May 28, 2018

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Preface

In July 2017, we did something we’d never done before.

In fact, we hadn’t even thought we’d ever do this.

But like it’s said, nothing can stop an idea whose time has arrived.

Insider was that idea whose time had arrived.

Initially, when I laid out my vision for Insider, some of my colleagues expressed skepticism and reluctance. Some
laughed. Because like I said, we had never thought we’d do something like this.

Eventually, my entire network of research analysts and big picture experts in India and overseas agreed to give
me access to their research.

And that’s how I have access to some of the best long-term investing ideas, trading strategies, alternative
investments, and big-picture insights.

All under the Insider umbrella.

So, if you ride with me, you’re going to have access to these investing ideas. But I’m going to make it even easier
and more valuable for you.

Here’s how…

As editor of Equitymaster Insider, I have access to investing ideas across eight of our premium services.

I’m going to reach out to all the analysts and experts in my network.

I’m going to scour the wealth of investing ideas across almost every recommendation service.

And I’m going to cherry-pick the best investing ideas for my readers.

That’s my simple mission.

This offers my readers the advantage of getting the best of our investing ideas from our various teams.

In this special report, I have cherry-picked five top stock ideas across our various recommendation services based
on diverse investment philosophies.

In the following pages, you’ll find five unique investing ideas from five different Equitymaster recommendation
services – Smart Money Secrets, Microcap Millionaires, ValuePro, StockSelect, and Hidden Treasure.

Happy investing…

Ankit Shah (Research Analyst)

Editor, Equitymaster Insider

5 Unique Investing Ideas to Buy During the Market Correction | 2

Stock Pick # 1
Newgen Software Technologies (Smart Money Secrets)

Kunal Thanvi is Bullish on This Recently Listed Software Company

In 2017-18, we saw a flood of IPOs hitting the primary markets in India.

In 2017, the market sentiments were so strong that most IPOs were received with great enthusiasm. The expensive
valuations were conveniently ignored.

Come 2018... and the mood has changed. The bulls are going through a period of fatigue. A slew of bad news,
both global and domestic, has weighed down on the markets.

Overall, it appears that the IPO boom is fizzling out.

In my Insider issues, I've shared my research team's views on all the major IPOs. And in most cases, my team's
prudence suggested you avoid them.

You see, my team doesn't look at IPOs from the point of view of listing gains... or how bullish the market sentiments
are. When they evaluate IPOs, they look at them the same way as listed companies...

1. How are the business fundamentals?

2. What are the future growth prospects?

3. How are the owners and the managers of the company?

4. What story do the numbers portray?

5. And finally, is there a margin of safety in the offer price?

Most of the time, it is the last question where my team feels the discomfort. And the reason lies in the basic
characteristic of the IPO market. Most IPOs come out when the market sentiments are bullish and investors are
willing to pay expensive valuations. No promoter or shareholder likes to offload their shares when the markets
are correcting or crashing.

So, IPO are inherently not in favour of long-term value investors.

But don't confuse our research team's conservative stance as a complete no-no to IPOs. In fact, my team actively
studies and tracks solid businesses that get listed on the stock exchanges.

In fact, my stock pick - Newgen Software Technologies Ltd is a company that my colleague Kunal Thanvi, Managing
Editor of Smart Money Secrets, has been tracking since it hit the primary markets earlier in 2018.

The IPO of Newgen was issued at a price of Rs 245 per share. At that price, the IPO was subscribed 8.16 times.
The portion reserved for institutional investors was subscribed 15.62 times.

Sumeet Nagar of Malabar India Fund - one of the super investors that Kunal tracks actively, picked up a stake by

3 | Stock Pick # 1 - Newgen Software Technologies (Smart Money Secrets)

being one of the anchor investors. In fact, Malabar has also bought some big tranches post the IPO and that too
via bulk deals. The total stake (IPO + Bulk) has gone to 2.9% in the company.

When Kunal dug deeper into the fundamentals and financials of this company, he found out that, 'the actual
profits were way higher than reported profits as the income for the current expenditure would yield over the
period of next five years'.

I would strongly insist you to read Kunal's entire recommendation report and see how Kunal sees a business. It's
a fantastic read. I love the way Kunal evaluates a company and dives into finer nuances that an average investor
would, generally, have great difficulty figuring out.

At the same time, he makes it very simple and accessible to even novice investors.

Below is a brief excerpt from the recommendation report:

Why we call Newgen a Niche IT company?

Reason#1 - It is not an IT services company which is a commoditized business, with big players like Infosys
and TCS. The only advantage these companies have is the cost arbitrage. However, Newgen is one of the
few Software product companies in the world.

Reason#2 - One of the common characteristics of a typical IT company is its concentration with respect
to - clients, products, and geography.

Smart diversification in all these three parameters has been instrumental in Newgen building a highly
resilient business model.

Reason#3 - The company has got multiple patents under its belt. To be specific it has got four patents in
India.

In fact, it has also filed around twenty-eight patents in India and two in the US. In addition to filing a dozen
of copyrights and patents. Put together, we term these as 'Intellectual Property Rights'.

These Intellectual Property Rights provides an unsaid competitive advantage to the company.

Reason#4 - Newgen has a sticky business model. Newgen is one of the few companies in the world which
provides multiple products in the industries it caters (Banking, Insurance, Government, PSUs, Healthcare,
Telecom, etc).

Once it acquires a client, it has a huge opportunity for client deepening and cross-selling its products.

Just to give you an example, in FY17, around 80% of total revenue was generated from repeat customers.
This is in the light of the fact that it has more than four fifty total clients.

Reason#5 - Newgen has got the ability to stay ahead of the curve. One of the key challenges in the IT
companies across spectrum is the innovation and disruption.

Newgen has always stayed ahead of the curve and spends around 7-8% of total revenues on the Research
and Development.

In fact, given its ability be ahead of the curve, it has been recognised by market research firms like Gartner
and Forrester as one of the leading player in innovations.

Stock Pick # 1 - Newgen Software Technologies (Smart Money Secrets) | 4

What to Do?
Now, let's see what, according to Kunal, is the best price to buy the stock:

We have valued Newgen Software Technologies Ltd based on price to earnings. We have been very conservative
both in the growth assumption and assigning of the exit multiple. The company has a very solid track record and
industry best financials.

Globally, software product companies are valued by price to sales because most of the global players make losses
even on operating level. One of the primary reason for such losses is huge expenditure in R&D and marketing.

Just to give you an example, Appian - one of the best players in software product business - came out with its IPO
in 2017. It had been reporting losses for two consecutive years and was yet valued at 8 times its sales.

At the recommended price of Rs 239 the company trades at 3.9 its FY17 sales. And on a price to earnings basis
the company trades at 30 times its trailing 12-month earnings.

This looks expensive but one should note that earnings of last two quarters are not representative of the correct
earnings because company has heavily invested in R&D and marketing. The stock trades at 10 times its expected
FY22 earnings.

Given a huge run way in revenues, strong return profile, and a possible operating leverage coming into play, we
have assigned an exit multiple of 18 times on expected earnings of FY22.

As such, we have arrived at a target price of Rs 416 for the company (from FY22 perspective).

The maximum buy price for the stock is Rs 260.

According to us, in a scenario of ideal allocation of funds, predominantly mid-caps and small-cap stocks could
be considered to comprise of not more than 30-40% of your total equity portfolio. Further, we believe a single
small cap stock should not form more than 2-3% of the total portfolio. Please note that this allocation will vary
from person to person. To customise a plan that works best for you, we recommend you talk to your investment
advisor.

5 | Stock Pick # 1 - Newgen Software Technologies (Smart Money Secrets)

Stock Pick # 2
UPL Ltd (StockSelect)

The Story Behind Tanushree's Bluechip Stock Pick Is Awe-Inspiring

I've cherry-picked a compelling long-term investing idea from my colleague Tanushree Banerjee's blue-chip stock
recommendation service StockSelect.

At StockSelect, Tanushree's mission to identify safe and solid businesses that offer long-term wealth creating
opportunities.

In short, solid returns, but with safety. That's what bluechip stock investing is all about.

But remember, no company starts off as a bluechip. Behind every bluechip success, there is an story of
entrepreneurship, struggle, genius and jugaad.

That brings us my stock pick from Tanushree’s StockSelect - UPL Ltd.

Tanushree offers an inspiring glimpse into the company's early days:

From a Jugaad Startup to India's First Homegrown Chemical Behemoth

From a Jugaad Startup to India's First Homegrown Chemical Behemoth

About half a century ago, a 36-year-old chemistry graduate from Gujarat, was running a small family-owned
unit. But he was obsessed with his new experiments. He mixed chemicals in search of a formula that
could help manufacture red phosphorus at low costs. Unfortunately, that experiment led to an explosion.
But neither the explosion nor the family pressure to discontinue the experiments could get this young
entrepreneur to give up on his dream.

In 1969, he set up a red phosphorous factory in Vapi. The company started production with a paltry sum
of four lakh rupees and about 25 employees. But its jugaad technology did not go well with the MNC
competitors. Wimco, the leading manufacturer of safety matches (which was not an ITC subsidiary then
but a Swedish company in those days), used red phosphorus for its match sticks. And the fact that this
startup was manufacturing phosphorus at one third Wimco's costs did not go well with it.

Wimco complained to the government, citing safety hazards at the Vapi plant. It contended that
manufacturing red phosphorous correctly required at least 100 times the capital that was invested in the
machinery at Vapi plant and extensive knowledge of the sector. The Gujarati entrepreneur did not seem
to be equipped with both!

A team of inspectors from Director General of Technical Development and the National Research and
Development Corporation visited the Vapi plant. But they sent a report to the government declaring
the plant safe and project perfect. Far from penalising the company for its low-cost red phosphorous
production, the government instead awarded it a gold seal to recognise his company's R&D efforts. And,
thus, started Rajnikant Shroff's journey of transforming his jugaad startup into India's first homegrown
chemical behemoth, UPL.

Stock Pick # 2 - UPL Ltd (StockSelect) | 6

Isn't that a very inspiring story? I'm sure you must be curious to know what became of that little company.

Over the last five decades, UPL Ltd has emerged to become a global generic crop protection, chemicals, and
seeds company. It is the largest producer of agrochemicals in India. It is the eighth largest overall and second
largest post-patent agrochemical player in the world in terms of revenues.

Over to Tanushree again:

Today, the Mumbai-headquartered company has 33 manufacturing units across 12 countries. In fact,
diversification across products and geographies is its key strength.

UPL's product portfolio includes crop protection chemicals such as fungicides, insecticides and herbicides.
The company also makes industrial and specialty chemicals, bulk of which are used for captive consumption.

14 of its manufacturing units are in India, while 19 are abroad. When we met the management, it explained
that since it is about 40% cheaper to set up a plant in India compared to other countries, a majority of
UPL's bulk chemical units are in India. The formulation plants that warrant lower capex are set up overseas
closer to its clients.

Even though UPL's business has a certain seasonality to it, by diversifying into multiple geographies, the
company has brought stability to its earnings. Overseas markets account for 80% of UPL's revenue, while
the balance 20% comes from India.

Although the company's revenue grew eight-fold between FY06 and FY16, its operating margins took a
big hit because of the acquisitions and debt levels. Since then UPL's management has kept a close watch
on the performance of the acquired assets. Also, with the capex completed and debt levels (closer to 1
time) in control, the company is now well poised to capitalize on growth opportunities.

In FY17, UPL filed for 19 patents and registered for 427 products across 72 countries. And with the
government's focus on improving agricultural produce and farm income, this chemical behemoth has
wind in its tails.

What to Do?
Let me tell you that was just a brief glimpse of UPL's success. In
her StockSelect recommendation report, Tanushree delves into
the company's business model, fundamental strengths, future
growth prospects, and risks in much greater depth.

Finally, we come to the question about the best price to buy the
stock.

Tanushree recommends a maximum buy price of Rs 728 for

UPL Ltd.

The target price for the stock is Rs 1,059 based on FY21 estimates.

According to us, in a scenario of ideal allocation of funds, bluechip stocks could be considered to comprise at
least 60% of one's total equity portfolio. Further, we believe that a single bluechip stock should ideally not form
more than 5-6% of the total portfolio. However, please note that this allocation will vary from person to person. For
something that works best for you, we recommend you talk to your investment advisor.

7 | Stock Pick # 2 - UPL Ltd (StockSelect)

Stock Pick # 3
Polyplex Corporation (Microcap Millionaires)

My Graham-Style Stock Pick for You

What is the best way to eliminate them from your investing process?

Rahul Shah has been tinkering with this question for a long time. And over the years, he has studied and built
intelligent system-based investing strategies.

One of them – Microcap Millionaires – has closed over 88% of its positions in the positive and delivered a 2x
outperformance over the BSE Sensex since its inception in 2014.

I’ve cherry-picked one of Rahul’s Microcap Millionaires recommendations for you.

Before I do, I want you a little about how this system works. Rahul insisted I explain to my readers that this is not
a typical stock recommendation service.

Buy Criteria

Any stock that becomes part of the Microcap Millionaires group of stocks will have to share two basic characteristics.
It should be trading at a significant discount to its intrinsic value based on some objective reasoning and it should
have sound financial management.

Once stocks qualify on these parameters, it will be the job of the Microcap Millionaires team to prune the list
further based on their own internal assessments of the stocks' fundamentals and business models.

Note that Graham's approach was more quantitative in nature, and in the latter part of his life, he became increasingly
indifferent toward detailed analysis. As a result, there are no management meets and detailed spreadsheets on
the companies, just a brief check to ensure the business quality is not suspect and all the financial data is in order.

Sell Criteria

It was Graham's firm view that one should have a definite selling policy for all common stock investments.

The SELL criteria for a stock is a gain of at least 50-100% or two years, whichever occurs earlier. Thus, if a stock
fails to achieve its target of at least 50% gains in two years, it will be removed from the Microcap Millionaires
Group.

Position Sizing

This is another very important aspect of the Microcap Millionaires service. Graham was of the view that, depending
on where the market is, fund allocation should fluctuate between bonds and stocks.

And this is exactly what the service recommends. At no point in time we will be 100% in bonds or 100% in stocks.
At least 25% of the total corpus will always be in one of these two categories. Thus, if stock markets turn very
attractive, 75% of the corpus could be in stocks and 25% in bonds.

Stock Pick # 3- Polyplex Corporation (Microcap Millionaires) | 8

Right now, the markets are pricing in a lot of earnings upside. The Sensex price to earnings (P/E) multiple currently
is a steep 23.5x. If the Sensex PE needle moves beyond 22x, it enters the significantly overvalued zone from a
historical perspective.

Right now, The Microcap Millionaires system suggests it is better to minimize one's stock allocation to around
25% of the corpus dedicated to this investment strategy.

Now, moving on to the Microcap Millionaires stock that I cherry-picked for you - Polyplex Corporation.

Let’s first have a look at the company’s business model. Here’s an extract from Rahul’s recommendation report:

Polyplex Corporation is a renowned name among plastic and polyester film manufacturers. It offers a
range of plastic film across several substrates; both standard plain films as well as a range of value-added
films. Since inception in 1984, it has grown from a small single-line facility at Khatima in the foothills of the
Himalayas in India into half-a-billion-dollar multinational presence with manufacturing and distribution
facilities in India, Southeast Asia, Europe, the Americas, and China.

The company's diversified product portfolio includes polyethylene terephthalate (PET) films, cast
polypropylene (CPP) films, and biaxially-oriented polypropylene (BOPP) films produced at manufacturing
plants in India, Thailand, Turkey, and the US, complemented with distribution facilities in China, Turkey,
and the Netherlands. Its products find applications in food packaging, flexible pouches, device screens,
medical films, insulation films, imaging, data storage, etc. Client industries include food, beverage,
healthcare, and other packaging end markets. This includes fresh foods such as meat, fish, bread,
produce, and dairy; processed foods such as confectionery, snack foods, coffee, and ready meals; as
well as folding cartons, high value-added resin-based packaging for industrial, hospital, pharmaceutical,
home, and personal care markets.

The company's model of expansion moves it closer to its regional markets to deliver more efficiently and
cost-effectively to its customers. Its fully integrated green-field film lines with upstream resin plants and
downstream capabilities like metallising, silicone coating, offline chemical coating and extrusion coating
deliver value-added products ensuring cost-competitiveness and minimised environmental impact in
addition to the advantages of a single-point supply for a portfolio of film products to its customers.

The management expects that growth in demand and supply would compensate each other and the
existing surplus scenario would persist for another couple of years. Demand-supply balance in Asia
is expected to tilt more in buyers' favour as supply growth is expected to outstrip growth in demand.
However, the company believes that it's well-distributed manufacturing operations, diversified, value-
added product portfolio, quality consistency, international customer base, efficient supply chain, and
conservative balance sheet should allow it to grow profitably and withstand industry volatility.

What to Do?
Given that Polyplex Corporation passes some of the most vital filters of Rahul’s systems, he has recommended
buying the stock.

At the prevailing stock price of Rs 467 per share, the stock is trading at 0.6 times its book value as of 30
September 2017. A stock that trades at or below 0.8 times the company’s book value passes one of the key filters
of Rahul’s system.

9 | Stock Pick # 3- Polyplex Corporation (Microcap Millionaires)

The company’s FY17 debt-to-equity ratio was 0.6. All stocks that
are part of Microcap Millionaires should not have debt in excess
of 100% of equity. In other words, the debt-to-equity ratio of the
company should not be higher than 1x for the latest financial year.

The stock is trading at a price-to-earnings multiple of 10.9

times based on trailing twelve-month EPS (as of December
2017 quarter).

After a stock passes the vital filters, Rahul and his Microcap
Millionaires team do yet another process of filtering to make sure
that the company has a sound business model and there are no outright red flags concerning the management.
However, you must understand that the system does not forecast the company’s future growth.

The company’s sales have quadrupled in the last decade. The topline has been steady around Rs 32 billion over
the last four years. And barring financial year 2013-14, the company has not had a single loss-making year in more
than a decade. The promoters have not pledged any of their shares.

How much to invest in the stock?

Here’s what Rahul recommends his subscribers:

A simple way to figure out what amount one should apportion to each stock is that it should be about
3.75% of the total value of the corpus one has set aside for this service. This allocation will of course vary
from person to person. For something that works best for you, we recommend you talk to your investment
advisor.

Important Note: Micro cap stocks are inherently riskier compared to blue-chip or mid cap stocks. On the brighter
side, they present a huge growth potential. It is not unusual for a good micro cap stock to turn a multibagger in a
matter of months. But on the flipside, there is a high risk attached.

Subscribers should note that not all micro cap stocks tend to be outperformers. In fact, we have seen micro cap
stocks plunging 80-90% when things turn sour. That is the reason micro caps are not recommendable to those
having a low risk profile. Even for subscribers having an appetite for slightly more risk, we recommend not more
than 10% of one's portfolio be invested in micro cap stocks. This means that the corpus that one sets aside for the
microcap millionaires service should not be more than 10% of the total money allocated towards equities.

Stock Pick # 3- Polyplex Corporation (Microcap Millionaires) | 10

Stock Pick # 4
HDFC Ltd (ValuePro)

Buy the Epitome of Safety and Durability

This is a time to pick stocks prudently and diligently. Given this, I have picked my first investing idea - HDFC - from
Tanushree Banerjee's ValuePro - our premium recommendation service based on the value investing principles
of Warren Buffett.

At ValuePro, Tanushree and her team focus on identifying companies that have strong businesses and moats, a
healthy balance sheet, and good management. And their aim is to achieve a total return of 4x-6x over a 5 to 10-
year period.

According to Tanushree, HDFC is an epitome of safety and durability. And if bought at a fair price, it could be a
rewarding long-term investment opportunity.

Let me take you through some of the key highlights of her ValuePro recommendation report...

Buying a Great Company at a Fair Price

If there is any financial entity in India that has balanced its spectacular growth journey without compromising
on safety and conservatism, it, undoubtedly, must be the Housing Development Finance Corporation
(HDFC).

HDFC pioneered housing finance in the country in 1977 and has become a role model for private housing
finance companies (HFCs) in developing countries with nascent markets. In the nearly four decades of its
existence, the housing finance giant has grown at a scorching pace, financing 6.1 million housing units till
date. But, conservative lending policies have ensured that its aggregate loan-write-off, till date, is barely
0.04% of the cumulative loans extended.

This, indeed, is a commendable feat considering global housing finance giants such as Freddie Mac and
Fannie Mae--much larger in size and enjoyed support of the US government--were on the verge of getting
wiped out during the subprime crisis of 2008.

HDFC, on the other hand, has multiplied both its assets and profits three times over since 2008. At the
heart of its superlative profit journey is a strong management adhering to the core values of integrity,
transparency, and professional service right since its inception.

Being the first specialized mortgage lender in the country, HDFC has focused on the safer individual loan
segment with a lion's share of 73% of its loan book. The riskier corporate loan and construction finance
segments have low shares of 8% and 12%, respectively. Further, HDFC on an average lends only 66% of
the property value to a borrower, thereby mitigating its risk from delinquencies.

HDFC's prudent underwriting and conservative lending policies have ensured that its bad loans remained

11 | Stock Pick # 4 - HDFC Ltd (ValuePro)

 below 1% of the loan portfolio regardless of business cycles. It has drastically cut down its operating
expenses over the years; this has boosted its profitability. As a matter of fact, its average cost-to-income
ratio of 7.4% is the lowest in the industry.

Looking ahead, low mortgage penetration, government's strong thrust on affordable housing, and
establishment of real estate regulation act are factors that will drive growth of housing finance. Given its
large presence, HDFC will be the biggest beneficiary.

What further fortifies HDFC's moat is its evolution into a diversified financial conglomerate. The company
has profitable subsidiaries and associates present in banking, insurance, asset management, affordable
housing finance, and educational loans. Among them, HDFC Bank adds tremendous value to shareholder
returns by way of dividend payouts. HDFC generated average shareholder's returns of 20% in the
past decade. And the icing on the cake is the strong dividend track record of the company. HDFC has
consistently paid dividends since 1994; and on average has distributed more than a third of its profits to
shareholders.

One of the key reasons for recommending HDFC is because it is set to have a huge windfall from the
unlocking of value in its profitable and well-run subsidiaries.

HDFC with its strong management quality, consistent profitable growth, and impeccable asset quality
perfectly fits into Warren Buffett's gospel of wealth creation. Further, the value unlocking potential in the
profitable subsidiaries might signal just the right time to enter this wealth generating stock at a fair price.

What to Do?
At ValuePro, Tanushree and her team set their vision fixed at the
very long term. So, when they valued HDFC they're looking as far
as FY27. Here's what Tanushree says about the stock's valuations:

"Due to HDFC's robust growth prospects, strong

shareholder returns and good asset quality we are giving
a range of 4 to 5 times price to adjusted book value
multiple. We estimate HDFC will be worth anywhere
between Rs 7.8 trillion and Rs 9.8 trillion by FY27."

At a market capitalisation of Rs 9.8 trillion, HDFC's share price will

be around Rs 6,123 per share. The ValuePro team always insists on a margin of safety in the region of 20-25%.
Giving a 20% discount, they have arrived at a valuation of Rs 4,899 per share for FY27.

The ValuePro team recommends a maximum buy price of Rs 2,000 for HDFC Ltd.

As per the ValuePro team, the stock has the potential to multiply money 3 times over the next 8-10 years.

According to us, in a scenario of ideal allocation of funds, no single stock should account for more than 7-8%
of the funds set aside for ValuePro. However, please note that this allocation will vary from person to person. For
something that works best for you, we recommend you talk to your investment advisor.

Stock Pick # 4 - HDFC Ltd (ValuePro) | 12

Stock Pick # 5
MPS Ltd (Hidden Treasure)

Richa Agarwal's Small Cap Pick for the Digital Era

Amid the recent correction in the stock markets, MPS Ltd - one of Richa's small cap recommendations has come
within buying range.

Below is a brief excerpt from Richa's Hidden Treasure recommendation report:

All Set to Ride the Outsourcing Boom in the Publishing Industry

We live in a digital era. With the pace of mobile phones and tablets making inroads into our lives,
companies with the technological capability in this sphere are in for a bounty. While the device market has
become commoditised; the digital technology solutions market is still in a nascent stage. But this segment
is gathering momentum.

One industry that will be impacted the most by the digital advancement is publishing. The global publishing
industry is an over US$ 400 billion market. But the digital segment is just about 10% of the industry size.
With a shift towards digitization, the publishing industry is witnessing a dramatic change.

Education and journals are two areas which have immense potential. A shift in reading preferences from
books to digital devices acts as a catalyst. While publishers would generally opt to do all the pre-publishing
work in-house, the advancements in technology, a focus to reduce costs as well as the need for timely
delivery, has led to outsourcing.

MPS is a publishing services company with over four decades of experience with major publishers around
the world. It offers end to end pre-publishing services. The company has the technological capability to
deliver complex projects at a fraction of a cost incurred in the US and Europe.

While entry barriers are low in certain low-end services like type setting etc, an increased amount of
automation along with the need for an integrated workflow system for publishers, puts MPS Ltd on a
strong footing. The company has tie-ups with all top 20 publishers in the world. This provides long-term
visibility even if outsourcing budgets of publishers were to shrink in a recession.

MPS is a trusted vendor for publishing groups across the globe including Elsevier, Nature Publishing
Group, Wolter Kluwer, Cengage Learning, etc.

Further, in the pre-publishing business, what matters most are end-to-end capability, the ability gain wallet-
share from existing customers, and delivery time. This is where MPS has an edge over its competition.
The company has always been focused on deepening client relationships and gaining wallet-share from
its existing customer base.

In this industry, pricing discounts are typically the way to attract more business. While one may think, this

13 | Stock Pick # 5 - MPS Ltd (Hidden Treasure)

 would have led to margin erosion the picture is completely different for MPS.

As this is a service industry, employee cost management is the key to extract operating leverage. The
management relocated its workforce to cost effective destinations and put in place a process for training
semi-skilled workforce from smaller towns and cities.

This has resulted in an increase of 9.4% CAGR in revenue per employee over the last six years. Thus,
scalability comes at a marginal cost for the company. This overrides the margin concerns from pricing
discounts.

We believe MPS is a perfect candidate to ride the outsourcing boom in the publishing industry. India's
status as a favoured outsourcing destination due to its language competency, further strengthens the
long-term business prospects for MPS.

What to Do?
Now, let's look at valuations and find out Richa's verdict on MPS
Ltd:

Good growth prospects with high margins, a strong

balance sheet, healthy cash flows and sound return
ratios make MPS Ltd a good long-term investment. The
company's focus on client mining and moving up the
value chain will to hold it in good stead. To add to this, a
good acquisition can give a boost to the numbers.

Over the last six years, the company's sales have grown
at 14.6% CAGR while profits have multiplied more than 5 times. MPS required negligible debt to fund this
growth. During this period, the company generated about Rs 2,750 million in operating cash flow, while
the capex requirement was just Rs 365 million. This left over a lot of cash for dividends and acquisitions.

Our FY20 target price is Rs 856.

The maximum Buy price for the stock is Rs 630.

According to us, in a scenario of ideal allocation of funds, small cap stocks could be considered to comprise
of not more than 10% of one's total equity portfolio. Further, we believe that a single small cap stock should
ideally not form more than 2-3% of the total portfolio. Please note that this allocation will vary from person
to person. For something that works best for you, we recommend you talk to your investment advisor.

Stock Pick # 5 - MPS Ltd (Hidden Treasure) | 14

 DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS)
REGULATIONS, 2014

INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on
October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora
group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with
registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and
recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:

For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:

a. 'Subject Company' is a Company on which buy/sell/hold view or target price is given/changed in this research
report

b. Equitymaster has financial interest in Newgen Software, Polyplex Corporation, HDFC Limited.

c. Equitymaster's investment in Newgen Software is as per the guidelines prescribed by the Board of Directors of
the Company. The investment however, is made solely for research purposes.

d. Equitymaster's investment in Polyplex Corporation, HDFC Limited is as per the guidelines prescribed by the
Board of Directors of the Company. The investment is however made solely for building track record of its
services.

e. Except for HDFC Limited Equitymaster’s Associate(s) has/have no financial interest in any other Subject
Company forming a part of this report.

f. Equitymaster's Research Analyst or his/her relative have no financial interest in the subject company.

15 | DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014

 g. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of
one percent or more securities of the subject company at the end of the month immediately preceding the date
of publication of the research report.

h. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of
interest at the time of publication of the research report.

i. Equitymaster's technical team/other research services have given a 'Hold' view on HDFC Limited.

DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:

a. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past
twelve months.

b. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the
subject company in the past twelve months.

c. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant
banking or brokerage services from the subject company in the past twelve months.

d. Neither Equitymaster nor it's Associates 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 twelve
months.

e. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject
company or third party in connection with the research report.

GENERAL DISCLOSURES:
a. The Research Analyst has not served as an officer, director or employee of the subject company.

b. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.

DEFINITIONS OF TERMS USED:

a. Buy recommendation: This means that the subscriber could consider buying the concerned stock at current
market price keeping in mind the tenure and objective of the recommendation service.

b. Hold recommendation: This means that the subscriber could consider holding on to the shares of the company
until further update and not buy more of the stock at current market price.

c. Buy at lower price: This means that the subscriber should wait for some correction in the market price so that
the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the
service.

d. Sell recommendation: This means that the subscriber could consider selling the stock at current market price
keeping in mind the objective of the recommendation service.

FEEDBACK:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 | 16

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Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is
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or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken
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take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation,
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disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein.
As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data
quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

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