CMP Target Rating Wabco India Rs. 5,629mailers.sparkcapital.in/uploads/Mukesh/Wabco FY16 AR...Page 2 Wabco India CMP Rs. 5,629 Target Rs. 6,200 Rating ADD Details of finished goods

Page 1

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Wabco India’s (WIL) annual report for FY16 presents even-toned commentary a) on efforts to grow revenue from the

domestic CV segment through increasing vehicle content led by introduction of new products b) WIL’s increasing

importance in the Wabco group’s overall scheme of things marked by its ascent up the manufacturing value chain (towards

global system/product development) c) concerted efforts to improve the distribution network with an eye on the fast growing

aftermarket segment. Additionally, management commentary clearly suggests increasing emphasis on cost reduction

through quality and cost optimisation measures, which are critical in the light of the recent hike in royalty rates.

Introduction of new products leading to increasing content per vehicle: WIL has introduced/focussed on increasing the

penetration of technologies/products like wiring harness, pole wheels, lift axle control systems, AMT, automatic slack adjusters, air

disc brakes, higher capacity compressors etc. This has enabled an strong increase in content per vehicle and hence, revenue

outperformance (compared to underlying CV volume growth) particularly in the last two years through FY16. Per a recently

released company presentation, the content per vehicle for WIL stands at ~$500 compared to an estimated ~$ 320 in FY11.

WIL’s steady progress up the value chain from being a mere supplier of braking systems to domestic OEMs to designing

and mfg. of subsystems for global OEMs: WIL’s parent, in a bid to make the best use of WIL’s frugal engineering prowess, has

made concerted efforts in developing WIL’s technical capabilities, leading to WIL now aiding global development of vehicle control

sub-systems for global OEMs. In FY16, WIL has initiated "Lean Equipment Development center" for frugal, high quality, low cost

capital investments in new projects which conceptualizes designs and builds manufacturing lines for WABCO global locations. WIL

also opened a new facility in Chennai to expand capability for software engineering to support local design of new products,

applications and systems. The software talent pool in India has nearly doubled to ~250 engineers since 2010.

Leading to strong growth prospects for exports: Exports of both components and services have been on a strong footing,

growing at a CAGR of ~37% each (FY11-FY16). Given the above efforts, we believe that these will continue to grow meaningfully

going forward.

Increased focus on improving customer reach through increased touch points and new products – an important moat:

WIL is exploring further potential in retro fitment of advanced products like Air Disc Brakes, Electronically Controlled Air

Suspension. Also, distributor branches are increasing their presence in B & C towns, resulting in availability of genuine parts in

remote locations. WIL’s authorized service center network is also being expanded with ~200 service centers currently.

Focus on cost optimisation: The company has initiated several cost reduction and quality improvement activities during the year

including deploying global best practices like "VDA 6.3" standards, upgradation of 24 production lines for making them robust

enough to prevent generation of defects, usage of new-gen cutting to improve productivity and so on. In FY16, ‘other expenses’

saw a reduction despite the increase in royalty rates on the back of such cost reduction/quality optimisation measures, combined

with improved operating leverages.

1

MUKESH SARAF [email protected] +91 44 4344 0041

RAMAKRISHNAN SESHAN [email protected] +91 44 4344 0020Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

Stock performance (%)

1m 3m 12m

WIL 0% -4% 4%

Sensex 5% 8% -2%

BSEAUTO 6% 9% 8%

Date July 18, 2016

Market Data

SENSEX 27837

Nifty 8541

MC IN WIL IN

Shares o/s 19mn

Market Cap Rs. 107bn

52-wk High-Low Rs. 7,450-5,166

3m Avg. Daily Vol Rs. 30mn

Index member BSE 200

Latest shareholding (%)

Promoters 75.0

Institutions 10.4

Public 14.6

Company Update

WIL – Key takeaways from the FY16 Annual Report

Financial Summary

Year Revenues (Rs. mn) EBITDA (Rs. mn) EBITDA Margin Adj. PAT (Rs. mn) Adj. EPS (Rs.) P/E(x) EV/EBITDA(x)

FY16 18,383 2,929 15.9% 2,046 107.9 53.4 36.6

FY17E 25,072 4,203 16.8% 2,864 151.0 38.2 25.2

FY18E 32,676 5,515 16.9% 3,877 204.4 28.2 18.8

Page 2

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Details of finished goods sold% of FY16

revenueFY11 FY12 FY13 FY14 FY15 FY16 CAGR

Air assist and full air actuation systems 36.5% 5,615 6,728 5,114 4,166 5,835 6,713 3.6%

Spares 11.8% 1,391 1,450 1,689 1,800 1,990 2,170 9.3%

Exports of automotive components 30.3% 1,157 1,481 1,988 4,176 4,317 5,568 36.9%

Anti lock braking system 16.0% 545 421 382 316 574 2,947 40.1%

Sub-total (Net of excise duty) 94.6% 8,709 10,081 9,174 10,458 12,715 17,399 14.8%

Details of services rendered

Software services 2.3% 138 220 239 286 328 424 25.2%

Research and development services 0.7% 38 57 83 165 160 120 25.5%

Global business services 1.1% - 16 30 69 113 193 87.4%*

Test track usage and other service income 0.7% - - 56 54 78 122 30.1%*

Sub-total 4.7% 176 293 408 574 678 859 37.3%

Scrap Sales and others

Scrap Sales 0.4% 65 82 78 75 86 74 2.7%

Others 0.3% 0 0 0 0 0 51

Sub-total 0.7% 65 82 78 75 86 125

Total operating revenue 100.0% 8,950 10,456 9,659 11,107 13,480 18,383

Exports to Wabco Group companies and ABS applications have exhibited tremendous growth

Source: Company, Spark Capital Research

Note: * CAGR for Global business services and Test track usage/other service income is for 5 years and 4 years respectively

Page 3

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

ABS implementation in Oct15 has given further impetus to WIL’s content per vehicle,

significantly accentuating its revenue growth over MHCV production growth


21%27%

41% 52%

-40%

-20%

0%

20%

40%

60%

FY11 FY12 FY13 FY14 FY15 FY16

MHCV production YoY Growth % WIL OEM revenue (incl ABS) YoY Growth %

WIL has exhibited growth rates surpassing the underlying CV volume growth led by increasing content per vehicle

Redacted from the Annual report for FY16:

The implementation of the ABS legislation from the third quarter of 2015-16resulted in

increased business. Overall revenue from ABS for FY16 stood at Rs.2,947mn, a 413%

YoY growth compared to FY15.

Additionally, the company focussed on increasing the content per vehicle by introducing

new systems / technologies like wiring harness, pole wheels and Lift axle control

system.

The company has also expanded into new segments like off- highway, defense,

luxury bus, car and trailers.

Wabco has introduced/focussed on

increasing the penetration of

technologies/products like wiring

harness, pole wheels, Lift axle

control systems, AMT, Automatic

Slack Adjusters, Air Disc Brake,

higher capacity compressors etc.

This has enabled an strong increase

in content per vehicle and hence,

revenue outperformance in the past

two years

We understand that WIL’s first mover

advantage along with strong

distribution network for replacement

segment gives it an edge over its

major competitor – Knorr Bremse.

Page 4

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

In line with increasing capabilities, exports of components to Wabco entities globally has grown

strongly over the last five years


WIL meaningful ascent up the value chain aided by concerted efforts by the parent

WIL has progressed significantly up the value chain from being a supplier to domestic OEMs to

designing and mfg. of subsystems for global OEMs

Source: Wabco Investor Presentation July 2016, Spark Capital Research

“WIL has also commenced

supplies of slack adjusters

and double diaphragm spring

brake actuators to global

markets through the other

WABCO sites”

Source: WIL FY16 Annual report

1,181 1,548

1,988

4,112 4,333

5,542

0%

50%

100%

150%

-

2,000

4,000

6,000


Exports (Rs. Mn) YoY Growth (%)

• Per management, the

parent has played a

critical role in improving

the capabilities of WIL.

• The implementation of a

new mfg. philosophy,

“WABCO 2.0” helped WIL

to benchmark itself to

global requirements.

• Exports have helped in

building manufacturing

capabilities to meet global

standards.

Page 5

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

WIL occupies an important position in the Group’s overall scheme of things

Source: Wabco Investor Presentation July 2016, Spark Capital Research

Per mgmt. Indian engineers have played an important role in recently developed

products in terms of contributing the designing the assembly systems and

products. .

Significant portion of the coding work is done from India; also, 85% of global

software requirements are done through India.

WIL now enjoys an exalted status of being engaged in global /local product and system development

Page 6

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Revenue from services rendered (primarily to group companies) have exhibited strong growth


Details of services

rendered

% of FY16

revenueFY11 FY12 FY13 FY14 FY15 FY16 CAGR

Software services 2.3% 138 220 239 286 328 424 25.2%

R&D services 0.7% 38 57 83 165 160 120 25.5%

Global business

services1.1% - 16 30 69 113 193 87.4%*

Test track usage/

others0.7% - - 56 54 78 122 30.1%*

Total 4.7% 176 293 408 574 678 859 37.3%


Note: * CAGR for Global business services and Test track usage/other service income is for 4years and 5 years respectively

“In 2015, WABCO also opened a new facility

in Chennai to expand capability for software

engineering.

In India, software engineers also support

local design of new products, applications

and systems to meet the technical and

economic needs of customers in emerging

markets around the world. At the same

time, they continue to contribute to global

development of WABCO’s advanced

technologies.

WABCO (India) has more than doubled its

world-class software talent pool in India to

nearly 250 engineers since 2010”

Source: Wabco Holdings Inc., 10K

“During the year the Company has

initiated "Lean Equipment

Development center" for frugal, high

quality, low cost capital investments

in new projects. This centre also

conceptualizes designs and builds

manufacturing lines to be shipped to

various WABCO global locations”

Source: WIL, AR 16

176

293

408

574 678

859

0%

10%

20%

30%

40%

50%

60%

70%

-

200

400

600

800

1,000


Revenue from services (Rs.mn) YoY Growth (%)

WIL increasingly becoming an important centre for R&D and software services for the group

Page 7

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

WIL focused intently on growing its touch point network; this imparts an invaluable edge over competition

Growth in AM revenue aided by growing touch point penetration


Redacted from the Annual report for FY16:

In the Aftermarket, the company is exploring further potential in retro fitment of advanced products like Air Disc Brakes, Electronically

Controlled Air Suspension.

The company has indicated that its efforts in the Trailer segment have boosted the sales growth considerably and Trailer Anti-Lock Brake

Systems (TABS) and Trailer Electronic Brake Systems (TEBS) are also continued to be explored in this segment.

Distributor branches are increasing their presence in B & C towns and that is resulting in availability of genuine parts in remote locations.

WIL’s authorized service center network is expanding and currently WIL has 200 service centers with Pan India presence to cater to the

customer requirements

WIL believes that these initiatives would result in improved service practices, availability of genuine parts and generate additional and

thereby generate additional revenue for the company

1,525 1,609

1,934 2,040

2,326

2,623 25%

6%

20%

5%

14%13%

0%

5%

10%

15%

20%

25%

30%

-

500

1,000

1,500

2,000

2,500

3,000


Aftermarket revenue (Rs. Mn) YoY Growth (%)

Page 8

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

The impact of the increase in steel prices was offset by the reduction in employee costs and other expenses


Page 8

15.1%

15.9%

-100 bps

119 bps

66 bps

2015 EBITDA % Delta in raw material costs % Delta in employee costs % Delta in other expenses % 2016 EBITDA %

Impacted by the increase in

steel prices consequent to the

levy of import duties and MIP by

the government

The count of on-roll employees increased to 1515 as at Mar16 from 1,109 as at Mar15.

Also, the % increase in median remuneration of employees for FY16 was 16.07%.

However, details of casual employees is not available.

We believe that the reduction in employee costs as % of revenue is on account of improved

operating leverages.

Reduction in other expenses as % of revenue was led by reduction in stores and

spares, packing and forwarding and exchange losses which cumulatively reduced

by ~210 bps YoY. This was partially offset by an increase in royalty and provision

for bad debts which cumulatively increased by ~170bps in FY16

FY16 margin favorably impacted by cost reduction efforts and improved operating leverages

Page 9

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Page 9

The impact of the increase in Royalty rates and provision for doubtful debts was offset by reduction in packing and stores/spares expenses

Break down of other expenses FY15 FY16 FY15 FY16 Variance

Consumption of stores and spares 510 581 3.8% 3.2% -0.6%

Packing and Forwarding 473 525 3.5% 2.9% -0.7%

Other expenses 270 361 2.0% 2.0% 0.0%

Royalty 85 255 0.6% 1.4% 0.8%

Power and fuel 199 209 1.5% 1.1% -0.3%

Provision for doubtful debts and advances - 164 0.0% 0.9% 0.9%

Travel and Conveyance 132 135 1.0% 0.7% -0.2%

Machinery Repairs 73 103 0.5% 0.6% 0.0%

Rent 63 88 0.5% 0.5% 0.0%

Bad debts written off - 72 0.0% 0.4% 0.4%

Building repairs 47 63 0.4% 0.3% 0.0%

Data processing 37 43 0.3% 0.2% 0.0%

Rates and Taxes 19 40 0.1% 0.2% 0.1%

Research and development 28 38 0.2% 0.2% 0.0%

Exchange differences (net) 114 - 0.8% 0.0% -0.8%

Others 32 42 0.2% 0.2% 0.0%

Total 2,082 2,718 15.4% 14.8% -0.7%

Other significant cost reduction projects during FY16 included:

Usage of new generation cutting tools, thereby improving the productivity levels.

Undertaking energy saving projects like introducing

Adiabatic cooling systems for chillers &utilizing third party power to reduce

energy cost.

Replacing cartons with 100% returnable packing for delivery of materials to key

customers.

Truck load optimization, production optimization for voluminous parts at Pant

Nagar, Lucknow.

Quality improvement efforts initiated during the year

Rigorous usage of poka-yokes, utilization of statistical tools for process

optimization and control also contribute towards improving the product quality.

Deploying global best practices like "8 steps of Quality Fundamental", "VDA 6.3"

standards, helped WIL reduce the defects significantly.

60% of WIL’s assembly lines are certified for 8 steps of Quality fundamentals,

24 assembly lines were upgraded for making them robust enough to prevent

generation of defects. Also new warranty process to do level zero inspection at

customer end helped in speedy analysis and resolution of failures.

FY16 margin favorably impacted by cost reduction efforts and improved operating leverages

Page 10

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

-

50

100

150

200

250

300

FY13 FY14 FY15 FY16

Royalty (Rs. Mn) Royalty as % of total revenue

Sharp increase in royalty payments in FY16 in line with the revision

in royalty rates beginning Jan 16


-

20

40

60

80

100

120

140

160

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

FY10 FY11 FY12 FY13 FY14 FY15 FY16

Wabco Inc WIL

Forex fluctuations have not had a material impact in margin


WIL maintained its total R&D expenditure at ~ 1% of revenue in

FY16


7

62

22

103

(114)

84

0.1%

0.6%

0.2%

0.9%

0.8%

0.5%

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

1.0%

(150)

(100)

(50)

-

50

100

150


Forex gain (Loss) (Rs. Mn) % of revenue (RHS)

75

43

76

119

28 31 18

29

1.1%

0.7%

0.7%

0.8%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

-

20

40

60

80

100

120

140

FY13 FY14 FY15 FY16

R&D Exp. Rs. Mn (Revenue) R&D Exp. Rs. Mn (Capital)

Total R&D exp. as % of revenue

Movement in other key elements of cost

R&D expenditure (INR mn)


Page 11

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

CFO exhibited a strong improvement led by reduction in NWC days


Investments in fixed assets comprised primarily of investments in

P&M


Improvement in WC days led by increase in payable days and other liabilities


Page 11

5,378 5,976

4,728 536 35 41 38

507 44 47

FY

14 G

ross

Blo

ck P&

M

So

ftw

are

/Lic

en

ses

Offic

e E

quip

.

Oth

ers

FY

15 G

ross

Blo

ck P&

M

So

ftw

are

/Lic

en

ses

Offic

e E

quip

.

Oth

ers

47 41 31 29

66 69 72 73

21 22 23 20 41 41 47

62

10 9 8 7

83 81 71

53

-

20

40

60

80

100

FY13 FY14 FY15 FY16

Inventory days Debtor days

Loans and Advances (days) Creditor and other payables (days)

Provisions (days) Net working capital

While the major items of working

capital have remained largely

stable in FY16 (YoY), there has

been an increase in the creditor

and other liability days.

This has been led by an increase

in sundry creditors to Rs. 3.4bn

as at Mar 16 from Rs.1.8bn as at

Mar15 and also by the increase in

other current liabilities to Rs,

624mn as at Mar16 from

Rs.157mn as at Mar15.

However, a break down of these

other current liabilities is not

available.

902

1,430 1,242

2,465

677 608 725

881

225

822

516

1,584

83 81

71

53

-

10

20

30

40

50

60

70

80

90

-

500

1,000

1,500

2,000

2,500

3,000

FY13 FY14 FY15 FY16

CFO (Rs. Mn) Capex (Rs. Mn) FCFF (Rs. Mn) NWC days

Improvement in WC days also contributed to an improvement in CFO in FY16

Page 12

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Efforts on technology absorption and benefits derived

1. Efforts made towards technology

absorption

a. Development of weather resistance PP

material for palm coupling shutter application

b. Development of surface protection for car

compressor bracket application

c. Development of Polyethylene coating for

(Dual Air Over Hydraulic) DAOH application

d. Development of surface protection for

ProVia Tristop

e. Development of O-ring for ProVia application

f. Durability test rig with active functionality on

control algorithm.

g. Development of accelerated durability tests

for Aftermarket Product Range

1. Efforts made towards technology

absorption

a. Mathematical model for NLC II 230

cc compressor.

b. Development of PE coating.

c. Development of Cataphoretic electro

coating process.

d. Development of Laser forming.

e. Automatic data acquisition for SBA

endurance.

f. Rubber parts for wider temperature

applications in VBV.

1. Specific areas in which R & D is carried out by the Company.

Existing activities:

a. Products launched

Higher capacity compressors, Lift axle control valve, New

actuators and brake chambers, Type 22, 24 brake chamber,

Integral pedal unit, 3" clutch servo, Automatic slack adjuster,

D2 Governor valve, Air tanks

b. New high speed test track formed to facilitate commercial

vehicle homologation of ABS;

c. Pune Engineering Centre established to support customers in

the western part of the country;

d. New test facilities added to support product validations;

e. Hydraulic booster performance facility is commissioned to

augment hydraulic testing capabilities.

FY16 FY15 FY14

2. Benefits derived

a. Improved sales and market share with

localized products

b. Improved competency for designing

products for global market.

c. Enhanced skillset and knowledge in new

technology for safety and fuel saving.

d. Reduction in lead time for products to reach

the market.

e. Enhanced corrosion resistance & surface

protection, leading to better Product life.

2. Benefits derived

a. Market expansion and improved

competitive position through

significantly improved products for

new markets.

b. New opportunity in global market by

introducing new range of foot brake

valve and relay valves.

c. Improved competency for designing

products for global market.

d. Acquiring competency in new areas

like exhaust pressure modulator.

2. Benefits derived as a result of R & D:

i. Design & development of cost competitive and value added

products for emerging markets to acquire new business

opportunities.

ii. Innovative products for entering into global market.

iii.Exclusive design and development of cost competitive global

aftermarket products to improve profitability.

iv. Acquiring competency in new areas like Hydraulic Brake

Boosters.

Page 13

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

US29.8%

EU49.8%

Asia19.1%

Others1.3%

Exports to group companies see a pronounced shift towards US based Wabco entities


Exports to group companies FY11 FY12 FY13 FY14 FY15 FY16

WABCO Europe BVBA, Belgium 159 288 726 1,534 1,241 1,976

WABCO North America L.L.C - - 4 365 596 806

WABCO Compressor Mfg. Co, USA 299 491 476 697 698 797

Meritor WABCO Vehicle Control Systems, USA 20 48 154 632 714 676

WABCO Automotive B.V, Netherlands - - - - 107 190

WABCO Japan Inc. Japan - - 4 82 114 109

WABCO Polska sp.z.o.o, Poland 132 256 238 165 167 109

WABCO China Co Ltd, China 196 98 61 118 92 93

WABCO Logistics GmbH, Germany 109 68 50 109 139 51

WABCO do Brasil Industria e Comercio.de Freios Ltda, Brazil 12 20 23 40 48 46

WABCO (Thailand) Limited, Thailand - - - 13 44 43

WABCO France S.A.S, France 88 126 137 210 145 25

Others 53 50 39 102 94 48

1,068 1,446 1,912 4,067 4,201 4,970

US45.9%

EU47.6%

Asia5.4%

Others1.1%

US47.8%

EU43.2%

Asia7.7%

Others1.2%

FY11 FY15 FY16

Exports to US based Wabco entities has been on the rise

Page 14

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Nature of services FY11 FY12 FY13 FY14 FY15 FY16

Software services

WABCO Development Gmbh, Germany 157 262 239 286 349 424

Global business service

WABCO Europe BVBA, Belgium - - - - 91 193

Research and development services

WABCO Europe BVBA, Belgium 21 57 83 165 149 120

Shandong Weiming Automotive Product Co. Ltd, China - - - - 11 -

WABCO Development Gmbh, Germany 17 - - - - -

Sub total 38 57 83 165 160 120

Shared services

WABCO Europe BVBA, Belgium - 16 30 69 - -

Test Rig Income

WABCO Logistics (Qingdao) Co. Ltd - - - - - -

WABCO Reman Solutions - - - 1 - -

WABCO Asia Private Ltd,, Singapore - - - - 0 -

WABCO (Thailand) Limited, Thailand - - - - 0 -

WABCO Compressor Mfg. Co, USA - - 4 - 1 -

Sub total - - 4 1 1 -

Tool development

WABCO Japan Inc - - - - - 0

WABCO Logistics GmbH - - - 2 - -

WABCO Polska sp.z.o.o, Poland - - 1 - - -

WABCO do Brasil Industria e Comercio.de Freios Ltda, Brazil - - - - - -

Meritor WABCO Vehicle Control Systems, USA - - 9 1 - 2

WABCO France S.A.S, France - - - 25 5 -

Sub total - - 10 28 5 2

Travel expenses

WABCO (Thailand) Limited, Thailand - - - - 0 -

Other service income

Meritor WABCO Vehicle Control Systems, USA - - - - - 11

196 335 366 548 607 749

WIL becoming a hub for R&D and software services for the Wabco group

Page 15

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Financial Summary

Abridged Financial Statements Key metrics

Rs. mn FY15 FY16 FY17E FY18E FY15 FY16 FY17E FY18E

Profit & Loss Growth ratios

Income from operations 12,715 17,399 23,987 31,391 Revenues 21% 36% 36% 30%

Other operating income 764 984 1,085 1,285 EBITDA 12% 44% 43% 31%

Total Income 13,480 18,383 25,072 32,676 PAT 3% 70% 40% 35%

Total operating expenses 11,446 15,453 20,869 27,161 Margins

EBITDA 2,034 2,929 4,203 5,515 EBITDA 15.1% 15.9% 16.8% 16.9%

EBIT 1,567 2,367 3,617 4,858 EBIT 11.6% 12.9% 14.4% 14.9%

Profit before tax 1,766 2,712 3,966 5,351 PAT 9.0% 11.1% 11.4% 11.9%

Tax 560 665 1,102 1,474 Leverage & WC ratios

Profit after tax 1,207 2,046 2,864 3,877 Debt to equity 0.0 - - -

Balance Sheet Current ratio 2.5 2.1 2.4 2.3

Netw orth 8,630 10,540 13,152 16,778 Working capital days 49 35 45 45

Loan funds 0.3 - - - Performance & turnover ratios

Sources of funds 8,795 10,639 13,252 16,877 RoACE 13% 18% 22% 23%

Net Block 3,237 3,556 3,770 3,914 RoAE 15% 21% 24% 26%

Capital WIP 176 176 176 176 Total asset turnover 1.3 1.5 1.7 1.7

Investments 392 2,202 2,202 2,202 Fixed asset turnover 2.7 3.2 3.8 4.4

Current assets, loans & advances 7,329 9,306 11,860 16,293 Valuation metrics

Current liabilities & provisions 2,340 4,602 4,757 5,708 Current price (Rs.)

Net Current Assets 4,989 4,705 7,103 10,585 Shares outstanding (mn) 19.0 19 19 19

Application of funds 8,795 10,639 13,251 16,877 Market Capitalisation (Rs.mn) 106,769 106,769 106,769 106,769

Cash Flows (Rs. mn) Enterprise value (Rs.mn) 104,538 104,638 103,176 100,880

Cash flow s from operations 1,242 2,705 2,399 3,347 EV/EBITDA (x) 51.4 35.7 24.5 18.3

Capex (727) (881) (800) (800) Per-share earnings (Rs.) 63.6 107.9 151.0 204.4

Cash flow s from investments (451) (2,691) (800) (800) P/E (x) 88.5 52.2 37.3 27.5

Free Cash Flow 515 1,824 1,599 2,547 Price to Sales 7.9 5.8 4.3 3.3

Cash flow s from financing (114) (115) (137) (251) EV/Sales (x) 7.8 5.7 4.1 3.1

Cash generated during the year 677 (101) 1,462 2,296 Dividend yield 0.1% 0.1% 0.2% 0.2%

5,629

Page 16

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Page 16

Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in

investment banking, investment advisory and institutional equities and infrastructure advisory

services. Spark Capital is registered with SEBI as a Stock Broker and Category 1 Merchant Banker.

We hereby declare that our activities were neither suspended nor we have defaulted with any stock

exchange authority with whom we are registered in the last five years. We have not been debarred

from doing business by any Stock Exchange/SEBI or any other authorities, nor has our certificate of

registration been cancelled by SEBI at any point of time.

Absolute Rating Interpretation

BUY Stock expected to provide positive returns of >15% over a 1-year horizon

ADD Stock expected to provide positive returns of >5% – <15% over a 1-year horizon

REDUCE Stock expected to provide returns of <5% – -10% over a 1-year horizon

SELL Stock expected to fall >10% over a 1-year horizon

Spark Capital has a subsidiary Spark Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and is registered with SEBI as

Investment Advisor. Spark Capital has also an associate company Spark Infra Advisors (India) Private Limited which is engaged in providing infrastructure advisory services.

This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This document is

provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment or financial

advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document.

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

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availability or use would be contrary to law, regulation or which would subject Spark Capital and/or its affiliates to any registration or licensing requirement within such jurisdiction. The securities

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of and to observe such applicable restrictions. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or

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Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this document. Spark Capital , its

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mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this

report.

0

2,000

4,000

6,000

8,000

Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16

Rs.

Price Target

WABCO India – 3 Year Price and Rating History Report Date Price Target Reco.

23/May/16 5,800 6,200 Add

12/Apr/16 5,725 6,165 Add

01/Feb/16 5,621 6,550 Buy

03/Aug/15 6,025 6,500 Add

25/May/15 5,625 5,915 Add

19/Mar/15 5,500 5,900 Add

27/Jan/15 5,000 5,223 Add

22/Oct/14 3,655 3,780 Add

23/Jul/14 3,550 3,780 Add

03/Jul/14 3,450 3,780 Add

10/Jun/14 2,656 2,700 Add

30/Jan/14 1,850 2,000 Add

Spark Disclaimer

Page 17

Wabco India CMP

Rs. 5,629

Target

Rs. 6,200

Rating

ADD

Page 17

Disclaimer (Cont’d)

This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark Capital. While we would

endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information. Also, there may be regulatory, compliance or

other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective directors, employees, agents or representatives shall be

responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents or any errors or discrepancies herein or for any decisions or actions taken in

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incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

Disclosure of Interest Statement Yes/No

Analyst financial interest in the company No

Group/directors ownership of the subject company covered No

Investment banking relationship with the company covered No

Spark Capital’s ownership/any other financial interest in the company covered No

Associates of Spark Capital’s ownership more than 1% in the company covered No

Any other material conflict of interest at the time of publishing the research report No

Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:

Managing/co-managing public offering of securities

Investment banking/merchant banking/brokerage services

Products or services other than those above

In connection with research report

No

Whether Research Analyst has served as an officer, director or employee of the subject company covered No

Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; No

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The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s

compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.

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This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under the Securities

Exchange Act of 1934, as amended) only by Auerbach Grayson, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act of 1934, as amended).

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restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Auerbach Grayson, LLC and Spark Capital Advisors

(India) Private Limited are permitted to provide research material concerning investment to you under relevant legislation and regulations.

Documents

CMP Target Rating Wabco India Rs. 5,629mailers.sparkcapital.in/uploads/Mukesh/Wabco FY16 AR...Page 2 Wabco India CMP Rs. 5,629 Target Rs. 6,200 Rating ADD Details of finished goods