Asian Electronics Limited[1]

8/6/2019 Asian Electronics Limited[1]

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Asian Electronics Lim ited(AEL) BUY

30 th August, 2007

Key DataBSE Code 503940NSE Code ASIANELEC

Bloomberg Code ASEL INSensex 15121CMP, Rs 807No.of Shares,mn (Diluted) 28.9Face Value 10.0Mcap,Rs mn 23369Mcap,USD mn @ 41 570.052 week H/L 1140 / 41515 day Avg. Daily Vol. BSE 28396

Share ho ld ing June'07 Post merger

Promoters 33.5% 59%Institutions 4.6%FII's 25.0%PCB's 14.6%Public 22.3% 41%Total 100% 100%

Shareholding >1% June'07HSBC Fin. Ser. Middle East Ltd 5.0%Citigroup GLobal Mkt. Maur. 4.8%Aayu Investment Pvt. Ltd. 3.5%Lehman Brother Asia Ltd 3.5%Carlson Fund Eq.

3.0%Merrill Lynch Cap. Mkts. Espana 2.7%Raymold Lighting pvt. Ltd. 2.7%Morgan Stalney & Co. Intl. Ltd. 2.6%Arun B Shah 2.2%Arisaig Partners (Asia) Pte Ltd 1.9%ABN Amro MF 1.6%MNR engineering Pvt. Ltd. 1.2%Laxmi Shivanand Mankekar 1.0%

www.aelgroup.comwww.plastic2petrol.com

Karthik [email protected]

Amber [email protected] Phone: +91- 22- 6631 8636

Investment Rationale

Imm ense global potential for plastic2power business

AELs unique technology to convert waste plastic into energy (plastic2power)has a capability to address the global issue of waste plastic handling. Asplastics are non biodegradable the world is looking for ways and means todispose off waste plastic efficiently. plastic2power is not only equipped todispose the plastic but is also converting it into energy. Globally more than200 million tones per annum of waste plastic is generated which has apotential to generate more than 100,000 MW of power (4.8tpd of plastic = 1MW/Hr) by using AELs technology.

Lower lead tim e vis--vis other power equipment m anufacturers

Normally for a power equipment manufacturer it would take upwards of 24months to setup a facility to manufacture power equipment. Whereas in caseof plastic2power AEL requires just ~6 months to set up a equipmentproduction facility with much lower capex and lesser lead time; which wil

give the company immense commercial advantage compared with others.Higher power demand augurs w ell for plastic2power business

By using equipment manufactured by AEL one can setup a 8MW powergeneration plant in just 6 months compared with 18 - 24 months in case o

other mode of power generation plants. AEL under its plastic2powebusiness plans to setup a series of 8MW power generating plants. Along withlower lead time the cost of generation would be as low as ~Rs 1.80/unitOther than its economic benefits this business significantly contributestowards environment protection by reducing waste plastic. plastic2powercould be the preferred mode due to the need for rapid capacity addition inpower generation due to deficit of power and increasing demand in thecountry.

Govt. thrust on efficient power consumption is a big opportunity forthe grow th of AELs lighting business

The recent energy bill states that that all premises & factories having a load> 500 kva must save 30% energy; to achieve this, they would buyproducts/services only out of the ESCO concept. Rapid growth of structuredmalls and larger residential complexes could be another demand driver forthe ESCO products. AEL being the pioneer in the industry is set to benefitmost from the sector growth.

Valuations

We estimate AELs revenue and profits to grow at CAGR of 87% and 133%

respectively, between FY07 and FY09F. We expect ROE to improve from19% in FY07 to 34% in FY09F. At CMP of Rs 807 stock is trading at 13.8xFY08F EPS of Rs 58.5 and 6.4x FY09F EPS of Rs 125.3. Given the hugepotential in its plastic2power business, and inexpensive valuations; weinitiate BUYrecommendation on the stock.

B r i e f F in a n c ia l s R e v e n u e s g ro w th EB I TD A N e t P r o f i t g r o w th EP S P .E E V / R O ER sm % % R s . x EB I TD A , x %FY05A 1041.1 25% 209.0 124.0 225% 14.6 55.3 33.1 12%FY06A 1561.1 50% 331.2 256.0 106% 28.6 28.2 22.6 19%FY07A 3674.5 135% 900.8 665.1 160% 47.8 16.9 13.4 19%FY08F 6533.5 78% 2181.6 1692.2 154% 58.5 13.8 10.4 23%FY09F 12815.9 96% 4612.3 3625.7 114% 125.3 6.4 5.2 34%Source : Company & Sunidhi Research


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Asian Electronics Lim ited (AEL)

Sunidhi Research Page 2 of 1

Company Background

Asian Electronics Limited (AEL) is involved in design, manufacturing and marketing oEnergy Efficient Products and specializing in lighting solutions. With its world-classmanufacturing facility at Nashik, Silvassa, Solan (HP) and Chennai, India, it is meetinginternational standards of quality lighting solutions. AEL's nationwide presence andstrategic international partnerships is making its mark in the Lighting world. AEL hasrecently added new high growth business segment i.e. manufacturingequipment for converting waste plastic into hydrocarbon and in turnproducing power from it.

Merger of Green Hydrocarbon and US I nstruments into AEL

Equity Issuance:

For every 1 Equity Share of Re 1/- each of Green Hydrocarbons India Pvt Ltdwill be entitled to 1 Equity Share of Rs 10/- each of the Company aggregating to10,000,000 Shares. (Ten Million Shares)

For every 5 Equity Shares of Re 1/- each of U.S. Instruments Pvt Ltd., will beentitled to 1 Equity Share of Rs 10/- each of the Company aggregating to2,000,000 Shares. (Two Million Shares)

The promoters and associates of Green Hydrocarbons India Pvt Ltd and U.S.Instruments Pvt Ltd will subscribe to 2,000,000 Equity Shares of the Company ofRs 10/- each at a price of Rs 1000/- per Share aggregating to Rs 2bn. (TwoMillion Shares)

As per the above information the fully diluted equity of AEL would go up to Rs289mn (28.9mn Shares).

On the diluted equity of 289mn the promoters stake will go up from current33.5% to ~59%.

Shah Group(Promoter of AEL)

AsianElectronicsLimited(34%)

Operating Div. ofUS InstrumentsPrivate Limited

(100%)(License Holder)

Green Hydrocarbons(India) PrivateLimited

(80% Shah Group)(20% Zadgaonkars)

Unique WasteMgmt Ltd.(75% Shah Group)(25% Zadgaonkars)

Patent Holder

Shah Group(Promoter of AEL)

Asian ElectronicsLimited

(~59% Shah Group)(~10% Zadgaonkars)

License Holder

Operating Div. ofUS InstrumentsPrivate Limited

(Merged with AEL)

Green Hydrocarbons(India) Private

Limited(Merged with AEL)

Unique WasteMgmt Ltd.

(75% Shah Group)(25% Zadgaonkars)

Patent Holder

Organizational Structure(Pre Merger)

Organizational Structure(Post Merger)


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Business Profile

Energy Services Company (ESCO)

ESCO represents a company engaged in developing, installing & financing comprehensiveperformance based projects with the underlying objective of improving energy efficiencyThe ESCO will guarantee that savings would exceed the annual payments made to coverthe entire project cost. Its a clear win-win situation as remuneration of an ESCO is

directly linked to the energy saving of its client. AEL, operating as an ESCO (approved byWorld Bank) in the Indian market, estimated at Rs 20 bn.

Selling & leasing of lighting products:

AEL has been in the business of operating leases in high tension (HT) and low tension(LT) switched capacitors for Automatic Load Monitoring Systems (ALMS), supplying toMaharashtra and AP State Electricity Board on a 10 years lease. The company has exitedfrom manufacturing of capacitor business in 1998 but continues Capacitor ESCObusiness, i.e. ALMS for supply and leasing and refocused to energy efficient, intelligentlighting products, and manufactures across plants in Nashik, Silvassa, Solan (HP) andChennai.

AEL will continue to grow its lighting segment and energy saving fittings and fixtures that

the company is supplying. Visualizing the growing retail segment and scarcity of poweras an opportunity the company has entered into JV to supply energy saving lightingsolution to retail chains and malls.

Distributors and Customers

With more than 300 distributors/dealers, AEL caters to over 500 institutional customersspread over all industry segments. Asian Raymold has supplied lighting solutions to BigBazaar, Pantaloon, Westside, Lifestyle, ABB, Athens Airport, German Railways, UKDefense department and Post Office Dept. Malta.

Innovative product marketing

AEL has innovative plans to market its product in India on a deferred payment basis. InAhmedabad, it has offered efficiency improvement lights to subscribers, who will pay theinitial capital costs through the monthly electricity bills. Similar plan is being launched inother states.

Plastic2power

AEL has acquired the technology from Prof. Mrs. Alka Zadgaonkar for converting wasteplastic into hydrocarbons and in turn to convert into power. AEL manufactures equipmentto set up plant to make plastic to power.

Unique waste management has the patents for the technology, process and catalystinvented by Prof. Mrs. Alka Zadgaonkar. AEL has license to use the technology, processand catalyst.

As this new segment is at initial stage AEL is only selling equipment at present whereas ithas few other possible revenue streams from this business which will be explored inthe future; such as

Taking up the operation of the plant on a production sharing basis.

Setting up a Joint Venture with the buyer of the equipment to operate on equitysharing.

Lighting division is expectedto grow at 57% CAGRbetween FY06 - FY09F

Innovative technology toconvert plastic intopower

License to usetechnology, process,catalyst

Multiple revenue streams


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JV with Cimelia

AEL has entered into a (50:50) JV agreement with Cimelia Resource Recovery Pte Ltd(part of $260mn Enviro-Hub listed in Singapore and a well established brand in global e-waste management and recycling industry).The JV Company will establish a plant inSingapore for this purpose and thereafter market its services and to sell similar plants toMalaysia, Indonesia, Thailand, Hong Kong, Vietnam, Philippines, New Zealand and Brazil

The company is planning to supply equipment for ~100MW in each of the abovementioned 8 countries at the initial stage.

Other possible Ventures

Company is also in talks with major oil company to set up a JV for processing of refineryheavy residue by Zadgaonkars process. This could open up a huge business opportunityfor AEL as the oil company generates ~7000tonnes of refinery heavy residue per day.

This business segment has a huge grow th potential as it solves

Handling of disposable waste plastic & using it for productive purpose withoutharming environment.

Setting up of a power plant (8MW) in only 6 months time period and Generate powe

at efficient cost.

Establishing base on globalscale through JointVentures

Domestic tie up with oilmajor


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Investment Rationale

Imm ense global potential for plastic2power business

Globally more than 200 million tonnes of waste plastics are generated annually (570,000MT per day of which ~ 10000 MT/day in India), which is a matter of growing concern forenvironment; as plastics are non biodegradable the world is looking for ways and meansto dispose off waste plastic efficiently. On the other hand the increasing economic

activity backed by higher GDP growth lead to higher demand of power worldwide. AELs unique technology to convert waste plastic into energy plastic2power has acapability to address the global issue of waste plastic handling. plastic2power is notonly equipped to dispose the plastic but is also converting it into energy.

The waste plastics generated in the world every day if converted into power; have apotential to generate more than 100,000 MW of power (4.8tpd of plastic = 1 MW/Hr) byusing AELs technology.

Apart from plastic the process can also be used to convert refinery heavy residue into oiand the trial run results shows that it gives much higher conversion compared with lowerpercentage obtained by using current process. Due to the heavy volume of refineryheavy residue generated, it can be of huge benefit for oil refineries if they get even a

smaller increase in the recovery.Lower lead tim e vis--vis other power equipment m anufacturers

Normally for a power equipment manufacturer it would take upwards of 24 months tosetup a facility to manufacture power equipment. Whereas in case of plastic2power AELrequires just ~6 months to set up a equipment production facility with much lower capexand lesser lead time; which will give the company immense commercial advantagecompared with others.

At present India has a total power generation capacity of ~134000MW of power andfacing a peak deficit of ~13%. The demand of power is growing at a faster rate than thesupply addition backed by the higher GDP and IIP growth. To sustain the robusteconomic growth by achieving higher GDP and IIP growth; uninterrupted and adequatesupply of power is must. We expect AEL can play a vital role in this context.

Higher demand of pow er augurs w ell for AELs plastic2power business

AEL under its plastic2power business will sell equipment for power plants which is basedon a new technology which uses plastic as feed. It plans to sell equipment for a series o8MW power generating plant and subsequently take up the operations and managementcontract for the same. The biggest advantage of this technology is one can set up a 8MW plant in just 6 months compared with the usual time of 18 - 24 months in case ofother mode of power generation. Along with lower lead time the cost of generationwould be as low as ~Rs 1.80/unit. Other than its economic benefits this businesssignificantly contributes towards environment protection by using waste plastic as rawmaterial and convert it 100% into value added product which is used to produce power.

Apart from selling equipment the company can add some other source of revenues to its

segment such as taking up operations and maintenance of the power plant etc. Theseoptions can be explored from time to time.

Govt. thrust on efficient power consumption is a big opportunity for thegrowth of ESCO

There is a huge business opportunity for Energy Service Companies (ESCO) in India. Dueto the huge supply deficit of power in India, conservation of power holds big importance.The recent energy bill states that that all premises & factories having a load > 500 kvamust save 30% energy; to achieve this; they would buy products/services only out of theESCO concept. By using ESCO products consumers can save up to 45% on its energycost. ESCO industry in India is still at a nascent stage and AEL being the pioneer in theindustry is set to benefit most from the sector growth.

Potential to supplyequipment for 100,000 M Wglobally

8 MW power plants can beset up in just 6 months;can become solution forenergy deficit in thecountry

45% of energy bil l can be

saved by using ESCOproducts

Substantially low er leadtime to commission thefacility; can becomesolution for energy deficitin the country


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Strategic tie ups to drive future grow th

Rapidly growing Indian retail, acceptance of structured malls provides an immensepotential for the energy services companies. AEL has recently entered into two JVagreements with Future group companies enabling AEL to tap this opportunity.

AEL also has in place various strategic alliances/JVs, which help the company in makingits products available in the overseas market and also to exploit newer opportunity within

and outside the country.Lighting div. of Asian Raymold Lighting Pvt. Ltd Lighting division of AsianRaymold Lighting Private Limited (Chennai) and which enabled Asian Electronics, to offerelegant, efficient and high quality luminaries. This division has been merged with AEL.

Global Energy Management - A European company, having exclusive marketing &sales right for AELs Retrolux product range in Europe.

Valuations

After assuming that AEL will deliver equipment for 60MW in FY08F and 150MW in FY09F,we estimate AELs revenue and profits to grow at CAGR of 87% and 133% respectively,between FY07 and FY09F. Operating margins are expected improving to 36% in FY09Ffrom current 25% in FY07. We expect ROE to improve from 19% in FY07 to 34% in

FY09F. At CMP of Rs 807 stock is trading at 13.8x FY08F EPS of Rs 58.5 and 6.4x FY09FEPS of Rs 125.3.

However we believe that due to huge power shortage, lower setup time and easyscalability the company can deliver much higher volume (MW) resulting in betteearnings than estimated.

Given the huge potential in its plastic2power business, immense growth potential inretail, and inexpensive valuations; we initiate BUYrecommendation on the stock.

Being the new technology and evolving business model we wil l review thecompanys performance quarterly to ensure the pace at which AEL is able totap the opportunity .Risk and Concerns

Plastic2power business is based on the new technology currently not running onthe commercial scale, difficulty in scaling up the plant size may delay theexecution of the business.Company is still on the finalization mode for the right business mix forplastic2power business segment, any change in the business model comparedwith our expected model would impact the future earnings estimates.Innovation of any other similar or better technology/process could posecompetition to this business and may impact the future earning estimates.Due to the new technology and limited public information, we have taken certainassumption for the purpose of calculating cost, payback, working capital needs,revenue model, Capital expenditure and funding. Any deviations on the actua

and our assumptions would impact the future earnings.An unfavorable US$/INR move, rising prices of imported components may impactthe companys business and in turn may impact the earning estimates.Competition from the unorganized sector as well as new competition withinorganized sector could adversely impact AELs performance.As the business has immense potential, AEL may not be able to capture the fulpotential of the business due to the size and other limitations in the short run.The future earning estimates has been done by taking various assumptionsmentioned in the report any deviation between the actual and the assumptionsmay impact the earning estimates.

Joint ventures to fuelfuture growth

Revenue CAGR of 87%

(FY07-FY09F)

PAT CAGR of 133%(FY07-FY09F)

ROE to grow from 19%to 34% by FY09F


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Plastic2power

We met the management of AEL to know about this innovative technology. Later wevisited Nagpur, where the first plant has been setup and is now used as a research &Development facility. We met Dr. Umesh Zadgaonkar the promoter of Unique WasteManagement Limited and discussed about the technology andinvention.

TechnologyPlastics have become an indispensable part in todays world. Due to their light-weightdurability, energy efficiency, coupled with a faster rate of production and designflexibility, these plastics are employed in entire gamut of industrial and domestic areas.

Plastics are non-biodegradable polymers of mostly containing carbon, hydrogen, and fewother elements such as chlorine, nitrogen etc. Due to its non-biodegradable nature, theplastic waste contributes significantly to the problem of Municipal Waste Management.

According to a nation wide survey, conducted in the year 2004, approximately 10,000tones (ten thousand tones) of plastic waste were generated every day in India, and only60% of it was recycled, balanced 40% was not possible to dispose off. So gradually itgoes on accumulating, thereby leading to serious disposal problems.

Prof. Mrs. Alka Umesh Zadgaonkar, Head of Department of Applied Chemistry at theNagpur based G.H. Raisoni College of Engineering invented an Environment friendlycatalytic process for disposal of waste plastic .

The invented process involves degradation waste plastic using `catalytic-additive. Underthis process individual as well as mixed plastics were successfully converted in to fuels.The products obtained in the process are Liquid hydrocarbons, Gas and residual Coke.

The heart of the technology is the Catalyst (Patented) which is being used into thereactor and mixed with melted plastic to get the desired output.

Zadgaonkars Process: (Plastic 2 Hydrocarbon)

The waste plastic is sorted based on physical properties such as, hard, soft, filmsetc. Size reduction of the sorted feed is carried out using crusher, cutter andshredder.

The graded feed is mixed and fed to Melting Vessel through a pre heater feederIn Melting Vessel, the feed is heated to 175-250 0C.

The melted plastic then goes into reactor where the Catalytic Additive is mixedPost reaction the impurities such as hard metal, clay, sand, glass etc. settles inthe bottom of the reactor, and the processed plastic goes into condenser focooling off.

Once the outcome is cooled off it results into Liquid Hydrocarbon and LPG

(Higher Ethylene content) which in turn stored into separate storage devices andcan be used for generating power.

Prof. Mrs. Alka UmeshZadgaonkar TheInventor

Recognized in globalforums with patentedtechnology, process

and catalyst


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Output Yield Data

The major process parameters and product yields are given in Table below. The evolved

vapors are condensed to collect gas and liquid products.

The product yields Quantity (wt % )

Gas 10-20

Liquid hydrocarbons 60-80

Residue (coke) 7-10

The process

No w aste generated


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Economies and w orking of the plant

Operating Effeciency 85%1 Kg / Plastic (@ 85% PLF) 5.00 Kwh of power1 MW plant (@85% PLF) 7.45 mn Kwh / annum8 MW Plant (@85% PLF) 59.47 mn Kwh / annum4.8 tonnes per day 1 MW/ hour33 tonnes per day 8 MW/ hourSale Price Rs / Kwh 4.50 For a 8 MW PlantCost Rs / Kg Sales Value Rsm (8 MW) 267.61Plastic Rs 3.50 EBITDA Rsm / 8 MW 160.56Catalytic Additive 2.50Labour costs 2.00 Capital Investments 8 MW PlantCost of generation 0.50Misc. 0.50 Plant & Machinary, Rsm 480

Other Assets, Rsm 20Cost Rs / Kg of plastic 9.00 otal Investment Rsm 500

Cost Rs / Kwh 1.80 Debt (70%) (@12.5%p.a) 350EBITDA Rs / Kwh 2.70 Equity (30%) 150Source : Sunidhi Research

Pay Back Calculation (Rsm)Year 1 2 3 4 5 6Value of assets 500 400 300 200 100 0Depreciation @ 20% 100 100 100 100 100 0Loan Amount 350 280 210 140 70 0

Loan Repayment for 5 years 70 70 70 70 70 0Interest @12.5% p.a 44 35 26 18 9 0

EBITDA Rsm 161 161 161 161 161 161Depreciation 100 100 100 100 100 0Interest 44 35 26 18 9 0PBT 17 26 34 43 52 161Tax % @35% 6 9 12 15 18 56PAT 11 17 22 28 34 104

Cash Profit 111 117 122 128 134 104Loan Repayment 70 70 70 70 70 0Cash Balance 41 87 140 198 261 366

Networth 161 177 200 228 261 366ROE % 7% 9% 11% 12% 13% 29%

Total Liablity 441 387 340 298 261 366Total Assets 441 387 340 298 261 366Source : Sunidhi Research

Note: To calculate the pay back period we have not taken any tax benefits the power generation unit would entitle to. We have alsonot considered the possibility to get carbon credits in the future. By considering these benefits the payback period will get substantiallyreduce.


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Sunidhi Research Page 11 of

Valuations Summ ary FY04A FY05A FY06A FY07A FY08F FY09FRevenues, Rsm 832.4 1041.1 1561.092 3674.5 6533.5 12815.9

growth, % 25% 50% 135% 78% 96%

EBITDA, Rsm 191.3 209.0 331.2 900.8 2181.6 4612.3Net profit, Rsm 38.1 124.0 256.0 665.1 1692.2 3625.7

growth, % 225% 106% 160% 154% 114%

EPS, Rs 4.5 14.6 28.6 47.8 58.5 125.3CEPS, Rs 15.7 23.7 38.0 54.3 63.5 131.9P/E, x 180.1 55.3 28.2 16.9 13.8 6.4P/Bv, x 6.1 6.5 5.3 3.2 3.1 2.2EV/EBITDA, x 36.1 33.1 22.6 13.4 10.4 5.2Mcap/Sales, x 28.1 22.4 15.0 6.4 3.6 1.8Dividend Payout, % 40% 15% 10% 11% 10% 9%

Key Ratios FY04A FY05A FY06A FY07A FY08F FY09FOPM % 23% 20% 21% 25% 33% 36%NPM % 5% 12% 16% 18% 26% 28%ROE % 3% 12% 19% 19% 23% 34%ROA % 2% 6% 8% 13% 20% 25%

D/E x 0.6 0.8 1.2 0.5 0.1 0.3Asset Turnover Ratio x 0.8 0.9 1.3 2.8 3.3 5.0

Growth Ratios FY05A FY06A FY07A FY08F FY09FIncome growth 25% 50% 135% 78% 96%

Operating Profit growth 9% 58% 172% 142% 111%

Earnings growth 225% 106% 160% 154% 114%

Income StatementRsm FY04A FY05A FY06A FY07A FY08F FY09F

Revenues 832.4 1041.1 1561.1 3674.5 6533.5 12815.9

Inc/Dec in Stock 0.0 0.0 0.0 0.0 0.0 0.0Raw Materials 199.5 397.0 764.0 1781.5 2482.7 4741.9Manufacturing Expenses 72.9 96.4 146.0 195.2 708.6 1286.7Employment Costs 41.3 64.8 64.3 138.8 180.5 252.6Administrative expenses 327.4 273.9 255.7 658.2 980.0 1922.4Operating Expenditure 641.1 832.1 1229.9 2773.6 4351.8 8203.6

Operating Income 191.3 209.0 331.2 900.8 2181.6 4612.3Other Income 64.4 57.3 70.9 126.1 100.0 100.0

Gross Profits 255.7 266.3 402.0 1026.9 2281.6 4712.3Finance and Interest Costs 85.5 76.1 92.5 166.3 144.0 255.0Depreciation 95.7 77.4 84.0 90.1 146.8 191.8

Profit Before Tax 74.5 112.8 225.5 770.6 1990.8 4265.5Tax 31.8 4.2 -26.0 104.4 298.6 639.8

Profit after Tax 42.7 108.6 251.5 666.2 1692.2 3625.7Extraordinary items 4.6 -15.4 -4.5 1.1 0.0 0.0

Net Profit 38.1 124.0 256.0 665.1 1692.2 3625.7Source : Company & Sunidhi Research

Source : Company & Sunidhi Research


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Balance SheetRsm FY04A FY05A FY06A FY07A FY08F FY09FSources of Funds

Equity Share Capital 85.0 85.0 89.4 139.1 289.4 289.4Reserves & Surplus 1035.2 954.6 1282.6 3394.8 7176.6 10472.3Net Worth 1120.2 1039.6 1372.0 3533.9 7466.0 10761.7

Secured 614.1 832.4 974.6 1150.4 350.4 1350.4Unsecured 24.5 14.0 613.3 499.7 399.7 2149.7Loan Funds 638.6 846.4 1587.9 1650.1 750.1 3500.1

Deffered Tax Liabilty 116.4 111.9 64.1 64.2 64.1 64.1

Total Liability 1884.0 2006.7 3024.0 5248.3 8280.3 14326.0

Application of Funds

Gross Block 1085.2 1148 1180.3 1322.5 1957.2 2557.2Less: Depreciation 430.3 504.5 585.3 674.5 821.3 1013.1Less: Impairment 0.0 156.9 156.9 156.9 156.9 156.9Net Block 654.9 486.6 438.1 491.1 979.0 1387.3WIP 84.5 0.2 108.2 334.8 300.0 100.0Net Fixed Assets 739.4 486.8 546.3 825.8 1279.0 1487.3

Investments 0.3 2.2 2.2 42.3 42.3 42.3

Current AssetsInventories 345.3 465.0 675.8 1045.3 1969.0 4037.9

Debtors 477.4 572.2 957.2 3403.4 5012.0 9129.2Cash and Bank 69.1 77.8 363.2 32.6 137.6 50.6Loans and Advances 534.6 705.4 965.9 714.7 1342.5 2809.0

Current Liabilities 249.9 258.6 416.5 707.9 1432.0 3160.1Provisions 32.2 44.1 70.1 108.6 70.1 70.1Net Current Assets 1144.3 1517.7 2475.5 4379.5 6958.9 12796.4

Misc Expnses 0.0 0.0 0.0 0.7 0.0 0.0Total Assets 1884.0 2006.7 3024.0 5248.3 8280.3 14326.0Source : Company & Sunidhi Research


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Cash flow statementRsm FY05A FY06A FY07A FY08F FY09F

Cash flow from operations 201.4 340.0 755.2 1,839.0 3,817.5

Cash for working capital (364.7) (672.4) (2,234.6) (2,474.5) (5,924.5)Net operating cash flow- A (163.3) (332.4) (1,479.4) (635.5) (2,107.0)

Net purchase of fixed assets 21.5 (140.3) (368.7) (600.0) (400.0)Net Purchase of investments (1.9) - (40.1) - -Net cash flow from investing- B 19.6 (140.3) (408.8) (600.0) (400.0)

Proceeds from equity 0.0 92.3 1,571.4 2,404.9 (0.0)Proceeds/Repayments from borrowings 170.7 691.8 62.4 (899.4) 2,750.0Dividend payments (18.3) (26.0) (76.3) (165.0) (330.0)Net cash flow from financing- C 152.4 758.1 1,557.6 1,340.5 2,420.0

Net cash flow (A+B+C) 8.7 285.4 (330.6) 105.0 (87.0)

Opening Cash 69.1 77.8 363.2 32.7 137.6Closing Cash 77.8 363.2 32.7 137.6 50.6Source : Company and Sunidhi Research

Assumptions

AEL is going to generate revenue under Plastic2power business only by sellingthe equipment; however other revenue streams may also get added in future.

As the business is on the evolving stage we have considered sale of equipment

for 60MW in FY08F and 150MW in FY09F. However the company can delivermuch higher volume growth as shared with media by the company in past(800MW in 3 years: CNBC)

The company is in talks for various joint ventures and operating contracts. In theabsence of details we have not considered those business opportunity for ouworking.

Our future projections are AELs standalone performance where we have notconsidered any revenue coming from JV with Cimelia.


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Quaterly Income StatementRsm Q1FY08 Q1FY07 YOY Q4FY07

Net Sales 839 537 56% 1502

ExpenditureInc/Dec in stock 19 -5 51Raw Materials 274 289 -5% 687% to sales 35% 53% 49%

Staff Cost 41 24 74% 61% to sales 5% 4% 4%

Other expenditure 113 114 -1% 258% to sales 13% 21% 17%

Total Expenditure 448 423 6% 1057

EBITDA 391 115 241% 445Other Income 7 16 13

Gross Profit 398 131 204% 458Interest 51 32 40Depreciation 25 21 25PBT 322 78 315% 393Tax 37 15 78PAT 284 63 355% 316

Equity, Rsm 145 89 143No of Shares,mn 15 9 14EPS, Rs (Annu.) 78.3 28.0 88.0

OPM, % 46.6% 21.4% 29.6%NPM, % 33.1% 8.7% 20.1%TAX, % 11.5% 19.4% 19.8%Source : Company & Sunidhi Research

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SEBI Registration Numbers: NSE: INB 230676436 BSE: INB 010676436

Maker Chamber IV, 14th Floor, Nariman Point, Mumbai: 400 021

Tel: (+91-22) 6636 9669 Fax: (+91-22) 5631 8638Web-site:www.sunidhi.com

Disclaimer: "This Report is published by Sunidhi Securities & Finance Ltd. ("Sunidhi") for private circulation. This report is meant for informationalpurposes and is not be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. While utmost care has

been taken in preparing this report, we claim no responsibility for its accuracy. Recipients should not regard the report as a substitute for theexercise of their own judgment. Any opinions expressed in this report are subject to change without any notice and this report is not under any

obligation to update or keep current the information contained herein. Past performance is not necessarily indicative of future results. This Reportaccepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this report. Sunidhi and its associatedcompanies, directors, officers and employees may from time to time have a long or short position in the securities mentioned and may sell or buysuch securities, or act upon information contained herein prior to the publication thereof. Sunidhi may also provide other financial services to the

companies mentioned in this report."

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Asian Electronics Limited[1]

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