November 17, 2014 Result Update CMP : INR 461 Rating : Buy Target : INR 784 Raymond Ltd. KEY DATA Market Cap (INR bn) 28.3 Market Cap (USD mn) 463.9 52 WK High / Low 518 / 255 Avg Daily Volume (NSE) 44877 Face Value (INR) 10 BSE Sensex 27940 Nifty 8357 BSE Code 500330 NSE Code RAYMOND Reuters Code RYMD.BO Bloomberg Code Shareholding % RW IN 2Q 1Q 4Q Promoter 40.20 40.20 39.89 Indian 40.20 40.20 39.89 Public 58.48 58.46 58.77 Institutions 22.22 24.69 24.61 FII 8.91 9.98 9.15 DII 13.31 14.71 15.46 Non Institutions 36.26 33.77 34.16 Bodies Corporate 8.40 8.10 7.58 Custodians 1.32 1.34 1.34 Performance Chart Is the tide turning around for Raymond limited (RYMD)? We believe it is! After a patchy performance off late RYMD has come up with a decent set of numbers in Q2FY15. This alone doesn't make us bullish, but it stems from the fact that the bookings this season are up 18-20% Y-o-Y while the management has given a more optimistic outlook this time than a more cautious one in the previous quarter and not to forget the price of key raw materials for RYMD, Cotton, Wool and Poly Viscose have declined significantly in Q3FY15 (till date) and trend is expected to continue. The company's continued push for top line growth led RYMD to post sales of Rs 14.61bn in Q2FY15, up 19% Y-o-Y but PAT declined 27% Y-o-Y to Rs 681mn. EBITDA margin contracted 370 bps Y-o-Y to 11.8% due to growth related investment coupled with products mix issues and some down trading but it expanded sharply by 823 bps. On the bottom-line front, the company came back to green in Q2FY15 after reporting a loss in Q1FY15. Coming to the business highlights, the Textile segment which has been the cash cow for the company performed better on the top line posting a growth of 24% Y-o-Y to Rs6.94bn driven by volume growth in exports, combo packs and penetration of shirting fabric across the B2C channel, while EBITDA margins which had suffered in Q1 recovered by a good 924bps sequentially even though it contracted by 793 bps Y-o-Y owing to the high mix of shirting business. Excluding B2C shirting the textile segment grew by 6% Y-o-Y. Exports continued to do well as they grew by 32% Y-o-Y during the quarter and contributed to 16% of the sales compared to 12% in the last year. Apparel segment's topline which continued to grow in double digits over the past four quarters delivered this time as well posting sales of sales of Rs 2.9bn, up 15% Y-o-Y in Q2FY15 while EBITDA margin was back to profitability after posting a dismal loss in Q1FY15, however the margins were lower Y-o-Y due to higher brand building cost & store rollouts. The company mentioned that they had been able to reduce discount sales and average discount percentage as well. The company stepped up advertising cost considerably which grew by 72% and impacting its margins; had the advertisement cost been maintained at the same level as Q2FY14, EBIDTA margin would have increased to 8.6% during the quarter compared to 7.9% in the last year. Garmenting segment continued its stellar run as it reported a top-line growth of 28% Y-o-Y, driven by increase in volumes while EBITDA margin at 10% was impacted by ~290 bps sequentially and Y-o-Y to due to rupee appreciation against dollar and higher employment cost. Management Outlook In the recent Q2FY15's results concall the company was fairly optimistic about its businesses in Q3 and remained confident about the strategic directions for the business. It plans to invest in brand building, modernization and expansion of retail network and also capacity expansion in the export driven businesses. The company mentioned that with respect to monetization of non-core assets, the progress was slow compared to its expectation. Our take Mahantesh Marilinga Senior Research Analyst Tel. : 4000 2666 [email protected] The company's aggressive investments (advertising and renovation of stores) and the market sluggishness had taken a toll on the apparel business offlate but times are changing and we could expect the bottom-line recovery to continue. The core textile business has continued to do well while recovering from the sub-par margin performance in Q1FY15. Garmenting again has benefitted from the increased competitiveness of the Indian garmenting sector globally. The decline in cotton and wool prices should benefit the textile, apparel and denim businesses of RYMD in Q3FY15 in a big way. We believe the continued traction in most of RYMD's businesses on the back of domestic economic recovery and an expected sharp fall in raw material costs Y-o-Y could spring a positive surprise in Q3FY15 numbers. FINQUEST research also available on BLOOMBERG FSPL <GO> and REUTERS. For Private Circulation Only Valuations On the back of good set of numbers in Q2FY15 and a visibility of better performance going ahead we value the core equity of RYMD at a P/E of 15x FY15E earnings, which gives us a value of Rs 440/share while we value the land bank at Thane at 25% discount to the expected market value which comes to Rs 344/share giving a combined price target of Rs 784 for FY15E. We expect a good set of results from RYMD in the current quarter i.e Q3FY15 which could lead to a re-rating of the stock and take it new levels. Any stake sale of its non-core businesses like the Tools and hardware business or the auto components or any new development on the land parcel development/sale could be a major positive for the stock price. SOTP Valuation of Raymond (RYMD) Company Basis of Valuation Raymond's core equity value No. of acres Valn. Parameter (CMP/EPS) 100 Rs 280 P/E Land Value / Share Total Value / Share Value/Mcap (Rs.mn) RYMD's Shares (in mn) Value/ RYMD's Share (Rs.) 25% Discount on Land bank 61 440 440 61 459 344 784 16.0x Rsmn/Acre 18,000 CMP Upside 461 70% Comparative Valuation Company PAGE Industries Arvind Ltd Trent Ltd Shoppers Stop Bom Fash Ray Raymond Kewal Kiran Bombay Dyeing Alok Industries Pantaloons Fashns. & Retls. Zodiac clothing Siyaram silk mills Mafatlal industries Maxwell Industries Skumars Nationwide Rs Rs bn Rs bn Sales Rs Bn (x) Price Mcap Cash Net D/E FY15E 9,580 281 1,436 487 140 459 1,695 69 12 121 361 860 162 38 5 107 72 48 40 19 28 21 14 16 11 7 8 2 2 1 0.0 1.4 1.5 0.2 1.0 4.7 4.8 0.3 6.8 0.2 0.3 0.1 0.2 0.0 0.2 0.6 1.1 0.2 1.3 1.9 0.9 -4.0 1.0 5.4 1.8 0.1 0.8 0.3 0.8 0.9 15 80 24 45 30 54 4 28 98 17 4 13 9 3 50 EPS Rs FY16E FY15E P/E (x) P/S (x) EV/EBITDA (x) FY16E FY15E FY16E FY15E FY16E FY15E FY16E 19 179.2 230.5 94 16.1 19.8 28 20.3 45.8 53 2.8 8.2 NA -10.0 NA 61 27.6 48.3 5 60.4 74.5 30 2.0 1.9 202 1.1 4.4 NA -20.2 NA NA 11.4 NA NA 67.8 NA NA 16.2 NA NA 0.8 NA NA -12.4 NA 53.5 17.5 70.7 172.0 -14.1 16.6 28.1 34.5 10.1 -6.0 31.8 12.7 10.0 45.2 -0.4 41.6 14.2 31.4 59.7 NA 9.5 22.8 36.3 2.6 NA NA NA NA NA NA 7.0 0.9 2.0 0.9 0.6 0.5 4.8 0.5 0.2 0.7 1.8 0.6 0.2 0.9 0.0 5.6 0.8 1.7 0.8 NA 0.5 4.1 0.5 0.1 NA NA NA NA NA NA 33.9 9.7 1.0 24.1 16.6 8.6 15.3 10.0 7.1 63.3 16.7 7.6 11.6 13.9 3.7 26.5 8.0 0.9 16.8 NA 7.7 12.6 10.4 2.5 NA NA NA NA NA NA EBIDTA (%) FY15E 20.9 13.2 1.5 4.3 13.1 10.2 24.6 10.1 24.4 2.1 10.8 11.3 3.1 9.0 18.0 Annual Annual RoE EPS Sales (%) Growth Growth FY15E (%) (%) (16E/15E) (16E/15E) Div. Yield (%) 58.3 15.2 5.6 3.9 -18.1 10.3 24.0 8.4 3.3 -27.8 8.8 18.6 6.4 5.3 -13.4 0.8 1.0 NA 0.2 NA 0.3 1.4 1.2 2.6 0.0 1.2 1.2 1.8 0.7 22.0 28.7 23.0 126 188 NA 74.6 23.4 -5.0 281.6 NA 56.3 15.5 -39.4 135.2 17.8 26.7 17.4 17.9 17.1 -9.3 13.9 19.3 6.7 107.1 29.3 14.1 25.2 15.3 2.7 -21.1 NA - Not Available November 17, 2014 For Private Circulation Only 2 Q2FY15 Highlights Particulars (Mn. Rs) Q2 FY15 Total Income 14,607 Q2 Y-o-Y Q4 FY14 change FY14 % 12,267 19.1% 10,968 Q-o-Q change % 33.2% 6M FY15 25,575 6M FY14 Y-o-Y change % 21,006 21.8% Less: COGS 6,451 4,744 36.0% 4,716 36.8% 11,167 8,002 39.5% Manufacturing & operating costs 2,328 2,118 9.9% 2,064 12.8% 4,392 3,953 11.1% Employee benefit expenses 1,630 1474.9 10.5% 1568.1 4.0% 3,198 2913.2 9.8% Other Expenses Total Expenditure EBIDTA Less: Depreciation & Amortization EBIT 2,479 2032.3 22.0% 2230.7 11.1% 4,709 3935.3 19.7% 12,888 10,369 24.3% 10,579 21.8% 23,467 18,804 24.8% 1,720 1,898 (9.4%) 389 342.7% 2,108 2,203 (4.3%) 396 486 (18.7%) 390 1.5% 785 961 (18.3%) 1,324 1,411 (6.2%) 1,323 1,242 6.5% Less: Interest 521 483 7.8% 483 7.8% 1,004 939 7.0% Add: Other income 108 150 (28.1%) 237 (54.5%) 344 267 28.9% (1) (11) (95.2%) (35) (98.6%) (36) (111) (68.1%) Extraordinary Expense (Net) Forex loss & Other one offs (1) (120472.7%) 52 (54) 131 (152) Profit Before Tax 910 1,068 (14.7%) (283) (422.3%) 628 459 36.8% Profit Before Extraordinary items and Tax 859 1,132 (24.1%) (327) (363.2%) 533 722 (26.2%) 158 179 (11.9%) 32 391.3% 190 101 87.4% 753 889 358 22.5% Less: Total Tax Profit After Tax before Minority Interest 79 (15.3%) (315) (339.3%) 438 Minority Interest (41) (2) 2431.3% (17) 144.0% (57) (5) 1042.0% Profit share of associates (31) 39 (180.7%) 3 (1259.3%) (29) 76 (137.5%) Profit After Tax 681 926 (26.5%) (329) (307.3%) 352 429 (17.9%) Profit After Tax Excl. extra-ordinaries 639 980 (34.8%) (377) (269.2%) 261 656 (60.2%) 61 61 61 61 Reported EPS (Rs.) 11.09 15.08 (26.5%) (5.35) (307.3%) 5.76 6.99 (17.6%) Proforma EPS (Rs.) 10.41 15.96 (34.8%) (6.15) (269.2%) 4.27 10.68 (60.0%) Shares Outstanding (Diluted) (mn) Margin Analysis 61 Change in bps EBIDTA Margin Change in bps Change in bps 11.8% 15.5% -370 3.5% 823 8.2% 10.5% -224 EBIT margin 9.1% 11.5% -244 0.0% 907 5.2% 5.9% -74 Proforma NPM 4.4% 8.0% -361 -3.4% 781 1.0% 3.1% -210 17.3% 16.8% 56 -11.4% 2,868 30.2% 22.1% 816 Effective Tax Rate Margin Analysis Change in bps Change in bps Cost of Material consumed/Net Sales 44.2% 38.7% 549 43.0% 116 43.7% 38.1% 557 Manufacturing & operating costs/Net Sales 15.9% 17.3% -133 18.8% -288 17.2% 18.8% -164 Employee benefit expenses/Net Sales 11.2% 12.0% -86 14.3% -314 12.5% 13.9% -136 Other Expenses/Net Sales 17.0% 16.6% 40 20.3% -337 18.4% 18.7% -32 Raymond Ltd. (RYMD) reported a decent set of numbers for Q2FY15. Sales grew by a good 19% Y-oY to Rs 14.61bn while the proforma PAT declined 35% Y-o-Y to Rs 639mn. However, there was a very good recovery in terms of profitability sequentially. The company benefitted from the robust performance of its textile and apparel business, both of which beat our expectations for the quarter. The textile business's top line grew 24% Y-o-Y and 43% sequentially while the EBIDTA margins even though contracted 793 bps Y-o-Y expanded by a massive 924 bps sequentially to 18.7%. On the other hand Apparel business's topline grew by 15% Y-o-Y and a massive 63% sequentially while EBITDA margins at 6.5% even though contracted 793 bps Y-o-Y and came back to profitability compared to a loss the previous quarter. November 17, 2014 For Private Circulation Only 3 Business wise Analysis 1 ] Textile Division (Fabric) Particulars (In Rs. mn) Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Net Sales Y-o-Y growth (%) % of total sales EBIDTA EBIDTA margin (%) % of total EBITDA 5,587 7.4% 44.4% 1,490 26.7% 67.0% 5,433 7.9% 44.2% 1,160 21.4% 62.3% 5,342 3.9% 43.1% 1,040 19.5% 67.3% 4,842 26.6% 43.1% 460 9.5% 54.1% 6,936 24.1% 46.7% 1,300 18.7% 65.3% Revenue from the Textile division grew by a massive 24% Y-o-Y to Rs 6.94bn. The rise in sales was led by the growth in export markets and penetration of shirting fabric across B2C channels while the margins were impacted due to adverse product mix, higher input cost and stores renovation. Excluding B2C shirting the textile segment grew by 6% Y-o-Y. Exports continued to do well as they grew by 32% Y-o-Y during the quarter and contributed to 16% of the sales compared to 12% in the last year. Combo packs continued to witness good traction and grew by 15% Y-o-Y in Q2FY15. The company also mentioned that there were few concerns in the domestic fabric business in Q2FY15 which it expects to ease in the next quarter. Increased B2C shirting and exports having lower margin impacted RYMD's textile segment margin by around 2% Y-o-Y. 2 ] Branded Apparel Particulars (In Rs. mn) Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Net Sales Y-o-Y growth (%) % of total sales EBIDTA EBIDTA margin (%) % of total EBITDA 2,544 8.6% 20.2% 200 7.9% 9.0% 2,503 14.6% 20.4% 210 8.4% 11.3% 2,344 21.4% 18.9% 0 0.0% 0.0% 1,793 13.5% 16.0% -60 -3.3% -7.1% 2,925 15.0% 19.7% 190 6.5% 9.5% The increase in sales led by double digit growth across all brands. Blended sales across secondary channels i.e Exclusive Brand Outlets (EBOs) and Large Format Stores (LFS) during the quarter grew by 15% Y-o-Y on blended basis. EBITDA margin came in lower Y-o-Y due to higher brand building cost & store rollouts. The company also launched the e-commerce portal RaymondNext.com during the quarter. RYMD's e-commerce sales through the online channel partners clocked in excess of 1.5 Crores per month during the quarter. The company added 16 new stores and closed 6 stores in Q2FY15. It also completed the renovation of 18 stores and 12 were undergoing renovation which impacted EBITDA margins by about 1% Y-o-Y. Blended same store sales growth across formats grew by 6% Y-o-Y while total sales growth across the exclusive network grew by 7% Y-o-Y. In addition to these there had been increase in input cost besides higher power rates per unit which also collectively impacted EBITDA margins by 3.5%. The company mentioned that they had been able to reduce discount sales and average discount percentage as well. The company stepped up advertising cost considerably which grew 72% y-o-yand impacting its margins; had the advertisement cost been maintained at the same level as Q2FY14 EBIDTA margin would have increased to 8.6% during the quarter compared to 7.9% in the last year. The Company mentioned that they had received good response at the recently concluded SS15 season bookings and initial booking data indicated 18-20% growth Y-o-Y. The company's retail channel exclusive network stores stood at 964, like to like secondary sales growth was 6% during the quarter, total secondary sales throughput across the entire exclusive network of stores grew by 7%. Same stores sales growth for stores post renovation was in excess of 10%. The company mentioned that it was increasing the pace of stores rollout renovation for in H2FY15 and expects to open 100-120 stores in FY15 including those under renovation. The company had planned to open ~50 stores during FY15; and by the end of September it had completed the renovation of 18 stores. November 17, 2014 For Private Circulation Only 4 3 ] B2B Luxury Cotton Shirting Fabric Particulars (In Rs. mn) Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Net Sales Y-o-Y growth (%) % of total sales EBIDTA EBIDTA margin (%) % of total EBITDA 880 11.4% 7.0% 100 11.4% 4.5% 860 7.5% 7.0% 90 10.5% 4.8% 920 31.4% 7.4% 90 9.8% 5.8% 914 28.7% 8.1% 86 9.4% 10.1% 1,070 21.6% 7.2% 180 16.8% 9.0% The sales growth was driven by increase in sales driven by combination of volumes and realizations in domestic market. EBITDA margin improved Y-o-Y due to better realizations and one-off income of Rs 65 mn. The one off income was related to the refund of power charge in the earlier period by MSEB which relates to the commercial taxes that they charge on the power tariff. The company mentioned that discussions are in progress to acquire the stake of JV partners. 4 ] Denim (Raymond Uco Denim JV)- 50% share Particulars (In Rs. mn) Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Net Sales Y-o-Y growth (%) % of total sales EBIDTA EBIDTA margin (%) % of total EBITDA 2,360 10.8% 18.7% 230 9.7% 10.3% 2,350 8.3% 19.1% 230 9.8% 12.4% 2,520 26.6% 20.3% 220 8.7% 14.2% 2,460 6.0% 21.9% 230 9.3% 27.0% 2,330 -1.3% 15.7% 230 9.9% 11.6% Sales de-grew marginally while EBITDA margins improved 13bps Y-o-Y due to higher export mix and lower raw material cost. 5 ] Garmenting Particulars (In Rs. mn) Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Net Sales Y-o-Y growth (%) % of total sales EBIDTA EBIDTA margin (%) % of total EBITDA 1,177 16.8% 9.3% 150 12.7% 6.7% 1,045 44.8% 8.5% 150 14.4% 8.1% 1,145 28.0% 9.2% 188 16.4% 12.2% 1,240 50.3% 11.0% 160 12.9% 18.8% 1,503 27.7% 10.1% 150 10.0% 7.5% The company's garmenting sales growth was driven by increase in volumes while EBITDA margins were impacted due to rupee appreciation against dollar and higher employment cost. Sales in hybrid segment grew marginally due to subdued demand for the product in the export market. 6 ] Tools & Hardware Particulars (In Rs. mn) Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Net Sales Y-o-Y growth (%) % of total sales EBIDTA EBIDTA margin (%) % of total EBITDA 1,136 22.3% 9.0% 80 8.5% 12.3% 1,103 15.1% 9.0% 150 13.2% 6.7% 1,121 5.0% 9.0% 110 10.0% 5.9% 948 0.6% 8.4% 100 8.9% 6.5% 1,147 0.9% 7.7% 40 4.2% 4.7% Tools and hardware segment grew marginally by 1% Y-o-Y to Rs 1,147mn while the contraction in the EBITDA margin was mainly due to unfavorable product mix. November 17, 2014 For Private Circulation Only 5 7 ] Auto Components Particulars (In Rs. mn) Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Net Sales Y-o-Y growth (%) % of total sales EBIDTA EBIDTA margin (%) % of total EBITDA 506 -5.2% 4.0% 66 13.0% 3.0% 565 12.5% 4.6% 69 12.2% 3.7% 703 21.4% 5.7% 60 8.5% 3.9% 704 8.0% 6.3% 90 12.8% 10.6% 600 18.6% 4.0% 40 6.7% 2.0% The growth in the Auto component segment was driven by domestic and export market. EBITDA margin nearly halved owing to higher input cost and to some extent the lower exports particularly in the European segment of the market. Outlook The company mentioned that with respect to monetization of non-core assets, the progress was slow compared to their expectation. The company was fairly optimistic about its businesses in Q3 and remained confident about the strategic directions for the business. It plans to invest in brand building, modernization and expansion of retail network and also capacity expansion in the export driven business. Segment Analysis Particulars (Mn. Rs) Q2 FY15 Q2 FY14 Y-o-Y change % Q4 FY14 Q-o-Q change % 6M FY15 6M FY14 Y-o-Y change % Textiles 6,936 5,587 24.1% 4,842 43.3% 11,778 9,412 25.1% Denim 2,234 1,782 25.4% 2,136 4.6% 4,369 3,297 32.5% Apparel 2,925 2,544 15.0% 1,793 63.1% 4,719 4,124 14.4% Garmenting 1,503 1,177 27.7% 1,240 21.2% 2,743 2,002 37.0% Tools & Hardware 1,147 1,136 0.9% 948 20.9% 2,095 2,079 0.8% Auto Components 600 506 18.6% 704 (14.8%) 1,305 1,158 12.6% 10 15 (32.0%) 18 (43.5%) 29 49 (41.1%) 816 512 59.5% 721 13.3% 1,537 1,147 34.0% 14,539 12,236 18.8% 10,961 32.6% 25,500 20,974 21.6% Textiles 1,127 1,266 (11.0%) 298 277.8% 1,425 1,380 3.3% Denim 202 93 117.8% 140 44.3% 342 199 71.6% Apparel 141 136 4.1% (109) (230.1%) 33 (28) (216.0%) Garmenting Segment Revenue Others Inter segment revenue Net Sales/ Income from operation Operating Profit 127 121 4.7% 132 (3.9%) 259 168 54.5% Tools & Hardware 79 129 (38.7%) 17 371.9% 96 191 (50.1%) Auto Components 13 37 (66.5%) 64 (80.3%) 76 91 (16.3%) (55) (62) (11.8%) (66) (17.2%) (121) (118) 2.9% Others Inter segment revenue 7 -10 (166.3%) -13 (151.6%) -6 -24 (74.8%) 1,640 1,709 (4.1%) 463 254.3% 2,103 1,859 13.1% 521 483 7.8% 483 7.8% 1,004 939 7.0% Add/(Less): Unallocable Income / (Exp) -248 -150 65.7% -244 1.8% -492 -355 38.6% Total Less: Finance Costs Add/(Less): Exceptional Items -1 -11 (95.2%) -35 (98.6%) -36 -111 (68.1%) Add/(Less): Provision for taxes -158 -179 (11.9%) -32 391.3% -190 -101 87.4% Add/(Less): Share of profit in associate companies -31 36 (187.4%) 3 (1259.3%) -29 73 (139.0%) 681 923 (26.2%) 353 426 (17.2%) Net Profit November 17, 2014 For Private Circulation Only (329) (307.4%) 6 Raw Material Trend Domestic Cotton Index Source: Company, FQ Research Currency adjusted Australian Wool Index Source: Company, FQ Research * Q3FY15 data till Nov. 12, 2014 November 17, 2014 For Private Circulation Only 7 Segmental Sales Contribution (%) - Quarterly Trend Segmental EBIT Contribution (%) - Quarterly Trend Source: Company, FQ Research Source: Company, FQ Research Segmental EBIT Margin (%) - Quarterly Trend Segmental RoCE (%) - Quarterly Trend Source: Company, FQ Research Source: Company, FQ Research November 17, 2014 For Private Circulation Only 8 Consolidated Financials Profit and Loss Statement Balance Sheet FY12 Total Revenues 36,424 Net Sales Growth (Y-oY) 20% Total Expenditure 31,888 EBIDTA 4,536 EBIDTA Margin (%) 12.5% EBIDTA Growth (Y-o-Y) 10% Interest 1,651 Depreciation/Amortization 1,658 Other Income 817 PBT 2,044 PBT Margin (%) 5.6% Net Profit 1,558 Net Profit Excl. extra-ordinaries 1,558 Net Profit Excl. extra-ordinaries (Y-o-Y %) -40% FY13 40,692 12% 36,978 3,714 9.1% -18% 1,906 1,890 739 367 0.9% 287 380 -76% FY14 45,577 12% 40,680 4,897 10.7% 32% 1,968 1,958 629 1,600 3.5% 1,433 1,433 277% FY15E 53,634 18% 48,145 5,489 10.2% 12.1% 2,116 1,618 589 2,344 4.4% 1,686 1,686 18% FY16E 61,094 14% 54,145 6,949 11.4% 27% 2,366 1,740 877 3,720 6.1% 2,944 2,944 75% Profit and Loss Statement FY12 FY13 FY14 FY15E FY16E 18.2 18.2 2.1 8.8 8.5 0.8 0.5% 98.5 74.5 2.0 13.0 10.0 0.7 0.2% 19.7 19.7 1.8 8.3 9.3 0.6 0.3% 16.8 16.8 1.6 8.6 8.3 0.5 0.3% 9.6 9.6 1.4 6.0 6.5 0.5 0.3% 0.8 2.7 0.7 1.9 0.8 2.5 0.8 2.6 0.7 2.9 25.4 25.4 52.4 224 4.7 6.2 35.5 227 23.3 23.3 55.2 250 27.5 27.5 53.8 283 48.0 48.0 76.3 332 Returns (%) RoE (%) RoE (%)- Excl. extra-ordinaries RoCE (%) RoCE (%)-Excl. extra-ordinaries Dividend Payout 11.9% 11.9% 11.2% 11.2% 11.3% 2.1% 2.7% 3.7% 4.1% 24.6% 9.8% 9.8% 11.8% 11.8% 5.9% 10.3% 10.3% 11.1% 11.1% 5.9% 15.6% 15.6% 14.3% 14.3% 3.4% Du-Pont Analysis EBIDTA/Sales (%) Sales/Operating assets (x) EBIDTA/Operating Assets (%) Operating Assets/Net Assets (x) Net Earnings/EBIDTA (%) Net Assets/Net Worth (x) RoE (%) 12.5% 1.4 17.2% 1.1 34.3% 1.8 11.9% 9.1% 1.5 13.4% 1.2 10.2% 1.7 2.7% 10.7% 1.5 16.3% 1.2 29.3% 1.7 9.8% 10.2% 1.6 16.7% 1.1 30.7% 1.8 10.3% 11.4% 1.8 20.0% 1.1 42.4% 1.7 15.6% Margins (%) EBIDTA margin PBT margin PAT margin 12.5% 5.6% 4.3% 9.1% 0.9% 0.7% 10.7% 3.5% 3.1% 10.2% 4.4% 3.1% 11.4% 6.1% 4.8% Growth (%) Revenue EBIDTA PAT APAT 20% 10% 190% -40% 12% -18% -82% -76% 12% 32% 399% 277% 18% 12% 18% 18% 14% 27% 75% 75% 64 48 105 121 66 52 94 108 68 39 98 127 60 37 90 113 60 37 90 112 Valuation Ratios P/E (x) P/E Excl. Extra-ordinaries (x) P/BV (x) P/CEPS (x) EV/EBITDA (x) Market Cap. / Sales (x) Div.Yield (%) Leverage Ratios Debt/Equity (x) Interest Coverage (x) Per Share Data Diluted EPS Fully Diluted EPS Excl. extra-ordinaries Diluted Cash EPS Book Value Per share (Rs.) Operating Cycle Debtors Creditors I nventory Cash conversion Cycle November 17, 2014 FY12 FY13 FY14 FY15E FY16E Liabilities Equity Capital Reserves & Surplus Equity Minority Interest Net Worth Other Liabilities Total Loans Capital Employed 614 13,010 13,623 141 13,764 2,049 8,839 24,653 614 13,175 13,789 123 13,912 1,341 8,165 23,418 614 14,047 14,661 706 15,367 1,388 11,178 27,933 614 15,908 16,522 832 17,354 1,661 11,892 30,907 614 18,852 19,466 915 20,382 1,837 12,995 35,213 Assets Net Block Capital WIP Investments Others - Assets 13,482 1,260 962 2,716 13,067 1,743 1,114 2,934 12,564 1,740 1,106 3,038 13,289 939 1,031 3,057 13,998 886 1,031 3,193 Current Assets Inventories Sundry Debtors Cash and cash equivalents Loans and Advances Other Current Assets Total Current Assets 9,171 6,352 4,461 1,085 564 21,634 9,477 7,384 4,508 991 611 22,972 10,925 8,499 4,851 1,007 695 25,977 11,871 8,886 9,219 1,234 751 31,961 13,351 9,994 12,176 1,405 855 37,781 Less:Current Liabilities & Provisions Short Term borrwing Sundry Creditors Provisions Other Current Liabilities Total Current Liabilities & Provisions Capital Applied 5,426 4,174 4,902 899 15,401 24,653 5,680 5,246 6,773 712 18,412 23,418 5,455 5,930 4,346 760 16,491 27,933 7,077 6,515 4,911 867 19,370 30,907 7,851 7,327 5,523 975 21,676 35,213 FY12 2,878 864 2,014 1,658 3,672 128 1,947 1,853 2,756 (904) (164) (740) (740) FY13 1,824 1,240 583 1,890 2,474 170 (308) 2,951 1,959 993 152 841 (93) 748 FY14 2,939 547 2,392 1,958 4,350 131 5,139 (658) 1,451 (10) (2,100) (8) (2,092) (2,092) FY15E 3,871 965 2,905 1,618 4,524 (74) 1,105 3,345 1,543 (55) 1,857 (75) 1,932 1,932 FY16E 5,209 1,258 3,951 1,740 5,691 123 2,292 3,522 2,396 1,126 1,126 1,126 Cash Flow Statement EBITDA Less: Adjusted Taxes NOPLAT Plus: Depreciation Gross Cashflow Minority Interest/ Profit share of associates Less: Increase in Working Capital Operating Cashflow Less: Net Capex Less: Increase in Net Other Assets FCF From Operation Less: Inc./(Dec.) in Investment FCF after Investment Plus: Gain/(loss) on Extraordinary Items Total FCF Recommendation Summary Event Date Price Rating Target Initiating Coverage 11-05-2012 377 Buy 506 Result Update (Q1FY13) 01-08-2012 355 Buy 480 Result Update (Q2FY13) 26-10-2012 376 Buy 480 Result Update (Q3FY13) 28-01-2013 386 Buy 460 Result Update (Q3FY14) 14-03-2014 280 Buy 515 Result Update (Q1FY15) 04-08-2014 419 Buy 500 Result Update (Q2FY15) 17-11-2014 461 Buy 784 For Private Circulation Only 9 ANALYST DISCLAIMER: Each analyst of FINQUEST Securities (P) Ltd. whose name appears on page 1 of the research reports accessible on this website hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst's personal views about any and all of the securities or issuers discussed herein that are within the analyst’s coverage universe and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the provision of specific recommendations or views expressed by the research analyst in the research report. 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FINQUEST and affiliates, including the analyst who has issued this report, may, on the date of this report, and from time to time, have long or short positions in, and buy or sell the securities of the companies mentioned herein or engage in any other transaction involving such securities and earn brokerage or compensation or act as advisor or have other potential conflict of interest with respect to company/ies mentioned herein or inconsistent with any recommendation and related information and opinions. FINQUEST and affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. BUY HOLD SELL More than 10% return Between 5-10% return Less than 5% return November 17, 2014 For Private Circulation Only 10
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