Dynamatic Technologies: Set for take-off!

Dynamatic Technologies

Initiating Coverage | Sector: Aerospace

Dynamatic Technologies

BSE Sensex

27,011

S&P CNX

8,182

CMP: INR3,164

TP: INR4,000 (+26%)

Buy

Set for take-off!

Aerospace division to drive secular growth

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

AvgVal. INRm/Vol‘000

Free float (%)

DYTC IN

6.3

4,225/776

-17/64/273

20.1

0.3

33/13

48.9

Dynamatic Technologies (DYTC) manufactures precision engineering products

that find application in tractors, earth moving and material handling

equipment, automobiles, and aerospace. Initially an auto components and

hydraulics player, it has gained significant experience in aerospace and is on

track to tap the high growth potential of this sector. It derives 67% of its

revenues from the Automotive division, 19% from the Hydraulics division and

14% from the Aerospace division. It has units in India, Germany and the United

Kingdom.



Financial Snapshot (INR b)

Y/E March

2015E 2016E 2017E

Net Sales

16.7 18.0 20.7

EBITDA

1.5

1.9

2.4

Adj PAT

EPS (INR)

Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

0.2

27.1

0.6

1.0

99.7 160.0

60.5

532

26.6

25.7

19.8

4.6



9.2 267.3

276

431

8.1

14.6

116.6

7.5

21.1

19.9

31.7

6.1



DYTC is India’s first private sector player to become a global tier-I supplier

to Airbus, Boeing and Bell, signifying the strength of its capabilities.

It commands a firm order book of USD984m against annual revenues of

~USD40m; its book-to-bill of 23x provides strong growth visibility.

We expect 143% EPS CAGR over FY15-17, led by 30% revenue CAGR in

Aerospace, and strong margin improvement in Autos and Hydraulics.

With massive opportunity in aerospace (~USD60b), strong growth visibility

(book-to-bill of 23x), improvement in return ratios (RoE to improve from

8.1% to 26.6% over FY15-17), we believe stock re-rating will continue.

Initiate coverage with Buy and a price target of INR4,000 (25x FY17E EPS).

Strong growth outlook for the global aerospace industry

Airbus predicts that air traffic will grow at 4.7% annually over the 20 years

(2013-2032), requiring more than 29,000 new and 10,000 replacement aircraft

valued at ~USD6t. This translates into an annual demand for ~2,000 aircraft,

with a value of USD300b. Aircraft assembly (building a hollow aircraft) is ~20%

of the aircraft cost, an opportunity of USD60b. This is the key target segment for

DYTC as well as other Indian aerospace vendors. We believe, as in the case of

auto components, India will eventually have strong capabilities in aircraft

assembly and will garner a larger market share in this USD60b global

opportunity.

Shareholding pattern (%)

As on

Dec-14 Sep-14 Dec-13

Promoter

51.1

53.8

55.3

DII

5.4

0.5

0.2

FII

16.8

18.0

26.0

Others

26.6

27.8

18.5

FII Includes depository receipts

Stock Performance (1-year)

Dynamatic Tech.

Sensex - Rebased

4,800

3,600

2,400

1,200

DYTC the pioneer in aerospace in India; with strong growth visibility

DYTC is the pioneer in the Indian private sector in manufacturing high precision

airframe structures and aerospace components. It has the largest infrastructure

in the Indian private sector, and possesses stringent regulatory approvals and

quality certifications that present significant barriers to entry. DYTC is the first in

the Indian private sector to become a global tier-I supplier to Airbus, Boeing and

Bell Helicopter. It has an order book of INR62b executable over the next ten

years, which against current revenues of INR2.7b translates into a book-to-bill

ratio of 23x. Led by strong growth visibility, we believe DYTC’s Aerospace

division will post 30% revenue CAGR over FY15-17.

4 May 2015

Dynamatic Technologies

Autos: Foray into steel nickel turbocharger to drive growth and margins

DYTC has developed castings for new generation steel nickel turbocharger, and

is among five players globally to have successfully developed this product. To

accommodate manufacturing of steel nickel turbocharger castings at German

facilities, the management plans to shift production of iron castings to its

Chennai facility, which has been certified by clients like BMW and VW. We

believe foray into steel nickel turbocharger and shift of iron castings

manufacturing from Germany to India are both crucial events, which can drive

significant margin expansion. We expect margins to improve from 5% to 7%

over FY15-17.

Hydraulics: Higher penetration of power steering in tractors, moving

from hydraulics to complete lift assembly to drive higher wallet share

DYTC commands 65% share of the organized market, with marquee clients like

Mahindra & Mahindra, Eicher, Punjab Tractors and John Deere. With current

arrangements of selling hydraulic pumps to clients, DYTL’s share of wallet stands

at INR1,200-3,000 per tractor, which costs INR600k-700k. However, with more

tractors getting manufactured with power steering (only 10-15% of tractors

currently have power steering), the opportunity size will expand 2x. A power

steering requires one more pump costing INR1,200-3,000. Additionally, DYTL is

looking at increasing its wallet share to INR20k-25k though foray into complete

lift assembly. Currently, majority of the revenues come from pure hydraulics,

and we believe product extensions could be relevant contributors over the

medium to long term.

Valuation and view

We expect 143% EPS CAGR over FY15-17, led by 30% revenue CAGR in

Aerospace, and strong margin expansion in Autos and Hydraulics. Given the

massive USD60b global opportunity in aerospace, strong growth visibility (book-

to-bill of 23x), improvement in return ratios (RoE to improve from 8.1% to 26.6%

over FY15-17), we expect stock re-rating to continue. We initiate coverage with

Buy

rating and a price target of INR4,000 (25x FY17E EPS).

4 May 2015

Dynamatic Technologies

About Dynamatic Technologies

Dynamatic Technologies (DYTC) manufactures precision engineering products that

find application in tractors, earth moving and material handling equipment,

automobiles and aerospace. It has units in India, Germany and the United Kingdom.

DYTC derives revenues primarily through three segments: Hydraulic Precision

Engineering (tractors and earth moving equipment), Auto Components and

Aerospace. Operations of these divisions are supported by a foundry unit (Chennai)

that manufactures castings, a key raw material, and a wind farm that caters to the

power requirements of the automotive division.

Exhibit 1: Business structure

Source: Company, MOSL

Exhibit 2: Revenue mix (segment-wise; FY14)

Aerospace,

14%

Hydraulics,

19%

Exhibit 3: EBITDA mix (segment-wise; FY14)

Hydraulics,

26%

Aerospace,

43%

Auto, 67%

Auto, 30%

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Exhibit 4: Vertically integrated business model

Source: Company, MOSL

Exhibit 5: Key milestones

1970-89

1973



Incorporation of Dynamatic

Hydraulics Limited

1974



Dynamatic enters into a

Technical Collaboration with

DOWTY Hydraulic Units Ltd,

U.K., for the manufacture of

hydraulic elements

1990-99

1991



Dynamatic R&D Center

established in Bangalore,

India

1992



Dynamatic Hydraulics re-

branded as Dynamatic

Technologies Limited

1995



Dynametal, Aluminum

Foundry, established at

Bangalore, India



Dynamatic Aerospace

established at Bangalore,

India

1998



JKM Daerim® Automotive

Ltd. established at Chennai,

India Dynametal expanded

& moved to Chennai, India

2000-07

2000



Powermetric® Design

Laboratory established

2005



JKM Global Pte established in

Singapore



Dynamatic sets up largest

Aerospace facility in Indian

Private Sector

2007



Acquisition of manufacturing

facilities of Sauer Danfoss

Limited, UK, at Swindon

through Dynamatic Limited,



Dynamatic sets up JKM

Science Center, a state-of-

the-art design, engineering

and R&D facility.



JKM Daerim® sets up second

manufacturing facility at

Chennai, India



Dynamatic buys out minority

stake in JKM Dae Rim.

Automotive Limited. The

subsequently merged

automotive unit was

rebranded as JKM

Automotive™

2008-14

2008



2008 Acquisition of JKM

Wind Farm, Coimbatore,

India Acquisition of Oldland

CNC, Bristol, UK Dynamatic

sets up ‘Prana’, a modern

facility for manufacturing of

Airbus A320 Flap Track

Beams

2010



Dynamatic inks agreement

with Govt. of Karnataka for

Aerospace Facility at

Devanahalli, India Dynamatic

Homeland Security

established

2011



Acquisition of Eisenwerk Erla

GmbH, Germany, & Sanmar

Ferrotech Ltd.

2012



KIADB allots 27 acres to

Dynamatic at the Devanahalli

Aerospace Park, Bangalore,

for Aeronautic

Manufacturing Facility

2013



Decentralisation of Indian

Hydraulics Operations into

Two Main Manufacturing

Units &Two Ancilliary Units.

Expansion of Aerospace

Facilities in India and UK

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Aerospace – massive growth opportunity

Firm order book of USD984m provides strong growth visibility



DYTC is the pioneer in the Indian private sector in manufacturing high precision

airframe structures and aerospace components.

It is the first in the Indian private sector to become a global tier-I supplier to Airbus,

Boeing and Bell Helicopter, which signifies the strength of its capabilities.

With a firm order book of USD984m against revenues of ~USD40m (book to bill of

23x), we believe DYTC can significantly grow its Aerospace division over coming years.

We expect 30% revenue CAGR and 23% EBITDA CAGR in this division over FY15-17.

About DYTC’s Aerospace division

The Aerospace & Defense division is engaged in the production of airframe

structures and precision aerospace components. DYTC assembles flap track beams

for the Airbus single aisle A-320 family of aircraft on a single source basis and is the

first private sector company in India to manufacture a functional aero-structure for

a major commercial jet. This division operates through facilities across India

(Bangalore, Chennai, Coimbatore and Nasik), the UK (Swindon and Bristol) and

Germany (Schwarzenberg). Operations of the division are supported by two captive

aluminum and iron foundries located in Chennai.

Exhibit 6: Aerospace India

Source: Company, MOSL

Exhibit 7: Aerospace India

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Exhibit 8: Aerospace UK

Source: Company, MOSL

Strong growth outlook for the global aerospace industry

Airbus predicts that air traffic will grow 4.7 per cent annually over 20 years (2013-

2032), requiring more than 29,000 new passenger and freight aircraft. Some 10,400

planes will replace existing aircraft, which means that the worldwide fleet will

double to around 36,500 aircraft by 2032. Combined demand of new and

replacement aircraft translates into an opportunity of ~USD6t. This translates into

an annual demand of ~2,000 aircrafts with value of USD300b.

According to Airbus, Asia-Pacific will lead the world in traffic by 2032, overtaking

Europe and North America. Today a fifth of the population in emerging markets take

a flight annually, but by 2032 this will rise to two thirds as global passenger numbers

more than double to 6.7b.

Exhibit 9: Growth outlook for the aerospace industry

Source: Industry, MOSL

4 May 2015

Dynamatic Technologies

Aircraft assembly is the key target segment for the DYTC

In the value chain of the aerospace manufacturing industry, most of the crucial

elements like design and component manufacturing lie with OEMs and key

component manufacturers. Aircraft assembly which basically means building a

hollow aircraft is ~20% of the aircraft cost, an opportunity of USD60b. This is the key

target segment for DYTC as well as other Indian aerospace vendors. Management

believes that as in the case of auto components, India has strong capabilities in the

as far as manufacturing of aircraft assembly goes. Maturing to the avionics level

requires significant R&D capabilities as well as investments, making it a difficult and

time consuming process for Indian players.

Exhibit 10: Value chain of the aerospace industry

Source: Company, MOSL

Aerospace & Defense,

Key Customers

Airbus

GKN Aerospace

Spirit AeroSystems

Northrop Grumman

Boeing

Dassault Aviation

DYTC the pioneer in aerospace in India

DYTC is the pioneer in the Indian private sector in manufacturing high precision

airframe structures and aerospace components. It has the largest infrastructure in

the Indian private sector, and possesses stringent regulatory approvals and quality

certifications that present significant barriers to entry. DYTC started this business 20

years ago and over the years has developed strong partnerships with the Ministry of

Defense (MoD) and agencies of national importance like DRDO and HAL.

Given that an airplane has to sustain itself under extreme climatic conditions (at

height of 20k feet it could freeze while at a temperature of 50 degrees in a desert it

could melt), each and every part of the aircraft has to be of a special material along

with manufacturing processes being highly stringent given the criticality of every

component. Thus, manufacturing prowess, past track record are key elements that

OEMs consider before awarding a contract to vendors. DYTC with its strong record,

earlier as a vendor to HAL (supplier of aero structure for the Sukhoi fighter plane) as

well as working with Spirit as a Tier 2 supplier (supplier of Flap Track Beams for

Airbus A320), is well placed in our view to capture market share in future orders.

4 May 2015

Dynamatic Technologies

DYTC is India’s only private player which is Tier 1 to Airbus, Bell and Boeing

DYTC has been producing flap track beam assemblies for the Airbus single aisle

(A320) aircraft family on a global single source basis since 2008 as a tier-II supplier.

Recently, DYTC won a contract from Airbus to supply flap track beam assemblies for

the Airbus long range aircraft (A330 family) variants. DYTC thus became the first in

the Indian private sector to become a global tier-I supplier to Airbus. Similarly, DYTC

also became Tier 1 supplier to Boeing and Bell Helicopter. Given the long gestation

period involved in developing relationships, we believe DYTC has just scratched the

surface as a Tier 1 supplier and as far as new orders go.

Strong order book provides high revenue visibility

DYTC has a strong order book amounting to INR62b executable over a period of next

ten years as against current revenues of INR2.7b translating into a book to bill ratio

of 23x, providing strong revenue growth visibility.

Exhibit 11: Strong order book totaling USD 984m

Customer

Airbus (Supply of FTBs for A330s)

Bell (Bell 407 airframe cabin assembly)

Spirit (Supply of FTBs for A320s)

Boeing (Ramp/pylon parts for Chinook CH-47)

GKN

HAL

Total

USD (m)

250

243

175

150

984

INR (b)

Proportion (%)

100

Source: Company, MOSL

Offset clause holds promise, but no near-term revenue visibility

DYTC registered itself under the offset clause (companies receiving defense-related

contracts have to reinvest ~30% of the contract in India) in April 2010. It has signed

agreements for offset partnership in India with clients like Boeing, Lockheed Martin

and Northrop Grumman. Since the introduction of the offset clause, the Ministry of

Defence (MoD) has concluded 16 offset contracts worth INR4.3b with various

vendors. The company expects offset business worth INR24b to flow into the

defense, civil aerospace and internal security sectors over the next decade. In the

past five years, DYTC has received orders worth INR61.7m only under the offset

clause. We do not expect the offset clause to benefit DYTC in the next two years.

However, if more orders come to India, DYTC stands to benefit owing to its track

record of servicing clients such as Airbus, Boeing and Bell Helicopter.

New advanced aerospace facility to put necessary infrastructure in place

DYTC plans to shift its Aerospace operations from Peenya, Bengaluru to a place in

proximity to the planned aero SEZ (near Bengaluru airport), where it has bought

27.5 acres of land. It is likely to start construction for the new facility in the next 2-3

years. This will provide easy access to its prospective clients and will also help in

developing capabilities in large aero-structural assemblies, composites and complex

engineering, which requires large space.

4 May 2015

Dynamatic Technologies

Large multi-year opportunity; Competition unlikely to be a concern

Given the size of the opportunity in aircraft assembly (~USD60b), and current size of

DYTC’s aerospace business (USD40m), we believe emerging competition from large

corporate groups in India like Tata’s, Adani’s, Ambani’s, Kalyani’s will not be a

concern, as there will be enough room for growth for all players.

Expect Aerospace division to report strong 30% revenue CAGR

We expect 30% CAGR in the Aerospace division. However, we expect margins to

decline 300bp to 23% as proportion of revenues from non-Spirit orders increases.

Thus, we expect EBITDA to post 23% CAGR over FY15-17.

Unlike rest of the clients, Spirit provides the raw materials for the orders, hence only

the value of job work done is recognized as revenues (which results in higher

percentage margin). In FY14, Spirit contributed 60% to revenues, which we expect to

scale down to ~20% over FY15-17, thus resulting in decline in Indian division’s

EBITDA margins from 48% in FY14 to 30% in FY17.

Exhibit 12: Aerospace revenues to post 30% CAGR over FY15-17 (INR m)

India

2,123

1,633

1,067

657

FY13

1,314

919

FY14

1,485

1,232

FY15E

1,848

2,495

FY16E

FY17E

Source: Company, MOSL

Exhibit 13: Revenue mix, Aerospace India (FY14, %)

Others, 6

HAL, 6

Spirit - Flap Track

Beams, 60

Boeing, 27

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Exhibit 14: Aerospace EBITDA to post 23% CAGR over FY15-17 (INR m)

India

318

245

285

297

FY13

235

437

223

481

647

749

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 15: Aerospace EBITDA margins to decline 300bp over FY15-17 (%)

India

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Automotive – Foray into steel nickel turbocharger,

substitution of manufacturing; to drive growth, margins

Expect 35% EBITDA CAGR over FY15-17



In Germany, DYTC is a preferred supplier of precision, complex metallurgical products

for automotive engines and turbochargers to leading global automotive OEMs

including Audi, BMW, Borg Warner, Volkswagen and Daimler.

It commands a market share of over 12.5% in the global petrol turbocharger market.

We believe foray into steel nickel turbocharger market as well substitution of iron

castings manufacturing from Germany to India will drive margins expansion from 5%

to 7% over FY15-17, driving 35% EBITDA CAGR.

About DYTC’s Automotive division

DYTC manufactures ferrous and non-ferrous critical engine and transmission

components for the automobile industry. Some of these products include

turbocharger parts, water pumps, oil pumps, exhaust manifold and transmission

parts. The products are manufactured at facilities located at Chennai, India and

Schwarzenberg, Germany. DYTC supplies to major OEMs in India and across the

globe like Audi, BMW, Volkswagen and Hyundai.

Exhibit 16: Automotive operations, India

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Exhibit 17: Automotive operations, Germany

Source: Company, MOSL

Automotive &

Metallurgy, India

Key Customers

Volkswagen

Man SE

BMW

Daimler AG

Hyundai Motor Company

Mando Corporation

Honeywell Garrett

Tata Motors

Ford Motor Company

Cummins

Renault–Nissan

Hyundai business facing margin pressures, client diversification key

DYTC started with its Indian automotive business as a JV in the year 2000 with

Daerim Enterprise Co (Korea) to supply engine-critical auto components to Hyundai

India. DYTC acquired the JV partner’s stake in CY08, thereby taking its stake in this

business to 100%. Initially, DYTC used to manufacture products like exhaust

manifold (value of INR1,500 per car) and intake manifold for Hyundai. DYTC

procures special grade raw material from Korea as per Hyundai’s requirements, and

castings from local manufactures. Since exhaust manifold is part of engine overhaul,

it does have a replacement market; hence DYTC has 100% OEM sales.

Over the past few years, led by INR depreciation, raw material costs have escalated

substantially for Hyundai business, while at the same time Hyundai has not rendered

commensurate price increase (for maintaining its own competitiveness), thus driving

this segment into losses. With a view to improve profitability, DYTC has been

diversifying its clientele in this segment, and has over the last two years reduced its

dependence on Hyundai from 85% in FY13 to 50% in FY15. Over this period it has

ramped up clients like Honeywell which now contribute 25% to revenues, as well as

newer clients like Daimler, Tata Motors, Ford, etc which together contribute 25% to

revenues. Going forward, DYTC aims to focus more on these clients for new and

value-added products. Client diversification and improvement in capacity utilization

from the current 65% should drive 7% revenue CAGR and margin expansion from -

5% to +2% over FY15-17.

Exhibit 18: Focused on reducing dependence on largest client

Daimler, Tata

Motors, Ford, etc,

25%

Hyundai, 50%

Honeywell, 25%

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Automotive &

Metallurgy, Germany

Key Customers

IHI Charging Systems International

Bosch Mahle Turbo Systems

Volkswagen

BorgWarner Turbo & Emissi

Vögele

Man SE

BMW

Mercedes-Benz

Audi

Voith

Daimler AG

Strong market share in global turbocharger market

In Germany, DYTC supplies components for turbochargers to leading global

automotive players like IHI, Audi, BMW, Borg Warner Turbo Emission Systems,

Volkswagen and Daimler. OEMs account for 90% of sales, with top-5 customers

contributing over 80% to revenues. IHI Charging Systems alone contributes 50% to

this division’s revenues. In terms of products, turbochargers constitute a dominant

90% of total revenues. It has one of the finest foundries in Europe, manufacturing

ferrous and special alloy castings for the auto industry.

Products include turbine housings, exhaust manifolds, and other automotive

castings. It specializes in high-grade alloys such as silicon molybdenum (SiMo), high

nickel (Ni-Resist), and heat resistant steel, and in core-making technology of

turbocharger castings. Given expertise in high-grade alloys, average selling price in

Germany stands at INR400/kg, as against INR140/kg to Hyundai India. It has a

market share of over 12.5% in the global petrol turbocharger market.

Exhibit 20: Turbochargers form ~90% of sales

Others,

Exhibit 19: OEMs form ~90% of sales

Replace-

ment, 10

OEMs, 90

Source: Company, MOSL

Turbo-

charger, 90

Source: Company, MOSL

Foray into steel nickel turbocharger to drive growth and margins

DYTC has developed castings for new generation steel nickel turbocharger, and is

one amongst five players globally who have successfully developed this product.

Thus, management targets to manufacture this new product from the

manufacturing facilities in Germany, and expects the product to clock revenues to

the tune of INR5b over the next 3 years. DYTC has already delivered a trial order

amounting to INR100m during FY15. In order to accommodate manufacturing of

steel nickel turbocharger castings at German facilities, management plans to shift

production of the existing iron castings to its Chennai facility. The Chennai facility is

the process of being certified by clients, and in FY15 it has been certified by some of

the clients like BMW and VW.

We believe foray into steel nickel turbocharger market as well substitution of iron

castings manufacturing from Germany to India, are key both crucial events which

can drive significant improvement in segment margins. We expect margins to

improve from the current level of 6% to 8% over FY15-17.

4 May 2015

Dynamatic Technologies

Auto business to post 7% revenue CAGR, margins set to expand

We expect 7% CAGR in the automotive division. We expect margins in India

operations to improve from -4% to 2% over FY15-17 led by client diversification

initiatives by the management. Similarly, we expect margins for German operations

to expand from 6% to 8%, driving 35% EBITDA CAGR over FY15-17.

Exhibit 21: Auto revenues to post 7% CAGR over FY15-17 (INR m)

India

Germany

7,642

8,822

9,440

9,912

10,903

2,354

FY13

1,762

FY14

1,604

FY15E

1,604

FY16E

1,844

FY17E

Source: Company, MOSL

Exhibit 22: Auto EBITDA margins to improve over FY15-17 (%)

India

Germany

-4

-5

FY13

FY14

-4

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 23: Auto EBITDA to post 35% CAGR over FY15-17 (INR m)

India

Germany

464

(83)

FY13

561

(87)

FY14

566

(64)

FY15E

694

FY16E

872

FY17E

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Hydraulics – growth and margins to revive

Key drivers: Higher penetration of power steering, foray into lift assembly



DYTC is the market leader in aluminum hydraulic gear pumps used in tractors in India;

these constitute ~80% of its revenues. The construction segment and industrial pumps

account for the balance 20% of revenues.

It commands 65% share of the organized market in India, with 80% of its revenues

coming from OEMs and the balance 20% from the replacement market.

We expect 6% CAGR in the Hydraulics division over FY15-17. Margins should expand

from 11% to 14%, led by higher utilization and operating leverage.

About DYTC’s Hydraulics business

DYTC manufactures an extensive range of Hydraulic Gear Pumps in Cast Iron and

Aluminum that find application in Agricultural Equipment, Construction Equipment,

Material Handling Equipment, Mining and Drilling Equipment and in Marine

applications. Products are manufactured at facilities located in Bangalore, India and

Swindon, UK. DYTC is a dominant player in the Indian hydraulics market and

command 65% market share in India. Key customers include players like Mahindra,

Eicher, Punjab Tractors, John Deere, CNH, Claas, Agco and Deutz-Fahr.

Exhibit 24: Hydraulics operations, India

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Exhibit 25: Hydraulics operations, UK

Source: Company, MOSL

Hydraulics business,

India – key customers

Key Customers

Mahindra & Mahindra Limited

John Deere

SAME Deutz-Fahr

New Holland

Eicher Motors

Cummins India Limited

Escorts

Tractors And Farm Equipment

Limited (TAFE)

Caterpillar Inc

CNH

Voltas

Force Motors Ltd.

AGCO

Dominant presence in Indian hydraulics market

DYTC is the market leader in aluminum hydraulic gear pumps used in tractors in

India; these constitute ~80% of its revenues. The construction and industrial

segments segment account for 20% of revenues. DYTC commands 65% share of the

organized market, with marquee clients like Mahindra & Mahindra, Eicher, Punjab

Tractors and John Deere. In the domestic market, it derives 80% of its revenues

from OEMs, with the balance 20% from the replacement market.

Exhibit 26: Revenue mix in Hydraulics, India

Industrial, 5%

Construction, 15%

Agriculture, 80%

Source: Company, MOSL

Exhibit 27: Revenue mix in Hydraulics, India

Replacement, 20%

OEM, 80%

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Exhibit 28: Key customers in Hydraulics, India (%)

Eicher

Tractors, 6

Cummins, 7

Newholland Fiat

India, 7

Same Deutz-Fahr

India, 9

John Deere

, 13

Mahindra &

Mahindra, 22

Source: Company, MOSL

Others, 35

Exhibit 29: Key products in Hydraulics, India (%)

Special products, 5

Water pumps, 5

Hand pumps, 5

Valves, 13

Others, 4

Single pumps, 48

Tandem

pumps, 20

Source: Company, MOSL

Early partnering with OEMs drives dominant market share

DYTC’s key edge lies in partnering with the OEM at the R&D level right at the stage

of a new model conceptualization. DYTC with the help off its UK R&D facility builds

customized hydraulics for OEMs and tests it with 50,000 hours of trial run, ensuring

high level of precision. Once approved, it becomes the core supplier to the OEM for

that model. Given high value-addition by DYTL right from the conceptualization

stage, along with over 2 decades of leadership in the hydraulics business, DYTL

commands a dominant 65% market share in the OEM tractors segment.

Higher penetration of power steering in tractors; moving from mere

hydraulics to complete lift assembly could drive higher wallet share

With current arrangements of selling hydraulic pumps to clients, DYTL’s share of

wallet stands at INR1200-INR3000 per tractor which costs INR6lakhs-INR7lakhs.

However, with more tractors now getting manufactured with power steering (only

10-15% of tractors currently have power steering enabled), this will expand

opportunity size 2x as power steering will require one more pump costing INR1200-

INR3000. Additionally, DYTL is looking at increasing its wallet share to INR20,000-

INR25,000 though foray into complete lift assembly which will include pumps, walls,

castings, integrator, etc. Even as percentage margin would remain same, potential

tenfold increase in revenue per tractor can substantially scale up this business.

Currently, majority of the revenues come from pure hydraulics, and product

extension would only be a relevant contributor over the medium to long term.

4 May 2015

Dynamatic Technologies

Focus on replacement market could drive margins higher

Even as DYTL commands a dominant 65% market share in the OEM market, it has a

minimal market share in the replacement market. Replacement market is twice the

size of the OEM market with a typical replacement cycle of 5 years for hydraulics in

a tractor (4 times in the lifecycle of 20 years of a tractor). DYTL with its popular

brand ‘Dowty Pumps’ commands 2x margins in the replacement market (24% as

against 12% with blended margins at 15%). The replacement market is currently

dominated by the unorganized players which sell spurious products at cheap prices.

Going forward, management plans to increase its focus on the replacement market

which can improve segment margins.

Near term outlook subdued in FY16 due to weak tractor sales

DYTC’s Hydraulics operations in India operate at 80% capacity utilization. Given

weak tractor sales, DYTL’s hydraulic revenues in India have been flat over the FY12-

15. Going forward, we expect improvement in tractor sales in FY17 which along with

higher wallet share per tractor can drive higher growth for this segment. We expect

India hydraulics revenues to post 7% CAGR over FY15-17.

Hydraulics business,

UK – key customers

Key Customers

John Deere

Muncie® Power Products

Alexander Dennis

White House Products Ltd

CNH

Termhope Limited – UK Distributor

UK hydraulics – focus is on increasing higher OEM share

In 2007, DYTC acquired Sauer-Danfoss’ UK Hydraulics division (acquisition cost of

USD10m; revenues of USD20m in FY08), engaged in engineering and manufacturing

of hydraulic pumps. Given the lack of focus of the previous owner, the company

stopped participating in new OEM programs, thus resulting in a revenue mix

strongly in favor of the replacement market at 75%. Post acquisition, DYTC re-began

its efforts on the OEM front with John Deere for one of its upcoming model.

Management believes increasing contribution from OEMs will be crucial in better

performance at the replacement market, hence looks forward to higher associations

with OEMs going forward.

Expect Hydraulics division to report modest growth; margin revival likely

We expect 6% CAGR in the Hydraulics division over FY15-17. Margins should expand

from 11% to 14%, led by growth recovery and higher operating leverage.

Exhibit 30: Hydraulics revenues to post 6% CAGR over FY15-17 (INR m)

India

1,414

1,160

1,252

1,284

1,591

1,684

1,785

1,874

2,062

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Exhibit 31: Hydraulics EBITDA margins to improve over FY15-17 (%)

India

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 32: Hydraulics EBITDA to post 18% CAGR over FY15-17 (INR m)

India

100

268

300

371

107

278

306

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

EBITDA to post 27% CAGR over FY15-17

Drivers: Strong growth in aerospace, margin revival in auto and hydraulics



We expect revenue to grow at a CAGR of 11% over FY15-17, led by 30% CAGR in the

Aerospace business, 7% CAGR in Automotive and 6% CAGR in Hydraulics business.

Revenue mix is likely to improve in favor of the high-margin Aerospace business.

We estimate 27% EBITDA CAGR over FY15-17. Margins should expand 270bp to 11.7%,

driven by higher contribution from the high margin Aerospace business.

We expect PAT to grow from INR0.2b to INR1.0b over FY15-17.

Led by better asset utilization, we expect return ratios to improve, with RoCE at 25.7%

and RoE at 26.6% for FY17.

Expect revenue CAGR of 11% over FY15-17

We expect revenue to grow at a CAGR of 11% over FY15-17, led by 30% CAGR in the

Aerospace business, 7% CAGR in the Automotive and 6% CAGR in Hydraulics

businesses. Revenue mix is likely to improve in favor of the high-margin Aerospace

business, which would contribute 22% to revenues in FY17.

Exhibit 33: Revenue to post 11% CAGR over FY15-17 (INR m)

20,679

15,085

14,521

15,875

16,705

18,031

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 34: Revenue mix to improve in favor of Aerospace (%)

Hydraulics

Auto

Aerospace

FY16E

FY17E

Source: Company, MOSL

FY13

FY14

FY15E

4 May 2015

Dynamatic Technologies

EBITDA to post 27% CAGR over FY15-17

We expect EBITDA to post 27% CAGR over FY15-17. Margins should expand 270bp

to 11.7%, driven by higher contribution from the high margin Aerospace business

and margin expansion in the automotive and hydraulic divisions.

Exhibit 35: EBITDA to clock 27% CAGR over FY15-17

EBITDA (INR m)

9.5

10.4

Margin (%)

10.5

9.0

11.7

9.3

1,401

FY12

1,378

FY13

1,647

FY14

1,511

FY15E

1,901

FY16E

2,429

FY17E

Source: Company, MOSL

Exhibit 36: EBITDA mix to remain largely stable (%)

Hydraulics

Auto

Aerospace

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

PAT to post significant growth over FY15-17

We expect PAT to grow significantly over FY15-17, from INR0.2b to INR1.0b.

Exhibit 37: PAT (INR m)

1,008

628

246

(119)

138

171

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: MOSL

4 May 2015

Dynamatic Technologies

Operating cash flows and free cash flows to remain strong

We expect operating and free cash flows to remain strong over FY15-17, enabling

debt retirement. We build in annual capex at INR0.5b over FY15-17.

Exhibit 38: Operating cash flow to remain strong (INR m)

2,389

1,741

1,281

1,076

1,303

1,545

(218)

Exhibit 39: Robust free cash generation (INR m)

1,795

1,634

1,136

790

1,019

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Debt-to-equity to decline to 0.8x

Led by higher free cash generation, we expect debt-equity to decline to 0.8x in FY17.

Exhibit 40: Debt-equity (x)

5.1

4.6

3.6

1.6

1.2

0.8

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: MOSL

Return ratios to improve

Led by better asset utilization, we expect return ratios to improve. We estimate

RoCE at 25.7% and RoE at 26.6% for FY17.

Exhibit 41: RoCE (%)

25.7

19.9

15.6

11.5

16.7

14.6

16.7

9.6

8.1

21.1

Exhibit 42: RoE (%)

26.6

(8.7)

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Valuation and view

Target price of INR4,000 implies 26% upside

We believe DYTC is well placed to capture the large global opportunity in the

Aerospace business on the back of its strong execution track record and global tier-I

status with reputed OEMs like Airbus, Boeing and Bell Helicopter. With a firm order

book of USD984m against revenues of ~USD40m, we believe DYTC can significantly

grow its Aerospace division over the coming years.

We expect 143% EPS CAGR over FY15-17 led by 30% revenue CAGR in aerospace

division, strong margin improvement in autos and hydraulics. With massive

opportunity in aerospace (~USD60b), strong growth visibility (Book to bill of 23x),

improvement in return ratios (RoE to improve from 8.1% to 26.6% over FY15-17), we

believe re-rating in the stock will continue. Initiate coverage with

‘Buy’

with a price

target of INR4,000 (25x FY17 EPS).

Exhibit 43: DYTC P/E band (x)

P/E (x)

5 Yrs Avg(x)

Negative

Earnings

Cycle

Exhibit 44: DYTC P/B band (x)

10 Yrs Avg(x)

Negative

Earnings

Cycle

P/B (x)

18.0

13.5

32.8

9.0

4.5

0.0

5 Yrs Avg(x)

10 Yrs Avg(x)

31.9

30.4

5.3

3.5

6.4

Source: Company, MOSL

Exhibit 45: DYTC EV/EBITDA (x)

2.5

9.9

10.9

13.2

EV/EBDITA(x)

Peak(x)

Avg(x)

30.5

Median(x)

Min(x)

Source: Company, MOSL

4 May 2015

Dynamatic Technologies

Exhibit 46: Assumption sheet

Assumptions

Hydraulics

Auto

Aerospace

Total Revenues (INR m)

Hydraulics

Auto

Aerospace

Total Revenue Growth (%)

Hydraulics

Auto

Aerospace

Total Revenue Mix (%)

20%

68%

12%

100%

FY13

2,875

9,996

1,724

14,595

FY14

3,098

10,585

2,233

15,916

30%

19%

67%

14%

100%

FY15E

2,945

11,044

2,717

16,705

-5%

22%

18%

66%

16%

100%

FY16E

3,034

11,516

3,481

18,031

28%

17%

64%

19%

FY17E

3,314

12,747

4,618

20,679

11%

33%

15%

16%

62%

22%

100%

Source: Company, MOSL

Risks and concerns

Moderate bargaining power with OEMs

DYTC has majority of its revenues coming from large global OEMs in the all its three

divisions – automotive, hydraulics and aerospace. Given large size of the OEMs as

against DYTC, we believe DYTC will have moderate bargaining power with them.

Exposed to global demand patterns

Given high exposure to export markets, DYTC will be exposed to global economic

cycles, which can impact demand patterns in the near term.

4 May 2015

Dynamatic Technologies

Management

Mr Vijai Kapur, Chairman

Mr Vijai Kapur, aged 83, was formerly the Deputy Managing Director of GKW

Limited and the past President of AIEI (now called CII). He has been the Director of

the company since 1992 and possesses rich business and managerial experience. As

the Chairman of the Board, he is responsible for all Board matters.

Mr Udayant Malhoutra, Managing Director and CEO

Mr Udayant Malhoutra, aged 48, is an industrialist and the promoter of the

company. He joined the company in 1986 and was inducted as an Executive Director

and into the Board of Directors in 1989. He is currently designated as the CEO &

Managing Director of the company.

Mr Hanuman Sharma, CFO

Mr Hanuman Sharma is a Chartered Accountant and has over 16 years of experience

in the automotive industry. He serves as the CFO of the company.

Mr PS Ramesh, COO, Hydraulics division

Mr PS Ramesh is the Chief Operating Officer of the Hydraulics division and has been

with the company since 1999. He is a Mechanical Engineer from IIT, Madras. He was

with the quality assurance group of HAL for over two decades.

Mr Uppili S, Executive Director, Automotive division

Mr Uppili S is the Executive Director for the Automotive division. He has about 26

years of experience in the industry. He has earlier worked with Igrashi Motors India

Limited as Chief of Operations.

Mr G Parasurami Reddy, COO, Aerospace division

Mr G Parasurami Reddy is the COO of the Aerospace division. He is a Mechanical

Engineer with a post graduate degree in Machine Design from the Indian Institute of

Science, Bengaluru. He has worked with HAL since 1968 and was involved with the

development of some of India’s major aircraft including Kiran MK II, Ajeet Trainer

and HJT 34.

4 May 2015

Dynamatic Technologies

Financials and valuations - Consolidated

Income Statement

Y/E March

Total Income from Operations

Change (%)

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Items

PBT after EO Exp.

Current Tax

Deferred Tax

Tax Rate (%)

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

FY10

4,399

7.7

3,819

86.8

580

13.2

225

355

249

158

33.5

105

-322.2

2.4

FY11

5,013

14.0

4,209

84.0

804

16.0

250

554

275

303

28.5

217

106.3

4.3

FY12

15,085

200.9

13,684

90.7

1,401

9.3

434

967

715

100

352

139

-33

30.0

246

13.7

1.6

FY13

14,521

-3.7

13,143

90.5

1,378

9.5

464

914

846

123

112

130

196.8

-119

-148.3

-0.8

FY14

15,875

9.3

14,228

89.6

1,647

10.4

513

1,135

1,030

154

258

46.6

138

-215.6

0.9

FY15E

16,705

5.2

15,194

91.0

1,511

9.0

498

1,013

790

285

-191

476

190

40.0

285

171

24.2

1.0

(INR Million)

FY16E

18,031

7.9

16,130

89.5

1,901

10.5

505

1,396

524

937

309

33.0

628

267.3

3.5

FY17E

20,679

14.7

18,251

88.3

2,429

11.7

529

1,900

464

1,504

496

33.0

1,008

60.5

4.9

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Equity Share Warrants

Total Reserves

Net Worth

Minority Interest

Deferred Liabilities

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Provisions

Net Current Assets

Deferred Tax assets

Misc Expenditure

Appl. of Funds

E: MOSL Estimates

FY10

1,153

1,207

255

2,526

3,987

4,095

1,308

2,788

105

2,051

627

920

228

276

970

925

1,082

-2

3,987

FY11

1,491

1,545

281

3,322

5,148

4,915

1,573

3,342

525

2,546

802

1,179

105

461

1,275

1,186

1,271

5,148

FY12

1,346

1,400

330

403

7,378

9,510

8,505

2,287

6,218

1,088

5,453

1,914

2,463

233

844

3,468

3,141

327

1,985

220

9,510

FY13

125

1,157

1,336

330

468

6,685

8,820

9,401

2,791

6,610

761

4,756

2,025

1,461

573

696

3,462

3,163

299

1,293

155

8,820

FY14

100

1,376

1,532

436

5,915

7,909

10,697

3,827

6,870

4,667

2,280

1,016

441

930

3,750

3,565

185

917

7,909

FY15E

100

2,502

2,665

436

4,615

7,716

10,497

4,325

6,171

167

5,154

2,340

1,303

301

1,209

3,880

3,657

222

1,274

7,715

(INR Million)

FY16E

100

3,130

3,293

436

4,115

7,844

10,997

4,830

6,166

180

5,506

2,461

1,407

1,572

4,113

3,846

267

1,394

7,843

FY17E

100

4,138

4,301

436

3,615

8,352

11,497

5,359

6,138

207

6,541

2,762

1,614

122

2,043

4,637

4,317

320

1,904

8,351

4 May 2015

Dynamatic Technologies

Financials and valuations - Consolidated

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Creditor (Days)

Working Cap. Turnover (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Debt/Equity

FY10

19.4

61.1

223.0

7.5

45.2

FY11

40.1

86.4

285.6

10.0

29.1

FY12

45.5

125.8

258.7

8.0

20.5

FY13

-22.0

63.7

247.0

0.0

FY14

24.9

117.4

276.4

0.0

127.3

26.9

11.4

1.6

15.4

0.0

294.9

9.6

16.7

2.0

146

1.2

3.9

FY15E

27.1

106.2

422.9

0.0

116.6

29.8

7.5

1.5

16.0

0.0

180.4

8.1

14.6

2.2

138

1.3

1.7

FY16E

99.7

179.9

522.6

0.0

31.7

17.6

6.1

1.3

12.6

0.0

125.4

21.1

19.9

2.3

138

1.3

1.2

FY17E

160.0

243.9

682.6

0.0

19.8

13.0

4.6

1.1

9.6

0.0

161.7

26.6

25.7

2.5

138

1.4

0.8

0.2

95.5

9.0

10.6

1.1

150

2.1

0.3

-107.5

15.8

13.4

1.0

176

2.0

2.1

0.3

-40.4

16.7

15.6

1.6

124

1.6

5.3

0.0

331.8

-8.7

11.5

1.6

137

1.4

5.0

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(inc)/dec in FA

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

(Inc)/Dec in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY10

158

225

-17

-39

422

292

713

-196

-248

-46

-537

-20

248

228

FY11

303

250

-50

-348

177

277

454

-1,035

-14

-1,050

786

-268

-56

473

-123

228

105

FY12

352

434

-284

545

736

1,281

-1,500

-1,674

-3,110

-666

-63

2,686

1,957

128

105

233

FY13

123

464

-76

959

1,490

899

2,389

-594

-13

-608

-853

-13

-622

-1,441

341

233

573

FY14

258

513

-208

270

840

901

1,741

-107

-106

-1,008

-772

-1,767

-132

573

441

FY15E

285

498

790

-190

-497

886

190

1,076

-26

840

-1,300

-790

-1,250

-140

441

301

(INR Million)

FY16E

937

505

524

-309

-354

1,303

-513

-500

-524

-1,024

-234

301

FY17E

1,504

529

464

-496

-455

1,545

-526

-500

-464

-964

122

4 May 2015

This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company(ies) and/sector(s), if any, covered in the report and may be

Dynamatic

This research report

distributed by it and/or its affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you.

Technologies

does

not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not

for public distribution and has been furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal

recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider

whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as

up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur.

MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a

some companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or

its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this

material may educate investors on investments in such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other

parties for the purpose of gathering, applying and interpreting information. Our research professionals are paid on the profitability of MOSt which may include earnings from investment banking and other business.

MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

Additionally, MOSt generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders,

and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary

trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing

among other things, may give rise to real or potential conflicts of interest. MOSt and its affiliated company(ies), their directors and employees and their relatives may; (a) from time to time, have a long or short position

in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation

or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with

respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations

made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as

such, may not match with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set

of customers having various objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets.

Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or

employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of

its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is

based on publicly available data or other sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt’s interpretation of the data, information and/or opinions

provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or

summary of the securities, markets or developments referred to in the document. While we would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to

update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way

responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time,

any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.

The recipients of this report should rely on their own investigations.

This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on

this report or for any necessary explanation of its contents.

Most and it’s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any

compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.

Most and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.

Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities

mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the

report.

Motilal Oswal Securities Limited is under the process of seeking registration under SEBI (Research Analyst) Regulations, 2014.

There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be

directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation

of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues

Disclosure of Interest Statement



Analyst ownership of the stock



Served as an officer, director or employee

DYNAMATIC TECH

Disclosures

Regional Disclosures (outside India)

For U.S.

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.

Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In

addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the

United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or

intended for U.S. persons.

This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional

investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major

institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the

"Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning

agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL,

and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors

Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to

accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.

In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Anosh Koppikar

Kadambari Balachandran

Email : anosh.Koppikar@motilaloswal.com

Email : kadambari.balachandran@motilaloswal.com

Contact : (+65)68189232

Contact : (+65) 68189233 / 65249115

Office Address : 21 (Suite 31),16 Collyer Quay,Singapore 04931

For Singapore

Motilal Oswal Securities Ltd

4 May 2015

Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com