Omkara Manufacturing Smallcase Final PPT

OMKARA MANUFACTURING SMALLCASE
FASTEN YOUR SEATBELTS

Disclaimer: Omkara Capital is a SEBI registered Research Analyst (SEBI Reg. no. INH000008206). This presentation, data
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companies, if any and/or directors, employees or associates may have interests or positions, financial or otherwise in
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buying/selling any company mentioned in this presentation. We may have advised the stocks mentioned herein to our
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the Companies.

2021 = 2003?

IMPORTANT Markets will be volatile in coming months. Geopolitical
CAVEATS tensions, interest rate hike, elections and weak results

We will give ideas when we find them attractive as
volatile markets will give ample opportunities.

This is thematic fund where investment is happening
ahead of the cycle. Patience will be key to make wealth

Don’t invest in this Smallcase in case your horizon is less
than 1 year. THIS IS NOT A QUICK MONEY KIND OF A
PRODUCT

DID YOU KNOW

IT exports has surpassed the gross oil import bill

India 3rd largest manufacturer of pharmacy in terms of volume,
but just 4% in value terms
India is poised to become the world’s third largest automobile
industry by 2026
Medical Devices: Market size may reach USD 50 billion by 2025

KMC

KM Birla Narendra Modi Manish Bhatnagar

Chairman AB Group Prime Minister of India MD SKF India

Predicting a Decade of PLI to boost India’s If I was a manufacturing guy, I
Capex Mahotsav for India Manufacturing by $520 Bn would be very happy, this is
going to be our DECADE

Manufacturing – How huge is the Opportunity?

Manufacturing sector can grow 2.8x by 2030 25%

6.0

5.0 17% 5
17%
4.0 20%

15% 20%

3.0 16% 15% 15%
13% 10%
2.0 2.7

1 5%

1.0

0.35

0.0 0%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2030

Indian GDP in $ Tn (LHS) Manufacturing Output $ Tn (LHS) Manufacturing as a % of GDP (RHS)

Source: World Bank

Capex Cycle – A direct play on Manufacturing

Triggers for the next capex cycle

Big Getting Bigger Government Initiatives Electronic Manufacturing
Improving Capacity Utilisation Defense
Changing mix of government capex
Industry Consolidation Capex as a % of GDP rising Import Substitution Plays
Project Announcements & Execution
Uptick in gross credit disbursement Budget Allocation to Major Schemes Improving Order Book of Sectors
Asset Quality Improvement Share of manufacturing in new investments is rising O/S Private Sector Capex
Export hitting all time high Reforms Increasing New Company
Deleveraging PLI Registrations

Improving Economic Health Improving Private Dynamics

Industry Consolidation – Big Getting Bigger

Visible Consolidation of Market Share Across Sectors

Sector Parameter Share Companies FY10 FY17 FY20 FY21
Bank Credit Credit Market Share Top 6 SBI, HDFC Bank, Kotak, ICICI, Axis, IndusInd
NBFCs – Housing Finance Companies AUM Share Top 2 HDFC, LIC Housing 37% 43% 48% 49%
Cement Sales Volume Top 5 Holcim, UltraTech, Shree, Dalmia, Ramco 76% 70% 72% 73%
Steel Sales Volume Top 6 Tata, JSW, JSPL, Arecelor (Essar), SAIL & RINL 41% 51% 58% 60%
Telecom Revenue Market Share Top 3 Jio, Airtel & Vodafone Idea 57% 56% 62% 68%
Aviation Available Seat Kms Top 4 Indigo, Spicejet, GoAir & Air India 65% 66% 83% 87%
Real Estate 75% 77% 85% NA
Launches Top 30
Number of developers 2085 1911 1100 NA
New launches share in tier-1 cities Volume Top 7 Adani group, Pipavav, Sikka, Magadalla, 42% 49% 60% NA
Ports - Share of Non-Major Ports 35% 43% 45% 46%
Gangavaram, Kakinada, Dharamtar
Power Generation - Share of Private 16% 38% 38% 40%
Paints Units JSW Energy, Torrent, tata Power 99% 100% 99% 98%
Passenger Cars 61% 64% 68% 73%
General Insurance Profit Top 4 Asian, Berger, Kansai & Akzo 42% 47% 57% 57%
Breweries 82% 88% 90% NA
Multiplex Volume Top 2 Maruti & Hyundai 6% 24% 28% NA

Source: Spark Research Gross Domestic Premium - Private Sector Share

Volume Top 3 United Breweries, AB InBev & Carlsberg

Gross Box office collections Top 2 PVR, Inox

Industry Consolidation – Improving Output & Utilisation

Overall Industry Capacity utilisation is nearing pre-Covid Levels

Source: RBI Capacity Utlisation (%)

80 74 75 76 76 74 69 69 70 63 67 69 60
70

60

50 47

40

30

20

10

0

Jun-18 Source: Economic Survey
Aug-18
Oct-18
Dec-18
Feb-19
Apr-19
Jun-19
Aug-19
Oct-19
Dec-19
Feb-20
Apr-20
Jun-20
Aug-20
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21

Cement FY05 FY10 FY15 FY20 FY21 Q1FY22

Capacity utilisation 84% 86% 67% 68% 67% 72%

Ex-South 85% 92% 80% 77% 76% 89% Capex Related
Nitti-Gritty
Top 10 80% 77% 69% 73% 70% 72%
Top players in Cement and Steel
Steel Industry are achieving peak

Capacity utilisation 91% 88% 81% 77% 71% 76% utilisation levels which usually
leads to further capex
Top 6 100% 92% 81% 83% 78% 86%

Power

Thermal Power PLF 78% 64% 56% 54% 59%

Source: Spark Research

Are the Economic conditions in place to support a Capex Cycle?

Improving Uptick in credit Strengthening Booming
Banking Health Balance Sheets Exports

Economic Health – Uptick in Credit & Improvement in Asset Quality

Industry Wise Deployment of Gross Bank Credit - Variation in % (YoY) Source: VQ Research

Industry Oct-20 Mar-21 Oct-21

Mining and Quarrying (incl. Coal) 4.2 4.9 16.5

Food Processing 5.1 7.8 6.5

Beverage and Tobacco 2.5 -3.6 0.5

Textiles -0.2 4.7 7

Leather and Leather Products 6.3 1.8 -3.3

Wood and Wood Products 7 8.6 6.1

Paper and Paper Products 10.2 14.7 9.9

Petroleum, Coal Products and Nuclear Fuels 14.9 -8.1 13.1

Chemicals and Chemical Products -2.3 -6.5 7.1

Rubber, Plastic and their Products 5.4 6.2 23.8 Source: RBI

Glass and Glassware 1.4 -5.1 15.8 Net NPA as a % of Gross Advances 2.1
1.6
Cement and Cement Products -4.6 -10.1 21.5 4.5
3.4 1
Basic Metal and Metal Product -4.7 -6.1 16.3 3.9 0.2
3.1 1.5
All Engineering -16.8 -6.3 6.6 3.5 2020
2.7 1.3 Foreign Banks
Vehicles, Vehicle Parts and Transport 7.1 1.3 -6.1 2.8
Equipment 0.8 2.1
0.3
Gems and Jewellery -3.4 -1.6 9.2 1.3

Construction 4.1 -8.2 -6

Infrastructure 0.1 3.7 8.9 0.3 0.2 0.2

Other Industries 0.6 4.5 10.9 2016 2017 2018 2019
Public Sector Banks Private Sector Banks
Total -0.7 0.5 4.1 Scheduled Commercial banks

Source: Economic Survey

Increasing borrowings should lead to future capex Banks have an incentive to lend as overall health of the sector Improved

Economic Health – Company Leverage in the last two decades

BSE 500 Net Debt Movement Excl RIL (Rs Bn) FY20 FY21 Demand>Supply leading Upcycle Consolidation leading
Agri 257 166 to Releveraging (Capex) Downcycle to Deleveraging
Specialty Chemicals 60 58
Auto Ancillaries 82 37
Auto OEM -660 -837
Building Material -15
Realty 7 83
Cement 221 13
Consumer Discrretionary 162 -150
Consumer Staples -22 -445
Pharma -470 -25
Healthcare 134 48
Capital goods 71 -99
Electrical -61 -50
Infra -25 1717
Telecom 1656 1250
Aviation 1009 -165
Oil & Gas -179 1621
Metals 2152 1468
Total 2021 4675
6415
Source: Spark Research

Economic Health – Revival in Exports Post A Decade

India Merchandise Exports ($ Bn) Engineering goods, Chemicals, Pharma, Textiles and Electronics sectors
witness better growth from a 2Y CAGR basis
450

2Y CAGR basis Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21

400 Engineering goods 7% 0% -1% -6% -18% -1% -2% 2% 12%

400

Decadal Breakout Chemicals & related products 18% 9% 8% 3% 2% 5% 7% 6% 8%

350 330 Agricultural & allied products -2% 5% -6% -4% -10% 5% 6% 10% 16%

306 300 314 310 313 Gems & jewellery -9% 1% -6% -12% -50% -24% -4% -7% -2%
304
292
300 15% 11% 8% 0% -24% -4% -1% 3% 5%
276 Machinery & instruments

262 Pearls, precious, semiprecious stones -4% 9% -8% -21% -48% -24% 1% 0% 7%
250

250 Drugs, pharmaceuticals & fine chemicals 14% 9% 10% 6% 11% 15% 16% 11% 7%

200 185 179 Transport equipment 11% 3% -3% -4% -28% -10% -6% -11% -5%
163 Textiles (excl readymade garments) 3% 2% 0% -3% -31% -5% 2% 4% 13%
Drug formulations, biologicals 16% 9% 12% 8% 13% 16% 17% 13% 8%
150 Yarns, fabrics, madeups 3% 1% 0% -4% -32% -7% 1% 3% 12%
126 Readymade garments -8% 7% 6% -3% -40% -5% -3% -8% -10%
Electronic goods 26% 33% 37% 25% -12% 9% 18% 20% 7%
103 Iron and steel 27% 11% 4% 2% -3% 5% -11% -7% 13%
100 84

64
53
50

Rice -7% 4% -11% -15% 12% 10% 3% 19% 60%
0 FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY 22E Total Merchandise Exports (2Y-CAGR) 6% 3% 1% -4% -21% -5% -3% 2% 9%

Source: Ministry of Commerce

A decade of pain finally getting over! Private sector ready for next capex cycle

Private sector participation in GFCF has … As cashflows were used to deleverage the
declined over the past decade… balance sheet

Gross Fixed Capital Formation Trends CFO/Capex at a 2 Decade High

Source: Kotak MF

Source: Economic Survey

12 Myths About The Capex Cycle – Interest Rates
10
Myth - High Interest Rates will hamper the Capex Cycle
8 Truth - Interest Rates rose to elevated levels in the last capex cycle
6
4
2
0

Source: NSE
Jan-01
Jul-01 India 10 Year G-Sec Yield (%)
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22

Myths About The Capex Cycle – Inflation

Myth - Inflation will hamper the cycle
Truth – Early stage inflation drives corporate profit to higher levels

Source: Equirus, Spark Research

Myths About The Capex Cycle – Inflation

GOVT INITIATIVES

Rising Capex as Changing Mix of Budget Allocation Govt Reforms
a % of GDP Govt Capex to Main schemes

THE GOLDEN DECADE FOR INDIA IS HERE

NITIN GADKARI ON
INDIA’S INFRA PUSH

Govt Initiatives – Rising Public Capex with improving execution

Public Capex as % of GDP

8.00 7.50 3.5%
7.00
6.00 2.2% 5.54 3.0%
5.00 2.9%
4.00 4.25 2.4%
3.00 2.5%
2.00
1.00 1.8% 1.8% 1.6% 1.7% 2.0%
0.00
2.53 2.85 1.5% 3.08 3.49
Source: Budget
2016 2.63 1.5%

1.0%

0.5%

0.0%

2017 2018 2019 2020 2021P 2022E 2023E
Capex (Rs Lakh crs) Capex % of GDP

Improving Implementation of Central Projects

Particulars 2008 2009 2010 2014 2015 2016 2019 2020 2021
Total Projects 86 120 174 165 184 202 267 287 283
Ahead 5 4 6
On Schedule 46 4 9 1 2 82 7 6 103
Delayed 32 62 52 48 62 100 142 130 153
Without DOC 3 53 96 100 107 16 114 21
17 16 13 92 37
Source: RBI 1 26

Govt Initiatives – Changing Mix of Outstanding Govt Capex

Govts Capex Focus Shifting Towards a facilitator role – Sectors that can Increasing spend on Transport (Road & Airports) and Construction
have multiplier impact on many industries (Setting up new Hospitals and Education Institutes)

Source: CMIE, Equirus

Govt Initiatives – Budget Allocation to Main Schemes

Budget Allocation to Major Centre Outlay in Major Heads & FY23BE absolute
Schemes (Rs Bn)
Schemes Growth compared to

FY19 FY20 FY21 FY22RE FY23BE FY20 FY21 FY22RE

Road 1539 1673 991 1181 1991 19% 101% 69%

Railway Infra 1355 1501 1093 1171 1371 -9% 25% 17% The heads (Road & Metro, Drinking Water, Shipping etc.) under which
govt has allocated capital have a higher growth multiplier effect on the
Metro & MRTS 158 202 179 395 405 100% 126% 3%
economy.
Urban Rejuvenation Mission 121 95 98 139 141 48% 44% 1%
On an absolute basis, govt allocation to major schemes in FY23BE
Housing Projects 254 240 121 246 374 56% 209% 52% compared to the previous budget has increased drastically due to

Swachh bharat Mission 154 95 58 122 95 0% 64% -22% robust tax collections

Power Sector 896 780 473 490 515 -34% 9% 5% Govt’s focus on Capex for economic purposes rather than socialistic
purposes highlights their intention to revive growth in the nation. This
Defence Capex 952 1111 1343 1388 1523 37% 13% 10%
is a bold decision as they face elections in key states of UP, Punjab,
Civil Aviation 145 36 40 726 105 192% 163% -86% Uttarakhand, etc.

Shipping 59 45 55 45 65 44% 18% 44%

Atomic Infra 247 268 152 227 228 -15% 50% 0%

Coal 165 157 174 187 214 36% 23% 14%

Drinking Water 55 95 160 510 672 607% 320% 32%

Source: Budget

Govt Initiatives – Reforms to focus on Manufacturing

Reforms Push Objective Impact

GOI's primary reason for introducing PLI was to boost India's manufacturing

PLI capabilities and encourage export-oriented production. 13 sectors have been targeted

by GOI under PLI schemes.

Repeal of Retrospective Tax Retrospective tax repealed to promote tax certainty and foreign investment.

The central government has rationalized 29 central labour laws into 4 labour codes

Labour Reforms which will help manufacturing companies reduce their labour, and compliance & filings

with GOI.

GOI increased FDI limit to 74% via the Automatic route, and up to 100% via the

Defense Government Route. This increase should positively benefit the manufacturing
capabilities of Indian Defense Sector and fast track the process of Indeginzation.

68% of Defense Expenditure (in FY22) will be spent on indigeniusly produced defense

products (This is a rise from 58% in FY21)

Land Reforms (Sale of Surplus GOI has accelerated their efforts to hive off surplus land bank of PSUs to separate

PSU Land) entities. This excess land then be utilized for Industrial Projects

Single Window clearance GOI has launched a single-window "Pavresh Portal" which gives all green clearances
Portal required by a manufacturing company to set up plants across the country. This portal
has significantly reduced the time required for the approval of the projects

GOI has reduced the corporate tax rate from 25% to 15% for new manufacturing firms,

Tax bringing the corporate tax rate on par with other Southeast Asian countries. The tax

rate for new manufacturing companies is one of the lowest in the world.

Source: Omkara Research Source: Equirus Research

Govt Initiatives – PLI Incentives

PLI Incentives Should Drive Annual Incremental Gross Value of Rs 7L crs

PLI Bifurcation ( Rs Cr) Benefits Capex Incremental Sales (5 Years) Asset T/o
Mobile & Specfied Electronic
componenets 41,000 11,000 10,50,000 25 Impact of Govt Policies on Electronic Manufacturing has set
the bar for the implantation of PLI Incentives

Medical Devices 2,800 900 13,500 3

Pharma 15,000 10,000 1,80,000 3

Pharma - API/KSM 6,300 5,400 81,000 3

White Goods & LED 6,200 7,900 1,18,500 3

Solar PV 4,500 17,500 1,75,000 2

Telecom 12,200 3,000 2,40,000 20

Food 10,900 6,100 1,22,000 5

Automobile & Auto components 57,000 40,000 9,60,000 4

IT Hardware 5,000 2,400 2,88,000 20

Speciality Steel 6,300 15,000 1,80,000 2

Texitle 10,700 10,000 90,000 2

Aviation (Drones) 120 - --

EV Battery 18,100 8,000 48,000 1

Total 1,96,120 1,37,200 35,46,000

Per year Manufacturing Output Incremental by FY24 7,09,200

Source: Omkara Research

Electronic Manufacturing and Defense are the
new standard of Success

MAKE IN INDIA

Electronics Manufacturing is a roaring success of Govt Policy Implementation

MSIPS Applications shot up by Govt This Boosted Electronic Manufacturing backed by 25% Capex Subsidy

MSIPS Approved Applications and Investments Electronics Production In India (Rs Bn)

800 5335 4974
730
4580

514 3883

3173

314 2433
260 286
168 199 1903
68 94 154 197
11 72
8 33 FY16 FY17 FY18 FY19 FY20 FY21

FY14 FY15

Proposed Investment (Rs Bn) Number of Applications FY15 FY16 FY17 FY18 FY19 FY20 FY21
Source: MeitY
Source: MeitY

Kenil

Subsequently Boosting Electronic Exports With the most impact on mobile manufacturing
Indian Electronic Exports (Rs Bn)
Mobile Phones Manufacturing in India (Rs Bn)

829 2140 2200

619 8x 1700

1320

382 390 400 412 900

540
267 189

FY15 FY16 FY17 FY18 FY19 FY20 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Rising Defense Exports Via Increasing Govt Policies

Defense Capital expenditure as % of the Total Defense Budget is rising Increasing FDI Limit, High Export Promotion, Corporatization of OFB’s will help
in reaching the export target of $5 Bn by FY24.

Source: Budget Defense Capital Expenditure Source: IBEF India Defense Exports ($ Bn)

20 18 18 30% 1.53
28% 1.29

15 25% 25% 6x 0.97
20% 0.72
19% 19% 11 19% 11 13 15%
10 11 17% 18%

10

10%
5

5%

0 0% 0.26 0.28 0.22
FY16 FY17 FY18 FY19 FY20 FY21 FY22RE

Capital expenditure ($ Bn) Capital expenditure as % of total Budget FY15 FY16 FY17 FY18 FY19 FY20 FY21

Support for increasing Indigenization from the govt will positively benefit domestic defense Industry

Changing Private Sector Dynamics

Announcement of Rs Changing Mix of Govt supporting new Private
8L crs Capex Private Capex manufacturing

Revival of Core 8 IIP shot Commentary from Cap Where are we in the cycle?
order book of Cap Goods Good companies

Notable Sectoral Capex Announcements of ~Rs 8L Crs between FY22E – FY24E

Steel (Rs Cr) Oil & Gas (Rs Cr) Power (Rs Cr)

Arcelor Mittal 50,000 IOC 1,00,000 Damodar Valley 4,545

JSW 28,000 Nayara Energy 5,000 NHPC 14,133

Tata 36,000 NTPC 46,190

Total 1,14,000 CPCL 31,580 NEEPCL 1,633

HPCL 64,057 Power Grid 15,000

Oil India 38,000 SJVN 13,000

Capital Goods (Rs Cr) BPCL 19,737 Tehri Hydro 5,900

SKF 525 ONGC 60,450 IRDEA 45,711

Schaeffler 850 SECI 1,832

BHEL 449 GAIL 40,000 NLC 4,981

HEG 600 Total 3,58,824 Total 1,52,925

CUMI 300

Elgi 100 Defense (Rs Cr) Renewable (Rs Cr)

Action Const 100

CG Power 50 BDL 140 RIL 75,000

Total 2,974 BEL 950

HAL 3,200 Adani Green 15,000

Non Ferrous (Rs Cr) Mishra Dhatu 361 NPCIL 15,615

Vedanta 22,500 HSL 105 Total 1,05,615

Hindalco 8,250 Goa Shipyard 118

Hind Copper 700 GRSE 80 Fossil Fuel (Rs Cr)

NALCO 3,300 Total 4,954

Total 34,750 Coal India 40,000

Source: Omkara Research

Changing Mix of Private Sector Capex

Private Sector is making in-roads where Govt is pulling out such as chemicals , electricity and metals

Mix of O/S Private Capex

Outstanding Private Capex

Source: CMIE, Equirus

Rising New Company Registrations, EC Grants, Govt Capex

Rising New company registrations and EC Grants should be followed by Capex in the coming years

Environment Clearance 4250

3250

1620 1753

1120 1100

555

CY15 CY16 CY17 CY18 CY19 CY20 CY21

Kenil

Centre Capex State Capex

1284

1113 1118 766

1076 668 673 709
566
951
860

713

379 365

4MFY16 4MFY17 4MFY18 4MFY19 4MFY20 4MFY21 4MFY22 4MFY16 4MFY17 4MFY18 4MFY19 4MFY20 4MFY21 4MFY22
Source: Spark Research

Revival in Core 8 Industries Shot up Order Book For Capital Good Companies

Notable Revival in Core 8 Industries 20% jump in order book from pre- 4.4% jump in order book from pre-
from Pre-Covid Levels covid levels to post covid covid levels to post covid

Source: Economic Survey, Omkara Research Cap goods - Non Electrical Cap goods - Electrical

Order Book (Rs Cr) Q4FY19 Q2FY22 Order Book (Rs cr) Q4FY19 Q2FY22

BDL 7,258 11,400 Siemens 13142 13520

HLE 280 ABB 4726 4765

Praj 928 2,235 CG Power 4540 2844

BEML 9,125 11,211 BHEL 107806 107058

Kirloskar Brothers 1,696 1,618 KEC 20307 24401

ION 1,760 2,500 Suzlon 7749 5170

Va tech wabag 9,291 10,040 Triveni Turbine 720 828

Thermax 5,370 6,463 Kalpataru Power 14068 18700

GE T&D 6400 8573

L&T 2,30,100 2,58,400 Inox Wind 7025 7917

Power Mech 7,407 15,809 Apar Industries 3020 1846

ISGEC 8,000 7,510 Schneider Electric 755 3087

HAL 58,588 79,467 Transformers &Rectifiers 787 910

Total 3,39,523 4,06,933 Total 1,90,258 1,98,710

Bullish Commentary from Capital Good Companies Domestic Companies

Global Companies

Source: Spark Research Source: Omkara Research

2021 is the new 2003

Inferences From
The Last Cycle

How did the last cycle look like?

Source: VQ Research

How did the last cycle look like for Capital Goods?

Revenue (Rs Cr) PAT (Rs Cr)

2,50,000 1,58,320
91,367
2,00,000 1,58,970 18,022
9,644
13,077
19,836
1,50,000 3.5x 5.8x 9,048
1,00,000
1,556
50,000 26,239
0

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Kenil

EBITDA (Rs Cr) OCF (Rs Cr)

30,000 28,372 25,000
25,000 12,573
20,000 20,000
15,000
10,000 19,260

5,000 4.5x 11,831 15,000 2.3x
0 10,000
2,654
6,802 5,283

5,000 2,908
0

Source: Omkara Research (Exc- Suzlon)

FY12-21 - GB goes 2x, asset turns dropped, more cash on BS, decadal low ROCE

Asset Turnover Gross Block – INDAS Adj (Rs Cr)

4.00 3.61 3.30 1,00,000 91,281
3.50 90,000
3.00 2.52 80,000
2.50 70,000
2.00 60,000 47,946
1.50 2.06 50,000
1.00 2.19 40,000 26,690
0.50 1.74 30,000
0.00 20,000
10,000 12,709
0

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Kenil

0.60 Total Debt/Equity(x) 0.32 40.00 ROCE (%) 19.21
0.22 35.00 13.98
0.50 0.51 0.50 30.00 35.40
25.00 23.80
0.40 0.30 20.00
0.34 0.20 15.00 18.25
10.00 17.13
0.30
5.00
0.20 0.00

0.10

0.00

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
TTM

Source: Omkara Research (Exc- Suzlon)

Source: Omkara Research (Exc- Suzlon) 2002 40.0 2002 50.0 TTM Valuations
2003 35.0 2003 45.0
2004 30.0 2004 40.0
2005 25.0 2005 35.0
2006 20.0 2006 30.0
2007 15.0 2007 25.0
2008 10.0 2008 20.0
2009 2009 15.0
2010 5.0 4.5 2010 10.0
2011 0.0 2011
2012 2012 7.5
2013 2013 5.0
2014 2014 0.0
2015 2015
2016 2016 34.7
2017 2017
2018 EV/EBITDA 2018 P/E
2019 2019
2020 17.8 2020 25.7
2021 9.4 2021 26.4
TTM TTM
12.1
2002 2002
2003 27.5 2003 44.6
2004 12.3 2004 19.6
2005 2005
2006 Kenil 2006
2007 2007
2008 3.5 2008 9.0
2009 3.0 2009 8.0
2010 2.5 2010 7.0
2011 2.0 2011 6.0
2012 1.5 2012 5.0
2013 1.0 2013 4.0
2014 0.5 0.5 2014 3.0
2015 0.0 2015 2.0
2016 2016 1.0
2017 2017
2018 2018 1.0
2019 2019 0.0
2020 2020
2021 EV/Sales 2021 P/B
TTM TTM
3.0 8.3

0.8 5.2 5.0

3.0 2.5
1.3 1.8 2.0

Cap Goods remains an under-owned sector

DII Holding (%) FII Holding (%)

18% 12% 14% 12% 9%
16% 17% 12%
14% 10% 6%
12%
10% 10% 8%
9%
8%
6% 6%
4% 4%
2% 2%
0% 0%

Cap Goods Mcap as % of Total NSE Mcap

7.0% 6.7%
6.0%

5.0%

4.0%

3.0% 2.3% 2.3%
2.0%
1.0% 1.6%

0.0%

Cap Goods as % of Total Mcap

Source: Omkara Research

10000 1496 20000 30000 50000 60000 70000 80000 90000 100000 0 4,000 6,000 8,000 14,000 16,000 Case Studies of Past Cycle - Siemens
0 40000 1,793 12,000
10,000
2,000
2003 16.63x 2003 7.20x
2004 2004
2005 13424 2005 9,417
2006 2006
2007 MCAP 2007 Sales
2008 2008
2009 24,135 2009 12920
2010 2010
2011 87,513 2011 14264
2012 75,741 2012
2013 2013
2014 120 2014 1800
2015 2015
2016 100 2016 1600
2017 2017
2018 80 7.80x 2018 1400
2019 2019
2020 60 2020 1200 4.96x
2021 38 2021
TTM TTM 1000
40
2003 2003 800 640586
2004 20 9 2004 600
2005 0 2005
2006 2006 400
2007 2007 168
2008 2008
2009 2009 200
2010 2010
2011 2011 0
2012 2012
2013 P/E 2013 EBITDA
2014 2014
2015 70 2015 1324
2016 2016 834
2017 2017
2018 84 2018 1516
2019 69 2019
2020 2020
2021 70 20210 400 1200
TTM 60 TTM 200 166 1000
50
2003 2003 800
2004 44 2004 600
2005 40 2005
2006 30 2006
2007 20 2007
2008 10 2008
2009 2009
2010 0 2010
2011 2011
2012 ROCE(%) 2012 5.23x
2013 2013
2014 64 2014 540
2015 46 2015
2016 2016 343 868 PAT
2017 7 2017
2018 2018
2019 2019 624
2020 2020
2021 16 2021 1046
TTM TTM

2003 20,000 2003 4000 Case Studies of Past Cycle – SKF India
2004 2004
2005 18,000 2005 3500
2006 2006
2007 16,000 2007 3000
2008 2008
2009 14,000 2009 2500
2010 2010
2011 12,000 2011 2000 4.77x
2012 2012
2013 10,000 2013 1500
2014 2014
2016 8,000 18.97x 2016 1000
2017 2017 467
2018 6,000 2018
2019 2019 500
2020 4,000 2020
2021 20210
TTM 2,000 192 TTM
0
2003 2003
2004 1,571 2004 1620
2005 2005
2006 3,645 MCAP (Rs Cr) 2006 2228 Sales (Rs Cr)
2007 2007
2008 17,223 2008 3474
2009 11,121 2009 2671
2010 2010
2011 50 20110 100 60 400 500 EBITDA (Rs Cr)
2012 45 2012
2013 40 2013 300 4.33x 600
2014 35 2014
2016 30 2016 198
2017 25 2017 200
2018 20 2018
2019 15 2019
2020 10 6 2020
2021 2021
TTM 5 TTM
0
2003 2003
2004 3.23x 2004
2005 2005
2006 12 2006
2007 2007
2008 P/E 2008 258
2009 2009
2010 19 2010
2011 2011
2012 44 2012 545
2013 37 2013 420
2014 2014
2016 0 10 30 40 60 2016 450
2017 20 21 50 2017 400
2018 2018 350
2019 2019 300
2020 2020
2021 2021 250 5.90x
TTM TTM
200
150
100

50 32
0

ROCE(%) PAT (Rs Cr)

51 190
128
26

391
298

25

5,000 15,000 20,000 25,000 7000 Case Studies of Past Cycle - Thermax
10,000 6000
329
2003 0 16.83x 2003 5000 8.72x
2004 2004
2005 7,160 2005 4000
2006 2006 3000
2007 2007 2000
2008 2008 1000 698
2009 2009
2010 2010 0
2011 2011
2012 5,533 MCAP (Rs Cr) 2012 Sales (Rs Cr)
2013 2013
2014 2014 6091
2015 2015
2016 2016 3433
2017 2017
2018 22,523 2018 5711
2019 16,038 2019 4791
2020 2020
2021 90 2021 700
TTM 80 TTM 600
70 500
2003 2003
2004 60 9.33x 2004 9.95x
2005 2005
2006 50 2006 400
2007 40 2007 300
2008 30 2008 200
2009 20 2009 100 60
2010 10 6 2010
2011 2011 0
2012 0 2012
2013 2013
2014 P/E 2014 EBITDA (Rs Cr)
2015 2015
2016 36 2016 602
2017 25 2017
2018 2018 373
2019 14 2019
2020 2020
2021 78 2021 426
TTM 71 TTM 355

2003 80 2003 450
2004 70 2004 400
2005 60 2005 350
2006 50 2006
2007 40 2007 300 6.70x
2008 30 2008
2009 20 22 2009 250
2010 10 2010 200
2011 2011 150
2012 0 2012 100 59
2013 2013
2014 2014 50
2015 2015 0
2016 2016
2017 ROCE(%) 2017 PAT (Rs Cr)
2018 2018
2019 68 2019 392
2020 2020 291
2021 37 2021
TTM 29 TTM

317
207

9
11

50,000 0 4000 10000 Sales (Rs Cr) Case Studies of Past Cycle – ABB India
45,000 2000 1468 8000
40,000 6000 12000
35,000
2003 30,000 2003 5.10x 6837
2004 2004
2005 25,000 5.59x 2005
2006 2006
2007 20,000 2007
2008 15,000 2008
2009 10,000 2009
2010 2010
2011 5,000 2,855 2011
2012 0 2012
2013 2013
2014 9,609 MCAP (Rs Cr) 2014
2015 2015
2016 14,841 2016 7565
2017 2017
2018 47,300 2018 6934
2019 2019
2020 0 40 100 4.58x 120 140 160 2020 0 100 200 142 300 400 500 600 800 900 1000
2021 23 2021
80 65 700 2.51x
2003 20 60 2003
2004 2004
2005 18 2005 EBITDA (Rs Cr)
2006 2006
2007 P/E 2007 789
2008 2008
2009 105 2009 355
2010 2010
2011 50 20110 200 PAT (Rs Cr)
2012 45 2012 124
2013 110 40 39 2013 600 547
2014 35 2014 100
2015 30 2015 500 4.41x
2016 25 2016
2017 20 2017 544 400
2018 15 2018 300
2019 10 2019
2020 2020
2021 5 2021
0
2003 2003
2004 47 2004
2005 2005
2006 ROCE(%) 2006 141
2007 2007
2008 10 2008
2009 2009
2010 4292010
2011 2011
2012 21 2012
2013 16 2013
2014 2014
2015 2015
2016 2016
2017 2017
2018 2018
2019 2019
2020 2020
2021 2021

5,000 15,000 20,000 25,000 1000 2000 2500 3000 Sales (Rs Cr) Case Studies of Past Cycle – AIA Engineering
0 10,000
2003 500 166 1500 8.54x 3500
2004 0
2005
2003 196 3355..0077xx 2006
2004 2007
2005 1,006 2008 691
2006 2009
2007 3,438 MCAP (Rs Cr) 2010 1417
2008 2011
2009 19,316 2012 3333
2010 16,830 2013 2881
2011 2014
2012 40 2015 800
2013 35 2016 700
2014 30 2017 600
2015 25 2018 500
2016 20 2019 400
2017 15 2020
2018 10 2021 300 10.04x
2019 TTM
2020 6 200
2021 5 2003 100 28
TTM 0 2004
2005 0
2003 3.40x 2006
2004 2007
2005 7 2008
2006 2009
2007 P/E 2010 EBITDA (Rs Cr)
2008 2011
2009 19 2012 249 277
2010 2013
2011 34 2014 659 664
2012 30 2015
2013 2016
2014 40 2017 300 400 500 600 PAT (Rs Cr)
2015 35 2018
2016 30 2019 10.30x 700
2017 2020
2018 27 2021 200 134
2019 25 TTM
2020 20 100
2021 15 2003 18
TTM 10 2004
2005 0
2003 5 2006
2004 0 2007
2005 2008
2006 ROCE(%) 2009 181
2007 2010
2008 32 2011
2009 22 2012
2010 2013
2011 5662014
2012 18 2015
2013 2016
2014 2017
2015 2018
2016 2019
2017 2020
2018 2021
2019 TTM
2020
2021
TTM

Capex Cycle – it fuels growth in a multitude of sectors and drives employment

Source: Spark Research

OMKARA Invest in leaders with track record of execution &
MANUFATURING very strong balance sheet
SMALLCASE
ROCE may look lower and PE may look high on TTM
basis as you investing ahead of the cycle

Next 1 or 2 quarters commodity inflation will remain
& margins have to be watched very carefully

Cap Goods, Engineering, Industrials, Autos/ Auto Anc
= major focus sectors

Maximum number of stocks will be 15

We will provide research on why we are buying a
particular stock in the portfolio

OMKARA MANUFATURING SMALLCASE: PRICING

Normal Fees
-1 year fees = Rs 8000 + GST
-6-month fees = Rs 5000 + GST

Celebration Offer on Omkara’s 1st anniversary
-25% discount only till 27th Feb, Sunday
- 1 year fees after discount 6000 + GST
- 6 month fees after discount 8000 + GST