maruti suzuki india limited absolute : long ),pt ( margins ... · sales promotion expenses were...

April 28, 2018 Analyst: AshutoshTiwari [email protected] (+91-8128694112 +91 79-40504017) of 12

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

Maruti Suzuki India Limited Absolute : LONG

Relative : Overweight

4QFY18 Result: Estimate (),PT (), Rating () Regular Coverage 13% ATR in 14 Months

Margins impacted by one-offs, to normalize from 1QFY19- upgrade to LONG Auto

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 8,783

Target Price (Rs) 9,980

Target Date 30th Jun'19

Target Set On 27th Apr'18

Implied yrs of growth (DCF) 20

Fair Value (DCF) 7,785

Fair Value (DDM) 2,281

Ind Benchmark BSEAUTO

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 2,653,275

Free Float (%) 43.79 %

52 Wk H/L (Rs) 10000/6320.35

Avg Daily Volume (1yr) 518,906

Avg Daily Value (Rs Mn) 4,250

Equity Cap (Rs Mn) 1,510

Face Value (Rs) 5

Bloomberg Code MSIL IN

Ownership Recent 3M 12M

Promoters 56.2 % 0.0 % 0.0 %

DII 11.5 % 0.5 % -0.8 %

FII 25.2 % -0.6 % 0.6 %

Public 7.2 % 0.2 % 0.2 %

Price % 1M 3M 12M

Absolute -0.8 % -5.3 % 37.8 %

Vs Industry -7.6 % -5.6 % 24.1 %

Bajaj Auto 1.7 % -15.8 % -26.0 %

TVS Motors 15.8 % 13.8 % 29.0 %

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (18A) 51.5 82.2 59.6 62.3

EPS (19E) 72.2 84.9 76.3 84.2

MSIL’s 4Q EBITDA (+18% yoy to ~Rs 30.2bn) fell short of estimates (EE: Rs 31.9bn) due

to one-offs related to higher gratuity provisioning, exchange rate variation in royalty,

and higher sales & promotion expenses. We expect margins to normalize from 1QFY19

and maintain our FY19/FY20E estimates. Demand for new models like Swift and Dzire

remains strong (as seen in waiting periods), and therefore outstanding bookings as of

Mar’18 stood at 110k. While commissioning of Gujarat plant’s second line will start

from Jan’19, MSIL is making efforts to increase production at Manesar and Gurgaon

plants; therefore, management is confident of achieving double-digit volume growth in

FY19. In view of the correction over last three months, we upgrade the stock to LONG

with a Jun’19 TP of Rs 9,980 (vs. a Mar’19 TP of Rs 9,772) set at 30x Jun’19 EPS.

High waiting periods to keep growth momentum strong in FY19; MSIL eyeing

double-digit growth: With waiting periods on Swift, Brezza, Baleno and S-Cross,

demand momentum for MSIL cars is expected to remain strong. During FY18, demand

from rural India also picked up with the company clocking 16% yoy rural growth. On

expectations of a good monsoon, demand is set to remain strong in FY19 as well. Apart

from the Gujarat plant ramp-up, management is working towards increasing Haryana

plant capacities through de-bottlenecking to achieve double-digit growth.

Cost control, favorable mix to help negate impact of RM price inflation: MSIL has

avoided taking meaningful price hikes to offset the impact of higher RM prices, and is

instead trying to weather the impact through cost control. From 4Q, the company has

shifted to royalty in INR terms on all new models lke Ignis, Swift and Dzire. A favorable

product mix also helped the company counter the impact of RM cost inflation in 4Q,

aiding a 122bps qoq expansion in gross margins.

4Q marred by one-offs; things to normalize from 1QFY19: Employee costs increased

34% yoy/21% qoq due to gratuity-related provisioning and some year-end provisioning.

Sales promotion expenses were also higher during the quarter owing to the Auto Expo

and Swift launch, and should normalize next year. Other expenses were impacted by

higher royalty of Rs 1bn due to exchange variation, half of which was related to 3Q.

Royalty rate for the quarter stood at 5.7% vs. 5.4% for the full year. Interest costs

included Rs 2.06bn of one-offs related to land compensation.

Estimate Revision:

Current

Change from previous

(%)

Rs Mn FY19E FY120E FY19E FY20E

Sales 9,13,161 10,67,953 0.0% 0.0%

EBITDA 1,39,938 1,63,071 0.0% 0.0%

PAT 95,920 1,13,935 -0.4% -0.6%

EPS 317.5 377.2 -0.4% -0.6%

Consolidated Financials

Rs. Mn YE Mar FY18A FY19E FY20E FY21E

Sales 797,627 913,161 1,067,953 1,238,506

EBITDA 120,616 139,938 163,071 189,112

Depreciation 27,579 29,358 31,695 34,775

Interest Expense 3,457 102 102 102

Other Income 20,455 23,677 28,075 33,604

Reported PAT 80,531 95,920 113,935 134,306

Recurring PAT 77,219 95,920 113,935 134,306

Total Equity 422,203 481,775 553,909 646,414

Gross Debt 0 0 0 0

Cash 341,574 405,774 485,765 585,289

Rs. Mn YE Mar FY18A FY19E FY20E FY21E

Earnings 255.6 317.5 377.2 444.6

Book Value 1,398 1,595 1,834 2,140

Dividends 80.0 100.0 115.0 115.0

FCFF 246.3 333.1 403.4 468.1

P/E (x) 34.4 27.7 23.3 19.8

P/B (x) 6.3 5.5 4.8 4.1

EV/EBITDA (x) 19.4 16.2 13.4 11.1

ROE (%) 19 % 21 % 22 % 22 %

Core ROIC (%) 64 % 75 % 91 % 111 %

EBITDA Margin (%) 15 % 15 % 15 % 15 %

Net Margin (%) 10 % 11 % 11 % 11 %

Maruti Suzuki India Ltd. Absolute – LONG Relative – Overweight 13% ATR in 14 Months

April 28, 2018 Analyst: Ashutosh Tiwari [email protected] (+91-8128694112, +91-79-40504017) of 11

Exhibit 1: Domestic and export sales segmentation (in ‘000 units)

Source: Company, Equirus Securities

Exhibit 2: Average selling price and EBITDA margin variation

Source: Company, Equirus Securities

Exhibit 3: Segmental split of sales volumes (in ‘000 units)

Source: Siam, Equirus Securities

333 322 383 357 383 368

457 401 427

27 26

35 31

32 26

35

31 35

360 348

418

387 414

395

492

431

462

0

50

100

150

200

250

300

350

400

450

500

4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 1Q FY18 2Q FY18 3Q FY18 4Q FY18

('000s)

Thousa

nds

Domestic Vehicle sales Export sales Total vehicle sold

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

400,000

410,000

420,000

430,000

440,000

450,000

460,000

470,000


(Rs/car) Blended ASP (Rs/car) Margins - RHS

0

50

100

150

200

250

300

350

400

450

500


Mini Cars Compact Cars Super Compact Mid Size Utility Vans Others



Earnings call takeaways

Industry & business update

The domestic PV industry grew at about 7.9% in FY18; UVs grew by 21%,

passenger cars by 3.3% and vans by 5.5%.

There is continued weakness in demand for diesel models.

Management expects double-digit growth for FY19.

MSIL outperformed the industry, posting 11.4% yoy volume growth at 461,773

vehicles and 14.4% sales growth at 205,943mn in 4Q. Growth was largely driven

by the compact and UV segments.

4QFY18 EBITDA grew ~18% yoy to Rs 30.2bn led by a better product mix and cost

reduction efforts despite higher other expenses and rising commodity prices.

The company expects RM prices to firm up further.

For FY18, volumes grew by 13.4% to 1,779,574 units and sales by 16.7% to

Rs 781,048mn.

For FY18, EBITDA grew 16.5% yoy to Rs 120.6bn.

In FY18, petrol vehicles outperformed industry growth, growing at 16.8% vs.

7.1% for the diesel segment.

The diesel: petrol vehicle mix stood at 29:71 for 4QFY18.

During FY18, the company sold 10,033 LCVs.

Cab aggregator contribution is ~5,000-6000 vehicles per month. A decline in the

segment stemmed from various problems in the cab aggregator business.

A shift towards non-hybrid vehicles was driven by the withdrawal of incentives

for hybrid vehicles under GST.

Rural markets saw a robust ~16% yoy growth in FY18, with the momentum likely

to continue ahead. The share of rural market in the sales mix is about 36%.

Staff costs increased in 4Q due to changes in provisions and in the Gratuity Act.

Export revenue for 4QFY18 stood at Rs 16.25bn as against Rs 14.30bn for

3QFY18.

Average discount per vehicle was at Rs 13,880 vs. Rs 17,900 last quarter.

Price increases in 4Q have not been significant and the commodity impact was of

~1%. Gross margins improved on a favorable product mix and cost reduction efforts.

Other expenses increased as (a) MSIL incurred freight expenditure of ~Rs 1.8bn, the

recovery against which is included in other operating income, (b) exchange variation

on royalty of ~1bn in 4QFY18, and (c) increasing power & fuel costs.

Royalty payment for FY18 was 5.4% of net sales as against 5.8% last year. For 4Q, it

was 5.7% owing to adverse exchange rates.

The new method of royalty calculation has been approved by Suzuki. Royalty will be

computed in INR instead of Yen for all models after Ignis, and the percentage of R&D

will be compensated.

The entire amount of ~Rs 2.5bn towards the Haryana government is accounted under

interest expenses, while the remaining has been capitalized under land.

Capacity and production

Gujarat plant is expected to deliver 250,000 units in FY19 as it will be the first full

year of double-shift operations. Second line at Gujarat will come on stream from

Jan’19.

New Swift and Baleno will be manufactured from the Gujarat plant.

The Gujarat plant contributed 58,000 units in 4Q and 157,000 units in FY18.

As a result of capacity expansion, MSIL’s pending bookings have declined to ~110,000

this year vs. ~120,000 last year.

Capex, dealership network and FY19 guidance

Capex guidance for FY19 is at Rs 50bn. Land acquisition costs for FY18 were at

Rs 7.9bn and would likely be at Rs 10bn for the next year.

MSIL expects significant impact of rising material costs going forward.

During the year, the company added 315 sales outlets, including 140 for commercial

channels.

Nexa contributed 20% of total domestic sales during the year.

Investment towards Arena is being done by dealers only.



Quarterly performance, standalone

Rs Mn 4QFY18 4QFY18E 3QFY18 4QFY17 % Change

Comments 4QFY18E 3QFY18 4QFY17

Net Sales 211,656 208,341 192,832 183,334 2% 10% 15%

Raw Material 143,763 145,005 133,323 127,669 -1% 8% 13%

Employee Cost 8,282 6,875 6,869 6,160 20% 21% 34%

Other Expenses 29,461 24,584 22,262 23,898 20% 32% 23%

Total Expenditures 181,506 176,465 162,454 157,727 3% 12% 15%

EBITDA 30,150 31,876 30,378 25,607 -5% -1% 18%

Depreciation 7,025 7,125 6,890 7,010 -1% 2% 0%

EBIT 23,125 24,751 23,488 18,597 -7% -2% 24%

Interest 2,731 48 263 226 NA 938% 1108%

Other Income 5,950 4,085 2,449 4,449 46% 143% 34%

PBT 26,344 28,788 25,674 22,820 -8% 3% 15%

Tax 7,523 8,349 7,684 5,730 -10% -2% 31%

Recurring PAT 18,821 20,440 17,990 17,090 -8% 5% 10%

Extraordinaries 1,111 0 139 -1,504 NA 699% -174%

Reported PAT 17,710 20,440 17,851 18,594 -13% -1% -5%

EPS (Rs) 62.3 67.7 59.6 56.6 -8% 5% 10%

EBITDA Margin 14.2% 15.3% 15.8% 14.0% -106 bps -151 bps 28 bps

EBIT Margin 10.9% 11.9% 12.2% 10.1% -95 bps -125 bps 78 bps

PBT Margin 12.4% 13.8% 13.3% 12.4% -137 bps -87 bps 0 bps

PAT Margin 8.4% 9.8% 9.3% 10.1% -144 bps -89 bps -177 bps

Tax Rate 28.6% 29.0% 29.9% 25.1% -44 bps -137 bps 345 bps

Raw Material 67.9% 69.6% 69.1% 69.6% -168 bps -122 bps -171 bps

Employee Cost 3.9% 3.3% 3.6% 3.4% 61 bps 35 bps 55 bps

Other Expenses 13.9% 11.8% 11.5% 13.0% 212 bps 237 bps 88 bps

Domestic Volumes 427,082 427,082 400,586 382,668 0% 7% 12%

Export Volumes 34,691 34,691 30,526 31,771 0% 14% 9%

Total Volume 461,773 461,773 431,112 414,439 0% 7% 11%

ASP (Rs/car) 458,355 451,175 447,290 442,367 2% 2% 4%

EBITDA/car (Rs) 65,292 69030 70,464 61,787 -5% -7% 6%



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY19E 317.5 338.0 -6 % Below consensus due to lower margin

assumptions FY20E 377.2 410.0 -8 %

Sales FY19E 913,161 915,516 0 %

FY20E 1,067,953 1,035,362 3 %

PAT FY19E 95,920 101,048 -5 %

FY20E 113,935 116,178 -2 %

Key Investment arguments:

Largest dealership network, high resale value and lower service cost are key

advantages.

Success of new launches has put MSIL in a strong position to deliver industry-leading

growth.

Volumes to grow at 11% CAGR over FY17-FY20E driven by mid-to-premium segment

cars, leading to better value growth.

Structural growth story; waiting period on key models to help stock trade at

valuation premiums.

Key Estimates:

FY17 FY18A FY19E FY20E FY21E

Volumes ('000) 1,569 1,780 1,960 2,188 2,425

yoy change 10% 13% 10% 12% 11%

ASP (Rs/car) 433,729 448,212 465,966 488,069 510,783

yoy change 8% 3% 4% 5% 5%

Sales (Rs mn) 680,348 797,627 913,161 1,067,953 1,238,506

yoy change 18% 17% 14% 17% 16%

EBITDA Margin 15.2% 15.1% 15.3% 15.3% 15.3%

EBITDA (Rs mn) 103,530 120,615 139,938 163,071 189,112

Key triggers

Margin decline & volume pressure

Sensitivity to Key Variables % Change % Impact on EPS

Revenue 5 % 4 %

EBITDAM 1 % 5 %

- - -

DCF Valuations & Assumptions

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

7.6 % 0.8 12.4 % 3.0 % 0.0 %

- FY19E FY20E FY21-23E FY24-28E FY29-33E

Sales Growth 14 % 17 % 9 % 10 % 8 %

NOPAT Margin 9 % 9 % 9 % 9 % 9 %

IC Turnover 8.68 10.55 12.58 12.58 12.58

RoIC 74.5 % 91.0 % 116.6 % 118.8 % 117.4 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 3,494 3,864 4,730 5,865 6,642

Valuation as of 30thSep'18 4,007 4,432 5,424 6,726 7,618

Based on DCF, assuming 20 years of 13% CAGR growth and 87% average ROIC, we derive

our 30th Jun’19 fair value of Rs 7,785.

Company Description:

MSIL is the leading passenger vehicle manufacturer in India with 47.4% of domestic

market share. The company was established in 1981 as a JV between the Government of

India and Suzuki Motor Corporation (SMC), Japan. Today, it is SMC’s largest subsidiary in

terms of volume of production and sales. SMC owns 56.21% equity stake in the company.

MSIL’s operational structure consists of manufacturing sites at Gurugram and Manesar

with an installed capacity of 1.55mn vehicles per year. It also sources vehicles from

SMC’s new plant in Gujarat, India.

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

Maruti Suzuki LONG 8,783 2,653,275 9,980 Jun’19 255.6 317.5 377.2 34.4 27.7 23.3 1,397.7 5.5 19 % 21 % 22 % 0.9 % 1.1 %

TATAMOTORS NA 337 1,068,728 NA NA 22.0 25.2 39.4 15.3 13.3 8.6 30.6 5.4 10 % 56 % 45 % - 1.0 %

M&M NA 863 1,072,502 NA NA 33.7 36.8 43.0 25.6 23.5 20.1 71.8 7.5 27 % 26 % 21 % 0.8 % 0.6 %



Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E

Revenue 175,457 217,682 192,832 211,656 205,523 242,620 224,120 240,898 240,722 284,304 262,880 280,047 797,627 913,161 1,067,953 1,238,506

EBITDA 23,312 36,776 30,378 30,150 31,856 37,606 33,618 36,857 37,793 44,067 38,643 42,567 120,616 139,938 163,071 189,112

Depreciation 6,839 6,825 6,890 7,025 7,043 7,241 7,438 7,636 7,635 7,827 8,020 8,212 27,579 29,358 31,695 34,775

EBIT 16,473 29,951 23,488 23,125 24,813 30,365 26,180 29,222 30,158 36,240 30,623 34,355 93,037 110,580 131,376 154,338

Interest 313 150 263 2,731 25 25 25 25 25 25 25 25 3,457 102 102 102

Other Income 6,827 5,229 2,449 5,950 5,721 5,527 6,064 6,365 6,764 6,563 7,218 7,530 20,455 23,677 28,075 33,604

PBT 22,987 35,030 25,674 26,344 30,508 35,867 32,218 35,561 36,897 42,777 37,816 41,859 110,035 134,155 159,349 187,840

Tax 7,423 10,186 7,684 7,523 8,695 10,222 9,182 10,135 10,516 12,191 10,778 11,930 32,816 38,234 45,415 53,534

Recurring PAT 15,564 24,844 17,990 18,821 21,813 25,645 23,036 25,426 26,381 30,586 27,039 29,930 77,219 95,920 113,935 134,306

Extraordinary -717 -3,845 139 1,111 0 0 0 0 0 0 0 0 -3,312 0 0 0

Reported PAT 16,281 28,689 17,851 17,710 21,813 25,645 23,036 25,426 26,381 30,586 27,039 29,930 80,531 95,920 113,935 134,306

EPS (Rs) 51.52 82.24 59.55 62.30 72.21 84.89 76.26 84.17 87.33 101.25 89.51 99.08 255.62 317.53 377.17 444.60

Key Drivers

Volumes 394,571 492,118 431,112 461,773 449,171 526,172 476,806 507,569 500,946 587,566 532,625 566,981 1,779,574 1,959,718 2,188,117 2,424,719

ASP 444,678 442,337 447,290 458,355 457,561 461,104 470,044 474,611 480,534 483,867 493,555 493,928 448,212 465,966 488,069 510,783

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

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

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

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

Sequential Growth (%)

Revenue -4 % 24 % -11 % 10 % -3 % 18 % -8 % 7 % 0 % 18 % -8 % 7 % - - - -

EBITDA -9 % 58 % -17 % -1 % 6 % 18 % -11 % 10 % 3 % 17 % -12 % 10 % - - - -

EBIT -11 % 82 % -22 % -2 % 7 % 22 % -14 % 12 % 3 % 20 % -15 % 12 % - - - -

Recurring PAT -9 % 60 % -28 % 5 % 16 % 18 % -10 % 10 % 4 % 16 % -12 % 11 % - - - -

EPS -9 % 60 % -28 % 5 % 16 % 18 % -10 % 10 % 4 % 16 % -12 % 11 % - - - -

Yearly Growth (%)

Revenue 18 % 22 % 14 % 15 % 17 % 11 % 16 % 14 % 17 % 17 % 17 % 16 % 39 % 14 % 17 % 16 %

EBITDA 5 % 21 % 22 % 18 % 37 % 2 % 11 % 22 % 19 % 17 % 15 % 15 % 36 % 16 % 17 % 16 %

EBIT 4 % 24 % 27 % 24 % 51 % 1 % 11 % 26 % 22 % 19 % 17 % 18 % 53 % 19 % 19 % 17 %

Recurring PAT 5 % 3 % 3 % 10 % 40 % 3 % 28 % 35 % 21 % 19 % 17 % 18 % 44 % 24 % 19 % 18 %

EPS 5 % 3 % 3 % 10 % 40 % 3 % 28 % 35 % 21 % 19 % 17 % 18 % 44 % 24 % 19 % 18 %

Margin (%)

EBITDA 13 % 17 % 16 % 14 % 16 % 16 % 15 % 15 % 16 % 16 % 15 % 15 % 15 % 15 % 15 % 15 %

EBIT 9 % 14 % 12 % 11 % 12 % 13 % 12 % 12 % 13 % 13 % 12 % 12 % 12 % 12 % 12 % 12 %

PBT 13 % 16 % 13 % 12 % 15 % 15 % 14 % 15 % 15 % 15 % 14 % 15 % 14 % 15 % 15 % 15 %

PAT 9 % 11 % 9 % 9 % 11 % 11 % 10 % 11 % 11 % 11 % 10 % 11 % 10 % 11 % 11 % 11 %



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 797,627 913,161 1,067,9

53 1,238,506 Equity Capital 1,510 1,510 1,510 1,510 PBT 110,035 134,155 159,349 187,840

Op. Expenditure 677,011 773,223 904,882 1,049,394 Reserve 420,693 480,265 552,399 644,903 Depreciation 27,579 29,358 31,695 34,775

EBITDA 120,616 139,938 163,071 189,112 Networth 422,203 481,775 553,909 646,414 Others 3,312 0 0 0

Depreciation 27,579 29,358 31,695 34,775 Long Term Debt 0 0 0 0 Taxes Paid 32,816 38,234 45,415 53,534

EBIT 93,037 110,580 131,376 154,338 Def Tax Liability 23,182 23,182 23,182 23,182 Change in WC 20,483 15,270 16,163 12,245

Interest Expense 3,457 102 102 102 Minority Interest 154 154 154 154 Operating C/F 128,593 140,548 161,792 181,325

Other Income 20,455 23,677 28,075 33,604 Account Payables 104,970 119,472 138,888 161,087 Capex -55,927 -40,000 -40,000 -40,000

PBT 110,035 134,155 159,349 187,840 Other Curr Liabi 48,343 58,274 67,290 71,364 Change in Invest -678 0 0 0

Tax 32,816 38,234 45,415 53,534 Total Liabilities & Equity 598,852 682,858 783,423 902,200 Others 0 0 0 0

PAT bef. MI & Assoc. 77,219 95,920 113,935 134,306 Net Fixed Assets 133,561 144,203 152,509 157,734 Investing C/F -56,605 -40,000 -40,000 -40,000

Minority Interest 0 0 0 0 Capital WIP 21,259 21,259 21,259 21,259 Change in Debt -4,836 0 0 0

Profit from Assoc. 0 0 0 0 Others 36,113 36,113 36,113 36,113 Change in Equity 0 0 0 0

Recurring PAT 77,219 95,920 113,935 134,306

Inventory 31,608 35,975 41,821 48,506 Others -17,319 -36,349 -41,801 -41,801

Extraordinaires -3,312 0 0 0 Account Receivables 14,618 16,638 19,341 22,433 Financing C/F -22,155 -36,349 -41,801 -41,801

Reported PAT 80,531 95,920 113,935 134,306 Other Current Assets 20,119 22,897 26,615 30,867 Net change in cash 49,833 64,199 79,991 99,524

FDEPS (Rs) 255.6 317.5 377.2 444.6 Cash 341,574 405,774 485,765 585,289 RoE (%) 19 % 21 % 22 % 22 %

DPS (Rs) 80.0 100.0 115.0 115.0 Total Assets 598,852 682,858 783,423 902,200

RoIC (%) 19 % 20 % 21 % 22 %

CEPS (Rs) 346.9 414.7 482.1 559.7 Non-cash Working Capital -86,968 -102,238 -118,400 -130,645

Core RoIC (%) 64 % 75 % 91 % 111 %

FCFPS (Rs) 246.3 333.1 403.4 468.1 Cash Conv Cycle -39.8 -40.9 -40.5 -38.5 Div Payout (%) 36 % 38 % 37 % 31 %

BVPS (Rs) 1,397.7 1,594.9 1,833.6 2,139.9 WC Turnover -9.2 -8.9 -9.0 -9.5 P/E 34.4 27.7 23.3 19.8

EBITDAM (%) 15 % 15 % 15 % 15 % FA Turnover 5.2 5.5 6.1 6.9 P/B 6.3 5.5 4.8 4.1

PATM (%) 10 % 11 % 11 % 11 % Net D/E -0.8 -0.8 -0.9 -0.9 P/FCFF 35.7 26.4 21.8 18.8

Tax Rate (%) 30 % 29 % 29 % 29 % Revenue/Capital Employed 2.3 2.2 2.2 2.3 EV/EBITDA 19.4 16.2 13.4 11.1

Sales Growth (%) 17 % 14 % 17 % 16 %

Capital Employed/Equity 1.0 1.1 1.1 1.0

EV/Sales 2.9 2.5 2.1 1.7

FDEPS Growth (%) 3 % 24 % 19 % 18 %

Dividend Yield (%) 0.9 % 1.1 % 1.3 % 0.0 %

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



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 508,014 575,890 680,850 797,627 Equity Capital 1,510 1,510 1,510 1,510 PBT 49,760 74,658 99,544 110,035

Op. Expenditure 439,573 487,003 577,269 677,011 Reserve 258,710 304,650 369,241 420,693 Depreciation 25,153 28,218 26,039 27,579

EBITDA 68,441 88,887 103,581 120,616 Networth 260,220 306,160 370,751 422,203 Others -7,123 -11,978 -21,452 3,312

Depreciation 25,153 28,218 26,039 27,579 Long Term Debt 1,802 774 4,836 0 Taxes Paid 10,751 19,475 23,229 32,816

EBIT 43,288 60,669 77,542 93,037 Def Tax Liability 2,650 5,604 11,422 23,182 Change in WC 8,352 14,421 21,918 20,483

Interest Expense 2,178 817 894 3,457 Minority Interest 134 144 154 154 Operating C/F 65,391 85,844 102,820 128,593

Other Income 8,650 14,806 22,896 20,455 Account Payables 56,860 74,089 83,692 104,970 Capex -32,631 -26,047 -33,748 -55,927

PBT 49,760 74,658 99,544 110,035 Other Curr Liabi 32,494 35,578 43,840 48,343 Change in Invest -15,239 -47,917 -58,475 -678

Tax 11,854 20,875 26,162 32,816 Total Liabilities & Equity 354,160 422,349 514,695 598,852 Others 2,060 776 491 0

PAT bef. MI & Assoc. 37,906 53,783 73,382 77,219 Net Fixed Assets 120,323 125,296 133,107 133,561 Investing C/F -45,810 -73,188 -91,732 -56,605

Minority Interest 12 10 10 0 Capital WIP 18,169 10,069 12,523 21,259 Change in Debt -13,578 -2,255 2,527 -4,836

Profit from Assoc. 180 998 1,493 0 Others 17,078 17,034 16,277 36,113 Change in Equity 0 0 0 0

Recurring PAT 38,074 54,771 74,865 77,219 Inventory 26,831 31,326 32,637 31,608 Others -6,457 -10,133 -13,820 -17,319

Extraordinaires 0 -191 -235 -3,312 Account Receivables 11,181 13,234 12,026 14,618 Financing C/F -20,035 -12,388 -11,293 -22,155

Reported PAT 38,074 54,962 75,100 80,531 Other Current Assets 14,671 18,125 16,384 20,119 Net change in cash -454 268 -205 49,833

EPS (Rs) 126.0 181.3 247.8 255.6 Cash 145,907 207,265 291,741 341,574

RoE (%) 16 % 19 % 22 % 19 %

DPS (Rs) 25.0 30.0 75.0 80.0

Total Assets 354,160 422,349 514,695 598,852

RoIC (%) 16 % 19 % 22 % 19 %

CEPS (Rs) 209.3 274.7 334.0 346.9 Non-cash Working Capital -36,671 -46,982 -66,485 -86,968 Core RoIC (%) 27 % 40 % 57 % 64 %

FCFPS (Rs) 70.3 43.8 38.9 246.3 Cash Conv Cycle -26.3 -29.8 -35.6 -39.8 Div Payout (%) 24 % 20 % 36 % 36 %

BVPS (Rs) 861.4 1,013.5 1,227.3 1,397.7 WC Turnover -13.9 -12.3 -10.2 -9.2

P/E 69.7 48.4 35.4 0.0

EBITDAM (%) 13 % 15 % 15 % 15 % FA Turnover 3.7 4.3 4.7 5.2 P/B 10.2 8.7 7.2 0.0

PATM (%) 7 % 10 % 11 % 10 % Net D/E -0.6 -0.7 -0.8 -0.8 P/FCFF 124.9 200.3 225.9 35.7

Tax Rate (%) 24 % 28 % 26 % 30 % Revenue/Capital Employed 2.2 2.3 2.4 2.3 EV/EBITDA 36.7 27.7 23.1 0.0

Sales growth (%) 14 % 13 % 18 % 17 %

Capital Employed/Equity 1.1 1.1 1.0 1.0

EV/Sales 4.9 4.3 3.5 0.0

FDEPS growth (%) 33 % 44 % 37 % 3 %

Dividend Yield (%) 0.3 % 0.3 % 0.9 % 0.9 %



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

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 Viral Desai [email protected] 91-22-43320635

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Viraj Mehta [email protected] 91-22-43320634

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Rushabh Shah [email protected] 91-22-43320632

Maulik Patel Oil and Gas [email protected] 91-79-61909519 Dealing Room E-mail

Pranav Mehta Building Materials [email protected] 91-79-61909514 Ashish Shah [email protected] 91-22-43320662

Praful Bohra Pharmaceuticals [email protected] 91-22-43320611 IleshSavla [email protected] 91-22-43320666

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Manoj Kejriwal [email protected] 91-22-43320663

Associates E-mail Dharmesh Mehta [email protected] 91-22-43320661

Ankit Choudhary [email protected] 91-79-61909533 Sandip Amrutiya [email protected] 91-22-43320660

Bharat Celly [email protected] 91-79-61909524 Compliance Officer E-mail

Harshit Patel [email protected] 91-79-61909522 Jay Soni [email protected] 91-79-61909561

Hetal Bhatia [email protected] 91-79-61909532 Corporate Communications E-mail

Meet Chande [email protected] 91-79-61909513 Mahdokht Bharda [email protected] 91-22-43320647 Nishant Bagrecha [email protected] 91-79-61909526

Parva Soni [email protected] 91-79-61909521

Ronak Soni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

Shreepal Doshi [email protected] 91-79-61909541

Varun Baxi [email protected] 91-79-61909527

Vikas Jain [email protected] 91-79-61909531

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.

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Analyst Certification

I, Ashutosh Tiwari, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also

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Disclosures

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The Research Analyst engaged in preparation of this Report:-

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“three years” period in the price chart).

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

Research Analyst’ or Relatives’ financial interest No

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Research Analyst’ or Relatives’ material conflict of interest No

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