A good set of numbers, PAT ahead of estimates

CMP(Rs) 18

Target Price(Rs) 28

Upside % 56

Prev Target (Rs) 28

Share Holding (%)

Promoter 68.7Institutions 0.0Public 31.3

Avg Vol ( 6m) (000) 403.1

FV 1

Beta 1.8

Mcap (Rs Mn) 4,160.0

52 week H/L 19.8/4.7

Bloomberg/Reuters GW IN/GRWN.BO

Group B

Sensex/Nifty 28,169/8,426

Pushkaraj Jamsandekar Email ID: pushkarajj@eisec.com (+91 22 22722364) 18th November, 2014

ABS% Sensex GWIL

3 M 7.9 83.5

1 Yr 38.1 269.2

Grauer and weil (India) Ltd Q2FY15 Result Update Target: Rs 28

Previous Rating: BUY Current Rating: BUY

Revenues grew by 17% YoY to Rs 1009 MnRevenues grew by 17% YoY to Rs 1009 Mn, slightly above our estimation of Rs 1004 Mn, led by the engineeringand paint segments which grew by 83% and 29% YoY to Rs 680 Mn and Rs 134 Mn respectively. The revenuefrom core business (Chemical Segment) contributed 67% of revenue, up by 4% YoY to Rs 680 Mn. Mall segmentposted the growth of 4% YoY to Rs 60 Mn.

EBITDA increased to Rs 180 Mn, up 17% YoY, Margin remains flatEBITDA increased to Rs 180 Mn, up 17% YoY which was bang on our estimates. The company's margins remainflat on qoq as well as YoY basis. Chemical segment EBIT expanded by 24 bps to 24.4%. The engineering divisionposted Rs 3.2 Mn EBIT against losses of Rs 6 Mn in Q2FY14. The EBIT margin from mall and paint segments wereon lower side due to higher depreciation. Paint division continues to make losses as company is investing upfronttowards marketing. Raw material cost as a percentage of net sales decrease by 28 bps YoY. Also, employee costwas down by 89 bps. But, these positives were offset by higher other expenses.

PAT grew 14% YoY to Rs 92 Mn, above our estimatesPAT grew 14% YoY to 92 Mn (Above our estimation of 9% YoY growth to Rs 87 Mn). Other income for the quarterdecline by 58% YoY to Rs 7 Mn. The tax refund for Q2FY15 was Rs 12 Mn which reduce the effective tax rate to9% v/s 20% in Q2FY14. Higher depreciation charges were offset by lower effective tax rate and lower interestcosts. Tax expense was lower due to higher depreciation.

Outlook and valuationDue to recovery in Indian economy and positive sentiments in the auto space are expected to drive the growthmomentum in the chemical segment. The reasonably encouraging order book of engineering division, focus onincreasing sales from paint business and stable rental income from mall segment offer the strong revenuevisibility for FY15. We maintain our DCF based target price of Rs 28 per share which offers a handsome return atcurrent level. Hence, we re-iterate our Buy view on the company.Year Revenue (Rs Mn) EBITDA Margin (%) PAT (Rs Mn) EPS (Rs) P/E (x) P/BV (x) EV/EBITDA ROCE % ROE %

FY12 3,332 16.7% 232 1.0 17.6 2.7 9.3 22.2 16.1

FY13 3,350 15.0% 198 0.9 20.6 2.4 10.0 18.3 12.2

FY14 3,859 14.8% 308 1.4 13.3 2.1 8.4 21.2 16.8

FY15E 4,599 15.1% 417 1.8 9.8 1.8 6.5 24.7 19.5

FY16E 5,474 15.4% 559 2.5 7.3 1.5 4.9 27.6 21.8

EISEC Research 2

Q2FY15 v/s Q2FY14

• Net Revenue at Rs 1009 Mn - increase of14% was above our estimates.

• EBITDA of Rs 180 Mn with a margin of 18% -an increase of 17%

• Profit before Tax (PBT) at Rs 101 Mn with amargin of 10%

• Profit after tax (PAT) at Rs 92 Mn with amargin of 9% - increase of 14%

• EPS for Q2 (not annualized) at Rs 0.40 pershare

H1FY15 v/s H1FY14

• Net Revenue at Rs 1911 Mn - increase of 9%• EBITDA of Rs 341 Mn with a margin of 18%,

an increase of 13%• Profit before Tax (PBT) at Rs 191 Mn with a

margin of 10%, a decline of 4%• Profit after tax (PAT) at Rs 165 Mn with a

margin of 9%, a decline of 2%• EPS for H1 (not annualized) at Rs 0.73 per

share

• Considering in-line performance, wemaintain our estimates for FY15 as well asFY16.

Quarterly Performance at a glance

Source: Company, Eisec Research

Particulars (Rs Mn) Q2FY15 Q1FY15 Q2FY14 QoQ YoY 1HFY14 1HFY15 YoYNet Sales 991 884 847 12% 17% 1726 1875 9%Other operating income 19 17 19 9% -4% 32 36 11%Total Net Sales 1009 901 866 12% 17% 1758 1911 9%Inc/Dec In Stocks -7 -42 -37 -84% -82% 41 -49 -Raw Material Cost 524 479 483 9% 8% 12 13 4%Purchase of Finished goods 6 7 5 -20% 12% 898 1003 12%Manufacturing Expenses 190 177 153 7% 24% 301 367 22%Employees Cost 117 119 108 -2% 8% 204 236 16%Total Expenditure 829 741 712 12% 16% 1456 1570 8%EBITDA 180 161 154 12% 17% 302 341 13%% Margin 18% 18% 18% - - 17% 18% -Depreciation 49 36 29 35% 71% 57 85 48%EBIT 131 125 126 5% 4% 244 256 5%Interest 37 37 43 2% -12% 88 74 -16%Other Income 7 3 17 177% -58% 44 10 -77%PBT 101 91 100 11% 1% 200 191 -4%% Margin 10% 10% 12% 11% 10%Tax 9 17 20 -46% -54% 31 26 -16%% Tax Rate 9% 19% 20% - - 16% 14% -PAT 92 73 80 25% 14% 168 165 -2%% Margin 9% 8% 9% - - 10% 9% -EPS 0.40 0.32 0.35 - - 0.74 0.73 -

Revenue Old New Change Old New Change(Rs Mn) FY15E FY15E (%) FY16E FY16E (%)Net revenue 4599 4599 0% 5474 5474 0%EBITDA 693 693 0% 845 845 0%% Margin 15% 15% - 15% 15% -PAT 417 417 0% 559 559 0%% Margin 9% 9% - 10% 10% -EPS 1.8 1.8 0% 2.5 2.5 0%

Change in Estimate

EISEC Research 3

Segment Revenue (Rs Mn) Q2FY15 Q1FY15 Q2FY14 QoQ YoY

Revenue

Chemical 680 605 654 12% 4%

% to total 67% 67% 74% - -

Engineering 118 100 65 18% 82%

Oils 19 22 0 -12% -

Paints 134 118 104 14% 29%

Shoppertainment 60 58 57 3% 6%

EBIT

Chemical 166 152 158 9% 5%

% to total 90% 85% 88% - -

Engineering 3.2 4 -6 - -

Oils 1.1 4 0 - -

Paints -10 -11 -5 - -

Shoppertainment 25 30 31 -15% -20%

% Margin

Chemical 24% 25% 24% - -

Engineering 3% 4% -9% - -

Oils 6% 17% - - -

Paints -7% -9% -4% - -

Shoppertainment 42% 51% 55% - -

Source: Company, Eisec Research

Segment Performance at a glance Paint Revenue (Rs Mn)

67%

11%

2% 13%

7%

Q2FY15

Chemical

Engineering

Oils

Paints

Shoppertainment

68%

12%

15%

5%

Q1FY15

Chemical

Engineering

Paints

Shoppertainment

74%

7%

12%7%

Q2FY14

Chemical

Engineering

Paints

Shoppertainment

EISEC Research 4

654 668

783

605680

0

250

500

750

1000

Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15

Chemical

65

102

140

100118

0

40

80

120

160

Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15

Engineering

104

130

168

118134

0

50

100

150

200

Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15

Paints

57

55 55

58

60

53

55

58

60

63

Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15Shoppertainment

Chemical Revenue (Rs Mn) Engineering Revenue (Rs Mn)

Paint Revenue (Rs Mn)Shoppertainment Revenue (Rs Mn)

Source: Company, EISEC Research

Source: Company, EISEC Research

Source: Company, EISEC Research

Source: Company, EISEC Research

EISEC Research 5

Financials

Income statement, Rs Mn FY12 FY13 FY14 FY15E FY16E Balance Sheet, Rs Mn FY12 FY13 FY14 FY15E FY16ETotal revenues 3332 3350 3859 4599 5474 Share Capital 227 227 227 227 227% growth 18% 1% 15% 19% 19% Reserves & Surplus 1312 1473 1733 2096 2579Operating expenses 2776 2849 3287 3906 4629 Total Neworth 1538 1700 1960 2322 2806EBITDA 556 501 571 693 845 Prefernce Capital 0 0 0 0 0% growth 41% -10% 14% 21% 22% Total Debt 1146 992 771 611 476Depreciation 99 110 115 120 126 Deferred tax liabilities 144 169 178 178 178EBIT 457 391 456 573 719 Other non-current liabilities 161 198 226 251 281Interest 183 174 132 83 65 Current Liabilities & Prov 896 1080 1121 1287 1513Other Income 29 21 34 39 54 Total Liabilities 3886 4138 4257 4650 5254Exceptional items 0 1 2 3 4 Gross Block 2697 2896 2950 3083 3222PBT 302 239 358 528 708 Net Fixed Assets 2242 2310 2264 2275 2288Tax 70 40 51 111 149 Investments 39 48 47 48 48PAT 232 198 308 417 559 Other non-current assets 150 160 187 220 262% growth 61% -15% 55% 36% 34% Total current assets 1454 1621 1759 2107 2657EPS 1.02 0.87 1.36 1.84 2.47 Total Assets 3886 4138 4257 4650 5254

Cash flow, Rs Mn FY12 FY13 FY14 FY15E FY16E Ratio analysis (%) FY12 FY13 FY14 FY15E FY16EPBT 302 239 358 528 708 EBIDTA margin 16.7 15.0 14.8 15.1 15.4Tax 70 40 51 111 149 PAT margin 7.0 5.9 8.0 9.1 10.2Depreciation 99 110 115 120 126 ROCE 22.2 18.3 21.2 24.7 27.6Chg. W.C. -132 98 -54 -23 -80 ROE 16.1 12.2 16.8 19.5 21.8Other 180 170 116 0 0 Inventory (days) 46 50 49 49 49OCF 379 576 485 515 605 Payable (days) 54 60 59 59 59Capex -101 -187 -96 -164 -181 Receivables (days) 63 70 69 69 69Investment -23 -8 0 -1 0 Debt to equity 0.7 0.6 0.4 0.3 0.2Other 34 16 40 0 0 Net debt to equity 0.72 0.55 0.36 0.18 0.02CFI -90 -179 -56 -165 -181Net Debt -83 -154 -220 -160 -135 Valuation parameters FY12 FY13 FY14 FY15E FY16ENet Equity 0 0 0 0 0 EPS 1.0 0.9 1.4 1.8 2.5Dividend Payout -40 -32 -42 -55 -76 P/E (x) 17.6 20.6 13.3 9.8 7.3Other -215 -199 -163 0 0 EV/ EBIDTA (x) 9.3 10.0 8.4 6.5 4.9CFF -337 -385 -425 -215 -211 P/BV 2.7 2.4 2.1 1.8 1.5Increase/(Decrease) in Cash -49 12 4 135 213Opening Cash 90 38 57 62 197Closing Cash 38 57 62 197 410

EISEC Research 6

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