cd equisearchpvt ltd · steel & refractory industry demand for steel. as per w years, compared...

$: CD EquisearchPvt Ltd · Steel & Refractory Industry demand for steel. As per W years, compared to ~4% in 2016. GOI Outlook & Recommendation The Indian steel industry has entered into$
CD EquisearchPvt Ltd

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Orient Refractories Ltd.

No. of shares (m) 120.1

Mkt cap (Rs crs/$m) 1596/249.0

Current price (Rs/$) 133/2.1

Price target (Rs/$) 157/2.4

52 W H/L (Rs.) 155/99

Book Value (Rs/$) 20/0.3

Beta 1.3

Daily volume (avg. monthly) 48260

P/BV (FY18e/19e) 5.9/5.0

EV/EBITDA (FY18e/19e) 12.7/10.7

P/E (FY18e/19e) 22.3/18.6

EPS growth (FY17/18e/19e) 23.2/4.4/19.5

OPM (FY17/18e/19e) 19.8/18.2/19.0

ROE (FY17/18e/19e) 31.1/28.1/29.0

ROCE(FY17/18e/19e) 31.1/28.1/29.0

D/E ratio (FY17/18e/19e) -/-/-

BSE Code 534076

NSE Code ORIENTREF

Bloomberg ORIENT IN

Reuters ORRE.BO

Shareholding pattern %

Promoters 69.6

MFs / Banks / FIs 4.9

Foreign Portfolio Investors 5.6

Govt. Holding 0.0

Public & Others 19.9

Total 100.0

As on June 30, 2017

Recommendation

ACCUMULATE

Phone: + 91 (33) 4488 0055

E- mail: [email protected]

Consolidated (Rs crs)

Income from operations

Other Income

EBITDA (other income included)

PAT after EO EPS(Rs)

EPS growth (%)


ities Distribution of Mutual Funds Dist

FY15

FY16

FY17

451.36 458.88 519.39

4.64 5.38 8.26

85.16 90.56 111.24

52.48 55.68 68.62

4.37 4.63 5.71

-1.0 6.1 23.2

Quarterly Highlights • Higher utilization rate of the steel sector on account of ~38% de

in finished steel imports and rising exports (up by 102%)

Joint Plant Committee in the last fiscal

refractories in India. Real consumption of steel grew at 3.0% in F

and is expected to grow by 6.1% in CY17, posits

(WSA). Growth outlook for refractory market thus remains unfaltering

in view of the slated growth in iron and steel industry.

• Liquidity crisis arisen out of demonetization of high value currency

notes posed challenging times for the steel industry, and consequently

refractory industry and continued to impact

quarter of FY17, restricting its growth to only 4.1% (y

remained muted on q-o-q basis. However, u

performance of the steel industry on the whole

to register revenue of Rs 519.39 crs ($77.4m) for the

Rs458.88 crs ($70.1m) reported in FY16.

• Even though operating profit margin slid scantily

20.6% in Q4FY17, rise in other income to Rs 2.18 crs ($0.3m) vs Rs 1.42

crs ($0.2m) in the last quarter of FY16 helped EBITDA margin to

improve by 40 bps to 22.3% and advance its after tax profit by 8.5%

Rs 17.70crs ($2.6m).

• The stock currently trades at 22.3x FY18e EP

EPS of Rs 7.13. Gamut of interventions undertaken by the government

to give an impetus to the steel industry to which ORL has full exposure,

have invigorated consumption of steel (already up by 4.6% in the first

quarter of current fiscal; source: Joint Plant Committee)

the industry to reach global benchmarks. This should prove propitious

for ORL and aid in culminating its revenue at a CAGR of 13.8% over the

next two years, though not without near term headwinds in

insolvency and bankruptcy proceedings against steel companies like

Bhushan Steel, Electrosteel, Essar Steel Adhunik

sharp rise in prices of ORL’s critical raw material like alumina,

magnesia, graphite electrodes. Weighting all

“accumulate’ rating on the stock with a target price of Rs 157

target Rs 161) based on 22x FY19e EPS over a period of 9

(forward PEG ratio ~1).

CD EquisearchPvt Ltd August 23, 2017

istribution of Life Insurance

FY18e

FY19e

588.47 672.26

9.74 11.53

116.56 138.99

71.64 85.63

5.96 7.13

4.4 19.5

Higher utilization rate of the steel sector on account of ~38% de growth

in finished steel imports and rising exports (up by 102%) according to

amplified the demand for

refractories in India. Real consumption of steel grew at 3.0% in FY17,

posits World Steel Association

Growth outlook for refractory market thus remains unfaltering

in view of the slated growth in iron and steel industry.

Liquidity crisis arisen out of demonetization of high value currency

steel industry, and consequently

refractory industry and continued to impact ORL’s revenue in the last

quarter of FY17, restricting its growth to only 4.1% (y-o-y) while it

However, underpinned by impressive

on the whole, the company managed

to register revenue of Rs 519.39 crs ($77.4m) for the entire year vs

scantily by 16 bps (y-o-y) to

rise in other income to Rs 2.18 crs ($0.3m) vs Rs 1.42

crs ($0.2m) in the last quarter of FY16 helped EBITDA margin to

advance its after tax profit by 8.5% to

22.3x FY18e EPS of Rs 5.96 and 18.6x FY19e

amut of interventions undertaken by the government

to which ORL has full exposure,

(already up by 4.6% in the first

; source: Joint Plant Committee) and encouraged

the industry to reach global benchmarks. This should prove propitious

L and aid in culminating its revenue at a CAGR of 13.8% over the

near term headwinds in terms of

bankruptcy proceedings against steel companies like

Steel Adhunik, to name a few, and

raw material like alumina,

Weighting all odds, we reaffirm our

ck with a target price of Rs 157 (previous

x FY19e EPS over a period of 9-12 months



Outlook & Recommendation

Steel & Refractory Industry

The Indian steel industry has entered into a new development stage, riding high on the resurgent economy and rising

demand for steel. As per World Steel Association

years, compared to ~4% in 2016. GOI has outlined its intent for ensuring long

announced National Steel Policy 2017 to give the required momentum to the steel sector and has laid down the broad

roadmap for encouraging long term growth for the Indian steel industry, both on demand and supply sides, by 2030

policy aspires to achieve 300 MT of steel making capacity by 2030 requiring

2030-31, increase the consumption of steel on back of growth in infrastructure, automobiles and housing, encourage adoption

of energy efficient technologies in the MSME steel sector to improve overall productivity and reduce energy intensity and

establish Steel Research and Technology Mission of I

is expected to further succor growth and immensely benefit the steel industry as it will improve the sector’s competitiveness

bring down the logistics cost and reduce the transportation time by up to 45%

by 8-10% in the current fiscal.

According to a report by MarketsandMarkets, the global refractories market is projected

registering a CAGR of 3.89% over a period of five years fueled by increasing number of infrastructural development projects

in emerging economies such as China, India and Brazil and high growth rate witnessed by the non

industry, driving the global refractories market.

largest end-use industry segment of the refractories market

rapid growth in this industry drives the market for refractories

bright with proactive policy measures adopted by the Government to drive steel growth; the Indian Steel industry is very

well poised to leverage the opportunities which augur well for the refractory industry as well.

Financials & Valuations

Spurred by reasonably good performance of Indian steel industry crossing

(growth of 9.4% y-o-y) coupled with a strong clientele base, ORL registered a robust growth of 13.2% in its income from

operations as against a rise of only 1.7% in FY16. Effective cost management (total expenditure as a percentage of sales

dropped by 120 bps to 80.2%), product mix, old recoveries along

margin to expand to 19.8% in FY17 vs 18.7% in the

to Rs 8.26 crs translated to a 23.2% bottomline growth compared to the sluggish growth of only 6.1% in FY16

backdrop of slow off take in the Indian steel industry.

2




ssociation, steel demand in India is expected to grow at 6

has outlined its intent for ensuring long-term viability of the sector through the recently

to give the required momentum to the steel sector and has laid down the broad

m growth for the Indian steel industry, both on demand and supply sides, by 2030

f steel making capacity by 2030 requiring an additional investment of Rs. 10 lakh crore by

on back of growth in infrastructure, automobiles and housing, encourage adoption


establish Steel Research and Technology Mission of India (SRTMI) to facilitate R&D in the sector. The implementation of GST

immensely benefit the steel industry as it will improve the sector’s competitiveness

and reduce the transportation time by up to 45%. CARE thus posits production of steel to grow

According to a report by MarketsandMarkets, the global refractories market is projected to reach USD 36.17 billion by 2022,


in emerging economies such as China, India and Brazil and high growth rate witnessed by the non

industry, driving the global refractories market. Refractories market follows steel industry’s trend.

nt of the refractories market – in India, it consumes ~75% of the refractories produced

arket for refractories. At present, the prospect of India’s

dopted by the Government to drive steel growth; the Indian Steel industry is very

well poised to leverage the opportunities which augur well for the refractory industry as well.

performance of Indian steel industry crossing production of 100 million ton

y) coupled with a strong clientele base, ORL registered a robust growth of 13.2% in its income from

7% in FY16. Effective cost management (total expenditure as a percentage of sales

product mix, old recoveries along with no significant rise in fixed costs helped operating

margin to expand to 19.8% in FY17 vs 18.7% in the preceding year. Higher margins, along with rise in other income by 53.6%

to Rs 8.26 crs translated to a 23.2% bottomline growth compared to the sluggish growth of only 6.1% in FY16

backdrop of slow off take in the Indian steel industry.

2




, steel demand in India is expected to grow at 6-7% p.a. in the next two

term viability of the sector through the recently

to give the required momentum to the steel sector and has laid down the broad

m growth for the Indian steel industry, both on demand and supply sides, by 2030-31. The

an additional investment of Rs. 10 lakh crore by

on back of growth in infrastructure, automobiles and housing, encourage adoption


The implementation of GST

immensely benefit the steel industry as it will improve the sector’s competitiveness,

production of steel to grow

to reach USD 36.17 billion by 2022,


in emerging economies such as China, India and Brazil and high growth rate witnessed by the non-metallic minerals

. Iron & steel industry is the

in India, it consumes ~75% of the refractories produced – and

India’s refractories industry is

dopted by the Government to drive steel growth; the Indian Steel industry is very

production of 100 million tons in the last fiscal

y) coupled with a strong clientele base, ORL registered a robust growth of 13.2% in its income from

7% in FY16. Effective cost management (total expenditure as a percentage of sales

with no significant rise in fixed costs helped operating

preceding year. Higher margins, along with rise in other income by 53.6%

to Rs 8.26 crs translated to a 23.2% bottomline growth compared to the sluggish growth of only 6.1% in FY16 against



[

To cater to the growing demand for refractories worldwide, existing capacity of ORL’s

current capacity utilization rate of 90%) is planned to be

The capacity is expected to be added within second half of 2018 and requires a capital outlay of

be financed through internal accruals. Fomented

an impressive growth in its sales by 13.3% and 14.2

Yet near term concerns remain with few short term headwinds in the form of increase in raw material prices

electrodes, magnesia) and exposure to financially stressed steel companies like Bhushan Steel Ltd. and Electrosteel

total turnover). Although the company is able to procure magnesia from

largest global suppliers of refractories and provides complete refractory solutions

post supply constraints for key materials like magnesia and carbon. According to

chairman Hakimuddin Ali “In last 2-3 months, China has gone through massive transformation in terms of their environmental

norms. Because of this, there has been tremendous increase in raw material prices from quarter one of this financial year and

impact has begun to be felt now".

The stock currently trades at 22.3x FY18e EPS of Rs 5.96 and 18.6x FY19e EPS of Rs 7.13

which ORL is wholly dependent on - looks positive on back of overall economic growth, and more specifically, accelerated

spend in infrastructure sector which is expected to create significant demand for steel in th

of the rollout of National Steel Policy 2017 which broadly focuses on increase in

players in the steel sector, introduction of m

manufactured iron and steel products (DMI&SP)

government should give a fillip to the steel industry in the coming years and galvanize the performance of refractory industr

on the whole. We expect after tax profit of ORL to incre

of 12.2% and 12.7% in FY18 and FY19 respectively.

pressure emanating from recent increase in raw material prices like alumina, graphite electrodes and magnesia.

reaffirm our “accumulate’ rating on the stock with a target price of Rs 157

over a period of 9-12 months (PEG ratio ~1). For more information, refer to our February report.

3



refractories worldwide, existing capacity of ORL’s export oriented

is planned to be ramped up by 25.8% from 9300 tons per year to 11,700 tons per year.

The capacity is expected to be added within second half of 2018 and requires a capital outlay of Rs 17.27 crs

Fomented by enhanced capacity and robust demand, we expect the company to witness

and 14.2% over the next two years.

with few short term headwinds in the form of increase in raw material prices

and exposure to financially stressed steel companies like Bhushan Steel Ltd. and Electrosteel

. Although the company is able to procure magnesia from RHI AG, its parent company,

largest global suppliers of refractories and provides complete refractory solutions, clampdown in illegal mining in China would

post supply constraints for key materials like magnesia and carbon. According to Indian Refractory Makers Association

3 months, China has gone through massive transformation in terms of their environmental

norms. Because of this, there has been tremendous increase in raw material prices from quarter one of this financial year and

22.3x FY18e EPS of Rs 5.96 and 18.6x FY19e EPS of Rs 7.13. The spectrum of steel industry

looks positive on back of overall economic growth, and more specifically, accelerated

spend in infrastructure sector which is expected to create significant demand for steel in the country. In addition to this,

cy 2017 which broadly focuses on increase in domestic production and promotion of domestic

steel sector, introduction of minimum import price (MIP) on steel, providing preference to domestically

manufactured iron and steel products (DMI&SP) in government procurement along with various other measures taken by the

government should give a fillip to the steel industry in the coming years and galvanize the performance of refractory industr

of ORL to increase at a CAGR of 11.7% over the next two years with n

ectively. Earnings cut for current fiscal (EPS cut by 11%) precipitated from margin

pressure emanating from recent increase in raw material prices like alumina, graphite electrodes and magnesia.

ck with a target price of Rs 157 (previous target Rs 161) based on 2

For more information, refer to our February report.

3



export oriented isostatic products (with

by 25.8% from 9300 tons per year to 11,700 tons per year.

Rs 17.27 crs ($2.7m) which will

y and robust demand, we expect the company to witness

with few short term headwinds in the form of increase in raw material prices (alumina, graphite

and exposure to financially stressed steel companies like Bhushan Steel Ltd. and Electrosteel (7-8% of its

its parent company, which is one of the

clampdown in illegal mining in China would

Refractory Makers Association (IRMA)

3 months, China has gone through massive transformation in terms of their environmental

norms. Because of this, there has been tremendous increase in raw material prices from quarter one of this financial year and the

. The spectrum of steel industry - on

looks positive on back of overall economic growth, and more specifically, accelerated

e country. In addition to this, impact

production and promotion of domestic

inimum import price (MIP) on steel, providing preference to domestically

in government procurement along with various other measures taken by the

government should give a fillip to the steel industry in the coming years and galvanize the performance of refractory industry

e next two years with net profit margins

Earnings cut for current fiscal (EPS cut by 11%) precipitated from margin

pressure emanating from recent increase in raw material prices like alumina, graphite electrodes and magnesia. On balance, we

ous target Rs 161) based on 22x FY19e earnings



Cross Sectional Analysis

Company Equity* CMP Mcap*

Orient Refrac. 12.0 133 1596

IFGL Refrac. 34.6 238 824

Vesuvius India 20.3 1353 2746 *figures in crores; calculations on ttm basis

Despite buoyant steel demand, IFGL displayed only a 6.8% growth in its revenue from operations last fiscal mainly because of

muted export business, while its peers like Orient Refractories and Vesuvius I

FY17 and CY16 respectively. To foster requisite

current fiscal – Rs 100 crs at IFGL Odisha plant to expand SGR and zirconia nozzl

increase the present capacity of ISO products by 50% to 240,000 pieces p.a. at IEL Kandla plant and an investment of Euro 2mn

Hofmann plant, Germany to increase capacity and improve efficiency. IFGL’s merger wi

approved by NCLT, Kolkata, which will rationalize costs and

Orient to post highest operating margin, followed by Vesuvius (see table above).

Vesuvius recorded a hefty growth in its net profit of 19.1% in H1CY17 (y

by its parent company, Vesuvius Group, U.K., powers business growth. ORL boasts of strong competitive advantage on back of

RHI AG, Austria, one of the largest global suppliers of refractories. Both these companies should benefit from GOI’s ambitious

target to usher steel industry over the coming years, as they are largely dependent on the domestic market.

4



Sales* Profit* OPM(%) NPM(%) Int cov. ROE(%)

519 69 19.8 13.2 34958.2

766 52 13.0 7.9 18.7

903 95 18.0 10.5 -

displayed only a 6.8% growth in its revenue from operations last fiscal mainly because of

muted export business, while its peers like Orient Refractories and Vesuvius India Ltd. recorded a growth of 13.2% and 17.4%

ely. To foster requisite advantages to keep pace with peers, it has planned significant capex for the

Rs 100 crs at IFGL Odisha plant to expand SGR and zirconia nozzles manufacturing facilities, Rs 100 crs to

increase the present capacity of ISO products by 50% to 240,000 pieces p.a. at IEL Kandla plant and an investment of Euro 2mn

Hofmann plant, Germany to increase capacity and improve efficiency. IFGL’s merger with IFGL Exports has been

a, which will rationalize costs and improve margins. Focused attention on controlling costs enabled

Orient to post highest operating margin, followed by Vesuvius (see table above).

Vesuvius recorded a hefty growth in its net profit of 19.1% in H1CY17 (y-o-y). Technology and manufacturing support provided


Austria, one of the largest global suppliers of refractories. Both these companies should benefit from GOI’s ambitious


4



ROE(%) Mcap/ sales

P/BV P/E

31.1 3.1 6.7 23.3

18.8 1.1 2.8 15.8

16.5 3.0 4.5 28.8

displayed only a 6.8% growth in its revenue from operations last fiscal mainly because of

ndia Ltd. recorded a growth of 13.2% and 17.4% in

, it has planned significant capex for the

es manufacturing facilities, Rs 100 crs to

increase the present capacity of ISO products by 50% to 240,000 pieces p.a. at IEL Kandla plant and an investment of Euro 2mn at

th IFGL Exports has been recently

Focused attention on controlling costs enabled

y). Technology and manufacturing support provided


Austria, one of the largest global suppliers of refractories. Both these companies should benefit from GOI’s ambitious




Financials

Quarterly Results

Income From Operations

Other Income

Total Income

Total Expenditure

EBITDA (other income incl.)

Interest

Depreciation

PBT

Tax

PAT

Extraordinary Item

Adjusted Net Profit

EPS

Income Statement

Income From Operations

Other Income

Total Income

Total Expenditure

EBITDA (other income included)

Interest

Depreciation

PBT

Tax

PAT

Extraordinary Item

Adjusted Net Profit

EPS (Rs)

Equity Capital

5



Quarterly Results Figures in Rs crs

Q4FY17 Q4FY16 % chg FY17 FY16

127.84 122.78 4.1 519.39 458.88

2.18 1.42 53.1 8.26 5.38

130.02 124.21 4.7 527.65 464.26

101.55 97.35 4.3 416.41 373.70

28.47 26.86 6.0 111.24 90.56

0.00 0.00 -71.4 0.00 0.00

1.52 1.53 -0.8 6.37 5.91

26.95 25.32 6.4 104.87 84.66

9.25 9.01 2.6 36.25 28.84

17.70 16.31 8.5 68.62 55.82

0.00 0.00 0.0 0.00 0.14

17.70 16.31 8.5 68.62 55.68

1.47 1.36 8.5 5.71 4.63

Income Statement Figures in Rs crs

FY15 FY16 FY17 FY18e

451.36 458.88 519.39 588.47

4.64 5.38 8.26 9.74

Total Income 456.00 464.26 527.65 598.20

Total Expenditure 370.84 373.70 416.41 481.64

EBITDA (other income included) 85.16 90.56 111.24 116.56

0.04 0.00 0.00 0.00

5.49 5.91 6.37 7.03

PBT 79.63 84.66 104.87 109.54

Tax 26.79 28.84 36.25 37.90

PAT 52.84 55.82 68.62 71.64

Extraordinary Item 0.36 0.14 0.00 0.00

Adjusted Net Profit 52.48 55.68 68.62 71.64

EPS (Rs) 4.37 4.63 5.71 5.96

Capital 12.01 12.01 12.01 12.01

5



Figures in Rs crs

% chg

13.2

53.6

13.7

11.4

22.8

50.0

7.8

23.9

25.7

22.9

-100.0

23.2

23.2

Figures in Rs crs

FY19e

672.26

11.53

683.80

544.81

138.99

0.00

8.05

130.94

45.30

85.63

0.00

85.63

7.13

12.01



Balance Sheet

Sources of Funds

Share Capital

Reserves & Surplus

Total Shareholders' Funds

Long Term Debt

Total Liabilities Application of Funds

Gross Block

Less: Accumulated Depreciation

Net Block

Capital Work in Progress

Investments Current Assets, Loans & Advances

Inventory

Trade Receivables

Cash and Bank

Other Assets

Total CA & LA Current Liabilities

Provisions-Short term

Total Current Liabilities

Net Current Assets Net Deferred Tax

Net long term assets

Total Assets *estimated

6



Figures in Rs crs FY15 FY16 FY17 FY18e FY19e

12.01 12.01 12.01 12.01 12.01

157.79 192.64 261.26 296.75 345.51

169.80 204.65 273.27 308.76 357.52

- - - - -

169.80 204.65 273.27 308.76 357.52

62.32 72.53

84.55* 91.11 110.11

29.09 34.24 40.60 47.63 55.68

33.23 38.29 43.94 43.48 54.43

3.96 1.57 1.57 14.00 -

0.01 0.01 0.00 0.00 0.00

71.56 64.22 81.38 92.98 104.13

112.69 118.50 113.99 119.69 125.67

26.13 76.47 110.84 124.91 166.35

3.01 5.04 5.85 6.24 6.76

213.40 264.24 312.06 343.81 402.92

59.90 76.50 82.70 90.50 97.29

20.79 21.68 0.39 0.40 0.45

80.69 98.18 83.09 90.90 97.73

132.71 166.06 228.97 252.91 305.18

0.79 0.66 0.37 0.35 0.39

-0.90 -1.93 -1.59 -1.98 -2.49

169.80 204.65 273.27 308.76 357.52

6





Cash Flow Statement

Net Income (a)

Non cash Expenses (b)

Depreciation

Interest Income

Deferred Tax

Others

Adjustments in NWC and others (c )

Inventories

Trade receivables

Trade Payables

Other liabilities

Other assets

Cash Flow from Operating Activities (a+b+c)

Purchase of fixed assets

Proceeds from sale of assets

Interest received

Others

Cash Flow from Investing activities

Net Borrowings

Dividend paid (including CDT)

Cash Flow from Financing Activities

Net Change (a+b+c+d+e)

7



Figures in Rs. crs

FY15 FY16 FY17 FY18e

52.84 55.82 68.62 71.64

2.45 4.50 4.52 3.37

5.49 5.91 6.37 7.03

-1.13 -1.84 -3.60 -5.15

-0.77 0.13 0.29 0.03

-1.14 0.30 1.46 1.46

-21.53 19.91 -8.42 -11.00

-8.24 7.34 -17.16 -11.60

-15.19 -7.18 3.05 -7.16

1.54 20.54 5.70 7.75

0.91 0.63 0.95 0.63

-0.56 -1.42 -0.96 -0.61

Cash Flow from Operating Activities (a+b+c) 33.75 80.22 64.72 64.01

-11.50 -9.13 -12.61 -19.03

0.80 0.30 - -

2.66 2.90 3.23 5.23

-1.59 1.74 - -

-9.63 -4.19 -9.38 -13.79

-0.47 -5.24 - -

-17.12 -19.73 -20.97 -36.15

-17.59 -24.98 -20.97 -36.15

6.53 51.06 34.37 14.07

7



Figures in Rs. crs

FY19e

85.63

2.53

8.05

-6.95

-0.04

1.46

-12.23

-11.16

-7.45

6.10

0.94

-0.66

75.94

-4.56

-

6.95

-

2.38

-

-36.87

-36.87

41.44



Key Financial Ratios

Growth Ratios (%)

Revenue

EBITDA

Net Profit

EPS

Margins (%)

Operating Profit Margin

Gross profit Margin

Net Profit Margin

Return (%)

ROCE

ROE

Valuations

Market Cap/ Sales

EV/EBITDA

P/E

P/BV

Other Ratios

Interest Coverage

Debt Equity

Current Ratio

Turnover Ratios

Fixed Asset Turnover

Total Asset Turnover

Debtors Turnover

Inventory Turnover

Creditor Turnover

WC Ratios

Debtor Days

Inventory Days

Creditor Days

Cash Conversion Cycle

Cash Flows

Operating cash flow

FCFF

FCFE

8



FY15 FY16 FY17 FY18e FY19e

11.9 1.7 13.2 13.3 14.2

1.3 6.8 23.1 4.8 19.2

-1.0 6.1 23.2 4.4 19.5

-1.0 6.1 23.2 4.4 19.5

17.8 18.7 19.8 18.2 19.0

18.7 19.7 21.4 19.8 20.7

11.6 12.1 13.2 12.2 12.7

33.0 29.3 31.1 28.1 29.0

34.1 29.7 31.1 28.1 29.0

2.3 2.0 3.0 2.7 2.4

12.1 9.4 12.9 12.7 10.7

19.9 16.6 22.6 22.3 18.6

6.1 4.5 6.5 5.9 5.0

1823.1 42221.0 34958.2 - -

0.0 0.0 - - -

2.6 2.7 2.6 2.7 2.9

14.2 12.8 12.6 13.5 13.7

2.9 2.5 2.4 2.3 2.3

4.3 4.0 4.5 5.0 5.5

5.5 5.5 5.7 5.5 5.5

7.2 6.1 5.6 5.9 6.2

85.8 91.9 81.7 72.5 66.6

66.4 66.4 63.8 66.1 66.0

50.3 60.3 65.5 61.7 59.2

101.8 98.0 80.0 76.8 73.4

33.8 80.2 64.7 64.0 75.9

24.2 75.3 55.3 50.2 78.3

23.6 70.1 55.3 50.2 78.3

8





Cumulative Financial Data

Rs crs FY14-15

Income from operations 855

Operating profit 160

EBIT 159

PBT 159

PAT 105

Dividends 38 Sales growth (%) 29.3

PAT growth (%) 43.3

OPM (%) 18.7

GPM (%) 19.7

NPM (%) 12.3

ROE (%) 38.8

ROCE (%) 37.4

Debt-Equity ratio* 0.0

Fixed asset turnover 13.7

Total asset turnover 3.1

Debtors turnover 4.6

Creditors turnover 7.3

Inventory turnover 5.4

Debtor days 78.7

Creditor days 49.8

Inventory days 67.5

Cash conversion cycle 96.3

Dividend payout ratio (%) 35.8

FY14-15 implies two year period ending fiscal15;*as on terminal year

With iron & steel industry being the largest consumer of refractories output in India, the slump in country’s steel market

in FY16 (production at -0.10%) marred ORL’s growth trajectory and led the company

cumulative revenue of 14.4% in FY16-17 period as aga

prices in FY16 which constituted 39.2% of its total raw material consumption supported the improvement in OPM by

bps in FY16-17 period. Even though profitability soared up to 23.2% in FY17

failed to give a leg up to the return on capital ratio

With various initiatives undertaken by the government such as anti

increased focus to expand MSME sector, enhanced R&D activities, to name a few

over the medium term All this should prop up the sales of ORL by

flagging period of FY16-17. However, with increase in raw material prices, margins are expected to remain under

pressure in the near future along with a decline in return ratios (see table above).

9



FY16-17 FY18-19e

978 1261

189 234

189 240

189 240

124 157

57 77

14.4 28.9

17.8 26.5

19.3 18.6

20.6 20.3

12.7 12.5

30.5 28.3

30.2 28.3

0.0 0.0

12.7 12.8

2.4 2.3

4.3 5.3

6.1 6.1

5.2 5.5

84.6 69.4

59.6 60.1

70.7 66.0

95.6 75.3

45.9 48.7

terminal year.

largest consumer of refractories output in India, the slump in country’s steel market

0.10%) marred ORL’s growth trajectory and led the company to book a displeasing growth

17 period as against 29.3% in the previous two years.

prices in FY16 which constituted 39.2% of its total raw material consumption supported the improvement in OPM by

Even though profitability soared up to 23.2% in FY17 as against 6.1% in the preceding year, it

to give a leg up to the return on capital ratio- ROE of 30.5% in FY16-17 as against 38.8% in FY14

With various initiatives undertaken by the government such as anti-dumping and safeguard duties on steel

increased focus to expand MSME sector, enhanced R&D activities, to name a few, refractories produc

All this should prop up the sales of ORL by 28.9% in the projected period of FY18

17. However, with increase in raw material prices, margins are expected to remain under

pressure in the near future along with a decline in return ratios (see table above).

9



largest consumer of refractories output in India, the slump in country’s steel market

to book a displeasing growth in its

inst 29.3% in the previous two years. However, fall in alumina

prices in FY16 which constituted 39.2% of its total raw material consumption supported the improvement in OPM by ~60

as against 6.1% in the preceding year, it

17 as against 38.8% in FY14-15.

dumping and safeguard duties on steel imports,

, refractories products would see a boost

in the projected period of FY18-19 from the

17. However, with increase in raw material prices, margins are expected to remain under



Financial Summary- US Dollar denominated

million $ FY15

Equity capital 1.9

Shareholders funds 27.1

Total debt 0.8

Net fixed assets (including CWIP) 5.9

Investments 0.0

Net current assets 21.2

Total assets 27.1

Revenues 73.8

EBITDA 13.8

PBDT 13.8

PBT 12.9

PAT 8.6

EPS($) 0.07

Book value ($) 0.23

Operating Cash Flow 5.4

Investing Cash Flow -1.5

Financing Cash Flow -2.8

Net Cash Flow 1.0

Income statement figures translated at average rates; balance sheet All dollar denominated figures are adjusted for extraordinary items.

10



US Dollar denominated

FY15 FY16 FY17 FY18e FY19e

1.8 1.9 1.9 1.9

30.9 36.6 42.4 49.6

- - - -

6.0 7.0 9.0 8.5

0.0 0.0 0.0 0.0

25.0 29.7 33.7 41.4

30.9 36.6 42.4 49.6

70.1 77.4 91.8 104.9

13.8 16.6 18.2 21.7

13.8 16.6 18.2 21.7

12.9 15.6 17.1 20.4

8.5 10.2 11.2 13.4

0.07 0.09 0.09 0.11

0.26 0.30 0.35 0.41

12.1 10.0 10.0 11.8

-0.6 -1.4 -2.2 0.4

-3.8 -3.2 -5.6 -5.8

7.7 5.3 2.2 6.5

tes; balance sheet at year end rates; projections at current rates (Rs 64.11All dollar denominated figures are adjusted for extraordinary items.

10



tions at current rates (Rs 64.11/$).



Disclosure & Disclaimer CD Equisearch Private Limited (hereinafter referred to as

Limited, Bombay Stock Exchange Limited and Metropolitan Stock Exchange of India Limited (Formerly known as MCX Stock Exchange

Limited). CD Equi is also registered as Depository Participant with CDSL and AMFI registered Mutual Fund Advisor. The associ

CD Equi are engaged in activities relating to NBFC

CD Equi is registered under SEBI (Research Analysts) Regulations, 2014 with SEBI Registration no INH300002274. Further, CD Equi

hereby declares that –

• No disciplinary action has been taken against CD Equi by any of the regulatory authorities.

• CD Equi/its associates/research analysts do not have any financial interest/beneficial interest of more than one percent/material

conflict of interest in the subject company(s)

• CD Equi/its associates/research analysts have not received a

months.

• CD Equi/its research analysts has not served as an officer, director or employee of company covered by analysts and has not b

engaged in market making activity of the company cov

This document is solely for the personal information of the recipient and must not be singularly used as the basis of any inv

decision. Nothing in this document should be construed as investment or financial advice. Each recipient

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the c

referred to in this document (including the merits and risks involved) and should consult th

risks of such an investment.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positio

trading volume, as opposed to focusing on a comp

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other rel

believed to be true but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for

general guidance only. CD Equi or any of its affiliates/group companies shall not be in any way responsible for any loss or d

may arise to any person from any inadvertent error in the information contained in this report. CD Equi has not independently verif

the information contained within this document. Accordingly, we cannot testify nor make any representation or warranty, exp

implied, to the accuracy, contents or data contained within this document.

While, CD Equi endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory

or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information and its contents, information or data may not be reproduce

redistributed or passed on, directly or indirectly. Neither, CD Equi nor its directors, employees or affiliates sh

damage that may arise from or in connection with the use of this information.

CD Equisearch Private Limited (CIN: U67120WB1995PTC071521)

Registered Office: 37, Shakespeare Sarani, 3rd Floor, Kolkata

10, Vasawani Mansion, 5th Floor, Dinshaw Wachha Road, Churchgate, Mumbai

2283, 2276 Website: www.cdequi.com; Email: [email protected]

buy: >20% accumulate: >10% to ≤20% hold:

Exchange Rates Used- Indicative

Rs/$ FY14 FY15

Average 60.5 61.15

Year end 60.1 62.59

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

11



CD Equisearch Private Limited (hereinafter referred to as ‘CD Equi’) is a Member registered with National Stock Exchange of India


Limited). CD Equi is also registered as Depository Participant with CDSL and AMFI registered Mutual Fund Advisor. The associ

CD Equi are engaged in activities relating to NBFC-ND - Financing and Investment, Commodity Broking, Real Estate, etc.

Equi is registered under SEBI (Research Analysts) Regulations, 2014 with SEBI Registration no INH300002274. Further, CD Equi

No disciplinary action has been taken against CD Equi by any of the regulatory authorities.

sociates/research analysts do not have any financial interest/beneficial interest of more than one percent/material

conflict of interest in the subject company(s) (kindly disclose if otherwise).

CD Equi/its associates/research analysts have not received any compensation from the subject company(s) during the past twelve

CD Equi/its research analysts has not served as an officer, director or employee of company covered by analysts and has not b

engaged in market making activity of the company covered by analysts.

This document is solely for the personal information of the recipient and must not be singularly used as the basis of any inv

decision. Nothing in this document should be construed as investment or financial advice. Each recipient

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the c

referred to in this document (including the merits and risks involved) and should consult their own advisors to determine the merits and

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positio

trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report on a company's

The information in this document has been printed on the basis of publicly available information, internal data and other rel

do not represent that it is accurate or complete and it should not be relied on as such, as this document is for

general guidance only. CD Equi or any of its affiliates/group companies shall not be in any way responsible for any loss or d

ise to any person from any inadvertent error in the information contained in this report. CD Equi has not independently verif

the information contained within this document. Accordingly, we cannot testify nor make any representation or warranty, exp

implied, to the accuracy, contents or data contained within this document.

While, CD Equi endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory

This document is being supplied to you solely for your information and its contents, information or data may not be reproduce

redistributed or passed on, directly or indirectly. Neither, CD Equi nor its directors, employees or affiliates sh

damage that may arise from or in connection with the use of this information.

CD Equisearch Private Limited (CIN: U67120WB1995PTC071521)

Floor, Kolkata – 700 017; Phone: +91(33) 4488 0000; Fax: +91(33) 2289 2557 Corporate Office:

Floor, Dinshaw Wachha Road, Churchgate, Mumbai – 400 020. Phone: +91(22) 2283 0652/0653; Fax: +91(22)

2283, 2276 Website: www.cdequi.com; Email: [email protected]

hold: ≥-10% to ≤10% reduce: ≥-20% to <-10% sell:

FY16 FY17

65.46 67.09

66.33 64.84

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.

11



) is a Member registered with National Stock Exchange of India


Limited). CD Equi is also registered as Depository Participant with CDSL and AMFI registered Mutual Fund Advisor. The associates of

Financing and Investment, Commodity Broking, Real Estate, etc.

Equi is registered under SEBI (Research Analysts) Regulations, 2014 with SEBI Registration no INH300002274. Further, CD Equi

sociates/research analysts do not have any financial interest/beneficial interest of more than one percent/material

ny compensation from the subject company(s) during the past twelve

CD Equi/its research analysts has not served as an officer, director or employee of company covered by analysts and has not been

This document is solely for the personal information of the recipient and must not be singularly used as the basis of any investment

of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

eir own advisors to determine the merits and

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

any's fundamentals and as such, may not match with a report on a company's

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources

do not represent that it is accurate or complete and it should not be relied on as such, as this document is for

general guidance only. CD Equi or any of its affiliates/group companies shall not be in any way responsible for any loss or damage that

ise to any person from any inadvertent error in the information contained in this report. CD Equi has not independently verified all

the information contained within this document. Accordingly, we cannot testify nor make any representation or warranty, express or

While, CD Equi endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory compliance

This document is being supplied to you solely for your information and its contents, information or data may not be reproduced,

redistributed or passed on, directly or indirectly. Neither, CD Equi nor its directors, employees or affiliates shall be liable for any loss or

488 0000; Fax: +91(33) 2289 2557 Corporate Office:

400 020. Phone: +91(22) 2283 0652/0653; Fax: +91(22)

sell: <-20%

translated at the average rate of the respective quarter/ year as applicable. Projections converted at

cd equisearchpvt ltd · steel & refractory industry demand for steel. as per w years, compared...

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