Systematix

Institutional Research
November 3,
2007

MEETING UPDATE ICSA (India) Ltd. (AURFI IN) August 5, 2010

Industry Capital Goods Ready to takeoff BUY (CMP: Rs.132)

Market Data Market Cap: Rs.5.7bn; USD 134mn
Market Cap. Rs.6.2bn/ US$1324mn We recently had a conference call with the management of ICSA (India) Ltd. to have an
Share Cap. (mn) 47.3 understanding of i) the corporate strategy for their new SMART meters manufacturing
52 Wk High/Low 230/104 facility, ii) new product development, and iii) recent developments within the T&D
Avg. Vol. (Weekly) 676,737
industry, specifically RAPDRP. ICSA is bullish on the demand potential of the SMART
Price Performance (RIC: ICSA.BO, BB: AURFI meters facility with peak revenue potential of Rs.1000–1500mn in the next 3-4 years. ICSA
IN) is also bullish on Power Quality Management Systems (PQMS), designed to monitor
interruptions, durations, voltages etc., at each distribution transformer level. Near-term
triggers to the stock include possible order inflow from high margin ESS business from Q3
FY11 onwards, fruition of which could provide an upside to the current order book of
Rs.18bn. We reiterate our BUY rating on the stock with a price target of Rs.239/share.
Strengthening SMART meter capacity
ICSA has set-up SMART meters manufacturing facility in Andhra Pradesh with a total
capacity of 150,000 meters/month at a cost of Rs.260mn. SMART meter is a combination of
energy meter and a communication device, which would form a part of smartgrids network
Shareholding Pattern in the country. ICSA sees immense demand potential for these meters going forward.
(As on June 30, 2010) (%) Presently, the company is planning to produce energy meters and other embedded
solutions like RTU and IAMR in this facility, which would be supplied to its distribution
utilities. The company is looking for revenue of ~Rs.1,000–1,500mn/year from this business
unit at the peak, which is expected to happen in the next 3–4 years. The company is
expecting margins of ~10–12% for energy meters and ~20%+ for SMART meters.
Product pipeline getting stronger with Power Quality Management System (PQMS)
ICSA has recently completed a pilot project for installation of a power quality management
system (PQMS). PQMS has been designed specifically to monitor interruptions, durations,
voltages etc., at each distribution transformer level. This equipment would help to improve
Financials (Cons) FY09 FY10E FY11E FY12E power quality. The company expects immense potential for this new product going forward.
Net sales (Rs mn) 11,004 12,375 13,755 18,695
EBITDA (Rs mn) 2,692 2,455 2,716 4,047
Expects orders inflow for high margin ESS business by Q3FY11 onwards under RAPDRP
PBT (Rs mn) 2,050 1,702 1,792 3,036 The company is maintaining the same guidance in terms of orders inflow for its high margin
PAT (Rs mn) 1,565 1,216 1,258 2,132 ESS business from System Integrators by Q3FY11 onwards under RAPDRP. For SCADA
EBITDA Margin (%) 24.5% 19.8% 19.7% 21.6%
PAT Margin (%) 14.2% 9.8% 9.1% 11.4%
solutions, the company is expecting floatation of tenders after one and a half month.
EPS (Rs ) 30.5 23.7 22.0 37.2 Currently, the company has placed bids for projects worth ~Rs.2bn for ESS business (other
Price / Earnings (x) 4.3 5.6 6.0 3.5 than SCADA solutions) and ~Rs.8bn for overall ESS and SCADA solutions. These above said
EV/EBITDA (x) 3.7 4.8 4.3 3.1
Price / Book Value (x) 1.0 0.9 0.8 0.6
orders are not part of the opportunities available under RAPDRP.
Looking for other opportunities available in Oil & Gas and Water segment
ICSA is considering a business opportunity of Rs 16–17bn for its product Intelligent Cathodic
Protection System (iCap) from the oil and gas segment in the next 2–3 years. Apart from
this, the company is looking for a business opportunity of Rs.21–22bn for its products
Intelligent Automatic Water Meter Reading and Agricultural Load Management System from
water and irrigation segment in the next 2–3 years.
Maintain “BUY”, with a price target of Rs.239/share
We expect a subdued performance in 1Q FY11 – net sales of Rs.3bn, down 2% Y-o-Y and PAT
of Rs.247mn, down 27% Y-o-Y. However, we maintain our full year estimates for revenue
and PAT despite subdued 1Q as we expect 2H FY11 to be much better than 1H, since
generally 60% of revenues get booked in 2H. We thus maintain our BUY rating on the stock
with a price target of Rs.239/share.
Rohit Jain
rohitj@systematixshares.com
(+91 22 3029 8269)

Aug 10 Systematix Research is also available on Bloomberg SSSL <Go>, Thomson & Reuters SYSTEMATIX SHARES & STOCKS (I) LTD.
 Page 2 8/5/2010JKLHJKLHJated by
SYSTEMATIX Institutional Research

FINANCIAL DETAILS - CONSOLIDATED

Profit & Loss Balance Sheet (Rs mn) FY10 FY11E FY12E
Statement (Rs mn) FY10 FY11E FY12E SOURCES OF FUNDS
INCOME Share Holders Funds
Net Sales 12,375 13,755 18,695 Capital 95 95 95
EXPENDITURE Application Money 1 1 1
Cost of Materials Consumed 4,116 10,222 13,567 Reserves and Surplus 7,005 8,186 10,240
Manufacturing / Direct Expenses 5,020 0 0 7,101 8,281 10,335
Selling Expenses 49 55 75 Loan Funds
Salaries, Wages and Other Employee Benefits 306 385 523 Secured Loans 4,325 4,325 5,325
Managerial Remuneration 73 83 112 Un-Secured Loans 1,814 1,814 1,814
Auditors Remuneration 4 7 9 6,140 6,140 7,140
Admin., Selling & Dist. Expenses 285 221 295 Minority Interest 0 0 0
Misc. Expenses W/off 67 67 67 Deferred Tax Liability 117 117 117
9,920 11,039 14,648 Total 13,357 14,538 17,592
EBITDA 2,455 2,716 4,047 APPLICATION OF FUNDS
EBITDA Margin (%) 19.8% 19.7% 21.6% Fixed Assets
Other Income 85 56 67 Gross Block 2,302 2,652 3,002
Interest & Financial Charges 624 767 830 Less: Depreciation 402 614 862
Depreciation 214 213 247 Net Block 1,900 2,038 2,140
Profit / (loss) before tax 1,702 1,792 3,036 Investments 0 0 0
Tax Expense 486 534 905 Current assets, Loans and Advances
Profit / (loss) after tax 1,216 1,258 2,132 Inventories 2,033 3,081 4,089
PAT Margin (%) 9.8% 9.1% 11.4% Sundry Debtors 5,355 6,038 7,967
Prior Period Adjustments 0 0 0 Cash and Bank Balances 644 766 919
Profit available for Appropriation 1,216 1,258 2,132 Other Current Assets 981 1,264 1,524
Profit / ( Loss ) Brought Forward 2,830 3,835 5,016 Loans and Advances 4,969 5,057 6,096
Profit available for appropriation 4,045 5,093 7,147 13,980 16,206 20,595
Proposed Dividend Less: Current Liabilities & Provisions
Dividend 76 66 66 Liabilities 2,340 3,605 4,753
Tax on Dividend 13 11 11 Provisions 547 398 620
Transfer to General Reserves 122 0 0 2,887 4,003 5,374
Balance carried to Balance Sheet 3,835 5,016 7,070 11,093 12,203 15,221
EPS - Basic (Rs) 25.8 26.6 45.1 Misc. Exp. to the extent not written off 363 297 230
EPS - Diluted (Rs) 23.7 22.0 37.2 Total 13,357 14,538 17,592

Key Ratio FY10 FY11E FY12E

Price / Earnings (x) 5.6 6.0 3.5
Price / BV (x) 0.9 0.8 0.6
EV / EBIDTA (x) 4.8 4.3 3.1
EV / Sales (x) 0.9 0.8 0.7
Cash Flow
EPS adj (Basic) (Rs) 25.8 26.6 45.1
EPS adj (Dil) (Rs) 23.7 22.0 37.2 Statement (Rs mn) FY10 FY11E FY12E
Book Value 150.2 175.1 218.6 CASH FLOW FROM OPERATING ACTIVITIES
ROE (%) 17.1% 15.2% 20.6% Net profit before tax and extraordinary items 1,701 1,792 3,036
ROCE (%) 9.1% 8.7% 12.1% Adjustment for:
Depreciation 214 213 247
Solvency Ratio (x) FY10 FY11E FY12E Dividend / Interest income -33 -56 -67
Debt / Equity (x) 0.9 0.7 0.7 Misc. Expenses written off 72 67 67
Debt / EBIDTA 2.5 2.3 1.8 Prior period Adjustments -54 0 0
Debt / Capital Emp. 0.5 0.4 0.4 Interest and Finance Charges 624 767 830
Capital Emp / Net Worth 1.9 1.8 1.7 Operating profit before working capital change 2,525 2,783 4,113
Interest Coverage Ratio 3.7 3.3 4.7 Change in working capital -2,972 -987 -2,865
Cash Generated from Operations -447 1,795 1,248
Turnover Ratio (x) FY10 FY11E FY12E
Taxes paid -339 -534 -905
Asset Turnover Ratio 0.9 0.9 1.1 Cash flow before extraordinary items -786 1,261 343
Fixed Asset Turnover Ratio 6.5 6.7 8.7 Extraordinary items 0
Working Capital Ratio (x) FY10 FY11E FY12E Net cash from operative activities -786 1,261 343
CASH FLOW FROM INVESTING ACTIVITIES
Current Ratio 4.8 4.0 3.8 Purchase of fixed assets -372 -350 -350
Working Capital to Sales 0.9 0.9 0.8 Purchase of investments 6 0 0
Inventory (days) 60.0 81.7 79.8 Interest / Dividend received 33 56 67
Debtors (days) 157.9 160.2 155.5 Net cash used in investing activities -333 -294 -283
Creditors (days) 207.5 128.7 127.9 CASH FLOW FROM FINANCING ACTIVITIES
Margin Ratio FY10 FY11E FY12E Proceeds from issue of share capital 12 0 0
Proceeds from borrowings 2,224 0 1,000
EBIDTA Margin 19.8% 19.7% 21.6% Interest paid -624 -767 -830
PBT Margin 13.8% 13.0% 16.2% Dividend paid -66 -77 -77
PAT Margin 9.8% 9.1% 11.4% Net cash used in financial activities 1,545 -845 93
Growth Ratio FY10 FY11E FY12E Net increase in cash and cash equivalents 426 122 153
Cash and cash equivalents at beginning of the year 218 644 766
Revenues 12.5% 11.2% 35.9% Effects of Changes in Foreign Exchange Rates 0 0 0
EBIDTA -8.8% 10.7% 49.0% Cash and cash equivalents at end of the year 644 766 919
Net Profit -22.4% 3.5% 69.4%

Aug 10 Systematix Research is also available on Bloomberg SSSL <Go>, Thomson & Reuters SYSTEMATIX SHARES & STOCKS (I) LTD. 2
 Page 3 8/5/2010JKLHJKLHJated by
SYSTEMATIX Institutional Research
For any queries contact us at: Institutional Team

Sanjay Vaid President – Institutional Equity +91-22-3029 8052 sanjayvaid@systematixshares.com

Equity Sales
Nikhil Khandelwal VP – Institutional Sales +91-22-3029 8270 nikhil@systematixshares.com
Pankaj Karde AVP – Sales +91-22-3029 8265 pankajkarde@systematixshares.com
Mamta Singh Manager– Sales +91-22-3029 8092 mamtasingh@systematixshares.com
Derivatives
Raghvendra Kedia VP – Sales (Derivatives) +91- 22- 3029 8091 rkedia@systematixshares.com
Abhishek Karande Technical Analyst + 91-22- 3029 8261 abhishekk@systematixshares.com
Rakesh Pandey Cash & Derivatives Dealer + 91-22- 3029 8181 rakeshpandey@systematixshares.com
Nayan Narnoli Derivatives Dealer + 91-22- 3029 8180 nayan@systematixshares.com
Sales Trading / Dealing
Kunal Kapur VP – Equity Sales Trading + 91-22- 3029 8255 kunalkapur@systematixshares.com
Kishor Binwal Sr. Manager – Institutional Equities + 91-22- 3029 8252 kishorb@systematixshares.com
Vinod Bhuwad Sales Trader + 91-22- 3029 8267 vinodbhuwad@systematixshares.com
Vijayendra Devadiga Trader + 91-22- 3029 8268 vijayendrad@systematixshares.com
Sneha Kamat Dealer + 91-22- 3029 8268 snehakamat@systematixshares.com
Equity Research Telephone: + 91-22- 3029 8000
RESEARCH ANALYST SECTOR ALLOCATION DIRECT Nos. E-mail
Sudarshan Narasimhan Sr. VP & Head of Research –Oil & Gas, Petrochemicals + 91-22- 3029 8293 sudarshan@systematixshares.com
Surya Narayan Patra AVP - Pharma + 91-22- 3029 8186 suryapatra@systematixshares.com
Vibhash Prakash Awasthi AVP - Metals & Mining + 91-22- 3029 8296 vawasthi@systematixshares.com
Madhu Babu AVP - IT, Telecom + 91-22- 3029 8258 madhu@systematixshares.com
Eric Martins AVP – Metals & Mining, Pipes + 91-22- 3029 8253 eric@systematixshares.com
Nihar Ranjan AVP – Mid Caps + 91-22- 3029 8260 niharranjan@systematixshares.com
Binod Modi Sr. Analyst – Cement & Construction + 91-22- 3029 8264 binodmodi@systematixshares.com
Rohit Jain Analyst - Metals, Pipes + 91-22- 3029 8269 rohitj@systematixshares.com
Reshma Bathija Analyst – Oil & Gas, Petrochemicals + 91-22- 3029 8294 reshmab@systematixshares.com
Kavita Rawat Analyst - Sugar + 91-22- 3029 8259 kavitar@systematixshares.com
Vinod Birla Associate + 91-22- 3029 8257 vinodbirla@systematixshares.com

Stock Ratings
BUY (B) The stock's total return is expected to exceed 20% over the next 12 months.
ACCUMULATE (A) The stock's total return is expected to be within 10-20% over the next 12 months.
HOLD (H) The stock's total return is expected to be within0-10% over the next 12 months.
SELL (S) The stock's is expected to give negative returns over the next 12 months.
NOT RATED (NR) The analyst has no recommendation on the stock under review.
Industry Views
ATTRACTIVE (AT) Fundamentals /Valuations of the sector is expected to be attractive over the next 12-18 months.
NEUTRAL (NL) Fundamentals /Valuations of the sector are expected to neither improve nor deteriorate over the next 12-18 months.
CAUTIOUS (CS) Fundamentals /Valuations of the sector is expected to deteriorate over the next 12-18 months.

ANALYST DISCLAIMER
This document has been prepared by Systematix Shares & Stocks (I) Ltd. This report is the personal information of the authorized recipient and does not construe to be any investment, legal or
taxation advice to you. This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.
We, at Systematix Shares & Stocks (I) Ltd., have prepared this report based on the data we consider reliable, but we do not vouch it to be accurate or complete, and it may not be relied upon as
such. Systematix Shares & Stocks (I) Ltd does not in any way be responsible for any loss or damage that may arise to any person due to the content in the report. Each recipient of this document
should make an independent valuation of their own in the securities referred to in this report.
Besides, the data in this document is subject to change without prior notice and is intended only for the person or entity to which it is addressed to and may contain confidential and/or privileged
material and is not for any type of circulation. Any review, retransmission, or any other use of the report and the content within, is prohibited.

Disclosure of Interest
1. The analysts who have prepared the report have in no way received or are expected to receive any compensation from the subject company.
2. The analysts do not hold any position in the subject company’s stock, as on the date of release.
3. Neither the company nor an affiliate company of Systematix Shares & Stocks (I) Ltd. has received a mandate from the subject company.
4. Systematix Shares & Stocks (I) Ltd., or its affiliates do not hold any paid up capital in the company

SYSTEMATIX SHARES & STOCKS (I) LTD.

Head Office J. K. Somani Building, 2nd Floor, British Hotel Lane, Registered Office EGA Trade Center, 4th Floor, 809-, Poonamalle High Road,
Fort, Mumbai, Pin: 400001, Tel: +91 22 66198000, Fax: +91 22 66198029 Kilpauk, Chennai, Pin: 600010Tel: +91 44 26612184/ 87/ 88Fax: +91 44 26612190

Aug 10 Systematix Research is also available on Bloomberg SSSL <Go>, Thomson & Reuters SYSTEMATIX SHARES & STOCKS (I) LTD. 3