Butterfly Gandhimathi (GANAP) 188

Result Update Rating matrix Rating : Buy Target : 240 Target Period : 12 months Potential Upside : 27% What s changed? Target EPS FY16E EPS FY17E Rating Quarterly performance Unchanged Unchanged Unchanged Unchanged Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%) Revenue 311.6 155.4 100.5 233.9 33.2 EBITDA 20.9 9.5 121.1 15.0 39.7 EBITDA (%) 6.7 6.1 63 bps 6.4 31 bps PAT 6.6 1.5 343.5 4.2 56.5 Key financials ( crore) FY14 FY15 FY16E FY17E Net Sales 764 529 969 603 EBITDA 49 40 74 56 Net Profit 22 3 32 30 EPS ( ) 12.5 1.6 17.8 16.9 Valuation summary FY14 FY15 FY16E FY17E P/E 15.0 116.0 10.5 11.1 Target P/E 19.1 148.1 13.5 14.2 EV to EBITDA 10.1 12.5 6.9 7.2 Price to book 1.5 1.5 1.4 1.3 RONW (%) 10.0 1.3 13.0 11.3 ROCE (%) 12.5 8.4 16.1 15.0 Stock data Particular Amount Market Capitalisation ( Crore) 264.0 Debt (FY15) ( Crore) 174.6 Cash (FY15) ( Crore) 15.5 EV ( Crore) 423.2 52 week H/L 308.55 /128 Equity Capital ( Crore) 17.9 Face Value ( ) 10 Price performance 1M 3M 6M 12M Butterfly Gandhimathi 5.1-5.8-33.5-42.7 TTK Prestige -2.8-4.7 9.5 0.0 Hawkins Cookers -15.2-20.2-32.4-32.4 Research Analysts Bharat Chhoda bharat.chhoda@icicisecurities.com Nirav Savai nirav.savai@icicisecurities.com November 18, 2015 Butterfly Gandhimathi (GANAP) 188 Growth in branded products from FY17 onwards Butterfly Gandhimathi Appliances (BGAL) Q2FY16 revenues grew 101% YoY to 311.5 crore on the back of strong Tamil Nadu Civil Supplies order execution ( 150.3 crore) in Q2FY16 The EBITDA margin improved 60 bps YoY to 6.7%, driven by lower employee cost & other expenses as a percentage of sales while EBITDA grew 86.4% YoY PAT increased to 6.56 crore vs. 1.48 crore YoY, mainly driven by higher revenue growth and lower interest cost Margin expansion to be driven by growth in branded product segment BGAL has undertaken initiatives like new market consolidation, focus on value added products and entry into modern retail to boost its branded products revenues. Currently, its product portfolio comprises more than 20 categories with 552 SKUs. Branded revenues are expected to show positive growth in H2FY16 owing to a marginal improvement in consumer sentiment and a weak base in H2FY15. As per the management, margins in the branded products segment of BGAL are around 9%, which is much higher than its government orders. Roadmap for future growth: to be driven by geographical expansion BGAL has expanded its reach & distribution network across India through 400+ exclusive distributors and 18000+retail points. Currently, non-south states contribute around 17% of total revenues, which is expected to go up to 30% by FY17. Over the last two years, the company has extended its presence to 28 states and is now looking at consolidating its position in newer markets. This would be driven by high brand promotion, marketing of branded products and expansion of the product portfolio. Government order execution to boost FY16E revenues FY16 revenues will be boosted by execution of government order to the tune of 508 crore (of which ~ 310 crore has been executed till H1FY16). The company is expected to complete the remaining government order by March 2016 of which ~ 110 crore would be TNCSC order and 90 crore of Pondicherry Cooperative Wholesale Stores (PCWS) order. Strong operational performance to drive PAT growth Revenue growth is expected to pick up from FY16 onwards driven by the government order execution and better performance of the branded product portfolio. In FY16, the branded products portfolio is expected to grow 12.5%. The management has indicated that it is targeting 20% branded revenue CAGR in FY17-20E with higher margin of ~ 9%, which would drive PAT growth. Branded products to drive margins higher; maintain BUY BGAL is trading at a discount to its peers (TTK Prestige, Hawkins Cookers). We believe it is a re-rating candidate considering the strong turnaround that it has made and also growth potential it has. We remain positive about the long-term prospects of the company and maintain BUY recommendation on Butterfly Gandhimathi with a revised target price of 240 (based on 14.0x FY17E EPS of 16.9). On a cautionary note, considering the various impediments faced by small cap stocks, we believe this should be looked at as a medium to long term investment, which has inherent risks of higher price volatility. ICICI Securities Ltd Retail Equity Research

Variance analysis Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) Comments Revenue 311.6 N/A 155.4 100.5 233.9 33.2 Other Income 1.6 N/A 1.0 63.3 0.7 118.0 Raw Material Expense 224.6 N/A 94.7 137.2 167.0 34.4 Employee Expenses 15.9 N/A 14.9 7.1 15.1 5.2 Other Expenses 50.1 N/A 36.4 37.8 36.8 36.4 BGAL reported strong growth in Q2FY16 in revenues of 100.5% YoY, which was mainly driven by 150 crore order execution of Tamil Nadu Civil Supplies Corporation EBITDA 20.9 N/A 9.5 121.1 15.0 39.7 EBITDA Margin (%) 6.7 N/A 6.1 63 bps 6.4 31 bps EBITDA margin improved 60 bps YoY, driven by lower other expenses & employee expenses as a percentage of sales Depreciation 2.9 N/A 2.6 14.0 2.8 6.0 Interest 9.8 N/A 5.6 74.7 6.7 45.4 PBT 9.8 N/A 2.3 333.4 6.2 58.0 Tax Outgo 3.2 N/A 0.8 314.1 2.0 61.1 PAT 6.6 N/A 1.5 343.5 4.2 56.5 PAT increased from 1.5 crore to 6.6 crore driven by higher sales & lower interest cost as a percentage of sales Key Metrics Segmental sales Appliances 133.5 N/A 135.0-1.1 75.7 76.4 Cooker / Cookware 26.0 N/A 31.4-17.2 15.1 72.2 Others 0.0 1.1-100.0 5.8-100.0 Compnents & Spare parts 159.5-96.6 65.1 Government Orders 150.3-133.8 12.3 Change in estimates FY16E FY17E ( Crore) Old New % Change Old New % Change Revenue 968.9 968.9 0.0 603.2 603.2 0.0 EBITDA 73.5 73.5 0.0 56.2 56.2 0.0 EBITDA Margin (%) 7.6 7.6 0 bps 9.3 9.3 0 bps PAT 31.9 31.9 0.0 30.1 30.1 0.0 EPS ( ) 17.8 17.8 0.0 16.9 16.9 0.0 ICICI Securities Ltd Retail Equity Research Page 2

Exhibit 1: Revenue trajectory (gross sales) 1,250 Company Analysis Stable revenues from branded products & strong government order execution to drive FY16 growth BGAL has been in the kitchen appliances segment for about four decades. It witnessed revenue growth of 58.1% in FY07-14. Since FY12, the company has also been servicing government orders, which have also aided this strong growth. Another factor that contributed to the revenue growth has been the capacity expansion done by the company. The company has spent ~ 150-200 crore on the same. Revenues had declined in FY15 on account of weak consumer sentiment and absence of government orders for a major part of FY15. However, the company received government orders to the tune of 510 crore in Q4FY15 to be executed by December 2015, which will drive strong revenue growth in FY16E. Apart from this, it also received a 90 crore order from Pondicherry Cooperative Wholesale Stores, which is expected to be executed in this financial year. Also, BGAL had acquired the home and electrical appliances division from its associate company LLM Appliances. The same will also help the company boost revenues. The acquired division garnered sales of 75-80 crore. The management expects sales of 100 crore from this division in the current fiscal. We have, however, assumed ~ 90 crore from this division. Exhibit 2: Capacity trend 18 crore 1,000 750 500 250-361 369 92 417-285 627 570 668 - - 272 357 422 444 - -69 161 221 FY07 FY08* FY10* FY11 FY12 FY13 FY14 FY15 FY16E FY17E Branded sales Government Sales in lakh pieces 15 12 9 6 3 0 1.8 1.8 0.5 1.8 1.8 0.5 16.0 15.0 16.0 15.0 16.0 15.0 5.4 3.6 0.5 5.4 3.6 1.5 5.4 3.6 1.5 5.4 3.6 1.5 9.0 7.0 2.5 2.5 2.5 2.5 FY07 FY08* FY10* FY11 FY12 FY13 FY14 FY15 FY16E FY17E LPG Stove Mixer Grinder Table Top Wet Grinder Apart from capacity expansion, we expect BGAL to benefit from expansion into non-south markets, from its plans to increase the share of exports and the recent acquisition (LLM Appliances). During this period, the stove capacity has gone up from 1.8 lakh pieces in FY07 to 16 lakh pieces in FY15. Similarly, the mixer grinder and table top wet grinder capacity has increased from 1.8 lakh pieces and 0.5 lakh pieces to 15 lakh pieces and 2.5 lakh pieces, respectively. Going forward, BGAL intends to further scale up the stove and mixer grinder capacity to 16.0 lakh pieces and 15.0 lakh pieces, respectively. ICICI Securities Ltd Retail Equity Research Page 3

Operating margins to improve from FY17E onwards After witnessing an operating margin expansion over the last few years, the operating margin is likely to remain subdued owing to the company s expansion into the non-south region in FY16. However, we expect the operating margin to touch 9.3% in FY17E, which would be driven by higher sales of branded products. Over the medium term, the management aims to touch the operating margin levels of its peers. Exhibit 3: EBITDA margin trend 12 11.2 % 11 10 9.7 9.9 9.7 9.6 9.3 9 8 8.0 7.5 7.6 7 6 FY07 FY08* FY10* FY11 FY12 FY13 FY14 FY15 FY16E FY17E 6.5 Revival in PAT growth from FY16E onwards The revenue and profitability of BGAL was subdued in FY15 on account of the absence of government orders for a major part of FY15 and also due to weak consumer sentiments. However, we expect BGAL s revenues to grow 68% YoY in FY16E driven by government orders. Also, an improvement in operating margin, on account of stabilisation of margins in the branded segment as its product gain better acceptance in new markets, would aid profit growth. We expect PAT to grow from 2.9 crore in FY15E to 27.4 crore in FY16E and 30.1 crore in FY17E. Exhibit 4: PAT trend 40 crore 30 30.4 33.4 22.4 31.9 30.1 20 15.6 15.2 10 9.5 2.9 2.9 - FY07 FY08* FY10* FY11 FY12 FY13 FY14 FY15 FY16E FY17E ICICI Securities Ltd Retail Equity Research Page 4

Valuation BGAL is trading at a discount to its peers (TTK Prestige, Hawkins Cookers). We believe it is a re-rating candidate considering the strong turnaround that it has made and also the growth potential it has. We expect the FY16 performance to improve significantly driven by government orders and better margins We remain positive about the long-term prospects of the company and maintain BUY recommendation on Butterfly Gandhimathi with a revised target price of 240 (based on 14.0x FY17E EPS of 16.9). However, on a cautionary note, though the upside seems lucrative, still considering the various impediments faced by small cap stocks, we believe this should be looked at as a medium to long term investment, which has inherent risks on account of higher price volatility. Exhibit 5: Valuations Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY14 764.2 4.7 12.5 (32.9) 15.0 10.1 10.0 12.5 FY15 529.0-30.8 1.6-87.1 116.0 12.5 1.3 8.4 FY16E 968.9 83.2 17.8 1001.1 10.5 6.9 13.0 16.1 FY17E 603.2-37.7 16.9-5.5 11.1 7.2 11.3 15.0 ICICI Securities Ltd Retail Equity Research Page 5

Company snapshot 450.00 400.00 350.00 300.00 250.00 Target Price 240 200.00 150.00 100.00 50.00 0.00 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Source: Bloomberg, Company, ICICIdirect.com Research Key events Nov-09 Revenues grow 43% YoY to 57.6 crore in Q4FY10 (December 2009) Mar-10 On the back of expanded capacity, the company continued to report healthy revenue growth. Revenues grew 48.2% YoY to 49.2 crore in Q5FY10 After reporting strong revenue and margin growth for several quarters, the operating margin declined YoY for four consecutive quarters. While sales continued to rise, Sep-10 the operational performance was impacted owing to higher costs Nov-10 Revenues grow 50% YoY to 79.8 crore. Albeit, operating margin declined 70 bps YoY to 11.1% May-11 Revenues grow 48.7% YoY to 68.5 crore in Q1FY12 Jul-11 Bags first order from the Tamil Nadu government worth 285 crore While revenue growth continues led by both branded and government sales growth, interest costs started to rise owing to increasing debt. This impacted the Dec-11 profitability of the company Mar-12 Reliance Private Equity picks up 13.7% stake for 100 crore at ~ 408/share Jun-13 Launches 50 new SKUs during the year thereby boosting sales growth After several quarters of strong growth, revenues remain flat at 101 crore while operating margin dipped marginally (30 bps to 11%), PAT de-grew 23.3% YoY to Oct-13 6.3 crore May-14 Launches four new product categories, 60 new SKUs and expanded pan-india presence to all states Aug-15 Bags order worth 90 crore from Pondicherry Cooperative Wholesale Stores for Butterfly brand TTWG & Mixer Grinder products Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m)n Change (m) 1 LLM Appliances, Ltd. 31-Mar-15 17.04 3.1 0.0 2 Butterfly Marketing Pvt. Ltd. 31-Mar-15 15.86 2.8 0.0 3 Reliance Venture Asset Management Limited 31-Mar-15 13.71 2.5 0.0 4 Seshadri (V M) 31-Mar-15 7.00 1.0 0.0 5 Narayanan (Lakshmi V M) 31-Mar-15 5.60 1.0 0.0 6 Butterfly Constructions, Ltd. 31-Mar-15 3.76 0.6 0.0 7 Balasubramaniam (V M) 31-Mar-15 3.19 0.5 0.0 8 Gangadharam (V M) 31-Mar-15 2.76 0.5 0.0 9 Kumaresan (V M) 31-Mar-15 2.73 0.5-0.3 10 SBI Funds Management Pvt. Ltd. 31-Mar-15 1.74 0.3 0.0 Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Promoter 65.1 65.1 65.1 65.1 65.1 FII - - - DII 17.7 17.4 16.2 13.7 13.7 Others 17.2 17.5 18.6 21.2 21.2 Recent Activity Investor name Investor name Investor name Value Shares Investor name Value Shares SBI Funds Management Pvt. Ltd. -0.81m -0.26m Daiwa Asset Management (India) Private Limited -0.35m -0.07m 0 0 0 Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 6

Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15 FY16E FY17E Total operating Income 764.2 529.0 968.9 603.2 Growth (%) 4.7-30.8 83.2-37.7 Raw Material Expenses 430.2 317.4 575.7 363.0 Employee Expenses 60.8 60.3 101.7 48.3 Manufacturing Expenses 100.7 24.2 92.0 57.3 Selling & Distribution Expenses 67.1 62.3 67.8 42.2 Admin & Other Expenses 55.9 25.0 58.1 36.2 Total Operating Expenditure 714.7 489.2 895.4 547.0 EBITDA 49.5 39.7 73.5 56.2 Growth (%) -29.1-19.7 85.0-23.5 Depreciation 4.9 10.2 10.9 10.2 Interest 16.7 29.6 22.8 10.1 Other Income 6.5 4.3 7.8 9.0 PBT 34.3 4.3 47.6 45.0 Growth (%) -28.0-87.5 1,010.1-5.5 Total Tax 11.9 1.4 15.7 14.8 PAT 22.4 2.9 31.9 30.1 Growth (%) -32.9-87.1 1,001.1-5.5 EPS ( ) 12.5 1.6 17.8 16.9 Cash flow statement Crore (Year-end March) FY14 FY15 FY16E FY17E Profit before Tax 34.3 4.3 47.6 45.0 Add: Depreciation 4.9 10.2 10.9 10.2 (Inc)/dec in Current Assets -93.4 104.6-169.1 215.1 Inc/(dec) in CL and Provisions -33.2-92.0 151.2-133.0 Taxes Paid -11.9-1.4-15.7-14.8 Others 16.7 29.6 22.8 10.1 CF from operating activities -82.5 55.2 47.6 132.5 (Inc)/dec in Investments 0.0 0.0 0.0 0.0 (Inc)/dec in Fixed Assets -66.5-20.6-29.0-10.2 Others 2.9 0.6-1.7 0.3 CF from investing activities -63.6-20.0-30.8-9.9 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0 Inc/(dec) in loan funds 136.6-9.6 15.3-89.3 Dividend paid & dividend tax 0.0-0.7-9.3-8.8 Others -16.7-29.6-22.8-10.1 CF from financing activities 119.9-39.8-16.8-108.2 Net Cash flow -26.3-4.5 0.1 14.5 Opening Cash 46.3 20.0 15.5 15.5 Closing Cash 20.0 15.5 15.5 30.0 Balance sheet Crore (Year-end March) FY14 FY15 FY16E FY17E Liabilities Equity Capital 17.9 17.9 17.9 17.9 Reserve and Surplus 205.8 207.8 228.4 249.8 Total Shareholders funds 223.7 225.7 246.3 267.6 Total Debt 184.2 174.6 189.9 100.6 Deferred Tax Liability - - - - Minority Interest / Others - - - - Total Liabilities 407.9 400.3 436.2 368.2 Assets Gross Block 182.9 208.0 230.8 245.0 Less: Acc Depreciation 23.7 33.4 44.3 54.5 Net Block 159.2 174.6 186.5 190.5 Capital WIP 4.5-6.2 2.2 Total Fixed Assets 163.7 174.6 192.7 192.7 Investments - - - - Inventory 167.2 168.9 238.9 148.7 Debtors 279.3 192.9 265.5 157.0 Loans and Advances 36.9 17.1 43.6 27.1 Other Current Assets - - - - Cash 20.0 15.5 15.6 30.0 Total Current Assets 503.4 394.3 563.5 362.9 Current Liabilities 229.3 159.8 307.8 175.4 Provisions 30.2 7.7 10.9 10.3 Total Current Liabilities 259.5 167.5 318.7 185.7 Net Current Assets 243.9 226.8 244.8 177.2 Deferred Tax Assets 0.3 (1.1) (1.4) (1.6) Application of Funds 407.9 400.3 436.2 368.2 Key ratios (Year-end March) FY14 FY15 FY16E FY17E Per share data ( ) EPS 12.5 1.6 17.8 16.9 Cash EPS 15.3 7.3 23.9 22.6 BV 125.1 126.2 137.7 149.7 DPS 0.0 0.3 4.5 4.2 Cash Per Share 11.2 8.6 8.7 16.8 Operating Ratios EBITDA Margin (%) 6.5 7.5 7.6 9.3 PBT Margin (%) 4.5 0.8 4.9 7.5 PAT Margin (%) 2.9 0.5 3.3 5.0 Inventory days 79.9 116.5 90.0 90.0 Debtor days 133.4 133.1 100.0 95.0 Creditor days 99.0 81.6 100.0 80.0 Return Ratios (%) RoE 10.0 1.3 13.0 11.3 RoCE 12.5 8.4 16.1 15.0 RoIC 5.8 0.8 7.6 8.9 Valuation Ratios (x) P/E 15.0 116.0 10.5 11.1 EV / EBITDA 10.1 12.5 6.9 7.2 EV / Net Sales 0.7 0.9 0.5 0.7 Market Cap / Sales 0.4 0.6 0.3 0.6 Price to Book Value 1.5 1.5 1.4 1.3 Solvency Ratios Debt/EBITDA 3.7 4.4 2.6 1.8 Debt / Equity 0.8 0.8 0.8 0.4 Current Ratio 1.9 2.3 1.7 1.8 Quick Ratio 1.2 1.3 1.0 1.0. ICICI Securities Ltd Retail Equity Research Page 7

ICICIdirect.com coverage universe (Retail) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E Bata India (BATIND)# 470 588 Buy 6,067 18.0 16.7 19.6 26.1 28.1 24.0 17.4 21.3 14.0 40.7 40.4 46.0 22.6 18.9 19.8 Shoppers Stop (SHOSTO) 380 500 Buy 3,335 5.1 5.1 5.1 66.6 100.0 54.1 25.3 17.3 13.9 2.3 6.2 8.2 8.0 4.6 10.6 Titan Company (TITIND) 350 375 Hold 31,400 9.3 9.6 11.7 37.8 36.4 30.0 26.8 26.5 22.0 37.1 33.2 36.1 26.6 23.1 23.5 ICICI Securities Ltd Retail Equity Research Page 8

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 9

ANALYST CERTIFICATION We /I, Bharat Chhoda, MBA,Nirav Savai, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities is full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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