From the Managing Director’s Desk

Friends,Greetings for the New Year!

With yet another dramatic year coming to an end, wecommence 2018 with a lot more positive energy and enthusiasm. 2017 wasindeed action-packed; that had to bear the shocks of the aftermath ofdemonetisation to the mid-year rollout of new indirect tax system– GST.

I ‘d like to present few factors which may be the key triggers to watch out for equityinvestments in 2018. The Union Budget will be the immediate focus of the market going into the newyear where many expect a populist tone from the government. State assembly elections are due in eightstates in 2018 and how BJP fares in the state elections will influence the market direction. With regardsto the monetary policy, some expect the RBI to stay on an extended pause, while others fear it raisingrates. Corporate earnings growth will be the key factor to watch out where Q3 and Q4 appear to bebetter than H1FY18. On the Global front, the market will lookout for any hawkish commentary fromthe US Federal Reserve. In that backdrop, we think we are now set for a very huge up-move and mustgear-up to reap the upcoming benefits of the markets.

Valued investors like you help us grow as an organization and we intend to serve you in thebest way we can. We have heard you and are constantly changing according to your prerequisites andaspirations. With so many new and exciting initiatives and happenings this year, we are treading thepath to fuelling your dreams and will continue to support you in as many innovative ways as possible.

Happy investing…

TM

The year had seen India climbing to the 100th position in the World Banks’ easeof doing business, i.e. 30 notches up from the last year and highest ever since2014. Similarly, Moody’s upgraded India’s sovereign ratings to Baa2 from itslowest investment grade (Baa3) after a gap of 13 years.

Warm Regards,Anil Gaggar

161% 140% 95% 93% 91%

Hester Biosciences

Ltd.

Supreme Petrochem

Ltd.

NACL Industries

Ltd.

Alicon Castalloy

Ltd.

Gufic Biosciences

Ltd.

Progressives’ Top Five of the year 2017

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Global Market Performance -2017

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Country Return %

Hong Kong 36%

India* 29%

Brazil 27%

US 25%

Philippine 25%

South Korea 22%

Japan 19%

Italy 14%

Germany 13%

France 9%

India* Ranked # 2

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COVERAGE UNIVERSE VALUATIONS

Company Reco at CLS Target Price (Rs) Appreciation(Rs) (Rs) T1 T2 T3 T4 T5 T6 T7

Supreme Petrochem Ltd 77 382 120 150 200 275 350 500 - 396%Shanthi Gears Ltd 107 163 150 200 - - - - - 53%Hind Rectifiers Ltd 69 133 110 140 175 - - - - 92%KCP Ltd 71 137 105 150 - - - - - 93%Harita Seating Systems Ltd 266 958 400 600 750 900 1150 260%Hester Biosciences Ltd 565 1866 750 875 1150 1500 1750 2200 - 230%Rallis India Ltd 181 265 260 300 - - - - - 46%The Hi-Tech Gears Ltd 298 565 450 600 - - - - - 90%Bharat Bijlee Ltd 787 1296 1100 1500 2000 - - - - 65%Tamil Nadu Newsprint & Papers Ltd 224 446 350 450 - - - - - 99%Triveni Turbine Ltd 92 134 135 175 - - - - - 46%Siemens Ltd 1128 1237 1500 - - - - - - 10%Hikal ltd 143 234 200 250 325 - - - - 64%Aksh Optifibre Ltd 15 35 24 35 45 - - - - 133%GMM Pfaudler Ltd 332 828 500 700 800 1000 - - - 149%Alicon Castalloy Ltd 288 702 450 600 750 - - - - 144%Premier Explosives Ltd 350 436 450 525 - - - - - 25%Gufic Biosciences Ltd 50 127 75 100 140 - - - - 155%Excel Industries Ltd 380 629 550 650 800 - - - - 66%Vesuvius India Ltd 1165 1391 1500 - - - - - - 19%Munjal Showa Ltd 191 285 250 300 - - - - - 49%Bharat Rasayan Ltd 2747 4174 3500 4250 5000 - - - - 52%Alkyl Amines Chemicals Ltd 391 670 550 700 - - - - - 71%Grauer & Weil (India) Ltd 45 70 65 80 - - - - - 57%

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COVERAGE UNIVERSE VALUATIONS

TRIL Stock Split 10:1Gulshan Polyols Stock Split 5:1Nesco Stock Split 10:2IHP Bonus 1:1EIL Bonus 1:1Castrol Bonus 1:1

Company Reco at CLS Target Price (Rs) Appreciation(Rs) (Rs) T1 T2 T3 T4 T5 T6 T7

Texmaco Rail & Engineering Ltd 91 112 125 170 - - - - - 23%Nagarjuna Agrichem Ltd 29 56 45 60 - - - - - 93%Simplex Infrastructure Ltd 540 582 700 - - - - - - 8%Sadhana Nitrochem Ltd 67 94 100 - - - - - - 40%ITD Cementation India Ltd* 158 215 225 - - - - - - 36%Westlife Development Ltd 266 330 350 425 - - - - - 24%Federal Mogul Goetze (India) Ltd 540 531 750 - - - - - - -2%Cupid Ltd 286 303 340 - - - - - - 6%Dynamatic Technologies Ltd 2160 2172 3000 - - - - - - 1%Hitech Corporation Limited 175 181 230 - - - - - - 3%NRB Bearings Limited 138 173 200 - - - - - - 25%Kokuyo Camlin Limited 132 133 175 - - - - - - 0%Timken India Limited 883 884 1200 - - - - - - 0%The Indian Hume Pipe Co Ltd 171 454 500 600 - - - - - 166%Engineers India Limited 211 200 200 250 - - - - - 90%TRIL 30 42 40 55 - - - - - 40%Gulshan Polyols Ltd 78 86 110 - - - - - - 10%Nesco Ltd 479 528 640 - - - - - - 10%Castrol India Ltd 223 193 275 - - - - - - -14%

Product range is the key to success: The major products of Supreme Petrochem Limited (SPL) include range of polystyrene, GPPS(General Purpose Polystyrene), Specialty PS, HIPS (High Impact Polystyrene), EPS (expandable polystyrene) and XPS (extrudedpolystyrene). Of this, SPL has forward integrated to provide value added products like XPS and EPS. XPS foam is an insulating materialfor commercial, industrial and residential structures, having the properties of resistance to moisture, compressive strength as wellresistance to biological growth and corrosion. Changes in lifestyle with more inclination towards packed or canned food will increasethe consumption of EPS as a product. Packaged or canned food is going to be a means to life with intense refrigeration to make lifesimpler, the key to penetration of EPS into the market. The value adds further i.e. EPS and XPS would have applications in real estate,construction, cold warehouses. However, although these are value added products, for capturing the market, these forward integratedproducts need to be sold under proper branding. Polystyrene (PS): The company expects the domestic PS market to grow by 5-6% inthe current year. Expandable Polystyrene (EPS): EPS 313 panel is one of the technologies selected under the Pradhan Mantri AwasYojna. The Government of Maharashtra has recently issued directives to the concerned authorities to start immediate implementationof the green norms while sanctioning building permissions. Speciality Polymer and Compounds (SPC): The company has a total ofnearly 25 distributors pan-India. The company plans to increase the number of distributors to 60 by 2019-20. This business is expectedto grow at 30% CAGR basis in next 5 years. Styrene Methyl Methacrylate (SMMA): SMMA is a new product for the Indian markets andthe company is the first one to make it in India. The company was ready for commercial production of SMMA by early February 2017after trial runs on the modified PS line with the ability to swing between PS and SMMA. It is an economical alternate to certainapplications of PMMA, Polycarbonate and clear ABS. SMMA has the advantage of ease of processing, lower density and is also suitablefor food contact applications.

Financials: The Company is virtually a debt free company. For FY18, the company intends to incur a capital expenditure on newextrusion lines for colour master batches, colour lab, polymer compounding line and warehouse for SPC plant as well as a warehousefor the XPS plant. Company shall also be upgrading some sections of PS plant to improve efficiency in operations. The total capitalexpenditure for FY18 is estimated at Rs300mn. GST in the longer run will have no or little effect impact on the bottom-line.

Outlook and Recommendation: There has been a gradual improvement seen in the growth of the company. With increasing visibility ofthe product offerings; the company should be able to ramp up on the market share as well the customer base going forward. We hadinitiated our report with a BUY call with a target of Rs120, revised to Rs150, Rs200, Rs275 and Rs350. We now stand at a revisedtarget of Rs500 over a 12 months’ horizon.

Supreme Petrochem Ltd.CMP: Rs382 |Target: Rs500 |Potential upside: 31%

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Water theme, going strong: With the diversified range of products catering to almost every water management need, Indian HumePipes Co Ltd (IHP) undertakes water supply projects for drinking water, irrigation water, sewer and drainage pipelines for cities andtowns. It also designs and installs penstock pipes required for hydroelectric projects and cooling water pipelines for thermal powerplants. The Company has been working on many Water Supply Projects and Drainage Schemes each of which are progressing welland/or nearing completion.

Another business line- Railways as customers: IHP has been supplying millions of concrete sleepers for track modernization of Railwaysin India, thereby playing a key role in improvising the country's infrastructure across different fields of Water Supply, Irrigation,Drainage, Power Generation and Rail transport.

Land Bank: Besides the strong business in the water infrastructure space, the other add-on to the prospects of the company is the hugeland bank that the company is sitting on. IHP has different land parcels (in prime areas of Badarpur (near Delhi,) Bangalore, Hadapsar(Pune) and Mumbai) which it plans to sell through joint development. The conservative value of the land bank should be aroundRs10bn. The development of Company’s land at Hadapsar (Pune), Wadala (Mumbai) and Badarpur (New Delhi) are at initial stages ofobtaining development related approvals from the Authorities.

Financials: The company has been gradually improving on the margins backed by the faster execution and operational efficiencies. Ithas been consistently adding to the order book, one of the important factors to start contributing to the company's bottom-line overthe next two to three years. Besides, the cash flows from the land development should help in effective debt management.

Outlook and Recommendation: The growth prospects of the company remains intact with the strong order book backing across thedifferent projects Pan India evident through the multi locational robust order book breakup of the company. It remains the perfect pickfor the water management theme. Post our recommendation the company has rewarded the shareholders with a bonus issue in theratio of one share for each share held. We had initiated a BUY call on the stock with a target price of Rs475(cum bonus) revised toRs650(cum bonus) and then to Rs800(cum bonus) , all of which was achieved. We had revised target of Rs500(post bonus) which isalso achieved. We further maintain our call and revise the target to Rs600 (post bonus) over a 12 months horizon.

Indian Hume Pipes Co. Ltd.CMP: Rs341 |Target: Rs600 |Potential upside: 32%

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Positives in Railways, positive for the company: With almost 70% of the revenues coming from the Railways, positives in the budgetplan and increased focus towards improvisation of Railways directly benefits the company. Hind Rectifiers Limited (Hirect) stands strongwith all that is required for tapping the opportunities through the growth in the railway sector.

Diversification across industries: The products of the company can cater to varied industries like Railways, telecom, defense, power,infrastructure, metals, heavy equipments to mention a few. However, the focus has been on the major revenue contributors namelyRailways and Power and Capital goods. Going forward, in order to reduce the dependency on a single industry that limits the clientbase, the company has started concentrating on increasing exposure towards other industries as well.

Collaborations and acquisitions: With the increased focus towards the export markets; the company has received orders worthRs650lacs against the average export turnover of Rs100lacs achieved in last 5 years. In line with this, the company has acquiredGauranga Soft-Tech Pvt Ltd and Gauranga Systems Pvt Ltd, to help develop software and hardware for the company that will reduce thecost of the existing and additional products that are under development. The Company has also signed an agreement for manufactureof IGBT (insulated gate bipolar transistor) based converters required for Indian railways for 3 phase locomotives.

Financials: There is a turnaround expected in the company with regards to the growth in turnover as a result of expected increase inthe order book particularly from Railways. The operating margins are also expected to improve in tandem with the likely lucrative orderbook and focus towards other sectors besides the Railways. The performance in the first two quarters is the proof of the pudding forthe above statement as losses have reduced when compared to the corresponding period of previous year. Recently, in December2017, the company has raised approximately Rs120mn via right issues. The proceedings will be used to reduce the debt, for generalworking capital requirements and corporate purposes.

Outlook and Recommendation: There is a gradual improvement seen in the operating performance of the company. With the pickup inthe orders from the Railways (their main customer), there has been a ramp up in the business for the company, reflected through thequarter results as well. The growth expected by the rail sector augurs well for the long-term prospects of the company. We hadinitiated BUY call on the stock with the target price of Rs110 and after achieving another revised target of Rs140, we maintain therevised target to Rs175 seeing the future potential of the company.

Hind Rectifiers Ltd.CMP: Rs133 |Target: Rs175 |Potential upside: 32%

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Caters to different industries: Shanthi Gears Limited (SGL) caters to an array of industries in infrastructure, defence, railways, power etcthat provides the company with a diversified clientele mitigating the risk of dependency on a single client for revenues, also mitigatingthe risk with the down turn in any particular industry.

Emphasis on reviving business sectors: There has been a slow but gradual pick up in the investment cycle across sectors ofdefense/railways, power and windmills, with emphasis of the government on the development of renewable energy theme especiallywind and solar power. SGL plays an indirect role in the wind energy theme by providing gears to wind and solar companies. Thecompany is also investing in building strong capabilities to grow in the planetary gearboxes segment. The company stands strong tocapitalize on the emerging opportunities from different sectors like Infrastructure, Railways and Make In India based on the on-goingcreation of distinctive competencies. Expectations of a more conducive economic environment especially with the initiatives of thegovernment to revive manufacturing growth in India should augur well for the company.

Margin improvement: After the change in the management, SGL is transforming into a customer centric organization. Holding strongonto the non-standard gears segments, it has also gripped onto customized gears segment, large size gearboxes and planetary gearboxes, which are high margin products. This shift in strategy is affecting the turnover in absolute value terms but it is helping in gettingbetter margins at the operating level. The company continues to remain focused on expanding its customer base, enhancing its dealerand service network and improving the production capabilities through investments in modern technologies.

Land bank- An Asset: The company has total of 80-100 acres of surplus land (from the close down of factories) which leaves it withhuge scope for expansion. The company does not intend to dispose the land in near future.

Financials: SGL is a debt free company. It has a healthy balance sheet, strong cash flow, surplus land and improving ROE.

Outlook and Recommendation: With the uptick in the economy, there are growth opportunities being passed to the company tocapitalize on. There has been positive restructuring of the business activity with focus on high margin products, evident through the lastcouple of quarter’s performance. The long term prospects remain intact. We had initiated a BUY call on the stock with initial targetprice of Rs150 which is further revised to Rs200 and maintain the same.

Shanthi Gears Ltd.CMP: Rs 163|Target: Rs200 |Potential upside: 22%

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Triggers for Growth- Power: The Power division of the company is majorly for captive consumption. KCP has a 18MW thermal powerplant at Muktyala that helps in providing continuous power to the cement units and help insulating its production from the power cutsthat the region often faces. The company is also now in a position to sell some of its surplus power to state government grids likeAPTRANSCO (Andhra Pradesh Transmission Corporation). Hydel unit has been disappointing, however wind, thermal and solar aresatisfactory.

Engineering and Cement: The engineering division of the company continues to struggle awaiting an uptick in the economic activities.The other major contributor to the revenues is the cement segment (around 80-85% of its revenues from the cement business). Thebrown field expansion being undertaken by the company, expected to be completed by mid 2018-19 should lead to ramp up in thevolumes.

Other key areas: The company has a joint venture namely Fives Cail KCP Ltd. Fives Cail specializes in engineering and the design aspectsof sugar plants in order to optimize process efficiency of sugar machinery. It does not have any manufacturing facilities of its own, andhence sub-contracts critical equipment manufacturing with KCP. Through the subsidiary KCP Vietnam, the company has presence in theVietnam sugar industry. The expansion of capacity has been completed and is operational with further expansion on the cards. Thecompany also has presence in the hospitality sector through the four star hotel project which is picking up on occupancy gradually.

Financials: Value unlocking for the investors can happen if and when the company thinks of de-merging its businesses into independententities. This process would help give accurate discounting for each of its business segments. We maintain our stance on the same.Further, the improving capacity utilizations led by the expansions and high operating leverage should lead to improvement in theoperating margins going forward.

Outlook and Recommendation: With the government initiatives been taken across all the key industries for the overall economicboost; the company stands strong to benefit from the same. Also at the company level, there are various plans chalked by the companythat should help it scale its business as well as reach across different industries. We had initiated BUY call on the stock with targetprice of Rs105 and revised it to Rs150 and maintain the same.

KCP Ltd.CMP: Rs 137|Target: Rs150 |Potential upside: 9%

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Growth through different business segments: Harita Seating Systems Limited (HSSL) is a part of USD7bn TVS group. It providescomplete seating solutions for driver and cabin seating for commercial vehicles, tractors and construction equipment, as well aspassenger seats for buses across all segments. The company is a leader in the bus passenger seats and has a dominating position in thedomestic tractors segment.

Potential Growth Triggers: High Speed Rail (HSR) projects: On a global level the governments of various nations are activelyparticipating to develop convenient and faster modes of transportation. One of the key initiatives is the investments in the high-speedrail (HSR) projects that are being undertaken by governments across different developed and developing countries.

Increase Market Share in Tractor Segment: The company aims to take advantage of the upcoming growth in the tractor industry byoffering platform products to leading tractor OEMs and thereby looks forward to win a large share of domestic sales.

New Products Launches: The company has launched new products in North India to further strengthen its leadership position invarious segments.

Key role played by the subsidiary: Harita Fehrer Ltd is a joint venture between Harita Seating Systems Ltd and F.S Fehrer AutomotiveGmbH, one of the market leaders in automotive foam business in Europe. Harita Fehrer is a leading supplier of polyurethane solutionsto automobile industry in India.

Financials: An important financial trigger is that the company is virtually debt free and has shown consistent growth in sales coupledwith improvement in the operating margins. Over the past 2 years, EBITDA margins has increased by 420bps from 3.8% in FY15 to 8.0%in FY17. Further, the strong presence of subsidiary in the European market has been adding 45-50% revenues to the consolidatedearnings.

Outlook and Recommendation: This stock has been one of the star performers in our recommended list. There has been a gradualimprovement in the EBITDA margins reported by the company over quarters. We initiated BUY on the stock with the target price ofRs400, Rs600 ,Rs750 and Rs900 achieved. We further revise the target to Rs1150 over a 12 months’ horizon.

Harita Seating Systems LtdCMP: Rs958 |Target: Rs1150 |Potential upside: 20%

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Hester Biosciences Ltd.CMP: Rs1866 |Target: Rs2200|Potential upside: 18%

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Animal healthcare in focus: HBL is the only listed Indian company which is exclusively involved in animal health. The product portfolioincludes vaccines, medicines, feed supplements and disinfectants. HBL offers nearly 47 animal vaccines and 35 animal health products.

Unique Remedies: Peste des Petits Ruminants (PPR) is a highly viral and contagious disease that occurs in goats and sheep withmortality rate of nearly 80 percent in acute cases. Currently there are no medications to treat this disease. The only way to prevent thedisease is through vaccination that boosts immunity. HBL is the first in India to commercially manufacture Goat Pox vaccine, (LiveUttarkashi strain). Goat pox is a viral disease in goats and sheep’s and besides been contagious, goat pox has a 100% mortality rate. HBLis in the process of developing a thermostable PPR vaccine to overcome the issues related to cold chain challenges in rural areasworldwide. Trials are at the moment undergoing and thermostable PPR vaccines.

Upcoming Boosters: The company has recently launched the diagnostic division and is anticipating the sales to commence fromQ4FY18. Management indicated the operations for the Nepal plant have been moving slower than forecasts. The wholly ownedsubsidiary of the company i.e. Hester Biosciences Africa Limited is currently undertaking a market survey towards setting up an animalvaccine manufacturing unit in Tanzania. The Management foresees, the large animal vaccine business to have a better potential forimproving the profitability of the company. Hester is focusing on the rural India via initiatives like creating awareness and strengtheningthe distribution channel. The company is also working with GALVmed and with International Livestock Research Institute in Africa toassist development of distribution networks. Hester is already working on the trials for thermostable vaccines in the central Africanregion. The progress with the PPR tenders is going strong; this appears to be a brighter spot in the next 9-12 quarters. The market forBrucella Abortus vaccine is growing. In the long run, the company will be focusing on registering patents for recombinant vaccines.

Financials: HBL was a single segment (poultry vaccines) and in the recent past developed more product segments like large animalvaccines (PPR and Goat Pox). The benefits of the newly commissioned Nepal plant are yet to be received. The company is constantlystriving towards effective efforts for improving its margins.

Outlook and Recommendation: HBL is very bullish on the progress and the product PPR vaccines. The commencement of the newplant located in Nepal for manufacture of PPR vaccine shall kick start and accelerate growth for the company. The increased sales oflarge animal vaccines coupled with on-going process towards rationalising the product mix are some of the main drivers for growth ofthe company. All these factors summed together maintain our conviction in the stock and compels us to maintain a Buy on the samewith sixth revised target price of Rs2200 with a horizon of 12 months.

Crop protection- Domestic and International: The company caters to the demands of different crop protection products through thedomestic as well as international arms. On the Domestic front, Rallis has a strong presence in the crop protection market through itswide range of products. On the International front, the company caters to the demand for different crop protection products in theinternational markets. Rallis has been undertaking registrations of different new products through the division. The company expectsthe crop protection segment to grow at a rate of 8-10% and seed and plant growth nutrients to grow at 10-12%.

Non Pesticide Portfolio (NPP) segment: Through this segment, Rallis caters to the different needs of the farmers’ community otherthan the crop protection requirements, i.e. it is a one-stop solution for agricultural needs. It remains as the focus area for the company.Metahelix manufactures hybrid seeds for paddy, bajra and maize, major emphasis on the Kharif season. It has launched about 11 newproducts in FY17.

New product launches continue: Over the last 12-18 months, the company has launched many new products. Rallis has a strongportfolio of innovative new products to offer to the industry. The company is quite pro-active in learning the changing market scenarioand introducing new products to its basket regularly.

Contract manufacturing: The company sees huge growth potential in the contract manufacturing segment. With the Dahej plant, thecompany has equipped itself to grab the growth potentials.

Financials: There has been good monsoons in the current financial year and the impact of this shall be visible in the coming quarterlyperformances.

Outlook and Recommendation: With a positive outlook in terms of the monsoons and the efforts by the company in terms of thetechnical growth, product launches and growth across different segments; going forward, one can expect the company to perform well.We maintain our Buy call on the stock with a revised target price of Rs300 (earlier achieved target of Rs260) over 12 months.

Rallis India Ltd.CMP: Rs265 |Target: Rs300 |Potential upside: 13%

TM

Full-fledged assembly supplier: Intuited as a gears and transmission equipment supplier, the company has expanded its portfolio ofproducts and customer base to the extent that it can claim itself as a full-fledged experienced assembly supplier. The company has alsostarted supplies of counter shafts, main shafts, kick starters assemblies to major OEM players in the two-wheeler segment.

Ramping up for global presence: The company has been working on increasing its focus towards a global presence. Proof to thepudding is the Teutech Industries and group companies acquisition, an attempt to be part of the Global Value Chain (GVC). This wouldstrengthen its global presence in the essential geographies.

Second line of growth: Robotics and e-engineering: At the consolidated level, the company is a complete solution provider via thedifferent subsidiaries. Hi‐tech e‐Soft: is the engineering services arm of the company, focused on high fidelity solutions for the range ofclients. It offers all from conceptualizing products to the service support needed. It offers services in Engineering analysis, Factoryautomation, Industrial and product design and different software services. Hi‐tech Robotic Systemz Limited (HRS): is an independentsystems venture raised by an internationally reputed engineering conglomerate of India. This division is mentored by technocratshaving experience in the field of robotics, artificial intelligence, biometrics, computer vision and automotive embedded systems.

Key Products and Customers: The major products of the company include two-wheeler transmission components, engine andtransmission components for commercial and passenger vehicles, precision forgings etc. Hero Honda is one of the key customers forthe company which procures its transmission component requirements from only two suppliers of which THGL is one.

Financials: The company continues to be debt free. The consolidation in operations has started showing results with good growth inrevenues as well as operational efficiency through margin expansions. The blend of growth expected in the Auto sector as well as focusinto the export markets should augur well for the company in times to come.

Outlook and Recommendation: After the downturn seen in the auto sector, there has been recovery with strong growth expectedgoing forward. India is inching towards becoming the third largest auto-components industry in the world by 2025. The Indian autocomponent manufacturers are well positioned to benefit from the globalization of the sector with ramp up in exports. India is alreadybecoming a global manufacturing hub for manufacture of all categories of vehicles including passenger and commercial vehicles. Withthe long term positivity in the sector, we had initiated a BUY on the stock with a target price of Rs450 which has been achieved andrevised to Rs600 over a 12 months horizon.

The Hi-Tech Gears Ltd.CMP: Rs 565|Target: Rs600 |Potential upside: 6%

TM

Business segments: The two major business segments of the company are namely Power Systems and Industrial Systems. The PowerSystems segment of BBL includes mainly Power Transformers upto 200 MVA, 220 KV voltage class and EPC projects for electricalsubstations upto 400 KV. As indicated by the management, the transformer business of BBL is heavily dependent on the investments inthe transmission networks across the country. The business is therefore linked to the capex budgets and infrastructure growth plans ofall State Power Utilities and the Power Grid Corporation of India Limited (PGCIL). Industrial Systems is second line of business for thecompany. It is the industrial segments that comprises of marketing, engineering, design and manufacture of the entire range ofindustrial motors, synchronous gearless machines for elevators, AC variable speed drives and drive systems. Although the segment isfacing competition due to lower demand, BBL is expecting recovery in the segment in the coming quarters.

Order inflows: Transformer business achieved its highest order booking. Transformer export has also seen some success by achieving abreakthrough order from a utility outside India. The projects business has seen a landmark order from reputed solar power company.Magnet technology division has signed a purchase agreement with a tier one customer for the sale of gearless machines of asubstantial number.

The investments: The company has a strong investment portfolio, which is value unlocking in addition to the business benefits. Theholdings is in sound companies like HDFC and HDFC bank, Siemens, HOECL, Bank of India, ICICI bank. If the investment are valued atmark to market, it would represent nearly 40-45% of the total market capitalization of the company.

Financials: There is rise in the order inflow, which is expected to improve the operational margins. However, heavy downward pressureon prices and business risk has forced the company to cherry pick very selectively. We feel it will be more of a consolidation year withsure signs of revival in prospects.

Outlook and Recommendation: The worst seems to have been factored in and any further downside seems to be limited. Consideringthe strong positioning that the company holds in the power sector, it is an apt candidate to reap the benefits earlier than others fromthe growth expected. We had initiated a BUY on the stock with a target price of Rs1,100 and Rs1500 which was achieved and furtherrevised it to Rs2,000 and maintain the same. The Stock is giving excellent chance to add.

Bharat Bijlee Ltd.CMP: Rs1296 |Target: Rs2000 |Potential upside: 54%

TM

Strong Legacy: Castrol has a strong legacy from that of CC Wakefield & Company, The Burmah Oil Company which was purchased by BPin the year 2000 and Castrol brand became a part of the BP Group of Companies. This indicates the strength to strength growth that thecompany has shown in the gradual transformation that it underwent to meet the dynamics of the industry. The company has a range ofproducts in manual and automatic transmission fluids, chain lubricants and waxes, coolants, suspension fluids, brake fluids, greases,cleaners and maintenance products etc. The company not only caters services to automotive segment, but also to non-automotivesegments like industrial, marine, aviation, oil exploration and production to mention a few. The company continues its growth viavolumes across all the segments and focuses on its robust strategy of volumes growth and power brands.

The Robust growth for a smoother ride: One cannot deny the fact that batteries, tyres and lubricants have shorter shelf lives and thushave a very strong replacement demand. With the product definition of a lubricant undergoing a change from a mere commodity to aFMCG product, a wide distribution network and a good brand image are the most important success factors in the automotive lubricantindustry. The worst seems to be over for auto segment in India which has started showing signs of revival and currently gatheringmomentum. Besides this, the company has also started focusing on high margin products. It has rechristened its strategies and many ofthe products are designed, co-engineered and recommended for major OEMs, including Audi, BMW, Ford, MAN, Honda, JLR, Volvo,Skoda, Tata and Volkswagen. Thereby, the company is putting in all the efforts and taking necessary growth steps to make the most ofthe opportunity coming forward in the auto industry. The company has been rewarding the shareholders with healthy dividends. TheBoard of Directors of the Company at its meeting held on 7th November 2017, had recommended an issue of bonus shares in the ratioof one equity share of Rs5 for every equity share of Rs5 (1:1).

Financials: The company seems to be absorbing market share from the unorganised sector as well as the organized ones. The companyhas fared-well post the initial glitches of implementation of GST; this should be positive for the entire industry in times to come. Thecompany in the long run will continue to focus on profitable volume growth and stick to their strategy. One can expect a moderategrowth in sales with more or less constant margins for CY17.

Outlook and Recommendation: The company has been reporting decent set of numbers. We continue to advocate it as a good buy. Inconsideration of the recent results and immediate outlook of the company, we tone down our target price to Rs275 (earlier targetRs300). We maintain a BUY on the stock with a target price of Rs275 over 12months perspective.

Castrol India Ltd.CMP: Rs193 |Target: Rs275 |Potential upside: 42%

TM

Key business segments: Engineers India Limited (EIL) is a state-owned leader in hydrocarbon and petrochemical projects consulting. Itprovides engineering consultancy, design, EPC and project management services. It has a strong presence across the hydrocarbon valuechain, all from petroleum refining, onshore processing centers, offshore platforms, oil and gas transportation and storage. It alsoundertakes lump sum turnkey contract (LSTK) with presence across range of industries like Oil & Gas (Upstream, Mainstream andDownstream), Petrochemicals, Pipeline, Mining & Metallurgy, Infrastructures and Fertilizers etc. to mention a few. EIL also caters tosectors such as chemical, mining and metallurgy, power, road and airport infrastructure, and water and waste management.

Different business segments: Besides the segments that the company already caters to, it is gradually expanding its consultancy spreadto other segments on a larger scale like power (Hydro, Thermal, Nuclear), Road, water & waste management, gas based fertilizersplants other energy sectors like CBM, Shale gas, Oil & gas exploration etc. It is focusing on consultancy and engineering space of thesenew areas going forward. For FY17 the company has reported historic order bookings across the different segments.

Strong Balance Sheet: The company has a strong balance sheet with zero debt on books and a healthy cash and cash equivalents. Theconsulting business plays a major role in the profitability of the company, with strong Ebidta margins in the range of 35-40%. Thecompany would continue to focus on the consulting segment of most of newer verticals that it plans to enter into going forward.

Financials: EIL is a debt free company. There has been a turnaround seen after the flat perfume over the last 2-3 years. This shouldramp up with the economic recovery especially the capital goods sector. We expect the company to ramp up on the margins coupledwith revenue growth going forward.

Outlook and Recommendation: The company is a long term bet due to its track record, technological capabilities and debt free status.With entry into newer segments, the scope of business activities would further expand in consultancy space going forward. We hadinitiated a BUY on the stock with adjusted target price of Rs250 ex bonus and maintain the same over a 12 months horizon.

Engineers India Ltd.CMP: Rs200 |Target: Rs250|Potential upside: 25%

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Capacity Expansion :The TNPL Unit II is gearing up for the next expansion, wherein a paper machine of a capacity of 1,65,000 tonnesper annum will be installed along with state-of-the-art hardwood ECF pulp mill. On implementation of the expansion scheme, theoverall production capacity will increase to 7,65,000 tonnes per annum. The mill is in the process of obtaining environment clearancefor the project and plans to take up the expansion scheme for implementation during 2018-19.

Cement: Second Line of Business: TNPL has set up a 600MT per day capacity cement plant to produce high grade cement, using solidwaste. TNPL has used the cement produced from the above mentioned cement plant for the construction of the multilayer doublecoated paper board project. It has expanded the cement production capacity to 900 per tons per day within 9 months from the date ofcommencement of the project by installing additional equipments and pre-calciner in the existing plant at a capital cost of Rs500mn.Further, the cement production increased by 38,103MT from 1,96,573MT in FY15-16 to 2,34,676MT in FY16-17.

Product Line: TNPL produces a wide portfolio of high quality surface-sized and non-surface sized papers best suited for printing &writing, coated & uncoated boards best suited for the packaging industry. It has manufactured a new variety of paper under the brandname “GreenPal”, using only bagasse pulp and deinked pulp. GreenPal is completely an environment friendly paper. Further de-inkedpulp production increased by 25,995MT from 42,705MT in FY15-16 to 68,700MT in FY16-17.

Exports as well Domestic Market: The company exports very high quality printing and writing papers to the developed markets. Theexports contributed 20% of the total revenue in FY16-17. Export House Status: TNPL has been awarded the status of “Three Star ExportHouse” by DGFT-Government of India in accordance with foreign trade policy.

Financials: Over the past 4 years, there has been consistent improvement in the company's performance which is visible from the CAGRin Sales, EBITDA, PAT of 12%, 16% and 30% respectively. These are expected to improve still further, once the expansions that thecompany has recently undertaken starts to reflect into the numbers. Overall, the long term prospects are bright for the company.

Outlook and Recommendation : The company had temporarily shut down 2 plants in the month of May due to water scarcity whichaffected the top line and bottom line in H1FY18. However due to increase in cement production and new capacity expansion, weexpect the company to outperform the industry growth rate. We had initiated a BUY on the stock with a target price of Rs350 whichwas achieved and revised it further to Rs450 and maintain the same.

Tamil Nadu Newsprint & Papers Ltd.CMP: Rs446|Target: Rs450 |Potential upside: 1%

TM

Steaming-up for growth: The company primarily operates in a single business segment i.e. power generating equipment and solutions.Apart from the 60% market share which the company enjoys in India, the strategy to focus on exports has started bearing fruits. TTLmakes use of internal accruals if required and thereby maintaining its debt-free status.

Subsidiaries: The company has recognised the need of local presence in Europe, Middle East and Africa. The company has two fullyowned subsidiaries: Triveni Turbines Europe Private Ltd, UK and Triveni Turbines DMCC, Dubai. Triveni Dubai is a fully owned subsidiaryof Triveni Turbines Europe Pvt Ltd, UK. As a result of the same, the company is capable of providing additional services like generalmaintenance, supply of spares and major upgrades to improve turbines’ efficiency to its clients internationally as well.

GE-TTL: As per the 50-50 joint venture agreement; GE transfers innovative technology and provide R&D support to the plant inBengaluru; to develop low cost products for its customers. With world class manufacturing and testing facilities, GE Triveni offers steamturbines in the range of 30MW to 100MW.

Innovation, Tech and IP: Tech Savvy: The company has the capability of manufacturing turbines as per customers’ requirements. TheR&D department is consistent is bringing out 10-12 models or variants every year. TTL has also realized the importance of IPRs and hasbeen filing patents, designs registrations, copyrights and trademarks to protect its innovative products in India as well as abroad.

After Market Sales: cherry to the toppings: The company also has considerable experience in Operations and Maintenance (O&M). Ithas a dedicated refurbishing team to service any kind of steam turbines, up to 300MW. TTL tries to respond to the queries within 24hours and resolve within 48 hours. After market service accounts nearly 15-20% of the revenues.

Financials: This is a debt free company and is expected to be so in near future as well. In the last couple of years the export markethelped the company to show robust performance; the potential here is still high. Coupled with the expected growth in local market, thecompany shall be able further improve upon its performance.

Outlook and Recommendation: The long term prospects for the power sector are bright as lot of action is being taken by theGovernment on this front. TTL certainly has a key role to play in this growth. Some of the major triggers for visibility of growth for thecompany include rapidly increasing exports, increasing aftermarket operations, a strong order book accompanied with an enquirypipeline. We had initiated a BUY on the stock with a revised target price of Rs175 and we maintain the same.

Triveni Turbine Ltd.CMP: Rs134 |Target: Rs175 |Potential upside: 31%

TM

Rapid Transit: Rapid transit is the need of the hour and major transformations are taking place in the railway sector due to GOIinitiatives. Some of the major rail improvement projects hover around modernizing railway station infrastructure, increasing the rollingstock, gauge conversion, electrification and rail automation etc. Siemens is a one stop solution for covering all these verticals. Thecompany is hopeful of good developments for Kanchrapara factory order by railways. The bidding for the tender will open in Jan18.

Smart cities: The GOI has indicated a plan for developing 100 smart cities where projection plans and layouts for nearly 20 have alreadybeen rolled out by various states. List of solutions required for applications such as fire safety, security, building automation, heating,ventilation, air conditioning (HVAC), system integration and energy management are provided by Siemens Limited. This clearly is a bigopportunity for the company under the guidance of the parent company.

Upcoming Growth: Management is expecting the demand for cyber security to grow significantly. The company is doing its first projectwith CLP India. The company has set-up first digital factory in Kalwa (global benchmarked). The management has declared its intentionon increasing digital offering to its clients. The company has launched a product called, SIRIUS which is developed for the India marketsand later for exports. In the segment for T&D orders from PGCIL have slowed down. The management is anticipating capex from thestate to pick-up in times to come, however, they may not completely compensate for decline in orders from PGCIL. In the segment ofPower Generation, smaller cement and fertiliser companies have started spending on turbines. In addition to this, improvement is alsoseen in the industrial processes side as well. On the process industries, segments like Pharma, F&B, packaging etc are driving basebusiness. In the Wind segment, Siemens supplies electrical/ electrical parts to wind turbine players. Wind business has slowed downdue to pricing pressure. Moreover, there is a shift from feed-in to tariff based structure.

Financials: Since last 2-3 years, the company has been focusing on profitable growth; they continue to focus on the same. This alsoclearly indicates there would be no cut in the selling price from Siemens while remaining a debt free company. In CY17 there was 26%increase in new orders, 14% growth in revenues and 14% growth in profit from operations.

Outlook and Recommendation: Siemens to concentrate on growing the base business and win one or two large orders per year while itcontinues to focus on the areas of electrification, automation and digitalization. The company has delivered a strong performance. Thegrowth path continues which is via all the divisions of the company. As per the management, the company continues to focus onwinning projects from the GOI where the push on spending is high. The stock remains as a candidate to SIP into on a monthly basis.We had initiated a BUY on the stock with a target price of Rs1500 and we maintain the same.

Siemens Ltd.CMP: Rs1237 |Target: Rs1500 |Potential upside: 21%

TM

Key areas of specialization: Hikal supplies molecules for discovery research on contract basis. Backed by state-of-the-artinstrumentation and an experienced team, the company focuses on research of new molecules. It is one of the preferred partners ofleading multinational companies in different phases of new drug discovery and development. Hikal undertakes custom manufacturingof key intermediates and active substances for pharmaceutical and agrochemical companies worldwide. In Process Development, thecompany has a successful track record in developing non-infringing processes and scaling them up from laboratory to kilo scale tocommercial scale production. Also in analytical method development, Hikal undertakes method validation of new substances. Theactivities include in-process analysis, identification and quantification of impurities.

Hybrid business model: The company stands strong with the edge of catering to different industries, helping it avoid dependency on asingle sector. The company is engaged in the manufacturing of various agrochemical intermediates, specialty chemicals, activepharmaceutical ingredients and contract research activities. In the pharmaceutical space, the company undertakes contract and custommanufacturing in intermediates and APIs for multinational companies. The company has a strong customer range from Innovators tomidsize and Biotech to generic companies. Hikal is the world’s largest supplier of Gabapentin, API for Neuropathic use.

Molecular Research: The company has several research molecules in various stages of Phase II & III - Building a pipeline for futurecommercial supplies. On an average the company has been investing 4-5% of its sales into the R&D space. One of the key requisites tobe competitive in the field of CRAMS is to come up with new molecules at regular intervals. With the R&D facilities and focus andinvestments into research, the company is well positioned to cater to the clients need of innovation. Hikal has presence throughdifferent business segments across the entire custom synthesis and contract research cycle. Through the different divisions, it is wellpositioned to benefit from each step from discovery to full scale manufacturing of an identified molecule.

Financials: The company has crossed the significant milestone of Rs10bn in sales. Over the past 2 years, PAT has shown a CAGR of 28%.The company has been consistent with the EBIDTA margin in H1FY18 Further we expect GOI to give more emphasis on agriculture andthe company being one of the key players in the agrochemical space to benefit from the same.

Outlook and Recommendation: The company is at the transformational stage. It is backed by the existing products as well as the newadditions in immediate and long term which will benefit going forward. We maintain our positive outlook on the company with atarget price of Rs325 over a 12 months horizon.

Hikal Ltd.CMP: Rs234|Target: Rs325 |Potential upside: 39%

TM

GOI reforms in Power sector: The launch of government schemes such as Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY),Integrated Power Development Scheme (IPDS) and National Electricity Fund (NEF), for improving distribution sector have provided withthe growth opportunity. Indian power and distribution transformer market is expected to witness a huge increase in domestic demandas the energy sector will evolve to cater to the growing market buoyed by initiatives like smart cities, power for all and India’s bullishpush for green energy business projects and soaring power generation demand.

Technical Collaboration: TRIL has a technology license agreement with a leading manufacturer of power T&D equipment; Fuji ElectricalCo. Limited, Japan which grants the license to TRIL to use its technology & know-how to design, manufacture, assemble and inspectgenerators. The company has last year entered into a Joint venture agreement with Jiangsu Jingke Smart Electric Company Limited, forpurpose of manufacturing and marketing of GIS/HGIS/TGIS systems and products for 220kV and below and distribution products of40.5kV and below in India. This will be an opportunity to tap the gas insulator substations market in India.

New Developments: The company has started seeing exports as a potential trigger for its growth. Over the years, the company hasinvested in technology which no other Indian company has done. The company see strong potential in Arc Furnace transformers and itstechnology. The market for the same is around 250mn Euros where nearly 74% of the market is captured by only 4 companies.

Strong Order Book: The company has strong order of Rs833cr as on 1st November, 2017. The Company received export order for One220 MVA, 132/33 kV Transformer. This is highest rating transformer order for export by TRIL.

Financials: TRIL has gone through tough times in the last couple of years wherein the operating margins were very low. However, withrecent GOI reforms in the power sector we expect the company to post good numbers from FY18 onwards.

Outlook and Recommendation: TRIL is definitely a long term story which is just about to unfold. We had initiated a BUY on the stockwith a price target of Rs55 for a 12 months horizon and maintain the same.

Transformers and Rectifiers (India) Ltd.CMP: Rs42 |Target: Rs55 |Potential upside: 31%

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Building network: The Indian optical fibre cables (OFC) market is expected to grow in a robust manner due to expansion of telecominfrastructure. The demand for global optical fibre cable is only seeing an uptick. Growing at a rate of 16% CAGR from 2005 up untilpresent 2017 reflects a tremendous potential for India, as it is highly under penetrated. Aksh has always been innovative with its cabledesigns and manufacturing and is one of the largest manufacturers of optical fibre and optical fibre cables in India. The company offerscost effective solutions for FTTH applications which is in line with GOI vision of digital India and smart cities. The company is positionedas a leader in FRP manufacturing and is aiming to increase its manufacturing capacities of FRP by 200% in the Dubai plant. The companyhas planned a diversification plan for manufacturing of ophthalmic lens with capacity of 25 Million pair lens per annum and scalableupto 70 Million pair lens per annum which is anticipated to be commenced during the current financial year. Moreover, 1 Stop Aksh isthe e-governance services arm of Aksh Optifibre as a PPP between the Rajasthan government and Aksh Optifibre Limited.

Strong networking: The demand for more intense and robust bandwidth, requirement for more mature network convergence, changein the tastes for media device interaction and overall requirement for upgrading the broadband network has led to the emergence ofFiber to the X (FTTX) technology. FTTX has a number of applications related to traditional internet, security, IPTV, VOIP and manyrequirements of the smart grid or smart home. Aksh has always been a key player in the domain for FTTX and FTTN.

Opportunity via GOI projects: Digital India is a blend of three ongoing projects namely, the National Optical Fibre Network, theNational Knowledge Network and the e-governance initiative. Consumers are increasingly shifting towards internet driven applicationslike E commerce , HDTV, video on demand and high-speed file sharing. To address the soaring demand for high speed datatransmission, GOI is investing substantial capital in upgrading the country's telecom infrastructure which will have an impact on thevolume demand for fibre connectivity. The company has planned a diversification plan for manufacturing of ophthalmic lens withcapacity of 25 Million pair lens per annum and scalable upto 70 Million pair lens per annum which is anticipated to be commencedduring the current financial year. Moreover, 1 Stop Aksh is the e-governance services arm of Aksh Optifibre. It is a public privatepartnership (PPP) model between the Rajasthan government and Aksh Optifibre Limited.

Financials: The sales from exports have increased from 31% in FY15 to nearly 52% in FY17. The company is looking at a strategic shifttowards long term sustainability and risk mitigation through diverse market portfolio.

Outlook and Recommendation: The emphasis on digitalization would act as a strong positive trigger for the company. We had initiated BUY call on the stock with target price of Rs24 and Rs35 and further revise it to Rs45 after the initial targets were achieved.

Aksh Optifibre Ltd.CMP: Rs 35|Target: Rs45 |Potential upside: 29%

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Strong foundations: GMM is a market leader in India and enjoys a market share of more than 50% in Glass lined equipment. The basketof products offered include mixing systems, filtration & drying equipments, engineered systems and other tailor made processequipments. These customers are spread across various industry segments like Agrochem, Pharma and Specialty Chemicals & Dyes etc.Some of the customers are Bayer, Rallis, GSFC, UPL, Excel and many more in the Agrochem sector; Cipla, Lupin, Sun Pharma, Ranbaxy,Glenmark, IPCA etc. in the pharmaceuticals segment and customers like CRODA, Ion Exchange, Thermax, Clariant, Auchel, Heubach etc.

Indian Triggers: During the last two to three years, Pharma Industry was the main driver for the revenues of the company; however,the scenario has changed and drifted towards Agrochem and fertilizers companies. However, the management is optimistic about therevival of growth in Pharma. The company has a healthy order back log. The company is looking to explore opportunities in othercountries. The company will be installing the new gas furnace for long-term benefits.

Overseas Triggers: The company is anticipating more orders via the parent in the next year. The company is seeing traction for theheavy engineering business via Pfaudler’s network. Last year there was a slowdown in the European market, however, there appears tobe a slow revival. Initially, GMMP did not have access to the US market; however, with the working of Mavag picking up, the company isin a position to pitch to the US market. If Mavag has to grow, it will have to source from GMMP, thus Mavag is the gateway to Europe.

Pharma Vision: The government of Telangana is contemplating setting up of a Pharma City in Rangareddy and Mahbubnagar districtsof the state. The vision is to make Telangana, a one stop shop for Pharma, biotech and life sciences companies. Thus, GMM Pfaudlerwhich is one stop solution for all chemical engineered equipments can be one of the biggest beneficiaries. The state of Telangana is aland of huge opportunities; the company is waiting for environmental clearances.

Financials: The company has been successfully maintaining its operating margins in the range of 14-15%. The average ROCE for thecompany over the last 5 years has been in the range 21-22%. The company is cash rich. GMM Pfaudler is a debt free consistentlydividend paying company (on a quarterly basis). The company as well as the subsidiary (Mavag) has a strong order book. The companyis fully geared to capitalize on the opportunities in the coming years. The impending growth will be very much apparent from theH2FY18.

Outlook and Recommendation: The company has delivered a strong growth and is providing visibility of further improving operatingmargins. We maintain a BUY on the stock with third revised target of Rs1000 .

GMM Pfaudler Ltd.CMP: Rs828|Target: Rs1000 |Potential upside: 21%

TM

Growing stronger: On the automotive front, in India, the group specializes in component manufacturing for the two-wheeler and four-wheeler industry. Its major products include cylinder heads and manifolds. Alicon has ambitious plans to become one of the top 5foundries (innovation and technology) across the globe by FY20-21. The company is already in the process of filling (process) patent.The company has identified 16 product segments (some of which they were already into) where they intend to grow. The company hasalready mentioned their intentions to work for e-mobility, e-vehicles and hybrid vehicles and or parts. Thereby, with the current focuson electric vehicles, Alicon sits in a sweet spot.

Get Set Go: Alicon is dedicated to the principles of PQCDDMSE (Productivity, Quality, Cost, Delivery, Development, Management, Safetyand Environment) and is continuously scaling the quality matrix through deployment of Kaizen. Alicon is a one-stop solution fordesigning, engineering, casting, machining & assembly, painting and surface treatment of aluminium in India. Nearly 90% of therevenues for the company come from the automotive segment. The current capacity utilization of the company is around 70-75%. Thecompany intentionally keeps some capacity idle, which can be ramped-up in case of impromptu orders from OEMs. Keeping this inmind, the company has been adding tangible assets. Alicon has identified land in Khed district in Pune.

Diverse presence: Besides being the leading supplier for automobiles, the company is also gripping for other non-automotive segmentsas well. Although the company has confidence in the auto sector to do well in the years to come; Alicon is taking measures to insulateits business model from the vagaries of any one sector by catering to the requirements of the non-auto sector as well. To further de-riskits operations, it is expanding the customer base, both in India and globally. In times to come, the exports market is expected to addstimulus to increasing the topline, so the company is already exploring more opportunities here.

Financials: The company has been gradually increasing the dividend payout over the last few years. Monsoons have been averagely at95% of the expectation this year; there can be a possibility of higher sales of two wheelers in the rural market as well as CV and LCVmarket which can be an added booster for the company. The effects of GST are more or less nil for the company.

Outlook and Recommendation: The company stands strong and lucrative to benefit from the growth expected across the automotiveas well as the above listed non-automotive sectors going forward. The conviction provided by the consistent trajectory growth of thecompany is immense. The same is also boosted by the interest of Enkei in the business; in May 2017, Enkei Corporation Japan, acquired8.6lakh equity shares from Alicon at a price of Rs478; thus increasing their shareholding from 8.98% to 14.94%. We continue tomaintain our stand and recommend a BUY on the stock with a (third revised target) price of Rs750 with a 12 month’s perspective.

Alicon Castalloy Ltd.CMP: Rs702 |Target: Rs750 |Potential upside: 7%

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Poised To Grow: PEL has evolved from a company manufacturing regular explosives to manufacturing solid propellants for missiles inIndia. The company has successfully matched the quality parameters for sustainer grains for Akash missile and is also working inadvanced stage of induction of Astra. The company has received Industrial Licenses for manufacture of ammunition, warheads andother defence supplies. A new company named PELNEXT Defence Systems Private Limited was incorporated as a subsidiary.

Make in India: Historically, India had been dependent on imports from other countries; however the GOI is now trying to bring inself-reliance and reduce the dependency on foreign countries in the defence segment by promoting Make in India where indigenisationis the prime focus. Some of the recent measures to promote defence industry in India include, allowance of FDI in defence, simplifyingthe procedure for grant of industrial licenses, equal opportunities for the private & public sector and programs such as Buy (Indian-IDDM), Buy (Indian), Buy & Make (Indian), Make I and Make II. PEL is rightly placed to take advantage of these opportunities.

Ammunition Shortfall: Ammunitions are considered very critical war fighting requirements. However, as per some research articles, theparamilitary forces are facing shortage of ammunition for their weapons. This short fall is a definite opportunity for the private andsmall firms.

Solid Propellants: The top 5 tactical missiles systems which come under Integrated Guided Missile Development Program includePrithvi, Agni, Trishul, Akash and NAG where DRDO and BDL are the key developers. Solid propellants for many of these missiles areprovided by PEL. In July 2016, the company delivered its 1000th Akash Missile Booster Grain to BDL. There seems to be a volumegrowth in Akash missile system which indirectly is beneficial for PEL. The company has successfully matched the quality parameters forSustainer grains for Akash missile which are currently been dispatched.

Financials: We have seen the conservative growth by the company until now. It appears that the foray into defence sector shall changethe rate of growth of the company in the coming 3 to 5 years. This will enable investors witness a sea change in the future financials ofthe company as along with growth in turnover, operating margins are also expected to improve. We would not be surprised to see PELas a defence dominated product company in the coming five years.

Outlook and Recommendation: The changing face of India involving rising construction activities, GOI promoting Make in India;opportunities like ammunition shortfall; goal to reduce the imports of weapons system & defence equipment, will provide a booster tothe company. We had recommended a BUY call on the stock with a target price of Rs450 and revised the same to Rs600.

Premier Explosives Ltd.CMP: Rs436|Target: Rs600|Potential upside: 38%

TM

Diversified Business : The company has its presence across a number of sectors and segments in Oral care, Paper industry, Pharmaexcipients, Paint Industry, Animal Feed industry, Liquor industry etc. Due to the presence in multi faceted industry, GPL appears to be ina very sweet spot wherein large number of products manufactured by the company like Sorbitol, PCC, WGCC, HFRS, Brown Rice Syrup,Rice Syrup Solids etc are used (maybe directly or indirectly) in day to day life.

Onsite- PCC Plant: GPL has been serving the paper industry since last 25 years. GPL is the first in the country to introduce the conceptof on-site PCC manufacturing plant for Value Added Paper (VAP) industries. As of now, the company has successfully installed its six on-site PCC plants. It is estimated, there can be an exponential in the segment for VAP in many of the developed and developing nations.GPL is the only Indian company which is offering onsite PCC technology and providing plants to overseas customers as well. Thecompany has also entered into an arrangement to set up a 24000 MTPA on site PCC / WGCC plant with a paper mill in western UP.

Business Going Forward: GPL has constantly been producing Sorbitol-70% solution, Liquid Glucose, Maltro-Dextrin Powder (MDP) andDextrose Mono-Hydrate (DMH). Apart from these, the company is also working ahead of time and tries to introduce new products inthe market. The company is recently working towards sugar alternatives named High Fructose Rice Syrup (HFRS), Brown rice Syrup andRice Syrup Solids.

Distilleries: Though a very small portion of the total revenue; GPL is also involved in the business for distilleries. The company is in theprocess of setting up a grain based distillery for manufacturing potable alcohol in Chhindwara Madhya Pradesh. Trial run of the distilleryhas been completed and the company is anticipating commercial production soon. The benefits of the upcoming distillery will showdirect impact on the top line.

Financials: The company is facing some margin pressure as it intends to gain some market share for sorbitol. The current year, thecompany is sacrificing margins for gaining market share. The current financial year appears to be a year of consolidation for GulshanPolyols.

Outlook and Recommendation: The company is showing strong revenue visibility in distant future. the company is becoming aggressivewith a view to gain market share which can be at the cost of margins. Considering the current financial year as a year of consolidationfor Gulshan Polyols, we revise the target price back to Rs110

Gulshan Polyols Ltd.CMP: Rs86|Target: Rs110 |Potential upside: 28%

TM

Business profile: Gufic is one of the largest manufacturers of Lyophilized injections in India and has a fully automated lyophilizationplant. The operations of the company mainly involve Contract Manufacturing and Bulk Drugs / API. In contract manufacturing, thecompany stands out as a valued and trusted partner. The APIs manufactured caters to different therapeutic segments.

Segmental contribution: The management has indicated a 20-25% growth every year for the next 2-3 years in the formulationssegment. Further, the company plans to gradually exit from the consumer business division. However, the company will take newtenders in the consumer business only if there’s a presence of 8-10% margins with a view to focus on the core business itself. Thecompany currently offers around 72 injectable products of superior quality. Going forward, in the offerings, the company intends to add8-10 injectable products per year.

Operations through different divisions: The company currently operates its business through 5 divisions. Looking at the demand andopportunities, the company has added 1 more division i.e. Infertility division to its operation in FY17-18. The company is striving forinnovation in its new division of Infertility i.e. instead of injections, oral therapy is considered. Further, the company expects to add 1more division by the end of the FY18. The management has an ambitious plan to add 1 division every year from FY19 onwards

Mergers is the key: After the merger of Gufic Biosciences and Gufic Stridden Bio-Pharma, the company will merge Gufic Life SciencesPvt Ltd with itself which will provide impetus for further growth. The management intends to use the capacity of Gufic Life Science PvtLtd instead of giving contract to third party which will help safeguard the technology and save on cost as well. The Current capacity is12lakh vials and 15lakh vials for Gufic Bioscience Ltd and Gufic Life Science Pvt Ltd respectively.

Financials: There has been a consistent growth seen in the revenues as well as the profits of the company. Going forward as well withthe triggers being intact, the company is expected to clock good numbers on the top as well as bottom-line.

Outlook and Recommendation: The company stands to benefit from the expertise of the management in the Pharma space, excellencein the domain of business with a strong clientele and manufacturing facility. Increase in the capacity with commercialization oflyophilized facility is yet another positive for the company. We had initiated a BUY on the stock with a target price of Rs75 which hasbeen achieved. It was further revised to Rs100 which was also breached. We have a revised target price of Rs140 over a 12monthshorizon and maintain the same.

Gufic Biosciences Ltd.CMP: Rs127|Target: Rs140 |Potential upside: 10%

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Speciality Chemicals and Agrochem Intermediates - The Backbone: Excel has an experience of more than 7 decades in process andproduct development catering to different agrochemical intermediates. The segment for chemicals which engages specialty chemicals& intermediates produced for various industries like agricultural chemicals, polymer, manufacturing & processing, soap & detergents,dyes & intermediates, water treatment and Pharma have been contributing nearly 96% to the total revenue of the company. Thecompany has a well-established presence in production of phosphorus intermediates which are used further for production ofOrganphosphorus (OP) insecticides.

Solid Remedy for Solid Organic Waste: The ever-increasing population, economic growth and the shift towards urban cites invitesproblems associated to tackling tonnes of waste. Excel was the first Indian company to innovate Solid and Liquid Waste Managementtechnologies and still continues to be the front runner in this philosophy with innovative products like OWC, Bioneer, Bioculum andSanitreat. Realizing the importance of decentralizing waste management system, Excel has improvised to create Organic WasteConverter (OWC).

API: Pharma and Veterinary intermediates: Many molecules are expected to go off patent by 2020 providing an opportunity of nearlyUSD155bn, of which more than 40 molecules of renowned drugs will open the doors for Indian API manufacturers. It is quite evidentthat India is one of the most preferred destination for APIs due to many factors such as cost advantage, advanced technology, betterinfrastructure etc

The Polymer Input Division: It is quite evident that the use of polymers in industries like automobiles, electronics, constructionindustry, power equipment, aerospace etc. is ever increasing due to shift in lifestyle across the world. This clearly provides a good visionfor increase in demand for Polymer Inputs and Additives segment as well.

Financials: The company reduced the debt by Rs180mn in FY17 which was on account of receipt of Rs300mn from sale of holding inexcel crop care. Going ahead we could see improvement in margin with operational efficiencies.

Outlook and Recommendation: The business of the company relating to the specialty chemicals segment has been improving over theyears, moreover the vision for future can be perceived from the segment of Pharma intermediates and that of EnviroBiotech. Wemaintain a BUY on the stock with a revised target price of Rs800 from a 12-month perspective.

Excel Industries Ltd.CMP: Rs629 |Target: Rs800 |Potential upside: 27%

TM

Revival of Steel Industry: Steel and foundry industries comprise the largest group of the company’s customers. India’s steel sectorposted a robust 11% growth in production in 2016-17 at 101.2 MT. SAIL, RINL, Tata Steel, Essar, JSWL & JSPL together produced 57.5 MTduring April-March 2016-17, which was a growth of 18.5% compared to same period last year; while production for other producerswas down by 1.2%. Insolvency & Bankruptcy law set to play a crucial role in the revival of Indian steel Industry as 5 companies belongsto steel Industry out of the total 12 being dragged into the Insolvency law. Government has been taking measures that include allowingthe promoters to bid for insolvent companies, carry forwards the unabsorbed losses of insolvent companies even when more than 50%shareholding change takes place.

Enhancing capacity utilization: The current capacity utilisation of the company is approx. 60-65%. As per the management, thecompany stands strong to ramp up its capacity, which could go up by ~30‐35%. The taphole plant in Vizag is still unutilised and can beeasily utilized as demand picks up as the blast furnace is very closely knit. Also, as indicated by the management, they have madesubstantial progress for their global centre of excellence for advanced refractories in Visakhapatnam (Vizag), India which should alsohelp the company add to its current product basket.

Debt Free Status :The company enjoys debt free status

Financials: Despite a slow down in the steel industry, company has been able to maintain the EBITDA margin. Further from CY14 toCY16, company’s Top-line and Bottom line has shown a CAGR of 13% & 21% respectively. With ramp up in the capacity utilization andrevival of steel industry, the company stands to strong benefit from the same.

Outlook and Recommendation: VIL is the largest player in the steel flow control segment in the refractory industry with market shareof ~50% and overall market share of ~12% in refractories. With growth starting to pick in the Indian Steel production, company is wellpoised to tap growing opportunities lying ahead. We recommend a BUY on the stock with a target price of Rs1500 for a 12 monthshorizon.

Vesuvius India Ltd.CMP: Rs1391 |Target: Rs1500 |Potential upside: 8%

TM

Shock Proof Products: Munjal Showa Limited is a reputed name in the auto ancillaries manufacturing market. MSL serves as an originalequipment manufacturer to a wide range of upper-end cars and export models of Maruti Suzuki, Honda City, Kawasaki Bajajmotorcycles, Kinetic Scooters and Hero range of mini-motorcycles & mopeds and Honda Motorcycles and Scooters India (Pvt) Limited.The products of the company can be easily classified into a single primary business segment i.e. Shock Absorber. There are manyvariants of shock absorbers like Front Forks, Rear Cushions, Struts and Gas Spring, Rear Door Lifters etc. Munjal Showa Limited is one ofthe largest suppliers of shock absorbers to some of the major and esteemed auto giants in India, Japan, Germany, United States and UK.The products offered by the company are amongst the highest standards of quality, safety, comfort and dependability. These areQS9000, ISO14001 and ISO9001 compliant. The manufacturing methods at Munjal are under constant upgradation, modification andimprovement in order to realize higher productivity. The company uses the Japanese system of encompassing 5S, 3G, 3K, 3M, in thework culture. Thus, the use of advanced technology at its ultra-modern facilities coupled with Japanese work culture contributes to theoutstanding growth in the company.

Technical Edge: (i) Total Productive Maintenance: By now, the technical core of the company is more or less Japanese style ofmanufacturing. Munjal has started following Total Productive Maintenance (TPM) with the help of Japan Institute of Plant Maintenance(JIPM) and CII, TPM Club India. The major objectives of TPM are to increase PQCDSME viz Productivity, to improve quality, to reducecosts, to ensure in time delivery, to increase safety, to increase profitability, to build morale and to protect environment. (ii) Lean TPMactivities: The company is following a combination of TPM along with lean manufacturing system (which is also known as Value StreamMapping). Some of the benefits of using this concept are lesser consumption of electricity, lesser occupancy space by machines andlesser inputs required for consumables, manpower, tools, oils, lesser set-up time and cycle time. Overall, religiously following thistechnique has helped the company reduce the cost of manufacturing.

Financials: This debt free company has had a tough time in the last two to three quarters. The long term prospects for the auto industryare bright as India could become a major hub of manufacturing for some international brands and this should benefit the auto ancillaryindustry hugely. The company has a good distribution policy and one expect this to become even better in future.

Outlook and Recommendation: The stock is currently not on the radar of any fund manager though it has a few HNIs holding it. Wecould see a totally different MSL in times to come. We maintain a Buy on the stock with a target price of Rs300 over a horizon of 12months.

Munjal Showa Ltd.CMP: Rs285 |Target: Rs300 |Potential upside: 5%

TM

Range of products: Bharat Rasayan Limited (BRL) is the flagship company of the Bharat Group engaged in the manufacturing oftechnical grade pesticides, which in turn is used from manufacturing of formulations for agrochemical industry. The products portfolioconsists of a wide spectrum of pesticides, fungicides, herbicides etc. that cater to every arena in the agricultural sector of crops (foodand commercial), horticulture and floriculture, in applications for public health, house-keeping and veterinary treatment besides lossprevention in warehouses, depots and granaries. The group has market leadership in many products which include Meta PhenoxyBenzaldehyde (MPB), Lambda Cyhalothrin (LC), Piroxofoppropinyl, Thiamethoxam and Cypermethrin among others for which thecompany is a preferred supplier in the international markets.

Contract Manufacturing: There has been a manufacturing shift indicated by the management from Japanese & Chinese player to Indianplayers. The company has been putting in efforts to tap different MNCs for off patented and patented molecules manufacturingrealizing the fact that once these relations which are quite an effort to be made, they are to stay, adding longevity to the business.There are earnest efforts being put to bring up the manufacturing standards up to the mark to garner as much as they can from theshift happening at the macro industrial level.

Industry Opportunities: The company has been putting earnest efforts to upgrade as per latest trends in demand and technology. Alsoin terms of international markets, it has been strongly placed to get registrations across key developing markets of LATAM and Braziland the developed markets of US and EU. The company is well versed with the demand prospects for the agrochemical industry withthe growth and opportunities witnessed. Overall, the company is well on track to maintain its stance and ramp up its market share inthe agrochemical markets domestic and internationally.

Financials: The company has reported consistent growth and improved financial performance. One of the key parameters; theoperating margins has seen improvement and this could further improve in times to come. The management has the vision to make theworking capital also negative in next couple of years. The balance sheet ratios are also set to improve further.

Outlook and Recommendations: With the increasing necessity of crop protection and development, there is impetus being given to theagrochemical industry as a whole. BRL is one of the pioneers in this field with immense experience and caliber to serve the expectedincrease in demand. We had initiated a BUY on the stock with a target price of Rs3,500 and Rs4250 which has been achieved; wefurther revise our target to Rs5000 over a 12 months horizon and maintain the same.

Bharat Rasayan Ltd.CMP: Rs4174 |Target: Rs5000 |Potential upside: 20%

TM

Ramp-up in Capacities: Implementation of the methylamines plant at Dahej is in full swing. Barring unforeseen circumstances, thecompany expects to commission the plant by the 3Q-FY18. This plant is expected to add 100 tons per day to the existing capacity,expandable to 150 tons later. In terms of the volumes with the shift from the existing capacity it could be 50 tons per day. The companyis also planning for a new plant to produce acetonitrile at Dahej.

Presence across different industries: The company deals in more than 104 products which can be diversified in 4 categories i.e.Aliphatic compound, Ethylene, Amine Derivative and specialty chemicals. The company has a range of products to offer which caters tovaried industries, thereby giving it the diversity and not dependent on single clientele for revenues. The major customer for theproducts of the company is the Pharma Industry, with the largest range of aliphatic amines manufactured by the company.Agrochemicals is the second major industry for the company with aliphatic amines used for manufacturing insecticides, pesticides,herbicides, insect repellent, animal feed, etc.

Specialty chemicals segment: the key to growth: The Indian specialty chemicals industry is valued at approximately USD25bn and isexpected to stand at USD33.2bn by 2019 as per market research report. In the AACL specialty chemicals portfolio, Acetonitrile is the keyproduct in terms of value and volume. The company stands as one of the leading manufacturers of acetonitrile in the world. Thecompany has undertaken expansion in the production with a capex of approximately Rs160mn. This would be majorly to cater to thePharma and fine chemicals market. Thereby, the growth momentum seen in the specialty chemicals market coupled with thesufficiency of the company in terms of capacities and demand, we expect significant contribution to the revenues going forward.

Financials: The company has reported consistent growth in the sales with increasing profitability. It stands strong on the operationalfront with margins better than the industry trends. The various expansions and debottlenecking of capacities being undertaken by thecompany should further add to the growth of the company.

Outlook and Recommendations : Being one of the leading players in its business, the company is strongly placed to benefit from theopportunities in the overall chemical sector. We had initiated with a target price of Rs550 which has been breached and further revisethe target to Rs700 over a 12 months horizon.

Alkyl Amines Chemicals Ltd.CMP: Rs670 |Target: Rs700 |Potential upside: 5%

TM

Engineering Business: Indabrator is a leading manufacturer, supplier and exporter of surface preparation equipment's, providingservices to different Indian industries like Foundries, Forging plants, Automotive industries, Indian railways, Defence organizations,Heavy engineering industries, Ship building industries, Chemical and Petrochemical industries etc. Nesco has its own captive alloy ironfoundry. The company has been supplying equipment’s to customers in the domestic as well as in the international markets.

Nesco Realty: The company has presence in facilities development and management business, with its venture into realty segment,capitalizing on the area of over 70 acres that the company owns. It has been constructing and leasing out buildings to IT, ITEScompanies. With the strategic location benefit that the company enjoys, it has been doing very well with IT companies to be partneredwith. Construction of the IT-4 which has a total built up area of 17 lakh.sq.ft. is in full swing and expected to be completed by 1QFY19.

Bombay Exhibition Centre- the cash-cow: Nesco owns and lends out the BEC which is a 4.5 lakh sq.ft centre at Goregaon on theWestern Express Highway. Structurally it is well equipped with four halls having all the latest amenities. During the last financial year, atthe BEC, the company had 109 exhibitions of which 27 were new additions. It is planning to build a new world class exhibition Centrewhich will have usable area of approx. 35 lakh sq ft and a built up of 70 lakh sq ft. The total cost of the project will be Rs2,400cr over aperiod of 6-8 years with the assistance of an Australian architecture.

Nesco Hospitality Private Limited: The company has started food court services within the Nesco Complex with leading internationaland national food brands to cater to the growing demand of quality food services from the exhibition organizers, exhibitors, visitors andemployees working in Nesco IT Park. The company is taking steps to establish a large world class kitchen measuring approximately24,000 sq.ft., having a capacity to produce around 15,000 meals per day.

Financials: The company has indicated of expansion across the IT park, BEC and Nesco hospitality which would cost approximatelyRs15,000mn which would be met by the own resources of the company without any borrowings needed. Further, one of the attractivetriggers is the debt free status of the company.

Outlook and Recommendations: The company continues to be an attractive bet with a blend of high quality business and aconservative management combined with a first-class asset base, which is being exploited slowly. The diversified business, wellmanaged by the controlling hands looks attractive from an investment point of view. We continue to recommend a BUY on the stockwith a target price of Rs640 (adjusted for the stock split) from a 12 months horizon.

Nesco Ltd.CMP: Rs528 |Target: Rs640 |Potential upside: 21%

TM

Diversified Business: GWL has its wings spread across a number of businesses and has been performing consistently well in segmentsof chemical, engineering, paints, lubricants and shop-entertainment. A major portion of the turnover i.e. nearly 69.2% is derived frombasic electroplating activities, electroplating equipment division, intermediary chemicals, oils and lubricants while nearly 13.4% iscontributed by paints, enamels, varnishes, etc.

Niche Player: GWL offers a wide range of quality products which are backed by strong fundamental and applied research. The technicalcollaboration of the company helps assist in maintaining technological leadership in the corrosion protection industry via new cuttingedge and futuristic technologies. Recently, the company was awarded the AS9100 Aerospace Certification from the BSI group. Theproducts offered by the Company can be regarded as a proxy play for the Defence aspect (electroplating and surface finishing) of Makein India.

Collaborations: The company has been constantly striving to improve their product profile and innovate its process & services. Inpursuit of the same, the company has indulged into valuable collaborations with some of the industry experts across the globe. GWILhas signed a technology transfer & license agreement with Herbert Schmidt GmbH & Co. KG (HSO) Germany. NOF METAL COATINGSGROUP, JAPAN which is a technology cum distributorship collaboration to sub-license the process of dacrotizing and supply relatedchemicals in the territory of India between GWIL and NOF Metal Coatings Group. SIDASA is a technical collaboration with SIDASA tooffer a wide range of specialised lubricants and oils for varied industrial applications. TRANSOCEAN COATINGS, THE NETHERLANDS,this association develops, manufactures and sells anti-foulings, anti-corrosives, coatings for ships, offshore installations, industrialfacilities, yachts etc.

Financials: There has been a smart improvement in the performance of the company in recent past and this has enabled them to repaythe long term loans and bringing it to almost debt free status and thereby improving its Debt-Equity ratio. As a result of this Return onCapital Employed (ROCE), Return on Assets (ROA) and Return on Equity (ROE) have seen consistent improvement in last 4-5 years.

Outlook and Recommendation: The company has seen its promoters gradually adding their stake. The stock currently appears to be alittle overpriced but the long term outlook is bright. GWIL is geared up to maintain its leadership position in the market in the entirevalue chain of surface finishing goods. We maintain a BUY on the stock with a revised target price of Rs80 from a 12 monthsperspective.

Grauer & Weil (India) Ltd.CMP: Rs70 |Target: Rs80 |Potential upside: 14%

TM

From Wagons to Complete Rail Solution: Texmaco is one of the largest wagon manufacturers in India with a capacity of 10,000 wagonsper year. Texmaco has always maintained a dominant position in the wagon market. The Indian Railways (IR) is the largest customerand company has taken steps to expand its presence in areas such as special purpose freight cars for oversized consignments, doubledecked rakes, high speed coaches, metro units etc. Texmaco has acquired Kalindee Rail Nirman (Engineers) Limited which is engaged inthe business of providing EPC services to railways and metros, especially in the field of signaling tracks, track construction,telecommunication and auto fare collection machines. Through this acquisition the company has expanded its offering which led thecompany in securing largest signaling and Telecom contract in Western Dedicated Freight Corridor (DFC).

Diversified Business Segment: In order to reduce dependency on the wagon business, company has diversified into business segments(i) Hydro-mechanical equipment (ii) Bridges & Structures (iii) Steel foundry (iv) Traction & Coaching (EMU, Coach Bogies LocomotiveComponents & Assemblies).

Subsidiaries and Joint Ventures:(i) Acquisition of Bright Power Pvt Ltd: Texmaco acquired 55% in Bright Power Pvt Ltd which is pioneer in the domain of Rail

infrastructure, specializing in the field of Overhead Electrification of Railway systems.(ii) Touax Texmaco Railcar Leasing Pvt Ltd: The JV which is into leasing wagon for medium to long term horizon. With new businesses

emerging in the field of fly ash, auto, steel and cement industries, the prospects for domestic trade are on the up-move.(iii) Wabtec Texmaco Rail Pvt Ltd: This is a JV company between Texmaco and Wabtec Corporation, USA (40:60 holding), incorporated

in July 2015 for supplying draft gear.

Financials: Despite slow down in the order flow from Indian Railway, there has been consistently improvement in the Ebitda margin.EPC business should be the major growth area for the company and this shall help it in improving its margins at the operating level.

Outlook and Recommendation : With recent receipt of order from Indian railway of 9500 wagons and construction of 45 Kilometerdual gauge railway line by Bangladesh Government, we expect the order flow to increase from FY18 onwards and company is wellplaced to benefit from Government's massive impetus in developing Indian railways infrastructure. We recommend a BUY on the stockwith a target price of Rs170 for a 12 months horizon.

Texmaco Rail & Engineering Ltd.CMP: Rs112 |Target: Rs170 |Potential upside: 52%

TM

New product launch: Nagarjuna Agrichem (NACL Industries Limited) is ranked among the top 20 Indian Agrochem companies offeringmore than 50 products. The business vertical which is divided in domestic formulations & technicals consists of a product portfolio forformulations business spread across a number of insecticides, fungicides, herbicides and plant growth regulators. It has recentlyentered into a development agreement with Nippon Soda Company, (NISSO). The company has entered into an exclusive distributionagreement with Asahi Chemical Mfg Co Ltd and Arysta Life Science Corporation for marketing of Atonik, a Plant Growth Regulator (PGR)product. The company has successfully launched a new fungicide called Slogan and has also launched a Bio-product named Alpha. Thecompany has registered 10 'me-too" formulations and has applied for 4 TIM (Tech indigenous Manufacturing)

Budget Booster: The Government's recent focus on agriculture and allied industries is bound to give a boost to farms and one willwitness a turnaround very soon. All these efforts will sooner or later revitalize the entire farm sector in days to come. All the efforts byGOI aim at reducing the stress for the farmers, improving the quality of living, increasing the purchasing power of the rural economy,enable them to purchase crop protection materials and finally boosting the farming practices to enable better farm returns.

Agrochemical Giants Eyeing India: Agrochemical sector as a whole has many bright prospects especially in the Indian subcontinent ledby the high consumption of these agrochemicals. The Chinese agrochemical industry has been going through a rough phase due tostrict and tightened pollution control norms. Many global players are getting attracted to India as there are many benefits in Indiaincluding low cost of production, high consumption, higher profitability and transparency over IPR protection. Thus, a large number ofdomestic as well as global investors are actively investigating for merger & acquisition to expand their operations in India.

Financials: The company expects demand from exports to increase in the quarters to come. The company will focus to sell brandedproducts in some African countries and at the same time increase the sales to Myanmar. The company in the process of restructuringits long term and short term debt, so that the cost of debt comes down to 14-12 % in the long run. The strong marketing network of thecompany coupled with the software and hardware already created should help the company capitalize through the new products to beintroduced in near future and further shall help in attaining better volumes and higher turnover.

Outlook and Recommendation: The demand for insecticide and fungicide is growing significantly in the Northern parts of India as wellas in the twin states of Andhra Pradesh and Telangana. This stock fits into a turnaround / growth category, so one will have to be patientenough to make decent money in the long run. We maintain a BUY on the stock with a revised target price of Rs60 over a period of 12months.

NACL Industries Ltd.CMP: Rs56|Target: Rs60 |Potential upside: 7%

TM

Opportunities in different segment of construction sector: Simplex Infrastructure is one of the leading construction players in India. Ithas its presence in almost all the segment of the construction sector like Building & Housing (38%), Urban utilities – Metro (13%),Industrial (13%), Pilling & ground Engineering (12%), Power (10%), Marine (4%), Road (4%),Railways (4%) and Bridges (3%).

Metro Projects: The company has been bidding aggressively in all the metro tenders floated across all the cities in India.(a) Mumbai Metro : MMRDA has awarded contracts to design and construct the 16.5km Metro-VII corridor in 3 packages from Andheri

East to Dahisar East to Simplex Infrastructure, NCC and J Kumar Infra. Simplex will design and construct the first package.(b) Ahmedabad Metro: On the North-South Corridor (connecting APMC to Motera), work on 8.9-km-long overhead section between

Shreyas and Ranip has been awarded to Simplex Infrastructures Ltd.(c) Pune Metro : With regards to the Pune metro construction tender, four companies had been short-listed namely, Simplex is one

amongst them.(d) Amravati Metro : Simplex named emerged during the opening of online tenders by the Delhi Metro Rail Corporation (DMRC)

Poised to be benefited from Indian Cities Modernization (Water & Sewage): JNNURM covers 63 cities with USD15bn planned outlayover the next 7 years. The estimated investment of USD5bn is chalked out for urban infrastructure over the next 5 years. The companyhas been a major participant in this sector.

Strong Order Book: The company order book stood at Rs1,65,180mn as on 31St March 2017. Of this 8% of the order-book and 14% ofthe revenues are from the overseas.

Financials: In the past, the revenues of the company were flat due to lower inflow of orders, delayed execution and stretched balancesheet. However, with the pick-up seen in the order inflows, we expect that the revenues should see an uptrend going forward. Also,there is gradual improvement expected in the Ebidta margins of the company with focus on operational efficiency.

Outlook and Recommendation : The company is a strong E&C player with robust growth outlook. The PAT has shown a CAGR of 25.6%from FY14-17 . With the inflow of orders being robust for the company, it can maintain the growth with no further equipment costs andthereby provides revenue visibility going forward. We recommended a BUY on the stock with a target price of Rs700 for a 12 monthshorizon.

Simplex Infrastructures Ltd.CMP: Rs582|Target: Rs700|Potential upside: 20%

TM

Key Products and Customers: The company has a range of products that caters to a diversified range of industries ranging from paper,Pharma, agro chemicals, thermal dyes, light stabilizer, aerospace, dyes and hair dyes etc. The major products of the company includeMeta amino phenol and Nitrobenzene. The diversified range of products insulates the company from the downturn in any specificindustry. Presently, SNCL is engaged in the manufacture and marketing of Nitrobenzene, its downstream derivatives and otherintermediates for various applications in aerospace, Pharma and agro, optical brightening agents, plastic additives, special fibres, epoxyresin hardeners, dyes and performance chemicals.

Geographical Presence: The company has a leading position in the domestic markets and the exports constitute about 74% of theoverall revenues from operation (as of FY17) including other income, well diversified in terms of product range as well as the countriesof Export. SNCL has set up a 100% subsidiary Anuchem b.v.b.a. in Antwerp, Belgium with the objective of providing immediate andassured service to the vast European clients. With the strong standing reputation, the company is well positioned to enter intocontracts with foreign companies for custom and toll manufacturing.

Efforts to improve operational efficiency: With the lowering of crude prices, improving energy efficiency and other factors; SNCL inrecent times is become competitive with the chinese competition and is well positioned to leverage the advantage of a better qualityproduct. The company continues to focus on cost control at every level to improve the operational efficiency which along with theincreased operating level and upward revision of product prices is expected to improve the margin. Continuous efforts are being madefor efficient energy and raw material consumption. The rate of flow of orders is also encouraging. It has realigned the productionfacilities to meet the demand. All of these efforts should help the company further improve the turnover and performance.

Financials: The company has been facing working capital pressure for the last 3-4 years which has been impacting the performance.Last few quarters results indicate a slight easing of positions, the positive factor for the company is strong order inflow. It appears thatwe may see a strong turnaround in the company’s performance from the current year onwards.

Outlook and Recommendation: A better product mix, operational efficiency and stringent control on the cost have contributedtowards increasing productivity, production and operating margins for the company. Being one of the known players in its offeringsdomain, SNCL has strong growth prospects going forward. It would be a HRHG category stock. One must also keep in mind that it is anilliquid stock and thus the movements could be volatile. We had initiated a BUY on the stock with a target price of Rs100 over a 12months horizon and we maintain the same.

Sadhana Nitrochem Ltd.CMP: Rs94 |Target: Rs100 |Potential upside: 6%

TM

Strong Foundation: ITD Cementation India Limited (ITDCem) is one of the leading players in the engineering, procurement andconstruction (EPC) area of the infrastructure and construction industry. The company has a strong backing from the parent company.ITDCem’s main activity areas include airports, buildings, dams and tunnels, highways, expressways, railways and bridges, industrialplants, mining, pipelines and utility works, marine construction services, rapid transit systems, steel structures, telecommunications etc.These activities are more or less the same and at-par with the parent’s portfolio.

The Infra Bucket: The basket of segments in which the company spreads its wings includes projects related to maritime structures,urban infrastructure or MRTS, projects for hydro, dams, tunnels, irrigation, industrial structures & buildings, highways, bridges andflyovers and specialist engineering. The company has gained experience in all the above segments with the expertise and alliance of theparent, thus enabling timely completion of the simple as well as complex projects.

GOI Initiatives- The Backbone: The GOI has ambitious projects to transform many towns into urban India which directly will provide animpetus to the construction industry. Some of the major triggers for growth provided by GOI include the 100 Smart Cities Missionproject, housing for All by 2022, providing housing at affordable prices and rehabilitation of slums, the AMRUT program launched in2015 which aims at promoting urban development, GOI plans to offer more road infrastructure projects under the PPP model.

Financials: The company is focusing on reducing its debt burden; a turnaround can be expected going forward. As of June 2017, thecompany has a very strong order backlog of Rs82bn where nearly 50% is through joint venture and is L1 in orders to the tune of Rs24bn.The company currently has orders with healthy margins and is expected to lay more emphasis on return on equity (ROE) in future.

Outlook and Recommendation: Many of the projects (which had lower margins) are in the completion stage, hence one should notexpect much growth, in fact we see a de-growth in the turnover in CY17 until the new ones are initiated from fourth quarter of currentfiscal year onwards. The order book pipeline remains strong and many opportunities will rise out of the infrastructure sector; wemaintain a BUY on the stock with a target price of Rs225 over a horizon of 12 months.

ITD Cementation Ltd.CMP: Rs215|Target: Rs225 |Potential upside: 5%

TM

Strong Supply Chain: Supply Chain (SC) built around the concept of “farm-to-fresh” model remains the backbone for the company.There are sourcing centres feeding resources into strategically-located distribution and warehousing centres (four centres locatedacross each corner of the geographic footprint), which in turn feed various restaurants. The company is always on toes with respect tothe back end support, avoiding any hindrance and vouching for a smooth overall working.

Growth factors: Store addition: The company stands at 265 restaurants, with a healthy mix between West and South India, on trackwith the target to add 25-30 new restaurants in the current financial year. The company has reported nine consecutive quarters ofpositive same store sales growth. Brand extensions: There are various initiatives taken for increasing its presence and ramp up on thetarget customers. McCafe: As of Q2FY18, there are total of 136 McCafe’s with 15 added during Q2FY18. Breakfast menu: After theinitial success across the restaurants that offer breakfast menu, the company is expanding beyond that. The company takes it as a 2-3years horizon opportunity which should gradually become an essential component of the revenues. Desert Kiosks: Being economicaland having a variety to offer, these are an important drivers in increasing the market penetration of the company. Mc Deliverycontinues to be the robust growth engine for the company in the existing restaurants. New happy price menu has been driving salesand footfalls with the newly launched Chatpata Nan which is a huge hit. Also the product range under the flavors of borders that waslaunched in the festive season was a hit. The implementation of ROP (Restaurant Operating Platform) 2.0 has ensured that newrestaurants break-even in a shorter span of time; this has aided margin expansion and lead to strong cash flow and profit growth.

Update on the Mr. Vikram Bakshi case: The tiff between Bakshi and McDonalds continues with McDonald being head strong on notdoing business with Bakshi. As and when it unfolds, Westlife would stand to benefit from the same.

Financials: Reduction of GST from 18% to 5% is a positive for the company. To deal with the hike, the company had increased the baseprice to keep the overall prices the same. The input tax credit on the other hand has been taken away which needs to be adjusted withthe reduction in GST. Overall the move is positive for the company and should be passed on to the customers.

Outlook and Recommendation: We had initiated the report with the key understanding that the customers in India will preferMcDonald’s stores due to value for money, accessibility, brand, and a desired combination of food and beverages; leading to WDL beingone of the key beneficiaries of the growth consumption story. Keeping in mind the positive scenario and positioning of the company inthe industry, we maintain a positive outlook with a revised target price of Rs425 (Rs350 achieved) over a 12 months horizon.

Westlife Development Ltd.CMP: Rs330 |Target: Rs425 |Potential upside: 29%

TM

Market leader: Federal Mogul is the largest manufacturer of pistons and piston rings in India. It manufactures world-class pistons,piston rings, sintered parts and cylinder liners covering a wide range of applications including two/three-wheelers, cars, SUVs, tractors,light commercial vehicles, heavy commercial vehicles, stationary engines and high output locomotive diesel engines.

Strong Parentage (Holding Company): Federal-Mogul Goetze (India) Limited was established as a JV with Goetze-Werke of Germanywhich is now owned by Federal-Mogul Corporation. Federal-Mogul Corporation is a USD6.3bn global company and one of the leadingmanufacturers of automotive components and power train component in the world with 225 subsidiaries spread across 40 countries.The parent brings in vast experience and strong technical expertise and financial assistance to Federal-Mogul Goetze (India) Ltd.

BS VI: In order to fight the increasing pollution, the government has announced the implementation of Bharat Standard BS-VI by April 1,2020. BS-VI is an equivalent of Euro-VI norms being followed globally. The company perceives this as a huge opportunity and hasalready started development work with some OEMs in India, on new engine projects. Federal-Mogul is currently producing many of theEuro-VI engine parts in Europe and for comparable engine standards in North America. This would be an opportunity that the companyis working to capitalize on going forward.

Financials: For the past 2 years, the company has been reporting negative to flat numbers at the top-line. However the company’sEBITDA margin has improved by 330bps from 10.5% in FY16 to 13.8% in FY17. The story of improvement in operational efficiency hasbeen seen in the H1 of FY18 where the EBITDA margins came in at 15.4%. This clearly indicates that the performance of the company ispicking up and is expected to continue going forward as well.

Outlook and Recommendation : Being one of the leader in Indian piston market, the company is expected to be benefited from theexpected changes in the emission norms and growth in the Indian automotive sector. We have recommended a BUY on the stock witha target price of Rs750 over a horizon of 12 months and we maintain the same.

Federal Mogul Goetze (India) Ltd.CMP: Rs531 |Target: Rs750 |Potential upside: 41%

TM

Core Business: Cupid holds the recognition of being India's first and second in the world to have a pre-qualification accredited by WHOfor worldwide public distribution of female condoms. The company is exploring opportunities in India and has already started targetingthe states of Bihar, Gujarat, Jharkhand, Karnataka and Tamil Nadu.

African opportunity: Cupid is planning to launch its products in different developing countries like Brazil, Nigeria, Tanzania, Indonesiaand other developing countries. Cupid intends to form a joint venture company with a South African partner and to submit bid forsecondary packaging plant which is expected to commence production from July 1st, 2018.

New Products launches: During FY17, the company launched new product namely lubricant jelly. The company has recently launchednew products like hand sanitizers, vaginal creams and wipes etc.

B2C business foray: Traditionally (in the B2B segment) the company has been catering to government and non-governmentorganizations worldwide. The company has started taking baby steps with its plans to foray into B2C business.

New orders: The global condom market presents a growing opportunity for Cupid. The company has received supply contract worthRs241.3mn to supply male condoms from Central Medical Services Society, Government of India. These goods will have to be deliveredover a period of five months. The company has an order book worth Rs670mn and repeat orders worth Rs60mn for a total of Rs730mn.

Timely Order Execution: The company successfully delivered male condoms along with lubricants packed together for the first time to South Africa and also exported water based lubricant jelly packed in tubes to a Central American country. The company intends to boost sales via online platform, online sales, digital marketing and other promotional activities from December 2017.

Financials: The company has the capability of switching the production lines between male and female condoms, as per the demandand requirement. The company is debt free. Being cash rich it is looking for opportunities to be explored organically as well asinorganically. Cupid has been generous in rewarding the shareholders with incremental dividend over the last few years.

Outlook and Recommendation: The company intends to expand the core B2B business into new territories through large institutionalopportunities, new product registrations and commercialization of the products along with its focus on B2C business as well. All thesefactors will help propel the top as well as the bottom line. We maintain our target of Rs340 with a horizon of 12 months.

Cupid Ltd.CMP: Rs303 |Target: Rs340 |Potential upside: 12%

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Truly Dynamatic: Dynamatic Technologies Limited (DTL) is reputed as one of world’s largest manufacturers and suppliers of hydraulicgear pumps and automotive turbo chargers. The company has maintained its leadership position in these segments. DTL also buildshigh-precision systems & sub-systems for aerospace, automotive, homeland security and other defence related products. The companyhas been built through a mixture of organic and inorganic growth. DTL supplies to almost all the top OEM’s in India and enjoys nearly60% share of the Indian organized tractors market. DTL produces high quality ferrous and non-ferrous automotive components forsome of the leading global automotive OEMs.

Aero Special: DTL is also involved in manufacturing of high precision air frame structures and aerospace equipments. DTL is the onlyIndian company to be a Tier I supplier to Airbus, Boeing, Bell Helicopters and HAL.

Make in India- Synergy: The sole aim of the Make in India initiative was to encourage national and multinational companies tomanufacture their products in India. With its intentions to tap the Indian UAV market; IAI has roped-in DTL. In addition to this, DTL hassigned a cooperation agreement with Magal Security Systems Ltd. (Magal-S3) to pursue Integrated Security Project(s) in India. DTL haspartnered with Carmor (formerly known as Hatecof) to manufacture armoured vehicles and other military vehicles.

Financials: One may not feel comfortable looking at the debt and debt-equity ratios of the company; however, the company will takesteps in near future to rectify the same. The company is under continuous capex and the process will continue with time as theaerospace demands increase. Boeing seeks and looks at advantages like capability, quality and cost where India is an obvious partnerand so will DTL fit into this frame. There are many segments in the company, the value of which will be unlocked with times to come(very long run), for e.g. the potential to unlock value in the Auto segment.

Outlook and Recommendation: The current scenario with focus on Make in India, providing impetus to exports from India, initial stepstowards mechanized farming, medium to moderate growth expected in the automotives segment, GOI focus on aerospace and alliedactivities will benefit the company. This stock is a pure long term futuristic pick and will not please short term traders. Looking at thefuturistic demand accompanied with unmatched high precision quality of products offered by the company, we maintain a BUY on thestock with a target price of Rs3000 for a horizon of 12 months.

Dynamatic Technologies Ltd.CMP: Rs2172 |Target: Rs3000|Potential upside: 38%

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Key business segments: Paint Packaging: The company offers leakage free paint packaging, caters to exquisite injection-mouldedplastic packaging designs. Personal Care and Healthcare: The company had initiated with designing of products, which then graduallymoved on to creating beautiful shaped containers, colour coding, airless pumps and elegant cartons. Health Care: The company offerslatest packaging innovations in rigid plastic health care packaging. Home Care: It is one of the best plastic packaging containermanufacturer, offering multifaceted solutions that facilitate packaging for both solid and fluid household products, coupled with brightcolours for packaging increasing visibility and brand recall, the use of large surfaces of containers or bottles for labeling that helpscreate strong visual identity. Food & Beverages: the company focuses on creating low-weight, sturdy food and beverage packagingdesigns, ease of opening and resealing, portability and clean dispensing systems making the company a reliable plastic packagingpartner. Agrochemicals: It caters to the diverse plastic packaging needs of the agrochemical industry including fertilizers, insecticides,herbicides, plant growth regulators or fumigants. Lubricants / Construction chemicals & Adhesives: the company offers a variety ofhigh-density polyethylene (HDPE) to maintain the efficacy of the product while preventing leach of unwanted chemicals.

Rohtak plant: Manufacturing at the Rohtak plant was disrupted from Feb 2016 due to the fire set by agitators. The company hasindicated that the plant has re-started with the operations with increase in capacity from March 2017. Once the plant gets into thenormal mode, the company should be better positioned to take up new products and clients across different industries.

Management Strength: There has been lot of restructuring in terms of the role of the management towards Hitech in the recent past.Experienced hands are working towards taking the company to the next level in tandem to the growth expected in the industry withintroduction of new products and clients to the bouquet.

Financials: Hitech has always focused on R&D, innovative product development to help strengthen the current business and enter intonewer markets. The company has made planned investments in terms of increasing capacities, better operational efficiency, productofferings; for the overall ramp up in operations.

Outlook and Recommendation: One of the preferred players in the space, the company has a strong clientele across various industries.With the management increasing its focus on the overall business; going forward the company is better placed to benefit from theexperience and expertise. Being optimistic with the kind of positioning that the company enjoys in its sector of presence, we arepositive on the future performance of the company. We maintain BUY on the stock with a target price of Rs230 over a 12 monthshorizon.

Hitech Corporation Ltd.CMP: Rs181|Target: Rs230 |Potential upside: 27%

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Market Leader in Needle Roller Bearing: NRB Bearings (NRB) is the largest needle roller bearing player in India with ~70% segmentalmarket share and the fourth-largest bearing company with ~7% share in the country’s total organized bearing market. It is one of thetwo organized bearing players of Indian origin among top five bearing players in the country. This is on account of close OEMrelationships (OEMs contribute 65% to revenue), customized product offerings and strong engineering capabilities reflected by researchand development.

Growth in the Indian Auto Sector: NRB Bearing’s revenue is strongly correlated with automotive segment’s growth. The IndianAutomobile Industry has shown a CAGR of 5-7% in the production volume across all segment over the last 3 years. By 2020, India'sshare in the global passenger vehicle market to touch 8% from 2.4% in 2016. India is the 6th largest automobile industry globally withan average annual production of 24million vehicles in 2016. Further it is the second largest two-wheeler manufacturer, the largestmotorcycle manufacturer and the fifth largest commercial vehicle manufacturer in the world. Two-wheeler production is expected torise from 19.9mn in FY17 to 34mn by FY20E.

Exports together with diverse revenue base: The supplies to the OEMs account for nearly 65% -70% of the demand; nearly 20-25% ofthe company’s products are exported while 12-15% is supplied to the Aftermarkets. The company exports to more than 25 countriesacross five continents. Some of its clients include Mercedes, Bosch, Honda, ZF Group, Volvo-Renault, Daimler, Audi, Mazda etc.

Financials: The company has the highest gross margin which is in the range of 60-62%. When compared with the other peers, thecompany has the lowest PE and EV/Ebitda in the industry at 24 and 13 respectively with a consistent ROE of nearly 17% since last 10years. The company has been investing and trying to build its R&D to develop new product lines, improve its performance and marginswhile they stream line the production processes.

Outlook and Recommendation : In the current scenario in India, the GOI is trying its best to boost exports and at the same time theinterest rates have fallen down. The auto industry has already started showing signs of recovery, which is also supported by the healthyauto sales over the last quarter. In addition to the auto sector, incremental revenue can also be anticipated from the defence,aerospace and railway segments. All these factors will directly be seen on the bottom-line of NRB. We maintain a BUY on the stockwith a target price of Rs200 for a 12 months horizon.

NRB Bearings Ltd.CMP: Rs173 |Target: Rs200 |Potential upside: 16%

TM

Japanese Management to Steer: Kokuyo Camlin limited (KCL) is one of the leading stationery player in Indian Market. KCL beingcredited with establishing well-known brands Camel and Camlin in India over a period of 8 decades was acquired by a leadingstationery manufacturer of Japan-Kokuyo Co. Ltd in 2011, post which the company was renamed as Kokuyo Camlin Limited. Recentlywith some top management level changes that have taken place; the company is now completely under the management of theJapanese. The Japanese Management will try to bring in more automation and introduce their culture of Kaizen and JIT which willimprove operational efficiencies and the benefit of the same should be reflected in the bottom line in the years to come.

Patalganga- New Plant: The company has set up new plant at Patalganga which is quite futuristic in design. One can expect nearly 200products SKUs to be launched in next 3-4 years (reworking, re-designing or new packaging). Integrated manufacturing at a single sitewould reduce the production cost owing to reduced transportation cost and enhanced shop floor efficiency. One must also note thatthe company currently maintains 29 depots which shall come down to nearly 5 to 6 depots post implementation of GST. This will alsocontribute to the cost savings in operation of depots and enable huge savings in logistics of the company. All these factors will furtherstrengthen the belief of cost reductions which appears to be an icing on the cake. The size of the property at Patalganga is somewherearound 14 acres of land, while the company is currently using only half of it (maybe around 6.5acres). The capacity created is goodenough for the next 5-6 years. This clearly shows the scope of further addition of capacity if the management intends to expand intimes to come.

Financials: In the past, due to stiff competition from both organized market and unorganized market, the company was compelled towork at thin Ebitda margin of 3-5%. Going forward, with commencement of new plant and changes in management, we could seevolume growth coupled with operating efficiencies and cost savings.

Outlook and Recommendation : Considering the commencement of the new plant recently, FY2017-18 is most likely to be a year ofconsolidation; however, some green shoots are already visible and the effect of new facility has started getting reflected in thequarterly result. We maintain a BUY on the stock with a target price of Rs175 for a 12 months horizon.

Kokuyo Camlin Ltd.CMP: Rs133 |Target: Rs175 |Potential upside: 32%

TM

Recent Deal with ABC Bearings: The company had recently announced the merger of ABC Bearings Limited (ABC Bearings is amanufacturer of tapered, cylindrical and spherical roller bearings, and slewing rings) which is likely to conclude by March, 2018. Themerger will bring significant operational synergies and will expand the capacity, customer base and company’s locally produced productbreath and improve market share in commercial vehicles and off-highway segment. ABL’s take over may lead to an equity dilution in thenear term, but is certainly earnings accretive as TIL will gain capacity and market share along with a wider portfolio.

Capacity and Capex ramp-up: The company has been ramping the capacity through yearly capex. Fixed Asset and CWIP shows a CAGRof 29% from FY13 to FY17. Timken has undertaken capex in the Jamshedpur plant to augment the existing Rail bearing capacity & TRBcapacity to cater to increasing local and global demand. The company has spent Rs1,169mn for the same (as per the AR). Jamshedpurplant was awarded the International Railway Industry Standard (IRIS) certification, making Timken as the only MNC bearing company inIndia to have both AAR & IRIS certification. This enables Timken India to export rail products even to European market. Overall with theexpanded capacity being operational, the company would be in a better position to capitalize on the increasing demand with betterrevenue visibility going forward.

Railways- The Key Growth Driver: In the past there has been a slow-down in the tenders for wagons by the railways. As and when theGovernment declares orders for wagons, Timken will be benefitted as wagons require roller bearings and Timken masters inmanufacturing technology. Further with the Government focusing on the High Speed, High Safety coaches, this would be a new marketto tap as existing coaches would require modification/replacement in a phased manner.

Financials: The company is consistently increasing its top line and bottom-line. Over the last 3 years, the top line and bottom line hasshown a CAGR of 13% and 25% respectively. Further to add to it, the company is virtually debt free.

Outlook and Recommendation: The rising government spending in the railway space, healthy balance sheet and improving profitabilityare some of the strong positives for the company. With the ramp up in production capacity and acquisition of ABC bearing, thecompany is well placed and equipped to tap the demand in the sectors of railways and commercial vehicles. We maintain a BUY on thestock with a target price of Rs1200 with a 12 months perspective.

Timken Ltd.CMP: Rs884 |Target: Rs1200 |Potential upside: 36%

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