September 23, 2019

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TABLE OF CONTENTS

Page

Introduction 3

Income Generator # 1
6
Mayur Uniquoters Ltd
Income Generator # 2
11
Castrol India Ltd

Disclosure 15

Disclaimer 18

Rahul Shah's Top Two Income Generators | 2

 Preface

Dear Valued Subscriber,

Have you had a chance to go through my Income Supervisor Map?

If you haven’t, I strongly recommend you do that first.

It will give you a good foundation from which to approach my Top Two Income
Generators that I have outlined in this report.

Anyways, here’s the gist.

My Double Income project has the single-minded goal of taking your income from X to
2X in the shortest time possible.

I plan to achieve this through a mix of individual stock investments, a low-cost index
fund and a fixed deposit component.

Allocation to each of these components will vary based on the broader market
valuation.

And while I will share the full details of the strategy in my first report, suffice to say
that stock component will be the most important component and the one that will
drive the bulk of the returns.

And I believe that stocks that are strong cash generating machines will be the perfect
fit for our ‘Mission Double Income.’

Almost all the stocks that I recommend in this service will have to pass this filter
before they can be even considered for recommendation.

3 | Introduction
I strongly believe that when you are looking for stocks that are strong cash generators,
you are fishing in the highly fertile field of companies with strong competitive
advantages and competent management teams.

After all, a company will only be able to generate strong cash year after year if it
has some kind of a competitive advantage and is helmed by a strong management
team. A team that not just runs the business in an efficient manner but also rewards
investors in the form of dividends and buybacks.

And therefore, when you are looking for businesses that are cash generators as well
as distributors, you are automatically zeroing on the best businesses in India.

Of course, another important point is to buy these businesses when they are trading
at attractive valuations vis-à-vis their long-term wealth creating potential.

And this is precisely going to be my endeavor in Double Income. I will recommend only
those stocks that not only generate strong cash but are also generous in paying them
out and are also available at reasonable valuations.

You would be happy to know that my top two Income Generators in this report today
have all the three attributes.

My first stock has in the last 10 years generated free cash flow (after fulfilling capex
needs) to the tune of Rs 39 billion and has paid out almost 80% of it in the form of
dividends.

Yes, you heard that right. This company has paid out Rs 8 out of every Rs 10 of free
cash flow it has generated over the years. And the icing on the cake is the fact that
because of a slowdown in the sector, it is available at valuation that is at a multi-year
low.

The second Income Generator may not be as prolific as the first one but does pack a
strong punch of its own. After accounting for capex, it has paid out as much as 58%

Rahul Shah's Top Two Income Generators | 4

of the free cash in the form of dividends and buybacks. And again, because of near
term slowdown concerns, it is available at very attractive valuations.

Let us go through a detailed profile on each of these companies. Please note that
these are two of the 8-10 income generators that we would be recommending over
the next few months, provided the conditions are right.

We would also recommend the preferred allocation between stocks, low cost index
fund and fixed deposits in our first full issue of Double Income scheduled for the 5th
of October.

For now, we recommend you to buy these two stocks as part of the double income
corpus and ensure that no single stock exceeds more than 4%-5% of the total corpus
set aside for this service.

Happy Investing.

Warm regards

Rahul Shah
Editor and Research Analyst, Double Income

5 | Introduction
 Income Generator # 1
Mayur Uniquoters Ltd
Buy
Maximum Buy Price: Rs 242

Mayur Uniquoters Ltd is India’s leading manufacturer of synthetic/artificial leather/

PVC vinyl.

The company's products are used in segments such as footwear, furnishings,

automotive original equipment manufacturer (OEM), automotive replacement
market, and automotive exports.

It sells its products to OEMs and other manufacturers, and wholesalers in India, and
also exports to various countries, including the United States and the United Kingdom.

The company produces specialized polyvinyl chloride (PVC) vinyl for the footwear
industry and offers products for various parts of footwear such as shoe uppers, shoe
lining, and insoles.

Apart from that, the company also offers products which are used in upholstery for
sofas, chairs, cushion-covers and bean bags.

The company has come a long way in the past two decades from a meager production
of 0.25 million linear meters per month, to an astonishing 3.05 million linear meters
per month, through its 6 state of the art Italian coating lines.

The company has its manufacturing units located at village Jaipura and Dhodsar,
Jaipur. The infrastructure consists of a full range of machinery to fulfill its knitting,
processing, heat setting, coating, embossing, printing, lacquering, sueding, tumbling
and laminating needs.

Rahul Shah's Top Two Income Generators | 6

The company’s physical, chemical and product development laboratories are capable
of testing predominantly all properties of artificial leather for different segments and
applications.

The company’s clients include automobile giants like Ford (USA), Chrysler (USA),
Maruti Suzuki, Tata Motors, M&M, Honda Motorcycles. The company will also be
soon supplying to BMW, Mercedes, and GM. In the footwear sector, the company
supplies its products to leading footwear manufacturers like Bata, Action Group,
Liberty Shoes, Paragon, VKC Group, and Relaxo Footwear.

7 | Income Generator # 1 Mayur Uniquoters Ltd

Financials at a glance
(Rs m, Standalone) FY15 FY16 FY17 FY18 FY19
Net sales 5,063 5,110 4,767 5,522 5,734

Sales growth (%) 8% 1% -7% 16% 4%

Operating profit 1,082 1,412 1,389 1,583 1,490

Operating profit margin (%) 21.4% 27.6% 29.1% 28.7% 26.0%

Net profit 659 825 821 941 872

Net profit margin (%) 13.0% 16.1% 17.2% 17.0% 15.2%

Balance Sheet
Fixed assets 1,441 1,438 1,380 1,380 2,179

Investments 758 971 1241 1563 1938

Other fixed assets 0 0 0.47 0 0

Current assets 2,598 3,013 2,641 2,867 2,581

Total Assets 4,797 5,421 5,262 5,809 6,698

Net worth 2,827 3,421 3,920 4,535 5,230

Non Current Liabilities 188 144 126 98 637

Current liabilities 1,783 1,857 1,217 1,177 832

Total Liabilities 4,797 5,421 5,262 5,809 6,698

Valuation*
(Rs m) FY15 FY16 FY17 FY18 FY19
Net sales (Rs m) 5,063 5,110 4,767 5,522 5,734

PAT (Rs m) 659 825 821 941 872

Adj. EPS (Rs) 14.5 18.2 18.1 20.8 19.2

Price to earnings (x) 14.5 11.6 11.6 10.1 10.9

Price to sales (x) 1.9 1.9 2.0 1.7 1.7

Price to book value (x) 3.4 2.8 2.4 2.1 1.8

*Adjusted basis

Rahul Shah's Top Two Income Generators | 8

Market Data

Price on reco. date (Rs) 210.3

52 week H/L 414 / 206

BSE code 522249

NSE Symbol MAYURUNIQ

No. of shares (m) 45.3

Face value (Rs) 5.0

FY19 dividend/share (Rs) (Adjusted) 3.3

Free float (%) 38.7

Market cap (Rs m) 9,532

Average 52-week liquidity (Rs m) 5.7

Price to sales* (times) 1.7

Price to earnings* (times) 12.3

Price to book^ (times) 1.8

Debt to Equity^ (times) 0.04

Dividend yield (FY19 at current prices) 1.5%

Promoter pledging (% of Total Equity) NIL

*Based on trailing 12-month standalone numbers
^Based on Audited Standalone Balance Sheet as at March 31, 2019

9 | Income Generator # 1 Mayur Uniquoters Ltd

 Mayur Uniquoters Ltd
Rs 100 invested 5 years back is now
200
Mayur Uniquoters Ltd Rs 47
Sensex Rs 133
150

100

50

-
Sep-14 Dec-15 Mar-17 Jun-18 Sep-19
Source: Company, Equitymaster

Shareholding (%, June 2019)

Category (%)
Promoters 61.3

Institutions 20.5

Others 18.2

Total 100

Rahul Shah's Top Two Income Generators | 10

 Income Generator # 2
Castrol India Ltd
Buy
Maximum Buy Price: Rs 155

Castrol India Ltd is one of the leading automotive and industrial lubricant
manufacturing and marketing companies in India. The company has a proud heritage
of innovation and success since over 100 years in the country.

At the forefront of pioneering technology, Castrol India provides a high performance

range of products and services across automotive, industrial and marine & energy
segments.

It is the market leader in the retail automotive lubricant segment, providing iconic,
high performance brands like Castrol EDGE, Castrol MAGNATEC and Castrol GTX for
passenger cars; Castrol Power1 and Castrol Activ for motorcycles and Castrol CRB,
Castrol RX and Castrol VECTON for trucks, amongst various others including specialty
products.

The company also offers a complete range of products for industrial applications and
is the market leader in corrosion preventives and metal cutting fluids segment.

Castrol India works closely with leading industry OEMs, supplying a broad range of
lubricants designed for particular operating conditions and environments. Many of
the company’s products are recommended by and co-engineered with major OEMs.

The company has three manufacturing plants at Patalganga, Paharpur and Silvassa,
serving a distribution network of over 105,000 retail outlets and B2B customers
through over 420 distributors.

In 2018, the company turned in a solid set of results. It grew volumes profitably three
years in a row achieving the highest ever volume since 2010, and grew ahead of the
market in the retail and industrial segments.

11 | Income Generator # 2 Castrol India Ltd

Financials at a glance
(Rs m, Standalone) CY14 CY15 CY16 CY17 CY18
Net sales 33,923 32,980 33,703 35,843 39,046
Sales growth (%) 7% -3% 2% 6% 9%

Operating profit 7,648 9,908 10,867 11,168 11,551

Operating profit margin (%) 22.5% 30.0% 32.2% 31.2% 29.6%

Net profit 4,746 6,153 6,704 6,918 7,084

Net profit margin (%) 14.0% 18.7% 19.9% 19.3% 18.1%

Balance Sheet
Fixed assets 2,716 2,776 2,546 3,428 3,241

Investments 0 0 0 0 0

Other fixed assets 12 9 228 73 28

Current assets 11,576 13,332 15,437 15,717 17,266

Total Assets 14,303 16,117 18,212 19,218 20,535

Net worth 4,968 5,756 9,815 10,202 11,657

Non Current Liabilities -481 -350 -531 -392 -374

Current liabilities 9,817 10,711 8,927 9,409 9,252

Total liabilities 14,303 16,117 18,212 19,218 20,535

Valuation*
(Rs m) FY15 FY16 FY17 FY18 FY19
Net sales (Rs m) 33,923 32,980 33,703 35,843 39,046

PAT (Rs m) 4,746 6,153 6,704 6,918 7,084

Adj. EPS (Rs) 4.8 6.2 6.8 7.0 7.2

Price to earnings (x) 28.0 21.6 19.8 19.2 18.8

Price to sales (x) 3.9 4.0 3.9 3.7 3.4

Price to book value (x) 26.8 23.1 13.5 13.0 11.4

*Adjusted basis

Rahul Shah's Top Two Income Generators | 12

Market Data

Price on reco. date (Rs) 134.5

52 week H/L 172.8 / 112.7

BSE code 500870

NSE Symbol CASTROLIND

No. of shares (m) 989.1

Face value (Rs) 5.0

CY18 dividend/share (Rs) (Adjusted) 5.0

Free float (%) 49.0

Market cap (Rs m) 132,988

Average 52-week liquidity (Rs m) 210.9

Price to sales* (times) 3.3

Price to earnings* (times) 18.2

Price to book^ (times) 11.4

Debt to Equity^ (times) 0.00

Dividend yield (CY18 at current prices) 3.7%

Promoter pledging (% of Total Equity) NIL

*Based on trailing 12-month standalone numbers
^Based on Audited Standalone Balance Sheet as at Dec 31, 2018

13 | Income Generator # 2 Castrol India Ltd

 Castrol India Ltd
Rs 100 invested 5 years back is now
200
Castrol India Ltd Rs 56
Sensex Rs 133
150

100

50

-
Sep-14 Dec-15 Mar-17 Jun-18 Sep-19
Source: Company, Equitymaster

Shareholding (%, June 2019)

Category (%)
Promoters 51.0

Institutions 28.9

Others 20.1

Total 100

Rahul Shah's Top Two Income Generators | 14

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15 | Disclosures under SEBI (Research Analysts) Regulations

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