1. business and industrial

Result Update
February 2, 2015
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Kansai Nerolac (GOONER)
Buy
| 2671
12 months
12%
Industrial segment drives performance…
What’s changed?
Target
EPS FY15E
EPS FY16E
EPS FY17E
Rating
Changed from | 2396 to | 2671
Changed from | 58.3 to | 53
Changed from | 71.1 to | 69.7
Changed from | 88 to | 89
Unchanged
Quarterly performance
Revenue
EBITDA
EBITDA (%)
PAT
Q3FY15
884.3
108.2
12.2
65.7
Q3FY14
821.6
87.2
10.6
49.1
YoY (%)
7.6
24.1
162bps
33.7
Q2FY15 QoQ (%)
915.2
-3.4
120.4
-10.1
13.0 -84bps
72.7
-9.6
Key financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)
FY14
3,136.1
362.1
206.6
38.3
FY15E
3,759.8
519.9
314.1
58.3
FY16E
4,529.9
633.4
383.0
71.1
FY17E
5,440.0
769.3
474.5
88.0
FY15E
45.0
50.4
26.5
8.0
17.7
24.6
FY16E
34.2
38.3
20.6
6.8
19.9
27.9
FY17E
26.8
30.0
16.3
5.7
21.2
29.7
Valuation summary
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)
FY14E
62.2
69.7
35.5
9.0
14.5
20.1
Stock data
Particular
Market Capitalization (| Crore)
Total Debt (FY14) (| Crore)
Cash and Investments (FY14) (| Crore)
EV (| Crore)
52 week H/L
Equity capital (| Crore)
Face value (|)
Amount
12,853.2
51.7
54.9
12,850.1
2508 / 826
53.9
10.0
Price performance
Asian Paints
Berger Paints
Kansai Nerolac
Akzo Noble
1M
14.3
15.1
22.5
9.5
3M
33.1
15.2
26.9
15.8
6M
33.5
53.6
53.1
44.4
| 2385
12M
79.2
125.1
130.1
87.8
Research Analyst
Sanjay Manyal
[email protected]
Hitesh Taunk
[email protected]
ICICI Securities Ltd | Retail Equity Research
• Kansai Nerolac (KNL) reported its Q3FY15 results wherein the topline
grew ~8% YoY supported by 6% YoY volume growth. We believe
the decorative segment recorded muted growth (2% YoY) during
Q3FY15 while a revival in automotive paints segment demand helped
in achieving Industrial paint volume growth of ~11% YoY
• Operating margins increased 162 bps YoY to ~12% mainly due to a
243 bps YoY dip in raw material cost on account of benign raw
material prices. Earnings growth of 34% was due to higher EBITDA
and an increase in other income
• We have modelled volume growth of 12.8% YoY and 13.8% YoY for
FY16E and FY17E, respectively, on the back of a revival in the
industrial paint segment. For FY17E, we build industrial and
decorative paint segment growth of 16% and 12% YoY, respectively
Increasing focus on decorative paints
KNL is India’s largest industrial paint company with ~35% market share in
industrial paints and third largest player with overall 14% market share.
With sustainable growth in decorative paints and subdued industrial
demand, KNL has increased its revenue contribution in decorative paints
from 50% in FY09 to 55% currently. It has strong brands in interior,
exterior and metal paints like Impressions, Excel, Surkasha, Satin Enamel,
Lotus Touch, Beauty, Pearl and Little Master. KNL continues to invest in
brands with 4-5% of sales going into advertisement and promotion. We
believe decorative paints would continue to grow strongly with the
presence of limited players and strong repainting demand. We expect a
revival in industrial paints demand (75% automotive paints), led by a
recovery in the automotive segment. We expect blended volume growth
of 12.8% and 13.8% YoY in FY16E and FY17E, respectively.
Leader in industrial paints
KNL is a leading industrial paints player with ~35% market share. The
company supplies paints to many automobile players. They account for
30-35% of its sales with Maruti Suzuki being its largest client. Automobile
demand has been subdued in the last two years as Maruti has seen ~1%
volume CAGR in FY12-14. However, we believe a revival in industrial
paints would lead to a recovery for KNL in industrial paints. Going
forward, we believe there should be a resumption in industrial paints
growth as automobile growth is likely to be ~15% YoY in FY16E and
~16% in FY17E. We expect revenue, earnings to grow at a CAGR of 18%,
32% respectively, during FY14-17E.
Beneficiary of strong revival in industrial paint demand: reiterate BUY
Despite KNL consciously increasing its decorative paints contribution to
55% of sales from 50%, we believe the stock is still trading at a discount
to Asian Paints. With improving margins, higher free cash flows and
expanding return ratios, we believe the discount to Asian Paints would
shrink and it would command a premium to its historic average of 22x.
Further, with an improvement in automotive paint demand supported by
higher demand for autos due to lower base effect, we expect industrial
and decorative volume growth of 16% and 12% YoY, respectively, in
FY17E. Simultaneously, higher operating leverage coupled with stable
raw material prices are expected to lead to an expansion in operating
margins by 200 bps by FY17E over FY15. At the CMP, the stock is trading
at 34x its FY16E & 27x its FY17E earnings. We reiterate our BUY rating on
the stock with a revised target price of | 2671 (30x FY17E earnings).
Variance analysis
Q3FY15 Q3FY15E
Revenue
Q3FY14
YoY (%)
Q2FY15 QoQ (%)
884.3
951.6
821.6
7.6
915.2
-3.4
6.9
10.0
5.3
29.4
12.4
-44.6
Raw Material Exp
593.2
609.8
571.2
3.9
616.5
-3.8
Employee Exp
Manuf & Other exp
37.6
148.3
37.3
59.2
33.3
132.4
12.9
12.0
34.9
151.4
7.9
-2.1
Total Expenses
779.1
830.0
736.9
5.7
802.8
-3.0
EBITDA
108.2
126.7
87.2
24.1
120.4
-10.1
EBITDA Margin (%)
12.2
13.2
10.6 162 bps
13.0
-84 bps
Depreciation
Interest
17.1
0.0
18.2
0.0
16.6
0.1
3.0
-100.0
17.4
0.0
-1.6
NM
PBT
Total Tax
PAT
95.0
29.3
65.7
113.4
36.6
76.8
73.3
24.2
49.1
29.5
21.0
33.7
107.4
34.7
72.7
-11.6
-15.6
-9.6
Other Income
Comments
Overall volume growth of 6% YoY led by the industrial segment on a revival of
demand from the automotive segment. We expect the volume growth of the
decorative segment to have been close to its peer of ~2% YoY, due to muted
demand during Q3
Sharp growth in other income on the back of gains from investments
Benign raw material prices led 244 bps YoY decline in raw material prices
We expect 65 bps YoY increase in other expenses to hav been largely driven
by higher advertisement and promotion expenses
In spite of slower volume growth, saving in raw material cost helped increase
margins by 162 bps YoY
Higher depreciation charges due to expansion in Hosur, Tamil Nadu
Sharp growth in PAT is attributable to expansion in EBITDA margin
Key Metrics
Volume Growth (%)
6.0
12.0
3.0
14.0
Realisation Growth (%)
2.0
3.0
4.5
3.0
With ~45% of sales contributed by the industrial segment, a revival in
demand from the automotive segment (up ~11% YoY) helped in achieving 6%
YoY growth during Q3FY15. However, demand from decorative segment was
subdued during Q3FY15
The company has taken average 2% hike in industrial and decorative paint
segment
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore)
Revenue
EBITDA
EBITDA Margin %
FY16E
Old
FY17E
New % Change
Old
Comments
New % Change
4,529.9
4318.3
(4.7)
5,440.0
5112.8
(6.0)
633.4
623.5
(1.6)
769.3
779.3
1.3
13.9
14.4
46bps
14.1
15.2
107bps
(1.9)
(1.9)
474.5
88.0
479.8
89.0
PAT
383.0
375.9
EPS (|)
71.1
69.7
Source: Company, ICICIdirect.com Research
We have marginally tweaked our revenue estimates for FY16E and FY17E considering the
slow pick-up in demand of decorative paints
We have modelled 200 bps growth in EBITDA margin in FY17E over FY15 on account of
saving in raw material cost (benefit of lower crude price) and higher operating leverage
1.1 Sales growth and margin expansion would help in driving bottomline
1.1
Assumptions
FY14
FY15E
Current
FY16E
FY17E
Earlier
FY16E
FY17E
Volume Growth (%)
5.5
10.7
12.8
13.8
14.5
Realisation Growth (%)
5.0
4.5
5.0
4.0
5.0
Comments
Volume growth of 12.8% YoY and 13.8% YoY for FY16E and FY17E, respectively, is
attributable to a revival in industrial paint segment. For FY17E, we build in industrial and
decorative paint segment growth of 16% and 12% YoY, respectively. The assumption in the
15.5
industrial paint segment is based on Maruti's overall volume growth while decorative paint
volume growth estimates are based on growth of the leader in the decorative paints
segment, Asian Paints
We believe the company would take a price hike of ~4% in FY17E to offset rising input cost
4.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 2
Company Analysis
Increasing focus on decorative paints
Kansai Nerolac is the largest industrial paint company in India with more
than 35% market share in industrial paints and third largest player with an
overall market share of 14%. With sustainable growth in decorative paints
and subdued industrial demand, the company has increased its revenue
contribution from decorative paints from 50% in FY09 to 55% in FY14.
The company has strong brands in interior, exterior and metal paints like
Impressions, Excel, Surkasha, Satin Enamel, Lotus touch, Beauty, Pearl
and Little Master and continues to invest in brands with 4-5% of sales
going towards advertisement and promotion. We believe decorative
paints would continue to grow at a faster pace with the presence of
limited players and strong repainting demand. We expect a revival in
industrial paints demand (which contains 75% automotive paints), led by
a recovery in the automotive segments. We expect blended volume
growth of 14.5% and 15.5% YoY in FY16E and FY17E, respectively.
With the sustainable growth in decorative paints and
subdued industrial demand, the company has increased its
revenue contribution of decorative paints from 50% in FY09
to 55% currently. We expect blended volume growth of
12.8% and 13.8% YoY in FY16E and FY17E, respectively
Exhibit 1: Net sales (| crore) & growth (%)
Exhibit 2: Maruti sales volume growth over the years
6000
5113
5000
4318
4000
3000
2127
2586
2840
3136
30
25
20
3637
15
10
2000
5
1000
0
FY11
FY12
FY13
FY14
Net Sales (LHS)
FY15E
FY16E
FY17E
% growth (RHS)
Source: Company, ICICIdirect.com Research
With more than 70-80% of decorative paints demand
contributed by repainting demand, a reduction in duration
of repainting activity from eight or nine years to four or five
years has been the reason for strong decorative paints
demand
ICICI Securities Ltd | Retail Equity Research
2.0
1.5
1.27
1.13
1.17
1.16
1.27
1.44
1.64
30
20
10
1.0
0
0.5
-10
0.0
-20
FY11
FY12
FY13
FY14
FY15E
Maruti Volumes (in million) (LHS)
FY16E
FY17E
% growth (RHS)
Source: Company, ICICIdirect.com Research
Urbanisation, early repainting demand for sustainable growth
Increasing urbanisation, higher rural income levels and a brief repainting
cycle has been the main reason for the sustainable decorative paints
demand. With the substantial increase in urban income from 2004 to 2011
and rural income in 2007-12, decorative paints demand has witnessed
double digit growth over the last four or five years. With more than 65%
of decorative paints demand contributed by repainting demand, reduction
in duration of repainting activity from eight or nine years to four or five
years has also been the reason for strong decorative paints demand.
Simultaneously, premiumisation, specifically from distemper to external
emulsion, is the new trend. This has led the higher realisations for
decorative paints. As the phenomenon continues, this would also help the
industry to command higher margins, going forward. We expect
operating margins of the company to improve from 13.2% in FY15E to
15.2% in FY17E.
Page 3
Kansai Nerolac is the leading player in industrial paints
with ~35% market share. Kansai is supplying to many
automobile players with Maruti Suzuki the biggest client
and accounts for ~30-35% of its sales. We expect overall
volume growth of 12.8% YoY and 13.8% YoY for FY16E and
FY17E, respectively
Leader in industrial paints
KNL is a leading player in industrial paints with ~35% market share. The
company supplies paints to many automobile players with Maruti Suzuki
the biggest client and accounts for ~30-35% of its sales. Automobile
demand has been subdued in the last two years as Maruti has seen
volume growth at ~1% CAGR during FY12-14. However, we believe a
revival in industrial paints would lead to a recovery for Kansai in the
industrial paints segment. Going forward, we believe there should be a
resumption in industrial paints as automobile growth is likely to be ~15%
in FY16E and ~16% in FY17E, respectively. We expect overall volume
growth of 12.8% YoY and 13.8% YoY for FY16E and FY17E, respectively.
Exhibit 3: EBITDA & margins (%) trend
900
779.3
800
700
400
300
13.0
12.0
484.2
500
290.7
337.3
336.1
15.0
14.0
623.5
600
16.0
11.0
362.1
10.0
9.0
200
8.0
FY11
FY12
FY13
FY14
EBITDA (| crore) (LHS)
FY15E
FY16E
FY17E
EBITDA (%) (RHS)
Source: Company, ICICIdirect.com Research
Strong cash flows, appealing return ratios
In the last two years, operating margins for the company have come
down from 13% to 11% mainly due to subdued demand for industrial
paints, titanium di-oxide price movement and volatile currency. However,
with titanium di-oxide price and currency stabilising, we expect a revival
in automotive demand and improvement in operating margins from
11.5% in FY14 to 14.1% in FY17E. Given the strong balance sheet, zero
debt on the books, higher operating margins and sustainable free cash
flows, we expect return ratios to improve (RoCE at 27.9% and RoE at 20%
in FY16E) from the current RoCE of 20.1% and RoE of 14.5%.
Exhibit 4: Return ratios (%)
35
27.9
30
24.3
24.8
25
20
24.6
21.5
22.5
15
29.7
20.1
22.7
20.3
17.7
19.9
21.2
14.5
10
FY11
FY12
FY13
RoCE (%)
FY14
FY15E
FY16E
FY17E
RoE(%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 4
Valuation
Despite the company consciously increasing its decorative paints
contribution to 55% of sales from 50%, we believe the stock is still trading
at a discount to Asian Paints. With improving margins, higher free cash
flows and expanding return ratios, we believe the discount to Asian Paints
would shrink and the stock would command a premium to its historic
average of 22x. Further, with an improvement in automotive paint
demand supported by higher demand for autos due to lower base effect,
we expect industrial and decorative volume growth of 16% and 12% YoY
for FY17E, respectively. Simultaneously, higher operating leverage
coupled with stable raw material prices are expected to lead to an
expansion in operating margins by 200 bps by FY17E over FY15. At the
CMP, the stock is trading at 34x its FY16E earnings and 27x its FY17E
earnings. We reiterate our BUY rating on the stock with a revised target
price of | 2671/share (30x FY17E earnings).
Exhibit 5: Forward PE
1800
1600
1400
30x
25x
1200
1000
20x
800
600
15x
400
200
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
0
Source: Company, ICICIdirect.com Research
Exhibit 6: Valuations
FY14
FY15E
FY16E
FY17E
Sales
(| cr)
3136.1
3637.0
4318.3
5112.8
Growth
(%)
16.0
18.7
18.4
EPS
(|)
38.3
53.0
69.7
89.0
Growth
(%)
38.3
31.5
27.6
PE
(x)
62.2
45.0
34.2
26.8
EV/EBITDA
(x)
35.5
26.5
20.6
16.3
RoNW
(%)
14.5
17.7
19.9
21.2
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 5
RoCE
(%)
20.1
24.6
27.9
29.7
Company snapshot
3,000
Target Price - | 2671
2,500
2,000
1,500
1,000
500
Dec-15
Sep-15
Jun-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Dec-09
Mar-10
0
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
Jan-10
Event
Stellar performance during Q3FY10, wherein revenue and earning increased 33% and 71% YoY, respectively
Mar-10
Company makes announcement on investing | 400 crore over three years in order to increase the manufacturing capacity
May-10
Sharp increase in EBITDA margin by ~242 bps YoY during Q4FY10, resulting in ~69% YoY rise in PAT
May-10
Commences operations in its new facility at Hosur, Tamil Nadu
Jun-10
Company approves bonus issue of 1:1
Aug-10
Company's board approves brown-field capacity expansion of Bawal unit of | 68 crore
Jan-11
Paints divests its 49% stake in Nipa Chemicals, an unlisted Indian company, for | 25.72 crore
Jan-12
Company records strong Q3FY10 numbers wherein revenue and net profit increase 19% and ~27% YoY, respectively
May-12
Company makes announcement on investing | 300 crore for establishment of manufacturing unit in Bangalore
Jun-12
Plans to acquire 68% stake in paint manufacturers in Nepal, Nepal Shalimar (NSPL) with investment of | 7.5 crore
Jul-13
Receives in-principle approval to explore various options for monetisation of surplus assets of the company located at Chennai
Jan-14
Continuous pressure on margin due to sluggish demand of industrial paint segment coupled with higher raw material cost and volatile currency
Source: Company, ICICIdirect.com Research
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Name
Kansai Paint Co Ltd
Aberdeen Asset Management (Asia) Ltd.
ICICI Prudential Life Insurance Company Ltd.
The New India Assurance Co. Ltd.
Oriental Insurance Company Ltd.
Franklin Templeton Asset Management (India) Pvt. Ltd.
Aberdeen Asset Managers Ltd.
SBI Funds Management Pvt. Ltd.
Birla Sun Life Asset Management Company Ltd.
Goldman Sachs Asset Management International
Shareholding Pattern
Latest Filing Date % O/S Position (m) Change (m)
30-Sep-14 69.27
37.3
0.0
30-Sep-14 8.04
4.3
0.1
30-Sep-14 4.81
2.6
0.0
30-Sep-14 1.20
0.7
0.0
30-Sep-14 1.18
0.6
0.0
31-Dec-14 0.99
0.5
0.2
30-Nov-14 0.90
0.5
0.0
31-Dec-14 0.46
0.3
0.0
31-Dec-14 0.31
0.2
0.0
30-Sep-14 0.23
0.1
0.1
(in %)
Promoter
FII
DII
Others
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14
69.3
69.3
69.3
69.3
69.3
11.8
11.8
11.9
11.7
10.9
4.6
4.7
4.8
4.7
5.3
14.3
14.3
14.1
14.3
14.6
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name
Investor name
Franklin Templeton Asset Management (India) Pvt. Ltd.
Goldman Sachs Asset Management International
Aberdeen Asset Management (Asia) Ltd.
J.P. Morgan Asset Management (Hong Kong) Ltd.
Sundaram Asset Management Company Limited
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Value
7.25m
3.76m
2.41m
1.84m
0.53m
Shares
0.23m
0.12m
0.08m
0.06m
0.02m
Investor name
Investor name
The New India Assurance Co. Ltd.
Daiwa Asset Management (Singapore) Ltd.
Tata Asset Management Limited
Oriental Insurance Company Ltd.
Value
-0.82m
-0.23m
-0.14m
-0.11m
Shares
-0.03m
-0.01m
-0.01m
0.00m
Page 6
Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)
Raw Material Expenses
Employee Expenses
Marketing Expenses
Administrative Expenses
Other expenses
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
Exceptional Income
PBT
Total Tax
PAT
Growth (%)
EPS (|)
| Crore
FY14
3,154.4
10.4
2,133.9
135.9
114.3
102.6
305.6
2,792.3
362.1
7.7
65.0
0.5
10.3
0.0
307.0
100.4
206.6
-29.3
38.3
FY15E
3,657.5
16.0
2,422.0
139.6
168.3
135.5
307.9
3,173.3
484.2
33.7
74.3
0.0
18.5
0.0
428.3
142.5
285.8
38.4
53.0
FY16E
4,341.2
18.7
2,745.1
195.0
202.3
165.7
409.5
3,717.7
623.5
28.8
81.8
0.0
18.5
0.0
560.2
184.3
375.9
31.5
69.7
FY17E
5,138.5
18.4
3,181.6
242.4
265.5
196.2
473.3
4,359.1
779.3
25.0
91.8
0.0
27.5
0.0
715.0
235.2
479.8
27.6
89.0
Cash flow statement
(Year-end March)
Profit before Tax
Add: Depreciation
(Inc)/dec in Current Assets
Inc/(dec) in CL and Provisions
CF from operating activities
(Inc)/dec in Investments
(Inc)/dec in loans & advances
(Inc)/dec in Fixed Assets
Others
CF from investing activities
Issue/(Buy back) of Equity
Inc/(dec) in loan funds
Dividend paid & dividend tax
Inc/(dec) in Sec. premium
Others
CF from financing activities
Net Cash flow
Opening Cash
Closing Cash
| Crore
FY14
206.6
65.0
-157.4
51.4
165.5
15.0
4.1
-124.8
-9.7
-92.6
0.0
0.0
-69.4
0.0
-8.8
-78.1
-5.3
60.1
54.9
FY15E
285.8
74.3
-184.6
100.3
275.8
0.0
-17.6
-150.0
0.0
-167.6
0.0
0.0
-94.6
0.0
0.0
-94.6
13.6
54.9
68.5
FY16E
375.9
81.8
-301.7
130.0
286.1
0.0
-14.0
-150.0
0.0
-164.0
0.0
0.0
-100.9
0.0
0.0
-100.9
21.2
68.5
89.6
FY17E
479.8
91.8
-304.9
123.7
390.4
0.0
-9.8
-200.0
0.0
-209.8
0.0
0.0
-107.2
0.0
0.0
-107.2
73.4
89.6
163.0
FY14
FY15E
FY16E
FY17E
38.3
50.4
264.1
11.0
10.2
53.0
66.8
299.6
15.0
12.7
69.7
84.9
350.6
16.0
16.6
89.0
106.1
419.7
17.0
30.2
11.5
9.8
6.6
69
53
51
13.2
11.8
7.9
69
53
51
14.4
13.0
8.7
69
53
51
15.2
14.0
9.4
69
53
51
14.5
20.1
20.3
17.7
24.6
24.9
19.9
27.9
28.5
21.2
29.7
31.3
62.2
35.5
4.1
4.1
9.0
45.0
26.5
3.5
3.5
8.0
34.2
20.6
3.0
3.0
6.8
26.8
16.3
2.5
2.5
5.7
0.1
0.0
1.8
1.7
0.1
0.0
1.8
1.7
0.1
0.0
1.9
1.8
0.1
0.0
2.0
1.9
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
Balance sheet
| Crore
(Year-end March)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Long Term Provisions
Deferred Tax Liability
Total Liabilities
FY14
FY15E
FY16E
FY17E
53.9
1,369.3
1,423.2
51.7
28.8
65.8
1,569.5
53.9
1,560.5
1,614.4
51.7
28.8
65.8
1,760.7
53.9
1,835.5
1,889.4
51.7
28.8
65.8
2,035.7
53.9
2,208.1
2,262.0
51.7
28.8
65.8
2,408.3
Assets
Gross Block
Less: Acc Depreciation
Net Block
Capital WIP
Total Fixed Assets
Non-Current Investments
Inventory
Debtors
Loans and Advances
Investments & Other CA
Cash
Total Current Assets
Creditors
Provisions & other CL
Total Current Liabilities
Net Current Assets
Others Non-Current Assets
Application of Funds
1,336.4
426.8
909.6
48.2
957.7
33.1
645.7
454.8
25.5
43.3
54.9
1,224.1
440.7
244.9
685.6
538.6
40.1
1,569.5
1,486.4
501.2
985.3
48.2
1,033.4
33.1
722.5
528.1
26.5
76.8
68.5
1,422.3
508.2
277.7
785.9
636.5
57.8
1,760.7
1,636.4
583.0
1,053.4
48.2
1,101.6
33.1
910.2
627.0
35.3
83.0
89.6
1,745.2
603.4
312.5
915.9
829.3
71.8
2,035.7
1,836.4
674.8
1,161.6
48.2
1,209.8
33.1
1,022.9
742.4
37.9
157.3
163.0
2,123.4
714.4
325.2
1,039.6
1,083.9
81.6
2,408.3
Key ratios
(Year-end March)
Per share data (|)
EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios (%)
EBITDA Margin
PBT / Total Operating income
PAT Margin
Inventory days
Debtor days
Creditor days
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
.
ICICI Securities Ltd | Retail Equity Research
Page 7
ICICIdirect.com coverage universe (Consumer Discretionery)
CMP
M Cap
EPS (|)
P/E (x)
EV/EBITDA (x)
(|)
TP(|) Rating
(| Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
Sector / Company
817
825
Hold 82,203 13.7 20.5 23.6 62.5 41.7 36.3 37.5 25.5 22.3
Asian Paints (ASIPAI)
234
326
Buy
2,334
4.4 15.6 18.7 52.7 15.0 12.5 15.1
7.8
6.8
Bajaj Electricals (BAJELE)
252
253
Hold 15,722
6.5
8.9 11.2 38.9 28.2 22.5 19.3 16.3 12.1
Havells India (HAVIND)
2,385 2,671
Buy 12,853 53.0 69.7 89.0 45.0 34.2 26.8 26.5 20.6 16.3
Kansai Nerolac (GOONER)
548
560
Hold 27,819 10.5 12.9 16.0 52.5 42.3 34.3 33.5 27.6 22.6
Pidilite Industries (PIDIND)
120
122
Hold
1,885
8.3
9.6 12.4 14.8 12.5
9.7
6.2
5.3
4.5
Essel Propack (ESSPAC)
2,328 2,764
Buy
8,143 42.5 54.7 71.8 54.8 42.6 32.4 41.8 32.2 24.5
Symphony Ltd (SYMCOM)
1,001
958
Hold
2,988 24.6 30.5 41.0 40.7 32.9 24.4 24.9 19.9 15.3
V-Guard Ind (VGUARD)
Source: ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
RoCE (%)
RoE (%)
FY15E FY16E FY17E FY15E FY16E
45.1 59.5 57.0 32.4 42.2
13.6 25.2 25.0
6.1 18.2
25.1 27.2 31.7 22.2 26.5
24.6 27.9 29.7 17.7 19.9
32.4 34.9 37.7 24.6 27.1
14.4 15.7 18.0 12.7 13.6
53.8 55.4 56.2 42.3 43.4
21.8 23.6 26.7 19.7 20.5
Page 8
FY17E
40.4
18.4
27.6
21.2
29.0
15.7
44.0
22.7
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Head – Research
Pankaj Pandey
[email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]
ICICI Securities Ltd | Retail Equity Research
Page 9
ANALYST CERTIFICATION
We /I, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research
report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is
a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general
insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.
Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.
It is confirmed that Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts of this report have not received any compensation from the companies mentioned in the report in
the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.
ICICI Securities Ltd | Retail Equity Research
Page 10