NiveshDaily. From Research Desk. News Updates. Lupin receives final approval for finofibrate, 54mg and 160mg. Company Updates

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1 NiveshDaily August 21, 2015 Daljeet S. Kohli Head of Research Tel: From Research Desk News Updates Lupin receives final approval for finofibrate, 54mg and 160mg Company Updates Infosys launches AI, KI & DO services a step towards vision 2020 Pennar Industries Research Update included IPO te Pennar Engineered Building Systems (PEBS) RECO: SUBSCRIBE Global Markets Outlook IndiaNivesh Research IndiaNivesh Securities Limited Research Analyst SEBI Registration. INH & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai Tel: (022) IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.

2 Daljeet S. Kohli Head of Research Tel: Tushar Manudhane Research Analyst Tel: News Updates Lupin receives final approval for finofibrate, 54mg and 160mg; We revise our price target to Rs1,720 (from Rs1,577 earlier); Maintain HOLD Our view: USFDA has granted final approval for finofibrate, 54mg and 160mg. Lupin, already had approval for 145mg and 48mg strength. Fenofibrate is used to treat high cholesterol and high triglyceride levels. The market size of this product is not yet clear. However, the approval being from Goa facility, which had received 483 from USFDA recently, is sentiment positive on the stock. The approval indicates corrective measures being implemented by the management at its Goa facility to comply with USFDA norms. Valuation: We raise our EPS estimate for FY16E and FY17E by 8.8% and 9.1% to factor faster ANDA approval and reduction in cost related to regulatory compliance. Accordingly, we revise our price target to Rs1,720 (from Rs1,577 earlier), based on 25x FY17E earnings. we remain positive on business model of Lupin from long term perspective on the back of robust ANDA pipeline and sustained outperformance in domestic formulation market. However, we maintain HOLD based on valuation. At CMP of Rs1,890, the stock trades at 32.3x FY16E EPS of Rs58.4 and 27.4x FY17E EPS of Rs68.8.

3 Daljeet S. Kohli Head of Research Tel: Amar Mourya Research Analyst Tel: Company Updates Infosys launches AI, KI & DO services a step towards vision 2020 Infosys launched three next generation services, which are as follows: (1) AI (platforms & platforms as a service), (2) KI (knowledge based management and evolution of landscapes), and (3) DO (service offering on Design Thinking). In addition, Infosys plans to offer platforms to address the Internet of Things (IoT) and Application Programming Interface (API) requirements of its clients. What is AI KI DO? AI KI DO Intelligent solutions on open source platforms to resolve emerging business problems Large scale, modular service to help renew enterprise landscapes Refers to service offering on Design Thinking and design led initiatives Data Analytics Platform Service Automation Platform Mobile Platform Cloud hosted Business Platform Business Process Automation (IoT & API) Knowledge Based IT Strategy Knowledge Cu ration Services Knowledge Based Cost Optimization Knowledge Based Innovation Strategic Design Consulting Transformational Digital Experiences Enablement of a future workforce KI & DO services will be offered by Infosys Consulting Our Take In our view, launch of AI, KI & DO services is the step clearly aligned to vision The $20 bn of revenue (AI,KI & DO) 2. Reach 30% EBIT margin (AI,KI & DO) 3. New services like Design Thinking, AI and the IP Led to contribute ~10% of revenue (AI & DO) 4. Increase revenue productivity to $80k/person/year from current ~$53k/person/year (AI, KI & DO) 5. Generate ~30% productivity improvement in traditional service from solutions and new platforms (KI) The launch will help Infosys to move up value the chain and bundle existing services with completely renewed focus. Three things remain crucial for the success of IT companies: (1) Execution, (2) Client Relationship, and (3) Prior Experience. Infosys under the leadership of Mr. Vishal Sikka possess all three character sticks. Given his rich experience in executing innovative new age IT related strategies followed by proven track record and rich client relationship will be the key differentiating factor of Infosys relative to peers. As a result, we believe Infosys endower to mimic, Accenture business model looks possible now under the leader ship of Mr. Vishal Sikka. Together, Ai, Ki and Do, will help the company to bring together existing services to serve strategic priorities of global businesses. We do not have any idea on the immediate financial impact of these launches. Valuation & Outlook At CMP of Rs.1138, the stock is trading at 18.7x FY16E and 16.5x FY17E EPS estimate. We are of the view that Infosys will be able to match the industry level $ revenue growth over longterm. The early sign of long term business mission was visible in Q1FY16 overall performance. The sustenance of similar performance and decline in quarterly performance fluctuation could lead to re rating from here on. Further, the company s plan to expand per capita productivity through AI, KI & DO looks positive. We maintain BUY with target price of Rs.1246 (valuing at 18x FY17 EPS) on Infosys.

4 Daljeet S. Kohli Head of Research Tel: Rahul Koli Research Associate Tel: Company Updates Pennar Industries: Update: Subsidiary of Pennar Industries, PEBS is coming out with an IPO on Aug The IPO comprises of Fresh issue aggregating up to Rs. 580 mn and An offer for sale of up to 5.5 mn equity shares Issue Price is in the Range of Rs per share, effectively valuing the company at Rs ~6 bn Our View: Pre issue holding of Pennar industries in PEBS stood at 59.65% (accounting for conversion of CCPS by Zephyr Peacock). This holding will come down to 53.98% (at higher price band of Rs 178). In our view, separate listing of high growth subsidiary PEBS is positive development for the Pennar industries. We initiated coverage of Pennar Industries in Sept 14 at then CMP of Rs 47 with TP of Rs81. In that report, we had mentioned of the possibilities of separate listing of PEBS, which can unlock the value for minority shareholder. Quote from our Sep 14 Pennar Stock idea report: Given that PEBS business has attained significant scale, we are of view that there exists a scope of listing the subsidiary separately, thereby giving exit to zephyr and unlocking value for minority shareholders. At issue price of Rs 178, PEBS is available at FY15, FY16E and FY17E, PE multiple of 28.2x, 19.2x and 14.4x. On EV/EBITDA basis it is available at 15.2x, 11.8x and 9.2x. We have buy rating on Pennar Industries with SOTP based TP of Rs 87. In our valuation (table given below) we had already accounted for the separate listing of PEBS. We give 11x EV/EBITDA multiple to PEBS, due to its high ROE and ROCE of 21% and 27% over past 3 years. For standalone business we have given EV/EBITDA multiple of 8x, which is similar to its peer company like Tube Investments. For Enviro business (which contributes small turnover currently), we have given EV/EBITDA multiple of 10x, taking into account its high growth in sales and profitability. Pennar Industries Valuation: Rs mn EV/EBITDA EBITDA FY17E EV Debt FY15 Mcap % Holding Mcap attributed to Pennar Price Per Share Standalone ,385 1,392 5, % 5, PEBS , ,146 54% 3, Enviro , ,284 51% Total 9.3 1,737 16,221 1,797 14, % 10, Source:Company,IndiaNivesh Research

5 Dharmesh Kant VP Equity and Derivatives Strategist Tel: Global Markets Outlook US Markets: U.S. stocks suffered their worst selloff in 2015 on Thursday as markets were buffeted by worries about a slowdown in global growth. The broad based rout, which saw the main indexes turn negative for the year, was marked by heavy selling in consumer discretionary, technology, energy and media shares, with investors unloading stocks into the close of trading, intensifying the markets slide and pushing indexes to their lowest levels of the session. That may signal more unsettling moves ahead Friday. The selloff comes about 24 hours after investors reacted badly to minutes that some investors read as taking a September rate increase off the table, but mostly delivered no clear guidance of the timing of the Fed s first interest rate increase in more than a decade. The day s data included a rise in weekly jobless claims that nonetheless signal the labor market remains healthy, better than expected existing home sales, strong manufacturing data from the Philadelphia Fed and a drop in the index of leading economic indicators. The number of people who applied for U.S. unemployment benefits in mid August rose for the fourth straight week, but initial claims remain at very low levels that suggest the labor market is still on the mend. Initial jobless claims rose by 4,000 to a seasonally adjusted 277,000 in the seven days stretching from Aug. 9 to Aug. 15, marking the highest level since early July. U.S. home sales set a fresh post recession high in July as the housing recovery continues, a trade group said Thursday. The National Association of Realtors reported that existing home sales rose 2% to a seasonally adjusted annual rate of 5.59 million. That's the highest rate since Feb. 2007, marks the third monthly gain in a row, and represents a 10.3% year over year gain. The median existing home price was $234,000, a rise of 5.6% from the same month of U.S. manufacturers in the Philadelphia region said conditions firmed a bit in August, contradicting an earlier weak reading from New York which showed that activity had tumbled to recession era levels. The Philadelphia Fed s index of business conditions rose to 8.3 this month from 5.7 in July. Any number over zero means more companies are expanding instead of contracting. On Monday, the New York Fed said its Empire State general business conditions index nose dived to a reading of negative 14.9 from positive 3.9 in July, marking the worst level since June The leading U.S. economic index fell 0.2% in July after four straight strong gains, largely because of a decline in U.S. permits to build new homes, the Conference Board said Thursday. The coincident index, which measures current conditions, edged up 0.2% in July. The lagging index rose 0.3%. The LEI is a weighted gauge of 10 indicators designed to signal business cycle peaks and valleys. Day s Performance: The S&P 500 lost points, or 2.1%, to 2,035.73, falling below a 200 day moving average, a key technical level. The benchmark index also turned negative for the year, ending 1.1% below its close at the end of The Dow Jones Industrial Average shed points, or 2.1%, to 16,990.69, its steepest percentage decline since Feb 3, 2014, and its lowest closing level, below psychologically significant 17,000 level, since the end of October. The Nasdaq Composite Index took the brunt of the Thursday s thrashing, ending the day off points, or 2.8%, to 4,877.49, its steepest one day decline since April 10, Set ups on S&P 500, Dow Industrial Average and Nasdaq 100 are correcting from all time high levels. We remain bearish on US markets; expecting a further correction to 1900 levels on S&P 500 in medium term. Emerging markets: Most of Asian indices are trading with deep cuts this morning on weak global cues. Concern on slowing Chinese economy and higher possibility of a September rate hike by US Fed is guiding traders to go short in emerging markets. Bullions & Commodities: Gold is trading at $1160 per troy ounce this morning up 0.58% from previous close. WTI Crude future is trading at $40.94 per barrel while Brent Crude future is trading at $46.36 per barrel. Currencies: The U.S. Dollar Index tracking the U.S. currency against a basket of six others currencies trading at this morning down (0.06%) from previous close. Long term set up on Dollar Index remain strong, a break above 100 on a weekly closing basis will initiate a new up move for a target of 120. The dollar and U.S. stocks often trade on opposite paths, with a weak dollar seen as providing investors with cheap funding to buy stocks. Plus the dollar s drop generally helps U.S. companies overseas sales. Source: Bloomberg

6 Pennar Engineered Building Systems (PEBS) IPO te August 20, 2015 RECO: SUBSCRIBE IPO Details Issue Opens 25 Aug 15 Issue Closed 27 Aug 15 BRLM MOIA,AC,KIS Registrar to Issue Karvy Face Value per equity share (Rs) 10 Offer Size Total (mn shares) Fress Equity (mn shares) OFS (mn shares) of o/s mn Shares (Pre Issue) of o/s mn Shares (Post Issue) Bid Lot 80 Shares Ratail and Employee Discount NA Issue Price (Rs / share) Issue Size total (in mn Rs) 1,518 1,562 Fress Issue (Rs mn) 580 OFS* (Rs mn) Source: Company, IndiaNivesh Research * OFS By Zypher Peackok and affiliates Holding Pattern (%) Pre Issue Post Issue Promoter and Group n Promoter Source: Company, IndiaNivesh Research Issue Details PEBS is coming out with Initial Public Offering (IPO) of 8.93 mn (at lower price band) equity shares of face value Rs 10 each. The IPO comprises of Fresh issue aggregating up to Rs. 580 million and An offer for sale of up to 5.5 mn equity shares Issue Price is in the Range of Rs per share. Key objective of the issue (fresh equity) are payment of working capital debt and expansion of design/engineering services. Use of Fresh Issue: Particulars Rs mn % Share Repayment/ prepayment, in full or part, of certain working capital facilities % Financing the procurement of infrastructure (including software and hardware) for the expansion of design and engineering services % General corporate purposes and Issue related expenses % Total % Source: RHP, IndiaNivesh Research About PEBS PEBS was incorporated in Jan 2008 and started commercial operation in Company is one of the leading custom designed building systems solutions providers in India. Company s capabilities include designing, manufacturing, supply and assembly of custom designed building systems. Company s products and services include 1)pre engineered buildings 2)design and engineering services 3)solar module mounting structures and 4)cold form buildings and structural steel products which are widely used for various manufacturing, warehousing, industrial, infrastructure and custom designed commercial buildings. Daljeet S. Kohli Head of Research Tel: daljeet.kohli@indianivesh.in Rahul Koli Research Associate Tel: rahul.koli@indianivesh.in IndiaNivesh Research Key Events,Milestones: Year Key events, milestones 2008 Incorporation and commencement of business of the Company 2009 Entered into Double Lok technical know how agreement with NCI Group, Inc Commenced commercial production with a capacity of 30,000 MT Manufacturing capacity expanded from 30,000 MT to 60,000 MT Manufacturing capacity expanded from 60,000 MT to 90,000MT Investment by Zephyr Peacock 2014 Commissioning of 0.5 MW solar power generation facility at Sadashivpet Source:RHP IndiaNivesh Securities Limited Research Analyst SEBI Registration. INH & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai Tel: (022) IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.

7 IPO te (contd...) Rationale 1. Pre Engineered Building (PEB) market growing in India PEB was introduced in India during late 1990s with onset of Indian economic growth post liberalization of However, the acceptance among consumer segments began in early 2000 with a strong burst of growth during periods. PEB growth was following a strong fixed capital formation in India and increased adoption by the customers. Indian PEB market size is estimated to be around Rs 55 bn mn for FY 14. Indian PEB market Source: RHP Despite economic slump in past few years Indian PEB market has grown at 13% CAGR over FY11 14 period. For FY15 19E period, Indian PEB market is expected to grow at CAGR of 15 20%. Currently industrial sector is the largest client of the PEB industry. Indian PEB market split by application Source: RHP Pennar Engineered Building Systems (contd...) August 20,

8 IPO te (contd...) Industry growth Drivers Source: RHP 2. Company has leading position in the country & has delivered Strong growth since inception PEBS s order book at the end of Q1FY16 stood at Rs 3, mn. for the period FY12 15, company has grown its top line at a CAGR of 22% to Rs 4,462 mn. For the year FY15, company has recorded total sales of 53,611 MT. Led by robust order book and revival in the capex cycle, we expect company to report CAGR growth of 23.2% over FY15 17E Period. 8,000 7,000 6,778 6,000 5,466 5,000 4,462 4,000 3,000 2,459 2,870 3,643 2,000 1,461 1,000 FY11 FY12 FY13 FY14 FY15 FY16E FY17E Net Revenue (Rs mn) Source: RHP; IndiaNivesh Research Company has non exclusive technical know how license arrangement with NCI Group, Inc., an established player in the United States metals buildings market, for supply of standing seam roofing panel system in India under the brand name Double Lok. PEBS is one of the few companies that offer leak proof roofing systems in India. This technology tie up with NCI Group, Inc. has proven to be a key differentiator in comparison to company s competitors. Pennar Engineered Building Systems (contd...) August 20,

9 IPO te (contd...) 60,000 50,000 40,000 30,000 20,000 10,000 20,459 32,612 34,900 42,534 53,611 FY11 FY12 FY13 FY14 FY15 Sales (MT) Peer Comparison: Company Source: RHP Kirby, Interarch and PEBS Pennar are the major players in India, in terms of revenues. Overall PEB Industry capacity is estimated to be around 1.6 million metric tonnes in FY2014. Kirby, Zamil Steel and Interarch are some of the competitors of the company. As per the management, due to their better designing and execution capability, PEBS is able to report better operating margins compared to its peers. Currently company mainly operates in south market through its Hyderabad based plant. To improve the competitiveness of company in northern market, company is planning to set up a new plant north India as well. Year Revenue (Rs mn) EBITDA (Rs mn) EBITDA margin % Face Value (Rs) Diluted EPS (Rs) NAV (Rs) RoNW (%) PEBS FY14 3, % FY15 4, % Zamil Steel Buildings India pvt ltd FY14 2, % Kirby Building Systems India ltd CY13 3, % Kirby Building Systems India (Uttaranchal) Pvt Ltd CY13 5, % Interarch Building Products pvt ltd FY14 4,495 NA 100 NA 2,186 8 Source:RHP 3. Expansion of design and engineering services PEBS started design and engineering services business in FY 14 by entering into a design services out sourcing agreement with a U.S. based entity. PEBS offers design and engineering services to them by using their software for manufacturing of pre engineered buildings for their overseas customers. Since this business has high growth potential and provides margins much better than company s core business, PEBS plans to leverage the experience of design and engineering team and develop a large scale design and engineering services division which provides services to third parties. In view of the proposed expansion plan, company intends to use Rs. 80 mn towards enhancement of infrastructure for design and engineering services. Contribution of this business s sales to PEBS s total turnover is currently very small. 4. Strong Balance sheet PEBS has no long term debt on its book. Working capital debt at the end of Q4FY15 stood at Rs 405 mn. gross debt to equity ratio was at just 0.1. With money raised from the IPO company is planning to further strengthen its balance sheet by paying part working capital debt. Pennar Engineered Building Systems (contd...) August 20,

10 IPO te (contd...) Outlook and Valuation: PEBS is a strong company with healthy balance sheet and technology advantage in the Indian PEB market. At higher price band of Rs 178, Company is available to FY15, FY16E and FY17E, PE multiple of 28.2x, 19.2x and 14.4x. Company has reported average ROE of 22.2% for the FY11 15 period, which justifies the given PE multiple. We recommend subscribe for the PEBS Issue. Risks Economy As PEB market is dependent on the overall economic activity any slump in economy will adversely affect the demand for company s products and services Competition Increase in competition from domestic and global players may erode profitability of company despite robust revenue performance Logistics logistics of PEB buddings is major cost for the company hence scalability of the business is dependent on company s capability to expand and set up plant near demand region. Financial Statements Income Statement: 22.0% Rs Mn FY11 FY12 FY13 FY14 FY15 FY16E FY17E Net Revenue (Rs mn) 1,461 2,459 2,870 3,643 4,462 5,466 6,778 growth % 68.3% 16.7% 26.9% 22.5% 22.5% 24.0% Expenses: Material Cost 874 1,483 1,748 2,074 2,688 3,280 4,067 Employee Expense Other expense ,002 1,078 1,320 1,637 EBITDA EBITDA Margin % 11.0% 10.8% 11.5% 9.4% 9.6% 9.9% 10.1% Other Income Depreciation EBIT Interest Cost Interest Coverage ratio Exceptional Item PBT Tax Expense effective tax rate 34.0% 32.5% 34.0% 40.2% 34.1% 34.0% 34.0% PAT Associate/Minority 0 0 Net Profit Adj Net Profit Adj Net Margin % 4.0% 4.3% 5.0% 4.5% 4.8% 5.7% 6.2% Balance Sheet: Rs Mn FY11 FY12 FY13 FY14 FY15 FY16E FY17E Share Capital Reserves and Surplus ,843 2,266 Networth ,066 1,285 2,185 2,609 Total Debt (ST+LT) Deferred tax liabilities Trade Payables ,136 1,348 1,671 Other Liabilities (ST+LT) Provisions (ST+LT) Total Equity and Liabilities 1,300 1,836 2,377 2,641 3,185 4,206 4,863 Fixed Assets,Net n Current Invetsment 0 Current Investment Deferred tax assets Cash and Cash equivalent Inventories ,003 Trade Receivables ,270 1,572 1,950 Loans and Advances (ST+LT) Other Assets (ST+LT) Total Assets 1,300 1,836 2,377 2,641 3,185 4,206 4,863 Cash Flow Statement: Rs Mn FY11 FY12 FY13 FY14 FY15 FY16E FY17E Profit Before Tax Depreciation Interest Other n cash/n op adj CFO before WC changes WC Adj Tax expense Cash Flow from Operations Capex Free Cash Flow Other Investment Cash Flow from Investing Prefernce Equity 580 Borrowings Dividend (Inc Tax) Interest Cash Flow from Financing Net C&CE Change Beginning C&CE Other adj End C&CE Source: Company Filings; IndiaNivesh Research Ratios: Y E March FY11 FY12 FY13 FY14 FY15 FY16E FY17E EBITDA per share Adj EPS (Rs) Cash EPS (Rs) DPS (Rs) BVPS ROCE % 30.5% 43.1% 36.1% 23.2% 22.5% 19.4% 18.0% ROE % 18.9% 29.1% 25.8% 18.7% 18.4% 18.3% 17.7% P/E EV/EBITDA Debt/Equity (x) Debt/EBITDA (x) Inventory Days Debtors Days Creditors Days Pennar Engineered Building Systems (contd...) August 20,

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(Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart) IndiaNivesh Securities Limited Research Analyst SEBI Registration. INH & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai Tel: (022) / Fax: (022) e mail: research@indianivesh.in Website: