ashoka buildcon absolute :...

November 13, 2017 Analyst: Devam Modi [email protected] (+91 – 90999 87467) of 15

Before reading this report, you must refer to the disclaimer on the last page.

Ashoka Buildcon Absolute : LONG

Relative : Overweight

2QFY18 Result: Estimate (), Target (), Rating () Regular Coverage 38% ATR in 17 Months

NH-6 traffic growth in double digits; execution to scale up post one-off impact in 2Q18E Construction

2017 Equirus All rights reserved

Rating Information

Price (Rs) 207

Target Price (Rs) 320

Target Date 31st Mar'19

Target Set On 13th Nov'17

Implied yrs of growth (DCF) 15

Fair Value (DCF) 326

Fair Value (DDM) 132

Ind Benchmark BSEMDCAP

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 38,805

Free Float (%) 43.35 %

52 Wk H/L (Rs) 243.5/136.5

Avg Daily Volume (1yr) 224,000

Avg Daily Value (Rs Mn) 42

Equity Cap (Rs Mn) 936

Face Value (Rs) 5

Bloomberg Code ASBL IN

Ownership Recent 3M 12M

Promoters 56.6 % 0.0 % 0.0 %

DII 27.0 % 2.2 % 3.9 %

FII 5.9 % -2.0 % -2.6 %

Public 10.5 % -0.2 % -1.3 %

Price % 1M 3M 12M

Absolute 9.8 % 17.5 % 30.0 %

Vs Industry 6.3 % 5.3 % -2.6 %

Sadbhav Eng 13.1 % 17.6 % 14.6 %

ITNL 19.8 % 28.2 % 55.1 %

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) 1.6 2.4 2.3 3.4

EPS (18E) 3.3 1.7 2.8 3.3

Ashoka Buildcon’s (ASBL) execution during 2QFY18 was hampered by one-offs

related to (1) local agitation in the Eastern Peripheral Project and, (2) lower T&D

revenues due to GST transition. With an order book of Rs 61bn and order book/TTM

revenues at 2.95x, we are confident on 20% revenue CAGR over FY17-FY20E. Toll

collections grew 17% yoy with most projects seeing decent traffic growth. We

expect new HAM project wins, sale of SBI Macquarie stake and steady EPC

performance to be key stock re-rating triggers. Maintain LONG with a SOTP-based

Mar’19 TP of Rs 320 (Sep'18 TP of Rs 276 earlier).

One-offs hurt execution; 2.95x OB/TTM revenue enhances visibility: Standalone

revenues declined 48% qoq/14% yoy due to local agitation at the Eastern Peripheral

Expressway and lower T&D revenues on account of GST transition. Normalcy has

been restored in these sites and with 2.95x OB/TTM revenue visibility, we remain

confident of 22%/23% revenue growth in FY18E/FY19E and 19% EBITDA CAGR over

FY17A-FY20E. We expect ASBL to generate EBITDA margins of 12.5-13% ahead with

increased contribution from higher-margin road EPC projects.

Four large ACL projects scale up with 17% yoy toll collection growth: During

2QFY18, ACL’s toll collections rose 14% yoy to Rs 1.95bn (2QFY17: Rs 1.7bn) aided by

toll rate hikes and strong traffic growth across key projects. Dhankuni/Jaora saw

16%/18% yoy revenue growth and Sambalpur/Belgaum 15%/17% yoy. Though the SBI

Macquarie stake transfer is taking some time, we expect a reasonable conclusion of

the process due to the inherent potential of NH-6 and a low traffic base.

Higher road share to improve WC position; expect order inflows to pick up in

2H: Higher contribution of roads and financial closure of HAM projects will lead to

a better margin profile and WC improvements ahead. Post the slow pace of

ordering in 1HFY18, we expect a substantial pick up in the coming 3-4 months.

Management is optimistic of incremental order inflows of Rs 30bn-40bn by FY18E.

Valuations offer significant room for re-rating: We expect a re-rating of the stock

led by (a) execution ramp-ups, (b) more EPC/hybrid annuity project wins and (c)

declining interest rates. We continue to value the stock at 15x P/E for FY18E EPC

business and FCFE-based DCF for BOT business. We have factored in (1) a 20%

holding company discount for the BOT portfolio and (2) ~Rs 5bn valuation for the

real estate portfolio. Key risks are weak execution and unrelated diversification.

Change in Standalone Estimates

% change over previous estimates

FY18E FY19E FY18E FY19E

Sales 24,963 30,739 -2.0% 0.4%

EBITDA 3,309 3,963 1.8% 4.4%

EPS 11.2 11.7 6.9% 2.5%

Standalone Financials

Rs. Mn YE Mar FY17A FY18E FY19E FY20E

Sales 20,451 24,963 30,739 36,517

EBITDA 2,597 3,309 3,963 4,616

Depreciation 507 517 577 612

Interest Expense 474 489 615 800

Other Income 719 333 148 153

Reported PAT 1,840 2,101 2,189 2,517

Recurring PAT 1,840 2,101 2,189 2,517

Total Equity 18,642 20,744 22,933 25,450

Gross Debt 1,768 3,907 4,103 4,144

Cash 638 380 -403 -1,228

Rs Per Share FY17A FY18E FY19E FY20E

Earnings 9.8 11.2 11.7 13.5

Book Value 100 111 123 136

Dividends 0.8 2.0 2.3 2.3

FCFF 17.8 -0.2 -2.8 -1.4

P/E (x) 21.1 18.5 17.7 15.4

P/B (x) 2.1 1.9 1.7 1.5

EV/EBITDA (x) 16.2 12.8 10.9 9.6

ROE (%) 10% 11% 10% 10%

Core ROIC (%) 17% 21% 20% 20%

EBITDA Margin (%) 13% 13% 13% 13%

Net Margin (%) 9% 8% 7% 7%

Ashoka Buildcon Ltd. Absolute – LONG Relative – Overweight 38% ATR in 17 months

November 13, 2017 Analyst: Devam Modi [email protected] (+91 – 90999 87467) of 15

Before reading this report, you must refer to the disclaimer on the last page.

Quarterly performance, standalone

Particulars (Rs Mn) 2QFY18 2QFY18E 1QFY17 2QFY17 % Change

Comments 2QFY18E 1QFY17 2QFY17

Net Sales 3,787 4,829 7,228 4,428 -22% -48% -14%

Operating Expenses 2,863 3,847 5,777 3,352 -26% -50% -15%

Employee Cost 247 226 269 207 9% -8% 19%

Other Expenditure 171 145 208 171 18% -18% 0%

Total Expenditures 3,281 4,218 6,253 3,730 -22% -48% -12%

EBITDA 506 611 975 697 -17% -48% -27%

Depreciation 130 146 113 130 -11% 15% 0%

EBIT 376 465 862 567 -19% -56% -34%

Interest 116 56 129 80 106% -11% 44%

Other Income 108 35 92 92 209% 17% 17%

PBT 368 444 824 580 -17% -55% -37%

Tax 41 111 205 125 -63% -80% -67%

Tax Rate 11% 25% 25% 22%

Recurring PAT 327 333 619 455 -2% -47% -28%

Extraordinaries 0 0 0 0

Reported PAT 327 333 619 455 -2% -47% -28%

EPS (Rs) 1.7 1.8 3.3 2.4 -2% -47% -28%

EBITDA Margin 13.4% 12.6% 13.5% 15.7% 71 bps -13 bps -239 bps

EBIT Margin 9.9% 9.6% 11.9% 12.8% 29 bps -200 bps -289 bps

PBT Margin 9.7% 9.2% 11.4% 13.1% 53 bps -169 bps -338 bps

PAT Margin 8.6% 6.9% 8.6% 10.3% 173 bps 6 bps -164 bps

Tax Rate 11.2% 25.0% 24.9% 21.6% -1378 bps -1365 bps -1034 bps


______________________________________________________________________________________________________________________________________ November 13, 2017 Analyst: Devam Modi [email protected] (+91 – 90999 87467) of 14

Key Quarterly Updates

Exhibit 1: Toll collections have risen robustly across stretches

A) Jaora-Nayagaon, Dhankuni & Sambalpur push toll collections up by 13%

ACL Projects 2QFY18 2QFY17 1QFY18 Yoy Qoq

Belgaum Dharwad 208 186 214 12% -3%

Dhankuni Kharagpur 757 659 786 15% -4%

Bhandara 150 146 156 3% -4%

Durg 185 189 190 -2% -3%

Jaora Nayagaon 503 425 474 18% 6%

Pimpalgaon Nasik - - - - -

Sambalpur 142 123 145 15% -2%

Total Toll Collection 1,945 1,728 1,965 13% -1%

Source: 2QFY18 Investor Presentation, Equirus Securities

B) Collections for ASBL projects up 13% YoY

ASBL Projects 2QFY18 2QFY17 1QFY18 Yoy Qoq

Ahmednagar Aurangabad 64 74 64 -13% 0%

Dewas - - - - -

Katni 44 42 55 4% -21%

Indore Edalabad - - - - -

Wainganga 71 69 75 2% -6%

Others* 244 155 220 58% 11%

Total Toll Collection 415 366 492 13% -16%


* # - Others include Anawali-Kasegaon, Kognoli Toll Plaza, Nashirabad, 3 Foot Over Bridges in

Mumbai and Hebbalu toll plaza Katni project: Toll collection under High Court order for extension of period on account of claims,

not recognized as revenue Closed toll operations of Indore-Edalabad project post expiration of the concession period from

18 Feb’17

c) Average Daily Toll Collection for 2QFY18

Project (Rs mn) Sept'17 Sept'16 Jun'17 Growth YOY

Belgaum Dharwad 2.29 2.04 2.38 12%

Dhankuni –Kharagpur 8.32 7.24 8.73 15%

Bhandara 1.65 1.60 1.73 3%

Durg 2.03 2.08 2.11 -2%

Jaora–Nayagaon 5.52 4.67 5.27 18%

Sambalpur 1.56 1.35 1.61 -

Ahmednagar– Aurangabad 0.71 0.81 0.71 -13%

Wainganga Bridge 0.77 0.76 0.83 2%

Katni Bypass 0.48 0.46 0.61 4%

Others 2.69 1.70 2.44 58%

Total Toll Collections 26.02 22.73 26.43 14%




Exhibit 2: Order-book breakup over last nine quarters

A. BOT order book at Rs 23,356mn

Project/Quarter (Rs mn) 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18

Dhankuni 2,093 1,871 1,205 978 802 595 759 578 501

Annuity BOT - Bagewadi 2,780 2,779 2,779 2,674 2,543 2,484 2,214 1,946 1,619

Annuity BOT - Hungund 2,490 2,490 2,489 2,488 2,466 2,428 2,225 1,928 1,698

Hybrid Annuity - Ludhiana - - - - 12,737 12,286 11,669 10,496 9,894

Chennai ORR 1,276 877 537 161 36 - - 48 -

KSHIP 1,104 654 - 21 13 - - - -

ModhulNipani - - 316

- -

Sambalpur - - - - - - -

Hybrid Annuity- Anandpuram - - - - - - 9,200 9,194 9,117

Others - - - - - - 226 226 527

Total 9,743 8,671 7,326 6,322 18,597 17,793 26,293 24,190 23,356

Source: Investor Presentations, Equirus Securities

B. EPC (Roads) order book at Rs 20,457mn


Eastern Peripheral 7,890 7,883 7,873 7,779 7,131 6,382 5,348 3,902 3,292

Mumbai JNPT 4,140 4,138 4,129 3,974 3,834 3,711 3,167 2,771 2,457

Islampur 2,770 2,770 2,766 2,764 2,761 2,759 2,756 2,754 2,752

MoRTH–Badami 1,108 1,107 1,043 940 774 554 388 311 304

MoRTH–Madhugiri 2,129 2,121 1,964 1,662 1,294 1,067 777 550 358

Jharkhand –Dumka - - 2,113 2,090 2,037 1,928 1,768 1,504 1,404

Jharkhand –Govindpur - - 1,901 1,898 1,826 1,791 1,917 1,429 1,369

Jharkhand –Chaas - - - 4,860 4,854 4,826 4,552 5,003 4,989

Maharashtra - - - - - - - - -

Others 3,052 3,987 3,789 3,303 4,582 4,585 4,174 4,097 -

Total 21,089 22,006 25,578 29,270 29,093 27,603 24,847 22,321 20,457




C. EPC(T&D) order book at Rs 17,288mn; execution affected in T&D projects due to GST-related issues, Bihar floods


D. Total Order Book stands at Rs 61,101mn

Order-Book 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18

Total 44,444 41,865 41,106 42,504 55,204 62,204 70,047 64,329 61,101

Growth 57% -6% -2% 3% 30% 13% 13% -8% -5%



Maharashtra 3,687 2,827 1,705 1,324 1,027 862 499 424 398

Bihar 7,304 5,965 4,796 4,129 3,529 12,661 12,613 11,890 11,501

Tamil Nadu 2,621 2,396 1,701 1,459 1,172 886 626 477 471

Uttar Pradesh - - - - 1,786 2,399 2,343 2,200 2,099

Jharkhand - - - - - - 2,827 2,827 2,820

Total 13,612 11,188 8,202 6,912 7,514 16,808 18,908 17,818 17,288



Valuation The current TP is contributed by (a) Rs 171/sh (Rs 154/sh earlier) for the standalone EPC

business and (b) Rs 148/sh (Rs 121/sh earlier) for the BOT portfolio.

Exhibit 2: Current SOTP Valuation

Valuation Details Valuation Stake Valuation Rs./share

Ashoka Buildcon Directly Owned

Operational Projects

Indore 4,099 100% 4,099 22

Aurangabad 215 100% 215 1

Dewas 1,304 100% 1,304 7

Wainganga 931 50% 466 2

Nashirabad 516 100% 516 3

Jaora 14,234 36.30% 5,167 28

ModhulNippani 696 61% 425 2

Value of Projects Directly Owned (A) 21,995 12,191 65

Ashoka Concessions (Valuation as on Mar 19)


Bhandara 3,496 51% 1,783 10

PNG -

Jaora 14,234 38% 5,366 29

Durg 6,409 51% 3,269 17

Belgaum 4,980 100% 4,980 27

Dhankuni 11,790 100% 11,790 63

Sambalpur 1,136 100% 1,136 6

Value of Operational Projects (B) 42,045 28,324 151

Projects Under Execution

CORR 2,859 50% 1,429 8

Hybrid Annuity (Ludhiana + Ranasthalam) 2,055 100% 2,055 11

Value of Projects Under Execution (C) 4,914

3,484 19

Total Value of Ashoka Concessions (B + C) 46,958 31,808 170

Share of SBI Macquarie 12,405 66

Share of Ashoka Buildcon as on Mar 19 19,403 104

Holding Company Discount of 20% 3,881 21

Valuation post HC Discount (D) 15,522 83

BOT Project Valuation (A + D) 68,953

27,713 148

Standalone EPC Business (E) 32,091 32,091 171

Total Valuation (A + D + E)

58,402 320

Exhibit 3: Earlier SOTP Valuation

Valuation Details Valuation Stake Valuation Rs./share

Ashoka Buildcon Directly Owned


Indore 3,898 100% 3,898 21

Aurangabad 222 100% 222 1

Dewas 1,264 100% 1,264 7

Wainganga 927 50% 463 2

Nashirabad 509 100% 509 3

Jaora 13,480 36.30% 4,894 26

ModhulNippani 616 61% 376 2

Value of Projects Directly Owned (A) 20,916 11,626 62

Ashoka Concessions (Valuation as on Mar 19)


Bhandara 3,313 51% 1,690 9

PNG -

Jaora 13,480 38% 5,082 27

Durg 6,069 51% 3,095 17

Belgaum 4,715 100% 4,715 25

Dhankuni 6,592 100% 6,592 35

Sambalpur 1,030 100% 1,030 6

Value of Operational Projects (B) 35,200 22,204 119

Projects Under Execution

CORR 2,703 50% 1,352 7

Hybrid Annuity (Ludhiana + Ranasthalam) 2,055 100% 2,055 11

Value of Projects Under Execution (C) 4,758

3,407 18

Total Value of Ashoka Concessions (B + C) 39,958 25,611 137

Share of SBI Macquarie 11,740 63

Share of Ashoka Buildcon as on Mar 19 13,871 74

Holding Company Discount of 20% 2,774 15

Valuation post HC Discount (D) 11,097 59

BOT Project Valuation (A + D) 60,874

22,723 121

Standalone EPC Business (E) 28,871 28,871 154

Total Valuation (A + D + E)

51,594 276

Source: Equirus Securities



Earnings call takeaways

Industry update: Bharatmala to provide a boost to opportunities

The government has taken up multiple new initiatives for the infrastructure sector.

The Bharatmala Project, worth Rs 7trn and having a target of building 83,677kms of

roads, will provide a significant boost. The government has roped in NHAI, MORTH

and state bodies for timely execution and monitoring.

The quarter hasn’t seen much ordering, but H2FY18 is expected to be much better.

Update on financials: Revenue of Rs 2bn hit by one-offs

The following one-offs hit 2QFY18 revenues by Rs 2bn: (1) Owing to renegotiations

with vendors on account of GST, work in the Eastern Peripheral Project was halted

for 50 days. (2) Execution in power T &D projects was affected due to GST-related

issues, delay in material supplies and Bihar floods.

Project level debt is Rs 44.9bn while standalone debt is Rs 1.39bn. Of the standalone

debt, equipment loan is Rs 705mn and working capital loan Rs 693mn.

A scheduled tariff increase has happened for all projects. Belgaum, Dhankuni and

Sambalpur Project witnessed about 4-4.2% toll hike, while Dhankuni and Durg a 3.5%

toll hike. Jaora Project saw a 10% toll hike during the quarter.

Other expenses shot up during the quarter due to the additional toll collection

contract taken in Karnataka. The contract is for a one-year period i.e. upto May’18.

Guidance: FY18E revenue growth of 20-25% with margins of 13-15%

The company has maintained its target of achieving 20-25% revenue growth in 2018.

Contribution from road projects is likely to be higher with 25-30% growth, followed

by growth in power project revenues at 15-20%

The company looks forward to order inflows of Rs 30-40bn. Of this, it expects 80% to

be contributed by road projects.

Management expects a tax rate of 21% for FY18 and 22% for FY19. Post this, 80IA

benefits would not be available and hence the tax rate shall normalize.

YTD, the company has already incurred Rs 1bn on road projects. The remaining half

of the year shall see an investment of Rs 700mn and FY19 of Rs 1.1bn. CGD projects

would require equity investment of Rs 150mn by Mar’18 and Rs 150mn in FY19. Real

estate projects yet to be undertaken would require investments of Rs 1.20bn in

FY18, Rs 700mn in FY19 and Rs 500mn in FY20.

ASBL has already spent Rs 250mn on equipment capex YTD. It shall incur another

Rs 200mn in FY18 and Rs 500mn in FY19.

Average interest rate for BOT projects is 9.5%, and should reduce to 9.1% by May’18.

Update on projects

The top-7 unexecuted projects in the company’s order book are as follows:

Projects Value Rs. Mn

Bihar Power T&D 11,501 HAM – Ludhiana 9,894 HAM – Anandpuram 9,117 Jharkhand – Chaas 4,989 Eastern Peripheral 3,292 Jharkhand Power T&D 2,820 Islampur 2,752

Jharkhand Chaas: Execution will start in the current quarter at this project.

Islampur Bypass: While AD has been given, land acquisition is pending.

Chennai ORR: Annuities shall start flowing in from the next quarter.

Mumbai Airport: The company is yet to sign the lease agreement since certain

clarifications are pending.

Sambalpur: There were no one-offs here with growth driven by tariff increases.

Dhankuni & Belgaum Dharwad: Extension is expected for both projects; a concession

of full 20% shall be received.

Refinancing of Dhankuni, Kharagpur & Sambalpur: Interest rates have been brought

down to 10.1%. The reset date as of now is May’18 when the refinancing is expected

at 9-9.5%.

Other updates

Exit of SBI Macquarie may happen in Mar’18.

HAM Maharashtra Projects worth Rs 300bn are expected to be bid out. Other states

are also looking at this model.



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY18E 11.2 9.5 18 % Expect consensus estimates to

streamline with management guidance FY19E 11.7 11.3 4 %

Sales FY18E 24,963 26,927 -7 %

FY19E 30,739 31,974 -4 %

PAT FY18E 2,101 1,755 20 %

FY19E 2,189 2,120 3 %

Our Key Investment arguments: (1) Proven execution capability, (2) minimal downside

risk to BOT valuations due to high level of operational assets with traffic records and

dismal state of traffic growth, (3) high credibility proven by multiple PE deals across

cycles

Key Drivers FY17A FY18E FY19E FY20E

EPC Revenues 20,451 24,963 30,739 36,517

EPC EBITDA Margin 13% 13% 13% 13%

BOT Revenues 6,954 8,567 9,912 11,628

BOT EBITDA Margin 77% 81% 83% 85%

Order Book 70,067 67,934 92,728 96,305

Risk to Our View

Protracted policy paralysis, high interest rate regime and low order book execution.

Key Triggers

Revival in NHAI activity, NHAI restructuring package, moderation in interest rates,

gradual progress of BOT projects, and economic recovery.

Sensitivity to Key Variables % Change % Impact on EPS

EPC Revenues -10 % -8%

Toll Growth -10 % -22%

Interest Rate 100 bps -5%

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.9 % 1.0 12.9 % 3.0 % 74.8 %

- FY18E FY19E FY20-22E FY23-27E FY28-32E

Sales Growth 13 % 21 % 8 % 7 % 5 %

NOPAT Margin 17 % 18 % 16 % 15 % 17 %

IC Turnover 1.08 0.91 1.00 1.61 2.31

RoIC 22.5 % 19.8 % 16.4 % 24.2 % 38.2 %

Years of strong growth 1 1 5 10 15

Valuation as on date (Rs) 121 133 105 214 275

Valuation as of Mar'19 143 157 124 252 326

Based on DCF, assuming 15 years of 15% CAGR revenue growth and 27% average ROIC, we

derive our current fair value of Rs 275 and a Mar’19 fair value of Rs 326.

Company Description:

Ashoka is one of the pioneers of BOT road projects and also does EPC contracting for

roads and power distribution. It has an order book of ~Rs 62bn and a portfolio of 17 BOT

projects, of which 16 are operational and one partially operational. It also has a small

RMC business and it utilizes the same for its captive construction.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E

Ashoka Buildcon LONG 207 38,805 320 31st Mar'19 -0.5 13.7 21.0 -389.5 15.2 9.9 89.3 2.1 -1 % 14 % 20 % 0.4 % 1.0 %

Sadbhav Engg LONG 316 54,294 386 30th Sept'18 11.0 14.8 15.4 28.9 21.4 20.5 96.8 2.9 12 % 14 % 14 % 0.2 % 0.5 %

PNC Infratech Reduce 178 45,651 129 30th Sep 18 4.6 5.5 5.7 38.6 32.3 31.2 57.0 2.9 8 % 9 % 9 % 1.4 % 0.3 %



Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18A 2Q18A 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E

Revenue 4,683 4,428 5,240 6,100 7,228 3,787 6,460 7,488 8,910 4,611 7,975 9,243 20,451 24,963 30,739 36,517

Operating Expenses 3,763 3,352 4,235 5,028 5,777 2,863 5,125 5,967 7,160 3,569 6,345 7,394 16,378 19,732 24,469 29,163

Employee Cost 198 207 244 252 269 247 300 309 331 301 371 382 901 1,125 1,384 1,644

Other Expenditure 86 171 142 184 208 171 194 225 267 138 239 277 575 797 922 1,096

EBITDA 636 697 620 636 975 506 841 987 1,151 602 1,020 1,190 2,597 3,309 3,963 4,616

Depreciation 123 130 107 147 113 130 135 138 141 143 145 147 507 517 577 612

EBIT 513 567 513 489 862 376 705 850 1,009 459 875 1,042 2,089 2,792 3,386 4,004

Interest 117 80 90 181 129 116 115 129 136 147 160 172 474 489 615 800

Other Income 82 92 117 432 92 108 71 63 25 28 56 39 719 333 148 153

PBT 478 580 540 740 824 368 661 783 898 340 772 909 2,338 2,637 2,919 3,356

Tax 170 125 111 82 205 41 132 157 224 85 193 227 488 535 730 839

Recurring PAT 308 455 429 658 619 327 529 627 673 255 579 682 1,850 2,101 2,189 2,517

Extraordinary 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Reported PAT 308 455 429 658 619 327 529 627 673 255 579 682 1,850 2,101 2,189 2,517

EPS (Rs) 1.64 2.43 2.29 3.42 3.31 1.75 2.82 3.35 3.60 1.36 3.09 3.64 9.79 11.23 11.70 13.45

Key Drivers

Standalone Revenues 4,683 4,428 5,240 6,100 7,228 3,787 6,460 7,488 8,910 4,611 7,975 9,243 20,451 24,963 30,739 36,517

Standalone EBITDA Margin 14 % 16 % 12 % 10 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 %

BOT Revenues -4,683 -4,428 1,739 14,327 2,270 1,928 2,185 2,185 2,627 2,230 2,528 2,528 6,954 8,567 9,912 11,628

BOT EBITDA Margin 77 % 77 % 77 % 77 % 81 % 81 % 81 % 81 % 83 % 83 % 83 % 83 % 77 % 81 % 83 % 85 %

Order Book 42,504 55,204 62,203 70,067 64,329 61,101 65,023 67,934 71,415 79,187 86,589 92,728 70,067 67,934 92,728 96,305

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -31 % -5 % 18 % 16 % 19 % -48 % 71 % 16 % 19 % -48 % 73 % 16 % - - - -

Operating Expenses -32 % -11 % 26 % 19 % 15 % -50 % 79 % 16 % 20 % -50 % 78 % 17 % - - - -

EBITDA -29 % 10 % -11 % 3 % 53 % -48 % 66 % 17 % 17 % -48 % 69 % 17 % - - - -

EBIT -32 % 11 % -10 % -5 % 76 % -56 % 88 % 20 % 19 % -55 % 91 % 19 % - - - -

Recurring PAT -55 % 48 % -6 % 53 % -6 % -47 % 62 % 19 % 7 % -62 % 127 % 18 % - - - -

EPS -55 % 48 % -6 % 49 % -3 % -47 % 62 % 19 % 7 % -62 % 127 % 18 % - - - -

Yearly Growth (%)

Revenue -15 % 23 % 36 % -10 % 54 % -14 % 23 % 23 % 23 % 22 % 23 % 23 % 4 % 22 % 23 % 19 %

EBITDA -8 % 67 % 25 % -29 % 53 % -27 % 36 % 55 % 18 % 19 % 21 % 20 % 4 % 27 % 20 % 16 %

EBIT -8 % 101 % 47 % -35 % 68 % -34 % 37 % 74 % 17 % 22 % 24 % 23 % 7 % 34 % 21 % 18 %

Recurring PAT -9 % 81 % 195 % -4 % 101 % -28 % 23 % -5 % 9 % -22 % 10 % 9 % 30 % 14 % 4 % 15 %

EPS -9 % 81 % 195 % -7 % 101 % -28 % 23 % -2 % 9 % -22 % 10 % 9 % 29 % 15 % 4 % 15 %

Margin (%)

EBITDA 14 % 16 % 12 % 10 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 % 13 %

EBIT 11 % 13 % 10 % 8 % 12 % 10 % 11 % 11 % 11 % 10 % 11 % 11 % 10 % 11 % 11 % 11 %

PBT 10 % 13 % 10 % 12 % 11 % 10 % 10 % 10 % 10 % 7 % 10 % 10 % 11 % 11 % 9 % 9 %

PAT 7 % 10 % 8 % 11 % 9 % 9 % 8 % 8 % 8 % 6 % 7 % 7 % 9 % 8 % 7 % 7 %



Consolidated Financials Forecast

P&L (Rs Mn) FY17A FY18E FY19E FY20E

Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E

Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E

Revenue 29,753 33,530 40,651 48,145 Equity Capital 936 936 936 936 PBT -464 3,381 4,835 5,281

Op. Expenditure 20,806 23,253 28,426 33,606 Reserve 15,781 17,886 19,991 22,096 Depreciation 2,735 2,876 3,147 4,391

EBITDA 8,946 10,277 12,225 14,539 Networth 16,717 18,822 20,927 23,032 Others 8,125 0 0 0

Depreciation 2,735 2,876 3,147 4,391 Long Term Debt 46,370 48,314 50,460 49,614 Taxes Paid -744 786 730 839

EBIT 6,211 7,401 9,077 10,148 Def Tax Liability 28,503 80,017 81,866 81,091 Change in WC -2,608 -1,500 -2,147 -2,196

Interest Expense 7,899 4,353 4,391 5,020 Minority Interest 4,490 4,530 4,711 5,059 Operating C/F 7,044 3,971 5,105 6,637

Other Income 1,224 333 148 153 Account Payables 5,744 7,013 8,587 10,148 Capex -1,419 -52,327 -1,600 -17,800

PBT -464 3,381 4,835 5,281 Other Curr Liabi 9,642 2,235 2,710 3,210 Change in Invest 108 -5,093 -4,513 15,363

Tax 790 786 730 839 Total Liabilities & Equity 111,466 160,932 169,261 172,154 Others 742 51,514 1,849 -774

PAT bef. MI & Assoc. -1,254 2,596 4,105 4,442 Net Fixed Assets 83,695 133,511 131,964 145,373 Investing C/F -569 -5,906 -4,264 -3,211

Minority Interest -1,154 40 180 348 Capital WIP 366 0 0 0 Change in Debt 653 1,944 2,146 -846

Profit from Assoc. 0 0 0 0 Others 5,440 10,533 15,045 -318 Change in Equity 0 0 -1,313 -1,425

Recurring PAT -100 2,556 3,925 4,093

Inventory 12,036 8,268 10,023 11,871 Others -8,088 -2,469 -507 -563

Extraordinaires 0 0 0 0 Account Receivables 4,910 2,756 3,341 3,957 Financing C/F -7,435 -525 326 -2,834

Reported PAT -100 2,556 3,925 4,093 Other Current Assets 3,596 4,881 6,736 8,529 Net change in cash -960 -2,460 1,167 591

FDEPS (Rs) -0.5 13.7 21.0 21.9 Cash 1,424 983 2,151 2,742 RoE (%) -1 % 14 % 20 % 19 %

DPS (Rs) 0.8 2.0 2.3 2.3 Total Assets 111,466 160,932 169,261 172,154

RoIC (%) 30 % 8 % 10 % 11 %

CEPS (Rs) 14.1 29.0 37.8 45.3 Non-cash Working Capital 5,156 6,656 8,803 10,999

Core RoIC (%) 20 % 22 % 20 % 16 %

FCFPS (Rs) 148.6 7.5 24.4 40.9 Cash Conv Cycle 63.3 72.5 79.0 83.4 Div Payout (%) -151 % 18 % 13 % 14 %

BVPS (Rs) 89.3 100.6 111.8 123.1 WC Turnover 5.8 5.0 4.6 4.4 P/E -389.5 15.2 9.9 9.5

EBITDAM (%) 30 % 31 % 30 % 30 % FA Turnover 0.4 0.3 0.3 0.3 P/B 2.3 2.1 1.9 1.7

PATM (%) 0 % 8 % 10 % 9 % Net D/E 2.7 2.5 2.3 2.0 P/FCFF 1.4 27.6 8.5 5.1

Tax Rate (%) -170 % 23 % 15 % 16 % Revenue/Capital Employed 0.5 0.5 0.6 0.7 EV/EBITDA 9.6 8.4 7.1 5.9

Sales Growth (%) 5 % 13 % 21 % 18 %

Capital Employed/Equity 4.2 4.2 4.1 4.0

EV/Sales 2.9 2.6 2.1 1.8

FDEPS Growth (%) -65 % -2,665 % 54 % 4 %

Dividend Yield (%) 0.4 % 1.0 % 1.1 % 1.1 %

TTM P/E vs. 2 yrs. forward EPS growth TTM EV/EBITDA vs. 2 yrs. forward EBITDA growth TTM P/B vs. 2 yrs. forward RoE

-50%

-20%

10%

40%

70%

100%

130%

160%

190%

-100

0

100

200

300

400

500

600

700

800

900

Mar/14

Jun/14

Sep/14

Dec/14

Mar/15

Jun/15

Sep/15

Dec/15

Mar/16

Jun/16

Sep/16

Dec/16

Mar/17

Jun/17

Sep/17

Dec/17

Mar/18

Jun/18

Sep/18

Dec/18

Mar/19

10x

20x

27x

32x

35x

EPS Growth

6x

0%

10%

20%

30%

40%

50%

60%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Mar/

14

Jun/14

Sep/14

Dec/14

Mar/

15

Jun/15

Sep/15

Dec/15

Mar/

16

Jun/16

Sep/16

Dec/16

Mar/

17

Jun/17

Sep/17

Dec/17

Mar/

18

Jun/18

Sep/18

Dec/18

Mar/

19

8x

10x

12x

14xEBITDA Growth

2x

-10%

0%

10%

20%

30%

-

50

100

150

200

250

300

350

400

Mar/

14

Jun/14

Sep/14

Dec/

14

Mar/

15

Jun/15

Sep/15

Dec/

15

Mar/

16

Jun/16

Sep/16

Dec/

16

Mar

/17

Jun/17

Sep/17

Dec/

17

Mar/

18

Jun/18

Sep/18

Dec/

18

Mar/

19

1.5x

3x

RoE

1x

2.5x



Historical Consolidated Financials

P&L (Rs Mn) FY14A FY15A FY16A FY17A

Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A

Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A

Revenue 17,949 23,197 28,249 29,753 Equity Capital 790 793 936 936 PBT 1,394 782 -1,263 -464

Op. Expenditure 14,003 18,467 19,066 20,806 Reserve 11,839 13,265 16,210 15,781 Depreciation 1,389 1,517 2,690 2,735

EBITDA 3,945 4,730 9,183 8,946 Networth 12,628 14,058 17,146 16,717 Others 1,814 3,790 8,700 8,125

Depreciation 1,389 1,517 2,690 2,735 Long Term Debt 31,926 41,952 44,236 46,370 Taxes Paid -702 -874 -1,095 -744

EBIT 2,556 3,213 6,492 6,211 Def Tax Liability 78,326 26,789 27,307 28,503 Change in WC -38 -1,317 -6,524 -2,608

Interest Expense 1,335 2,721 7,996 7,899 Minority Interest 4,645 6,720 5,625 4,490 Operating C/F 3,858 3,899 2,507 7,044

Other Income 89 290 811 1,224 Account Payables 5,701 7,046 5,400 5,744 Capex -10,802 -8,872 -1,089 -1,419

PBT 1,310 782 -692 -464 Other Curr Liabi 1,956 8,226 10,057 9,642 Change in Invest -25 231 -200 108

Tax 688 796 974 790 Total Liabilities & Equity 135,183 104,790 109,770 111,466 Others 1,605 519 246 742

PAT bef. MI & Assoc. 622 -14 -1,666 -1,254 Net Fixed Assets 40,250 86,514 85,148 83,695 Investing C/F -9,222 -8,122 -1,043 -569

Minority Interest -425 -828 -1,383 -1,154 Capital WIP 79,621 422 200 366 Change in Debt 7,391 6,811 3,826 653

Profit from Assoc. -72 0 0 0 Others 5,007 4,044 5,427 5,440 Change in Equity 0 -106 5,005 0

Recurring PAT 974 815 -283 -100 Inventory 6,272 7,324 10,731 12,036 Others -1,601 -3,011 -8,581 -8,088

Extraordinaires 0 0 570 0 Account Receivables 1,305 4,424 5,161 4,910 Financing C/F 5,790 3,694 250 -7,435

Reported PAT 974 815 -854 -100 Other Current Assets 888 1,470 692 3,596 Net change in cash 425 -530 1,715 -960

EPS (Rs) 5.2 4.4 -1.5 -0.5 Cash 1,840 592 2,412 1,424

RoE (%) 8 % 6 % -2 % -1 %

DPS (Rs) 1.3 0.7 2.2 0.8

Total Assets 135,182 104,790 109,770 111,466

RoIC (%) 4 % 1 % 29 % 30 %

CEPS (Rs) 15.0 14.7 12.9 14.1 Non-cash Working Capital 807 -2,053 1,127 5,156 Core RoIC (%) 1 % 3 % 26 % 20 %

FCFPS (Rs) -30.0 -26.9 110.6 148.6 Cash Conv Cycle 16.4 -32.3 14.6 63.3 Div Payout (%) 22 % 14 % -48 % -151 %

BVPS (Rs) 80.0 88.6 91.6 89.3 WC Turnover 22.2 -11.3 25.1 5.8

P/E 39.8 47.6 -136.9 -389.5

EBITDAM (%) 22 % 20 % 33 % 30 % FA Turnover 0.1 0.3 0.3 0.4 P/B 2.6 2.3 2.3 2.3

PATM (%) 5 % 4 % -1 % 0 % Net D/E 2.4 2.9 2.4 2.7 P/FCFF -6.9 -7.7 1.9 1.4

Tax Rate (%) 53 % 102 % -141 % -170 % Revenue/Capital Employed 0.5 0.5 0.5 0.4 EV/EBITDA 37.5 22.6 12.0 9.6

Sales growth (%) -3 % 29 % 22 % 5 %

Capital Employed/Equity 3.2 3.8 4.2 4.2

EV/Sales 8.3 4.6 3.9 2.9

FDEPS growth (%) 16 % -16 % -135 % -65 %

Dividend Yield (%) 0.6 % 0.3 % 1.1 % 0.4 %



Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 Sweta Sheth [email protected] 91-22-43320634

Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Dealing Room E-mail

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Ashish Shah [email protected] 91-22-43320662

Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ilesh Savla [email protected] 91-22-43320666

Praful Bohra Pharmaceuticals [email protected] 91-79-61909532 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

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Pranav Mehta [email protected] 91-79-61909514

Ronak Soni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

Shreepal Doshi [email protected] 91-79-61909541

Varun Baxi [email protected] 91-79-61909527

Vikas Jain [email protected] 91-79-61909531

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap > Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

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Tel. No: +91 – (0)22 – 4332 0600

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Corporate Office:

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Analyst Certification

I, Devam Modi, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also

certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures

Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the

Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock

Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers

Regulations, 1993 (Reg. No. INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No. IN-DP-324-2017). There are no disciplinary actions taken by any regulatory

authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to

merchant banking services, private equity, mergers & acquisitions and structured finance.

As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for

investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have

received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their

directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in

their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or

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Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or

brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.

The Research Analyst engaged in preparation of this Report:-

(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c)

has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or

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research report. Thus, investors should be aware that the firm may have conflict of interest.



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“three years” period in the price chart).

Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst’ or Relatives’ financial interest No

Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No

Research Analyst’ or Relatives’ material conflict of interest No

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