Factor RONW ROA debt/equity Fixed assest T.O W cap T.O Inv T.

O Recievables TO current ratio Total asset T.O Investment + cash Sales Salesgr NPM OPM ( PBDIT/Sales) NP gr RM Cost %of sales

2002 8.0%

2003

2004

screen 2005 2006 2007 2008 2009 2010 2011 2012

2013

9.0% 11.0% 11.0% ### ### ### ### ### ### ### 28.5% 3.6% 5.8% 5.7% 7.3% ### 7.8% ### ### ### ### 22.0% 1.3 2.2 8.4 15.4 8.5 1.78 1.77 1.0 2.8 10.0 14.2 10.0 1.70 2.21 1.2 2.8 6.9 11.0 9.2 2.09 1.97 1.2 3.0 11.3 10.0 8.8 1.53 2.40 1.46 3.5 8.7 10.6 9.3 1.0 2.48 1.80 2.9 6.9 8.4 9.6 1.0 2.03 1.5 3.1 8.7 11.9 14.4 1.0 2.27 1.0 1.05 0.54 0.52 3.6 3.3 4.0 3.2 9.4 12.4 24.7 19.2 10.6 10.10 13.49 9.31 15.4 16.17 17.30 16.77 1.1 1.0 1.0 2.61 2.63 3.46 2.75 4400

1.8 2.0

1.39

5946

6971 7986 17.2% 14.6%

8241 9867 11683 13191 16609 ### 24739 29684 34069 3.2% ### ### ### ### ### ### ### 14.8% 4.3% ### ### ### 3.9% ### 2.0% ### 5.9% ### ### ### 7.2% 7.1% 8.1% 8.0% ### ### ### 15.8% ### ### ### 13.2% ### 65% ### 67.5% ### 3.9% 2.5% 1.7% ### 3.8% 2.4% 1.8% 16.6% 3.7% 2.4% 1.5%

1.9% 2.0% 2.6% 2.9% 3.0% 15% 12.6% 11.1% 10.9% ### 27.9% 47.9% 12.4% ### 23% 64% 66% 65.6% ###

Overhead % 20.1% 19.5% 20.0% ### ### ### ### ### Manpower cost 3.4% 3.2% 3.5% 3.4% 3.4% 4.1% 4.0% 3.9% Depriciation (% of sales) 6% 5.2% 5.2% 4.8% 4.2% 3.4% 3.0% 3.2% 2.6% Interest cost 7.1% 4.7% 3.2% 3.0% 2.7% 2.8% 2.9% 3.3% 1.6% Interest % of debt Tax % of PBT 7% 16.7% 4.5% 8.0% ### ### ### ### ### Dividend ratio (DPS/EPS) 42% 44% 32% 32% 3.1 2.059 2.066 0.94 Net cash from ops/ net 0.57 2 FA Capex ( % of sales) 3% -4% 2% 3% 1% 10% 5% 1% Wcap capex (% sales) #### 0% 5% -3% 4% 4% 0% 1% Total Capex % of sales #### -4% 7% -1% 5% 14% 5% 2% Depreciation %/ Capex % #### -125% 0.704 ### 68% 22% 66% 115% FCF (% of sales) #### 12% 1% 8% 3% -7% 4% 8% Interest income as % of cash

### ### 32.9% 33% 28% 0.87 1.22 1.22 7% 0% 9% -1% -3% 2% 7% -3% 11% 38% -86% 22% 3% 13% -1%

Capital usage 6 yrs Mn Details % Cum NP 7587 Cum Depreciation 3203 Net Wcap change (inc) 0 0% Gross FA change (inc) 7800 72% Net debt change (dec) 0 0% Net dividends (paid) 2435 23% Net investment (mutual etc) 330 10% Net equity change (buy back) 245 2% Net (should be 0) -20 0%

EBIT Net profit Depreciation Dividend

879 111 334 0

877 142 364 0

890 210 413 0

900 1019 1362 1527 2469 3055 3670 4828 236 300 501 511 973 1448 1749 2405 392 413 402 395 525 529 628 724 0 0 208.8 227.1 307.3 457 ### 661.4

5393 2723 817 0

comments improved due to improved margins and doubled Asset turns. Company likely to maintain at 30% levels Debt is overstated, company has included buyer's credit. Also wcap/ fixed asset needs have increased debt in 2013 drop in 2013 due to high capex. Should imrpove excludes short term debt and commerical complex inventory value increase in 2013 due to increase in Oil prices Asset turn improvements mainly from higher FA turns. Wcap usage has generally been small value of commercial property + supreme petrochem Company has grown by 20% in last 7-8 yrs. Should be able to do 20% (1012% volume + 7 % price increase) 2013 growth excludes property sales Has been able to hold the margins and pass through RM cost changes. At best likely to improve to 9%. 2013 excludes property sales improvement due to drop in overhead costs. 2013 does not include Should be able to achieve 20%+ growth with small improvements in increase in RM costs which have not been passed through Overhead reduction main reason for the drop - most heads have grown at rates lower than sales. Larger network of plants has resulted in drop in steady improved with higher economies of scale NPM up due to drop in interest costs 422 248

Factors to track to know if company doing well - add factors crucial to the industry Company specific Key variables (Important and knowable/predictable) Factor 2003 2004 2005 2006 2007 2008 2009 2010 2011 Capacity 2E+05 240400 3E+05 3E+05 3E+05 Polymer processed 91913 1E+05 95439 1E+05 1E+05 139239 2E+05 2E+05 2E+05 Growth 8.9% -4.6% 23.8% 10.5% 6.7% 24.1% 11.0% 17.2% Sales/ unit (Mn/MT) 0.0758 0.0798 ### 0.0835 0.0895 0.0947 0.0961 0.1055 0.1101 Price increase 5.2% 8.2% -3.3% 7.1% 5.9% 1.5% 9.7% 4.4% Capacity utilization 72% 58% 63% 66% 68%

le/predictable) 2012 2013 Comments 4E+05 2E+05 3E+05 12% volume growth (2 times GDP) 9.4% 14.6% 0.1208 0.1210 9.7% 0.2% increase @ 5.5 %, same as inflation 70%

Checklist - Key issues highlighted in red, Important positives in green Company type analysis Company type a. Fast grower with competitive advantages b. slow or no growth with competitive advantages c. Turn around situation (fundamental performance) d. cyclical company in a downturn - with clear catalyst in 6-12 months Fast grower with durable competitive advantage - Is the valuation more than 20 times earnings ? Slow or no growth with durable competitive advantages (blue chip) - Does the company sell below median PE for the company and undervalued due to recent weak performance ? Turn around situation (fundamental performance) - Is the company facing a temporary issue due to macro or due to temporary but solvable business issue ? cyclical company in a downturn - Is it a cyclical company (50% drop in profits or more from peak) and facing the bottom of the business cycle

Business economics Does the company have ROA=ROE, is ROA greater than WACC ? Does the company have average ROE above WACC for last 10 yrs ? Is the FCF less than 0.8 times earnings on average for last 5+ yrs ? Has the recent performance been due to bubble/ Cyclical high or am I looking at cylical earnings ? Does the company operate in a business with poor ROE, high competiton, low barriers to entry and typical commodity economics - i.e does it have sustainable competitive advantage Does the company face intense competition in its segment from some new competitor or other large Does the industry have a history of intense competition in the past ? Does the company enjoy entry barriers to maintain high growth and high ROE ? Does the industry have a duoploy or limited no. of big companies (top 5 account for more than 60%) ? Is the market share change among top 5 companies less than 2-3% ? Are the NPM and Return on capital numbers comparable with other companies in the sector, if not why ? Is the company getting impacted or will get impacted by low cost imports ? What is the level of change in the end product service ? Is it a fast cycle product (rapid changes such as cell phones ) or slow cycle product (consumer good like soap etc) ? How does the product cycle impact

Scalability/ Multi-bagger evaluation Is the current market/ future market for the company growing at 10%+ in volumes ? Can the company grow @ 15%+ and maintain ROE in excess of 20% for next 10 yrs ? Can the company improve its ROE/ROCE and how will it do it ? - improve margins (and how) - Improve asset turns (FA or reduce Wcap) - due to scale or outsourcing ? Is the company increasing / improving its competitive advantage ?

Liabilities Does the company have > 0.7 times debt (unless it is a bank / finance institution) Will the company be able to finance/ renew the debt without equity dilution or bankruptcy

Is the debt non-recourse or recourse ? Does the company have contigent / off balance sheet liabilities in excess of annual profits ? Does the company need borrowed money for funding a critical aspect of the business ? Does the company have FCCB (foreign currency borrowing). % of total borrowing > 30% ? does the company have foreign currency demoninated borrowings ? Does the company have a currency exposure in excess of 100% of annual sales ? Value trap analysis Is the management hoarding cash and not growing business ? Is the trend coming to an end (for example stagnation in subscriber growth in telecom ?) Is the company undergoing technological disruption ? Is there a power shift in the value chain ? Is the company in an industry with deterorating economics ? Is there a new business model or change in biz model happening ? IS the company a 3rd or fourth tier company in cyclical industry or an also ran in winner takes all ? Does the company have incompetent management with poor ethics and poor capital allocation skills ? General Do all the stakeholders of the company benefit or is the company predatory with some stakeholder, for ex: selling credit to poor customers Does the product involve high incentive for the employee to sell, but traps customer in a long term deal with bad results for them ? What are the regulatory risks ? Does the government decide the cost of RM, Pricing of final product or some key input for business such as spectrum, mkt access etc ? Does the high returns depend on the regulatory approval/ current regulations being maintained by Will the company being analysed be impacted in terms of fundamentals and price by fairly same factors as other ideas in the portfolio Does the company have a weak business unit which will destroy the value of the rest of company in due time Is there only 5 years of history of good performance, i.e is there insufficient past history of performance

Fast grower with competitive advantages

Fast grower with shallow competitive advantages. Cannot value it at more than 20 times NA NA NA

No, ROA is lower than ROE due to debt. ROA is greater than WACC (at least 15% or more) No, improvement from 2006 onwards No No Business has low ROE, low entry barriers and lots of small competition. The company benefits by having advantages of scale, large mfg and distribution network and large range of products and technologies Yes, from other large and small competitors Yes Yes, company is likely to keep increasing scale and products range and maintain a decent ROE No, industry characteristed by lots of small companies and un-organized sector NA No, company has much better ROE and margins due to the wide range of products Yes, currently facing competition from low cost imports from china Yes - fast life cycle products. New products have to be introduced regularly to maintain margins

Yes - market grows at around 1.5 times GDP 5% inflation and market growth of around 10%, can give company 15% growth. Can maintain ROE at margins of 6% and above Improve margins - by reducing overheads and interest costs Asset turns may show minor improvements Yes, company has improved its competitive advantage by increasing the range of products, increasing mfg and distrbution scale

No Yes

Re-course No No No around 50% of borrowing (99 Crs ) is foreign borrowing, should be able to absorb currency impacts No

No No No No No, industry is characterised by unorganized sector and a lot of smaller companies No No No - management has allocated capital intelligently in the last 6 years

No No No No No No No

Management checklist Management performance Has the management invested incremental cash at 15%+ levels ? Is the management hoarding cash without raising dividend or reinvesting it ? Has the management does accquisitions in the past at high valuations and did they work out successfully ? (Check goodwill write offs, has book value increase been lesser than retained earnings ?) Has the management used aggressive accounting in the past to manage results ? Fraud analysis (more than 2-3 of below should lead to rejection of company) Has the management been reprimanded by SEBI or other bodies. Does the management has bad governance history with other firms ? (check Does the company have a lot of subsidairies with no details on these subsidiaries ? Has the company been lending large sums of money to subsidiaries and related parties for no logical reason ? Does the company has opaque transactions with subsidiaries (check related party) and transaction size is big ? Large loans and advances transactions with no details (greater than 10% of net Are fixed assets much higher in proportion to sales compared to other companies in industry ? Is depreciation less than 3% of fixed assets ? Has the dividend been stopped for no reason ? What is the % of non core income (other than operations). Is it more than 10%, does it look fishy ? Does the management make more than 3% of net profit as salary Does the company have an management which has worked against shareholder interests in the past ? Check the board composition - how many as % is promoter or family ? Does the family perform any useful role in management ? Has the management pledged more than 20% of shares, why the pledge ? check special resolutions for the last 5-8 yrs. Any resolution which are antiInsider buying What is % holding by promoters/ management Has there been insider buying in the last 3-6 months. If yes, what % of outstanding ? Why should the insiders be buying ? - low holding ? - Go private ? - possible increase in value ? - Promotional / ulterior motives ?

Valuation and growth Does the company sell @ PE >20 Does the current valuation assume growth in excess of the past or the same as past above average growth ? Does the company sell at huge discount to market or to other companies in the industry ? Why ?

Yes No No accquisition Does not appear so

None No No No No No No No Does not appear high Yes - almost 5% of net profit Does not seem so 50% board is promoter family No pledge None 49% None Yes, management has increased shareholding from 44% to 49% through open market operations. Seems to be transaction to increase holding in a value creating biz

No, around 14-15 times No No, looks like a premium due to better ROC of the business

Test of competitive advantage One of the Dominant firms in product or geo segment ? (is it an oligopoly or duoplogy - indicator of competitive advantage) Limited number of companies in the sector with stable market share (list top 5 companies) and not much change in top 5 in the last 5 years ? If google search does not give the names easily, chances are the mkt is fragmented Market share stability (Will entry of a new player or incumbents caused a major, permanent erosion of market share ?) - has the market share changed by more than 5% for companies - if yes, High ROE (> 15% ?) for last 10 years and the same is being maintained ? If yes, displays persistence of returns and hence CA Has the dominant firm maintained ROE > 15% for a long period of time ? Does the company have customer or production advantage - analyse ROC and check if Margins > 10% of Asset turns in excess of 1. - If high margins, in excess of 10-12% then customer advantage, if high asset turns then production advantage. If both are high then both advantage. Low entry / exits ?

The company is among top 3 players in almost each segme

1. Time technoplast 2. Sintex 3. Atral poly The industry is characterised by a large number of small co Market shares are stable in most segments with the larger p

No, has happened in the last 6-7 years as the company has

Margins less than 10%, but have expanded from 3 to 8% le Asset turns have been above 2 and now @ 4 times, indicati

Yes Does the company has pricing power - ability to raise prices Yes - company is able to change price based on changes in ahead of inflation : check if the price/ unit or tonne has kept pace with inflation or ahead of inflation ?

Source of competivite advantage - production advantage / customer a Strong competitive advantages create entry barriers for incumbents, preventing entry of competition and enables incumbents t Production advantage factors 1. Process economies (resulting in lower cost of production - resulting in moat (cost based advantages). Weaker than for incumbent) customer based advantages expect in case of patents or a. Indivisibility lead economies government regulation (like licenses ). b.complex , linked activities - indicator is high asset turns c. learning curve process cost d. patent/ copyright/ R&D advantage e. resource uniqueness 1. Scale economies a. In demand b. Distribution c. purchasing d.production e. R&D f. Informational economies of scale such as in advertising would give prevent new competitor Customer advantage - creates more durable competitive 1. Habit forming and High Differentiation - No. 1 advantage 2. Experience goods (brand effect, trademarks) - No. 2 - more common, indicator is high margins 3. High switching cost (Lock-in) - No. 3 (for ex : change of business software by a co. such as SAP ERP etc) 4. High search cost ( where it is diffcult, expensive and risk for custom to look for alternative ) like case of doctor or lawyer 5. Network effect (related to switching cost - network effect increases switching cost)

Government/ Regulation based advantage Moat analysis - does company has deep and wide competitive advantage or weak one ? Customer advantages are more sustainable !

1. License 1. Does co have multiple demand side advantages ? absence or minimal demand side advantages mean weak o no moat 2. Does company has scale advantages - absolute advantag is not necessary. Local or product specific advantages are enough 3. Does the company has cost advantages with or without scale Answer to these 3 questions decides whether Franchise Analysis - Competitive advantage analysis ( part repeat of the previous Key factors of competitive advantage for Drivers Barriers to entry 1. Consumer demand Preference (Brands / Trade marks) or customer relationships 2. Key assets - distribution network, Logistics, access to key RM or knowledge base, patents 3. Scale advantages (due to high fixed costs already incurred) Switching costs 1. Switching cost to other supplier 2. Network effect - benefits are high in the current network like telecom , e-mails, e-bay etc) Enduring Low cost position

1. due to economies of scale advantages 2. Due to management skill - good but may not endure the current management 3. Due to technology / Processes - not so enduring

Distinctive capability analysis applied to specific market (product or geographic create the customer based or production based Analysis of Distinctive capability for the firm Type Description Relationships with all stakeholder / systems / process / Knowledge base Architecture Distribution network / Customer relationships / plant / licen monopoly / natural reserve /Patents / Media Properties/ Network effects / Switching costs Strategic assets Innovation Cost Finanical strength Reputation R&D / Innovation history /NPD Enduring Low Cost position Strong Balance sheet Brands / trademarks

List of the drivers/ factors (internal / external ) for the Superior Economic returns ( Driver Sales growth Operating margins

Value driver Sales

Value factors Sales volume Price and mix

Operating margins

Operating cost Operating leverage Economies of scale Investment efficiency Asset intensity

Re-investment rate

competitive advantage

ng top 3 players in almost each segment it operates

acterised by a large number of small companies in organized and unorganized sector able in most segments with the larger players gain share over the un-organized ones the last 6-7 years as the company has achieved scale

%, but have expanded from 3 to 8% levels. May approach 9% at best en above 2 and now @ 4 times, indicating production side scale advantages

e to change price based on changes in RM prices

production advantage / customer advantage factors f competition and enables incumbents to earn high returns s (resulting in lower cost of production 1. Process economies resulting from a. Linked activities economies b. Learning curve process costs ctivities cess cost R&D advantage ess 1. Scale economies from a. Distribution b. purchasing c. Production d. Mktg and advtg

nomies of scale such as in advertising new competitor High Differentiation - No. 1 (brand effect, trademarks) - No. 2 st (Lock-in) - No. 3 (for ex : change of y a co. such as SAP ERP etc) where it is diffcult, expensive and risk or alternative ) like case of doctor or

Customer advantage a. small brand effect in some, in some cases brand and quality is important (pipes etc) b. Small switching cost in some cases for OEM

elated to switching cost - network effect cost)

None 1. Limited demand side advantages in some products and higher in other product lines 2. Company has mainly scale advantages at product/ local s scale advantages - absolute advantage level cal or product specific advantages are Company has shallow and narrow moat on which it has to keep working hard and operates efficiently and on scale y has cost advantages with or without

tiple demand side advantages ? demand side advantages mean weak or

questions decides whether alysis ( part repeat of the previous table ) only to be read again Analysis for the company d Preference (Brands / Trade marks) or 1. Customer relationships ps 2. Key assets - Distribution network, customer relationships bution network, Logistics, access to key and brands se, patents 3. Scale advantages (due to high fixed costs already

other supplier None enefits are high in the current network ( s, e-bay etc) Mainly due to economies of scale and management skill

of scale advantages ent skill - good but may not endure the t y / Processes - not so enduring

he customer based or production based advantages tinctive capability for the firm Description Details for the firm l stakeholder / systems / process / Relationships with customers and supplier of RM and tech/ Process base and knowledge / Customer relationships / plant / license Distribution network/Customer relationship/ Plants/ License for eserve /Patents / Media Properties/ some products/ Small switching costs witching costs Mainly purchased technology Yes Yes Some brands/ trademarks

story /NPD

osition

for the Superior Economic returns ( ROE > 15 % )

Influenced by New products, increasing consumption Economies of scale

Trigger Y Y

How much should it change to cause the PE to increase Continue at current 20% +growth rate Drive OPM to 17%+

Y N Y N N

Drive OPM to 17%+ Yes - key driver of higher margin

Already at 4 times

Y/N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 17 ENTRY BARRIER - No. 1 Factor for Competitive advantage Asset specificity Economies of Scale Proprietary Product difference Brand Identity Switching cost Capital Requirement Distribution strength Cost Advantage Government Policy Expected Retaliation Production scale Anticipated payoff for new entrant Precommitment contracts Learning curve barriers Network effect advantages of incumbents No. of competitors - Monopoly / ologopoly or intense competition (concentration ratio ) - high concentration mean high likelihood of entry barriers Total (average) SUPPLIER POWER Differentiation of input Switching cost of supplier Presence of substitute Supplier Concentration Imp of volume to supplier Cost relative to total purchase Threat of forward v/s Backward integration Total (average) BUYER POWER Buyer conc. v/s firm concentration Buyer volume M M M H L H L NA

Entry barriers mainly from distribution network, brands and economies of scale
Moderate Important driver of margins Low Moderate Low Moderate High - key differentiator High - key differentiator None High High Moderate High High Low

Remarks (go beyond low moderate and high and give explaination for Points Key CA factor each point) Y Y Y Y Y

High levels of competition in most product segments N N Y N N L L L L H N H M H L

Low as the main RM is polymers which are dependent on Oil prices

Low Moderate None High Moderate High None

####

18 19 20 Buyer switching cost 21 Buyer information 22 Ability to integrate backward Total (average) Substitute product 23 Price sensitivity 24 Price / Total Purchase 25 Product difference 26 Switching cost 27 Buyer propensity to Subsititute Total (average)

Low power as the company sells to a wide range of customers

Low Moderate to low Low High None

####

None, products are actually substitutes of metal based products

28 29 30 31 32 33 34 35

RIVALRY DETERMINANT Industry growth Fixed cost / value added Intermittent overcapacity Product difference Informational complexity Exit Barrier Industry concentration Demand variability Total (average) Total Grand Total average Low, Bad - 1 Med - 2 High, Good -3 Low CA = < 30 Med 30< , <50 High CA > 50

L M H M M L

Moderate to high rivalry in several segment. commoditization levels are quite

High high Low Low Low Low Low Moderate Y Y

#### #### ####

The Industry structure helps in identifying the critical competitive factors which have to be managed to create a sustainable CA

Industry mapping Key segments Plastic piping Packaging products Consumer products Industrial products

Mkt shareKey companies in each segment 0.1 Finolex, Chemplast sanmar, Kriti industries, Tulsi extrusions, Astral polytechnik Several large and un-organized players Nilkamal Tata Auto comp, sintex industries, Time technoplast, Nilkamal

Competitor analysis - update data from financial websites - use moneycontrol for 5 yr average competitior names Sintex Finolex Time technoplast Astral poly ROE 14% 13% 14% 22% NPM 8% 4% 6% 7% OP D/E FA M turns ## 1.2 1.3 ## 1.3 1.5 ## 0.8 1.3 ## 0.3 3 Wcap turns 3 6 4 10 Inv turns 11.5 7 5 5 Avg 5 yr numbers Recievabl FCF/ Sales es turn sales (%) CY 3 6% 4450 28 5 6.2 3% 6% 7% 2100 1550 415

Parameter Net margins Debt equity ROA ROE Sales growth Profit growth EV/EBDITA

Comparitive evaluation (how company compares with competition) Details Comparable net margins to other companies Much less debt (< 0.5) compared to 0.7 or higher higher than other companies due to lower Wcap Higher unleveraged ROE due to lower Wcap comparable to other companies - 15%+ comparable to other companies - 15%+ Higher than most companies as the company has comparable growth and

Avg 5 yr numbers NP - CY Sales Gr 302 14% 75 92 32 10% 15% 35%

Profit Gr 10% 3% 0% 25%

Sales EV/EBDIT PE (volume A 5.9 8 7.2 6.7 10 10 14 19

% share of

Analysis of performance High debt due to prefab segment. Also ROE is low. Unrelated diversification Company topline has grown. Profits and margins have stagnated. ROE is poor Expansion in foreign markets has depressed returns. Will take time to turnaround Company growing rapidly in niche. Margin are reducing. Long term sustainability of margins is suspect as

Checklist

Economics models - general

Does the industry have good economics - a) High return on capital , Less price wars, barriers to entry. Chk industry returns for last 10 years and see if the indsutry returns have been high or characterised by high competition Does the industry have scale - characterised by large competitors or a large no. of small firm and intense competition - indicator of low Fixed cost and hence lower competitive Describe the nature of the industry - close monopoly (1 or at best 2 companies ?) - Oligopoly (3-4 companies have 70% mkt share) - monopolisitic competition ( 10+ companies with low mkt share and high competition) - Perfect competition ( 25+ companies with un diffferentiated product) Does the industry/ category have high growth opportunity (1.5X GDP growth) with a few consolidated players (with entry barriers ) - this ensures value will remain with these players Is the industry RM intensive / sensitive ( 40-50 % ) total cost and hence has low Variable costs - hence high operating leverage ? Does the industry have high Capital intensity ( sales / FA+NWCA <1.5 ) Can the company increase prices freely ahead of inflation/ Does it have untapped pricing power ( VV IMP ) What is the earning power of the company through the complete business cycle (level of Does the industry have a high degree of change and obsolesence ? Are they regulatory or technology shifts happening in the industry which will migrate value to a different set of industry participants ? Does it impact the company ? What is the % of installed capacity being used ? Will the company require substantial capex Summary - Does the industry have good economics and does the company in turn have good economics (inspite or due to the industry). Analyse each factor and summarize here. How has economics changed in the last 10 yrs Summary - What is the nature of the business : pure competition, monopoly or oligopoly. Summarize here where the company lies in the continium

Economics models - demand/ supply and cost curves

Does the Industry have high fixed cost Does the Industry has a low marginal cost ? How does the company's marginal cost compare with the best in industry? How does the Average total cost of the company compare with the best in the industry? How much will the current price have to drop for the company to lose money at operating level (related to variable cost) Commodity company analysis Is the Company a Low cost producer or among low cost producers (especially commodity ), if yes why ? Does the industry have an inelastic supply curve ? How long does it take to add new capacity or plant (brownfield or greenfield). This is critical for commodity companies as this will define period of supply squeeze and hence high Does the industry have an inelastic demand curve ? - Is the commodity or product a small % of the total cost of end product (less than 20%) ? - does the commodity or product have easy substitutes ? - At what price will the end user start reducing the usage ? Impact of the demand and supply curves - how long will it take for the shortage situation to resolve (in commodity industry) via demand reduction and supply increase for prices to drop ? Has the company made above cost of capital ROE over a complete business cycle ? Are the net margins higher than competition ? Why ? Is the company strengthening its CA, if yes - how ? Does the company have a recurring revenue stream Is company gaining share in the industry profitably Does the company have high concentration of sales with few customers Does the company have a strong MKt/Sales organisation Is the business model becoming less asset intensive and increasing the ROC

Business model checklist

Does the company have high demand growth due to a) growth in exisitng product/ market b) growth in exisiting product / new market c) growth in new product / existing market d) growth in new product / new market Is the company reducing the amount of capital invested ? i.e is the company freeing up capital or increasing FCF Does the company have investment which are expensed such as Advtg, R&D. how effective have been these 'investments' Does the business have intangible assets - brands, trademarks, patents, customer Is the business catching some wave or trend and can ride with it for sometime

Knowledge economy models (creating consumer advantage)

Does the Business have network effects Does the business have a lock in - once the product is bought the tendency to continue is Are switching cost high Is company increasing the service component Summary - What is the key nature of the company's customer advantage. Has the company enhanced the same in the last 10 yrs ?

Will the business survive/adapt into a niche or is it a dominant player Does the business have practise evolution Describe how the company operates as part of the ecosystem - dominant firm or small firm in a niche ? Will the company succeed by out competing others in a narrow or broad segment ? Will the company succeed by co-operating with others in the same or complementry Summary - Any models which in combination with economics model will create a very large

Biomodels

Does the company have subsidiary which are carried at cost and is worth more Does the company has real estate which is at cost and worth more Does the company have investments which are worth more than the cost Summary - Any value which should be used to raise the valuation upwards ? Forex/ derivative liability ESOP liability Pension liability Equity dilution via FCCB Contigent liability as % of Net worth and annual profit (concern ?)

Hidden assets

Hidden liability

Is the company a slow growing company with high competitive advantage - returns to come from valuation gap closing ? Is the company a cyclical stock currently cheap due to down turn - returns to come from cycle upturn in the commodity ? Is the company a moderately priced mid/small cap with decent biz model and competitive advantage - returns to come from growth and high ROE? Is the company a sector/ market leader suffering from temporary biz or sector specific distress - returns to come from market recognizing true value of company and sector ? Is the company a cheap, graham like stock (extremely cheap by PE, asset based valuation) returns to come from valuation gap closure ? Summary - how will the undervaluation correct itself ?

Company classification

Catalyst

Shift of demand/supply to favor company ( relevant more for commodity company ) Change in the business cycle / economic cycle- imp for commodity business Regulatory changes Management action - Buy back, Bonus etc Asset conversion - buyback / LBO/De-merger/Accquisitions - critical if the business is a holding company or reason for buying is discount to asset Value creation through access to capital market on very favorable terms Sale / buying of any asset Unexpected earnings increase Time - Catalyst if self assesment of CAP is higher than market. With time market realises the higher CAP and will give higher valuation (value - Poor management not interested in enhancing value) Summary - Which catalysts will work and how long will it take ?

Probability / options models

Does the industry have high level of change - results in a larger no of real options Does management has capability of identifying and utilising the real options What are the low probability event which can kill the company. What is the probability of that happening ?

Physcological models
Am I working with recency bais - giving more wieght to recent data ( check if the projections based on recent data or averages / look at 10-12 yrs data) Am I working with Hindsight bais - thinking that fact was obvious beforehand ( check if the ve factor was noted before hand ) Am I framing issues correctly and in different manners - trying to look at situation using varying models Is there a data framing bais - influenced by the way data has been presented. Am I too overconfident on the situation - assuming over familiarity , associating positive unrelated feeling, too high wieght to optimistic scenario ( familiarity due to work / association with the industry ) Have I done probability analysis for all negative factors Am I having too much loss aversion - overwieghing negative factor Am I working with sunk cost mentality - trying to average down the cost Am I slow in changing opinion - not responding to negative news Describe negative thesis for the company (give three reasons against the idea) Bais from commitment and consistency tendency - Make this spreadsheet hence committed Have I looked at the base case for the industry - have majoritiy of the companies in the industry created wealth ? social proof bais - stock being recommended by various analyst Incorrect / low weightage of existing/ new negative information or even positive Status quo bais - unwilling to sell existing holding ( review discount to intrinsic value and sell based on that ) False consensus bais : confirmation bais ,selective recall, baised evalution ( check all information against you investment thesis and evalute objectively ) Have you questioned the consensus Has the analysis been done with reverse thinking (working the problem forward and Summary - Of the factors impacting me, what can I do to counter-act them ?

Other models
What are the key no-brainer questions ? Any combination of factor effects Are there one or two key variables, which if focussed by management will account for a major success of the business ?

What factors will cause the intrinsic value to rise ? At what rate can we assume that the intrinsic value will grow ?

Munger Model
1. Solve the big no brainer points in the thesis - find the key points of the idea which define success/ failure for the idea 2. Use math to support the reasoning the supporting/ opposing points for the idea 3. Think the problem forwards and backwards - find causes which will cause the company to 4. Use multidisciplinary approach - analyse the idea based on models on this page. Any specific models point to a hidden factor not being considered and can cause it to fail ? 5.Properly consider results from a combination of factors or lollapalooza effects 6. What are the few key factors the maximizatio of which will make the company succeed ? 7. what additional factors to point 6 if done well will add to success Huge external opportunity with ability of company to scale ? Value migration to this company ? Change in govt regulation causing value to migrate to the company ? Demand curve inflection (drop in price or income increase causing an inflexion in demand) Competitive landscape change causing share for the company to rise unexpected turnaround Discontious corporate action such as M&A, huge capex, business model change ? Management with high ability not recognized Extremely pessimism with the sector/ company

Exceptional upside possible ?

Based on DCF what factors would improve the CAP and growth further Based on DCF what factors will cause a deterioration in performance Will the returns come from Earnings growth or PE expansion ? Will earnings triple in 5 years ? What factors will contribute to this high earnings growth or hinder it ? Any reason why the terminal PE should be 12 times earnings (higher than current ?) If PE expansion, what factors will cause it

Other questions

High debt level Cyclical high in terms of margin Management competency Competition List all factors or evidence, the presence of which will invalidate the bullish argument for the ideas (or cause the rejection of idea). Search for the evidence What is the price and volume action of the stock ? Are there any short term : 3-6 month events which will drive the price up or down ?

Failure analysis (list factors which will cause the company/idea to fail) describe

Execution filters

Remarks Read AR/ Google to answer questions on various models

No, industry is characterised by low returns on capital, price wars and low barriers to entry A large no. of small firms - unorganized sector earning low return on capital indicating low competitive advantage for most companies

25+ companies in most low end products. However some major products have a 8-10 companies with 70% market share No, growth will be 2X GDP, however constant entry of new competition will result in regression of returns Yes No Yes, supreme is able to increase price consistent with inflation 20%+ for the business cycle Yes, new products are constantly being introduced and becoming commoditized No Yes - companyies require constant capex to grow.Capex not too expensive and take 2-3 yrs (with high IRR) The industry as a whole has average economics. Company has superior profitability due to focus on new products, low Wcap and extensive distribution network/ customer relationships Pure competition in several products. Limited oligopoly in the newer products/ technology No No - RM and overheads account for 80% of cost Yes Yes around 15-18% NA

With 1-2 % of competition Yes - by expanding distribution, adding new products and adding new customers Yes Yes - mainly from unorganized sector and from substitution effect No Yes Yes - has done in the past. Now at the upper limit of the same

a. Existing product/market c. New products in existing market d. New product/ new market - smallest (composite cylinder) Yes - mainly reduced Wcap turns and improved Asset turns too Not too high Mainly customer relationships Yes - movement to higher plastic usage and replacement of metals

No Small effect Low Yes - by providing better distribution and total solution in packaging products Mainly by providing wider distribution, high quality products and new products

Dominant player in specific niches Yes Dominant player in specific niches In broad segments Co-operate with other in the ecosystems such as Auto OEM, contractors etc None apparent

No yes No around 10% of Mcap will come from selling the real estate None None None None around 40% of annual profit - not too high

No No Yes No No Stock does not have undervaluation. Returns should be commensurate with increase in intrinsic value

No Yes No No No No No Yes Yes Stock does not have undervaluation. Returns should be commensurate with increase in intrinsic value

Yes Yes - has constantly dropped low margin products and introduced new products. Now expanding into A 20% drop in economy which is a very low probability event, can cause serious damage to company

Yes giving wieghtage to the last 6-7 years of data more. However this seems to be appropriate No yes - analysing the downside and comparing with industry performance No No Yes No No - just started position Not yet 1. commoditization proceeds faster than expected and impacts margins and ROE 2. Growth of new products is lesser than expected, resulting in lower overall margins 3. Oil price shock causes the margins to suffer Not yet Yes Not influenced by the recommendations No New position attempting to avoid Yes - seem to concur yes, doing so in the worksheet Need to avoid confirmation bais, commitment and consistency tendency on this idea

1. Will the company be maintain growth and margins in the products in pipe and packaging segments 2. How will the new composites based products perform in the future 3. Any import threats ? Continued migration to plastics product (substitution) and from un-organized to organized Continued focus on expanding distribution and new products Organic growth in the industry 1. Expand distribution and new customer relationships (including expand existing relationship) 2. Introduce new high margin products (exit the lower margin products) 3. Focus on cost efficiences

Continued ROE at existing level and 15% (10 % volume growth) growth in profits will cause the fair value to rise around 15%

Will the company be able to maintain margins via new products and on existing high margin products Will the company get extra profitable growth via exports ? Volume growth = 2XGDP - around 14-15% value growth for industry + new product and expansion should give the company a 20% value growth. Company should be able to maintain current margins and thus deliver a bottom line growth of 20% Done All considered

Yes No No No Yes - move from unorganized to organized No No No No

Mainly from earnings growth Yes Growth in usage of plastics, new products and migration from unorganized to organized / from metals to plastics product ROC is 30% and company should grow atleast at GDP rate maintain ROC @ 30% and growth @ 20%

No Yes No Yes - very likely Competition resulting in lower margins and ROC could make this a poor investment 50% increase in the last 6 months due to continued good performance continued good performance at the fundamental level

e 2-3 yrs (with high IRR)

will cause the fair value to rise

Management factors
Is the management rational in capital allocation . Does management allocate capital well and above current rate of return.
Is the management investing cash in low return business (core or unrelated ? - empire What has the management done with excess cash (which cannot profitability invested in core biz) a. increasing dividends ? b. Buybacks c. Lending to associate and sister companies d. Investing in the stock market ? E. dothe nothing (sitting on balance in fixed income instruments) Does management have integrity sheet - any anti shareholder resolutions in the past ? related party transaction - are they harmful to the co ( rights offer, sale of promoter owned ventures to the company at high price) Does the management discuss both negative and positives of the company performance What is the compensation levels in the co. Is the CEO/owner being compensated heavily (cash or options?) salary as % of sales Has the management issued warrants below or at market cost in the past ? Does the management / CEO have substantial ownership in the company ? Tax as a % of PBT ( is it too low , < 15%, why ?) Has the management been reprimanded by SEBI or other such govt bodies ? Does they have any past cases or issues in other companies ? - check google and stock boards such as moneycontrol , TED etc Is the cash held in foreign banks ? Has the management done accquisitions in the past ? What is the track record of these accquisitions ? Has the management done restructuring and taken such charges on a regular basis ? What is the management track record in the last 10 yrs ? Have they followed through on their statements in the past ? How is their execution track record Past history of CEO / top management team. Describe their experience

Yes No

Management has invested excess cash into business at an incremental rate of 30%, increased dividend and also executed buyback at an opportune time. No No Yes around 5% of net profit, on the higher side .4% of sales No Yes No No No Minimal, seem to be successful No Yes Current management has run the company for 40+ yr. This is their only company and seem to be focussed on it

Key Demand Drivers Economic growth in country Substitution of metal and other products by plastics Migration to organized sector Operational Risk factors RM price fluctuations Margin drop due to competition Positive factors Demand tailwind Strong balance sheet Minimal wcap Brand, customer relationships and distribution network Sell criteria : Imp ( define clear quantitative and qualitative If ROC drops below 15% OPM drops below 13% Growth slows below 10%

Impact High High High Impact Moderate High Impact High High High high

Remarks

Remarks Company can pass on the change with time lag (as in 2008) constant commoditization is threat in the industry Remarks As detailed in demand drivers enables the company to invest in capacity enables the company to earn high ROC enables company to introduce new products, maintain price and margins

Sales revenue accounting (topline) Is sales booked agressively ? - recording revenue before completing obligation - Recording revenue in excess of work completed - recording revenue when payment is still uncertain Is the sale a long term sale with front loading of revenue ? Is sales got through liberal financing - AR is increasing as % of sales Are the payment terms more generous than competition ? Has the company changed revenue recognition policy which has increased revenue and growth in the recent past Does the management use a revenue recognition approach which is different from others in industry ? Does company use percentage of completion accounting although its industry Does the company consider a high residual value in a lease arrangement (check with average of others in the industry) Is the cash flow lagging net income more than 10% for last 5 years ? / Does the CFFO lag net income ? Does the company record revenue for shipments to distributors ? Does the company have a high returns % of sales ? Does the company record too much upfront revenue on long term contracts ? Has the revenue recognition policy been changed and revenue growth changed as a result ? Does the company record revenue with parties where there isnt an arm's length distance ? Is it to a related party, JV or affiliated party ? Recording cash from a lender, partner or vendor as revenue ? Use of an appropriate or unusual revenue recognition policy ? Does the company consider grossed up revenue instead of net revenue (like the priceline case) Unusual increase or decrease in liability reserve account ? Does the management show one time event as revenue ? Has the management held back revenue before accquisition? See proforma growth for before period and after period - has it increased a lot? Sudden increase or decline in deffered revenue ? Why? Has management shown income increases due to lease assumption changes in the last few quarters ?

Expense accounting Does the company lease product on financial / operating leases on market terms Has the company start capitalizing new expenses in the last 2-3 years. Chk if there is an increase as % of sales in AR, inventory or some other non PPA asset For tech companies - check the software capitalization policy. Is the asset for the software capitalization increasing as % of sales in the last 5 years ? Does management record restructuring charges regularly - every year for last 5Does the management shift losses to discountinued operations ? Has management improperly classified normal operating expenses ? Has the capitalization policy changes or accelerated ? Sudden increase in capex ? Decrease in obsolesence or bad debt expense (critical for banks) ? Unusual decrease in reserve for warranty or warranty expenses ? Has management created large reserves (write offs, bad debt, accquisition related etc) to release later into revenue ? Has the management aggresively written off expenses, created reserves well in excess of required and then released them in future ? Large write off on arrival of a new CEO ? Large writeoffs before accquisitions ? Gross margin increase after inventory write offs ? Big write off of any kind of deferred expense ?

Large write off of intangible assets to boost future income ?

Cash flow accounting (update from cash flow accounting book) Does the management missclassify investing or financing cash flow into the operating sectio to boost operating cash flows ? Has the management recorded bank borrowing as cash inflow ? Has the management boosted cash flow by selling recievables, with recourse or by financial recievables (bank notes?) Has management classified operating cash flow as investments - and shifted to investing section ? unusual increase in capex as % of sales with no corresponding logical reasoning has management recorded inventory purchase as investing outflow? Does management do a lot of accqusition ? Operating inflow are inflated as they consist of the accquired companys cash flow too, but outflow moves to investing section (accounting quirk) Declining FCF when cash flow is increasing ? New categories of cash flow, not followed by others in industry ? Has management boosted cash flows temporarily by - collecting AR rapidly or prepayments ? - increase in AP cycle days - paying vendors slowly? - one time reduction in inventory ?

Options accounting Options grant as a % of O/s shares - is it greater than 1% p.a ? Future dilutions due to ESOP (evaluate adjust - important for Tech companies) Calculate annual dilution % for impact on fair value (see MSFT example) Has the management repriced options in the past ?

Pension accounting Does the management have aggressive pension accounting ? (% of income, per employee) do the provident fund charges look correct (PF amount / employee - compare with other companies Does management has aggressive pension asset assumptions (expected return > 7-8%?) Has the management taken down the pension return rates based on low market returns in the past 2-3 yrs? Does the company has a large pension income (@ > 5% of the reported net Tax accounting Is tax as % of PBT below 25%. If yes why ? Is the cash tax below taxes on book by more than 10% (last 5 yrs) and is there a corresponding increase in deferred taxes ? - find reason

Derivative accounting Check in detail MTM and derivative accounting (especially for companies with large export sales)

Has management used AS11 in the past and hidden derivative losses in the balance sheet instead of a pass through P&L Does management use too much derivatives to smooth results ? More in proportion of sales or more compared to others in industry ? Does the company have large gains from ineffective hedging ? Consolidation accounting Has the accquired company created reserves before accquisition and released later after the merger ?

Asset / Liability accounts Any MTM losses on the balance sheet or 'Shareholder' equity statements ? Due to derivative instruments Is the loan and advances too high and growing year on year ? chk for losses in the loan portfolio (banks) Are they new asset account, sudden increase in soft assets relative to sales ? Amortizting or depreciating costs (related assets) too slowly ? Failure to record expense of imparied assets - such as AR, loan accounts etc ? Jump in inventory as % of sales (chk inventory turns) Decrease in loan loss reserves for credit loss (% of loans and as % of bad loans) Decrease accuruals, reserves, or soft liability accounts ? Failing to highlight off balancesheet obligations ? Has management failed to write off impaired investments ? Impaired investments exist but are still carried on books at cost value

Key metrics Has the definition of a key metric of the industry been changed by the management (such as same store sales in retail, bookings or backlog etc) Does management highlight a misleading metric as surrogate for revenue or other performance factor ? Unusual definition for organic growth sales ? Difference in earnings between 10-Q and release ? Does management pretend that recurring charges are non recurring in nature ? Does management pretend that one time gains are recurring and includes in Has management distorted AR turns, suddenly reduced AR to present a better Has management moved inventory to other parts of balance sheet, use a distorted metric to hide inventory turns deteoration ? Does management distort debt metric to hide liquidity issues ?

Others Any critical qualifications by the auditors ? Have the auditors been changed in the last 5 years. If yes, why ? Are the auditors a reputed firm, or is it a small unknown company. Chk on their background Is the compensation of the auditors excess (subjective criteria) Check if the accounting has changed during topline and bottom line slowdowns in the past ? FCCB borrowing resulting in dilution (Indian companies) Interest income as % of cash (looks correct ?)

Are earning managed by modifying reservers/ special charges ? - Retained earnings > increase in book value Has the income been boosted by a one time event ? Does the company take too many restructuring changes frequently and report it below the line ? Does the company record proceeds from selling a biz into revenue ? Analyse the JV accounting closely ? Has the disclosure details been changed or reduced from last quarter as the performance has slowed (especially if industry is in a down cycle)

Comments No - sales is booked when shipped to distributor/ customer

No No - very low AR No Does not seem so No No NA No, cash flow has been higher than profits with Wcap becoming negative Not clear No No No No No No No No Yes - sale of property is being shown as revenue NA No No

Comments No No NA NA No No No No as planned NA None NA No No No No No

No

Comments No No No No No No NA No No No - improvement mainly by controlling inventory and AR

Comments none none none

Comments no on lower side @ 5% of salary No no no Comments No No. cash taxes roughy equal to taxes on book

Comments Company has hedging for around 200 Cr, no losses accumulated on books

NA no no Comments None

Comments No No NA No No - around 2-3% of sales looks ok no no NA NA No no

Comments no no no NA no have included real estate sales in regular revenue. This is not ongoing revenue No No Does not liquidity issue, but has highlighted buyer credit as current liability in past. Buyer credit is short term debt Comments No No - same auditor Small firm not high no NA NA

No Yes - will be when the sale of real estate happens No Yes - will be when the sale of real estate happens NA no

Valuation ( neutral ) detail PBDIT excpl item & non operating inc. Less :TAX Less : Wcap change Less : Capex Less : Capex ( maint) ** Less : Options cost (post tax) FCFF- normal $$ FCFF(Mn) 5 shares ( mn) fcff/ share fcff / share ( maint) discount ( 1.15 or 1+ WACC ) NPV ( maint) terminal value : note 1 Intrinsic value estimate Less : Pension liability/ share Less : Debt/ share Less : Contingent liability/share Less : MTM losses not recognized/ share Add :Net cash/ share (excluding debt) Equity value / share : note 2

actual 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 958 863 889 898 1042 1363 1525 2463 3047 3672 4826 5440 90 0 #REF! 205.66 #REF! 662.34 100 #REF! 6.6234 30 0 179 218 10 -30 -331 167 20 60 398 -324 557 -63 606 -97.5 130 230 -855 0 -735 1255 -620 323 420 740 870 1150 1297 0 2130 -2120 0 70 791 2339 -311 -40 2690 378 2523 -1601 517 770

2014 6080 1435 100 2100 940

2015 6720 1562 100 2100 1080

2016 7820 1840 100 2100 1220

plan 2017 9010 2167 100 1100 1290

2018 9600 2297 100 1100 1360

654 1240 -77 1369 2823 615 712 272 1079 1853 100 100 100 100 100 6.54 12.4 -0.77 13.7 28.2 6.15 7.12 2.72 10.8 18.5

40 1252 -2162 5233 3716 1383 2445 2958 3780 5643 6103 972 1665 -216 4403 3159 3373 3705 4078 4760 5553 5943 100 100 100 127 127 127 127 127 127 127 127 0.4 12.5 -21.6 41.2 29.3 10.9 19.25 23.29 29.76 44.43 48.06 9.72 16.6 -2.16 34.7 24.9 26.6 29.17 32.11 37.48 43.72 46.8 1.05 1.2 1.3 1.5 1.7 1.9 25.3 24.8 24.4 25.4 26.5 25.3

307 485 0 0 0 0 485

Chklist : Check for underfunded pension plans Chklist : Check what % of annual profit (> 50% is a risk) Chklist : Check for comprehensive income losses which may come up later Chklist : Chk if the net profit excludes income from excess cash Chklist : Terminal value should be less 14 times FCF + excess capital

MICAP calculation Terminal value 3 total = terminal value+ cum of value 4 MICAP years current price Notes : 1. FCF ( n+1 th year )/ Wacc - g Wacc : weighted cost of capital , g - long term growth / economy growth 2. Equity value = IV - ( LTD+STD-cash - cash equivalent ) + Non operating asset- ESOP value - contingent liability 3. Terminal value = current year NOPAT / WACC /(1.15 ^ no. of year)

373

414 480 #REF! 463.5 554.9 #REF!

4 cum of value = total of discounted fcff till year in question 5. FCFF adjusted for maintenance capex $$ - adj for normal capex ** - capex for maintenance

cash/share

15.8

28.6 12.8 15.5

29.1 0.46 11.3

40.5 11.4 30

46.9 6.35 16.1 11.1

an 2019 2020 10880 12000 2649.2 2953.5 100 100 1100 1100 1430 1500 7031 7847 6800.8 7546.5 127 127 55.36 61.783 53.549 59.421 2.1 2.3 25.8 25.6

which may come up later

F + excess capital

587 661 663.71 738.64

sales Sales Gr Operating cost % of sales PBDIT % Gr % of sales depriciation dep %sales dep % FA Interest % of sales Tax % of PBT % of sales Net Profit % Gr % of sales wcap Sales/Wcap Inc Wcap wcap % of sales Inc Wcap % of inc sales capex Capex as% of sales Capex as % of Cash flow Capex ( Maint ) Capex ( Maint ) % fixed asset Sales /FA EPS TA Sales/ TA

2002 5946 4988 83.9% 958 16.1% 334 5.6% 11.4% 423 7.1% 90 44.8% 1.5% 111 1.9% 0 ##### 0 0.0% 0.0% #REF!

2003 6971 17.2% 6108 87.6% 863 -10% 12.4% 364 5.2% 11.7% 327 4.7% 30 17.4% 0.4% 142 28% 2.0% 831 8.4 0 11.9% 0.0% 179 2.6%

2004 2005 2006 7986 8241 9867 14.6% 3.2% 19.7% 7097 7343 8825 88.9% 89.1% 89.4% 889 898 1042 3% 1% 16% 11.1% 10.9% 10.6% 413 392 413 5.2% 4.8% 4.2% 14.7% 13.2% 12.8% 256 250 269 3.2% 3.0% 2.7% 10 20 60 4.5% 7.8% 16.7% 0.1% 0.2% 0.6% 210 236 300 48% 12% 27% 2.6% 2.9% 3.0% 801 1199 875 10.0 6.9 11.3 -30 398 -324 10.0% 14.5% 8.9% -3.0% 156.1% -19.9% -331 557 -63 -4.1% 6.8% -0.6%

Current 2007 11683 18.4% 10320 88.3% 1363 31% 11.7% 402 3.4% 12.0% 330 2.8% 130 20.6% 1.1% 501 67% 4.3% 20 584.2 -855 0.2% -47.1% -735 -6.3%

Projections 2008 13191 12.9% 11666 88.4% 1525 12% 11.6% 395 3.0% 8.6% 389 2.9% 230 31.0% 1.7% 511 2% 3.9% 20 659.6 0 0.2% 0.0% 1255 9.5% 2009 16609 25.9% 14146 85.2% 2463 62% 14.8% 525 3.2% 9.7% 545 3.3% 420 30.2% 2.5% 973 90% 5.9% 20 830.5 0 0.1% 0.0% 791 4.8% 2010 2011 20219 24739 21.7% 22.4% 17172 21067 84.9% 85.2% 3047 3672 24% 21% 15.1% 14.8% 529 628 2.6% 2.5% 9.4% 8.5% 330 425 1.6% 1.7% 740 870 33.8% 33.2% 3.7% 3.5% 1448 1749 49% 21% 7.2% 7.1% 2150 30 9.4 824.6 2130 -2120 10.6% 0.1% 59.0% -46.9% 2339 -311 11.6% -1.3% 2012 2013 29684 34000 20.0% 14.5% 24858 27200 84% 80% 4826 5440 31% 13% 16.3% 16% 724 1000 2.4% 2.9% 9.8% 10.0% 547 510 1.8% 1.5% 1150 1296.9 32.3% 33% 3.9% 5.2% 2405 2633 38% 9% 8.1% 7.7% 30 100 989.5 340 0 70 0.1% 0.3% 0.0% 1.6% -40 2690 -0.1% 7.9% 74.0% 516.6 770 1.7% 2.3% 7380 10000 4.0 3.4 18.9 20.7 7410.0 10100.0 4.0 3.4 32% 26% 127 127 2014 38000 11.8% 30400 80% 6080 12% 16% 1200 3.2% 10.0% 532 1.4% 1434.84 33% 5.2% 2913 11% 7.7% 200 190 100 0.5% 2.5% 2100 5.5% 51.1% 940 2.5% 12000 3.2 22.9 12200.0 3.1 24% 127 2015 42000 10.5% 33600 80% 6720 11% 16% 1400 3.3% 10.0% 588 1.4% 1561.56 33% 5.2% 3170 9% 7.5% 300 140 100 0.7% 2.5% 2100 5.0% 45.9% 1080 2.6% 14000 3.0 25.0 14300.0 2.9 22% 127

ROC
No. of shares (adjust for options dilution)

205.7 3.5% 2938 2.0 1.1 ##### 2.0 0% 100

218.19 167.12 606.25 -97.48 -620.08 3.1% 2.1% 7.4% -1.0% -5.3% 3117 2816 2975 3236 3356 2.2 2.8 2.8 3.0 3.5 1.4 2.1 2.4 3.0 5.0 3948.0 3617.0 4174.0 4111.0 3376.0 1.8 2.2 2.0 2.4 3.5 4% 6% 6% 7% 15% 100 100 100 100 100

322.77 378.14 2522.8 -1600.6 2.4% 2.3% 12.5% -6.5% 4611 5402 5611 7420 2.9 3.1 3.6 3.3 5.1 9.7 14.5 13.8 4631.0 5422.0 7761.0 7450.0 2.8 3.1 2.6 3.3 11% 18% 19% 23% 100 100 100 127

Projections 2016 2017 46000 53000 9.5% 15.2% 36800 42400 80% 80% 7820 9010 16% 15% 17% 17% 1600 1700 3.5% 3.2% 10.0% 10.0% 644 742 1.4% 1.4% 1840.08 2167.44 33% 33% 5.2% 5.2% 3736 4401 18% 18% 8.1% 8.3% 400 500 115 106 100 100 0.9% 0.9% 2.5% 1.4% 2100 1100 4.6% 2.1% 39.4% 18.0% 1220 1290 2.7% 2.4% 16000 17000 2.9 3.1 29.4 34.7 16400.0 17500.0 2.8 3.0 23% 25% 127 127

2018 2019 60000 68000 13.2% 13.3% 48000 54400 80% 80% 9600 10880 7% 13% 16% 16% 1800 1900 3.0% 2.8% 10.0% 10.0% 840 952 1.4% 1.4% 2296.8 2649.24 33% 33% 5.2% 5.2% 4663 5379 6% 15% 7.8% 7.9% 600 700 100 97.14286 100 100 1.0% 1.0% 1.4% 1.3% 1100 1100 1.8% 1.6% 17.0% 15.1% 1360 1430 2.3% 2.1% 18000 19000 3.3 3.6 36.7 42.4 18600.0 19700.0 3.2 3.5 25% 27% 127 127

Additional data average 2020 Projection History 75000 12.3% 10.3% 60000 80% 12000 10% 16% 16.3% 15% 2000 2.7% 10.0% 8.0% 12% 1050 1.4% 1.4% 4% 2953.5 33% 5.2% 4.2% 2% 5997 12.1% 11% 8.0% 7.9% 5% 800 93.75 100 1.1% 0.6% 6% 1.4% 1.5% 10% 1100 1.5% 3.7% 2% 13.8% 1500 2.0% 2.3% 2% 20000 3.8 3.28 3.32918 47.2 20800.0 3.6 29% 25.2% 16% 127

CAP = 8 years (base case) NPM Topline growth 12% 15% 6% 390 430 7% 450 530 8% 485 570 20% 550 650 700

What are the assumption behind the above valuations ?

Economy growth around - 6%, Plastic growth - 10-12% plus inflation - 15-17% market growth @ 15% company is growing at market grow (quite doable) average margin has been 6-7% for the industry. 7% 6-7% can happen if the company's plans to increase composites and other NPD suceed. 8% is not highly unlikely ( most likely value seems to be between 550-650 Current assumption is that margin will be < 6% and growth around 10%

8% is not highly unlikely (OPM > 16%). 6-7% is more doable

sales np eps price - low Price - high no. of shares Mn mcap mcap/sales p/e - low p/e - high p/e high v/s low

2003 6971 142 1.0 138

2004 7986 210 1.5 138

2005 8241 236 1.7 22 32 138 3036 0.4 12.9 18.7 1.5

2006 9867 300 2.2 31 46 138 4278 0.4 14.3 21.2 1.5

Normalised year 2007 2008 11683 13191 501 511 3.6 3.7 32 22 76 77 138 138 4416 3036 0.4 0.2 8.8 5.9 20.9 2.4 20.8 3.5

earnings calculation 2009 16609 973 7.1 19.8 72 138 2732 0.2 2.8 10.2 3.6 2010 20219 1448 11.4 79 161 127 10033 0.5 6.9 14.1 2.0 2011 24739 1749 13.8 143 216 127 18161 0.7 10.4 15.7 1.5 2012 29684 2405 18.9 184 302 127 23368 0.8 9.7 15.9 1.6 Comments

Find the average low PE for last 10 yrs. Is the variability more than 100% ? - yes Find average high PE for last 10 yrs Is high v/s low > 2 - yes, reduced recently Subjective Probablility based valuations Optimistic scenario Neutral scenario Pesimisstic scenario Intrinsic value disocunt to int price

PE based valuations (based on observed Normalised earnings based valuation PE Lower limit ( historical ) 9 Upper limit ( historical ) 17 Normalised PE 14 Normalised PE based valuation Earnings Earnings in depressed 20 scenario Earnings in optimistic 24 Normalised Earnings 22 current odds based on past Upper band price Lower band price Current price (buy) Upside ( upper - current ) Downside ( current - down Price 198.0 374.0 308.0 price 280 336 308

price behavior 374 198 290 84.0 92.0

Capital usage efficiency Computation for 5 yrs Profit growth Capex added Depreciation Net capex ROI in capex ROI on net capex

Gain / loss value * upside / downside No brainer price

Upside/ downside ratio *

0.9
31 210

Checklist - Is the Risk reward greater than > 3 - No

PE comparison based valution Sector avg PE times Mkt current PE 0.9 Earning yield (latest) Earning gr Expected return without PE expansion Tot ret /PE ( between 1-2 ) 6.3% 18% 24% 1.5

At this loss probability is very low. Risk reward more than 10:1

* compare the current PE with PE of other companies ** also do a rough comparison of PE with that of other

E for last 10 yrs. Is the variability s or last 10 yrs

based valuations Price 350.0 290.0 190.0 279.0 -0.04 Probability 0.15 0.65 0.2 Expected 52.5 188.5 38.0

cy Computation for 5 yrs 1894 4034 2801 1233 47% 154%

Checklist - Is the ROI greater than WACC

Asset valuation Net cash ( Debt - cash ) Any investment Asset = NFA (reproduction cost) + WCAP Total asset (Slice 1) = Asset + Investment + Net cash (or reduce debt ) - Any off balance sheet liability No growth value (NOPAT/WACC)- Slice 2 DCF Value (Slice 3)

0 3000 7500 82.7 295.1 current Checklist - Is current Mcap below or at growth value ? market cap assumes no growth

Current Mcap

If slice 1 >= Slice 2 No competitive advantage If slice 2 > Slice ( check the EVA / sales % ) competitive advantage Slice 3 - slice 2 represents the value of growth of the excess return over cost of capital Average EBIT based Ten year average sales Ten year average EBIT Average margins Future margin Sales (2 yrs from now) Average low PE for last 10 years Average high PE for last 10 years Low price High price

14919 2059.7 14% 0.14 assume the future EBIT margin in the future 42000 9.0 17.2 278 533

w or at growth value ?

Q2 2013 results company came out with decent results. Topline growth of around 15% and profit of around 30% (excluding property Fixed asset went up with new capacity, also Wcap has crept up and hence debt has gone up. Company should be Company executing as per plan (debt is slightly high)

30% (excluding property sales) up. Company should be able to bring down debt in next one year as new capacity comes on stream