Price ` 734
Fair Value 892
Upside 22%
Div Yield 0.1%
Tenure 1Year
Sensex 36347.08
Nifty 10908.70
Group/Index
M.cap (` in cr) 475
Equity (` In cr) 6.47
52 wk H/L ` 1,157.25/652.05
Face Value ` 10
NSE code -
BSE code 526817
BUDGE-BUDGE
RONW 10%
P/E 8.97
P/BV 0.9
EV/EBIDTA 6.11 FALTA
IN `
EV (`in cr) 486.62
BV (`in cr) 813.21
NW(`in cr) 526.15
Adj. EPS (TTM) 81.80
FY 19Est. Earnings 59.16
Equity Share Capital 6.47
10
0.65
EPS Est. (FY2019) 91.43
Estimated P/E Ratio 9.76
Fair Value 892
Year End 201803 201703 201603 201503
Tax Rate % 26.90 25.52 28.46 18.27
Receivable days 34 28 29 34
Source: Google Div. Payout % 1 1 21 30
INVESTMENT RESEARCH
FUNDAMENTAL COVERAGE- CHEVIOT COMPANY LTD.
Dated : 18 th December, 2018
BUY Investment Rationale
Key Valuation Ratios
Key Financial Data
Composite Jute Mill producing high quality jute yarns & traditional jute products such as-Hessiancloth & Bags in different sizes & constructions, Sacking bags like A-Twill, B- Twill & DWF Bags-bothNormal & Food Grade Quality.
VALUATION (` In Cr except per share)
Corporate Governance Transparency Ratio's
No. of Equity Shares
Stock Details
Share Holding Pattern
GOVERNMENT INITIATIVES TO ADD SPUNK
FV
Under the Jute Packaging Materials (Compulsory Use in Packing Commodities) [JPM Act], 1987,
Government specifies the commodities and the extent to which they are mandatorily required to be
packed in Jute Packaging Materials. At present, The Cabinet gave its nod to raise jute packaging for food
grains to 100 per cent from 80 per cent and 20 per cent for sugar. With this, the government has made
jute bags mandatory for food grain packaging in 2018-19.
The quantity of raw jute available during 2017-18 and projection for 2018-19, as per assessment of
the Jute Advisory Board, is 101.40 lakh bales (18.25 lakh tonnes) and 98.40 lakh bales (17.71 lakh
tonnes), respectively. The closing balance is 20.4 lakh bales (3.67 lakh tonnes) in jute year 2018-19.
Further, the decision to use diversified jute bags is meant to prevent contaminants such as jute fiber
and jute batching oil. The government sector buys bags worth about Rs 6,500 crore every year for
foodgrains.
With a view to boost demand in the jute sector, the Government of India has imposed definitive anti-
dumping duty on the import of jute goods from Bangladesh and Nepal with effect from January 5, 2017.
In order to improve the productivity and quality of raw jute through a carefully-designed intervention,
called the Jute ICARE, the Government has been supporting close to one lakh jute farmers.
With a view to support the diversification of the jute sector, the National Jute Board has collaborated
with National Institute of Design, and a jute design cell has been opened in Gandhinagar.
GROUP CHEVIOT - a renowned Industrial House of India having interest in JUTE, TEA & LEATHER
Industries. Company having presence in more than 100 years in manufacturing Eco Friendly & Bio-
Degradable products.
Apart from manufacturing Jute Fine Yarn, Normal Hessian & Sacking Products, the company is into the
production of high quality Jute Fabric for the Industrial & decorative Applications and have installed
around 100 Sulzer Looms for this purpose. As a forward integration, Company has also created a
facility for manufacturing jute-
Shopping Bags
Fashion bags
Beach bags
Cotton bags
Bottle bags
Artless Polka collection
Specialty Jute Weaving unit manufacturing high quality technical / Decorative Fabrics on SULZERLOOMS and Jute Shopping Bags.
X / S&P BSE
SmallCap
Since the Company has the facility for manufacturing Fabric as well as Shopping Bags in house, it
gives an edge to the Company to offer Shopping Jute Bags at very competitive Price & also guarantee
quality & timely shipments.
Manufacturing Units
74.76%
25.24%
Promoter public
Page 1 www.rudrashares.com
The industry incentives under different schemes:
Q2FY18 Results
` in crores
201809 201806 201709 2018 2017
96.35 86.41 94.74 11.50% 1.70% 376.12 393.54 -4.43%
19.88 19.30 21.05 3.01% -5.56% 79.23 74.97 5.68%
20.63% 22.34% 22.22% - - 21.07% 19.05% -
18.57 17.96 19.83 3.40% -6.35% 73.97 66.43 11.35%
19.27% 20.78% 20.93% - - 19.67% 16.88% 16.51%
12.68 13.08 14.42 -3.06% -12.07% 51.65 43.83 17.84%
13.16% 15.14% 15.22% - - 13.73% 11.14% 23.30%
19.61 30.35 32.74 -35.39% -40.10% 125.48 109.71 14.37%
19.6 20.2 22.3 -2.97% -12.11% 79.90 67.8 17.85%
Threats, Risks and Concerns
To support jute farmers, Jute Corporation of India (JCI) has been given a grant of Rs 100 crore for two years starting from 2018-19
to enable JCI to conduct minimum support price (MSP) operations and ensure price stabilization in the jute sector.
Further, promotion of jute geo textiles and agro-textiles has been taken up with the state governments, particularly those in the
North-Eastern region, and also with departments such as the Ministry of Road Transport and the Ministry of Water Resources.
Also, the imposition of definitive anti-dumping duty has provided scope for an additional demand of 2 lakh metric tonne (MT) of
jute goods in the domestic market for the Indian jute industry.
With a view to promoting transparency in jute sector, Jute Smart, an e-government initiative was launched in December 2016,
providing an integrated platform for procurement of B-Twill sacking by government agencies.
Looking ahead, demand of jute goods is expected to be buoyant. There has been regular flow of Government Orders and enquiries from
overseas markets. The Company is making all efforts to maintain steady production by incentivizing and mobilizing workforce in order to
make effective utilization of its production capacity to be able to execute orders.
Barring unforeseen circumstances, the outlook for the current year appears to be promising for the industry & for cheviot.
Adjusted EPS
] Weak rupee may offer better opportunity for export of jute
products at competitive prices
] Jute Goods, being bio-degradable and eco-friendly, will always
be preferred across the world.
] Demand for promotional bags, lifestyle products & made ups
and jute geo textiles are expected to see an upsurge
] Promotion of Jute diversified products by Government of
India will help in increasing market of jute goods
] Dilution of the Jute Packaging Material Act, 1987 remains a
primary area of concern and uncertainty
] Inadequate leverage of the environment-friendly nature of Jute
has been a bane for the industry.
] Shortage of workers posing threat to maintain stable capacity
utilization.
] Farmers opt for alternate agricultural activities in absence of
proper incentive to grow jute crop on continuous basis
] More competition from synthetic packaging materials specifically
because of falling crude prices
PBT
PBT%
EPS
“Amended Technology Upgradition Fund Scheme (ATUFS)”, which provides 15% Capital Investment Subsidy on eligible machines
with a Capital Investment Subsidy per individual entity of ` 30.00 crores for the period 13.01.2016 to 31.03.2022
In promoting the exports of Jute Goods from India, Government has increased the rate of rewards in the form of duty free scripts
from 5% to 7% of realised FOB value in free foreign currency under Merchandise Exports from India Scheme (MEIS) effective from
1st November, 2017. Moreover, National Jute Board is also continuing with scholarship scheme for children of jute mill workers,
export market development assistance and incentive scheme for acquisition of plant and machinery
Net Sales witnessed a marginal increase at ` 96.35 crore in September 2018 up 1.7% from ` 94.74 crore in September
2017. This mainly is due to lower prices of raw jute having consequential impact in prices of finished goods. However,
Net sales were up 11.5% from the previous quarter .
Quarterly Net Profit was down 12.07% at ` 12.68 crore in September 2018 from ` 14.42 crore in September 2017.
EBITDA stands at ` 19.88 crore in September 2018 down 5.56% from ` 21.05 crore in September 2017.
Company's EPS has decreased to ` 19.61 in September 2018 from ` 32.74 in September 2017.
Opportunities
Tabular presentation
PAT
PAT %
Year ended
The Company’s export oriented unit at Falta Special Economic Zone has been running smoothly. Efforts are being
made to increase customer base in conventional and diversified hessian fabrics and jute shopping bags.
Qu
art
erl
y &
ye
arl
y R
esu
lts
An
aly
sis
Standalone Results
ParticularsQuarter Ended % change
Q-0-Q
% change
Y-0-Y
% change
Y-0-Y
Net Sales
EBITDA
EBITDA %
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COMPANY OVERVIEW
VALUATION CONCLUSION
Cheviot Company Ltd is an India-based company and is engaged in the manufacturing and sale of jute
goods. The Company's geographical segments are Within India and Outside India. It owns Cheviot Jute
Mills in West Bengal. The Company manufactures jute products and jute fabrics to cater to both domestic
and international market. Its jute bags and products include promotional bags, fashion bags, beach bags,
bottle bags, utility bags, cotton bags, and jute for hessian bags and sacking bags. The Company offers jute
bags of various sizes, styles, shapes and colors. It also offers jute yarn or twin yarn in single or multiple
twists available in cylindrical/conical/coneless spools or hanks. The Company also offers covering
fabrics; stuffings, and other materials that are used in upholstering.
The ATUFS scheme, which provides 15% Capital Investment Subsidy on eligible machines for the
period 13.01.2016 to 31.03.2022, Implementation of various schemes by The National Jute Board for
market development, workers' welfare and promotion of diversification and exports, issue of
notification by the Government, mandatory packaging for food grains & sugar in jute bags & various
other initiatives set up by the government is totally a BOON for this industry.
These decisions will give a fillip to the development of the jute sector, increasing the quality and
productivity of raw jute, diversification of jute sector and also boosting and sustaining demand for jute
product.
Estimating the share price of the company as per P/E valuation
P/E of FY19E at 9.76x , EPS(Est.) at ` 91.43, the estimated share price for next 1 year tenure turns
around to be ` 892. We recommend to BUY this script.
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LTM 201809 201806 201803 201712
377.20 96.35 86.41 104.89 89.57
79.60 19.88 19.30 15.99 24.45
4.60 1.10 1.09 1.40 1.05
75.00 18.78 18.21 14.59 23.40
19.30 5.50 4.03 0.01 9.73
1.00 0.21 0.25 0.34 0.20
74.00 18.57 17.96 14.25 23.20
21.10 5.89 4.89 5.58 4.73
52.90 12.68 13.08 8.67 18.47
- - - - -
52.90 12.68 13.08 8.67 18.47
112.90 19.60 30.35 20.12 42.85
81.80 19.60 20.20 13.40 28.60
Particulars 201503 201603 201703 201803 2019E 2020E 2021E
Revenue 266.99 343.04 393.54 376.12 391.02 409.23 432.14
Other operating Income - - - - - - -
Total Inc. from operations 266.99 343.04 393.54 376.12 391.02 409.23 432.14
Operating EBITA 20.54 39.08 35.68 50.88 60.60 65.16 71.30
Total Inc. from operations 266.99 343.04 393.54 376.12 391.02 409.23 432.14
TOTAL EXPENDITURE 239.97 298.23 349.94 320.87 325.72 339.25 355.87
EBITDA 27.02 44.81 43.6 55.25 65.30 69.98 76.27
Depreciation (6.48) (5.73) (7.92) (4.37) (4.70) (4.82) (4.97)
Goodwill amortization - - - - - - -
OTHER INCOME 22.64 12.72 31.36 23.98 21.25 22.29 25.43
Net financials
Interest income - - - - - - -
Interest expenses (0.87) (0.82) (0.62) (0.89) (0.93) (0.89) (0.87)
Net Financial Items (0.87) (0.82) (0.62) (0.89) (0.93) (0.89) (0.87)
Reported Pre-tax profit 42.31 50.98 66.42 73.97 80.93 86.56 95.86
Reported Tax charge (7.73) (14.53) (16.95) (19.90) (21.77) (23.29) (25.79)
Reported Net profit 34.58 36.45 49.47 54.07 59.16 63.28 70.08
Minorities - - - - - - -
P/L OF ASSOCIATE CO. - - - - - - -
34.58 36.45 49.47 54.07 59.16 63.28 70.08
Extra Ordinary income 0.79 - 0.61 - - - -
Dividend Paid (7.67) (7.67) (0.45) (0.43) (0.64) (0.65) (0.64)
Retained earnings 26.12 28.78 48.41 53.64 58.51 62.63 69.43
Reported EPS 76.67 80.82 109.69 125.45 91.43 97.80 108.31
Adjusted Basic EPS 52.23 56.34 75.52 83.57 91.43 97.80 108.31
DPS 17.00 17.00 1.00 1.00 1.00 1.00 1.00
Opening Balance 4.51 4.51 4.51 4.51 4.31 6.47 6.47
Issued - - - - 2.16 - -
Bought Back - - - 0.20 - - -
Closing Balance 4.51 4.51 4.51 4.31 6.47 6.47 6.47
FV 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Wtd. Avg. no. of shares 0.451 0.451 0.451 0.431 0.647 0.647 0.647
Note:- The figures shown in the brackets means NEGATIVE.
Rep Net Inc
Depreciation
Net Sales
EPS
Taxes
Op Income
EBT
Adjusted EPS
Income Statement and Estimates ( ` in Cr except per share)
Profit & Loss
Rep. profit before othrinc.,
fin.cost,tax & excp. Item20.54
Misc.Inc (Exp.)
Extraord. Items
Net Inc(Reg)
Interest Exp
Quarterly Results (` in cr except per share)
EBITDA
Particulars
74.86 81.86 87.45 96.73
Rep. NP after min. Int.
39.08 35.68 50.88 60.60 65.16 71.30
Rep. profit before othrinc.,
fin.cost,tax & excp. Item20.54 39.08 35.68 50.88 60.60 65.16 71.30
Number Of Shares
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Rep.Net Income after
extra ordinary items33.79 36.45 48.86 54.07 59.16 63.28 70.08
EPS and Dividend
Profit from ordinary act. Before
Fin.Cost ,TAX & Exp.Items 43.18 51.8 67.04
Page 4 www.rudrashares.com
201503 201603 201703 201803 2019E 2020E 2021E
Equity & Liabilities
Shareholders' Fund
Share Capital 4.51 4.51 4.51 4.31 6.47 6.47 6.47
Reserves and Surplus 352.43 413.58 470.05 496.08 554.59 617.22 686.65
- - - - - - -
Total Shareholders' Fund 356.94 418.09 474.56 500.39 561.06 623.69 693.12
Non-Current Liabilities
Long-term Borrowings - - 0.03 0.85 0.71 0.68 0.9
Other LT Liabilities 0.1 0.08 1.37 1.63 1.98 2.38 2.85
Deferred Tax Liability 1.08 1.06 9.12 9.7 10.19 10.69 11.23
Long term Provisions - - - - - - -
Total Non-Current Liab. 1.18 1.14 10.52 12.18 12.88 13.75 14.98
Current Liabilities
Short term Borrowings 14.03 12.59 13.3 4.59 5.05 5.55 6.11
Trade Payables 8.14 9.33 5.27 5.61 9.78 10.64 11.67
Other current liability 2.78 4.54 10.65 17.26 16.42 15.55 15.12
Short term Provisions 14.48 5.09 4.92 4.92 5.41 5.95 6.55
Total current Liab. 39.43 31.55 34.14 32.38 36.66 37.70 39.45
Total Equity & Liab. 397.55 450.78 519.22 544.95 610.60 675.14 747.56
Assets
Non-Current Assets
Fixed Assets
Tangible fixed Assets 112.18 145.78 150.26 149.29 151.83 155.81 160.77
G/W On Consolidation - - - - - - -
Non-current Investment 168.63 162.46 208.59 214.46 246.63 278.60 316.40
Long term L&A 0.61 1.51 0.36 2.59 2.74 2.90 3.07
Other Non current Ass. 3.33 3.48 3.5 1.04 1.12 1.21 1.31
Deferred tax receiv. - - - - - - -
Total Non-Current Ass. 284.75 313.23 362.71 367.38 402.32 438.52 481.55
Current Assets
Current Investments 24.81 25.03 37.34 50.57 62.26 73.30 81.14
Inventories 45.26 59.29 60.05 61.42 66.47 73.66 82.11
Trade Receivables 24.64 29.7 30.9 38.24 43.01 49.11 56.18
Cash & cash Equi. 7.51 8.41 11.52 10.98 18.89 22.13 27.10
Short Term L&A 6.13 9.79 - - - - -
Other current Assets 4.47 5.33 16.72 16.38 17.60 18.42 19.45
Total current Assets 112.82 137.55 156.53 177.59 208.24 236.61 265.97
Total Assets 397.55 450.78 519.22 544.95 610.60 675.14 747.56
Cash & cash equivalents 7.51 8.41 11.52 10.98 18.89 22.13 27.10
Other int. bearing assets 193.44 187.49 245.93 265.03 308.89 351.90 397.54
Interest-bearing debt 16.81 17.13 23.98 22.70 22.18 21.78 22.13
Net interest-bearing debt (184.14) (178.77) (233.47) (253.31) (305.60) (352.24) (402.51)
Net gearing (%) - - - - - - -
Tangible assets
Gross capex (2.63) (6.63) (10.22) (3.51) (7.23) (8.80) (9.94)
Sale of fixed assets 0.19 0.31 0.38 0.16 - - -
Net capex (2.44) (6.32) (9.84) (3.35) (7.23) (8.80) (9.94)
Depreciation tangibles (6.48) (5.73) (7.92) (4.37) (4.70) (4.82) (4.97)
Note:- The figures shown in the brackets means NEGATIVE.
BALANCE SHEET
Particulars
Minority Interests
Investments
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201503 201603 201703 201803 2019E 2020E 2021E
Return on assets - 8.59% 10.07% 10.16% 10.24% 9.84% 9.85%
Return on equity - 9.41% 10.95% 11.09% 11.15% 10.68% 10.64%
ROCE - 10.02% 7.79% 9.97% 10.90% 10.53% 10.38%
EBIT Margin - 15.10% 17.04% 19.90% 20.93% 21.37% 22.38%
Pre tax margin - 14.86% 16.88% 19.67% 20.70% 21.15% 22.18%
Net Profit Margin - 10.63% 12.42% 14.38% 15.13% 15.46% 16.22%
Total asset turnover - 0.81 0.81 0.71 0.68 0.64 0.61
Fixed asset turnover - 2.66 2.66 2.51 2.60 2.66 2.73
Equity turnover - 0.89 0.88 0.77 0.74 0.69 0.66
Current Ratio - 4.36 4.58 5.48 5.68 6.28 6.74
Quick Ratio - 2.48 2.83 3.59 3.87 4.32 4.66
Cash Ratio - 0.27 0.34 0.34 0.52 0.59 0.69
Receivable Days - 28.91 28.10 33.55 37.92 41.08 44.46
Inventory Days - 63.98 62.24 69.09 71.66 75.39 79.88
Payable Days - 10.21 12.23 10.48 14.42 18.19 18.80
Conversion Cycle (Days) - 82.68 78.11 92.15 95.16 98.28 105.54
Financial Leverage Effect - 1.23 0.89 1.02 1.10 1.11 1.09
Debt to Capital - 0.04 0.05 0.04 0.04 0.03 0.03
Debt to Equity - 0.04 0.05 0.05 0.04 0.03 0.03
Note:- The figures shown in the brackets means NEGATIVE.
RATIO ANALYSIS
Particulars
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Disclosures :
1) Business Activity :
2)
3)
4)
Sr. No. Yes/No
a) No
b) No
c) No
5)
Sr. No. Yes/No
a) No
b) No
c) No
6) Other Disclosures:
Yes/No
Sr. No.
a) No
b) No
c) No
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Disclaimers:
This Research Report (hereinafter called report) has been prepared and presented by RUDRA SHARES & STOCK BROKERS
LIMITED, which does not constitute any offer or advice to sell or does solicitation to buy any securities. The information presented in
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