Research Analysis Report Dynasty Ceramic PCL PDF

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This report is published for educational purposes only by students
competing on the CFA Institute Research Challenge. DYNASTY CERAMIC PCL
Date: 21/12/2014 Current Price: THB 55.75 Target Price: THB 41.50
Ticker: DCC (SET) USD 1.00: THB 32.85 Recommendation: SELL (25.6% Downside)
Company Overview Investment Highlights
Founded in 1989, Dynasty Ceramic PCL
We place a “SELL” recommendation. Despite the high Return on Equity (“ROE”) and solid financial
(“DCC” or the “Company”) is one of the
position, the absence of future growth opportunities as well as the intensifying competition
largest tile manufacturers and distributors
of ceramic tiles in Thailand. Listed on the
implies that past stellar performance is unlikely to repeat again. With our valuation using
Stock Exchange of Thailand in 1992. As of Dividend Discount Model (“DDM”) and Free Cash Flow to Firm (“FCFF”) model, the one-year
December 2014, DCC operates 195 outlets target price is THB 41.50, which leads to our final recommendation.
nationwide targeting low-to middle-income
Limited ability to drive sales through store expansion leads to greater reliance on same store
customer segments mainly in provincial
areas. sales growth: With 195 stores covering almost all 77 provinces throughout Thailand, the
Company is likely to experience difficulties in expanding its branch network. The declining trend
DCC Relative to SET Index in the number of new stores opened annually from 10 stores in 2012 to only 4 stores in 2013
15% indicates deteriorating expansion opportunity. In fact, in year-to-date 2014, 1 store was closed
10%
5% while no stores were opened. This reflects management’s failure to meet the initially set 5 new
0% stores. Even in the scenario in which the company successfully achieves the expansion target, the
-5%
-10% impact on top line would be immaterial because of the current large store network. Going
-15% forward, DCC is unlikely to achieve substantial growth of its existing business purely through
-20%
opening new stores as it used to experience in the past.
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Weak economic outlook implies low potential to boost same store sales: DCC’s main target
DCC SET market is in upcountry areas, where the demand is closely tied to the agricultural products. With
Source: Bloomberg
the continuous declining in both farm income and agricultural price index by -7.7% YoY and
-7.2% YoY in 3Q2014, the recovery of sales growth appears difficult. In addition, the level of
DCC VS. SET Holding Period Return
household debt has reached the record high of 84% of Thailand’s GDP, as of June 30, 2014. This
Time horizon SET DCC can potentially slowdown house renovation market which is DCC’s key market. Combining these
1-year 26.63% 21.23% unfavorable macroeconomic indicators, the turnaround of same store sales growth is unlikely to
3-year 71.08% 9.36% take place in the near future.
5-year 160.02% 145.57%
Intensifying competition adds risk to future growth prospect: The lower cost of imported tiles,
Source: Bloomberg
especially from China and Vietnam, has incentivized both local tile manufacturers and other home
improvement retailers to outsource the production activities. It allows importers to sell their
High ROE is offset by high P/BV products at 10-15% below market Average Selling Price (“ASP”). As a result, tiles imported value
ROE has been increasing with the CAGR of 28% during 2009 to 2013. In addition, other competing
(%) DCC TB
50.00 home improvement retailers, namely Global House and Thai Watsadu, have aggressively
Average
expanded their stores in both urban and provincial areas with number of stores increasing from
40.00
12 to 66 stores within last 5 years. The competitive advantage of DCC as being a low-cost
30.00 manufacturer and having the extensive store network is now being threatened. This changing
SCC TB Average competitive landscape reflects in a gradual decrease in DCC market share from 24% in 2009 to
20.00 TTC VN
21% in 2013. DCC’s sales volume continues declining from -4.9% in 2013 and -5.2% in 2014.
TGCI TB
10.00
GLOBAL TB Future plan to grow remains questionable: After domestic sales saturates, the clarity of the
0.00 next growth strategies is crucial to drive DCC forward. At the moment, international expansion
0.00 2.00 4.00 6.00 8.00 10.00
seems to be very attractive. However, the management has decided to put the expansion strategy
P/BV (Times)
Note: The label represents Bloomberg ticker on hold due to many uncertainties and risks involved. Therefore, the international expansion is
Source: Bloomberg expected not to happen in the near future. An absence of the next growth engine makes DCC
become less attractive.
Relative
DCC
Peers Relative Valuations also indicate overprice for no growth company: The indicative valuation
Multiples Average multiples obtained from the relative valuation, covering both local and regional comparable
P/E 18.90 14.51 companies further confirms that DCC’s stock price is not justified by its growth outlook. Although
PEG 7.43 3.00 DCC’s P/E ratio of 18.9x is considered in line with peers’ average P/E ratio at 14.5x, when the
P/B 8.58 2.30
EV/EBITDA 13.68 10.17
Company’s growth is incorporated into multiple analysis, DCC’s PEG ratio of over 7.4x is, in fact,
significantly higher than peers’, which is only 3.0x. With the expected growth rate of 2-3% per
Source: Bloomberg and Team’s Estimates
annum, the results from all valuation methods confirm that the current price of THB 55.75 per
share is overvalued.
Market Profile
52 weeks price range Key Financial Ratios 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F
(THB/share) 48-61 Sales Growth 5.5% -0.7% -4.4% 2.4% 2.8% 2.4% 2.4% 2.3%
Average daily volume (Shares) 306,100
Beta 0.57 Earning per Share Growth 1.8% 2.6% -7.9% 3.6% -2.8% -8.9% 21.5% 22.6%
Dividend yield 5.76% Gross Profit Margin 39.2% 41.1% 40.5% 40.5% 40.5% 40.5% 40.4% 40.3%
Market capitalization (Mn THB) 23,358
Net Profit Margin 16.7% 17.2% 16.6% 16.6% 16.5% 16.4% 16.3% 16.2%
Share outstanding (Mn Shares) 408
Free float 36.07% Return on Equity 45.8% 46.8% 43.1% 43.5% 44.4% 45.0% 45.7% 46.3%
Foreign limit 35.00% Debt-to-Equity Ratio 0.30 0.43 0.47 0.54 0.61 0.63 0.65 0.65
Source: Bloomberg Earning per Share (THB) 3.08 3.18 2.93 2.99 3.06 3.12 3.18 3.23
1
Figure 1: Sales by distribution channels
Export
Business Description
Franchise
2%
Real Estate 3% Founded in 1989, Dynasty Ceramic Public Company Limited (“DCC” or the “Company”) is one
Developers
10% of the largest ceramic tile manufacturers in Thailand. The Company manufactures and sells a great
variety of ceramic wall/floor tiles as well as other tile-related products under its own brands
Home
(Appendix 1 & 2). DCC targets low to lower-middle income customer segments mainly in
Improvemen provincial areas. The Company distributes its products through various sales channels; however,
Outlet Stores
t Centers
67%
the main sales channel is DCC’s own outlet stores (Figure 1). As of December 2014, DCC has 195
18%
outlet stores located nationwide and 2 factories in Saraburi with total annual production capacity
of 69 Mn sq.m.
In June 2014, DCC has conducted a group restructuring by Entire Business Transfer of three of the
Source: Company Data and Team’s Estimates,
Company’s subsidiaries, with an intention to reduce interrelated work process and general and
Average 9M2014
administrative expenses, leaving Tile Top Industry Public Co., Ltd as DCC’s only subsidiary
company with 97% controlling stake (Appendix 3).
Product Types Description
Low-price
products
16x16” tiles and smaller Company Strategies
High-price Hybrid and rectified
products 16x16” tiles and larger Product line extension: Aiming to capture the higher market segment, DCC has recently launched
the high-price products, i.e. Digital and larger-sized tiles. And to further ensure the success of new
Figure 2: Average selling price and market penetration, DCC has been renovating its outlet stores hand-in-hand with the launch of
sales contribution by product types new products.
THB/Sq.m
225
88% 12% Distribution channel expansion: DCC has been continuously expanding through its new outlet
200 stores. This allows the Company to further reduce its reliance on other distributors. However,
after the slowdown in sales from outlet stores, it also aims to expand the distribution channels by
175 187.7
focusing on other markets such as; new home market, wholesale, and construction projects in
150 Overall ASP order to expand its customer base. Nevertheless, this might still be questionable whether it is
125
136.9 going to benefit DCC enough because it may lead to the decrease in margin and increase in
128.2
accounts receivable days.
100
Low-price products High-price products
Cost reduction: In order to achieve gross margin target of 43% in 2014, DCC has been trying to
ASP Sales Contribution
reduce the cost of production. Both natural gas and chemicals, the main cost components (Figure
Source: Company data and Team’s estimates, As
of September 2014 3), were reduced through the production process adjustments. In addition, the company also
improves kilns in order to increase the production efficiency and capability.
Figure 3: Cost structure
Shareholders Structure
Others The Saengsastra family and some of the Board of Directors (“BOD”) own and control 47% of total
Gas
27% 30% common shares. Other major shareholders are institutional and individual investors who own
17% (Figure 4). As of December 19, 2014, free float is accounted for 36% with the daily turnover
rate of 0.075% or 306,100 shares per day.
Labor
7%
Chemicals
Corporate Management
Materials
16% 20%
Mr. Roongroj Saengsastra became the Chairman of DCC since 2001 (Appendix 4). Under his
leadership, the Company has been going through many strategic changes, expanding its own
Source: Company data, As of September 2014 outlet stores, and has built up its scale to become the leader in tiles manufacturing business.
Figure 4: Shareholders structure DCC’s operating performance has improved significantly with earning growth stands at
approximately 14% CAGR since year 2008. Despite well-planned business strategy, the
management has failed to achieve their plan. This can be proved by the under-targeted number of
new outlet stores opened over the past years.
Public Saengsastra
36% Family & Board
of directors Corporate Governance and Social Responsibility
47%
Corporate Governance
Other major
shareholders
17% DCC has been implementing good corporate governance practices by organizing its Code of
Conduct to fight against corruptions as well as verifying its working procedure to be in
Source: Company data, As of November 2014 accordance with established corporate governance policies. Apart from the Annual General
Meeting, the Company regularly holds the Opportunity Day and company presentation, in order
Figure 5: Corporate governance score to keep investors and other concerned parties being updated. However, we observe that recently
ranking among listed companies the Company provides less information in detail than before causing more difficulty for investors
No. of Cumulative to analyze the company data. DCC is a family-run company, with 3 out of 9 seats in BOD come
Rating
companies ranking from Saengsastra family aligning with the management positions and shareholders structure. The
Excellent 29 29 rest of BOD are professionals and independent directors. In terms of CG rating, DCC has been
Very good 108 137
Good 171 308
evaluated as “Good” by Thai Institute of Directors Association (Appendix 5). This rating
Satisfactory & below 242 550 represents the average CG rating score of all companies listed on SET index (Figure 5).
Total 550 550
Source: Thai Institute of Directors Association (IOD),
As of December 2014
2
Figure 6: Quarterly GDP and Growth Corporate Social Responsibility
GDP Growth DCC has been actively seeking opportunities to give back to the society. The Company has
(Bn THB) (% YoY)
1,300 30 organized the official committee and set rigorous policy towards becoming a socially responsible
1,250 19.1
20 company. DCC initiated various CSR activities aiming to improve the local community such as
1,200
1,150 2.9 2.7 10 donating tiles to rural schools and sponsoring vocational training session to prisoners.
1,100 0.6 -0.5 0.4 0.6
3.1 5.4 0
1,050
1,000 -10
Industry Overview and Competitive Positioning
Quaterly GDP GDP Growth (YoY)
Macro-economic Analysis
Source: National Economic and Development Board
The overall Thai economy is still under pressure
Figure 7: Debt Service Ratio by Income
DSR (%) The GDP growth is forecasted to be 1.5%-2% in 2014 and 3.5%-4.5% in 2015 resulted from a
60 49 slower-than-expected economic recovery. In order to achieve the forecast of 2014, it will require
50
40 29 25 23 23 Average a substantial growth of approximately 7% in 4Q2014, which tends to be unachievable by many
30 DSR constraints (Figure 6). First, Thai exports is experiencing a low growth due to vulnerable global
20 28 economy. Manufacturing Production Index (MPI) is still at low level indicating by -3.9 in
10
0 3Q2014. Moreover, government policy to stimulate economy has still not been taken into action
as much as targeted. Currently, there is only THB 55 Bn from the total budget of THB 365 Bn
Household being injected into the system.
Income
(THB/month)
Source: SCB Economic Intelligence Center, As of
Vigorous recovery of household consumption is unlikely
October 2014
Household debt is already at high: Household debt has been continuously expanding in terms of
Figure 8: Change in Farm Income Index both absolute and relative. In 2Q2014, the most recent updates, household debt had increased to
and Agricultural Price Index 84% of GDP which is accumulated up to the all-time-high of THB 10bn with a growth of 8.1% YoY.
(Appendix6). At this level, low-income people are crucially in concern, due to lower debt
% YoY
5 3.3 repayment ability indicated by high debt service ratio (Figure 7).
1.2 2.9
0
-0.8 Agricultural prices remain at low level: Thailand is now facing low agricultural product prices,
0.9
-4.6 -3 particularly the main products: such as rice, rubber, and palm oil. Each contributed to a drop in
-0.9
-5 -4
overall agricultural price index. This has caused an effect to more than 30% of Thai labor that are
-7.2 farmers. The problem is crucially driven by market mechanism, an oversupply, and the
-7.1 -6.9 -6.9 -7.7
-10 competition from other countries. This low price level has caused a direct effect to farm income
1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014
that had experienced a slump of -7.7% YoY in 3Q2014 (Figure 8).
Farm Income Index
Agricultural Price Index Stagnant Consumer Confidence Index (“CCI”) signals weak purchasing demand: After a
Source: Office of Agricultural Economic
continuous increase in CCI, it has ceased in 3Q2014 and remains at around 80. This number
below 100, the 125th consecutive month, indicates outlook of overall economic directions that has
Figure 9: Stable Consumer Price Index not yet been fully recovered (Figure9).
90
85 80.1 79.2 These unfavorable economic indicators are expected to lessen the purchasing power of low-
80
75 71.5
69.9 68.8 78.2 80.178.9 income people who are DCC’s main target customers. This could also pass on the pressure to
70 75.1 home renovation market, since it is not a daily necessary cost. Thus, the sales turnaround
70.7
65 67.8 will be difficult to achieve (Appendix 7).
60
55
50 Industry Analysis
In the ceramic tile industry, there are six key domestic players including DCC competing head-to-
Source: University of Thai Chamber of Commerce head with one another in terms of design, brand presence, and price (Appendix 8). DCC, however,
positions itself as the leader in low-price market and is able to gain the largest share based on
Figure 10: Increasing in imported tiles domestic sales. The barrier to entry is relatively high, as the business requires large amount of
market value capital investment (Appendix9). Also, the industry seems to be matured with slightly growth and
Bn THB
10 8.7 limited demand. On the other hand, the competition within the industry itself has become more
7.3 intense after a coming of imported tiles, mainly from China and Vietnam. These tiles are being
8
sold at highly competitive selling price.
6 5.3
4.8
4 3.3 Industry Highlights

2
Low demand for tiles resulted from a slowdown in property sector: The property sector is
- expected to encounter a downward trend reflected by the decline in number of approved
2009 2010 2011 2012 2013
construction areas by 1.5% YoY in 9M2014. This is caused by the massive amount of unsold
Source: The Customs Department and Team’s properties from real estate boom in 2012-2013. Also, slow recovery of overall economy will likely
Estimates to pass on pressure to new project developments. Hence, we see a direct negative effect on DCC’s
sales to developers.
More intense competition highlighted by imported tiles and house brand: The industry can
observe the growing trend of imported tiles from low-cost producers in China and Vietnam. The
tiles are imported and sold by local manufacturers and modern trades under house brand. With
an average selling price of THB 125 per sq. m. compared to those local ones of THB 137 per sq. m.,
these imports have been gaining the market share from 13% in 2009 to 24% in 2013 (Figure10).
This implies that the overall domestic tile market has been growing on an expense of the local
3
manufacturers including DCC. Moreover, modern trade, especially specialty store, has been
continuously growing by 4.5% in 1H2014 despite the economic slowdown. This is considered as a
threat to DCC due to a change in competitive landscape and a difficulty to attract customers to
shop at DCC outlet stores (Appendix 10).
Figure 11: Domestic Manufacturers

Competitors Analysis
Market Share by Sales
Local Tiles Manufacturers
RCI-Rci
TGCI- 4%
Campana The Siam Cement (SCC): SCC has introduced its tiles into the market under the brand “Cotto”
Casa
9% with premium quality aiming to capture middle-to-high income people. After an investment in
DCC-
Dynasty Prime Group Ceramic, the production capacity could reach over 100 Mn sq.m. per year,
28%
UMI-
Dulagres
comparing to 69 Mn sq.m. of DCC. With the leading position of premium tiles of SCC, the strategy
14%
of DCC to expand product line to capture high-price is crucially hardened.
SCC-Cotto Sosuco Ceramics: Sosuco is one of the leading tiles manufacturers with a strategy to retain its top
SOSUCO
28%
17% 3 domestic market shares and increase proportion of exports. Currently, the company has an
annual production capacity of 58 Mn sq.m. Sosuco offers wide range of product to broad customer
segments, which could potentially be a threat to DCC.
Source: Company Data
Union Mosaic Industry (UMI): UMI is one of the key players in local tiles manufacturer market
with the tiles product being sold under the brand “Duragres”. The company can produce up to
16.8 Mn sq.m. per year. For the distribution, it is mainly focusing on agents. Even though UMI
does not own any outlet stores, the threat to DCC could be in terms of targeted customers.
Previously, UMI has bought a stake in TT Ceramic, allowing the company to expand its product
lines to cover all segments including low-price market. With an active strategy, UMI could share
the pie and pass on pressure on future DCC’s sales.
Thai-German Ceramic Industry (TGCI): TGCI is considered a direct competitor to DCC since both
their product offerings and target customer segment are exactly the same. The only difference is
that TGCI distributes the tiles mainly to agents under the brand “Casa” and “Campana”; whereas
DCC mainly distributed via its own outlet stores. For the capacity, the tiles could be produced up
to 20 Mn sq.m per year.
Royal Ceramic Industry (RCI): The tiles product of RCI includes glazed tiles, clayed tiles and
porcelains with an aim to capture middle-income people. Currently, the company distributes the
tiles through agents and own only 2 outlet stores. For the production side, it could reach the
maximum level of only 6.8 Mn sq.m. per year. By combining low capacity and different target
customer, RCI could pass on a minimal effect on DCC.
High
Note: size represents the
COTTO
production capacity and
(SCC)
color represents the level
DCC of threat to DCC
Target
UMI SOSUCO
Aiming to capture RCI
High Low
Market middle-to-high
segment
TGCI
Low DCC
Own retail stores Dealer / modern trade

Concentration of Distribution Channel
Source: Team’s Estimates
Figure 12: Number of stores and sales Local home improvement retailers
growth (2014F)
Siam Global House (GLOBAL): Global House operates as a building materials and home
Number of Sales Growth
Stores (2014F)
improvement retailer, with 27 branches located most in North-East of Thailand. The company
DCC 195 -4.40% mainly targets home contractors and homeowners. The growth of GLOBAL would adversely affect
DCC as the Company is planning to increase sales from developers.
GLOBAL 27 16%
Thai Thai Watsadu: The company offers wide variety of products relate to construction materials. It
39 15-20%
Watsadu
targets a range of customers such as real estate contractors and homeowners with total of 39
Source: Company Data, Team’s Estimates, branches concentrate largely in Central and North-East of Thailand. The company also imports
Finansia Syrus Research
tiles and sells under its own house brand. Both store expansion and house brand would be a
threat to DCC that mainly sell the products through its own outlet stores.
4
Figure 13: DCC failed to meet target Investment Summary
expansion plan
# Stores We place a “SELL” recommendation. Despite the high Return on Equity (“ROE”) and solid financial
20
15 15 position, the absence of future growth opportunities as well as the intensifying competition
15 13 12
10 10 implies that past stellar performance is unlikely to repeat again. With our valuation methods of
10 7 7
5 5 Dividend Discount Model (“DDM”) and Free Cash Flow to Firm (“FCFF”) model, the one-year
4
5
0
target price is THB 41.50, which leads to our final recommendation.
0
2009 2010 2011 2012 2013 2014F Limited ability to drive sales through store expansion leads to greater reliance on same store
Target Actual
sales growth: With 195 stores covering almost all 77 provinces throughout Thailand, the
Source: Company Data and Team’s Estimates
Company is likely to experience difficulties in expanding its branch network. The declining trend
in the number of new stores opened annually from 10 stores in 2012 to only 4 stores in 2013
Figure 14: Declining sales volume and indicates deteriorating expansion opportunity. In fact, in year-to-date 2014, 1 store was closed
growth
(In Thousands Sq.m.)
while no stores were opened. This reflects management’s failure to meet the initially set 5 new
60,000 20.0% stores (Figure13). Even in the scenario in which the company successfully achieves the expansion
58,000 target, the impact on top line would be immaterial because of the current large store network.
10.0%
56,000 Going forward, DCC is unlikely to achieve substantial growth of its existing business purely
54,000
0.0% through opening new stores as it used to experience in the past.
52,000
50,000 -10.0% Weak economic outlook implies low potential to boost same store sales: DCC’s main target
2011 2012 2013 2014E market is in upcountry area, where the demand is closely tied to the agricultural products. With
Total Sales volume (LHS) the continuous declining in both farm income and agricultural price index by -7.7% YoY and -
YoY Volume growth (RHS)
7.2% YoY in 3Q2014, the recovery of sales growth appears difficult. In addition, the level of
household debt has reached the record high of 84% of Thailand’s GDP as of June 30, 2014. This
can potentially slowdown house renovation market which is DCC’s key market. Combining these
Figure 15: Higher sales contribution from
unfavorable macroeconomic indicators, the turnaround of same store sales growth is unlikely to
high-price product take place in the near future (Figure 14).
30 138 140
137
135 136 Product line extension has little impact on profit: The launch of high-price products confirms
134 133 136
20
the weak market conditions in low-price market segment. Despite higher contribution of high-
14 132
13 price product sales from 9% in 1Q2014 to 14% in 3Q2014, the ASP of the Company has not
9
10
7 128 picked up as expected to reflect the higher contribution of such product sales. In addition, during
4.3 4.7
124 the same period, overall gross margin remained flat at 40%. Thus, we believe that DCC’s ongoing
0 120
efforts in promoting its high-price products are unlikely to have immaterial impact on overall
profitability of the Company (Figure 15).
ASP (RHS)
Sales contribution from high-end product (LHS) Intensifying competition adds risk to future growth prospect: The lower cost of imported tiles,
especially from China and Vietnam, has incentivized both local tile manufacturers and other home
improvement retailers to outsource the production activities. It allows importers to sell their
products at 10-15% below market Average Selling Price (“ASP”). As a result, tiles imported value
has been increasing with the CAGR of 28% during 2009 to 2013 (Appendix 11). In addition, other
Figure 16: Declining DCC market share competing home improvement retailers, namely Global House and Thai Watsadu, have
through 2019 aggressively expanded their stores in both urban and provincial areas with number of stores
%
22
increasing from 12 to 66 stores within last 5 years. The competitive advantage of DCC as being a
21
low-cost manufacturer and having the extensive store network is now being threatened
20
(Appendix 12-14). This changing competitive landscape reflects in a gradual decrease in DCC
-2.2
18
-0.5
markets share from 24% in 2009 to 21% in 2013 (Figure 16). DCC’s sales volume also continues
-0.6
16 -0.7 15.2 declining from -4.9% in 2013 and -5.2% in 2014.
-0.8
14
Future plan to grow remains questionable: After domestic sales saturates, the clarity of the
12 next growth strategies is crucial to drive DCC forward. At the moment, international expansion
10 seems to be very attractive. However, the management has decided to put the expansion strategy
2013 2014F 2015F 2016F 2017F 2018F 2019F
on hold due to many uncertainties and risks involved. Therefore, the international expansion is
Source: Kasikorn Research Center, Team’s
Estimates expected not to happen in the near future. An absence of the next growth engine makes DCC
become less attractive
Figure 17: Market recovery from Relative Valuations also indicate overprice for no growth company: The indicative valuation
Thailand’s political unrest multiples obtained from the relative valuation covering selected comparable companies further
15% confirms that DCC’s stock price is not justified by its growth outlook. Although DCC’s P/E ratio of
10%
5%
18.9x is considered in line with peers’ whose average P/E ratio currently stands at 17.0x, when
0% the Company’s growth is incorporated into multiple analysis, DCC’s PEG ratio of over 7.5x is, in
-5%
-10%
fact, significantly higher than peers’ whose average PEG ratio is only 3.5x. With the expected
-15% growth rate of 2-3% per annum, the results from all valuation methods confirm that the current
-20% price of THB 55.75 per share is overvalued.
Aug-13
Dec-13
Feb-14
Apr-14
May-14
Jul-14
Aug-14
Oct-13
Nov-13
Jan-14
Oct-14
Nov-14
Sep-13
Mar-14
Jun-14
Sep-14
Low beta does not lead to expected diversification benefit: Despite DCC’s low beta of 0.57
DCC SET relative to SET Index, we found the high discrepancy between the beta during the bullish market
Source: Bloomberg
5
(0.48) and that during the bearish one (0.73). This indicates that DCC has limited upside during
the bullish period and yields low diversification benefit in the bearish market (Figure 17), just
simply the time when the investors need such benefit most. Thus, DCC might not be a good
investment choice for investors who want to reduce their portfolio risk through diversification
(Appendix 15).
Event Analysis
Share Price (THB)
80 Household debt reached
to 84% of GDP
70
First announced 100%
60 dividend payout
50
50% Decrease in natural
40
gas price during Continuous drop
30 Sept 08- May 09 in agricultural
Thailand Great product price
20 Flood
10
0
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14
DCC stock price significantly skyrocketed in year 2008-2011 due to the huge drop in natural gas
price, the continuous store expansion, and the announcement of 100% dividend payout. The
great flood in Thailand was also a big event that drove the demand in home improvement market
in 2011. However, in recent years the stock price has been sideway reflecting the impact from
consumption problem in low-price segment e.g. household debt and the huge drop in agricultural
product price.
Valuation
As a single business company with stable cash flow streams, we use Discounted Cash Flow (DCF)
method in arriving the target price for DCC. The Company is perceived as a dividend stock from
investor perspectives since it has been consistently paying stable and high dividend with the
payout ratio of 100%. Hence, Dividend Discount Model (DDM) is used for the valuation of DCC.
However, to better reflect intrinsic value of the Company, we also include Free Cash Flow to Firm
(FCFF) method in our valuation in order to capture the controlling aspect of the largest group of
shareholders, the family owner and the board of directors.
Five-Year Projected Cash Flow Assumptions

Figure 18: Sales growth drops
during the forecast period Expected decline in sales growth: Sales for DCC is forecasted by distribution channel, with ASP
Mn THB and volume as the key drivers.
12,000
CAGR
 Outlet Sales: DCC’s main revenues are from sales through its own outlet stores,
10,000 1.29% approximately 70% of total revenue, which are driven by expected number of stores
8,000 8.20% and same store sales for each region. The assumptions are estimated based on economic
6,000 outlook and store coverage in the areas. As the store expansion opportunity becomes
4,000 limited and higher competition is expected, we estimate the SSS to slightly decline.
2,000  Other distribution channels: Selling prices are discounted by 3-5% from the outlet
-
selling prices. We expect 1-4% growth of sales volume for wholesale customers such as
2008 2013 2019F home improvement retailers and real estate contractors.
Source: Company Data and Team’s Estimates With all factors combined, sales growth is estimated to drop to 1.29% CAGR during the forecast
period, compared to 8.20% in the past five years (Figure 18).
Figure 19: COGS driven by Gas price
Millions THB/M Costs of production driven by natural gas price: Cost of goods sold (COGS) consists of three
THB MBTU main components: Natural gas cost, other variable costs and fixed costs. Natural gas is the main
6,000 500 cost of production with approximately 30% contribution to the total cost. It is calculated from (1)
5,000 400 Natural gas usage per unit, which is expected to remain constant at 0.06 MMBTU per sq.m. and
4,000
300
(2) Natural gas price per MMBTU, expected to increase by 3.5% annually (Figure 19).
3,000
2,000
200 Net profit grows slower than sales: Other income and SG&A expenses are expected to increase
1,000 100 proportionately to sales. Cost of financing for DCC is based on the Company’s historical short-
0 0 term borrowing rate of 2.85%. With the increase in COGS and SG&A, which are driven by higher
depreciation and expected natural gas price, DCC’s net profit margin is estimated to decline from
17.25% in 2013 to 16.24% in 2019.
Gas cost Variable costs
Fixed costs Gas Price Capital Expenditures on store expansion and production capacity maximization: The annual
Source: Company Data and Team’s Estimates CAPEX is forecasted to range between THB 336Mn to 441Mn during 2014 to 2019 and invested in
6
Figure 20: DCC Cost of Capital Estimates 3 main activities: (1) Store expansion and relocation, expected at 10 relocations with 1-3 new
stores each year; (2) Store renovation, to maintain the quality and meet customers’ need; (3)
WACC Computation Production capacity maximization, targeted at 2 kilns modification per year. The assumptions are
Risk-Free Rate 2.86% estimated based on management’s target announcement and past achievements.
Market Return 11.98%
Country Risk Premium 2.50% Unsustainable high dividend payout: DCC can maintain its dividend payout ratio at 100% for
Beta 0.57 the past years and it is expected continue throughout the forecast period, in accordance with the
Cost of Equity 9.48% management’s intention to be a high dividend payout stock. However, to maintain the debt level
Cost of Debt 3.38% in long run, the Company is likely to retain the earnings at a level that is sufficient for operation.
Marginal Tax Rate 20.00%
Terminal growth assumption determined by target earning retention: The sustainable
Cost of Debt, post tax 2.71%
retention rate is estimated to be 5%, which is the level that the Company will be able to maintain
Effective WACC 8.99% its capital structure. Using the sustainable growth formula, the perpetual growth rates are
Source: Bloomberg and Team’s Estimates derived in 2 stages, 2.32% and 1.31%, with the assumption that the Company will be able to
maintain ROE at 46.32% in the first stage, and reduce down to 26.24% as profit margin will
Figure 21: Target Price converge to industry average in the long run (Appendix 16).
Weight Price Additional country risk premium added to reflect political instability: The cost of equity is
FCFF 47% 40.64 calculated using CAPM with 10-year Thai government bond risk-free rate of 2.86%. Market return
DDM 53% 42.14 of 11.98% and beta of 0.57 are derived from 10-year weekly data. With additional country risk
Target Price 41.50 premium to reflect the higher risk during political and economic instability, the final cost of
equity is 9.48% (Figure 20).
Weighted average cost of capital: The cost of debt of 3.38% is derived from company’s historical
short-term borrowing rate, and 20% tax rate is applied. As the capital structure changes during
the forecast period, we calculate different WACC for each forecasted year to include the effect of
Figure 22: Valuation Range DCC higher leverage (Appendix 17 & 18). With all components combined, we arrive the effective
WACC of 8.99% (Figure 20).
DDM
FCFF Weighting of Valuation Models

PE
The shareholder structure serves as a good proxy for the allocated weights to the models. 47% is
PE Band assigned to FCFF representing the portion owned by the family and board of directors whereas
EV/EBIT… the remaining 53% reflects the minor shareholders. The long-term holding period reflects the
20 30 40 50 60
investment for dividend purpose. Hence, DDM is used to value DCC for this group of investors,
Price (THB) representing 53% of the firm’s value. By combining both valuation methods, the fair price for DCC
Target Price THB 41.50 is THB 41.50 (Figure 21).
Current Price THB 55.75
Target Price Relative valuation also confirms: Apart from DCF methods, we also consider relative valuation
Relative Valuation by using P/E, P/E Band and EV/EBITDA multiple analyses in order to reflect better market view
(THB/share)
P/E Band 39.13 on DCC. DCC fundamentally has exposure in both manufacturing and retailing businesses. Since
P/E 43.33 there are no perfect comparable companies, cross-sectional peers were chosen for better
comparison. All the chosen comparable companies can be classified into 3 tiers based on their
EV/EBITDA 45.64
business fundamentals: (1) local construction material manufactures (2) local home
improvement retailers (3) regional tile manufacturers (Appendix 19 - 22).
Valuation confirms stock overvalued: Both DCF and relative valuation give the target price
estimates that are in line with each other (Figure 22). However, we choose DDM and FCFF for our
Figure 23: High ROE is offset by high P/BV
ROE
valuation of DCC as it best suits the nature of Company’s stock. At the current price of THB 55.75,
(%) DCC TB DCC is overvalued with the potential downside of 25.56% by the end of 2015. Hence, we ground
50.00
for the “SELL” recommendation with the target price of THB 41.50.
Average
40.00
In addition, the indicative valuation multiples obtained from PEG further confirms that DCC’s
30.00 stock price is not justified by its growth outlook. After incorporate the Company’s growth, DCC
SCC TB Average has PEG ratio of 7.4x, which significantly higher than peer’s average of 3.0x. Hence, with the
20.00 TTC VN
expected growth rate of 2-3% per annum, the results from all valuation methods confirm that the
TGCI TB
10.00 current price of THB 55.75 per share is overvalued.
GLOBAL TB P/BV
0.00
0.00 2.00 4.00 6.00 8.00
(Times)
10.00
Current price implies unobtainable growth rate
PBV
Based on the current market price of THB 55.75, it implied the sustainable growth rate of 4.12%.
Note: The label is Bloomberg ticker This data reflects an over-expectation from the market since DCC is a matured company, and
Source: Bloomberg expected to be threatened by many external factors. With the changing competitive landscape
and having no clear growth drivers, achieving such ambitious growth expectation might be
Figure 24: DCC P/E Band challenging for DCC.
PER (Times)
25
20
+2.0 SD Market view on DCC
+1.0 SD
15 +0.5 SD
LT average As of December 2014, DCC is trading at current P/E Ratio of 18.9x, which is higher than historical
10 -0.5 SD
-1 SD long-term average P/E Ratio +1 SD, and higher than current PER of SET which is 16.9x (Figure
5 24). Therefore, current trading price of DCC is quite expensive while the Company is in mature
0 stage with slowing down trend leading to less attractive in terms of current valuation. In addition,
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
recently DCC’s daily trading volume is only 17 million Baht indicating the low daily turnover of
Source: Bloomberg 0.075%. Furthermore, comparing DCC to SET in the bullish trend in the past, DCC tends to
underperform SET (Appendix 23 & 24).
7
Financial Analysis
2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F 2019 F
LIQUIDITY RATIOS
Current Ratio 1.01 0.89 0.87 0.82 0.79 0.78 0.78 0.78
Quick Ratio 0.17 0.13 0.13 0.12 0.12 0.12 0.12 0.12
Cash Ratio 0.10 0.08 0.08 0.07 0.07 0.07 0.07 0.07
PROFITABILITY RATIOS
Gross Profit Margin 39.17% 41.06% 40.51% 40.49% 40.51% 40.46% 40.39% 40.29%
Operating Profit Margin 21.89% 22.00% 21.28% 21.21% 21.20% 21.13% 21.05% 20.95%
Net Profit Margin 16.70% 17.25% 16.65% 16.57% 16.50% 16.40% 16.33% 16.24%
Return on Equity 45.79% 46.83% 43.12% 43.52% 44.40% 45.03% 45.71% 46.32%
Return on Assets 27.42% 25.99% 22.90% 22.41% 21.93% 21.61% 21.54% 21.57%
LEVERAGE RATIOS
Debt-to-Equity Ratio 0.30 0.43 0.47 0.54 0.61 0.63 0.65 0.65
Interest Coverage Ratio 105.34 69.54 45.43 41.91 37.16 33.70 33.02 32.17
Cash Flow to Debt Ratio 1.35 1.22 1.08 0.94 0.87 0.88 0.83 0.89
Debt-to-EBITDA Ratio 0.46 0.63 0.74 0.83 0.91 0.92 0.94 0.92
EFFICIENCY ACTIVITY RATIOS
Assets Turnover 1.64 1.51 1.38 1.35 1.33 1.32 1.32 1.33
Inventory Days 111.13 129.45 138.50 139.50 142.00 143.00 143.50 144.00
Accounts Receivable Days 6.43 5.87 5.90 6.30 6.50 6.70 6.90 7.00
Accounts Payable Days 53.68 52.41 52.41 53.00 53.00 53.50 53.50 54.00
Cash Conversion Cycle 63.88 82.91 91.99 92.80 95.50 96.20 96.90 97.00
Earnings per Share (THB) 3.10 3.18 2.93 2.99 3.06 3.12 3.18 3.23
Dividend per Share (THB) 3.08 3.18 2.93 2.99 3.06 3.12 3.18 3.23
Figure 25: Decreasing in sale growth

Earnings: With the slower-than-expected Thai economic recovery as well as the increasing in
Mn THB % YoY
10,000 8.0 competition in the tile market, we expect DCC’s earnings growth to slow down with the revenue
8,000 4.0
and net income CAGR of 1.29% and 0.27% during 2013-2019, respectively (Figure 25).
6,000 0.0
Slowdown in store expansion: From past aggressive store expansion, we are convinced that the
4,000 -4.0 Company has already captured the opportunity both in Bangkok and provincial areas. An
2,000 -8.0 international expansion is also unlikely to take place, thus, the decreasing trend in store
- -12.0 expansion is expected to continue. In year 2014, we expect number of stores to remain
unchanged, at 195 stores, due to weak demand in upcountry area. Afterward, the number of new
Sales(LHS) Net Income(LHS) stores open is expected to decline; from 3 new stores in 2015 to only 1 store by 2019, with the
Sales growth(RHS) NI growth(RHS) total of 206 stores by the end of 2019 (Figure 26).
Unsustainable same store sales growth: Looking forward, there will be less opportunity to
capture new market since DCC has already had an extensive store coverage throughout Thailand.
Figure 26: Slowdown in store expansion
Moreover, the weak economic condition is expected to pressure SSS growth down to -5.75% in
Stores
210 2014 due to lower purchasing power of DCC’s target customers. With a slow effect from
1
2 government continuous attempt to boost the economy, we expect the recovery to start in 2015
2
200
-1 3
3 and 2016. This will lead to a slight SSS growth of 1.31% YoY. However, the increasing SSS growth
4 is unlikely to remain throughout the forecast period due to cannibalization from store expansion
190
192
as well as the change in competitive landscape of tile market. We expect a slowdown in SSS
195 195 198 201 203 205
180
growth from 1.56% in 2016 to 0.91% in 2019.
Slight decrease in profit margin: DCC has already enjoyed the benefits from the reduction in
Existing stores New stores
amount of natural gas used in production. However, the further improvement might be limited.
Source: Company Data and Team’s Estimates According to Ministry of Energy, looking forward natural gas supply will be lower which will lead
to the increase in imported natural gas that is sold at higher price. Hence, we expect the gross
Figure 27: Increasing in Cash Conversion profit margin to slightly decrease from 41.06% in 2013 to 40.29% in 2019 due to the increase in
Cycle
natural gas price. Also, operating profit margin and net profit margin are expected to slightly
2019F drop.
2018F
2017F
Cash Flows: The Company has planned to expand sales by capturing more wholesales customers:
such as real estate contractors and home improvement retailers, and increasing the product lines
2016F
offered. These ongoing strategies are expected to result in the longer accounts receivable and
2015F
inventory days. Cash conversion cycle is expected to increase from 83 days in 2013 to 97 days in
2014F
2019 (Figure 27).
2013
2012 High potential of increasing in debt financing: In previous years, the Company has financed its
Days
-40 10 60 110 160
operation mainly through equity and short-term debt. As the cash conversion cycle increases,
Account Payable Days more funding is needed. We expect the incurring of short-term debt to support company
Operating Cycle (Days)
Cash Conversion Cycle (Days) operation. Debt-to-equity ratio is expected to increase from 0.43 in 2013 to 0.65 times in 2019
(Figure 28). The ability to pay interest will decline as interest expense increases, supported by
8
Figure 28: Rise in Debt-to-Equity ratio the decrease in interest coverage ratio from 69.54 in 2013 to 32.17 times at the end of forecast
0.80
0.61 0.63
0.65 0.65 period, 2019.
0.60 0.54
0.47
0.43 Du Pont Analysis: DCC has historically been able to maintain its ROE within the range of 40-
0.40 0.30
46%. Throughout our forecast period, DCC is expected to retain its ROE at around the same level,
0.20
with a slight decline from 46.8% in year 2013 to 46.3% in year 2019. However, our Du Pont
- analysis indicates that the key drivers for such high ROE is an increase in leverage, as reflected by
a higher equity multiplier (“EQM”) of 1.80 in 2013 to 2.15 times in 2019 (Figure 29). Hence, the
Source: Company Data and Team’s Estimates higher return on equity doesn’t necessarily caused by the margin improvements. (Appendix 25).
Figure 29: Du Pont Analysis indicates
rise in ROE Investment Risks
Regulatory Risks
RR1: Increase in rule and regulations for imported tiles
Tax charged and regulation for imported tiles still remain a key factor to prevent Thai companies
to outsource from low cost tile manufacturers oversea. The success of Quality Assurance
introduced by Thai government will help decrease the amount of imported tile due to higher
quality control. This will reduce competition in local tile market and enhance DCC’s future growth
opportunity.
Figure 30: Risk Analysis Matrix RR2: Success on government stimulus packages
Thai government has been trying to reduce the effect on household debt from the past policy of
first car, first house, as well as rice subsidy scheme. The success of reducing household debt will
help enhance purchasing power of Thai people, mainly low-to-middle income segment who are
DCC’s main target customers.
Macro Risks (Market Risks)

MR1: Early economic recovery results in increase in DCC sales
DCC’s sales are highly correlated with Thai GDP at the correlation of 0.97. The faster-than-
expected economic recovery and stable political situation will help enhance overall sales. The rise
in volume to 58.73 million sq.m. will increase our target price to THB 47.39 and change our
Regulatory Macro Operational
risks risks risks recommendation to hold, while, further increase to 72.90 million sq.m. will change our
recommendation to buy.
Figure 31: Impact-Recovery Matrix

MR2: Possibility of foreign fund flow coming into Thai equity market
Given the current global economy, we believe that there might be some foreign funds flowing into
Thailand’s equity market. Despite the high possibility of equity market booming, we believe that
the fund flow will likely to be a selective buy due to the high valuation of SET. In addition, DCC
tends to receive less benefit from fund flows because it has just been taken out of SET100 Index,
which represents the top 100 listed companies on SET in terms of large market capitalization
with high liquidity. This indicates characteristics of DCC that will be some fund limitations: small
market capitalization and low trading liquidity. Hence, the impact from fund flows on DCC stock
price may be very limited.
Operational Risks
Regulatory Macro Operational
risks risks risks
OR1: Decrease in gas price results in better profit
Note: Time to recover is the time we expect One of the main manufacturing costs is coming from natural gas, with contribution of 30% to
the effect from risk factors to last.
overall cost of production. Natural gas price has been fluctuating and unpredictable (Figure 32);
however, the decrease in gas price will help reduce cost of product. The reduction in natural gas
Figure 32: Company’s historical Natural price to THB 354.6 will change our recommendation from sell to hold and further fall to THB
Gas cost
THB/MM
227.7 for a buy recommendation.
BTU
500 OR2: Success on the introduction of digital and larger-sized tiles
400 By successfully increasing larger-sized and digital tile sales, it will help increase Company average
300 selling price (ASP) since these tiles are sold at 40-50% higher than normal tile price. Instead of
seeing an increase in sales contribution, we would like to see more effect on average selling price
200
since the contribution can be misleading if there is any sales promotion. The ASP needs to
100
increase to THB 142.7 to change our recommendation to hold and increase to THB 154.8 to result
- in buy recommendation.
Valuation Risk
Source: Company data
To test the effect of the macro and operational risks on our recommendation, we perform
Figure 33: Scenario Analysis scenario analysis of changes in sales volume, ASP, and natural gas price. The better and best cases
Scenario Analysis
will change our target price to THB 51.25 and THB 60.50 respectively and result in hold
recommendation. Please see Appendix 28 for more detail on the analysis (Figure 33). In addition,
Base Better Best we run Monte Carlo Simulation to further examine the probability of changing our
41.50 51.25 60.50 recommendation. Using 5-year historical standard deviation, the simulation analysis shows that
there is only a 4% chance that would trigger a change in our recommendation from sell to buy
Source: Team’s estimates
and 28% to hold. On the other hands, the possibility of a downside is as high as 68% (Figure 34).
9
Sensitivity Analysis
Since Terminal value accounts for the major part of the DCF model, we perform sensitivity
Figure 34: Monte Carlo Simulation
analysis of changes in perpetual growth rates to our target price. Dividend payout ratio and ROE
68% 28% 4%
are used as the sensitive variables as they are the main components of the terminal growth
SELL HOLD BUY
(Appendix 29). The upper and lower bounds of long-term ROE are the forecast ratio of last period
and WACC respectively, while the range of dividend payout ratio is estimated based on the ability
to payback debt of the company.
Terminal ROE
41.43 9.48% 17.86% 26.24% 36.28% 46.32%
Terminal 90.0% 43.45 46.19 49.64 55.13 63.03
Dividend 92.5% 41.27 43.05 45.15 48.20 52.04
Source: Team’s Estimates Payout 95.0% 39.25 40.29 41.50 42.98 44.75
Ratio 97.5% 37.39 37.84 38.31 38.91 39.55
100.0% 35.66 35.66 35.66 35.66 35.66
Figure 35: Real Option Valuation Other Upside Potentials

Summary
Announcement of international expansion plan
Real Option Summary (In Mn THB)
The opening of AEC will present an opportunity for DCC to expand its business oversea. This can
Spot Value 1,459 be done by both expanding the production base and establishing Company’s own outlet stores.
However, from the statement made by DCC’s management team, the most likely case is to open its
Strike Value 1,614
own outlet stores. We see this opportunity as an option to expand internationally whose
Volatility (%) 50% characteristic is similar to call option. This can be valued using Black-Scholes option pricing
3-Y Risk free rate (%) 2.3% model (Appendix 30). The real option value is THB 473.1 million or THB 1.16 on per share basis
(Figure 35). The option is currently out-of-the-money due to the riskiness of entering into new
Real Option Value 473
market that has no prove of success.
Number of shares outstanding (Mn) 408
DCC as a potential target acquisition company
Real Option Value/share (THB) 1.16
Construction material industry in Thailand has been growing toward the consolidation trend.
Source: Team’s estimates
SCC, the largest cement-building material company in Thailand, has been acquiring various
companies in the industry. It partially staked in TGCI, a tile manufacturer, in 2008 and also in
GLOBAL, a one-stop shopping home center, in 2012. Those target companies help enhance and
strengthen business of SCC. By looking at both side of the acquisition, being an acquirer as well as
being a target company, we believe that there is low chance for DCC to be an acquirer due to its
excess production capacity throughout the forecast period (Appendix 31). On the other hand, as
one of the leader in tile market with a large production capacity and strong brand reputation in
particular market; DCC can potentially be a target company for acquisition. Observing from past
transactions, the company is likely to be bought at premium of around 6.70% to 26.44% at a price
range of 60.12 to 70.10 Baht per share (Appendix 32).
Additional Downside Risk

Probable increase in Value-Added Tax will slow down the consumption
The government is considering increasing the Value-Added Tax or VAT, which is planned to be
lifted from current 7% to 8% next year and to 10% in following years. This could potentially
slowdown the recovery of economy as observed from Japan. Especially in low-price segment,
DCC’s main customers, tend to have less incentive to spend because they are more sensitive to the
change in VAT. Given the increase in VAT take place, we expect the money to be spent mostly on
daily necessities with a small leftover spared for home renovation as necessary.
10
Appendix Index
Financial Statements Page
Appendix A: Income Statement 13
Appendix B: Income Statement (Common-Size) 13
Appendix C: Balance Sheet 14
Appendix D: Balance Sheet (Common-Size) 15
Appendix E: Statement of Cash Flow 16
Business Description
Appendix 1: Brands under DCC 17
Appendix 2: Product Types 18
Appendix 3: Business Structure and Subsidiaries 19
Appendix 4: Key Management Personnel 21
Corporate Governance
Appendix 5: Corporate Governance 27
Industry analysis
Appendix 6: Absolute and Relative Increase in Household Debt 28
Appendix 7: Growth of Renovation Market 28
Appendix 8: Domestic Manufacturers Market 29
Appendix 9: DCC’s Five Forces Analysis 30
Appendix 10: Growth of Specialty Store and Overall Modern Trade
31
Investment summary
Appendix 11: Imported Tiles 32
Appendix 12: Home improvement centers (modern trade) 33
Appendix 13: Comparison among DCC and other improvement centers 34
Appendix 14: Home Improvement Centers store footprint 34
Appendix 15: Calculations of upside and downside beta between DCC stock price and SET 100
index
35
Valuation
Appendix 16: DCF Assumptions 36
Appendix 17: WACC Assumptions 41
Appendix 18: DCF Analysis 42
Appendix 19: Relative Valuation 43
Appendix 20: DCC Expected Return-to-Beta comparison 45
Appendix 21: DCC Price-to-Earnings Ratio to Earning Growth Comparison 46
Appendix 22: DCC Return on Equity to Price-to-Book Value Comparison 47
Appendix 23: PE Band 48
Appendix 24: DCC underperforms SET over the past 3 years 48
Financial Analysis
Appendix 25: Du Pont Analysis 49
Investment Risks
11
Appendix 26: Impact-Probability Risk Analysis Matrix 50
Appendix 27: Impact-Time to recover Risk Analysis Matrix 50
Appendix 28: Scenario Analysis 51
Appendix 29: Sensitivity Analysis 51
Appendix 30: Real Option Valuation 52
Appendix 31: Production Capacity Analysis 53
Appendix 32: Comparable M&A Transaction 55
Others
Appendix 33: Management Structure 56
Appendix 34: Tile manufacturing factories 57
Appendix 35: Major shareholders structure 58
12
Appendix A: Income Statement
Income Statement (Mn THB) 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F
Revenue from sales 7,603 7,546 7,211 7,388 7,595 7,779 7,963 8,148
Costs of goods sold

(4,625) (4,447) (4,290) (4,396) (4,518) (4,632) (4,747) (4,865)
Gross income 2,978 3,099 2,921 2,991 3,077 3,148 3,216 3,283
Other income 35 18 21 22 22 23 24 24
Selling expenses (761) (755) (721) (739) (760) (778) (796) (815)
Administrative expenses (588) (701) (687) (707) (729) (749) (767) (785)
Income before finance costs income tax 1,664 1,661 1,534 1,567 1,610 1,644 1,676 1,707
Finance costs (16) (24) (34) (37) (43) (49) (51) (53)
Income before income tax 1,648 1,637 1,500 1,530 1,567 1,595 1,625 1,654
Income tax (379) (335) (300) (306) (313) (319) (325) (331)
Net Income 1,270 1,302 1,200 1,224 1,253 1,276 1,300 1,323
Appendix B: Income Statement (Common-Size)

Income Statement (Common-Size) 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F
Revenue from sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of goods sold 61% 59% 59% 60% 59% 60% 60% 60%
Gross income 39.2% 41.1% 40.5% 40.5% 40.5% 40.5% 40.4% 40.3%
Other income 0.5% 0.2% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%
Selling expenses 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Administrative expenses 7.7% 9.3% 9.5% 9.6% 9.6% 9.6% 9.6% 9.6%
Income before finance costs income tax 21.9% 22.0% 21.3% 21.2% 21.2% 21.1% 21.1% 20.9%
Finance costs 0.2% 0.3% 0.5% 0.5% 0.6% 0.6% 0.6% 0.7%
Income before income tax 21.7% 21.7% 20.8% 20.7% 20.6% 20.5% 20.4% 20.3%
Income tax 5.0% 4.4% 4.2% 4.1% 4.1% 4.1% 4.1% 4.1%
Net Income 16.7% 17.2% 16.6% 16.6% 16.5% 16.4% 16.3% 16.2%
13
Appendix C: Balance Sheet
Balance Sheet (Mn THB) 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F
ASSETS
Cash and cash equivalents 189 169 180 185 190 194 199 204
Trade accounts and notes receivable - net 137 106 127 128 143 143 158 154
Inventories - net 1,550 1,605 1,651 1,709 1,806 1,823 1,910 1,929
Other current assets 36 35 35 36 37 38 39 40
Total Current Assets 1,911 1,915 1,994 2,058 2,176 2,198 2,306 2,326
Other investment - net
Property, plant and equipment - net 2,701 2,942 3,073 3,238 3,392 3,472 3,512 3,529
Goodwill 104 104 104 104 104 104 104 104
Intangible assets - net 7 15 16 16 17 17 17 17
Deferred income tax - asset 119 127 122 125 128 131 134 137
Other non - current assets 37 38 35 36 37 38 39 40
Total Non - Current Assets 2,967 3,226 3,350 3,519 3,678 3,762 3,807 3,827
TOTAL ASSETS 4,877 5,141 5,343 5,577 5,854 5,960 6,112 6,154
LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Short - term loans from financial institutions 840 1,185 1,312 1,520 1,712 1,781 1,861 1,852
Trade accounts and notes payable 689 588 644 633 679 678 713 726
Accrued income tax 183 148 141 145 149 153 156 160
Other current liabilities 176 236 201 206 212 217 222 227
Total Current Liabilities 1,887 2,157 2,298 2,504 2,752 2,829 2,953 2,965
Unfunded provident fund 51 53 55 57 59 61 63 65
Employee benefits obligation 118 136 151 166 181 196 211 226
Deferred income tax - liability 23 33 32 33 34 34 35 36
Total Non - Current Liabilities 193 222 238 255 273 291 309 327
TOTAL LIABILITIES 2,080 2,379 2,536 2,760 3,025 3,120 3,262 3,292
SHAREHOLDERS’ EQUITY
Issued and paid - up - 408,000,000 shares 408 408 408 408 408 408 408 408
Premium on share capital 506 506 506 506 506 506 506 506
Retained earnings
- Appropriated for legal reserve 41 41 41 41 41 41 41 41
- Unappropriated 1,797 1,757 1,799 1,804 1,812 1,817 1,823 1,829
Shareholders' equity of the Company 2,752 2,711 2,753 2,759 2,767 2,772 2,778 2,784
Non-controlling interests in subsidiaries 46 50 54 58 62 67 72 78
TOTAL SHAREHOLDERS' EQUITY 2,798 2,761 2,807 2,817 2,829 2,839 2,851 2,862
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,877 5,141 5,343 5,577 5,854 5,960 6,112 6,154
14
Appendix D: Balance Sheet (Common-Size)
Balance Sheet (Common-Size) 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F
ASSETS
Cash and cash equivalents 3.9% 3.3% 3.4% 3.3% 3.2% 3.3% 3.3% 3.3%
Trade accounts and notes receivable - net 2.8% 2.1% 2.4% 2.3% 2.4% 2.4% 2.6% 2.5%
Inventories - net 31.8% 31.2% 30.9% 30.7% 30.9% 30.6% 31.2% 31.3%
Other current assets 0.7% 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% 0.6%
Total Current Assets 39.2% 37.3% 37.3% 36.9% 37.2% 36.9% 37.7% 37.8%
Other investment - net
Property, plant and equipment - net 55.4% 57.2% 57.5% 58.1% 58.0% 58.3% 57.5% 57.3%
Goodwill 2.1% 2.0% 1.9% 1.9% 1.8% 1.7% 1.7% 1.7%
Intangible assets - net 0.1% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%
Deferred income tax - asset 2.4% 2.5% 2.3% 2.2% 2.2% 2.2% 2.2% 2.2%
Other non - current assets 0.7% 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% 0.6%
Total Non - Current Assets 60.8% 62.7% 62.7% 63.1% 62.8% 63.1% 62.3% 62.2%
100.0
TOTAL ASSETS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
%
LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Short - term loans from financial institutions 17.2% 23.1% 24.6% 27.3% 29.2% 29.9% 30.5% 30.1%
Trade accounts and notes payable 14.1% 11.4% 12.1% 11.3% 11.6% 11.4% 11.7% 11.8%
Accrued income tax 3.7% 2.9% 2.6% 2.6% 2.5% 2.6% 2.6% 2.6%
Other current liabilities 3.6% 4.6% 3.8% 3.7% 3.6% 3.6% 3.6% 3.7%
Total Current Liabilities 38.7% 42.0% 43.0% 44.9% 47.0% 47.5% 48.3% 48.2%
Unfunded provident fund 1.1% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.1%
Employee benefits obligation 2.4% 2.6% 2.8% 3.0% 3.1% 3.3% 3.4% 3.7%
Deferred income tax - liability 0.5% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%
Total Non - Current Liabilities 4.0% 4.3% 4.4% 4.6% 4.7% 4.9% 5.1% 5.3%
TOTAL LIABILITIES 42.6% 46.3% 47.5% 49.5% 51.7% 52.4% 53.4% 53.5%
SHAREHOLDERS’ EQUITY
Issued and paid - up - 408,000,000 shares 8.4% 7.9% 7.6% 7.3% 7.0% 6.8% 6.7% 6.6%
Premium on share capital 10.4% 9.8% 9.5% 9.1% 8.6% 8.5% 8.3% 8.2%
Retained earnings
- Appropriated for legal reserve 0.8% 0.8% 0.8% 0.7% 0.7% 0.7% 0.7% 0.7%
- Unappropriated 36.8% 34.2% 33.7% 32.4% 31.0% 30.5% 29.8% 29.7%
Shareholders' equity of the Company 56.4% 52.7% 51.5% 49.5% 47.3% 46.5% 45.5% 45.2%
Non-controlling interests in subsidiaries 0.9% 1.0% 1.0% 1.0% 1.1% 1.1% 1.2% 1.3%
TOTAL SHAREHOLDERS' EQUITY 57.4% 53.7% 52.5% 50.5% 48.3% 47.6% 46.6% 46.5%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
15
Appendix E: Statement of Cash Flow
Statement of Cash Flow (Mn THB) 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F
Cash Flows From Operating Activities
Net income 1,270 1,302 1,200 1,224 1,253 1,276 1,300 1,323
Adjustments
Depreciation and amortization 179 232 251 264 276 287 297 308
Others (5) (4) (4) (5) (5) (5) (5) (5)
Increase (Decrease) in Operating Assets &
Liabilities
Trade accounts and notes receivable (6) 31 (21) (1) (15) (0) (15) 4
Inventories (283) (55) (46) (58) (97) (16) (87) (19)
Other current assets (1) 1 0 (1) (1) (1) (1) (1)
Other non - current assets (22) (10) 8 (4) (5) (4) (4) (4)
Trade accounts and notes payable 18 (101) 56 (11) 46 (1) 35 13
Other current liabilities (51) 26 (41) 8 10 9 9 9
Other non - current liabilities 37 30 15 18 18 18 18 18
Net Cash Provided from Operating Activities 1,136 1,451 1,417 1,434 1,482 1,563 1,547 1,646
Cash Flows from Investing Activities

Acquisitions of assets (371) (485) (392) (439) (441) (378) (350) (336)
Acquisitions of intangible assets (1) (12) (5) (5) (5) (6) (6) (6)
Proceed from disposal of fixed assets 3 17 14 15 16 17 17 18
Other investment 3 4 4 4 4 5 5 6
Net Cash Used in Investing Activities (366) (477) (379) (425) (426) (362) (333) (319)
Cash Flows from Financing Activities

Increase (decrease) in overdraft & short-term
440 345 127 208 191 70 80 (10)
loans
Dividend payment (1,154) (1,213) (1,241) (1,266) (1,290) (1,312)
(1,212) (1,338)
Net Cash Used in Financing Activities (772) (993)
(1,027) (1,005) (1,050) (1,196) (1,210) (1,322)
Net Decrease in Cash and Cash Equivalents (2) (19) 11 4 5 5 5 5

Cash and Cash Equivalents at Beginning of Year 190 189 169 180 185 190 194 199
Cash and Cash Equivalents at End of Year 189 169 180 185 190 194 199 204
16
Appendix 1: Brands under DCC
The Ceramic tiles produced by the Company and its subsidiaries comprised of the following:
• Floor and wall ceramic tiles under the “Dynasty” trademark
• Floor and wall ceramic tiles under the “Tile Top” trademark
• Floor and wall ceramic tiles under the “Tomahawk” trademark
• Floor and wall ceramic tiles under the “Jaguar” trademark
• Floor and wall ceramic tiles under the “Anna” trademark
• Floor and wall ceramic tiles under the “Value” trademark
• Floor and wall ceramic tiles under the “Mustang” trademark
17
Appendix 2: Product types
Product Types Sales Contribution
Floor 16x16 29%
Floor 12x12 41%
Floor 8x8 3%
Low-price Products Wall 8x12 7%
Wall 8x10 5%
Wall 8x8 0%
Other 3%
Total Low-price Products 88%
Granito 0%
Floor 24x24 (Rectified) 3%
Floor 16x16 Hybrid 5%
High-price Products Floor 16x16 Hybrid (Rectified) 1%
Floor 12x24 Hybrid (Rectified) 0%
Total High-price Products 12%
We classify 16x16 inch tiles and below as low-price products while hybrid and rectified 16x16 and 24x24 inch tiles and up as
high-price products, the low-price products will contribute 88% of total sales while the high-price products contribute only
12% of total sales.
18
Appendix 3: Business Structure and Subsidiaries
Before restructuring (Before June, 2014)
Dynasty Ceramic PCL. (DCC)

Produces Ceramic Floor Tiles, Grout
and Distributed all Products
DCC Subsidiary, which DCC hold 96.83%
Tile Top Industry PCL

Produces Ceramic Floor and Wall Tiles
sold to DCC
Sells to Factory
Wholesales-Local Export
Outlets
Muangthong Ceramic Co., Ltd

DCC holds 99.98%
Pick & Pay Co., Ltd DCC holds 97.99%
World Wide Ceramic Co., Ltd DCC holds 99.93%
19
After restructuring (After June, 2014)
Dynasty Ceramic PCL. (DCC)

Produces Ceramic Floor Tiles, Grout
and Distributed all Products
DCC Subsidiary which DCC hold 96.83%
Tile Top Industry PCL

Produces Ceramic Floor and Wall Tiles
sold to DCC
Sells to Own Factory

Wholesales-Local Export
Outlets
20
Appendix 4: Key Management Personnel
Board of Directors
Name / Position Highest Education % of Share Family Other Current Position Experience
/ Date of Birth Holding relationship
among
executives
1. Mr. Roongroj Bachelor of Accounting, 100,000,000 Miss Cattleya Listed Company - None 2005-Present
Saengsastra Chulalongkorn shares Saengsastra’s Chairman of Pick and Pay Co., Ltd
University (24.51%) Non Listed Company 4 Chairman of Muang Thong Ceramic Co., Ltd
Chairman at November, brother Companies Chairman of World Wide Ceramic Co., Ltd
2014 1. Chairman of TileTop Industry
5 March 1950 Public Co., Ltd 2000-2007
2. Chairman of Pick and Pay Co., President of Dynasty Ceramic Public Co., Ltd
Ltd President of TileTop Industry Public Co., Ltd
3. Chairman of Muang Thong
Ceramic Co., Ltd.
4. Chairman of World Wide
Ceramic Co., Ltd
2. Mr. Sanchai Janejarat Bachelor of Engineering, 342,000 shares None Listed Company - None 2008 – Present
Chulalongkorn President of Dynasty Ceramic Co., Ltd
President University (0.08%) Non Listed Company 4 President of TileTop Industry Public Co., Ltd
Companies
10 October 1949 Directors Accreditation at November, 1. President of TileTop Industry 2002 – 2007
Program (DAP) 2014 Public Co., Ltd Executive Director (Production) at Dynasty
No.54/2006 2. Director at Pick and Pay Co., Ceramic Public Co., Ltd
Ltd Executive Director (Production) at TileTop
3. Director at Muang Thong Industry Public Co., Ltd
Ceramic Co., Ltd
4. Director at World Wide
Ceramic Co., Ltd
3. Mr. Yothin Bachelor of Accounting, None None Listed Company 1 Company Head of Management System Development -
Juangbhanich Chulalongkorn 1. Independent Director & Revenue Department
University Chairman of Audit Committee at Regional 12 Revenue Chief
Independent Director & Tanasiri Group Public Co., Ltd
MBA, University of
Chairman of Audit Non Listed Company 2
Committee Santa Clara, USA Companies 1.Sub-committee to
strengthen good governance in
the public sector, the Senate.
2. Part-time Faculty at
21
22 September 1949 Director Accreditation Assumption University: Tax
Accounting
Program (DAP) 79/2009
4. Mr. Chaiyasith Bachelor of Engineering, 20,460,000 None Listed Company 1 Company

Viriyametakul Chulalongkorn shares 1. President at Vibhavadee
University Hospital
Director (5.02%)
National Defense College Non Listed Company 2
22 July 1949 (NDC.4414) at November, Companies
2014 1. Vice Chairman of BOD at
Director Accreditation Chao Paya Hospital Public Co.,
Program (DAP) 20/2004 Ltd
- Increasing Your 2. Executive Director at
Corporate Value through Vibharam Co., Ltd and its
Effective Subsidiaries
Communication Year
2003
- Risk Management
5. Mr. Suvit Smarnpanchai High-School, Charnvit 10,000,000 None Listed Company - None Present
Wittaya School shares Advisor of the Audit Committee and
Director Non Listed Company 1 Monitoring The Police Administration of
Director Accreditation (2.45%) Company Ratchburana police Station
17 April 1947 Program (DAP) 54/2006 1. Managing Director at
at November, Ekasithpun Co., Ltd 2000 – Present Managing Director at
2014 Ekasithpun Co., Ltd
6. Mr. Surasak Bachelor of Law, None None Listed Company 1 Company 1969 – Present
Kosiyajinda Thammasart University 1. Director at AJ Plast Public Co.,
Ltd Own office at Jutturatham Law Office
Independent Director & Director Accreditation
Audit Committee Program (DAP) 48/2005 Non Listed Company 1
Company
19 January 1943 1. Director at United Food Co.,
Ltd
7. Mr. Phachon Bachelor of Arts in None None None 1975 – 2005

Khachitsarn Economic, Kasetsart Administration Department Manager, Fuel
University Advanced Administration and Finance Division EGAT
Independent Director & /Public Utility
Audit Committee Certificate of
Administration, National
Institute of
22
24 September 1948 Development
Administration (Nida)
Advanced Mini- MBA,

Chulalongkorn
University
Director Accreditation
Program (DAP) 99/2012
8. Miss Cattleya Bachelor degree 11,000,000 Mr. Roongroj Listed Company 1 Company 1995 – Present
Saengsastra Accounting (Honor), shares Saengsastra’s 1. Independent Director and Director at TileTop Industry Public Co., Ltd
Chulalongkorn Sister Chairman of Audit Committee
Executive Director and University (2.7%) S&P Syndicated Public Co., Ltd 2005 – Present
Company Secretary Director at Pick and Pay Co., Ltd
Management at November, Non Listed Company 4 Director at Muang Thong Ceramic Co., Ltd
25 January 1948 Development Program- 2014 Companies Director at World Wide Ceramic Co., Ltd
J.J.Kellogg North 1. Executive Director and
Western University Company Secretary at TileTop 1990 – 1995
Industry Public Co., Ltd Executive Director (Accounting) at S&P
Directors Accreditation 2. Director at Muang Thong Syndicated Public Co., Ltd
Program (DAP) Ceramic Co., Ltd
No.47/2005 3. Director at World Wide 1971 – 1990
Ceramic Co., Ltd Vice President Accounting System at Siam
Cement Public Co., Ltd
9. .Mr. Monrak Master of Business 30,000,000 Mr. Roongroj Listed Company - None 2013 – Present
Saengsastra Administration, shares Saengsastra’s Executive Director (Administration) at
Kasetsart University Son Non Listed Company 4 Dynasty Ceramic Public Co., Ltd and TileTop
Executive Director (7.35%) Companies Industry Public Co., Ltd
(Administration) Master of Art in 1. Executive Director at TileTop
International at November, Industry Public Co., Ltd Feb 2012 - Jan 2013
3 November 1975 Economics, Southern 2014 2. Director at Pick and Pay Co., Senior Executive Vice President
Methodist University, Ltd (Administration) at Dynasty Ceramic Public
USA 3. Director at Muang Thong Co., Ltd and TileTop Industry Public Co., Ltd
Ceramic Co., Ltd
Bachelor of Science in 4. Director at World Wide 2010 - Feb 2012
Business Computer Ceramic Co., Ltd Senior Executive Vice President (Production)
Information Systems, at Dynasty Ceramic Public Co., Ltd and Tile-
University of North Top Industry Public Co., Ltd
Texas, USA
2004 - Mar 2013
23
Vice President (Administration) at Dynasty
Ceramic Public Co., Ltd and TileTop Industry
Public Co., Ltd
2000 – 2004
Senior System Analyst, PepsiCo Business
Solutions Group. Plano, Texas. USA.
MIS Assistance / Network Administrator,
Westin Park Central/ Sheraton Park. Dallas,
Texas. USA.
System Analyst, Chapal Zenray Inc. Dallas,
Texas. USA.
Corporate Officers
Name / Position Highest Education % of Share Family relationship Other Current Position Experience
/ Age Holding among executives
Mr. Monrak Master of Business Administration, 7.35% at Mr. Roongroj Listed Company - None 2013 - Present
Saengsastra Kasetsart University November, Saengsastra’s Son Non Listed Company 4 Executive Director (Administration) at
Executive Director 2014 Companies Dynasty
(Administration) Master of Art in International 1. Executive Director at Ceramic Public Co., Ltd and TileTop
39 years old Economics, TileTop Industry Industry Public Co., Ltd
Southern Methodist Public Co., Ltd
University, USA 2. Director at Pick and Feb 2012 - Jan 2013
Pay Co., Ltd Senior Executive Vice President
Bachelor of Science 3. Director at Muang (Administration)
in Business Computer Thong Ceramic at Dynasty Ceramic Public Co., Ltd and
Information Systems, Co., Ltd TileTop Industry Public Co., Ltd
University of North 4. Director at World
Texas, USA Wide Ceramic Co., 2010 - Feb 2012
Ltd Senior Executive Vice President
(Production)
at Dynasty Ceramic Public Co., Ltd and
Tile-
Top Industry Public Co., Ltd
2004 - Mar 2013

Vice President (Administration) at
Dynasty
Ceramic Public Co., Ltd and TileTop
Industry
Public Co., Ltd
24
2000 - 2004
Senior System Analyst, PepsiCo Business
Solutions Group. Plano, Texas. USA.
MIS Assistance / Network Administrator,
Westin Park Central/ Sheraton Park.
Dallas,
Texas. USA.
System Analyst, Chapal Zenray Inc.
Dallas,
Texas. USA.
Miss Sontaya Bachelor of Accounting, 0.07% at None None 2010 - Present
Yaowalee Thammasat University November, Senior Executive VP Outlets and Support
Senior Executive VP 2014 at Dynasty
Outlets and Support Ceramic Public Co., Ltd
53 years old
2007 – Feb 2012
Secretary of Audit Committee at Dynasty
Ceramic Public Co., Ltd
2007 – 2010
Executive Vice President (Outlet
Marketing) at DynastyCeramic Public Co.,
Ltd
2005 – Present
Director at Pick and Pay Co., Ltd, Muang
Thong Ceramic Co., Ltd, and World Wide
Ceramic Co., Ltd
Mr. Suthee Boonnag Bachelor of Science Program in None None None 2010 - Present
Senior VP Technical Materials Science, Chulalongkorn Senior VP technical at Dynasty Ceramic
58 years old University Public Co., Ltd
2005 - Present
VP Technical (Acting)
Mr. Jaruwat Traithavil Engineering / Information 0.12% at None None 2010 – Present
Senior VP Production Technology, Australian National November, VP Production at Dynasty Ceramic Public
33 years old University 2014 Co., Ltd
Engineering Project Management, 2009 – 2010

University of Melbourne VP Production at TileTop Industry Public
Co., Ltd
2008 – 2010
25
Senior Engineer at at TileTop Industry
Public Co., Ltd
Miss Supaporn MBA in Accounting, University of None None None 2012 – Present
Meephatra the Thai Chamber of Commerce VP Accounting at Dynasty Ceramic Public
VP Accounting Co., Ltd
42 years old Bachelor of Accounting.
Bangkok University 2010 – 2012
Accounting Manager at Dynasty Ceramic
Public Co., Ltd
2007 – 2012
Head of Accounting Department at
Dynasty Ceramic Public Co., Ltd
Mr. Maruth Master of Science in Computer 7.35% at Mr. Roongroj Listed Company Sep 2013 – Present
Saengsastra Science, Southern Methodist November, Saengsastra’s Son Senior Executive Vice Senior Executive Vice President
Executive Director at University, USA 2014 President (Marketing) at Dynasty Ceramic Public
TileTop Industry Co., (Marketing) at Dynasty Co., Ltd and TileTop Industry Public Co.,
Ltd (Subsidiary) Director Accreditation Program Ceramic Public Co., Ltd Ltd
37 years old (DAP) 107/2014
Non Listed Company 4 Nov 2010 – Present
Companies Assistant Company Secretary and
1. Senior Executive Vice Investor Relation at Dynasty Ceramic
President (Marketing) at Public Co., Ltd
TileTop Industry Public
Co., Ltd 2006 – Present
2. Director at Pick and Vice President Information Officer at
Pay Co., Ltd Dynasty Ceramic Public Co., Ltd
3. Director at Muang
Thong Ceramic Co., Ltd Aug 2001 – May 2005
4. Director at World Teaching Assistant at University of North
Wide Ceramic Co., Ltd Texas, USA
26
Appendix 5: Corporate Governance
The quality of corporate governance based on the principles of good corporate governance by Thai Institute of Directors
Association (IOD) in 2014, which are comprehensive and comparable to the Principles of Corporate Governance of the Organization
for Economic Co-operation and Development (OECD). The criteria can be classified to main 5 perspectives:
Rights of Shareholders: Basic shareholder rights and mechanism for shareholders to participate and informed on decisions
concerning fundamental corporate changes
Equitable Treatment of Shareholders: All shareholders should have the opportunity to obtain their rights and be treated equally.
Roles of Stakeholders: The recognition of the rights of stakeholders established by law or through mutual agreements and
encouragement of active co-operation between corporations and stakeholders in creating wealth and sustainability.
Disclosure and Transparency: Timely and accurate disclosure is made on all material matters regarding the corporation,
including the financial situation, performance, ownership, and governance of the company.
Board Responsibilities: the strategic guidance of the company, the effective monitoring of management by the board, and the
board’s accountability to the company and the shareholders.
After evaluating, DCC gets the score in good level congruent with the corporate governance rating of 3 out of 5 by Thai Institute of
Directors Association
Organization for Economic Co-operation and Development (OECD) Principles of Corporate Governance – Thai Institute of Directors
(IOD) criteria:
Rights of Shareholders (15%)
Equitable Treatment of Shareholders (10%)
Roles of Stakeholders (10%)
Disclosure and Transparency (20%)
Board Responsibilities (35%)
Total (100%)
Score range Number of Logo Description
90-100 Excellent
80-89 Very Good
70-79 Good
60-69 Satisfactory
50-59 No logo given Pass
Less than 50 No logo given N/A
Source- Team’s estimates, Thai Institute of Directors Association (IOD) and OECD Principles of Corporate Governance
27
Appendix 6: Absolute and Relative Increase in Household Debt
Household Debt Household Debt to

(Mn THB) GDP (%)
10,000 90
82 82.6 84
79 80
9,000
74 76 76.5 77 80
8,000 72.5
70
7,000
60
6,000
5,000 50
1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014
Amount of Household Debt Household Debt to GDP (%)
Source: Bank of Thailand
Appendix 7: Growth of Renovation Market
Home Renovation
Market Growth (%YoY)
25 4.7% 5.0%
20 4.0%
2.9% 2.8%
15
2.5% 2.4% 3.0%
2.3%
10 2.4% 2.4% 2.4% 2.0%

2.2% 2.2%
2.1%
5 1.0%
0 0.0%
2008 2009 2010 2011 2012 2013
Provincial area Bangkok Provincial area Bangkok
Source: Real Estate Information Center
28
Appendix 8: Domestic Manufacturers Market
RCI-Rci
TGCI-Campana
4%
Casa
9%
UMI-
DCC-Dynasty
Dulagres
28%
14%
SCC-Cotto SOUSUCO
28% 17%
Company Brand Sales (In Mn THB, as Gross profit Net profit

of 2013) margin margin
Dynasty Ceramic Dynasty, Tiletop, Tomahawk, 7,546 41.10% 17.20%
Jaguar, Anna, Value, Mustang
The Union Mosaic Industry PCL Duragres, Duragres Lila, UMI 3,736 17.32% 0.21%
Thai-German Ceramics industry Campana, Casa 2,576 33.39% 7.65%
The Royal Ceramic Industry RCI, Modena 1,015 31.23% 6.31%

PCL
29
Appendix 9: DCC’s Five Forces Analysis
Competitive Rivalry
within industry
5
Threat of Substitute Bargaining Power of

Products 2.5 Customers
2
1 1
Threat of New Bargaining Power of

Entrances Suppliers
1 = Low impact to DCC

5 = High impact to DCC
Source: Team’s Analysis
Threats of New Entrances

The huge capital investment will provide a great barrier of entry for tiles industry. The production has to be done by large amount
in order to benefit from economy of scales. Currently, the industry basically gives low margin without a concurrent increase in
demand that seems to be less attractive in the eyes of new comers. Thus, the unfavorable impact from new entrances is low.
Threats of Substitute Products

Both when building new house and renovating, tiles will always be one of materials required. Even though some has shifted away
from using tiles, there is a specific area that tiles could not be substituted such as where there is humid. Without complete
alternatives, substitute product does not really be a threat to DCC.
Bargaining Power of Customers

DCC has been producing low price tiles in order to serve low-income people. The pricing for this targeted segment is more
competitive comparing to the upper level. As a result, the company could not sharply increase the price. However, there is a small
room for DCC to slightly increase the selling price since its tiles are currently priced below average. This bargaining power of
customers could cause a medium impact to DCC.
Bargaining Power of Suppliers

DCC orders raw materials including soils, minerals and grinded rocks from various sources, not limited to any suppliers. These
materials have no such uniqueness that allows suppliers to demand for premiums. Thus, bargaining power of suppliers has left no
effect to the company in terms of price risk and costs when switching from one to the other supplier.
Competitive Rivalry within Industry

The competitive landscape has intensified by both domestic manufacturers and imported tiles. Some local manufacturers are
expanding their product lines and increase distribution channels by joint venturing. Also, the coming imported tiles are priced at
even lower than of DCC’s posting a highly competitive environment. These threats would pass on high impact to DCC’s ability to
sustain their sales and market share.
30
Appendix 10: Growth of Specialty Store and Overall Modern Trade
Growth
(% YoY)
20.0 18.0
16.0
10.8 10.7 13.6
12.0 10.6 10.0
8.5
7.1
8.0
4.5 4.3
4.0
0.0
2010 2011 2012 2013 1H14
Specialty store Modern trade Average
Source: Thai Retailers Association
31
Appendix 11: Imported Tiles
Increasing value of imported tiles from China and Vietnam

10,000
8,000
6,000
4,000
2,000
-
2014 (Jan-
2008 2009 2010 2011 2012 2013
Sept)
China 2,579 3,022 4,379 4,571 5,162 7,580 4,596
Vietnam 222 251 453 716 1,176 1,126 787
Total 2,801 3,273 4,831 5,287 6,337 8,706 5,383
* In the end of 2013, The Thai Industrial Standard Institute (TISI) imposed the Quality Assurance Policy on imported ceramic tiles.
Many importers were afraid that the implementation of the new policies will cause the delay in their future imports. As a result,
many importers increased import volume up to 20-50%. The over-supply caused the import value to drop slightly in year 2014.
Thai Ceramic Tiles Market Size(In Mn THB)

40,000 4-year
10% CAGR (%)
35,000 28%
30,000 -1%
25,000 9%
13%
20,000
7%
15,000
10,000 2%
5,000 6%
-
2009 2010 2011 2012 2013
DCC-Dynasty SOUSUCO SCC-Cotto UMI-Dulagres

TGCI-Campana Casa RCI-Rci Import
Market Share by Value (%) 2009 2010 2011 2012 2013

DCC 24% 23% 25% 23% 21%
SOUSUCO 18% 16% 16% 15% 13%
SCC 24% 20% 19% 20% 21%
UMI 9% 9% 9% 10% 10%
TGCI 7% 10% 9% 9% 7%
RCI 4% 4% 4% 3% 3%
Imported tiles (China/Vietnam) 13% 17% 18% 22% 24%
32
Appendix 12: Home improvement centers (modern trade)
Home Product Center PCL: Thailand’s largest home improvement retailer, retails
products ranging from construction materials to home furniture. With 64 branches
locating in Bangkok and provincial areas. HMPRO targets upper-middle to high-price
customer segment in the modern trade channel.
Mega Home: Subsidiary company of Home Pro. First launched in 2013, Mega Home
retails and wholesales wide range of products, ranging from construction materials
to kitchen hardware, office suppliers and etc. Opposite to Home Pro, Mega Home
aims to capture lower-end market segment. It is the Home Pro’s management
intention to use Mega Home to penetrate into provincial markets.
Thai Watsadu: Founded in 2010, Thai Watsadu is one of Central Retail

Corporation’s subsidiary companies. The company offers wide variety of products
relate to construction materials. It targets a range of customers such as real estate
contractors and homeowners with total of 39 branches concentrate largely in
Central and North-East of Thailand.
Siam Global House PCL: Positions itself as “one stop shopping home center”.
Global House offers wide ranges of home improvement products (over 90,000
SKUs). Global House targets customers are home contractors and homeowners.
Focusing on provincial areas, Global House currently has 27 stores concentrate
largely in North-East of Thailand.
BoonThaVorn: Established in 1977, BoonThaVorn offers a great variety of tiles,

kitchen and bathroom hardware. Not only providing quality products, BoonThaVorn
also offers a seamless customer service. With this clear positioning, BoonThaVorn
target customers are upper-middle to high-income segments. Currently it has total
of 10 branches in Bangkok and vicinity.
33
Appendix 13: Comparison among DCC and other improvement centers
Number of branches (as of

Name Average store size (sq. m.) SKUs
Nov 2014)
Home Pro 12,000-18,000 60,000 64
Mega Home 20,000-30,000 80,000 2
Thai Watsadu 24,000 100,000 39
Global House 18,000-32,000 90,000 36
BoonThaVorn 20,000 50,000 10
DCC* 3,000-5,000 1,000 195
Source: Company’s data and Team’s estimates
Appendix 14: Home Improvement Centers store footprint
2013 2014F 2015F 2016F

Home Pro 62 64 74 80
Mega Home 1 4 7 10
Global House 27 36 44 54
Total 90 104 125 144
2014F 2015F 2016F

Home Pro 2 10 6
Mage Home 3 3 3
Global House 9 8 10
Total number of new stores 14 21 19
34
Appendix 15: Calculations of upside and downside beta between DCC stock price and SET Index
DCC Downside Beta of 0.73 is calculated from 10-year weekly historical data, included only the day that
SET index generate positive return in order to see how DCC stock price movement on those days. While
Upside Beta of 0.48 is coming from the weekly return of DCC stock in the period that the market generates
positive return.
DCC Downside Beta

0.00%
-15.00% -10.00% -5.00% 0.00% 5.00% 10.00%
-5.00%
-10.00%
-15.00%
DCC Upside Beta

10.00%
5.00%
0.00%
-15.00% -10.00% -5.00% 0.00% 5.00% 10.00%
35
Appendix 16: DCF Assumptions
1. Sales
For year 2014, we use actual 3 quarters information from company’s announcement while the projections for year 2015 to 2109
are forecasted as followed:
Average Selling Price (ASP)
Average selling price is forecasted to grow 1%. We believe that the company will be able to slightly increase the price to capture
the recovery in economy, though the ASP growth will not be as high as the historical period due to the intense competition. ASP for
each distribution channel is derived from discounted margin and sales volume contribution based on forecasted company’s ASP.
𝑛
ASP = ∑ 𝑊𝑖 × [𝐴𝑆𝑃1 × (1 − 𝐷𝑀𝑖 )]

𝑖=1
ASP for outlet sales can be derived from the above equation. Then, we multiply it with (1 – DM) to get the ASP for other distribution
channels.
Discounted
Sales Volume Contribution (W) 2014F 2015F 2016F 2017F 2018F 2019F
Margin (DM)*
(1) Outlet 67.71% 67.08% 67.28% 67.15% 66.74% 66.12% -
(2) Real Estate Developer 9.77% 9.99% 10.06% 10.22% 10.43% 10.71% 3.00%
(3) Home Improvement Retailer 17.45% 18.04% 17.99% 18.10% 18.36% 18.75% 5.00%
(4) Franchise 2.73% 2.60% 2.43% 2.32% 2.29% 2.26% 5.00%
(5) Export 2.35% 2.28% 2.24% 2.21% 2.18% 2.15% -
*The
*The prices are discounted from outlet selling prices
ASP by Channels 2014F 2015F 2016F 2017F 2018F 2019F

Outlet 138.75 140.12 141.51 142.93 144.38 145.87
Real Estate Developer 134.59 135.91 137.26 138.64 140.05 141.49
Home Improvement Retailer 131.81 133.11 134.43 135.78 137.16 138.57
Franchise 131.81 133.11 134.43 135.78 137.16 138.57
Export 138.75 140.12 141.51 142.93 144.38 145.87
Weighted Average 136.88 138.25 139.63 141.03 142.44 143.86
Outlet Stores Assumptions
Number of Stores
The number of stores in 2014 is forecasted to be 195 stores, according to the Company’s data as of December 2014, which are less
than 196 stores in 2013. For the rest of forecast period, the assumptions are based on past achievement along with the limited
expansion opportunity as following:
2014F 2015F 2016F 2017F 2018F 2019F

No. of new stores 0 3 3 2 2 1
36
Same Store Sales Volume
Sales volume per store for DCC is forecasted to increase in 2015 from the economic recovery and slowdown to flat rate throughout
the forecast period. As the company is going through the mature stage, sales growth tends to slowdown and the cannibalization
from new stores opened will also reduce the sale volume per store. The forecast of year 2014 is based on actual information.
SSS Volume Growth VS. No. of New Stores
2.00% 4
1.50% 3
1.00% 2
0.50% 1
0.00% -
2015F 2016F 2017F 2018F 2019F
No. of New Stores (LHS) SSS Volume Growth (RHS)

Other Distribution Channels Assumptions
Volume Growth
We expect the sales through franchises to continuously decline as the management has shifted the focus to other channels and has
no further plan on franchise expansion, while export sales remain flat. Sales through real estate developers and home
improvement centers are estimated to grow at 2-3% per year from 2015 to 2019 due to management’s intention to focus more on
these two channels.
37
2. Cost of Production
Cost of production for Dynasty Ceramic tiles composes of 3 main components: Natural gas costs, Variable costs and Fixed costs,
including depreciation and labor costs. Natural gas and other variable costs are driven by forecasted volume, while fixed costs are
forecasted based on data of previous period.
Cost of Production 2013
Natural Production
Gas Costs Assumptions
16%
Costs
30%
Natural Gas Ministry of Energy's
Costs forecast
Variable Costs
48% 20% Average of historical
Variable Costs
cost per unit
7% Fixed Costs Fixed
4% Depreciation Average usage life
22%
1%
Fixed Costs Labor Costs Inflation
Sources: Bloomberg Data and Team's Estimates
Materials Chemicals Power
Packaging Supplies Used
Natural Gas Price Forecast (2013 - 2030)

THB
800
600
400
200
0
2013 2017F 2022F 2027F 2030F
Local Production Import from Myanmar Imported LNG
Source: Ministry of Energy
3. Capital Expenditures
Capital expenditures are invested in 3 main activities: Store expansion and relocation, Store renovation, and Production
capacity maximization. The assumptions are estimated based on management’s target and past performance.
CAPEX (in Mn THB) 2014F 2015F 2016F 2017F 2018F 2019F Assumptions
No. of new stores 0 3 3 2 2 1
Team estimates
No. of relocated stores 10 10 10 10 10 10
Store expansion & relocation costs 150 195 195 180 180 165 15Mn THB / Store
No. of store renovation 45 45 45 20 5 5 Team estimates
Store renovation costs 90 90 90 40 10 10 2Mn THB/ Store
No. of kiln modification & maintenance 2 2 2 2 2 2 Team estimates
Kiln modification & maintenance
80 80 80 80 80 80 40Mn THB / Store
costs
Other CAPEX 72 74 76 78 80 81 Percentage of sales
Total CAPEX 392 439 441 378 350 336
38
4. Depreciation
The base annual depreciation represents the depreciation of existing assets, derived from company’s data. Depreciation on new
fixed assets is calculated using straight-line method.
Depreciation (in Mn THB) 2014F 2015F 2016F 2017F 2018F 2019F Assumptions
Base annual depreciation 227 218 209 200 192 184 Team's calculation
Buildings (2014-2019) 7 15 23 29 34 39 30 years
Machineries and others (2014-2019) 13 25 38 52 65 78 12 years
Annual Depreciation 247 258 271 281 292 302
5. Working Capitals
Working capitals are forecasted based on assumptions as following:
Working Capitals 2014F 2015F 2016F 2017F 2018F 2019F

Accounts receivable days 5.90 6.30 6.50 6.70 6.90 7.00
Inventories days 138.50 139.50 142.00 143.00 143.50 144.00
Accounts payable days 52.41 53.00 53.00 53.50 53.50 54.00
Accounts receivable days are expected to slightly increase as the company is trying to capture more sales through home real
estate developers and home improvement centers that will require longer credit terms.
Inventory days are forecasted to increase due to the higher variety of products offered. This would require higher inventory level.
Accounts payable days are estimated based on the historical trend.
6. Income Statement
Accounts Assumptions
Other income Percentage of sales
Selling expenses Percentage of sales
Administrative expenses Percentage of sales plus depreciation expenses
Finance costs Company's interest rate on short-term loan from previous period
Income tax Corporate income tax policy
39
7. Balance Sheet
Accounts Assumptions
Cash and cash equivalents Minimum cash balance as percentage of total assets
Trade accounts and notes receivable Accounts receivable days
Inventories Inventories days
Other assets Percentage of sales
Short - term loans Funding required to maintain minimum cash balance
Trade accounts and notes payable Accounts payable days
Additions - Percentage of beginning balance
Unfunded provident fund
Subtractions - Average historical payment during the year
Additions - Equal to 2013 increase in obligation and interest
Employee benefits obligation
Subtractions - Average historical obligation payment
Other liabilities Percentage of sales
Appropriate retained earnings Equal to 2013 nominal amount
Additions - Net income attributed to company's shareholders
Unappropriate retained earnings
Subtractions - Dividend payment
Dividends Percentage of income attributed to company's shareholders
8. Terminal Value
Terminal growth for DCC is derived from the formula:
g = b x ROE
Where: g = Perpetual growth rate
b = Long-term retention ratio
ROE = Return on equity
There are 2 stages of perpetual growth rate in the valuation. In the first stage, we use the growth rate of 2.32%, derived from ROE
forecast as of 2019 at 46.32% and expected retention ratio of 5%, which is sufficient for operation and debt repayment. The last
stage reflects the target ROE of 26.24%, calculated from Du Pont analysis, using peers’ average profit margin of 9.20% and given
other factors constant. The last perpetual growth rate is 1.31%.
40
Appendix 17: WACC Assumptions
Variables Values Sources

Risk-Free Rate 2.86% 10-year Thai Government Bonds yield as of 8 December 2014
Market Return 11.98% 10-year historical SET weekly return
Beta 0.57 Bloomberg data
Country Risk Premium 2.50% Bloomberg data
Cost of Equity 9.48% Team computations
Pre-tax cost of Debt 3.38% Company disclosures
Marginal Tax Rate 20.00% The Revenue Department
Cost of Debt, post tax 2.71% Team computations
Effective WACC 8.99% Team computations
1. Risk-Free Rate
The risk-free rate is based on 10-year Thai Government Bonds with yield of 2.86% as of December 19, 2014.
2. Market Return
The market return for Thailand is based on 10-year historical SET weekly return.
3. Beta
The beta of 0.57 is derived from the regression of 10-year weekly DCC stock prices with SET Index.
4. Pre-tax Cost of Debt

The Pre-tax cost of debt for DCC is based on the Company’s average short-term borrowing rate, mainly promissory
notes, in previous periods.
5. Marginal Tax Rate

The tax rate of 20% is based on the corporate income tax rate set by the Revenue Department of Thailand.
6. Capital Structure
The capital structure for each period is forecasted as following:
Capital Structures 2014F 2015F 2016F 2017F 2018F 2019F

Debt 5.45% 6.27% 7.00% 7.26% 7.56% 7.53%
Equity 94.55% 93.73% 93.00% 92.74% 92.44% 92.47%
WACC 9.11% 9.06% 9.01% 8.99% 8.97% 8.97%
41
Appendix 18: DCF Analysis
1. Dividend Discount Model (DDM)
DDM (THB) 2014F 2015F 2016F 2017F 2018F 2019F

Dividend 2.93 2.99 3.06 3.12 3.18 3.23
Terminal Value 46.11
Cash Flow 2.93 2.99 3.06 3.12 3.18 49.34
By discounting the cash flows at 9.48% cost of equity, DDM reflects the fair price of THB 42.14 per share.
2. Free Cash Flow to Firm (FCFF)
FCFF (Mn THB) 2014F 2015F 2016F 2017F 2018F 2019F

EBIT 1,534 1,567 1,610 1,644 1,676 1,707
- Tax (20%) (307) (313) (322) (329) (335) (341)
+D&A 251 264 276 287 297 308
- CAPEX - Net (383) (429) (431) (367) (338) (325)
- Change in NWC (12) (70) (65) (18) (68) (2)
Free Cash Flow 1,084 1,018 1,068 1,218 1,233 1,346
Terminal Value 18,584
FCFF 1,084 1,018 1,068 1,218 1,233 19,931
Since the capital structure changes due to higher leverage, we discount the cash flows with different WACC for each period. The
terminal value is discounted back in 2 stages with different perpetual growth rate, 2.32% and 1.31%.
2014F 2015F 2016F 2017F 2018F 2019F

FCFF 1,084 1,018 1,068 1,218 1,233 1,346
Terminal Value 18,584
Total FCFF 1,084 1,018 1,068 1,218 1,233 19,931
+ PV of next year's CF 16,598 17,083 17,554 17,915 18,290
PV of FCFF 17,682 18,102 18,622 19,133 19,522
WACC 9.11% 9.06% 9.01% 8.99% 8.97% 8.97%
We discount each cash flow back period by period using particular WACC for each year until 2015. The PV of FCFF in 2015 is the
target firm value. Then we subtract with net borrowing to arrive in the target price of THB 43.84.
Target Price (In Millions)

PV of FCFF 18,102
- Net Debt (1,520)
Value of Equity 16,581
No. of Common shares 408
Price/Share 40.64
42
Appendix19: Relative Valuation
Since there are no close peers for DCC in construction materials sector, cross-sector peers were chosen to better
reflect DCC’s market sentiment.
Trailing
Bloomberg 12-month
Company Listed Exchange P/E P/B PEG EV/EBITDA
Ticker Revenue
(Mn USD)
Stock Exchange of
DYNASTY CERAMIC PUB CO LTD DCC TB 225.55 18.90 8.58 7.43 13.68
Thailand
Stock Exchange of
SIAM CEMENT PCL/THE SCC TB 14,748.43 16.77 3.27 7.15 13.76
Thailand
Stock Exchange of
SIAM CITY CEMENT PUB CO LTD SCCC TB 982.76 18.67 4.77 2.58 13.67
Thailand
Stock Exchange of
THAI-GERMAN CERAMIC INDUS PU TGCI TB 92.81 16.67 1.64 1.50 12.74
Thailand
Stock Exchange of
SOUTHERN CONCRETE PILE PCL SCP TB 60.07 7.83 2.31 0.03 5.17
Thailand
Stock Exchange of
SIAM GLOBAL HOUSE PCL GLOBAL TB 470.41 50.39 2.45 2.13 39.81
Thailand
YI-LAI BHD YLAI MK Bursa Malaysia 51.30 10.84 0.78 10.16 4.86
Hanoi Stock
CHANG YIH CERAMIC JSC CYC VN 17.08 11.89 0.31 0.06 7.30
Exchange
Hanoi Stock
THANH THANH CERAMIC JSC TTC VN 17.66 4.94 0.84 0.15 2.02
Exchange
Average excludes max. and min. 14.51 3.00 2.30 10.17
Source: Bloomberg
Relative Valuation Target Price

P/E Band 39.13
P/E 43.33
EV/EBITDA 45.64
Comparable company Description

Tier 1: Local construction material manufacturer
Southern Concrete Pile PCL (SCP) is a subsidiary of Chinteik Brothers Group (CB Group), which consists of more than 20
companies in different industries. With more than 30 years of experiences in construction material business, SCP produces all types
of pretressed concrete products and other related precast-pretresses concrete for construction industry. SCP is also the biggest
supplier of electric poles for the Provincial Electricity Authority. Up to date, SCP has total of 6 large plants located nationwide, with
annual production capacity of more than 300,000 cubic meters.
43
Thai-German Ceramic Industry PCL (TGCI) manufactures and distributes decorative glazed and unglazed floor tiles under T-GCi,
Campana, and Casa brand names. TGCI targets low to lower-middle income customer segment. The company distributes its
products mainly through agents or home improvement retailers. Currently, it has total production capacity of 20 Mn sq. m.
Siam Cement PCL (SCC) is one of the largest diversified industrial company and is the largest cement company in Thailand. The
company’s operations include cement manufacturing, petrochemicals manufacturing, paper manufacturing, building materials
manufacturing and distribution. SCC has a very well-established brand in both local and international markets. COTTO is one of the
most well-known tile brand in Thailand under SCC’s business portfolio. The company produces a wide range of products that serve
almost all target customers from high to low end. The company aims to become the largest tile manufacturer.
Siam City Cement PCL (SCC) is a manufacturer and seller of different types of cement for various applications. The products are
sold under company’s own brand “Insee”.
Tier 2: Local home improvement retailer
Siam Global House PCL (GLOBAL) operates as a building materials and home improvement retailer, with over 31 branches located
in the Northern, North Eastern and Western regions in Thailand. Global House store provides a wide range of products over
100,000 items, and positions itself as a provider of quality products at affordable price.
Tier 3: Regional tile manufacturer
Yi-Lai BHD (YLAI MK) is a Malaysia-based investment holding company. The company, through its subsidiaries, is engaged in the
manufacture and sales of ceramic tiles. The company sells the products under the brand “Alpha Tiles”.
Chang Yih Ceramic JSC (CYC VN) is a manufacturer of floor and wall tiles with many designs and sizes based in Vietnam. Founded
in 2000 and listed on Ho Chi Mihn City stock exchange in 2006, Chang Yih applies the best in class technology for its tile
manufacturing business. The products are not only distributed though networks in Vietnam but also being exported to many
different countries. Currently, the company is developing and marketing its products under “KIS” brand.
Thanh Thanh Ceraic JSC (TCC VN) is a Joint Stock Company based in Vietnam with more than 30 years of established experiences
in ceramic tiles market. Its products have been selected by consumers to be the Vietnamese high-quality goods. Thanh Thanh’s
market has been covering all provinces in Vietnam and exported to many countries including Thailand.
44
Appendix 20: DCC Expected Return-to-Beta comparison
18.0%
GLOBAL TB
16.0% TGCI TB
14.0%
12.0% SCC TB
10.0% Average
DCC
E(R)
8.0%
6.0%
TTC VN
4.0%
Average
2.0%
0.0%
0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20
Beta
Company E(R) Beta
Tier 1
DYNASTY CERAMIC PUB CO LTD 8.6% 0.57
SIAM CEMENT PCL/THE 11.1% 0.98
SIAM CITY CEMENT PUB CO LTD 11.5% 0.94
THAI-GERMAN CERAMIC INDUS PU 14.6% 0.95
SOUTHERN CONCRETE PILE PCL 15.0% 0.90
Tier 2
SIAM GLOBAL HOUSE PCL 15.4% 1.12
Tier 3
YI-LAI BHD 8.4% 0.85
CHANG YIH CERAMIC JSC 7.2% 0.66
THANH THANH CERAMIC JSC 6.1% 0.99
Average 10.9% 0.89
Source: Bloomberg
45
Appendix 21: DCC Price-to-Earnings Ratio to Earning Growth Comparison
55.00
GLOBAL TB
45.00
35.00
25.00
PERDCC
TGCI TB Average
15.00
SCC TB
TTC VN
Average
5.00
-5.000.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00

Earning Growth (%)
Earning
Company PER PEG
growth(%)
Tier 1
DYNASTY CERAMIC PUB CO LTD 18.90 2.54 7.43
SIAM CEMENT PCL/THE 16.77 2.34 7.15
SIAM CITY CEMENT PUB CO LTD 18.67 7.23 2.58
THAI-GERMAN CERAMIC INDUS PU 16.67 11.08 1.50
Tier 2
SIAM GLOBAL HOUSE PCL 50.39 23.64 2.13
Tier 3
YI-LAI BHD 10.84 1.07 10.16
THANH THANH CERAMIC JSC 4.94 32.00 0.15
Average 19.59 11.42 4.44
Source: Bloomberg
46
Appendix 22: DCC Return on Equity to Price-to-Book Value Comparison
50.00
DCC
45.00
40.00
35.00
30.00
ROE
25.00
(%) SCC TB Average
TTC VN
20.00
15.00
TGCI TB
10.00
Average
5.00
GLOBAL TB
0.00
0.00 2.00 4.00 6.00 8.00 10.00
PBV
Company ROE(%) P/BV
Tier 1
DYNASTY CERAMIC PUB CO LTD 44.66 8.58
SIAM CEMENT PCL/THE 20.19 3.27
SIAM CITY CEMENT PUB CO LTD 26.76 4.77
THAI-GERMAN CERAMIC INDUS PU 8.89 1.64
SOUTHERN CONCRETE PILE PCL 40.19 2.31
Tier 2
SIAM GLOBAL HOUSE PCL 5.78 2.45
Tier 3
YI-LAI BHD 6.97 0.78
CHANG YIH CERAMIC JSC 2.61 0.31
THANH THANH CERAMIC JSC 17.93 0.84
Average 19.33 2.77
Source: Bloomberg
47
Appendix 23: PE Band
17x
15x
13x
11x
9x
7x
5x
5x
Source: Company data and Team’s estimates
Appendix 24: DCC underperforms SET over the past 3 years
80%
60%
40%
20%
0%
-20%
-40%
DCC SET
Source: Bloomberg
48
Appendix 25: Du Pont Analysis
Source: Team’s analysis
49
Appendix 26: Impact-Probability Risk Analysis Matrix
Regulatory Operational
Macro risks
Impact risks risks
Significant
Moderate
Minor
Probability
Low Medium High
Appendix 27: Impact-Time to recover Risk Analysis Matrix
Regulatory Operational
Macro risks
risks risks

50
Appendix 28: Scenario Analysis
From the macro and operation risk analysis, average selling price, volume and natural gas price are the main variables that
will affect our recommendation. Hence, we perform scenario analysis to examine the impact of changes in these variables to
our target price. Assumptions for each scenario are based on standard deviations, calculated from 5-year historical growth.
Variables Base Case Better Case Best Case

ASP Growth + 0.25 SD + 0.5 SD
Volume Growth + 0.25 SD + 0.5 SD
Natural Gas Price Growth - 0.25 SD - 0.5 SD
Target Price 41.50 51.25 60.50
In both Better and Best case, the changes in the variables will change our recommendation from sell to hold at the target
price of THB 51.25 and THB 60.50 respectively.
Appendix 29: Sensitivity Analysis
Since Terminal value accounts for the major part of the DCF model, we perform sensitivity analysis of changes in perpetual
growth rates to our target price. In the analysis, we use terminal dividend payout ratio and ROE for sensitive variables, as
they are the main components of terminal growth.
ROE
41.43 9.48% 17.86% 26.24% 36.28% 46.32%
90.0% 43.45 46.19 49.64 55.13 63.03
Dividend 92.5% 41.27 43.05 45.15 48.20 52.04
Payout
Ratio 95.0% 39.25 40.29 41.50 42.98 44.75
97.5% 37.39 37.84 38.31 38.91 39.55
100.0% 35.66 35.66 35.66 35.66 35.66
Sensitivity Analysis Assumptions
 Dividend Payout Ratio:

The maximum dividend payout ratio is estimated at 100% based on current performance, which implies the zero
perpetual growth as the Company payout all earnings and has no retention for future investment. We believe 90%
is an appropriate estimate of minimum payout since it covers all investment and debt repayment while having
excess cash on hand.
 Return on Equity (ROE):

The cost of equity of 9.48% is used to estimate the lower bound of ROE at terminal time for DCC, which is the
minimum level for the company in order to sustain its business. The maximum of 46.32% represents ROE in the
last forecast year, 2019. It is the optimistic estimate for sustainable ROE.
51
Appendix 30: Real Option Valuation
Real Option Valuation Assumptions
Spot Value It is derived from the present value of expected
incremental FCFFs. In case that the option is
exercised, we expect DCC to open 2 stores each
year. The effect will gradually increase from
negative of -0.39% of net income to 2% increase
by the end of forecast period. On the other hand,
if the plan fails, the option will not exercise. The
differences between the stream of FCFFs from
implementing and not implementing the plan will
be used to calculate incremental FCFFs. Terminal
value of differences is also accounted. By
discounting the stream of cash flows, we obtained
the spot value of THB1,459 Million.
Strike Value We derived the strike value from additional

capital expenditures. It is estimated to be
approximately THB 30 million annually. It is
calculated from the cost of establishing new store.
Discounting additional CAPEX give us a strike
value of THB 1,614 Million.
Volatility Though DCC stock volatility is low, expanding

overseas will add risk to the company. Therefore,
we adjust the volatility up to 50% to reflect this
risk factor.
Risk-free 3 Year risk free rate of 2.27%
Option life Expected option life is 3 years from 2014-2016
Source: Team’s Analysis
52
Appendix 31: Production Capacity Analysis
In order to analyze whether DCC will need to increase its production capacity or not, we conduct scenario analysis on 4 cases
including;
1. No kiln modification
2. Kiln modification
3. No kiln modification with international expansion
4. Kiln modification with international expansion
This will help we see the production capacity utilization in all possible scenarios. The underlying assumptions are listed below.
Capacity
As of 2013, the Company has an annual production capacity of 69 Mn sq.m. DCC has implemented strategy to increase production
capacity by modifying 2 kilns per year. This strategy is expected to increase 5% of total production capacity. We expect the same
effect of this strategy to continue throughout the forecast period for all cases with kiln modification.
Utilization
DCC’s sales mainly come from domestic sales which is also expected to continue since there is no explicit plan for international
expansion from management. However, we also consider international expansion as part of the possible cases since it will directly
have an effect on production capacity. For international expansion cases, we assume that the Company will open 2 outlets per year
from the year 2017-2019. The sales volume per outlet will be the average domestic outlet sales volume per branch. Since all
products produced usually are not totally sold, we expect the stock keeping to be at the average 3-year rate.
Case1: No Kiln modification 2011 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F
Full Capacity (Mn sq.m.) 61 69 69 69 69 69 69 69 69

Used Capacity (Mn sq.m.) 58 62 57 55 56 57 58 58 59
Utilization Rate 95% 90% 83% 80% 81% 82% 83% 84% 86%
Domestic Sales only
Total sales volume (Mn sq.m.) 56 58 55 53 53 54 55 56 57
Sales volume/Production volume 0.96 0.94 0.97 0.96 0.96 0.96 0.96 0.96 0.96
Case2: Kiln modification 2011 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F

Kiln modification
No. of Kiln 2 2 2 2 2 2
Capacity increase per kiln (Mn sq.m.) 1.73 1.73 1.73 1.73 1.73 1.73
Domestic Sales only
53
Case3: No Kiln modification with
2011 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F
International Expansion

Domestic sales volume (Mn sq.m.) 56 58 55 53 53 54 55 56 57
International sales volume (Mn
sq.m.) 0.4 0.7 1.1
Case4: Kiln modification with

2011 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F

Kiln modification
No. of Kiln 2 2 2 2 2 2
Capacity increase per kiln (Mn sq.m.) 1.73 1.73 1.73 1.73 1.73 1.73
International expansion
Domestic sales volume (Mn sq.m.) 56 58 55 53 53 54 55 56 57
International sales volume (Mn
sq.m.) 0.4 0.7 1.1
In all scenarios, there is an excess production capacity. Therefore, it is reasonable to expect that without
any unexpected expansion plan, DCC will not increase its production capacity in the near future.
54
Appendix 32: Comparable M&A Transaction
GLOBAL (offered price = 14 Baht) TGCI (offered price = 1.45 Baht) Average
Weighted Weighted
average average
Number of % of Number of % of % of
closing price per closing price per
retroactive days premium retroactive days premium premium
share share
(Baht/share) (Baht/share)
30 days 12.58 11.29% 30 days 1.42 2.11% 6.70%
60 days 12.09 15.80% 60 days 1.29 12.40% 14.10%
90 days 11.75 19.15% 90 days 1.13 28.32% 23.73%
180 days 11.48 21.95% 180 days 1.1 31.82% 26.88%
360 days 10.16 37.80% 360 days 1.26 15.08% 26.44%
DCC
Weighted
average
Expected
Number of retroactive closing price % of
offered price per
days per premium
share (Baht/share)
share
(Baht/share)
30 days 56.35 6.70% 60.12
60 days 57.11 14.10% 65.17
90 days 57.57 23.73% 71.24
180 days 56.75 26.88% 72.00
360 days 55.44 26.44% 70.10
Source: GLOBAL & TGCI’s data and Team’s Analysis
We use GLOBAL and TGCI as the comparable target acquisition companies because they are in construction
material industry and have partial similarity as DCC business. More importantly, they were also staked by
SCC, the largest cement-building material company in Thailand that has highest possibility to acquire DCC.
TGCI was staked by SCC 74.71% in 2008 and GLOBAL was staked by SCC 30.02% in 2012. Both deals also
used Market Value Approach in order to finalize the tender offer price. Therefore, we also apply this
method from the deals in order to estimate the premium and expected tender offer price of DCC.
55
Appendix 33: Management Structure Saengsastra Family member
Non- Saengsastra Family member
Board of Directors
Mr. Roongroj Saengsastra (Chairman)
The Company Secretary Office
Miss Cattleya Saengsastra (Company Secretary)
Audit Committee Nomination and remuneration Executive and Corporate Governance Risk Management and Business
Committee Committee Continuity Committee
Mr. Yothin Juangbhanich (Chairman)
Mr. Roongroj Saengsastra (Chairman) Mr. Roongroj Saengsastra (Chairman) Mr. Sanchai Janejarat (Chairman)
President
Mr. Sanchai Janejarat (Chairman)
Executive Director Administartion Senior Executive VP Marketing Senior Executive VP Technical

Mr. Monrak Saengsastra Mr. Maruth Saengsastra Mr. Suthee Boonnak
Senior Executive VP Outlets and Senior Executive VP Production

Support
Mr. Jaruwat Traithavil
Miss Sontaya Yaowalee
Source: Company data
56
Appendix 34: Tile manufacturing factories
DCC owns two tile manufacturing factories both directly and through its subsidiary located in Saraburi:
DCC Factory
Address: 54/8 Moo3, Suwannasorn Road, Koke Yae Sub-District, Nong Kae District, Saraburi Province 18230
Tile Top Factory
Address: 3/2 Moo 8, Paholyothin Road, Nong Khai Nam Sub district, Nong Khae District, Saraburi Province 18140
57
Appendix 35: Major shareholders structure as of November, 2014
Holder Name Position Insider Percent

status Outstanding
ROONGROJ SAENGSASTRA 100,000,000 Yes 24.51
VIBUL VADCHARASURANG 35,219,610 No 8.63
MONRAK SAENGSASTRA 30,000,000 Yes 7.35
MARUT SAENGSASTRA 30,000,000 Yes 7.35
CHAIYASITH VIRIYAMETAKUL 20,460,000 Yes 5.01
SUPANEE TONGPLENGSRI 18,000,000 No 4.41
CATTLEYA SAENGSASTRA 11,000,000 Yes 2.70
KRUNGSRI DIVIDEND STOCK LTF (KFLTFDIV) 10,142,300 No 2.49
SUVIT SMARNPHANCHAI 10,000,000 Yes 2.45
STATE STREET BANK EUROPE LIMITED 9,018,751 No 2.21
THAI NVDR CO LTD 7,421,222 No 1.82
CHASE NOMINEES LIMITED 6,398,800 No 1.57
KRUNGSRI DIVIDEND STOCK FUND (KFSDIV) 5,529,800 No 1.36
ABERDEEN SMALL CAP FUND 4,296,100 No 1.05
SUWIT PANYAWI 4,085,000 No 1.00
RAMKHAMHAENG HOSPITAL PCL 4,008,300 No 0.98
CHASE NOMINEES LIMITED 50 3,935,200 No 0.96
RACHAN TAYANUWAT 3,476,150 No 0.85
ABERDEEN GROWTH FUND 3,250,500 No 0.80
ABERDEEN LONG TERM EQUITY FUND 3,155,200 No 0.77
STATE STREET BANK AND TRUST COMPANY 2,700,566 No 0.66
SUPANNIKA VADCHARASURANG 2,042,500 No 0.50
ROSSUKON VADCHARASURANG 2,040,300 No 0.50
Source: SET
58
Disclosures:
Ownership and material conflicts of interest:
The author(s), or a member of their household, of this report does not hold a financial interest in the
securities of this company.  The author(s), or a member of their household, of this report does not
know of the existence of any conflicts of interest that might bias the content or publication of this
report. 
Receipt of compensation: 
Compensation of the author(s) of this report is not based on investment banking revenue. 
Position as a officer or director: 

The author(s), or a member of their household, does not serve as an officer, director or advisory
board member of the subject company. 
Market making: 
The author(s) does not act as a market maker in the subject company’s securities. 
Disclaimer: 
The information set forth herein has been obtained or derived from sources generally available to the
public and believed by the author(s) to be reliable, but the author(s) does not make any
representation or warranty, express or implied, as to its accuracy or completeness. The information
is not intended to be used as the basis of any investment decisions by any person or entity. This
information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy
or sell any security. This report should not be considered to be a recommendation by any individual
affiliated with CFA Society of Thailand, CFA Institute or the CFA Institute Research Challenge with
regard to this company’s stock.

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CFA Institute Research Challenge

4 3.3 Industry Highlights

Figure 11: Domestic Manufacturers

Own retail stores Dealer / modern trade

Five-Year Projected Cash Flow Assumptions

FCFF Weighting of Valuation Models

Figure 25: Decreasing in sale growth

Macro Risks (Market Risks)

Figure 31: Impact-Recovery Matrix

Figure 35: Real Option Valuation Other Upside Potentials

Additional Downside Risk

Costs of goods sold

Appendix B: Income Statement (Common-Size)

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES AND SHAREHOLDERS' EQUITY

Cash Flows from Investing Activities

Cash Flows from Financing Activities

Net Decrease in Cash and Cash Equivalents (2) (19) 11 4 5 5 5 5

• Floor and wall ceramic tiles under the “Dynasty” trademark

• Floor and wall ceramic tiles under the “Tomahawk” trademark

• Floor and wall ceramic tiles under the “Jaguar” trademark

• Floor and wall ceramic tiles under the “Anna” trademark

• Floor and wall ceramic tiles under the “Value” trademark

• Floor and wall ceramic tiles under the “Mustang” trademark

Product Types Sales Contribution

Floor 16x16 29%

Floor 12x12 41%

Low-price Products Wall 8x12 7%

Total Low-price Products 88%

Floor 24x24 (Rectified) 3%

Floor 16x16 Hybrid 5%

High-price Products Floor 16x16 Hybrid (Rectified) 1%

Floor 16x16 (Rectified) 3%

Floor 12x24 Hybrid (Rectified) 0%

Floor 12x24 (Rectified) 0%

Total High-price Products 12%

Dynasty Ceramic PCL. (DCC)

DCC Subsidiary, which DCC hold 96.83%

Tile Top Industry PCL

Muangthong Ceramic Co., Ltd

Pick & Pay Co., Ltd DCC holds 97.99%

World Wide Ceramic Co., Ltd DCC holds 99.93%

Source: Company Data

Dynasty Ceramic PCL. (DCC)

DCC Subsidiary which DCC hold 96.83%

Tile Top Industry PCL

Sells to Own Factory

Source: Company Data

4. Mr. Chaiyasith Bachelor of Engineering, 20,460,000 None Listed Company 1 Company

7. Mr. Phachon Bachelor of Arts in None None None 1975 – 2005

Advanced Mini- MBA,

2004 - Mar 2013

Engineering Project Management, 2009 – 2010

Rights of Shareholders (15%)

Equitable Treatment of Shareholders (10%)

Roles of Stakeholders (10%)

Disclosure and Transparency (20%)

Board Responsibilities (35%)

Score range Number of Logo Description

80-89 Very Good

50-59 No logo given Pass

Less than 50 No logo given N/A

Household Debt Household Debt to