fc sheet-techno industry report

8/13/2019 FC Sheet-Techno Industry Report

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TECHNO SHARES & STOCKS LTD

INDIA RESEARCH

FC SHEET INDUSTRY

FIBER CEMENT SHEET INDUSTRY REPORT

GRAMIN VIKAS

ABHILASHA SATALE6633 8900 EXT. 152

[email protected]

20thAUGUST 2010


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This Page is Intentionally Left Blank


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FC SHEET 3 20thAugust 2010

FC SHEET INDUSTRY

KEY HIGHLIGHTS

Rising disposable income in the hands of rural people and rising warehousing demand is

major drivers Fibre Cement (FC) Sheet demand. Governments increasing thrust on rural

housing, rising MSPs of crops are likely to fuel demand growth of 4mnt FC sheet industryat more than 10% CAGR over the medium term. Oligopoly structure of the industry

retains 60% of the market share in the hands of 4 players giving pricing power. Capacity

additions foreseen in the industry over the medium term are unlikely to create a glut.

Therefore, we recommend BUY on Everest Industries, Ramco Industries, Hyderabad

Industries and Visaka Industries .

Governments thrust on rural housing: In just 5years from 2006-07 to2010-11 government spending on rural economy has increased at a CAGR of

47% from `7735cr to `53084cr. Under NREGA the allocation has increased at

a CAGR of 37% from `11300cr to `40100cr over the same period. Indira

Aawas Yojana has been able to garner budgetary support of `10000cr in 2010-

11. Under this scheme total house constructed in the year has gone up from

11lakh houses in 2005-06 to 40lakh houses in 2010-11. This will increase thedemand for FC sheets, as this is the preferred roofing material in the rural

housing.

Warehousing- Big opportunity: The development of organized retail inIndia and the rising fortunes of the manufacturing sector following Indias

emergence as a low-cost outsourcing hub have buoyed its warehousing

market. Indian warehousing sector growing at the rate of 35-40 percent

annually to become a $55 billion industry by 2010-11. We expect demand

from this sector for FC sheets to pick up very fast as the sector is still under

penetrated.

Rural boom to benefit: Rural consumer enjoys rising disposable incomedue to unprecedented food inflation, which has driven up MSPs for farmerswhereas the costs are capped due to government subsidies. MSPs for most

of the crops have increased at more than 10% CAGR during last 5 years.

Rising disposable income in the hands of rural consumer will fuel up demand

for FC sheets.

Sustainable growth: Rural boom, rising warehousing are growth potentialsfor FC sheet industry. Current consumption of FC sheets in the country is

around 4mnt, which we expect to grow at a sustainable rate of 10-12% over

the longer term. Oligopoly structure of the industry to retain more than 60%

market share in the hands of 4 major players.

Reducing cost increasing margins: Reducing cement prices to reduce costof manufacturing for asbestos cement sheets as cement contributes around

35% of the total cost. Cement prices have corrected by 20% from its high.Thus, reducing manufacturing cost. Another important raw material for

cement sheets is asbestos fiber, which is mostly imported. The prices of the

product have increased by 5-6% having 2-3% effects on the end product

pricing.

Valuations not factoring future potentials: Inspite of strong growthexpected in medium term the entire gamut of companies in the sector is

available at very compelling valuations currently. We expect demand growth of

10% for FC Sheet industry to drive four organized players profitability at 20%

CAGR over next two years. Ramco Industries is our best bet in the

entire spectrum due to aggressive expansion plans and ramping up

of Srilankan operations. Followed by Everest Industries due to itscheap valuation and exposure to building solutions segment. We

recommend BUY on Hyderabad Industries and Visaka Industries

as well.

RAMCO INDUSTRIES LTD.

Recommendation BUY

CMP `67

Target Price `85Equity `86.7cr

Mkt Cap `585cr

EVEREST INDUSTRIES LTD.

Recommendation BUY

CMP `275

Target Price `336

Equity `14.82cr

Mkt Cap `407.55cr

HYDERABAD INDUSTRIES LTD.

Recommendation BUY

CMP `625

Target Price `808

Equity `7.49cr

Mkt Cap `468.53cr

VISAKHA INDUSTRIES LTD.

Recommendation BUY

CMP `162.75

Target Price `202Equity `15.92cr

Mkt Cap `259.098cr


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INVESTMENT RATIONALE

GOVERNMENTS THRUST ON RURAL HOUSING

GOIs focus on rural housing to be another factor, which will drive FC sheet

demand.Through different social schemes like Bharat Nirman, Indira Aawas Yojana

and NREGA government is boosting support to housing development in rural

market.Allocation towards IAY andNREGA has increased at a CAGR of 29% and

37% over 2006-2010 respectively. Total houses to be build under IAY is expected

to be around 40lakh in 2010-11. Government intends to build 150lakh houses in

11thFive Year Plan.

NREGA is anticipated to provide employment to around 10.9cr people in 2010-

11E. Average wage per person per day has gone up from `65 in 2006-07 to `89 in

2010-11E.

Rising disposable income through increased primary product prices and different

government initiatives to provide dwelling and employment to give more pricingpower in the hands of rural people. Current penetration of FC sheet is low in the

country whereas, increasing income in the hands of rural consumers to improve

demand for FC sheets going forward. We expect FC sheet demand to grow at 10-

12% in the medium term. Current consumption in the country is around 40lakh

tones for FC sheets.

Allocation under schemes (```Cr)

4000

3000 26000 0 0

960

1200 1800

2350 2350 2984

2775

2920 4040

5400 8800 10000

11300 1200030000 39100 40100

0%

20%

40%

60%

80%

100%

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Sampoorna Gramin Rozgar Yojana Swarnajayanti Gram Swarozgar Yojana

Indira Aawas Yojana NREGA

Source : Economic Survey

Houses constructed (Units) NREGA Success

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

20

05-

06

20

06-

07

20

07-

08

20

08-

09

20

09-

10

20

10-

11


3.78

6.48

10.0110.89

2.13.39

4.51 4.34

6575

8489

0

2

4

6

8

10

12

2006-07 2007-08 2008-09 2009-10

0

20

40

60

80

100

Job cards issued (Crores)

Employment provided to households (Crores)

Average wage paid per person/day (Rs)



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FC Sheet Price (```/tonne) FC Sheet demand (lakh tonne) and growth (%)

6812 7064

6212

7533

83499000

50006000

7000

8000

9000

10000

2004-

05

2005-

06

2006-

07

2008-

09

2009-

10

2010-

11

Source : Industry

31.4 33.836.8 40 44

48.8

8% 7.6%

8.9% 8.7%

10.0%10.9%

20

2530

35

40

45

50

55

2004-05 2005-06 2006-07 2008-09 2009-10 2010-11

5%

7%

9%

11%

13%

Source : Industry, Techno Estimate

WAREHOUSING- BIG OPPORTUNITY

The boom in commodities and retailing will result in Indian warehousing sector

growing at the rate of 35-40 percent annually to become a $55 billion industry by

2010-11. According to an industry report by the Associated Chambers of

Commerce and Industry in India (Assocham), India is short of 10 million tonnes of

cold storage capacity, resulting in the wastage of over 30 percent of agricultural

produce every year. A recent report by brokerage Macquarie Research said the

Indian government plans to spend $24 billion over eight years on cold or supply

chain infrastructure.The development of organized retail in India and the risingfortunes of the manufacturing sector following Indias emergence as a low-cost

outsourcing hub have buoyed its warehousing market. FC sheet is preferred

roofing material in warehousing industry. Therefore we feel warehousing industry

to be major demand booster for FC sheet industry.

OLIGOPOLY TO RETAIN PRICING POWER

Four players gaining around 60% of the market share makes FC sheet industry an

oligopoly retaining pricing power to leaders. Hyderabad Industries with 854500t of

capacity controls around 19% of the market share in FC sheet industry. Strong

demand and controlled supply to improve margins of these players.

In 2007-08 global slowdown and capacity expansions created glut in roofing sheet

industry affecting the profitability of the companies. However, current upturn is

likely to sustain longer as capacity additions are very limited in the current cycle.

Where demand is expected to increase by atleast 400000t every year the capacity

additions by major four players is averaging 200000t p.a. for next two years. FC

sheet manufacturing is highly sensitive to environmental norms. Similarly, plantlocation is also very important the product being less transport friendly. These

factors act as barriers for huge expansion consequently avoiding the glut.

Capacity additions by major players (Tonnes) (Revenue)

238000

9000064500

242000

192000208150

165000153470

20102009200820072006200520042003

Source : Industry, Techno Estimates


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FC sheet-PREFERRED ROOFING OVER ITS ALTERNATIVES

Cement Asbestos Sheet is preferred choice amongst rural class due to durability,

sound resistance, safety and affordability. There are estimated 25 crore houses in

India Of these, 46% are considered to be homes with pucca roofs. The rest 54%

homes are made of thatch (temporary kuccha roofing) and clay tiles. Usage of clay

tiles is shrinking due to non-availability of raw material. Amongst pucca houses,less than half are made with RCC slabs. The rest are made with ready-house

roofing products, which include Fibre Cement Roofing and metal roofing. Some

roofs are also made using bricks and stone. A kuccha roof homeowner has

aspirations and seeks security. He is more likely to graduate to a Fibre Cement

Roof rather than a RCC slab. The cost of a pucca roof using Fibre Cement Roofing

is 1/3rd the cost of an RCC ceiling slab. The market for Fibre Cement Roofing

today is estimated to be `4,000 crores and for metal roofing `3,500 crores and

Indias demand for housing and infrastructure continues to grow unabated.

Preferability chart

Comparison of other sheets with FC sheet chart.

THATCHET RED CLAY TILESCORRUGATED GALV.

IRON SHEETSALUMINIUM SHEETS FC SHEET

Life Span (years) 2-3years NA Oct-15 NA 50

Maintenace Nil Frequent 3-5yers Nil Nil

Fire rating Poor Retardant Poor Poor Retardant

Thermal insulation Good Good Poor Poor Good

Wind Resistance Poor Poor Poor Poor GoodNoise level Poor Poor Poor Poor Good

Acoustic rating NA Poor Poor Poor Good

Condensation Low Low High High Low

Cost Very Low Low High Very High Low

REDUCING CEMENT PRICES TO BENEFIT

Cement contributes around 45% of the total volume in FC sheet manufacturing

and around 15% of the total cost. Rising capacity expansions in the cement

industry has created medium-term supply glut in the industry thus, putting

pressure on the prices. Cement prices on an average have reduced around 20%

from its high. We expect cement prices to be lower for the medium term. This

would benefit FC Sheet industry as the end product prices are not dependent on

the raw material prices, end user being different.


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KEY RISKS

Dependency on imported raw material

Asbestos fibre is important raw material for FC sheet manufacturing contributing

around 30% of total cost. India doesnt have any procurable reserves of chrysotile

fibre. Therefore, we import 100% of our requirement from major four players.

Imported raw material leaves industry vulnerable to forex risks and dependencyon four players doesnt give bargaining power.

HYDERABAD INDUSTRIES EVEREST INDUSTRIES VISAKA INDUSTRIES RAMCO INDUSTRIES

PRODUCT NAMEASBESTOS CEMENT FIBRE

SHEETBUILDING PRODUCTS

ASBESTOS CEMENT FIBRE

SHEET

ASBESTOS CEMENT FIBRE

SHEET

Capacity (MT) 854500 710000 652000 534000

Contibution to revenue (%) 80.55 81 78.64 62

Market share (%) 19.4 16.1 14.8 12.1

PRODUCT NAMEBUILDING PANELS &

BOARDS

STEEL BUILDING BOARDSCALCIUM SILICATE

BOARDCapacity (MT) 460000 30000 60000 40000

Contibution to revenue (%) 2.9 17 2.41 3.97

PRODUCT NAME AACB TEXTILE YARN (SPINDLES)CEMENT CLINKERS

GRINDING

Capacity (MT) 100000 1816 216000

Contibution to revenue (%) 3.87 18.71 4.28

PRODUCT NAME THERMAL INSULATION TEXTILE YARN (SPINDLES)

Capacity (MT) 6000 43296

Contibution to revenue (%) 4.7 12.77

PEER COMPARISON

( mn)

EVEREST HYDERABAD RAMCO VISAKA

FY09 FY10 FY11E FY12E FY09 FY10 FY11E FY12E FY09 FY10 FY11E FY12E FY09 FY10 FY11E FY12E

Sales 5520.10 6809.00 9886.00 11308.00 6234.00 7036.90 8522.65 9963.31 4528.70 5286.10 6284.80 7685.09 5779.80 5981.30 7226.20 7805.10

EBITDA 537.30 684.00 1092.48 1272.35 928.30 1548.40 1639.53 1949.02 1031.50 1195.40 1493.82 1771.36 903.90 1171.60 1328.47 1402.07

Net Profit 144.50 283.80 523.24 623.25 440.90 870.20 920.39 1096.93 356.50 535.90 642.15 854.88 359.40 572.10 684.65 729.29

Equity 148.00 148.00 148.00 148.00 74.60 74.60 74.60 74.60 43.30 86.70 86.70 86.70 158.80 158.80 158.80 158.80

Debt 1743.00 1281.80 1290.00 1190.00 803.20 698.40 740.00 860.00 2592.00 2476.60 3250.00 2930.00 1687.50 1620.30 1415.50 1415.50

EPS 9.76 19.18 35.35 42.11 59.10 116.65 123.38 147.04 82.33 6.18 7.41 9.86 22.63 36.03 43.11 45.92

BVPS 98.88 109.80 134.40 171.87 218.85 287.50 380.19 485.51 604.41 34.98 41.15 48.59 109.26 133.32 167.05 205.52

GROWTH MARGINS & RETURNS

sales growth 86% 23% 47% 15% 30% 13% 21% 17% 19% 17% 19% 22% 34% 3% 21% 8%

PAT growth 84% 110% 84% 19% 213% 97% 6% 19% 40% 50% 20% 33% 369% 59% 20% 7%

EBITDA margins 10% 10% 11% 12% 15% 22% 19% 20% 23% 23% 24% 23% 16% 20% 18% 18%

PAT margins 3% 4% 5% 6% 7% 12% 11% 11% 8% 10% 10% 11% 6% 10% 9% 9%

Tax rates 4% 29% 29% 29% 33% 7% 6% 33% 29% 29% 29% 29% 32% 33% 33% 33%

ROE % 10% 17% 26% 25% 27% 41% 32% 30% 14% 18% 18% 20% 21% 27% 26% 22%

ROCE % 10% 12% 19% 19% 21% 32% 27% 26% 12% 14% 15% 16% 14% 17% 17% 34%

DER 1.15 0.74 0.58 0.42 0.44 0.28 0.23 0.21 0.93 0.75 0.85 0.64 0.90 0.69 0.48 0.40

VALUATIONS

CMP 260.00 639.00 72.00 163.00

Mcap 3848.00 4766.94 6242.40 2588.44

PER (x) 26.63 13.56 7.35 6.17 10.81 5.48 5.18 4.35 0.87 11.65 9.72 7.30 7.20 4.52 3.78 3.55

P/BV 2.63 2.37 1.93 1.51 2.92 2.22 1.68 1.32 0.12 2.06 1.75 1.48 1.49 1.22 0.98 0.79

EV / EBITDA (x) 9.16 7.20 4.51 3.87 5.26 3.16 2.98 2.51 6.21 5.36 4.29 3.61 4.10 3.16 2.79 2.64

Mcap / sales 0.57 0.68 1.18 0.43


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INVESTMENT OUTLOOK

RURAL BOOM TO BENEFIT

Rising disposable income in the hands of rural consumer will drive asbestos

cement roofing sheet demand in the country.Rising food deficit, increasing prices

and rising MSPs are providing farmers with additional disposable income. Eventoday only 20% of rural roofs are of FC Sheet thus, stores lot of potential for

replacement demand against thatched and red tiles roofs.

Food inflation is at the highest level today at 16% showing supply side constraints.

Good prices world over sky-rocketed last year and are not showing signs of

softening. This has increased MSPs (Minimum Support Prices) for all the

commodities leaving more disposable income in the hands of farmers. 60% of the

population, which drives the consumption of the economy gaining money power,

would drive the demand for rural products such as FC sheets. We expect food

inflation is not a short-term cause to deal with. Rising consumption to settle food

prices at higher level benefiting that 60% of the population.

MINIMUM SUPPORT PRICE (MSP)

0

1000

2000

3000

1990-

91

1999-

00

2001-

02

2002-

03

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

Maize Barley Gram Arhar

Moong Urad Sugarcane


VALUATION

We feel FC sheet industry to be major beneficiary of rural boom and rise in

warehousing demand. Inspite of huge potential the companies under this sector

are under owned by investors. This is expected to be reason for re-rating of the

entire sector. On an average we expect the profitability of the sector companies

to grow at a CAGR of 20% over the next two years. However, the stocks are still

available at much lower level of P/E of around 6-7x forward.

Our favorite stock in the spectrum is Ramco Industries which will bebenefited from its aggressive expansion plans in the domestic as well as

Srilankan Markets. Everst is also preferred bet in the spectrum due to

its exposure to building solutions business which store huge business

opportunity in itself. Other than these we also recommend BUY on

Hyderabad Industries being a leader and still available cheap and

Visaka Industries.

( mn)

PEER COMPARISON PRICE (`) MKT. CAP NET SALES PAT EPS P/E EV/EBIDTA ROE(%)

FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12

Hyderabad Industries 643 4815 8445.3 9935.4 920.4 1096.9 123.4 147.0 5.2 4.3 3.0 2.5 32.50% 30.3%

Ramco 72 5850 6304.8 7715.1 654 878 7.5 10.1 9.5 7.1 4.2 3.6 18.30% 24%

Everest 260 3857 9576 10968 523 623 35.4 42.1 7.4 6.2 4.5 3.9 26.30% 24.5%

Visaka 163 2591 7226.2 7805.1 684.6 729.3 43.1 45.9 3.8 3.5 2.8 2.6 25.80% 22.3%


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RAMCO INDUSTRIES LTD.

KEY HIGHLIGHTS

Gaining market share through aggressive expansion: Ramco isadding its FC sheet capacity by 120000t at Gangaijondan, which is expectedto get commissioned by 30th September 2010. Diversifying the presence

Ramco Industries is further expanding its capacity by 120000MT at the

Industrial Area, Bihiya, Bhojpur District in the State of Bihar to cater to the

markets of the Eastern and North Eastern Regions. The estimated cost of

the project is around `35cr. Aggressive capacity expansion in diversified

geographical arenas to benefit Ramco to gain market share in the growing

market. We expect Ramco to expand its sales volume from 466250t in

FY10 to 524000t in FY11E and 582600t in FY12E.

Geographical reach widening: Ramco currently operates through 7plants located in Tamil Nadu, Karnataka, Madhya Pradesh and Gujarat. Its

8th plant at Gangaikondan will strengthen its reach Southern part. And

further expansion in Bhojpur district will widen its presence in Northern

and Eastern districts. FC sheet being less transport friendly, wider

geographical presence enables Ramco to garner various rural markets

countrywide. Its international presence in Sri Lanka to benefit it being

growing market for FC Sheets.

Sri Lankan operations to contribute: Ramco Industries has operationsin Sri Laka under its wholly owned subsidiary with total capacity of 100000t

FC sheets. Looking at the growth prospects in this country the firm has

decided to expand this capacity by 72000t at a total cost of `30cr.

Improved profitability from this division is likely to contribute it its profits

going forward.

Textile business to flourish: Ramco with 43296 spindles capacity spinsaround 2.6mnt yarn. Production is expected to rise due to rising yarn

prices. We expect Ramco to spin around 4mnt yarn in FY11E and FY12E.

Yarn prices have increased around 25% in FY10, which we expect to settle

at higher level. Therefore, profitability from the textile business is expected

to rise.

Hiving off plastic division- a positive move: The managements moveto hive off plastic storage container division is a positive move. The division

generates thin margin thus, impacting ROE. The anticipated consideration

for the proposed move is around `1.43cr.

Strong cash flow to fund capex: Ramco Industries is expected togenerate Free Cash Flow of `45cr and `65cr in FY11E and FY12E

respectively. Strong cash flows generation to take care of future expansion.

However, strong cash flow is expected to keep debt:equity ratio at 0.6:1

level.

Improving ROCE: Improving profitability and reducing debt level toimprove ROCE to 20% from 17% in FY09. Upturn in the industry cycle

ensures the sustainability of ROCE over medium term.

ATTRACTIVE VALUATION:We expect Ramcos sales to increase at aCAGR of 18% over FY10-FY12E and PAT at 36% over the same period. At

the current price of `67 the stock is trading at 9xFY11E and 7xFY12E

earnings respectively. EV/EBIDTA of the firm is at 4x and 3.3x ofFY11E and FY12E EBIDTA respectively. We recommend BUY

at current price with 12-month price target of ```85.

COMPANY NOTE

BUY

CMP `67

52 week High / Low 73/34

Equity Cap (current) 86.70

Face Value `1

Mkt. Capitalization `585cr

Avg. Daily Vol. (12 M) 47238

BSE SENSEX 18257

NSE - NIFTY 5479

NSE Code RAMCOIND

Bloomberg Code RAMCO IN

BSE Code 532369

SHAREHOLDING PATTERN @ 30-06-10

Promoters 50.54%

Indian Institutions 7.70%

Public & Others 41.76%

6-MTS YTD 1-YR

RAMCO 7% 20% 19%

Nifty 13% 11% 22%

Sensex 13% 11% 20%

( mn)

BRIEF FINANCIALS FY09 FY10 FY11E FY12E

Net Sales 4,528.7 5,286.1 6,304.8 7,715.1

Sales growth 18.7% 16.7% 19.3% 22.4%EBITDA 708.7 868.3 1,430.2 1,713.4

PAT 356.5 535.9 654.0 878.0

EPS 82.3 6.2 7.5 10.1

P/E (x) 0.9 11.6 9.5 7.1

RONW (%) 13.6% 17.7% 18.3% 24.0%

EV/EBITDA 6.2 5.4 4.2 3.6

ABHILASHA SATALE

66338900 EXT. 152

[email protected]


10/29


FINANCIALS

( mn)

P & L A/c FY07 FY08 FY09 FY10 FY11E FY12E

Gross Sales 3,760.9 4,084.1 4,763.8 5,627.5 6,766.3 8,189.1

Excise Duty 262.7 269.9 235.1 341.4 368.0 415.0

Net Sales 3,498.2 3,814.2 4,528.7 5,286.1 6,398.3 7,774.1

% Change 17.9% 9.0% 18.7% 16.7% 21.0% 21.5%

Raw Materials 1,767.2 2,023.3 2,478.6 2,922.2 3,087.7 3,746.4

Stock Adjustments (71.9) (34.6) (99.2) (118.7) - -

Employee Expenses 188.8 198.4 208.9 261.7 328.0 344.0

Other Mfg Exp. 98.7 96.7 110.8 239.0 156.5 180.0

Repairs & Maintainence 61.6 97.1 129.2 - - -

Power, Oil & Fuel 237.0 271.5 304.8 339.9 430.6 520.0

Selling & Administrative Expenses 688.8 561.5 622.1 718.9 878.9 1,103.0

Provisions & Write offs - 3.9 - - - -

Other Expenses - Recurring 32.3 29.6 37.3 54.8 150.0 250.0Non Recurring 6.6 11.5 27.5 - - -

TOTAL EXPENDITURE 3,009.1 3,258.9 3,820.0 4,417.8 5,031.8 6,143.4

Operating Profit 489.1 555.3 708.7 868.3 1,366.5 1,630.7

% Change -15.6% 13.5% 27.6% 22.5% 57.4% 19.3%

Other Income - Recurring 292.4 294.2 322.8 327.1 79.0 88.0

Non Recurrng 2.0 5.2 - - - -

EBITDA 783.5 854.7 1,031.5 1,195.4 1,445.5 1,718.7

% Change 6.5% 9.1% 20.7% 15.9% 20.9% 18.9%

Current Interest 164.9 194.9 252.6 212.2 265.6 250.8

Financial Charges 7.8 8.5 8.7 7.8 - -

Less: Interest Capitalised - - - - - -

PBDT 610.8 651.3 770.2 975.4 1,179.9 1,467.9

Depreciation 277.8 282.0 306.6 289.5 350.0 380.0

EBIT 505.7 572.7 724.9 905.9 1,095.5 1,338.7

PBT 333.0 369.3 463.6 685.9 829.9 1,087.9

% Change -29.9% 10.9% 25.5% 48.0% 21.0% 31.1%

Current Tax 77.0 69.5 130.0 180.0 240.9 315.9

Deferred Tax 9.5 41.2 (27.5) (30.0) (49.2) (64.5)

Fringe Benefit Tax 3.3 3.8 4.6 - - 1.0

Net Profit Before Minority Interest 243.2 254.8 356.5 535.9 638.2 835.6

% Change -26.5% 4.8% 39.9% 50.3% 19.1% 30.9%

Minority Interest 1.4 (0.4) - - - -

Net Profit After Minority Interest 241.8 255.2 356.5 535.9 638.2 835.6

Extra Ordinary Items 1.4 (0.4) - (7.7) - -

Adjusted PAT 241.8 255.2 356.5 543.6 638.2 835.6

% Change -26.7% 5.5% 39.7% 52.5% 17.4% 30.9%

Dividend - Equity 65.0 65.0 65.0 73.6 87.6 114.8

Preference - - - - - -

Retained Earnings 178.2 189.8 291.5 462.3 550.5 720.8


11/29


( mn)

BALANCE SHEET FY07 FY08 FY09 FY10 FY11E FY12E

Share Capital - Equity 43.3 43.3 43.3 86.7 86.7 86.7


Reserves & Surplus - - - - - -Revaluation Reserve - - - - - 1.0

Others 2,207.3 2,416.1 2,731.5 3,203.7 3,754.2 4,475.1

Minority Interest - - - - - -

Secured Loans - Long Term 1,621.8 2,331.6 1,886.5 1,966.2 2,116.0 1,900.0

Short Term - - - - - -

Unsecured Loans - Long Term 633.3 308.9 705.5 510.4 680.0 740.0


Deferred Tax Liabilities 280.2 329.2 295.8 263.9 220.0 120.0

Total Liabilities 4,785.9 5,429.1 5,662.6 6,030.9 6,856.9 7,322.8

Gross Block 3,086.9 3,885.9 4,056.2 4,173.3 4,460.0 4,610.0Less Accumulated Depreciation 1,126.9 1,407.2 1,713.2 1,989.6 2,339.6 2,719.6

Less Impairment of Assets - - - - - -

Net Block 1,960.0 2,478.7 2,343.0 2,183.7 2,120.4 1,890.4

Capital WIP 50.9 15.9 8.3 249.8 - -

Lease Adjustments - - - - - -

Investments 1,928.3 1,928.3 2,026.2 2,026.3 2,680.0 2,890.0

Current assets, Loans & Advances

Inventories 592.9 683.7 1,097.1 1,292.9 1,440.0 1,680.0

Debtors 239.9 273.0 290.9 293.3 460.0 610.0

Advances 353.3 376.3 485.7 592.6 890.0 1,010.0

Total Current Assets 1,186.1 1,333.0 1,873.7 2,178.8 2,790.0 3,300.0

Less Current Liabilities 292.1 364.3 561.3 542.4 620.0 760.0

Provisions 105.7 120.5 178.7 242.5 326.0 353.0

Net Current Asssets 788.3 848.2 1,133.7 1,393.9 1,844.0 2,187.0

Cash & Bank 58.4 150.2 149.4 177.2 201.5 335.4

Miscelleneous Exp. Not w/f - - - - - -

Deffered Tax Asset - 7.8 2.0 - 11.0 20.0

Total Assets 4,785.9 5,429.1 5,662.6 6,030.9 6,856.9 7,322.8


12/29


EXPENSE ANALYSIS FY07 FY08 FY09 FY10 FY11E FY12E

Raw Material / Net Sales 50.5% 53.0% 54.7% 55.3% 48.3% 48.2%

Raw Material adjusted / Net Sales 48.5% 52.1% 52.5% 53.0% 48.3% 48.2%

Power & Fuel / Net Sales 6.8% 7.1% 6.7% 6.7% 6.7% 6.7%

Employee Exp. / Net Sales 5.4% 5.2% 4.6% 4.6% 4.6% 4.6%

Other Mfg Exp./ Net Sales 2.8% 2.5% 2.4% 2.4% 2.4% 2.4%

S & D/ Net Sales 19.7% 14.7% 13.7% 13.7% 13.7% 13.7%

Other Exp./ Net Sales 1.1% 1.1% 1.4% 1.4% 1.4% 1.4%

MARGIN ANALYSIS FY07 FY08 FY09 FY10 FY11E FY12E

Operating Margin(%) 14.0% 14.6% 15.6% 16.4% 21.4% 21.0%

EBITDA Margin(%) 22.4% 22.4% 22.8% 22.6% 22.6% 22.1%

PBDT Margin(%) 17.5% 17.1% 17.0% 18.5% 18.4% 18.9%

EBIT Margin(%) 14.5% 15.0% 16.0% 17.1% 17.1% 17.2%

PBT Margin(%) 9.5% 9.7% 10.2% 13.0% 13.0% 14.0%

PAT Margin(%) 7.0% 6.7% 7.9% 10.1% 10.0% 10.7%

EBIAT Margin(%) 11.9% 12.0% 13.6% 14.3% 14.1% 14.0%

ANALYSIS INPUTS FY07 FY08 FY09 FY10 FY11E FY12E

Book Value Per Share 500.3 543.9 604.4 35.0 41.1 48.5

DPS 15.0 15.0 15.0 0.8 1.0 1.3

EPS 56.2 58.8 82.3 6.2 7.4 9.6

Adjusted EPS 55.8 58.9 82.3 6.3 7.4 9.6

CEPS 120.3 124.0 153.1 9.5 11.4 14.0

Cash As a % Of Total Exp. 2.8% 3.2% 3.9% 3.7% 3.8% 4.4%

Net Sales/ Gross Block (Times) 1.1 1.0 1.1 1.3 1.4 1.7

Current Tax (%) 24.1% 19.8% 29.0% 29.0% 29.0% 29.0%

DEBT EQUITY RATIO (TIMES) FY07 FY08 FY09 FY10 FY11E FY12E

Current Ratio (Times) 3.1 3.1 2.7 3.0 3.2 3.3

Debt Equity Ratio (Times) 1.0 1.1 0.9 0.8 0.7 0.6

Interest Coverage Ratio(Times) 2.5 2.4 2.4 3.6 3.4 4.3

Return On Average Net Worth(%) 11.2% 10.8% 13.6% 17.7% 17.9% 19.9%

Dividend Payout (%) 26.7% 25.5% 18.2% 13.7% 13.7% 13.7%

Dividend Yield (%) 22.1% 22.1% 22.1% 1.2% 1.5% 1.9%

Debtors Turnover(Times) 15.0 14.9 16.1 18.1 17.0 14.5

Creditors Turnover(Times) 15.5 18.2 14.0 14.6 15.1 15.9

Inventory Turnover (Times) 5.7 6.0 5.1 4.4 4.7 5.0

Average Collection period (Days) 24.3 24.5 22.7 20.2 21.5 25.1

Average Payment period (Days) 23.6 20.0 26.0 25.1 24.2 23.0

Inventory Turnover (DAYS) 64.3 61.1 71.8 82.5 78.0 73.2

PRICE/ADJUSTED EPS FY07 FY08 FY09 FY10 FY11E FY12E

P/E 1.2 1.2 0.8 11.0 9.2 7.1

Price/CEPS 0.6 0.5 0.4 7.1 6.0 4.8

Price/Book Value 0.1 0.1 0.1 1.9 1.7 1.4

EV/EBITDA 7.4 6.8 5.6 4.9 4.0 3.4

Pay Back Period 0.6 0.5 0.4 7.0 5.9 4.8


13/29


( mn)

CASH FLOW FY07 FY08 FY09 FY10 FY11E FY12E

Net profit 241.8 255.2 356.5 543.6 638.2 835.6

Depreciation 277.8 282.0 306.6 289.5 350.0 380.0

Deffered Tax 9.5 41.2 -27.5 -30.0 -49.2 -64.5

change in working capital -149.1 -59.9 -285.5 -260.2 -450.1 -343.0

Cash Flow From Operating

Activities:380.0 518.5 350.1 542.9 488.8 808.1

Capex -227.5 -764.0 -162.7 -358.6 -36.9 -150.0

Investments (Net) -123.5 0.0 -97.9 -0.1 -653.7 -210.0

Cash Flow from Investing Activities -351.0 -764.0 -260.6 -358.7 -690.6 -360.0

Dividend -65.0 -65.0 -65.0 -73.6 -87.6 -114.8

Share Capital 0.0 0.0 0.0 43.4 0.0 0.0

Share premium received 0.0 0.0 0.0 0.0 0.0 1.0

Debt 10.0 385.4 -48.5 -115.4 319.4 -156.0

Cash Flow From Financing Activities -55.0 320.4 -113.5 -145.6 231.8 -270.8

Others 84.3 133.3 126.2 188.0 207.2 378.8

Net change in cash -51.9 91.8 -0.8 27.8 24.3 133.8

Opening cash 110.3 58.4 150.2 149.4 177.2 201.5

Closing cash 58.4 150.2 149.4 177.2 201.5 335.3

FCF 152.5 -245.5 187.4 184.3 451.9 658.1


14/29


EVEREST INDUSTRIES LTD.

KEY HIGHLIGHTS

Providing complete building solutions: Everest has diversified itspresence into complete building solutions making foray into cladding,flouring, walling and ceiling solutions. Its wide range of products enables it

to cater to all class of customers. Out of total capacity of 710000t, around

136000t capacity is installed for production of boards and panels. The

company commands 14% market share in the India.

Volume increase to improve profitability: Everest has increased itsfibre sheet capacity to 710000t. The company has set up a unit in

Bhagwanpur, Roorkee, a tax haven in Uttaranchal. The plant has fostered

EILs presence in the Northern market, which is lucrative for its entire

gamut of products in building solutions. We expect sales volume to increase

to 560000t and 630000t by FY11E and FY12E respectively. Improving

volumes and reducing cost to improve profitability increasing margin to

11% by FY12E.

Foray into steel building: Two years before Everest has entered intosteel building division and has executed around 350 projects and is now

established amongst architects, structural consultants, project divisions of

companies and leading contractors operating in industrial and logistics

sectors. The market today for PEB's in India is estimated at `3000 crores

with a 35% growth rate. Everests market share in the PEB market is 5%.

Current order book of the firm is around `120cr to be executed over 8-12

months. Furthermore EILs 5 manufacturing plants along with nearly 6000

retail outlets, ensures the company, pan India presence. This givescompetitive advantage for its steel building business.

Strong cash flow to fund capex: Everest Industries has spend `8cr onits capex in FY10 and has scheduled around `20cr capex for the next year.

Strong operating cashflows to fund the capex keeping debt:equity ratio at a

comfortable level of 0.5:1. With asset turnover of 2:1 the firm is able to

generate high ROCE of 19%.

ATTRACTIVE VALUATION:We expect EIL to clog revenue CAGR of30% over FY10-FT12E and PAT CAGR of 45% on account of improved

profitability of FC sheets. At the current price of `260 the stock is trading

at 8xFY11E and 7xFY12E earnings. EV/EBIDTA of the firm is at 4.9x and4.2x of FY11E and FY12E EBIDTA respectively. Compelling valuations

store lot of potential for investors to make money going forward.

We recommend BUY with 12-month price target of ```336.

COMPANY NOTE

BUY

CMP `275

52 week High / Low `271.50/100

Equity Cap (current) `14.82 cr

Face Value `10

Mkt. Capitalization `407.55 cr


BSE SENSEX 18257

NSE - NIFTY 5479

NSE Code EVERESTIND

Bloomberg Code EVI IN

BSE Code 508906


Promoters 50.17%



6-MTS YTD 1-YR

EVEREST IND 14% 71% 119%

NIFTY 5% 14% 16%

SENSEX 4% 14% 14%

( mn)


Net Sales 5,286.9 6,525.3 8,271.4 9,750.4

Sales growth 86.1% 23.4% 26.8% 17.9%EBITDA 489.4 603.7 900.3 1,069.7

PAT 144.5 283.8 471.3 570.3

EPS 9.8 19.2 31.8 38.5

P/E (x) 28.2 14.3 8.6 7.1

RONW (%) 9.9% 17.5% 24.0% 23.1%

EV/EBITDA 9.1 7.1 4.9 4.2

ABHILASHA SATALE

66338900 EXT. 152

[email protected]


15/29


FINANCIALS

( mn)


Gross Sales 3,257.9 3,070.1 5,520.1 6,809.0 8,581.4 10,090.4

Excise Duty 234.3 229.9 233.2 283.7 310.0 340.0

Net Sales 3,023.6 2,840.2 5,286.9 6,525.3 8,271.4 9,750.4

% Change 19.9% -6.1% 86.1% 23.4% 26.8% 17.9%

Raw Materials 1,617.6 1,644.3 2,863.5 3,626.0 4,829.4 5,648.1

Stock Adjustments (91.4) (101.9) (86.7) (46.3) - -


Other Mfg Exp. 173.9 185.9 472.1 - - -


Power, Oil & Fuel 119.1 169.9 204.5 - 579.0 790.0

Selling & Administrative Expenses 527.9 493.8 670.6 453.7 - -

Provisions & Write offs 9.4 1.3 5.8 - - -Other Expenses - Recurring 272.1 125.1 174.8 1,258.0 1,240.7 1,462.6

Non Recurring 1.0 35.0 45.6 - - -


Operating Profit 264.1 181.3 489.4 603.7 900.3 1,069.7

% Change -35.7% -31.4% 169.9% 23.4% 49.1% 18.8%


Non Recurrng 17.7 122.7 16.9 - - -

EBITDA 294.5 323.8 537.3 684.0 988.3 1,166.7

% Change -42.8% 9.9% 65.9% 27.3% 44.5% 18.1%


Financial Charges - - - - - -

Less: Interest Capitalised 17.8 42.9 11.8 - - -

PBDT 267.3 276.8 372.5 584.5 883.3 1,064.7

Depreciation 89.1 96.4 171.4 183.7 210.0 250.0

EBIT 205.4 227.4 365.9 500.3 778.3 916.7

PBT 178.2 180.4 201.1 400.8 673.3 814.7

% Change -58.3% 1.2% 11.5% 99.3% 68.0% 21.0%

Current Tax 50.1 24.2 0.2 117.0 202.0 244.4

Deferred Tax 6.9 6.7 47.9 - - -

Fringe Benefit Tax 4.6 6.3 8.5 - - -


% Change -62.5% 22.8% 0.9% 96.4% 66.1% 21.0%

Minority Interest (0.3) 69.8 9.2 - - -


Extra Ordinary Items (0.3) 69.8 9.2 - - -

Adjusted PAT 116.9 73.4 135.3 283.8 471.3 570.3

% Change -51.9% -37.2% 84.3% 109.8% 66.1% 21.0%

Dividend - Equity 59.2 59.2 37.0 - 18.7 18.7




16/29


( mn)




Reserves & Surplus - - - - - -Revaluation Reserve - - - - - -

Others 1,197.2 1,265.4 1,365.3 1,588.8 2,041.4 2,593.0


Secured Loans - Long Term 683.7 1,118.3 1,497.3 1,198.9 1,140.0 910.0






Gross Block 1,783.5 1,989.1 3,335.6 3,352.9 3,480.0 3,610.0Less Accumulated Depreciation 743.2 831.4 989.8 1,150.2 1,360.2 1,610.2


Net Block 1,040.3 1,157.7 2,345.8 2,202.7 2,119.8 1,999.8

Capital WIP 672.9 1,028.1 69.4 63.3 - -


Investments 0.1 0.6 0.5 - 0.5 0.2


Inventories 579.9 790.0 1,295.7 1,233.2 1,550.0 1,680.0

Debtors 104.0 68.9 238.4 231.9 263.0 320.0

Advances 537.3 202.7 361.1 451.2 553.0 760.0


Less Current Liabilities 421.5 563.2 998.2 963.6 1,120.0 1,250.0

Provisions 498.1 102.2 101.9 144.6 110.0 190.0

Net Current Asssets 301.6 396.2 795.1 808.1 1,136.0 1,320.0

Cash & Bank 172.3 315.3 225.8 192.1 470.7 718.0


Deffered Tax Asset 14.9 15.1 103.2 25.3 37.6 28.0

Total Assets 2,202.1 2,913.0 3,539.8 3,291.5 3,764.6 4,066.0


17/29








S & D/ Net Sales 17.5% 17.4% 12.7% 7.0% 0.0% 0.0%




EBITDA Margin(%) 9.7% 11.4% 10.2% 10.5% 11.9% 12.0%

PBDT Margin(%) 8.8% 9.7% 7.0% 9.0% 10.7% 10.9%

EBIT Margin(%) 6.8% 8.0% 6.9% 7.7% 9.4% 9.4%

PBT Margin(%) 5.9% 6.4% 3.8% 6.1% 8.1% 8.4%

PAT Margin(%) 3.9% 5.0% 2.7% 4.3% 5.7% 5.8%

EBIAT Margin(%) 4.8% 6.7% 5.9% 5.9% 7.0% 6.9%



DPS 4.0 4.0 2.5 - 1.3 1.3

EPS 7.9 9.7 9.8 19.2 31.8 38.5

Adjusted EPS 7.9 5.0 9.1 19.2 31.8 38.5

CEPS 13.9 16.2 21.3 31.6 46.0 55.4



Current Tax (%) 30.7% 16.9% 4.3% 29.2% 29.2% 29.2%






Dividend Payout (%) 50.8% 41.3% 25.6% 0.0% 4.0% 3.3%

Dividend Yield (%) 1.5% 1.5% 0.9% 0.0% 0.5% 0.5%








P/E 34.9 28.4 28.2 14.3 8.6 7.1

Price/CEPS 19.8 17.0 12.9 8.7 6.0 5.0

Price/Book Value 3.1 3.0 2.8 2.5 2.1 1.7

EV/EBITDA 16.6 15.1 9.1 7.1 4.9 4.2

Pay Back Period 23.8 20.4 15.5 10.5 7.2 6.0


18/29


( mn)


Net profit 116.9 73.4 135.3 283.8 471.3 570.3

Depreciation 89.1 96.4 171.4 183.7 210.0 250.0

Deffered Tax 6.9 6.7 47.9 0.0 0.0 0.0

change in working capital 70.9 -94.6 -398.9 -13.0 -327.9 -184.0


Activities:283.8 81.9 -44.3 454.5 353.4 636.3

Capex -667.7 -560.8 -387.8 -11.2 -63.8 -130.0

Investments (Net) 0.0 -0.5 0.1 0.5 -0.5 0.3

Cash Flow from Investing Activities -667.7 -561.3 -387.7 -10.7 -64.3 -129.7

Dividend -59.2 -59.2 -37.0 0.0 -18.7 -18.7

Share Capital 0.0 0.0 0.0 0.0 0.0 0.0


Debt 481.0 638.7 390.8 -461.2 8.2 -120.0

Cash Flow From Financing Activities 421.8 579.5 353.8 -461.2 -10.5 -138.7

Others 5.9 -42.9 11.3 16.3 0.0 120.6

Net change in cash 32.0 143.0 -89.5 -33.7 278.6 247.3

Opening cash 140.3 172.3 315.3 225.8 192.1 470.7

Closing cash 172.3 315.3 225.8 192.1 470.7 718.0

FCF -383.9 -478.9 -432.1 443.3 289.6 506.3


19/29


HYDERABAD INDUSTRIES LTD.

KEY HIGHLIGHTS

Largest player retaining its market share: Hyderabad Industries is thelargest player in FC industry with total capacity of 854500tpa. With growing

industry size the company is expected to retain its market share of 18%. In

the current financial year the company has expanded its FC capacity by

90000tpa. Thus, we expect Hyderabad industries to increase its sales

volume from 729000t in FY10 to 760000t in FY11E and to 811000t in

FY12E.

Strong brand name commands premium: The firm has well-established brand Charminar. Being well-penetrated the brand fetches 10-

15% premium to other brands. Thus, the realization for the firm has been

better than its peers. We expect realization for FC Sheet to increase from

`8300/t in FY10 to `9000/t and `9400/t for FY11E and FY12E respectively.

Diversification to benefit: Diversification into allied products to benefitthe company. Hyderabad Industries has diversified into autoclave concrete

blocks, building panel, refractory and FC pipes. These businesses contribute

less than 20% of its topline. The firm markets its building panels and AACB

under the brand name Aerocon and refractory under the name Hysil. The

allied business to provide cushion in the downturn of the cycle.

Capacity expansion to reap benefits: HIL is expanding its capacity inAACB and thermal insulation. It is expanding its AACB capacity to 2.2 lakh

Cu. Mtr. by Q1FY11E. It is setting up a new plant in Golan, Surat from whichit would cater to the high growth and lucrative markets of Gujarat and

Maharashtra. The capacity of thermal insulation business, which is high

margin business, is expected to expand to 9300t by Q2FY11E.

Strong operating cash flows: HIL has generated strong cash flows in thepast 6 years and we expect it to generate cash flow of around `100cr over

next two years. Strong cash flow and low debt level of 0.2:1 generates very

high ROCE of around 25% which is the highest in the industry.

VALUATION: At the current price of `625 the stock is available at 5.2xand 4.3x FY11E and FY12E earnings respectively. Due to low debt level

EV/EBIDA is at very compelling level of 3x and 2.5x of FY11E and FY12EEBIDTA respectively. The leader to benefit from the long lasting

boom in the industry. We recommend BUY on the stock with

12 month price target of ```808.

COMPANY NOTE

BUY

CMP `625

52 week High / Low `761/311


Face Value `10



BSE SENSEX 18282

NSE - NIFTY 5486

NSE Code HYDRBADIND

Bloomberg Code HYI IN

BSE Code 509675


Promoters 43.10%



6-MTS YTD 1-YR

HYD IND -9% 13% 76%

NIFTY 5% 14% 16%

SENSEX 4% 14% 14%

( mn)

BRIEF

FINANCIALSFY08 FY09 FY10E FY11E

Net Sales 6,234.0 7,036.9 8,522.7 9,963.3

Sales growth 29.6% 12.9% 21.1% 16.9%

EBITDA 886.3 1,507.9 1,599.5 1,909.0

PAT 440.9 870.2 920.4 1,096.9

EPS 59.1 116.6 123.4 147.0

P/E (x) 10.8 5.5 5.2 4.3

RONW (%) 27.0% 40.6% 32.5% 30.3%

EV/EBITDA 5.3 3.2 3.0 2.5

ABHILASHA SATALE

66338900 EXT. 152

[email protected]


20/29


FINANCIALS

( mn)


Gross Sales 4,765.1 5,234.7 6,639.7 7,563.7 9,188.0 10,660.0

Excise Duty 398.3 425.1 405.7 526.8 665.4 696.7

Net Sales 4,366.8 4,809.6 6,234.0 7,036.9 8,522.7 9,963.3

% Change -2.3% 10.1% 29.6% 12.9% 21.1% 16.9%

Raw Materials 2,552.6 2,649.4 3,000.6 3,617.0 3,692.3 4,192.7

Stock Adjustments (308.9) (56.1) 292.3 (333.8) - -


Other Mfg Exp. 169.0 229.2 252.2 - - -


Power, Oil & Fuel 378.2 394.9 435.5 - 596.6 790.0

Selling & Administrative Expenses 689.9 600.8 544.2 - - -

Provisions & Write offs 30.5 0.5 28.3 - - -

Other Expenses - Recurring 126.2 141.4 155.5 1,683.6 1,960.2 2,291.6Non Recurring 8.7 3.2 29.4 - - -


Operating Profit 269.8 352.3 886.3 1,507.9 1,599.5 1,909.0

% Change -59.7% 30.6% 151.6% 70.1% 6.1% 19.3%


Non Recurrng 7.3 17.4 2.2 - - -

EBITDA 316.3 408.0 928.3 1,548.4 1,639.5 1,949.0

% Change -56.0% 29.0% 127.5% 66.8% 5.9% 18.9%


Financial Charges - - - - - -


PBDT 266.3 330.2 834.1 1,485.9 1,574.5 1,882.0

Depreciation 95.6 111.2 139.8 155.5 180.0 220.0

EBIT 220.7 296.8 788.5 1,392.9 1,459.5 1,729.0

PBT 170.7 219.0 694.3 1,330.4 1,394.5 1,662.0

% Change -71.0% 28.3% 217.0% 91.6% 4.8% 19.2%

Current Tax 59.6 43.3 223.5 460.2 474.1 565.1

Deferred Tax 19.0 29.8 23.9 - - -


Net Profit Before Minority Interest 87.1 140.8 440.9 870.2 920.4 1,096.9

% Change -76.1% 61.7% 213.1% 97.4% 5.8% 19.2%

Minority Interest (22.5) 4.1 (7.5) - - -

Net Profit After Minority Interest 109.6 136.7 448.4 870.2 920.4 1,096.9

Extra Ordinary Items (22.5) 4.1 (7.5) - - -

Adjusted PAT 109.6 136.7 448.4 870.2 920.4 1,096.9

% Change -71.3% 24.7% 228.0% 94.1% 5.8% 19.2%

Dividend - Equity 37.3 37.3 74.6 147.2 155.7 185.6




21/29


( mn)




Reserves & Surplus - - - - - -Revaluation Reserve 55.7 54.0 52.3 52.3 52.3 52.3

Others 1,287.5 1,381.2 1,734.8 2,405.5 3,117.8 3,976.9


Secured Loans - Long Term 541.6 703.1 468.4 468.4 510.0 510.0






Gross Block 2,298.6 2,383.6 2,822.1 3,120.0 3,450.0 3,820.0Less Accumulated Depreciation 1,004.3 1,091.4 1,224.1 1,379.6 1,559.6 1,779.6


Net Block 1,294.3 1,292.2 1,598.0 1,740.4 1,890.4 2,040.4

Capital WIP 26.4 229.9 365.3 512.0 322.0 360.0


Investments 95.7 94.5 93.4 110.0 350.0 430.0


Inventories 1,151.4 1,134.8 1,115.3 1,220.0 1,580.0 1,780.0

Debtors 389.2 478.9 506.1 610.0 796.0 910.0

Advances 287.3 220.7 190.3 273.0 365.0 552.0


Less Current Liabilities 817.5 919.0 975.2 1,020.0 1,180.0 1,260.0

Provisions 185.3 103.9 145.7 185.0 272.0 190.0

Net Current Asssets 825.1 811.5 690.8 898.0 1,289.0 1,792.0

Cash & Bank 64.6 162.8 104.6 164.4 270.4 467.4



Total Assets 2,374.8 2,636.8 2,894.9 3,445.8 4,147.7 5,148.8


22/29








S & D/ Net Sales 15.8% 12.5% 8.7% 0.0% 0.0% 0.0%




EBITDA Margin(%) 7.2% 8.5% 14.9% 22.0% 19.2% 19.6%

PBDT Margin(%) 6.1% 6.9% 13.4% 21.1% 18.5% 18.9%

EBIT Margin(%) 5.1% 6.2% 12.6% 19.8% 17.1% 17.4%

PBT Margin(%) 3.9% 4.6% 11.1% 18.9% 16.4% 16.7%

PAT Margin(%) 2.0% 2.9% 7.1% 12.4% 10.8% 11.0%

EBIAT Margin(%) 3.1% 4.5% 8.6% 13.3% 11.6% 11.7%



DPS 5.0 5.0 10.0 19.7 20.9 24.9

EPS 11.7 18.9 59.1 116.6 123.4 147.0

Adjusted EPS 14.7 18.3 60.1 116.6 123.4 147.0

CEPS 24.5 33.8 77.8 137.5 147.5 176.5



Current Tax (%) 37.8% 22.1% 33.1% 34.6% 34.0% 33.0%






Dividend Payout (%) 42.8% 26.5% 16.9% 26.5% 26.5% 26.5%

Dividend Yield (%) 0.8% 0.8% 1.6% 3.2% 3.3% 4.0%








P/E 53.5 33.1 10.6 5.4 5.1 4.3

Price/CEPS 25.5 18.5 8.0 4.5 4.2 3.5

Price/Book Value 3.6 3.3 2.9 2.2 1.6 1.3

EV/EBITDA 15.1 11.7 5.2 3.1 2.9 2.5

Pay Back Period 26.2 19.0 8.2 4.7 4.3 3.6


23/29


( mn)


Net profit 109.6 136.7 448.4 870.2 920.4 1096.9

Depreciation 95.6 111.2 139.8 155.5 180.0 220.0

Deffered Tax 19.0 29.8 23.9 0.0 0.0 0.0

change in working capital -290.6 13.6 120.7 -207.2 -391.0 -503.0


Activities:-66.4 291.3 732.8 818.5 709.4 813.9

Capex (156.5) (288.5) (573.9) (444.6) (140.0) (408.0)

Investments (Net) 84.9 1.2 1.1 (16.6) (240.0) (80.0)

Cash Flow from Investing Activities (71.6) (287.3) (572.8) (461.2) (380.0) (488.0)

Dividend (37.3) (37.3) (74.6) (147.2) (155.7) (185.6)

Share Capital 3.1 - - - - -

Share premium received - - - - - -

Debt 155.2 164.6 (114.5) (104.8) 41.6 120.0

Cash Flow From Financing Activities 121.0 127.3 (189.1) (252.0) (114.1) (65.6)

Others (14.9) 33.1 29.1 45.5 109.2 63.4

Net change in cash (2.1) 98.2 (58.2) 59.8 106.1 196.9

Opening cash 66.7 64.6 162.8 104.6 164.4 270.4

Closing cash 64.6 162.8 104.6 164.4 270.4 467.3

FCF (222.9) 2.8 158.9 373.9 569.4 405.9


24/29


VISAKHA INDUSTRIES LTD.

KEY HIGHLIGHTS

Aggressive expansion in FC sheets to benefit: Visaka gets first moveradvantage to accrue additional market share in the industry boom due to

timely expansion. In the current financial year the firm has expanded its

capacity by 48000t at its Pune plant taking total capacity to 100000t at

Pune. It is further expanding its capacity by 120000t at Sambalpur pant,

which is expected to get commenced by January 2011.

Volume increase through strong brand: Ongoing expansion andstrong demand and brand name to give Visaka consistent volume growth.

We expect Visaka to increase its sales volume from 557965t in FY10 to

665000t in FY11E and 690000t in FY12E. Rising volumes with rising

realization to improve profitability of the firm by maintaining margins at

18%.

Textile boom to benefit: Visaka Industries has blended yarn division withtotal capacity of 1816 spindles. The division contributes around 18% of total

turnover. Yarn prices have moved up 40% y-o-y in FY10. Due to strong

demand and capacity consolidation witnessed in the global market yarn

prices are likely to stay firm in near future. We expect the division to grow

at 20% CAGR over next two years.

Strong cash flow to fund capex: Visaka Industries is expected togenerate Free Cash Flow of `40cr in FY10 and `60cr in FY11E. This would

take care of its Sambalpur expansion of `41cr. Visaka is expected to repayaround `20cr debt in FY11E. However, strong cash flow is expected to

keep debt:equity ratio at 0.4:1 level.

Improving ROCE: Improving profitability and reducing debt level toimprove ROCE to 20% from 15% in FY09. Upturn in the industry cycle

ensures the sustainability of ROCE over medium term.

ATTRACTIVE VALUATION: We expect Visaka Industries to expand itsrevenue at a CAGR of 15% over FY10-FY12E and earnings at a CAGR of

14% over the same period. At the current price of ```163 the stock is

trading at 4xFY11E and 3.5xFY12E earnings. EV/EBIDTA of the

firm is at 3x and 2.6x of FY11E and FY12E EBIDTA respectively.

We recommend BUY at current price.

COMPANY NOTE

BUY

CMP `162.75

52 week High / Low `192.95/108.10


Face Value `10


Avg. Daily Vol. (12 M) `32135 cr

BSE SENSEX 18257

NSE - NIFTY 5479

NSE Code VISAKAIND

Bloomberg Code VSKI IN

BSE Code 509055


Promoters 37.70%



6-MTS YTD 1-YR

VISAKA -14% 32% 41%

NIFTY 5% 14% 16%

SENSEX 4% 14% 14%

( mn)


Net Sales 5,779.8 5,981.3 7,226.2 7,805.1

Sales growth 34.4% 3.5% 20.8% 8.0%

EBITDA 789.5 1,088.1 1,288.0 1,362.1

PAT 359.4 572.1 684.6 729.3

EPS 22.6 36.0 43.1 45.9

P/E (x) 7.2 4.5 3.8 3.5

RONW (%) 20.7% 27.0% 25.8% 22.3%

EV/EBITDA 4.1 3.2 2.8 2.6

ABHILASHA SATALE

66338900 EXT. 152

[email protected]


25/29


FINANCIALS

( mn)


Gross Sales 4,451.9 4,595.7 6,063.5 6,393.1 7,706.2 8,325.1

Excise Duty 278.8 295.2 283.7 411.8 480.0 520.0

Net Sales 4,173.1 4,300.5 5,779.8 5,981.3 7,226.2 7,805.1

% Change 42.5% 3.1% 34.4% 3.5% 20.8% 8.0%

Raw Materials 2,374.6 2,748.9 2,958.3 3,362.2 3,726.0 4,030.0

Stock Adjustments (17.4) (200.5) 308.6 (258.1) - -


Other Mfg Exp. 157.8 167.1 247.9 311.7 375.8 405.9

Repairs & Maintainence 37.5 42.7 64.6 67.7 72.0 78.0

Power, Oil & Fuel 240.6 242.6 259.0 295.5 433.6 468.3

Selling & Administrative Expenses 482.6 493.0 696.7 714.8 863.6 932.8

Provisions & Write offs 0.9 14.6 47.6 28.3 36.0 42.0

Other Expenses - Recurring 116.4 128.4 108.2 130.0 144.5 156.1Non Recurring - 47.8 74.6 1.9 - -


Operating Profit 578.0 396.4 789.5 1,088.1 1,288.0 1,362.1

% Change 21.5% -31.4% 99.2% 37.8% 18.4% 5.8%


Non Recurrng 1.1 - - 22.4 - -

EBITDA 631.6 460.9 903.9 1,171.6 1,328.5 1,402.1

% Change 22.8% -27.0% 96.1% 29.6% 13.4% 5.5%


Financial Charges 22.0 15.2 13.4 14.7 - -


PBDT 487.9 288.5 720.3 1,047.6 1,231.5 1,293.1

Depreciation 147.6 156.6 166.0 183.9 210.0 205.0

EBIT 484.0 304.3 737.9 987.7 1,118.5 1,197.1

PBT 340.3 131.9 554.3 863.7 1,021.5 1,088.1

% Change 17.0% -61.2% 320.2% 55.8% 18.3% 6.5%

Current Tax 91.7 57.0 173.2 284.8 336.8 358.8

Deferred Tax 11.1 (6.1) 16.1 6.8 - -



% Change 20.9% -67.1% 368.6% 59.2% 19.7% 6.5%

Minority Interest 0.1 (21.0) (26.2) (12.4) - -


Extra Ordinary Items 0.1 (21.0) (26.2) (12.4) - -

Adjusted PAT 232.7 97.7 385.6 584.5 684.6 729.3

% Change 20.8% -58.0% 294.7% 51.6% 17.1% 6.5%

Dividend - Equity 41.6 47.6 63.5 79.4 93.0 99.1

Preference 0.6 - - - - -



26/29


( mn)




Reserves & Surplus - - - - - -Revaluation Reserve - - - - - -

Others 1,400.2 1,433.7 1,718.7 2,198.1 2,789.7 3,420.0


Secured Loans - Long Term 1,689.2 1,815.7 1,508.3 1,165.5 1,165.5 1,165.5




Deferred Tax Liabilities 103.9 102.7 121.9 126.2 62.0 -


Gross Block 2,688.3 2,699.6 3,123.4 3,309.8 3,750.0 4,050.0Less Accumulated Depreciation 826.2 977.3 1,140.9 1,232.2 1,442.2 1,647.2


Net Block 1,862.1 1,722.3 1,982.5 2,077.6 2,307.8 2,402.8

Capital WIP 35.0 372.7 105.1 91.6 130.0 50.0


Investments 12.5 - 22.2 23.0 31.0 35.0


Inventories 799.6 940.6 899.7 1,166.7 1,420.0 1,570.0

Debtors 473.7 536.5 531.3 507.6 690.0 780.0

Advances 633.4 635.9 659.2 782.6 840.0 960.0


Less Current Liabilities 408.5 476.7 503.1 571.9 630.0 830.0

Provisions 327.0 370.0 474.6 589.0 690.0 190.0

Net Current Asssets 1,171.2 1,266.3 1,112.5 1,296.0 1,630.0 2,290.0

Cash & Bank 442.9 308.5 455.6 608.7 318.2 210.5



Total Assets 3,525.0 3,676.1 3,687.3 4,103.4 4,426.0 4,994.3


27/29








S & D/ Net Sales 11.6% 11.5% 12.1% 12.0% 12.0% 12.0%




EBITDA Margin(%) 15.1% 10.7% 15.6% 19.6% 18.4% 18.0%

PBDT Margin(%) 11.7% 6.7% 12.5% 17.5% 17.0% 16.6%

EBIT Margin(%) 11.6% 7.1% 12.8% 16.5% 15.5% 15.3%

PBT Margin(%) 8.2% 3.1% 9.6% 14.4% 14.1% 13.9%

Adjusted PAT Margin(%) 5.6% 2.3% 6.7% 9.8% 9.5% 9.3%




DPS 2.6 3.0 4.0 5.0 5.9 6.2

EPS 14.7 4.8 22.6 36.0 43.1 45.9

Adjusted EPS 14.7 6.2 24.3 36.8 43.1 45.9

CEPS 24.0 14.7 33.1 47.6 56.3 58.8



Current Tax (%) 28.3% 46.5% 32.3% 33.0% 33.0% 33.0%






Dividend Payout (%) 17.9% 62.1% 17.7% 13.9% 13.6% 13.6%

Dividend Yield (%) 1.6% 1.8% 2.5% 3.1% 3.6% 3.8%








P/E 11.1 33.7 7.2 4.5 3.8 3.5

Price/CEPS 6.8 11.1 4.9 3.4 2.9 2.8

Price/Book Value 2.1 1.6 1.5 1.2 1.0 0.8

EV/EBITDA 6.0 8.2 4.2 3.2 2.8 2.7

Pay Back Period 9.9 16.1 7.2 5.0 4.2 4.0


28/29


( mn)


Net profit 232.7 97.7 385.6 584.5 684.6 729.3

Depreciation 147.6 156.6 166.0 183.9 210.0 205.0

Deffered Tax 11.1 -6.1 16.1 6.8 0.0 0.0

change in working capital -457.7 -95.1 153.8 -183.5 -334.0 -660.0


Activities:-66.3 153.1 721.5 591.7 560.6 274.3

Capex 547.5 349.0 156.2 172.9 478.6 220.0

Investments (Net) 12.4 -12.5 22.2 0.8 8.0 4.0

Cash Flow from Investing Activities 559.9 336.5 178.4 173.7 486.6 224.0

Dividend -42.2 -47.6 -63.5 -79.4 -93.0 -99.1

Share Capital 27.1 0.0 0.0 0.0 0.0 0.0


Debt 352.7 118.8 -293.0 -67.2 -204.8 0.0

Cash Flow From Financing Activities 337.6 71.2 -356.5 -146.6 -297.8 -99.1

Others 580.9 695.2 396.3 465.7 1039.9 506.9

Net change in cash 250.3 -134.4 147.1 153.1 -290.5 -107.7

Opening cash 192.6 442.9 308.5 455.6 608.7 318.2

Closing cash 442.9 308.5 455.6 608.7 318.2 210.5


29/29

Corporate Office:

Manu Mansion, 2ndFloor, 16, Shahid Bhagatsingh Marg, Fort, Mumbai 400 001. Tel. 91-226633 8900 / 2261 8787 / 4027 8900

Fax No. 91-22 2269 0041 Email: [email protected] website: www.technoworld.in

Strictly for Private Circulation only. All rights reserved. Techno Shares & Stocks Ltd

DISCLAIMER: This information & opinions in this report have been prepared by TECHNO SHARES & STOCKS LTD. The report & theinformation contained herein are strictly confidential and meant solely for the authorized recipient and may be restricted by law or regulation incertain countries. This report is for information purposes only for the authorized reader and does not construe to be any investment, legal ortaxation advice. This report is based on the information obtained from public sources and sources believed to be reliable, however, no warranty,express or implied, are given for the accuracy or correctness of the same and it should not be construed as such. It is also not intended as an offeror solicitation for the purchase and sale of any financial instrument.

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