gujarat ambuja exports absolute : long ) regular coverage 43% … · 2018. 11. 2. · gujarat...

October 30, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) of 11

Before reading this report, you must refer to the disclaimer on the last page.

Gujarat Ambuja Exports Absolute : LONG

Relative : Overweight

2QFY19 Result: Estimate (), TP (), Rating () Regular Coverage 43% ATR in 14 Months

Outlook remains buoyant for both maize & soya — maintain LONG Agricultural Products

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 240

Target Price (Rs) 360

Target Date 31st Dec'19

Target Set On 30th Oct'18

Implied yrs of growth (DCF) 10

Fair Value (DCF) 306

Fair Value (DDM) 20

Ind Benchmark SPBSMIP

Model Portfolio Position No

Stock Information

Market Cap (Rs Mn) 27,520

Free Float (%) 36.24 %

52 Wk H/L (Rs) 309.85/145.5

Avg Daily Volume (1yr) 1,67,840

Avg Daily Value (Rs Mn) 37

Equity Cap (Rs Mn) 229

Face Value (Rs) 2

Bloomberg Code GAEX IN

Ownership Recent 3M 12M

Promoters 63.8 % 0.0 % -2.2 %

DII 0.7 % -0.3 % 0.6 %

FII 1.4 % 0.6 % 1.0 %

Public 34.1 % -0.2 % 0.6 %

Price % 1M 3M 12M

Absolute 31.8 % 9.6 % 39.5 %

Vs Industry 34.3 % 19.5 % 52.6 %

Sukhjit Starch 4.6 % -8.5 % 12.3 %

Gulshan

Polyols -1.1 % -11.1 % -31.1 %

Consolidated Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (18A) 1.5 1.8 5.5 6.9

EPS (19E) 4.6 2.9 5.8 6.4

Gujarat Ambuja Exports (GAEX) reported below-expected 2QFY19 revenues of ~Rs 7.8bn

(flat yoy, -11% vs. EE) with the agro processing segment posting a 9% yoy decline due to

lower crushing utilization amid shortage of the soybean crop. The maize processing

segment however grew by a robust 17% yoy despite a 25-day maintenance shutdown at

the Hubli plant. EBITDAM expanded 311bps yoy to 9.6% (EE 9.8%) as maize segment

profitability improved sharply. Revenue growth shall further accelerate in H2 on the back

of 1) Strong order book in Agro segment, 2) Maize segment to benefit from improving

utilization levels at the Chalisgaon plant and derivative facilities expected to get

commissioned by year-end. We update our FY19/FY20 EPS estimates by +10%/-2% and roll

over to a SOTP-based Dec’19 TP of Rs 360 (Sept’19 TP: Rs 330). Maintain LONG.

Maize generates 51% of 2Q revenue led by Chalisgaon plant: Maize division revenues

grew ~17% yoy even as the company took a hit of ~Rs 400mn due to maintenance

shutdown at the Hubli plant. Volumes grew by 28% yoy but product mix changes impacted

average realisations. With the Hubli plant is back on track and derivative capabilities at

Chalisgaon expected to come on stream by 4Q, average realisations would improve going

forward. Segment EBITDAM stood at 19% (20% in 1Q, 8% last year) mainly helped by higher

export volumes. Due to an increase in corn’s MSP, the procurement price for GAEX has

risen by Rs 1-1.5/kg; accordingly, starch prices have also increased by Rs 1/kg.

Strong tailwinds for agro segment in H2: Agro processing revenues declined ~9% yoy

due to shortage of the soybean crop, which led to a 50% drop in crushing volumes.

Segment EBITM contracted ~329bps yoy/289bps qoq as the product mix shifted towards

lower-margin refining activities (2-3% margins). Currently, GAEX’s agro segment is

operating at 25-30% utilization; however, as government policies remain supportive

(increase in import duties, export incentives on soya DOC cakes), utilization levels are

set to improve in 2HFY19, especially with the soya crop likely to be better than

last year.

Maintain LONG with a revised SOTP-based Dec’19 TP of Rs 360: We have updated our

numbers and revised our FY19/FY20 EPS estimates by +10%/-2%. We roll over to a SOTP-

based Dec’19 TP of Rs 360 (from a Sept’19 TP of Rs 330; Exhibit 9). The maize segment

continues to show consistent growth and profitability while the agro segment continues

to surprise positively on the back of government support. At CMP of Rs 240, the stock is

trading at a P/E of 12x/10x on our FY19/FY20 estimates. Maintain LONG.

Change in Estimates

Rs. Mn FY19E Chg (%) FY20E Chg (%)

Sales 42,097 5% 50,445 0%

EBITDA 4,299 8% 4,983 0%

EPS 19.7 10% 23.5 -2%

Consolidated Financials

Rs. Mn YE Mar FY18A FY19E FY20E FY21E

Sales 33,644 42,097 50,445 55,621

EBITDA 3,173 4,299 4,983 5,755

Depreciation 763 977 1,036 1,139

Interest Expense 179 244 219 164

Other Income 91 102 72 89

Reported PAT 1,799 2,257 2,698 3,224

Recurring PAT 1,799 2,257 2,698 3,224

Total Equity 10,224 12,320 14,823 17,814

Gross Debt 6,986 6,267 5,717 3,517

Cash 69 173 54 279

Rs Per Share FY18A FY19E FY20E FY21E

Earnings 15.7 19.7 23.5 28.1

Book Value 89 107 129 155

Dividends 0.9 1.2 1.4 1.7

FCFF 2.3 12.2 8.7 25.6

P/E (x) 15.3 12.2 10.2 8.5

P/B (x) 2.7 2.2 1.9 1.5

EV/EBITDA (x) 10.9 7.8 6.7 5.3

ROE (%) 19 % 20 % 20 % 20 %

Core ROIC (%) 12 % 13 % 15 % 17 %

EBITDA Margin (%) 9 % 10 % 10 % 10 %

Net Margin (%) 5 % 5 % 5 % 6 %

Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 43% ATR in 14 Months


Quarterly performance, consolidated

Rs Mn 2QFY19 2QFY19E 1QFY19 2QFY18 % Change

Comments 2QFY19E 1QFY19 2QFY18

Net Sales 7,763 8,761 8,042 7,751 -11% -3% 0% 25 days plant shutdown and lower inventory of Soybean impacted growth

Raw Materials Consumed 5,544 6,746 5,626 6,060 -18% -1% -9%

Employee benefits expense 255 271 269 218 -6% -5% 17%

Other expenses 1,222 888 1,170 972 38% 4% 26% MTM forex loss of Rs 180mn led to higher other expenses

Total Operating Expenses 7,020 7,905 7,065 7,250 -11% -1% -3%

EBITDA 743 856 977 501 -13% -24% 48%

Depreciation 247 235 235 188 5% 5% 32%

EBIT 496 622 742 313 -20% -33% 58%

Interest 54 58 69 41 -6% -21% 31%

Other Income 18 17 51 16 3% -65% 9%

PBT 459 581 724 288 -21% -37% 59%

Tax 127 168 193 78 -24% -34% 63%

Recurring PAT 331 412 531 209 -20% -38% 58%

Extraordinaires 0 0 0 0

Reported PAT 331 412 531 209 -20% -38% 58%

EPS (Rs) 2.9 3.6 4.6 1.8 -20% -38% 58%

Gross Margin 28.6% 23.0% 30.0% 21.8% 559 bps -144 bps 678 bps

EBITDA Margin 9.6% 9.8% 12.1% 6.5% -21 bps -258 bps 311 bps

EBIT Margin 6.4% 7.1% 9.2% 4.0% -71 bps -284 bps 235 bps

PBT Margin 5.9% 6.6% 9.0% 3.7% -72 bps -309 bps 220 bps

PAT Margin 4.3% 4.7% 6.6% 2.7% -44 bps -233 bps 157 bps

Tax Rate 27.8% 29.0% 26.7% 27.2% -123 bps 109 bps 55 bps

Cost Items as a % of Sales

RM Cost 71.4% 77.0% 70.0% 78.2% -559 bps 144 bps -678 bps

Employee Cost 3.3% 3.1% 3.3% 2.8% 19 bps -6 bps 46 bps

Other Expenses 15.7% 10.1% 14.5% 12.5% 560 bps 119 bps 320 bps



Key takeaways from management interaction

Maize segment

▪ Maize segment revenues were impacted by a 25-day maintenance shutdown at the

Hubli plant.

▪ Capacity utilization for the Chalisgaon plant stood at of ~57% in 2QFY19 vs. 37% in

1QFY19; it would reach ~70% in 3QFY19 and 80-85% in 4QFY19.

▪ The derivative facility in Chalisgaon will begin commercial production in 4QFY19.

▪ EBITDAM for the maize segment came in at ~19% in 2QFY19 vs. 8% in 2QFY18.

▪ About 60% of the Chalisgaon topline comes from exports.

▪ Maize segment exports during the quarter stood at ~Rs 1.12bn.

▪ GAEX did grinding of ~172,000 tons of maize in 2QFY19 vs. ~134,000 tons in 2QFY18; the

number would have touched 190,000 had it not been for the Hubli plant shutdown.

▪ Realizations for the quarter declined because the company produces only starch at

the Chalisgaon plant as of now.

▪ GAEX gets ~5% export incentives on starch and starch derivatives.

▪ Currently, the company is buying corn at Rs 14.5-15/kg.

▪ Current price of starch is ~Rs 22+/kg; it was stable at ~Rs 21/kg for the last 4-5 years.

▪ Prices for derivatives are negotiated every quarter and it is easier to pass on the

increase in input cost.

Agro-processing segment

▪ EBITDAM for the agro segment came in at ~5.11% in 2QFY19 vs. ~8.4% in 2QFY18.

▪ Trading revenues increased to ~Rs 870mn in 2QFY19 from ~Rs 820mn in 2QFY18.

▪ Soya crop has been good, with ~11mn tones expected in 2HFY19 (2-3mn tones higher

than last year); therefore, utilization is expected to improve going ahead.

▪ GAEX has an order book of ~1,00,000 tons for 3QFY19.

▪ Due to the US-China trade war, management sees an opportunity of exporting soya

DOC to China; 4-5 companies in India are eligible to export to China and exports

should begin by 3Q-end or 4Q-beginning. GAEX would be amongst the first 2-3

companies to start exporting DOC to China.

▪ 1, 00,000 tons could be exported to China by GAEX in 4Q; this would be in addition to

what the company is doing right now.

▪ Management has guided for 2.5-3L tons of DOC exports in 2HFY19.

▪ GAEX should be able to clock ~7% EBITDAM for full-year FY19.

▪ Import duties on soy refined oil have gone up from 12% to 45%.

▪ Export incentives on soya DOC are at ~10%.

▪ In the absence of DOC exports, the agro division did exports of only ~Rs 10mn in

2QFY19.

▪ During 2QFY19, GAEX did crushing of only ~34,000 tons of soya vs. 68,000 tones in

2QFY18. 2QFY18 inventory was priced at ~Rs 29/kg vs. ~Rs 32/kg in 2QFY19. MSP for

soybean is ~Rs 34/kg.

▪ EBITDAM for oil refining is 2-3% and covers the segment’s fixed expenses.

Cotton segment

▪ GAEX doesn’t expect any substantial profit in this segment.

▪ Unlike 2QFY19, the company had a huge finished goods inventory in 2QFY18.

▪ GAEX produces ~3,500 tons of cotton yarn every quarter.

▪ Exports for the division stood at ~Rs 270mn.

Other important points

▪ Exports revenue stood at ~Rs 1.4bn in 2QFY19 vs. Rs 1.87bn in 2QFY18.

▪ MTM losses for the quarter were to the tune of ~Rs 180mn.



Exhibit 1: Quarterly revenue trends in the agro processing segment

Source: Company, Equirus Securities

Exhibit 2: EBITM has been volatile for agro processing segment


Exhibit 3: Commissioning of new plant to drive growth in maize division


Exhibit 4: Maize EBITM has recovered post a sharp drop in 1HFY18


3,0

88

3,7

76

4,4

01

2,8

49

4,0

45

2,6

76

5,1

02

6,6

41

3,6

49

3,6

34

6,0

82

4,2

32

3,2

68

3,3

17

12%

62%

-14% -13%

31%

-29%

16%

133%

-10%

36%19%

-36%

-10% -9%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

1000

2000

3000

4000

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6000

7000

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

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FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

Agro Processing Revenue (Rs. mn) Growth (yoy%)(RHS)

145

-19-15 -6

297

-15

340 187 76 282 490 451 241 148

5%

-1% 0% 0%

7%

-1%

7%

3%

2%

8%8%

11%

7%

4%

-2%

0%

2%

4%

6%

8%

10%

12%

-100

0

100

200

300

400

500

600

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

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FY17

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FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

Agro Processing EBIT (Rs mn) EBITM (%)(RHS)

2,6

61

2,7

65

3,1

08

3,2

91

3,1

75

3,2

55

3,1

98

3,4

26

2,8

42

3,3

86

3,4

17

3,8

52

4,1

24

3,9

67

3%

16%

27%31%

19% 18%

3% 4%

-10%

4%7%

12%

45%

17%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

500

1000

1500

2000

2500

3000

3500

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4500

1Q

FY16

2Q

FY16

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FY16

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FY16

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3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

Maize Processing Revenue (Rs mn) Growth (yoy%)(RHS)

354

326

387

412

418

343

363

416

189

157

549

712

657

578

13%

12%12% 13% 13%

11%11%

12%

7%

5%

16%

18%

16%

15%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

100

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1Q

FY16

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FY18

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FY18

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FY18

4Q

FY18

1Q

FY19

2Q

FY19

Maize Processing EBIT (Rs mn) EBITM (%)(RHS)



Exhibit 5: Corn prices remain benign, though increased MSP is a key risk

Source: Bloomberg, Equirus Securities

Exhibit 6: Soybean and soymeal prices have started moderating recently

Source: NCDEX, Equirus Securities

Exhibit 7: Soymeal exports decline in FY18 as some big players shut shop

Source: SOPA, Equirus Securities

Exhibit 8: Maize remains the focus area in terms of capital allocation


-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18

Corn Prices (Rs/qtl) Growth (Yoy%)

500

550

600

650

700

750

800

850

10000

15000

20000

25000

30000

35000

40000

45000

50000

Dec-1

2

Mar-

13

Jun-1

3

Sep-1

3

Dec-1

3

Mar-

14

Jun-1

4

Sep-1

4

Dec-1

4

Mar-

15

Jun-1

5

Sep-1

5

Dec-1

5

Mar-

16

Jun-1

6

Sep-1

6

Dec-1

6

Mar-

17

Jun-1

7

Sep-1

7

Dec-1

7

Mar-

18

Jun-1

8

Sep-1

8

Soyameal (Rs/tonne) Soya refined oil (RHS) (Rs/10kg)

0

50,000

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

FY16 FY17 FY18

13%

89%

77%

30%

55%

75%80%

72%

50%

76%

64%

95%

0%

20%

40%

60%

80%

100%

120%

0

500

1000

1500

2000

2500

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Capex in maize segment % of total capex



Valuation and risks

GAEX currently trades at 12x/10x/9x P/E and an EV/EBITDA of 8x/7x/5x on our

FY19/FY20/FY21 estimates. The company has historically traded in the range of 5-15x

P/E on TTM EPS and an EV/EBITDA of 5-7x on TTM EBITDA.

We use the SOTP methodology to value GAEX as shown below. Overall, we arrive at a

Dec’19 SOTP-based TP of Rs 360, implying a P/E multiple of 18x/15x/13x and an

EV/EBITDA multiple of 11x/9x/8x on our FY19/FY20/FY21 estimates.

Exhibit 9: We arrive at a SOTP-based Dec’19 TP of Rs 360

TTM Dec’19E (Rs mn) EBITDA Multiple EV

Agro processing 1,397 8x 11,173

Maize processing 3,222 11x 35,446

Others 180 4x 719

Group's EV 47,338

Total debt 6,267

Total cash 599

Equity value 41,670

No. of shares outstanding(mn) 115

Dec’19 Target price (Rs) 360

Source: Equirus Securities

Investment risks

Downside risks:

1. Commodity price risk: Factors like political and regulatory changes, seasonal

variations, weather, technology and market conditions can significantly affect

commodity prices. An unexpected movement in commodity prices can have a bearing

on the company’s profitability. GAEX tries to mitigate the risk by covering positions

through hedging at commodity exchanges like CBOT, REFCO, NCDEX, NMCEX and

others.

2. Foreign currency risk: GAEX manages foreign currency exposures through forward

exchange contracts. Forex risks are partly mitigated by purchase of goods/

commodities in respective currencies.

3. Capital misallocation: GAEX has a good business (maize), an average business (oil) and

a bad business (textile). In the last decade, the company has mainly invested in its

maize business and has no intention of investing further in the oil and textile

businesses. Any major investments in these businesses will be against our investment

thesis.

4. Increased competition: While many players have entered and exited the industry

over the last few years, an increase in the number of entrants ahead should not be

surprising given the industry’s growth potential. This would put pressure on pricing

and utilization levels of existing players.



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY19E 19.7 - - There are no other estimates available.

FY20E 23.5 - -

Sales FY19E 42,097 - -

FY20E 50,445 - -

PAT FY19E 2,257 - -

FY20E 2,698 - -

Segmental Drivers:

Revenue growth (%) FY18 FY19E FY20E FY21E

Agro processing -5% 29% 18% 9%

Cotton 18% -6% 8% 8%

Maize processing 3% 25% 24% 12%

EBITDA margins (%) FY18 FY19E FY20E FY21E

Agro processing 7.9% 6.9% 6.0% 6.0%

Cotton 1.3% 4.1% 4.0% 4.0%

Maize processing 15.8% 18.7% 17.0% 18.0%

Key downside risks:

a) Volatility in corn and soya prices.

b) Increase in competition may put pressure on prices and utilization levels.

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

7.7 % 1.3 15.5 % 6.0 % 31.7 %

- FY19E FY20E FY21E FY22-28E FY29-33E

Sales Growth 25 % 20 % 15 % 11 % 10 %

NOPAT Margin 6 % 6 % 6 % 6 % 6 %

IC Turnover 2.32 2.51 3.30 4.40 5.30

RoIC 13.5 % 14.6 % 17.1 % 24.8 % 30.8 %

Years of strong growth 1 2 3 10 15

Valuation as on date (Rs) 85 104 162 258 261

Valuation as of Dec'19 101 123 192 306 308

Based on DCF, we derive Dec’19 fair value of Rs 308.

Company Description:

Gujarat Ambuja Exports Limited (GAEX) is a leading manufacturer of starch derivatives,

soy derivatives and cotton yarn. It has the second highest crushing capacity in India with

six solvent extraction plants across India with a total capacity of 4,600 MTPD. Currently,

the company’s refining capacity stands at 1,200 MTPD. GAEX’s main focus area has been

wet-milling of corn and it has set up three operational processing plants. With

commencement of operations of its new Chalisgaon plant, the company has become the

largest maize processor in India in terms of installed capacity.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E

Gujarat Ambuja Exports

LONG 240 27,520 360 31st Dec'19 15.7 19.7 23.5 15.3 12.2 10.2 89.2 2.2 19 % 20 % 20 % 0.4 % 0.5 %

Sukhjit Starch NA 430 3,173 NA NA 30.7 - - 14.0 - - 364.1 - 9 % - - 1.2 % -

Gulshan Polyols NA 55 2,578 NA NA 3.9 - - 14.1 - - 58.2 - 7 % - - 18.2 % -



Consolidated Quarterly Earnings Forecast and Key Drivers

Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19A 2Q19A 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E

Revenue 6,913 7,751 10,173 8,808 8,042 7,763 12,754 13,538 9,196 9,521 15,349 16,378 33,644 42,097 50,445 55,621 Raw Materials Consumed 4,878 5,064 7,316 6,234 4,300 4,876 9,565 10,154 7,127 7,379 11,512 12,284 23,492 30,889 38,301 43,106

Increase/Decrease in Stock -6 176 -101 -141 1,038 -206 0 0 0 0 0 0 -72 0 0 0

Purchase of stock-in-trade 605 820 488 62 289 874 0 0 0 0 0 0 1,974 0 0 0

Employee benefits expense 193 218 288 285 269 255 266 273 284 284 284 284 984 1,062 1,137 1,216

Other expenses 899 972 1,078 1,199 1,170 1,222 1,697 1,758 1,506 1,506 1,506 1,506 4,093 5,846 6,024 5,544 EBITDA 344 501 1,105 1,169 977 743 1,225 1,354 279 352 2,047 2,304 3,173 4,299 4,983 5,755 Depreciation 183 188 194 199 235 247 247 248 259 259 259 259 763 977 1,036 1,139 EBIT 162 313 912 970 742 496 978 1,106 20 93 1,788 2,046 2,410 3,322 3,947 4,615 Interest 24 41 46 68 69 54 58 63 55 55 55 55 179 244 219 164 Other Income 64 16 40 24 51 18 17 17 18 18 18 18 91 102 72 89 PBT 202 288 906 926 724 459 937 1,059 -17 56 1,751 2,009 2,322 3,179 3,800 4,540 Tax 33 78 274 137 193 127 272 330 204 215 323 360 523 922 1,102 1,317 PAT bef. MI & Assoc. 168 209 632 789 531 331 666 729 -220 -159 1,429 1,649 1,799 2,257 2,698 3,224 Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Profit from Assoc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Recurring PAT 168 209 632 789 531 331 666 729 -220 -159 1,429 1,649 1,799 2,257 2,698 3,224 Extraordinaries 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Reported PAT 168 209 632 789 531 331 666 729 -220 -159 1,429 1,649 1,799 2,257 2,698 3,224

EPS (Rs) 1.47 1.83 5.51 6.88 4.63 2.89 5.80 6.36 4.35 4.60 6.89 7.69 15.69 19.68 23.53 28.11

Key Drivers

Agro processing revenue (Rs. mn) - - - - - - - - - - - - 17,597 20,519 26,876 30,459 Cotton revenue (Rs. mn) - - - - - - - - - - - - 2,585 2,722 2,776 2,832 Maize processing (Rs. mn) - - - - - - - - - - - - 13,496 17,575 20,837 23,379 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -35 % 12 % 31 % -13 % -9 % -3 % 64 % 6 % -32 % 4 % 61 % 7 % - - - - Raw Materials Consumed -32 % 4 % 44 % -15 % -31 % 13 % 96 % 6 % -30 % 4 % 56 % 7 % - - - - EBITDA -51 % 45 % 121 % 6 % -16 % -24 % 65 % 10 % -79 % 26 % 481 % 13 % - - - - EBIT -69 % 93 % 191 % 6 % -24 % -33 % 97 % 13 % -98 % 362 % 1,819 % 14 % - - - - Recurring PAT -50 % 24 % 202 % 25 % -33 % -38 % 101 % 10 % -130 % -28 % -999 % 15 % - - - -

EPS -50 % 24 % 202 % 25 % -33 % -38 % 101 % 10 % -32 % 6 % 50 % 12 % - - - -

Yearly Growth (%)

Revenue -10 % 23 % 17 % -17 % 16 % 0 % 25 % 54 % 14 % 23 % 20 % 21 % 1 % 25 % 20 % 10 % EBITDA -57 % 1 % 49 % 66 % 184 % 48 % 11 % 16 % -71 % -53 % 67 % 70 % 17 % 35 % 16 % 15 % EBIT -75 % -2 % 61 % 88 % 358 % 58 % 7 % 14 % -97 % -81 % 83 % 85 % 21 % 38 % 19 % 17 % Recurring PAT -66 % -30 % 39 % 134 % 215 % 58 % 5 % -8 % -142 % -148 % 115 % 126 % 13 % 25 % 20 % 19 %

EPS -66 % -30 % 39 % 134 % 215 % 58 % 5 % -8 % -6 % 59 % 19 % 21 % 13 % 25 % 20 % 19 %

Margin (%)

EBITDA 5 % 6 % 11 % 13 % 12 % 10 % 10 % 10 % 3 % 4 % 13 % 14 % 9 % 10 % 10 % 10 % EBIT 2 % 4 % 9 % 11 % 9 % 6 % 8 % 8 % 0 % 1 % 12 % 12 % 7 % 8 % 8 % 8 % PBT 3 % 4 % 9 % 11 % 9 % 6 % 7 % 8 % 0 % 1 % 11 % 12 % 7 % 8 % 8 % 8 %

PAT 2 % 3 % 6 % 9 % 7 % 4 % 5 % 5 % -2 % -2 % 9 % 10 % 5 % 5 % 5 % 6 %



Consolidated Financials P&L (Rs Mn) FY18A FY19E FY20E FY21E Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E

Revenue 33,644 42,097 50,445 55,621 Equity Capital 229 229 229 229 PBT 2,322 3,179 3,800 4,540

Op. Expenditure 30,472 37,798 45,462 49,866 Reserve 9,994 12,090 14,593 17,584 Depreciation 763 977 1,036 1,139

EBITDA 3,173 4,299 4,983 5,755 Networth 10,224 12,320 14,823 17,814 Others 81 143 147 75

Depreciation 763 977 1,036 1,139 Long Term Debt 6,469 5,750 5,200 3,000 Taxes Paid 464 922 1,102 1,317

EBIT 2,410 3,322 3,947 4,615 Def Tax Liability 517 517 517 517 Change in WC -1,317 -1,321 -2,056 -1,393

Interest Expense 179 244 219 164 Minority Interest 0 0 0 0 Operating C/F 1,385 2,056 1,825 3,046

Other Income 91 102 72 89 Account Payables 1,228 1,354 1,679 1,890 Capex -1,303 -930 -1,052 -312

PBT 2,322 3,179 3,800 4,540 Other Curr Liabi 510 510 510 510 Change in Invest 45 0 0 0

Tax 523 922 1,102 1,317 Total Liabilities & Equity 18,948 20,451 22,729 23,730 Others 5 104 72 89

PAT bef. MI & Assoc. 1,799 2,257 2,698 3,224 Net Fixed Assets 7,718 8,214 7,430 7,403 Investing C/F -1,254 -827 -980 -224

Minority Interest 0 0 0 0 Capital WIP 543 0 800 0 Change in Debt 113 -719 -550 -2,200

Profit from Assoc. 0 0 0 0 Others 573 573 573 573 Change in Equity 0 0 0 0

Recurring PAT 1,799 2,257 2,698 3,224 Inventory 7,237 8,209 10,179 11,456 Others -242 -407 -414 -397

Extraordinaires 0 0 0 0 Account Receivables 2,293 2,768 3,179 3,505 Financing C/F -129 -1,126 -964 -2,597

Reported PAT 1,799 2,257 2,698 3,224 Other Current Assets 515 515 515 515 Net change in cash 1 103 -119 225

FDEPS (Rs) 15.7 19.7 23.5 28.1 Cash 69 173 54 279 RoE (%) 19 % 20 % 20 % 20 %

DPS (Rs) 0.9 1.2 1.4 1.7 Total Assets 18,948 20,451 22,729 23,730 RoIC (%) 12 % 14 % 15 % 16 %

CEPS (Rs) 22.3 28.2 32.6 38.0 Non-cash Working Capital 8,307 9,627 11,683 13,075 Core RoIC (%) 12 % 13 % 15 % 17 %

FCFPS (Rs) 2.3 12.2 8.7 25.6 Cash Conv Cycle 90.1 83.5 84.5 85.8 Div Payout (%) 7 % 7 % 7 % 7 %

BVPS (Rs) 89.2 107.4 129.3 155.4 WC Turnover 4.1 4.4 4.3 4.3 P/E 15.3 12.2 10.2 8.5

EBITDAM (%) 9 % 10 % 10 % 10 % FA Turnover 4.1 5.1 6.1 7.5 P/B 2.7 2.2 1.9 1.5

PATM (%) 5 % 5 % 5 % 6 % Net D/E 0.6 0.5 0.3 0.2 P/FCFF 102.2 19.6 27.5 9.4

Tax Rate (%) 23 % 29 % 29 % 29 % Revenue/Capital Employed 2.1 2.4 2.6 2.7 EV/EBITDA 10.9 7.8 6.7 5.3

Sales Growth (%) 1 % 25 % 20 % 10 % Capital Employed/Equity 1.7 1.6 1.4 1.3 EV/Sales 1.0 0.8 0.7 0.6

FDEPS Growth (%) 13 % 25 % 20 % 19 % Dividend Yield (%) 0.4 % 0.5 % 0.6 % 0.7 %

TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE

25x

5x

10x

15x

20x

0%

20%

40%

60%

80%

100%

0

400

800

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c/19

EPS Growth

-20%

-10%

0%

10%

20%

30%

40%

50%

0

24000

48000

72000

96000

De

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/11

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/12

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/19

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c/19

5x

10x

12x

15x

18xEBITDA Growth

0%

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20%

30%

0

400

800

1200

De

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Jun

/12

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/13

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RoE

1x

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6x

8x



Historical Consolidated Financials P&L (Rs Mn) FY15A FY16A FY17A FY18A Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A

Revenue 25,313 27,365 33,336 33,644 Equity Capital 277 277 229 229 PBT 977 1,194 1,994 2,322

Op. Expenditure 23,668 25,512 30,628 30,472 Reserve 7,996 8,929 8,302 9,994 Depreciation 610 662 714 763

EBITDA 1,645 1,852 2,708 3,173 Networth 8,273 9,206 8,531 10,224 Others 93 -8 108 81

Depreciation 610 662 714 763 Long Term Debt 3,031 3,285 6,356 6,469 Taxes Paid 177 185 467 464

EBIT 1,035 1,191 1,994 2,410 Def Tax Liability 587 494 492 517 Change in WC 1,031 -290 -1,782 -1,317

Interest Expense 150 99 228 179 Minority Interest 0 0 0 0 Operating C/F 2,534 1,374 567 1,385

Other Income 91 103 228 91 Account Payables 629 834 1,015 1,228 Capex -1,234 -1,187 -1,706 -1,303

PBT 977 1,194 1,994 2,322 Other Curr Liabi 325 351 695 510 Change in Invest -84 -176 440 45

Tax 136 190 408 523 Total Liabilities & Equity 12,844 14,170 17,088 18,948 Others 23 39 92 5

PAT bef. MI & Assoc. 841 1,004 1,586 1,799 Net Fixed Assets 5,428 5,681 6,071 7,718 Investing C/F -1,295 -1,324 -1,173 -1,254

Minority Interest 0 0 0 0 Capital WIP 629 1,027 1,587 543 Change in Debt -984 183 3,071 113

Profit from Assoc. 0 0 0 0 Others 778 658 695 573 Change in Equity 0 0 -2,266 0

Recurring PAT 841 1,004 1,586 1,799 Inventory 4,437 4,308 6,244 7,237 Others -258 -210 -214 -242

Extraordinaires 0 0 0 0 Account Receivables 1,081 1,737 2,078 2,293 Financing C/F -1,242 -26 592 -129

Reported PAT 841 1,004 1,586 1,799 Other Current Assets 322 362 356 515 Net change in cash -3 23 -14 1

EPS (Rs) 7.3 8.8 13.8 15.7 Cash 170 397 58 69 RoE (%) 11 % 12 % 18 % 19 %

DPS (Rs) 0.8 0.8 0.8 0.9 Total Assets 12,844 14,170 17,088 18,948 RoIC (%) 8 % 9 % 12 % 12 %

CEPS (Rs) 10.5 12.0 20.1 22.3 Non-cash Working Capital 4,886 5,222 6,968 8,307 Core RoIC (%) 8 % 8 % 12 % 12 %

FCFPS (Rs) 9.9 1.0 -3.7 2.3 Cash Conv Cycle 70.5 69.7 76.3 90.1 Div Payout (%) 16 % 13 % 7 % 7 %

BVPS (Rs) 59.8 66.5 74.4 89.2 WC Turnover 5.2 5.2 4.8 4.1 P/E 32.7 27.4 17.4 15.3

EBITDAM (%) 6 % 7 % 8 % 9 % FA Turnover 4.2 4.1 4.4 4.1 P/B 4.0 3.6 3.2 2.7

PATM (%) 3 % 4 % 5 % 5 % Net D/E 0.3 0.3 0.7 0.6 P/FCFF 24.3 250.7 -64.8 102.2

Tax Rate (%) 14 % 16 % 20 % 23 % Revenue/Capital Employed 2.1 2.2 2.4 2.1 EV/EBITDA 19.2 16.9 12.9 10.9

Sales growth (%) -18 % 8 % 22 % 1 % Capital Employed/Equity 1.5 1.4 1.6 1.7 EV/Sales 1.2 1.1 1.0 1.0

FDEPS growth (%) -25 % 19 % 58 % 13 % Dividend Yield (%) 0.4 % 0.3 % 0.3 % 0.4 %



Equirus Securities

Research Analysts Sector/Industry Email Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Bharat Celly Healthcare [email protected] 91-79-61909524 Viral Desai [email protected] 91-22-43320635

Depesh Kashyap Mid-Caps [email protected] 91-22-43320671 Viraj Mehta [email protected] 91-22-43320634

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Ruchi Bhadra [email protected] 91-22-43320601

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Cash Dealing Room E-mail

Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ashish Shah [email protected] 91-22-43320662

Pranav Mehta Building Materials [email protected] 91-79-61909514 Ilesh Savla [email protected] 91-22-43320666

Praful Bohra Healthcare [email protected] 91-22-43320611 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

Associates E-mail Sarit Sanyal [email protected] 91-22-43320666

Ankit Choudhary [email protected] 91-79-61909533 Vikram Patil [email protected] 91-22-43320677

Dhairya Dhruv [email protected] 91-79-61909528 Gaurav Mehta [email protected] 91-22-43320680

Harshit Patel [email protected] 91-79-61909522 Compliance Officer E-mail

Meet Chande [email protected] 91-79-61909513 Jay Soni [email protected] 91-79-61909561

Nishant Bagrecha [email protected] 91-79-61909526 Corporate Communications E-mail

Prateeksha Malpani [email protected] 91-79-61909532 Mahdokht Bharda [email protected] 91-22-43320647

Ronak Soni [email protected] 91-79-61909525 Quant Analyst

Rushabh Shah [email protected] 91-79-61909520 Kruti Shah [email protected] 91-22-43320632

Shreepal Doshi [email protected] 91-79-61909541 F&O Dealing Room

Varun Baxi [email protected] 91-79-61909527 Kunal Dand [email protected] 91-22-43320678

Vikas Jain [email protected] 91-79-61909531 Dhananjay Tiwari [email protected] 91-22-43320668

Mukesh Jain [email protected] 91-22-43320667

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

Registered Office:

Equirus Securities Private Limited

Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,

N M Joshi Marg, Lower Parel,

Mumbai-400013.

Tel. No: +91 – (0)22 – 4332 0600

Fax No: +91- (0)22 – 4332 0601

Corporate Office:

3rd floor, House No. 9,

Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,

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Disclosures

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Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

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