cd equisearch pvt ltd… · highlights • the asian development bank forecasts that by 2030, india...

CD Equisearch Pvt Ltd April 27, 2018

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Indian Hume Pipe Company Ltd (IHP)

No. of shares (m) 48.4

Mkt cap (Rs crs/$m) 1664/249

Current price (Rs/$) 343/5.1

Price target (Rs/$) 478/7.2

52 W H/L (Rs.) 595/285

Book Value (Rs/$) 88.6/1.3

Beta 1.2

Daily volume NSE (avg. monthly) 52180

P/BV (FY18e/19e) 3.5/3.1

EV/EBITDA (FY18e/19e) 9.9/7.8

P/E (FY18e/19e) 17.6/12.9

EPS growth (FY17/18e/19e) 240/-12.7/49.4

OPM (FY17/18e/19e) 11.5/11.8/11.0

ROE (FY17/18e/19e) 28.5/21.0/26.4

ROCE(FY17/18e/19e) 20.3/16.3/20.1

D/E ratio (FY17/18e/19e) 0.7/0.7/0.5

BSE Code 504741

NSE Code INDIANHUME

Bloomberg INHP IN

Reuters INHE.BO

Shareholding pattern %

Promoters 69.9

MFs / Banks / FIs 5.3

Foreign Portfolio Investors 0.4

Govt. Holding 0.0

Public & Others 24.4

Total 100.0

As on March 31, 2018

Recommendation

BUY

Phone: + 91 (33) 4488 0011

E- mail: [email protected]

Standalone (Figures in Rs crs)

FY15 FY16 FY17

FY18e

FY19e

Income from operation 1009.86

938.94 1799.54 1544.77 2273.23

Other Income 12.69 122

2.96 2.96 2.98 3.07

EBITDA (other income included) 122.39 99.92 210.54 155.11 253.13

Profit after EO

35.20 29.01 98.61 86.10 128.62

EPS(Rs) 7.26 5.99 20.36 17.77 26.55

EPS growth (%) 56.8 -17.6 240.0 -12.7 49.4

Highlights

• The Asian Development Bank forecasts that by 2030, India will encounter a

water deficit of 50%. UN projects 840 mn people to live in the most water

starved parts of the country by 2050, as compared to about 320 mn people in

2017. India’s Union Ministry of Water Resources has reckoned the country’s

current water requirement to be around 1100 billion cubic metres(m3) per year,

which is estimated to rise to around 1200 billion m3 for the year 2025 and

further to 1447 billion m3 by 2050. With a projected population growth of 1.4

billion people by 2050, the country will scarcely be able to cater to its total water

demand. • Marred by the hostile aftermath of GST rollout – that placed the contracts

executed by the company, which were largely tax exempt previously, in the

12% GST slab – the revenues from construction contracts in Q3FY18 dwindled

by 15.7% y-o-y. As a consequence, revenues in Q3FY18 pummeled by 6.8%,

although significant rise in revenues from other segments (y-o-y) provided

some relief. • IHP’s order book recorded a growth of 10.8% y-o-y with its estimated balance

of work stood at Rs 3367 crs as at Jan 31, 2018. The order book in last one year

ballooned as a result of relentless order inflows from the state of Chhattisgarh,

Karnataka, Madhya Pradesh, Rajasthan and Andhra Pradesh. Order inflows of

IHP remains sturdy as the company has already acquired orders worth over Rs

2000 crs in FY18, well above the previous year’s count of Rs 998 crs. • Order inflows of prominent projects under “Atal Mission for Rejuvenation and

Urban Transformation” (AMRUT) scheme has already witnessed an increase of

more than seven fold in FY18. The company bagged over a third of its

prominent order flows under this scheme as compared orders worth less than

10% of total in FY17. Order book in FY18 swelled by virtue of water supply

project orders received from the states of Chhattisgarh (Rs 264 crs), Andhra

Pradesh (Rs 256 crs) and Karnataka (257 crs) under AMRUT.

• The stock currently trades at 19.3x FY18e EPS of Rs 17.77 and 12.9x FY19e EPS

of Rs 26.55. Profits are estimated to grow substantially in the current fiscal,

galvanized by sturdy pickup in order execution post overcoming GST

implementation setbacks. Orders inflows would gather steam due to roll out of

various schemes on infrastructure development and water management as well

as increasing awareness regarding efficient water supply systems. Considering

better clarity on GST related issues going forward along with various

government initiatives to boost the infrastructure sector, we maintain our ‘buy’

rating on the stock with a revised target price of Rs 478 (previous target: 693)

based on 18x FY19e EPS (peg ratio: 1.3) over a period of 9-12 months.

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Outlook & Recommendation

Industry Outlook

Infrastructure development of a country is essential for the overall growth of its economy. According to IBEF, India requires

investment worth Rs 50 trillion in infrastructure by 2022 to propel sustainable development in the country. As per the ranking

of global cities based on urban infrastructure (State of World Cities 2012/13), New Delhi and Mumbai are placed at 47th and

50th positions, respectively, showing comparatively lower levels of infrastructure in the national and financial capitals of India.

High Powered Expert Committee, appointed by the Ministry of Housing and Urban Affairs, cited that about Rs 39 lakh crore

(at 2009- 10 prices) was required for creation of urban infrastructure over the next two decades. However, for a developing

country like India, raising resources of this magnitude and effective and timely execution of infrastructural projects continue to

remain a challenge.

Addressing the issue of dearth of funds and resulting infrastructural deficit will require adequate resources, some of which

could come from the Centre and the states as well as other international institutions. The government has been working

towards diminishing the bottlenecks that impedes infrastructural growth and attract private investment in this sector. The

Fourteenth Finance Commission (FFC) has recommended a grant of around $87,000 crore to the municipalities for the period

2015-20, constituting assistance of around $ 500 per capita per annum on average. The Government of India has further

increased its allocation to infrastructure for 2018-19 to Rs 5.97 lakh cr compared to Rs 4.94 lakh cr revised estimate for 2017-18.

It seeks to aid economic recovery from the slowdown of demonetization and GST and bridge the infrastructure gap that exists

in the country.

Crisil, a credit rating agency, projects infrastructure investment in India to rise to Rs 50 lakh cr in FY18-22 which will provide

premise for rapid and inclusive economic growth in the country. While GDP growth on average will hover around 7% during

this period, the sustained infrastructure spending will stand at 5.3% of GDP. The private players share in infrastructure

investment will remain subdued at about 28%, according to Crisil. The railways and infrastructure sector are expected to see

rapid growth in investments in the five year period. However, shortfall in recovery of operations and maintenance costs and

slow project execution serve as impediments to this sector.

Source: Crisil Source: Crisil Source: Crisil

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Recent initiatives assert the government’s strong commitment to infrastructure. Affordable housing was given infrastructure

status in the Budget 2018. Approximately 60 mn homes are expected to be built in India between 2018 and 2022 - “Housing

for All” under Pradhan Mantri Awas Yojana (PMAY) aims to build 20 mn urban and 30 mn rural houses by 31st March 2022.

The government is also making an attempt to revive and boost the public private partnership in this sector. 99 cities have

been selected under the “Smart Cities Mission” with an outlay of Rs 2.04 lakh cr in Budget 2018. These initiatives are

expected to provide considerable boost to the infrastructure sector though policies and regulations need to be in place for

effective implementation of such programs.

The UN Department of Economic and Social Affairs postulated that India’s population could transcend that of China by

2024 and is projected to touch 1.5 bn in 2030. The 2030 Water Resources Group has estimated that India’s water demand will

outrun its supply by 50% by 2030. Therefore there is a need to increase conservation of water across operations and regions.

Water Aid, an international organization working for water sanitation and hygiene, observed that 80% of India’s surface

water is polluted most of which is a result of domestic sewerage. The World Health Organization finds that water borne

diseases lead to about 1.6 million deaths every year – 90% of them being children under the age of 5, due to lack of safe

drinking water and basic sanitation.

Despite having ~18% of the global population, India only harbours 4% of the world’s fresh water. Growing population, rapid

industrialization, urbanization and climate change has led to declining per capita availability of water for diverse uses. This

has raised concerns with regard to water planning, development and management, and after decades of neglect, the

seriousness of the challenges associated with water supply and sanitation is being acknowledged in India. Acknowledging

role of cleanliness in healthy living, the Prime Minister of India launched the “Swachh Bharat Mission” on October 2, 2014 in

order to accelerate the efforts to achieve universal sanitation coverage. Atal Mission for Rejuvenation and Urban

Transformation (AMRUT) was launched in 2015 to establish and renew urban infrastructure to ensure robust sewage

network and adequate water supply to urban India.

Source: CSE-DTE Data Centre

To ensure optimal water supply and demand management in future cities where freshwater sources may be insufficient to

keep pace with population growth, infrastructure needs careful assessment and revamp. It is also essential that necessary

technologies, capabilities, water management processes and water supply projects are undertaken to cope with increasing

demand. There is also a need to recognize water as a scarce and vulnerable resource and improve governance in the water

segment.

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Financial & Valuation

IHP’s revenue was critically hit owing to the implementation of GST with effect from July 1, 2017. Despite having sufficient

order book in hand, the revenues in 9MFY18 plunged by 10.3% y-o-y as execution of contracts was battered on account of

transitional challenges arising due to GST, particularly in Q2 and Q3. The significant rise in other expenses for 9MFY18 is by

virtue of a provision of Rs 30.33 crs which was created on a prudent basis against sales tax demand for work contracts

executed in Rajasthan, for which the outcome of the recall application filed by the company is pending.

Before GST, the execution of drinking water contracts for the Government was not subject to service tax and the materials

used in the execution of such projects was exempt of excise duty. Work Contract Tax/VAT of about 5% was charged in most

cases. However, owing to the rollout of GST, such contracts were placed in the 18% slab initially and subsequently with effect

from 22nd August, 2017, they got categorized in the 12% slab. For the contracts entered pre GST, delay on part of the

customers to make the requisite GST related amendments to contracts and compensate for the additional tax liability snagged

the execution of contracts. As a result, net profits slumped by a hefty 61.4% in Q2 and 17.5% in Q3FY18. Significant rise in

trade receivables (Rs 461 crs Vs Rs 402 crs in FY17) coupled with delay in contract billing strained working capital.

To cater to the increasing demand for bar crapped steel cylinder (BWSC) pipes and prestressed concrete cylinder pipes

(PCCP) among its clients, IHP set up three manufacturing plants as well as created additional facilities in its existing factories

to manufacture these pipes. In FY17, the company manufactured 295.64 Km of BWSC pipes worth Rs 119.20 crs while it

bagged orders worth Rs 106.73 crs for BWSC pipes, orders worth Rs 34.85 crs for PSC pipes and orders worth Rs 162.26 crs

for PCCP pipes. The company also received work orders to manufacture railway sleepers worth Rs 50.04 crs during FY17.

IHP’s order book amplified by 3.3x from Rs 1010 crs in FY11 to Rs 3367 crs as on January 31, 2018 (last reported). As per IHP’s

reporting of prominent order inflows, its order inflows rose to the highest level in a decade to nearly Rs 2100 crs in FY18

thereby providing signs of business recovery. The order inflows flourished owing to resurgence of orders from the southern

states of Karnataka and Tamil Nadu that had declined over the last two fiscals. On the other hand, order receipts from the

state of Telangana dried up y-o-y whereby, it constituted a considerable share in the previous three fiscals.

Order works from Andhra Pradesh in the current fiscal got acceleration under the government initiative, AMRUT for water

supply improvement schemes. Additionally, order works from the state of Chhattisgarh constitutes the highest share in the

order inflows for the FY18 at about 22%, largely driven by projects under AMRUT (Rs 264 crs).

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The company was engaged in the manufacturing of air rifles / air pistols for sports and target shooting competitions, under

the brand of National Air Rifle at Vatva, Ahmedabad since 1970 with a capacity of manufacturing 12000 units per annum.

However, during FY18, Ministry of Home Affairs issued ‘New Arms Rules’ that mandated the buyers and sellers of 0.22 air

rifles – that constitutes a significant portion of the company’s total sales of air rifles / air pistols - to possess a license.

Additionally, these Rules warranted for high compliance and regulatory cost on the company. As a consequence, the

company decided to close its uneconomical National Rifle Division in the first quarter of FY18.

In the first month of FY19, IHP managed to secure order works worth Rs 686.7 crs ($102.8m) – about 33% of the reported

order inflows in FY18. This suggests strong pick up in business could be foreseen with clarity on GST issues and better

business environment. Orders worth Rs 578.50 crs ($86.6) were reported from Madhya Pradesh under the Rural Water

Supply Scheme and Rs 108.19 crs ($16.2m) from Gujarat for Lift Irrigation Project. However, the upcoming assembly

elections in various states – Karnataka, Chhattisgarh, Madhya Pradesh and Rajasthan - could suppress order inflows from

various states as well as affect IHP’s execution of orders in those states.

The stock currently trades at 19.3x FY18e EPS of Rs 17.77 and 12.9x FY19e EPS of Rs 26.55. As compared to FY17, the

company accomplished considerable growth in the value of order works (absolute terms) secured from every major state

that IHP caters in FY18 (except Telangana). The outlay on Urban Rejuvenation Mission (AMRUT and Smart Cities)

witnessed a hike from Rs 8999 crs in FY18 (RE) to Rs 12169 crs for FY19 (BE). Government of India is expected to increase its

spending in the infrastructure sector prior to its general election in 2019. Furthermore, a number of water supply schemes,

sewerage disposal and drainage schemes are impending around Swachha Bharat. These initiatives would doubtlessly spur

the order book of the company and thereby propel growth. Yet, its dependency on the state governments and high

sensitivity towards legal and regulatory risks cannot be neglected. Surmounting massive challenges posed by GST, order

flows and execution have started returning to normalcy; earnings for FY18 and FY19 slashed by 32% and 19.6%

respectively. Yet, in view of robust pick up in order in current fiscal, we maintain our ‘buy’ rating on the stock with a

revised target price of Rs 478 (previous target: 693) based on 18x FY19e EPS (peg ratio: 0.4) over a period of 9-12 months. For

more information, refer to our August report.

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Risks and Concerns

Regulatory Risk

Various Central, State and local governments do business with the company and therefore pose regulatory risks. The policies for

approval of finance, allocation of funds and ability to raise funds to undertake various infrastructure related projects poses

significant risk to the company. Any adverse changes and lack of funds delays the work resulting in higher cost and can disrupt

the industry and the business of the company. Ever rising regulatory and legal requirements may impair the company’s growth.

Competition

The company faces severe competition from the manufacturers of alternative pipes like ductile iron, PVC pipes, HDPE and

spirally welded steel pipes. Such available alternatives can potentially diminish its market share.

Cross Sectional Analysis

Company Equity* CMP Mcap* Sales* Profit* OPM (%) NPM (%)

Int Cov ROE (%)

Mcap/Sales P/BV P/E

IHP 10 343 1664 1672 96 11.9 5.8 4.3 24.0 1.0 3.9 17.3

NCC Ltd 120 126 7589 7304 361 10.0 4.9 2.0 10.0 1.0 1.8 21.0

*figures in crores; calculations on ttm basis

Book value adjusted for goodwill & revaluation reserves, wherever applicable

NCC Limited, one of the largest construction companies in India, enjoys a pan India presence with offices across 13 cities in key

states. It undertakes civil construction in various segments like buildings, water, roads, irrigation, power, mining, etc. FY17

proved to be a challenging year for the company on account of demonetization and payment delays by some of its clients in

electrical and water division. Consolidated revenues as a result degrew by 5.5% (y-o-y), while its operating profits fell by 32.3%

(y-o-y).

Its order book as at the end of 9MFY18 stood at Rs 31627 crs, accentuated by strong order inflows of Rs 21614 crs. It secured new

orders worth Rs 23438 crs in the first eleven months of FY18 (order inflows in FY17 worth Rs 9226 crs). In February, the company

received seven new orders worth Rs 2980 crs largely owing to its water and environment division (Rs 1967 crs) and buildings and

housing division (Rs 707 crs). It further reported new orders worth Rs 1085 crs received in March 2018.

The turnover in 9MFY18 degrew by 10.2% due to GST issues. The billing process and payments got delayed by clients and the

supplies from vendors were also adversely affected. The company received a bonus of Rs 73 crs in Q3FY18 on account of early

completion of UP expressway project. This, along with margin improvement during the third quarter, helped NCC to register a

95.7% growth in its operating profit, albeit revenues fell by 2.8% (y-o-y) for the quarter.

Capital expenditure of Rs 226 crs was done on plant and machinery for execution of its orders in Q3FY18. The interest cost of the

company increased during the quarter due to rise in outstanding debt. However, the 9MFY18 finance cost fell, even though the

quantum of debt was higher y-o-y, on account of reduction in the average cost of debt. Stabilization of the economy and boost to

the infrastructural sector would doubtlessly foster the business of the company.

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Financials Quarterly Results Figures in Rs crs

Q3FY18 Q3FY17 % chg 9MFY18 9MFY17 % chg

Income From Operations (Net) 356.09 382.04 -6.8 1114.77 1242.56 -10.3

Other Income 0.49 0.40 21.4 1.89 1.62 16.9

Total Income 356.58 382.44 -6.8 1116.66 1244.18 -10.2

Total Expenditure 319.45 338.60 -5.7 1009.95 1099.14 -8.1

EBITDA (other income included) 37.13 43.85 -15.3 106.71 145.04 -26.4

Interest 11.73 13.77 -14.8 33.84 37.48 -9.7

Depreciation 2.80 2.77 0.8 7.91 7.70 2.7

PBT 22.60 27.30 -17.2 64.97 99.87 -34.9

Tax 7.92 9.50 -16.6 22.10 34.75 -36.4

PAT 14.68 17.80 -17.5 42.86 65.12 -34.2

Extraordinary Item - - - -20.01# -

Adjusted Net Profit 14.68 17.80 -17.5 62.87 65.12 -3.5

EPS (Rs) 3.03 3.67 -17.5 12.98 13.44 -3.5

Segment Results Figures in Rs crs

Q3FY18 Q3FY17 % chg 9MFY18 9MFY17 % chg

Segment Revenue

Construction projects 343.73 407.98 -15.7 1128.47 1312.29 -14.0

Others 13.83 1.74 695.7 22.56 4.94 356.3

Income From Operations (Gross) 357.56 409.72 -12.7 1151.03 1317.23 -12.6

Segment EBIT

Construction projects 40.93 48.28 -15.2 119.93 163.63 -26.7

Others 1.45 0.32 348.2 3.00 0.28 976.5

Sub Total 42.38 48.60 -12.8 122.93 163.91 -25.0

Interest 11.73 13.77 -14.8 33.84 37.48 -9.7

Other Unallocable Exp. (net of income) 8.04 7.53 6.9 24.12 26.57 -9.2

PBT 22.60 27.30 -17.2 64.97 99.87 -34.9

EPS adjusted for bonus issue, wherever applicable #Represents provision against sales tax demand

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Income Statement Figures in Rs crs

FY15 FY16 FY17 FY18e FY19e

Income From Operations (Net) 1009.86 938.94 1799.54 1544.77 2273.23

Growth (%) 22.7 -7.02 91.7 -14.2 47.2

Other Income 12.69 2.96 2.96 2.98 3.07

Total Income 1022.55 941.90 1802.51 1547.76 2276.31

Total Expenditure 900.15 841.98 1591.96 1392.65 2023.18

EBITDA (other income included) 122.39 99.92 210.54 155.11 253.13

Interest 48.30 45.26 47.71 43.89 43.60

Depreciation 12.13 9.80 10.53 10.92 11.65

PBT 61.97 44.85 152.30 100.29 197.88

Tax 20.40 15.76 53.52 34.20 69.26

PAT 41.57 29.10 98.78 66.09 128.62

Extraordinary Item 6.37 0.09 0.17 -20.01# -

Adjusted Net Profit 35.20 29.01 98.61 86.10 128.62

EPS (Rs) 7.26 5.99 20.36 17.77 26.55

Segment Income Statement Figures in Rs crs

FY15 FY16 FY17

Segment Revenue

Construction projects 996.86 920.63 1779.53

Others 6.97 16.29 12.34

Income From Operations* 1003.83 936.91 1791.87

Segment EBIT

Construction projects 122.34 111.58 235.59

Others 0.89 -0.02 -0.04

Sub Total 123.23 111.56 235.55

Interest 48.30 45.26 47.71

Other Unallocable Exp. (net of income) 16.09 21.45 35.53

Exceptional Income 3.12 - -

PBT 61.97 44.85 152.30

EPS adjusted for bonus issue, wherever applicable *Excluding other operating income #Represents provision against sales tax demand

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Balance Sheet Figures in Rs crs FY15 FY16 FY17 FY18e FY19e

Sources of Funds

Share Capital 4.84 4.84 9.69 9.69 9.69

Reserves 282.04 301.81 389.92 442.01 547.31

Total Shareholders' Funds 286.88 306.65 399.60 451.70 557.00

Long Term Debt 20.63 13.65 8.16 1.89 1.25

Total Liabilities 307.51 320.30 407.76 453.59 558.25

Application of Funds

Gross Block 156.20 162.61 175.49 180.20 192.10

Less: Accumulated Depreciation 81.48 89.50 97.60 108.53 120.17

Net Block 74.72 73.11 77.89 71.67 71.93

Capital Work in Progress 0.35 2.59 0.96 1.25 1.35

Investments 0.96 0.29 0.29 9.53 9.53

Current Assets, Loans & Advances

Inventory 375.55 436.27 597.31 60.00* 75.00*

Trade receivables 335.21 335.45 402.73 463.13 509.45

Cash and Bank 21.07 10.06 43.49 10.04 7.35

Short term loans (inc. other current assets)

216.80 237.56 273.20 766.34 821.72

Total CA 948.62 1019.34 1316.72 1299.51 1413.52

Current Liabilities 658.77 715.44 898.33 950.44 963.32

Provisions-Short term 62.63 65.97 112.69 9.27 13.64

Total Current Liabilities 721.40 781.41 1011.03 959.71 976.96

Net Current Assets 227.22 237.93 305.70 339.80 436.56

Net Deferred Tax -0.89 0.55 0.99 12.64 12.64

Net long term assets ( net of liabilities) 5.15 5.84 21.94 18.71 26.25

Total Assets 307.51 320.30 407.76 453.59 558.25 *Inventory reported as per IndAs

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Cash Flow Statement Figures in Rs crs

FY15 FY16 FY17 FY18e FY19e

Net Income (a) 41.57 29.10 98.78 66.09 128.62

Non Cash Expenses (b) 4.17 8.51 11.50 -2.78 9.59

Depreciation 12.13 9.80 10.53 10.92 11.65

(Profit)/Loss on sale of assets -6.37 -0.14 -0.26 - -

Provision for doubtful debt/ advances (net) 1.24 0.86 2.56 - -

Interest income -1.37 -0.66 -0.83 -2.01 -2.01

Dividend income -0.08 -0.03 -0.04 -0.04 -0.04

Deferred Tax -1.38 -1.32 -0.45 -11.65 0.00

Adjustments in NWC and others (c) -96.42 -34.13 -11.39 -126.51 -46.37

Inventory -20.47 -60.72 -161.04 537.31 -15.00

Other Assets (Net of Liabilities) -75.95 26.59 149.66 -663.82 -31.37

Cash Flow from Operating Activities (a+b+c) -50.68 3.48 98.90 -63.20 91.85

Proceed from sale of assets 11.16 0.28 0.41 - -

Purchase of fixed assets -7.53 -10.57 -13.83 -5.00 -12.00

Net Purchase/Sale of Investments 0.67 0.67 0.00 -9.24 0.00

Interest received 1.31 -0.12 0.85 3.19 2.01

Dividend received 0.08 0.03 0.04 0.04 0.04

Cash Flow from Investing Activities (d) 5.69 -9.72 -12.52 -11.00 -9.95

Net Borrowings 57.97 12.33 -49.44 54.75 -61.27

Dividend Paid (including CDT) -6.80 -18.08 -5.83 -13.99 -23.32

Cash Flow from Financing Activities (e) 51.17 -5.75 -55.27 40.75 -84.59

Net change (a+b+c+d+e) 6.17 -11.99 31.11 -33.45 -2.69

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Key Financial Ratios FY15 FY16 FY17 FY18e FY19e

Growth Ratios (%)

Revenue 22.7 -7.0 91.7 -14.2 47.2

EBITDA 44.8 -11.6 110.8 -11.8 36.5

Net Profit 56.8 -17.6 240.0 -12.7 49.4

EPS 56.8 -17.6 240.0 -12.7 49.4

Margins (%)

Operating Profit Margin 10.9 10.3 11.5 11.8 11.0

Gross profit Margin 6.4 5.8 9.0 9.2 9.2

Net Profit Margin 3.5 3.1 5.5 5.6 5.7

Return (%)

ROCE 12.4 9.6 20.3 16.3 20.1

ROE 13.0 9.8 28.5 21.0 26.4

Valuations

Market Cap/ Sales 0.6 0.8 1.1 1.0 0.7

EV/EBITDA 8.2 10.8 10.2 9.9 7.8

P/E 18.1 26.4 19.4 17.6 12.9

P/BV 2.2 2.5 5.0 3.5 3.1

Other Ratios

Interest Coverage 2.1 2.0 4.2 4.0 5.5

Debt Equity 1.1 1.0 0.7 0.7 0.5

Net Debt-Equity Ratio 1.0 1.0 0.6 0.7 0.5

Current Ratio 1.3 1.3 1.3 1.3 1.4

Turnover Ratios

Fixed Asset Turnover 12.7 12.7 23.8 20.7 31.7

Total Asset Turnover 3.4 3.0 5.0 3.7 4.6

Inventory Turnover 2.5 2.1 3.1 - -

Debtors Turnover 3.6 2.8 4.9 3.6 4.7

Creditor Turnover 4.3 3.4 5.5 4.2 5.8

WC Ratios

Inventory Days 148.1 176.0 118.5 - -

Debtor Days 101.8 130.4 74.9 102.3 78.1

Creditor Days 84.3 106.1 65.9 86.6 63.5

Cash Conversion Cycle 165.6 200.2 127.4 - -

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Cumulative Financial Data

FY05-07 FY08-10 FY11-13 FY14-16 FY17-19e

Income from operations 722 1477 1913 2772 5618

Operating profit 57 166 164 283 640

EBIT 67 161 150 261 616

PBT 49 106 80 133 481

PAT 37 68 54 87 313

Dividends 11 14 18 25 59

OPM (%) 7.8 11.2 8.5 10.2 11.4

NPM (%) 5.1 4.6 2.8 3.1 5.6

Interest coverage 3.7 2.9 2.2 2.0 4.6

Debt-equity* 0.6 1.1 0.7 1.0 0.5

ROE (%) 10.9 14.2 8.5 10.6 24.7

ROCE (%) 9.6 11.5 8.4 10.9 18.8

Fixed asset turnover 9.3 9.7 8.9 12.1 25.8

Debtors turnover 17.9 31.2 6.0 3.5 4.4

Creditors turnover 4.2 3.2 3.4 4.1 5.4

Inventory turnover 1.9 1.5 1.6 2.3 6.5

Debtor days 20.4 11.7 60.5 104.5 82.3

Inventory days 189.7 245.0 227.0 161.4 55.9

Creditor days 85.9 112.5 107.0 89.2 67.5

Cash Conversion 124.2 144.3 180.4 176.7 70.7

Dividend payout ratio (%) 20.9 21.0 26.2 26.3 20.3

FY05-07 implies three years ending FY07. *as on terminal year

IHP has witnessed consistent rise in its cumulative revenue expanding 3.8 fold to Rs 2772 crs in FY14-16 from Rs 722 crs in

FY05-07. The company’s performance was marginally subdued in FY16 as revenues degrew by 7% y-o-y adversely affecting

nearly all its financial ratio metrics in that fiscal. However, in FY17, revenues registered astounding growth by 91.7% owing

to significant increase in new orders bagged by the company in FY16.

Bettering from period FY14-16, IHP’s cumulative revenue is projected to more than double, driven by increasing thrust on

infrastructure and the resulting growth in order book. Plagued by implementation of GST, FY18 registered degrowth due to

adverse impact on the execution of contracts and delay in billing. However, substantial rise in the order inflows and pick up

in the business suggests speedy recovery. The resulting margins would doubtlessly surge potentially due to economies of

scale. The high need for working capital by the company and the resulting impact on the interest coverage ratio cannot be

ignored.

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Financial Summary – US dollar denominated

million $ FY15 FY16 FY17 FY18e FY19e

Equity Share capital 0.8 0.7 1.5 1.5 1.4

Shareholders' funds 45.8 46.2 59.5 66.8 80.9

Total debt 48.8 47.9 41.4 49.7 39.2

Net fixed assets (incl. CWIP) 12.0 11.4 12.2 11.2 11.0

Investments 0.2 0.0 0.0 1.5 1.4

Net Current assets 36.3 35.9 45.0 49.6 62.9

Total Assets 49.1 48.3 60.7 67.0 81.1

Revenues 165.2 143.4 268.2 239.7 340.2

EBITDA 18.5 15.2 31.3 28.8 37.9

EBDT 10.6 8.3 24.2 22.0 31.4

PBT 8.6 6.8 22.7 20.3 29.6

PAT 5.8 4.4 14.7 13.4 19.2

EPS($) 0.12 0.09 0.30 0.28 0.40

Book value ($) 0.95 0.95 1.23 1.38 1.67

Income statement figures translated at average rates; balance sheet and cash flow at year end rates; projections at current

rates(Rs 66.83/$). All dollar denominated figures are adjusted for extraordinary items.

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Exchange Rate Used- Indicative

Rs/$ FY15 FY16 FY17 FY18

Average 61.15 65.46 67.09 64.45

Year end 62.59 66.33 64.84 65.04

All $ values mentioned in the write-up translated at the average rate of the respective quarter/ year as applicable. Projections converted at

current exchange rate. Cumulative dollar figure is the sum of respective yearly dollar value.

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