern (%)

Sep-19 Jun-19 Sep-18

As On

Promoter

75.0

DII

12.2

12.7

13.5

FII

3.4

3.5

3.2

Others

9.4

8.9

8.3

FII Includes depository receipts

Stock Performance (1-year)

1,700

1,550

1,400

1,250

1,100

ABB

Sensex - Rebased



Post demerger, the residual business will be pure play on Industry 4.0:

Post

the pending demerger of Power Grid business, ABB India’s business will be

largely products & services oriented with projects forming 7-8% of revenue.

This makes it a pure play on the digitalization and automation theme. After

coming in at 13% over CY15-18, residual business revenue CAGR is estimated at

14% over CY18-21.

Order inflows may be volatile due to short cycle nature of business:

Given the

high component of products & services, the residual business will be short

cycle in nature. Thus, order inflows may be volatile over the near term,

especially given ups and downs of the economic cycle. For example, order

inflows increased at just 5% YoY in 3QCY19 v/s 23% YoY in the preceding

quarter. While the sharp slowdown in order inflow momentum may be

attributed to the current economic slowdown, we believe that order inflows

will bounce back sharply as the economy recovers.

Not just a capex play, beneficiary of consumption-led growth as well:

Historically, ABB has been a key beneficiary of the capex cycle. However, over

the past few years, it has been realigning its business model toward the

changing realities of industrialization. Thus, from primary a power sector

dependent company, ABB India today caters to end markets across industries.

Thus, we believe that the sensitivity of earnings to capex spending has reduced

drastically. ABB is a beneficiary of consumption revival as well, especially in the

end markets of auto, food and beverages.

Expect strong earnings momentum to continue:

Over FY13-18, ABB delivered

an adj. PAT CAGR of ~20%. In 9MCY19, it delivered reported PAT growth of 22%

YoY. However, in the continued business, the growth rate stands at 89.2%. We

forecast residual business CAGR of 29.5% over CY19-21. Including the Power

Grid business, the earnings CAGR stands at 22.9%.

Upgrading to Buy with a TP of INR1,660.

ABB’s stock has rallied just 10% YTD

v/s 40% for Siemens and 13% for Nifty 50 Index. We attribute this

underperformance to the pending demerger of the Power Grid business (likely

by Jun’20). ABB, along with Siemens, is one of the biggest beneficiaries of the

corporate tax cut and also the likely beneficiary of the boost in the

manufacturing sector in India. Exports as a percentage of revenue stand at

~15% and have grown 91% in 9MCY19 (CY18: 31%). We continue valuing its

discontinued T&D business at a target multiple of 25x and current core

business at 45x. However, we roll over our TP to Sep’21E EPS from Mar’21E.

Thus, our TP increases to INR1,660. We

upgrade ABB to Buy

from Neutral.

6 December 2019

Capital Goods | Update

Story in charts

Exhibit 39:

Revenue break-up (excl. PG)

Industrial

Automation

, 23

Exhibit 40:

Revenue CAGR assumption in continued business

Revenue CAGR (CY18-CY21E)

17.0

Robotics &

Motion, 37

14.3

14.4

Electrificati

Products,

Source: MOFSL, Company

Exhibit 41:

We forecast revenue CAGR of 14.4% in continued

business over CY18-21

Revenue (ex-PG)

41.6

23.1

7.5

46.1

49.5

60.9

9.8

12.3

14.8

YoY (%)

Exhibit 42:

EBITDA and EBITDA margin in continued

business; note that EBITDA margin for 9MCY19 has already

expanded 220bp YoY

EBITDA (INR b)

8.4

6.8

9.5

EBITDA (%)

8.9

9.5

16.1

6.3

7.7

(1.0) 1.4

32.1

32.5

66.9

75.1

86.2 100.1

4.1

4.6

Source: MOFSL, Company

Exhibit 43:

Expect adj. PAT (excl. PG) CAGR of 39.3% over

CY18-21 (9MCY19: 89.2%)

Adj. PAT (ex-PG) (INR b)

61.2

33.7

12.7

2.3

2.5

4.1

5.5

6.9

YoY (%)

Exhibit 44:

Expect adj. PAT (incl. PG) CAGR of 21.8% over

CY18-21 v/s 17% over CY14-18 as tax cuts help boost

earnings

35.0

22.8

Adj. PAT (INR b)

YoY (%)

24.3

21.6

16.4

8.1

21.5

19.8

25.4

2.7

3.3

3.9

4.2

5.1

6.3

7.7

9.2

Source: MOFSL, Company

6 December 2019

Capital Goods | Update

Exhibit 45:

We value ABB at INR1,660/sh

Valuation

ABB (ex-PG)

Total

Basis

Sep'21 PE

PE Multiple

45.0

25.0

39.7

Dec'20

EPS

25.8

10.6

36.4

Dec'21

EPS

32.4

11.2

43.6

Sep'21

EPS

30.8

11.0

41.8

Value/

1,384

276

1,660

Source: MOFSL, Company

Exhibit 46:

ABB trades at 1Y fwd P/E multiple of ~42x v/s long-term average of ~65x

P/E (x)

115.0

95.0

75.0

55.0

35.0

15.0

65.5

50.7

41.0

42.2

80.3

Avg (x)

Max (x)

Min (x)

+1SD

108.2

-1SD

Source: MOFSL

6 December 2019

Capital Goods | Update

Financials and Valuations

Income Statement

Y/E December

Net Sales

Change (%)

EBITDA

% of Net Sales

Depreciation

Interest

Other Income

Extra-ordinary Items (net)

PBT

Tax

Rate (%)

PAT (incl. PG)

Adjusted PAT

Change (%)

2016

86,422

6.2

7,085

8.2

1,510

919

1,216

-140

5,733

1,988

34.7

3,745

3,885

16.4

2017

60,937

-29.5

4,146

6.8

1,012

572

777

1,945

5,284

1,084

20.5

4,200

2,255

-41.9

2018

66,901

9.8

4,578

6.8

928

539

840

2,567

6,518

1,410

21.6

5,109

2,542

12.7

2019E

75,099

12.3

6,333

8.4

930

200

738

2,253

8,194

1,845

22.5

6,349

4,096

61.2

2020E

86,223

14.8

7,682

8.9

1,008

200

843

2,239

9,556

1,842

19.3

7,714

5,475

33.7

(INR Million)

2021E

1,00,133

16.1

9,471

9.5

1,086

200

988

2,375

11,549

2,309

20.0

9,240

6,865

25.4

Balance Sheet

Y/E December

Share Capital

Reserves

Net Worth

Loans

Net Deffered Tax Liability

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other current Assets

Current Liab. & Prov.

Creditors

Other Liabilities

Provisions

Net Current Assets

Application of Funds

E: MOFSL Estimates

2016

424

32,443

32,867

6,000

-1,304

37,564

14,059

1,510

12,549

678

163

62,618

9,403

29,707

11,892

413

11,204

38,445

21,573

13,326

3,546

24,174

37,564

2017

424

35,645

36,069

-1,173

34,937

15,251

3,064

12,187

1,165

2,706

71,650

11,536

27,641

14,917

462

17,095

52,770

27,131

22,067

3,572

18,880

34,938

2018

424

39,649

40,073

-1,150

38,944

11,419

2,488

8,931

831

58,628

9,279

16,869

14,751

263

17,468

29,448

18,745

8,046

2,657

29,180

38,944

2019E

424

45,015

45,439

-1,150

44,310

12,419

3,418

9,002

831

67,532

10,415

18,936

16,858

295

21,028

33,056

21,042

9,032

2,982

34,476

44,310

2020E

424

51,415

51,839

-1,150

50,710

13,419

4,425

8,994

831

78,837

11,958

21,741

19,758

338

25,041

37,953

24,159

10,370

3,424

40,884

50,710

(INR Million)

2021E

424

59,008

59,431

-1,150

58,302

14,419

5,511

8,908

831

92,637

13,887

25,248

23,473

393

29,636

44,076

28,056

12,043

3,976

48,561

58,302

6 December 2019

Capital Goods | Update

Financials and Valuations

Ratios

Y/E December

Basic (INR)

EPS

Growth

Cash EPS

Book Value

DPS

Payout (incl. Div.Tax)

Valuation (x)

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

RoIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors. (Days)

Asset Turnover (x)

Leverage Ratio

Net Debt/Equity (x)

Cash Flow Statement

Y/E December

PBT before EO Items

Add : Depreciation

Interest

Less : Direct taxes paid

(Inc)/Dec in WC

CF from operations

EO Income

CF from Oper. incl. EO Items

(Inc)/Dec in FA

Free Cah Flow

(Pur)/Sale of Investments

CF from investments

(Inc)/Dec in Net Worth

(Inc)/Dec in Debt

Less : Interest Paid

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

E: MOFSL Estimates

2016

18.3

16.4

25.5

155.1

4.0

21.8

78.9

56.8

42.4

3.5

9.3

0.3

11.8

12.0

14.9

125

2.3

-0.2

2017

10.6

-41.9

15.4

170.2

4.4

41.3

136.0

93.8

70.4

4.8

8.5

0.3

11.6

11.5

17.6

166

163

1.7

-0.4

2018

12.0

12.7

16.4

189.1

4.8

40.0

120.6

88.4

63.8

4.4

7.7

0.3

12.7

14.4

21.3

102

1.7

-0.4

2019E

19.3

61.2

23.7

214.4

3.9

20.0

74.9

61.0

45.8

3.9

6.7

0.3

14.0

15.0

24.9

102

1.7

-0.4

2020E

25.8

33.7

30.6

244.6

5.2

20.0

56.0

47.3

37.3

3.3

5.9

0.4

14.9

15.8

26.2

102

1.7

-0.4

2021E

32.4

25.4

37.5

280.5

6.5

20.0

44.7

38.6

29.9

2.8

5.2

0.4

15.5

16.4

27.6

102

1.7

-0.4

(INR Million)

2021E

9,174

1,086

200

2,309

-1,587

6,563

-1,000

5,563

-1,000

-200

-1,648

-1,848

3,715

19,758

23,473

2016

5,873

1,712

200

1,988

3,986

9,381

9,262

-1,254

8,127

-1,989

-371

200

985

-2,929

6,155

5,736

11,892

2017

3,339

1,859

100

1,084

8,319

11,586

9,507

-1,137

10,450

-2,543

-1,939

-297

100

953

-3,714

4,894

11,892

14,917

2018

3,951

2,003

1,410

-3,671

-202

10,246

2,662

2,460

2,705

-1,891

116

-237

1,221

-4,840

9,454

14,917

14,751

2019E

5,941

930

200

1,845

-935

4,291

-1,000

3,291

-1,000

-200

-983

-1,183

2,107

14,751

16,858

2020E

7,317

1,008

200

1,842

-1,270

5,414

-1,000

4,414

-1,000

-200

-1,314

-1,514

2,899

16,858

19,758

6 December 2019

Capital Goods | Update

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are

available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a

registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and

National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National

Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance

Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of associate entities of Motilal Oswal Financial Services Limited are

available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and

buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other

compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report

should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific

merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the

website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental

research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated

from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong

Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst

Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of

research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity

to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under

applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers

Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any

brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is

intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as

"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which

this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration

provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange

Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-

dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public

appearances and trading securities held by a research analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and

Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL

in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,

of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the

SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and

inform MOCMSPL.

Specific Disclosures

1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOSL has not received any compensation or other benefits from third party in connection with the research report

10 MOSL has not engaged in market making activity for the subject company

6 December 2019

Capital Goods | Update

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The associates of MOFSL may have:

- financial interest in the subject company

- actual/beneficial ownership of 1% or more securities in the subject company

- received compensation/other benefits from the subject company in the past 12 months

- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in

nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing

in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this

document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this

document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views

expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade

securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or

entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in

all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost

revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its

affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such

misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,

expenses that may be suffered by the person

accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;

Website

www.motilaloswal.com.CIN

no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,

Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is

a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.

Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.

Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance

Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench.

6 December 2019