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NiveshDaily October 30, 2015 Daljeet S. Kohli From Research Desk Head of Research  Result Update Tel: +91 22 66188826 [email protected] Dr. Reddy’s Laboratories Jubilant Life Sciences NTPC Crompton Greaves Ltd OnMobile Global Ltd (OGL)  Result Preview Atul Auto Ltd. | Rating: Hold| Target: Rs. 471 (Result on 31 October 2015) ICICI Bank | Rating: BUY | Target: Rs 390/‐  Concall Update Coromandel International Ltd (COIL) KEC International Ltd  First Cut Analysis Torrent Pharma SKF India Ltd. Alstom T&D India Ltd  Global Markets – Outlook IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511 IndiaNivesh Research 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Dr. Reddy’s Laboratories US and DF business drive earnings; efforts on to resolve regulatory hurdle Previous Current CMP : Rs.4221 Rating : BUY Rating : BUY Target : Rs.4712 Target : Rs.4712 STOCK INFO 500124 Bse Nse DRREDDY Bloomberg DRRD IN REDY.BO Reuters Sector Pharmaceutical Face Value (Rs) 5 Equity Capital (Rs mn) 848 Mkt Cap (Rs mn) 719,809 4,387 52w H(Rs) 52wLl(Rs) Avg Daily Vol (Bse+Nse) 2,996 916,101 SHAREHOLDING PATTERN (as on Sept. 2015) Promoters FIIs DIIs Public & Others % 25.5 36.7 23.4 14.4 Q2FY16 Result Update Dr. Reddy Laboratories’ (DRRD IN) adjusted PAT was better‐than‐
estimates. Adjusted PAT grew at much higher rate than sales on y‐y basis led by better operating margin for the quarter. US and Domestic formulation continued to drive earnings for DRRD. We maintain our estimates for FY16E and FY17E to Rs168 and Rs196, respectively, and maintain our price target to Rs4,712. The regulatory overhang with respect to Shrikakulam facility remains as indicated by rescission letter citing DRRD API facility classified as potential ‘Official Action Indicated (OAI)’ on the date of approval. However, we believe that DRRD has been building product pipeline in US market which is mix of Para IV filings as well as niche opportunity for future growth, and growth would also be aided by new product launches along with increased traction in existing products in domestic formulation. Hence we maintain BUY on the stock. Rs.mn
Revenue
EBIT
Adjusted PAT
Reported PAT
STOCK PER. (%) Dr.Reddys Lab Sensex 1m 3m 12m 3.4 13.7 38.6 4.1 (2.6) (1.0) Source: Capitaline, IndiaNivesh Research Dr. Reddy’s Laboratories v/s SENSEX 160 140 120 100 80 60 40 20 ‐
DR REDDY'S LABS
SENSEX Index
Source: Capitaline, IndiaNivesh Research October 30, 2015
Source: BSE Q2FY16
Q2FY15
39,890 35,879 8,938 6,201 7,603 5,836 7,220 5,742 Q1FY16
37,578 7,587 6,184 6,257 Y‐o‐Y %
11.2 44.2 30.3 25.7 Q‐o‐Q %
6.2 17.8 22.9 15.4 INSPL Est
40,060 7,724 6,299 6,299 Variance(%)
(0.4)
15.7 20.7 14.6 DRRD delivered highest ever quarterly EBITDA of Rs11.4bn: Sales came in at Rs39.8bn, up 11.2% y‐y, mainly led by 29.9% y‐y growth in US sales and 13.9% y‐y growth in DF sales. Sales growth was dragged down to some extent due to decline in ROW and PSAI sales. Gross margin rose by 285bps y‐y to 61.3% led by increased proportion of higher margin products. EBITDA margin increased at higher rate of 513bps y‐y to 22.4% due to lower other expenses. R&D spent remained at Rs4.4bn, was at similar level in terms of percentage of sales. DRRD had capex of Rs5.6bn for 1HFY16. Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Tushar Manudhane Research Analyst Tel: +91 22 66188835 [email protected] IndiaNivesh Research Y‐y growth remains on uptrend for third consecutive quarter: Q2FY16 is the second consecutive quarter, wherein, DRRD has been able to show robust y‐y growth in US sales to Rs18.6bn (US$290mn). This is mainly due to improved performance of injectable franchise and increased market share in existing molecules, namely, Valganciclovir, sirolimus, memantine and Habitrol. DRRD had started selling g‐
Nexium at the end of Q2FY16, whose larger impact would be visible in Q3FY16. However, base business price erosion and channel consolidation may impact US business to some extent over near term. Also, DRRD has guided for lesser number of potential approval in 2HFY16 which may further impact US sales to some extent. DRRD made two new filing during the quarter, taking the cumulative ANDAs pending for approval to 76. DRRD has strong pipeline of 50 Para IV filings, out of which 18 are first‐to‐file. In October 2015, DRRD’s API customer received ANDA approval rescission letter from USFDA citing company’s API facility as potential ‘Official Action Indicated’ on the date of approval. This indicates regulatory overhang to continue over medium term. DRRD has been simultaneously working on site transfer of selected products to avail the business opportunity post ANDA approval. IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Q2FY16 Result Update (contd...) DF sales momentum continues: DF sales came in at Rs5.5bn, up 13.9% y‐y. The portfolio acquired from UCB got fully integrated into supply chain of DRRD, aiding some y‐y growth in DF business. However, there has been spill‐over of some business to October impacting y‐y growth negatively. Adjusting both the factors, y‐y growth is in‐line with industry growth for Q2FY16. Currency headwinds in Russia and cautious stance in Venezuela impacted ROW sales: ROW sales declined by 20.7% y‐y to Rs6.6bn for the quarter. The reduction in ROW sales is mainly due to 39.5% y‐y contraction in Russia sales. In constant currency, Russia sales grew at moderate rate of 11% y‐y. Currency headwinds continue to worsen the situation. Excluding Russia, ROW sales also declined by 23.8% y‐y due to cautious stance by DRRD in Venezuela. PSAI sales yet to pick up: PSAI sales declined by 7.4% y‐y to Rs5.9bn for the quarter. The product rationalization continued to affect sales growth in this segment. DRRD filed 10 DMFs globally. The cumulative DMF filing stands at 755 at the end of Q2FY16. Valuation: We maintain our estimates for FY16E and FY17E to Rs168 and Rs196, respectively, and maintain our price target to Rs4,712. The regulatory overhang with respect to Shrikakulam facility remains as indicated by rescission letter citing DRRD API facility classified as potential ‘Official Action Indicated (OAI) on the date of approval. However, we believe that DRRD has been building product pipeline in US market which is mix of Para IV filings as well as niche opportunity for future growth, and growth would also be aided by new product launches along with increased traction in existing products in domestic formulation. Hence we maintain BUY on the stock. Key risk: Delay in getting regulatory compliance at Srikakulam facility, delay in getting ANDA approvals and currency headwinds are the key risk to our call and estimates Quarterly financial summary Particulars (Rsmn)
2Q FY16
2Q FY15
Y‐o‐Y %
1Q FY16
Q‐o‐Q %
1H FY16
1H FY15
Y‐o‐Y %
Net Income from Sales and Services
39,890 35,879 11.2 37,578 6.2 77,468 71,054 9.0 (Increase) / decrease in stock (947) (1,238) (23.5) (1,050) (9.8) (1,998) (1,932) 3.4 Consumption of raw materials
9,076 9,688 (6.3) 8,955 1.3 18,031 18,225 (1.1)
Other expenditure
7,292 6,442 13.2 6,726 8.4 14,018 12,930 8.4 Gross Profit 24,469 20,987 16.6 22,947 6.6 47,416 41,830 13.4 SG&A Exp
11,058 10,673 3.6 10,973 0.8 22,031 21,352 3.2 R&D Exp
4,473 4,113 8.8 4,387 2.0 8,860 7,988 10.9 EBITDA
11,404 8,158 39.8 9,855 15.7 21,260 16,404 29.6 EBIT
8,938 6,201 44.2 7,587 17.8 16,526 12,490 32.3 Finance (expense) / income, net
263 539 (51.2) 125 110.4 388 414 NA Profit/Loss to equity affiliates, net of tax 56 51 10.2 49 14.4 106 105 1.0 Other Income
320 266 20.4 125 156.1 445 450 (1.2)
Profit / (loss) before tax 9,578 7,056 35.7 7,886 21.4 17,464 13,459 29.8 Tax Expense
1,879 1,196 57.1 1,721 9.2 3,600 2,701 33.3 Net Profit after tax 7,603 5,836 30.3 6,184 22.9 13,864 10,758 28.9 Non controling stake
‐ ‐ NA ‐ NA ‐ ‐ NA Net Profit (adjusted)
7,603 5,836 30.3 6,184 22.9 13,787 10,855 27.0 Non‐recurring income
(479) (118)
NA 91 NA (388) 488 (179.5)
Net Profit (Reported)
7,220 5,742 25.7 6,257 15.4 13,476 11,246 19.8 Paid up equity capital (Rs 5 per share)
848 848 ‐ 848 ‐ 848 848 ‐ Adj EPS (Rs)
44.8 34.4 30.3 36.5 22.9 81.8 63.5 28.9 Ratios Gross Margin (%)
EBIT Margin (%)
Net Margin (%)
Material cost/ Total Income (%)
Other Expenses (%)
R&D Expenses/ Total Income (%)
SGA/Total Income (%)
Tax Rate (%)
2Q FY16
61.3 22.4 19.1 22.8 18.3 11.2 27.7 19.6 2Q FY15
58.5 17.3 16.3 27.0 18.0 11.5 29.7 17.0 bps
285 513 279 (425)
33 (25)
(203)
266 1Q FY16
61.1 20.2 16.5 23.8 17.9 11.7 29.2 21.8 bps
28 222 260 (108)
38 (46)
(148)
(220)
1H FY16
61.2 21.3 17.9 23.3 18.1 11.4 28.4 20.6 1H FY15
58.9 17.6 15.1 25.6 18.2 11.2 30.1 20.1 bps
234 375 276 (237)
(10)
19 (161)
54 (contd...) October 30, 2015 | 2 Q2FY16 Result Update (contd...) Sales breakdown 2Q FY16
(Rs Mn)
Global Generics
North America
Europe
India ROW
Total Global Generics
PSAI
North America
Europe
India
RoW
Total PSAI
Proprietary Products & Others Total
2Q FY15
Y‐o‐Y %
1Q FY16
Q‐o‐Q %
1H FY16
6,617
14,293 29.9 18,515 0.3 1,434 48.1 1,912 11.1 4,799 13.9 4,756 14.9 8,343 (20.7) 5,776 14.6 32,768
28,869 13.5 30,959
692
1,298 (46.7) 664 4.2 1,356
1,493 62.5 2,352 3.1 4,778
2,020 (64.2) 587 23.3 1,311
1,581 31.3 2,011 3.2 4,087
6,392 (7.4) 5,614 5.4 11,532
18,563
2,124
5,464
2,426
724
2,076
1H FY15
Y‐o‐Y %
20.5 37,078
30,761
4,036
2,893
39.5 10,220
8,798
16.2 12,393
5.8 63,727
57,871
15,419 (19.6)
10.1 1,845 (26.5)
14.5 4,174
2,795 (53.1)
31.2 3,115
11,929 (3.3)
1,204 618 94.8 1,003 20.0 2,207 1,252 76.3 39,890 35,879 11.2 37,576 6.2 77,466 71,052 9.0 5,918
Uptrend in y‐y growth continues US generics (Rs bn)
Y‐y growth (%) ‐ RHS
75.5 20.5
80.0
18.5
70.0
16.5
60.0
51.5 14.5
50.0
42.9 12.5
40.0
31.1 10.5
29.9 30.0
8.5
14.6 6.5
20.0
12.4 7.9 4.5
13.2 16.2 15.0 16.5 14.3 3.7 16.8 10.0
17.2 18.5 18.6 2.5
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1Q FY15
4Q FY14
3Q FY14
2Q FY14
‐
DF sales up 13.9%y‐y and 14.9%q‐q Domestic formulation (Rs bn)
6.0
Y‐y growth (%) ‐ RHS
18.9 20.0
17.8 5.5
18.0
15.7 14.5 14.1 13.9 5.0
16.0
14.0
10.6 4.5
12.0
10.0
8.5 4.0
8.0
5.2 3.5
6.0
4.0
3.0
4.2 3.9 4.1 4.0 4.8 4.3 4.7 4.8 5.5 2.5
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1Q FY15
4Q FY14
3Q FY14
‐
2Q FY14
2.0
(contd...) October 30, 2015 | 3 Q2FY16 Result Update (contd...) Y‐y decline in PSAI sales maintains lower proportion of PSAI sales in total sales Proportion of PSAI sales (%)
24
23
22.8 22.4 21.8 22
20.7 21
20.0 19.9 20
18.5 19
17.8 18
17.0 17
16
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1Q FY15
4Q FY14
3Q FY14
2Q FY14
15
Gross margin remains stable sequentially 80.0
65.6 65.9 67.6 67.3 19.6 19.5 20.6 2QFY16
66.1 PSAI (%)
1QFY16
70.0
66.5 4QFY15
Global generics (%)
68.2 62.8 60.0
50.0
40.0
30.0
20.6 20.1 16.4 20.0
16.8 13.1 12.2 3QFY15
2QFY15
1Q FY15
4Q FY14
3Q FY14
2Q FY14
10.0
(contd...) October 30, 2015 | 4 Q2FY16 Result Update (contd...) Financial Summary Income statement
Y E March (Rs m)
Net sales
Growth %
Expenditure
Raw Material
Employee cost
Other expenses
EBITDA
Growth %
EBITDA Margin %
Deprecaition
EBIT
EBIT Margin %
Other Income
Interest
PBT
Tax
Effective tax rate %
Extraordinary items
Less: Minority Interest
Adjusted PAT
Growth%
PAT margin %
Reported PAT
Growth%
FY13
FY14
FY15
FY16E
FY17E
116,266 132,170 148,189 172,936 199,992
19.8%
13.7%
12.1%
16.7%
15.6%
36,716
18,971
35,114
35,030
21,339
44,587
38,495
24,291
51,302
44,963
28,056
56,730
52,998
32,317
65,060
25,465
31,214
34,101
43,187
49,617
9.5%
22.6%
9.2%
26.6%
14.9%
21.9%
23.6%
23.0%
25.0%
24.8%
6,143
19,322
16.6%
2,479
(460)
22,261
4,900
22.0%
792
6,598
24,616
18.6%
1,590
(400)
26,606
5,094
19.1%
‐
8,732
25,369
17.1%
1,112
(1,682)
28,163
5,984
21.2%
‐
9,169
34,018
19.7%
1,776
(430)
36,224
7,607
21.0%
‐
9,627
39,990
20.0%
1,908
(430)
42,328
8,889
21.0%
‐
17,361 21,512 22,179 28,617 33,439
20.9%
23.9%
3.1%
29.0%
16.8%
14.9%
16.3%
15.0%
16.5%
16.7%
16,777 21,512 22,179 28,617 33,439
29.0%
28.2%
3.1%
29.0%
16.8%
Source:
Cash Flow
Y E March (Rs m)
PBT
Depreciation
Interest
Other non cash charges
Changes in working capital
Tax
Cash flow fromoperations
Capital expenditure
Free Cash Flow
Other income
Investments
Cash flow from investments
Equity capital raised
Loans availed or (repaid)
Interest paid
Dividend paid (incl tax)
Cash flow from Financing
Net change in cash
Cash at the beginning of the year
Cash at the end of the year
Source:
FY13
21,647
5,502
1,003
4,123
(12,944)
(5,552)
13,779
(7,557)
6,222
(7,227)
321
(14,463)
1
2,403
(1,257)
(2,715)
FY14
26,606
6,475
1,267
2,542
(10,050)
(7,143)
19,697
(10,831)
8,866
2,387
(8,497)
(16,941)
2
3,898
(1,162)
(2,980)
FY15
28,163
8,732
(1,682)
‐
(16,850)
(4,746)
13,617
(14,131)
(514)
‐
‐
(14,131)
‐
‐
1,682
(4,224)
FY16E
36,224
9,169
(430)
‐
(4,863)
(7,607)
32,492
(12,106)
20,387
‐
‐
(12,106)
‐
‐
430
(5,434)
FY17E
42,328
9,627
(430)
‐
(5,527)
(8,889)
37,109
(13,999)
23,110
‐
‐
(13,999)
‐
‐
430
(6,349)
(1,568)
(2,252)
7,388
5,136
(242)
2,514
5,937
8,451
(2,542)
(3,056)
8,451
5,395
(5,004)
15,383
5,395
20,778
(5,919)
17,191
20,778
37,969
Balance sheet
Y E March (Rs m)
Share Capital
Reserves & Surplus
Net Worth
Non Current Liabilities
Long term borrowing
Deferred Tax liabilities
FY13
FY14
FY15
849 851 851
71,956 89,950 110,451
72,805 90,801 111,302
FY16E
FY17E
851 851
133,635 160,724
134,485 161,575
12,625
1,838
14,307
1,779
20,740
2,744
14,307
1,779
14,307
1,779
Other Loang Term Liabilities
963
1,783
3,326
3,326
3,326
Long term Provisions
47
92
53
53
53
15,473
25,359
19,465
19,465
19,465
24,053
11,862
15,888
2,288
54,091
142,369
24,002
10,503
16,739
2,819
54,063
170,222
28,819
10,660
20,285
4,231
63,995
194,762
28,819
17,063
23,106
3,459
72,446
226,397
28,819
19,775
26,779
4,000
79,373
260,413
51,835
4,820
‐
59,121
7,355
0
64,520
7,587
0
67,457
7,587
0
71,830
7,587
0
Total assets
16,963
21,600
31,972
5,136
1,060
8,984
85,714
142,369
25,083
23,992
33,037
8,451
1,852
11,332
103,746
170,222
34,259
25,529
40,755
5,395
5,436
11,281
122,655
194,762
34,259
32,218
47,380
20,778
5,436
11,281
151,353
226,397
34,259
37,259
54,792
37,969
5,436
11,281
180,997
260,413
Key ratios
Y E March
EPS (Rs) Core
EPS Reported
Cash EPS (Rs)
DPS (Rs)
BVPS (Rs)
FY13
FY14
FY15
FY16E
FY17E
101.9
126.3
130.2
168.0
196.3
101.9
126.3
130.2
168.0
196.3
66.2 88.4 82.9 175.8 279.4
19.6 23.4 24.8 31.9 37.3
836 999 1,143 1,329 1,529
Current Liabilities
Short term borrowings
Trade payables
Other current liabilities
Short term provisions
Total Liabilities
Assets
Net Block
Non Current Investments
Long term laons & Advances
Current Assets
Current investmetns
Inventories
Sundry Debtors
Cash & Bank Balances
Other Current Assets
Loans & Advances
ROCE
ROE
9.3%
30.6%
10.0%
29.3%
8.3%
25.3%
9.8%
26.9%
10.0%
26.2%
EBITDA Margin %
Net Margin %
21.9%
14.9%
23.6%
16.3%
23.0%
15.0%
25.0%
16.5%
24.8%
16.7%
PER (x)
P/BV (x)
P/CEPS (x)
EV/EBITDA (x)
Dividend Yield %
19.7
33.3
32.3
25.0
21.4
2.4 4.2 3.7 3.2 2.8
30.4
47.6
50.7
23.9
15.0
10.83 8.73 8.08 6.03 4.90
1.0%
0.6%
0.6%
0.8%
0.9%
m cap/sales (x)
net debt/equity (x)
2.9
0.2
net debt/ebitda (x)
0.5
5.4
0.1
0.3
4.8 4.1 3.6
(0.0) (0.1) (0.2)
‐0.1
‐0.4
‐0.7
(contd...) October 30, 2015 | 5 Jubilant Life Sciences Superior operating margin sustained; outlook remain positive Current CMP : Rs.400 Rating : BUY Target : Rs.472 Previous Rating : BUY Target : Rs.393 STOCK INFO Bse Nse Bloomberg Reuters Sector Face Value (Rs) Equity Capital (Rs mn) Mkt Cap (Rs mn) 52w H(Rs) 52wLl(Rs) Avg Daily Vol (Bse+Nse) 530019 JUBILANT JOL IN JUBO.BO Pharmaceutical 1 159 63,848 430 116 3,428,354 SHAREHOLDING PATTERN (as on Sept. 2015) Promoters FIIs DIIs Public & Others 54.0 17.6 0.6 27.9 Source: BSE STOCK PER. (%) 1m 3m 12m Jubilant Life Sciences 10.4 52.6 174.1 Sensex 4.1 (2.6) (1.0) Source: Capitaline, IndiaNivesh Research Jubilant Life Sciences v/s SENSEX JUBILANT LIFE
SENSEX Index
350 300 250 200 150 100 50 ‐
Source: Capitaline, IndiaNivesh Research Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Tushar Manudhane Research Analyst Tel: +91 22 66188835 [email protected] IndiaNivesh Research % Q2FY16 Result Update October 30, 2015
Jubilant Lifesciences (JOL IN) adjusted PAT was better‐than‐expectation, led by better operating margin and higher other income. JOL maintained momentum in terms of sales growth as well as EBITDA margin in pharmaceutical segment on y‐
y basis. Though there has been decline in LSI segment sales, JOL delivered sharp improvement in EBITDA margin on y‐y basis, partly due to low base of past year. JOL maintained EBITDA margin on sequential basis in LSI segment for the quarter. Considering the superior EBITDA margin for 1HFY16 and positive outlook for medium term, we raise our EPS estimate by 35.8% and 19.6% to Rs28.7 and Rs38.6 for FY16E and FY17E, respectively, and revise our price target to Rs472, based on 8x FY17E EV/EBITDA. We maintain BUY rating on the stock. At CMP of Rs400, JOL is trading at 8.5x FY16E EV/ EBITDA and 7.2x FY17E EV/EBITDA. Rs.mn
Revenue
EBIDTA
Adjusted PAT
PAT
Q2FY16
14,447 3,023 1,135 1,158 Q2FY15
y‐o‐y (%)
Q1FY16 q‐o‐q (%) INSPL Est Variance(%)
13,621 6.1 14,384 0.4 14,850 (2.7)
1,110 172.3 3,093 (2.3) 2,870 5.3 (987)
NA 1,261 (10.0) 1,012 12.1 (941)
NA 1,281 (9.6) 1,012 14.4 Pharmaceutical segment continue to drive earnings: Net sales came in at Rs14.4bn, up 6.1% y‐y, for the quarter. There has been uptrend in overall y‐
y growth in sales for JOL. The y‐y growth in sales for this quarter primarily led by pharmaceutical segment. LSI segment dragged y‐y growth to some extent for the quarter. EBITDA margin improved 1,343 bps y‐y due to superior product mix and lower other expenses. Other expenses were lower due to operational efficiency and high base of past year. Better operational performance led adjusted PAT of Rs1.1bn from loss of Rs987mn in Q2FY15. JOL has maintained capex guidance of Rs3bn and R&D expense to the tune of Rs1bn for FY16. JOL’s net debt stands at Rs43.9bn, which is at similar rate on sequential basis. JOL continue to deliver growth in sales and better EBITDA margin in Pharmaceutical segment: Pharmaceutical sales came in at Rs7.5bn, up 21.6% y‐y for the quarter. Y‐y growth in Pharma segment has been on uptrend for four consecutive quarters now, though y‐y growth moderated a bit compared to y‐y growth in Q1FY16. The strong y‐y growth of 21.6% is mainly due to strong performance in specialty pharmaceuticals. In addition to improvement in sales on y‐y basis, EBITDA margin also improved from 11.2% to 28.8% for the quarter. This is on the back of improved performance in Specialty segment and higher capacity utilization in CMO business. JOL has 32 ANDAs at various stages of approval for US market. Management has indicated for 8‐10 filings per annum. JOL’s effort of normalizing operation at Spokane is on track. There would be gradual improvement in sales from Spokane facility, coupled with cost rationalization to improve margins. JOL sustained EBITDA margin in LSI segment for second consecutive quarter: LSI segment sales declined by 5.6% y‐y to Rs7.2bn for the quarter. This is the fourth consecutive quarter of decline in sales, albeit at lower rate compared to previous quarters. The y‐y decline for the quarter is mainly due to lower raw material prices in Life Science Chemcials segment of LSI. The other segment, specialty intermediates and nutritional product have shown good growth for the quarter. IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Q2FY16 Result Update (contd...) LSI showed 831 bps y‐y increase and 38bps q‐q decrease in EBITDA margin of LSI segment for Q2FY16. The increase in EBITDA margin is partly attributed to price hike taken for Niacinamide. During the quarter, JOL has received new contracts for nutritional products and witnessed robust pricing. JOL has also received new contract for specialty intermediates segment as well. JOL has also started receiving orders from Europe, Africa, Middle East and Asia for Life Science Chemcal segment. Overall, we expect decline in sales to reduce and maintain improvement in EBITDA margin going forward in LSI segment. JOL board approves raising upto US$200mn via equity: JOL’s board has approved an enabling resolution to raise equity up‐to US$200mn, mainly for lowering debt level. JOL’s net debt stands at Rs43.9bn, which is at similar rate on sequential basis. However, there is no clarity yet on timeline for the transaction. Valuation: we raise our EPS estimate by 35.8% and 19.6% to Rs28.7 and Rs38.6 for FY16E and FY17E, respectively, and revise our price target to Rs472, based on 8x FY17E EV/EBITDA, to factor superior EBITDA margin for 1HFY16 and positive outlook for medium term. We maintain BUY rating on the stock with potential upside of 18% from current levels. At CMP of Rs400, JOL is trading at 8.5x FY16E EV/ EBITDA and 7.2x FY17E EV/EBITDA Key Risks: Delay in ANDA approvals, delay in ramp up at Spokane facilty, adverse macro condition for pyridine based products are the key risks to our call and price target. Key changes in estimates: Old estimates
FY16E
FY17E
Sales
67,909 75,997
EBITDA
11,054 13,178
EBITDA Margin (%) 16.3 17.3
Adjusted PAT
3,364 5,136
EPS (Rs)
21.1 32.2
PT (Rs)
393
New estimates
FY16E
FY17E
68,566 76,736
12,658 14,522
18.5 18.9
4,567 6,142
28.7 38.6
472
Change (%)
FY16E
FY17E
1.0 1.0
14.5 10.2
218 158
35.8 19.6
35.8 19.6
Quarterly result summary: (Rs mn)
Sales
Raw material
Employee Cost
Other & SG A
Total Expenses
EBITDA
Depreciation
EBIT
Interest
Other Income
PBT
Tax
PAT
Minority Interest
Net Profit after Tax & Minority Interes
Exceptional Items loss (gain)
Net Profit After tax (Reported)
Adj EPS
Q2FY16 14,447 5,303 2,851 3,270 11,425 3,023 751 2,272 974 228 1,525 390 1,135 ‐ 1,135 23 1,158 7.13 Q2FY15 13,621 6,063 2,712 3,826 12,601 1,020 692 328 960 354 (278)
645 (923)
(65)
(987)
46 (941)
(6.20)
y‐o‐y (%)
6.1 (12.5)
5.1 (14.5)
(9.3)
196.3 8.6 592.2 1.5 (35.7)
NA (39.5)
NA NA NA NA NA NA Q1FY16 q‐o‐q (%) 14,384 0.4 5,458 (2.8)
2,742 4.0 3,091 5.8 11,291 1.2 3,093 (2.3)
702 7.0 2,390 (5.0)
964 1.1 240 (5.0)
1,666 (8.5)
405 (3.6)
1,261 (10.0)
‐ NA 1,261 (10.0)
19 19.1 1,281 (9.6)
7.92 (10.0)
H1FY16 28,831 10,761 5,593 6,361 22,716 6,115 1,453 4,662 1,938 468 3,191 795 2,396 ‐ 2,396 43 2,439 15.04 H1FY15 28,226 13,255 5,434 7,188 25,877 2,349 1,422 927 1,739 522 (290)
352 (642)
(111)
(753)
(140)
(893)
(4.73)
y‐o‐y (%)
2.1 (18.8)
2.9 (11.5)
(12.2)
160.3 2.2 403.0 11.5 (10.4)
NA 125.9 (473.1)
NA NA NA NA NA Q2FY16 Q2FY15 20.9 7.5 7.9 (7.2)
36.7 44.5
19.7 19.9
22.6 28.1
26 (233)
bps
1,343 1,511 (780)
(18)
(546)
NA
Q1FY16 bps 21.5 (58)
8.8 (91)
37.9 (124)
19.1 67 21.5 115 24 128 H1FY16 H1FY15 21.2 8.3 8.3 (2.7)
37.3 47.0
19.4 19.3
22.1 25.5
25 (121)
bps
1,289 1,098 (963)
15
(340)
14,617
Key ratios EBITDA Margin (%)
Net Margin (%)
Material Cost (%)
Employee Cost (%)
Other SG&A (%)
Effective Tax Rate (%)
(contd...) October 30, 2015 | 2 Q2FY16 Result Update (contd...) Sales Breakdown Q2FY16 7,470
7,160
14,630
Pharmaceuticals
LSI
Total
Q2FY15 6,143
7,588
13,731
y‐o‐y (%)
Q1FY16 q‐o‐q (%) H1FY16 21.6 7,409
0.8 14,879
(5.6) 7,177
‐0.2 14,337
6.5 14,586
0.3 29,216
H1FY15 12,185
16,287
28,472
y‐o‐y (%)
22.1
(12.0)
2.6
Segment‐wise EBITDA margin (%) Q2FY16 Q2FY15 bps
28.8
11.2 1,755
16.5
8.2 831
22.1
9.1 1,304
Pharmaceuticals
LSI
Total
Q1FY16 bps H1FY16 H1FY15 bps
30.4 (159)
29.6
8.6 2,095
16.9 (38)
16.7
12.0 470
22.8 (68)
22.5
9.7 1,283
Uptrend in y‐y growth in pharma segment takes a pause Pharmaceuticals sales (Rs bn)
Y‐y growth (%)
22.7
21.6
9.0
25.0
8.0
20.0
7.0
15.0
6.0
8.2
5.0
4.0
10.0
3.9
1.5 5.0
0.4 3.0
‐
2.0
1.0
(7.3)
6.8
7.1
(5.0)
6.0
7.0
7.6
7.4
7.5
0.0
2Q
FY
16
1Q
FY
16
4Q
FY
15
3Q
FY
15
1Q
FY
15
4Q
FY
14
3Q
FY
14
(10.0)
Trend in y‐y decline in sales reverses in Q2FY16 10.0
9.0
LSI sales (Rs bn)
23.0 30.0
Y‐y growth (%)
25.0
19.7 8.0
20.0
24.3 7.0
15.0
6.0
10.0
5.0
5.0
(3.0)
4.0
(5.6)
3.0
(5.0)
(9.8)
2.0
1.0
‐
(10.0)
7.7
8.6
8.7
7.4
(17.4)
7.2
7.7
(15.0)
7.2
0.0
EBITDA margin sustained at elevated level 35.0
EBITDA Margin (%)
2QFY16
1QFY16
4QFY15
3QFY15
1QFY15
4QFY14
3QFY14
(20.0)
Pharma
LSI
30.4 30.0
28.8 25.0
22.4 20.0
20.7 20.0 18.7 15.0
15.4 15.3 15.3 16.9 16.5 1QFY16
2QFY16
10.0
6.0 5.0
8.2 5.7 ‐
3QFY14
4QFY14
1QFY15
3QFY15
4QFY15
(contd...) October 30, 2015 | 3 Q2FY16 Result Update (contd...) Financial Summary Income statement
Balance sheet
Y E March (Rs m)
Net sales
Growth %
Expenditure
Raw Material
Employee cost
Other expenses
EBITDA
Growth %
EBITDA Margin %
FY13
FY14
FY15
FY16E
FY17E
51,430 57,216 57,761 68,566 76,736
20.9%
11.3%
1.0%
18.7%
11.9%
20,501
9,622
11,115
10,193
23.0%
19.8%
24,421
11,052
12,485
9,259
‐9.2%
16.2%
26,617
10,903
13,850
6,392
‐31.0%
11.1%
27,426
12,920
15,561
12,658
98.1%
18.5%
30,387
14,389
17,437
14,522
14.7%
18.9%
Deprecaition
EBIT
EBIT Margin %
Other Income
Interest
PBT
Tax
Extraordinary items
Less: Minority Interest
Adjusted PAT
Growth%
PAT margin %
Reported PAT
Growth%
2,538
7,655
14.9%
176
2,302
5,708
1,524
26.7%
(2,297)
(361)
3,824
5.3%
7.4%
1,527
948.9%
2,812
6,447
11.3%
191
3,237
4,218
696
16.5%
(2,145)
(286)
3,235
‐15.4%
5.7%
1,090
‐28.6%
2,880
3,512
6.1%
425
3,553
884
805
91.0%
(481)
(176)
(97)
‐103.0%
‐0.2%
(578)
‐153.0%
3,089
9,570
14.0%
509
3,708
6,371
1,593
25.0%
‐
(211)
4,567
‐4827.4%
6.7%
4,567
‐890.6%
3,247
11,275
14.7%
611
3,358
8,528
2,132
25.0%
‐
(253)
6,142
34.5%
8.0%
6,142
34.5%
Y E March (Rs m)
Share Capital
Reserves & Surplus
Net Worth
Minority Interest
Non Current Liabilities
Long term borrowing
Deferred Tax liabilities
Other Loang Term Liabilities
Long term Provisions
FY13
159
24,784
24,944
1,115
FY14
155
26,111
26,265
1,579
FY15
155
24,376
24,530
‐
FY16E
155
27,801
27,955
211
FY17E
155
32,101
32,255
465
24,688
3,241
8
2,380
17,169
2,371
115
2,195
36,913
2,380
398
670
31,913
2,380
398
670
28,413
2,380
398
670
30,317
21,850
40,362
35,362
31,862
9,188
10,562
6,737
1,457
27,944
84,320
11,878
7,181
17,312
2,540
38,912
88,606
5,172
6,992
8,287
975
21,425
86,317
5,172
7,204
13,713
3,402
29,491
93,019
5,172
7,982
15,347
4,945
33,446
98,027
54,044
256
3,449
55,712
340
3,274
55,079
395
3,568
55,076
395
3,568
55,282
395
3,568
Total assets
11,149
7,100
3,561
3,525
1,236
26,571
84,320
13,414
8,059
4,795
2,145
868
29,280
88,606
12,353
8,164
3,939
2,143
675
27,275
86,317
14,664
9,691
6,405
2,544
675
33,980
93,019
16,411
10,846
8,002
2,847
675
38,782
98,027
Key ratios
Y E March
EPS (Rs) Core
EPS Reported
Cash EPS (Rs)
DPS (Rs)
BVPS (Rs)
FY13
FY14
FY15
FY16E
FY17E
24.0
20.3
‐0.6
28.7
38.6
9.6
6.8
‐3.6
28.7
38.6
39.9 38.0 17.5 48.1 58.9
3.6 3.7 (0.1) 7.2 11.6
157 165 154 176 203
Current Liabilities
Short term borrowings
Trade payables
Other current liabilities
Short term provisions
Total Liabilities
Assets
Net Block
Non Current Investments
Long term laons & Advances
Current Assets
Inventories
Sundry Debtors
Cash & Banak Balances
Loans & Advances
Cash flow
Y E March (Rs m)
PBT
Depreciation
Interest
Tax
Capital expenditure
Free Cash Flow
Other income
Investments
Interest paid
Others
Net change in cash
Foreign Currency translation difference
Cash on consolidation
FY13
3,411
2,538
2,987
1,999
(40)
(1,196)
9,699
(3,874)
5,825
(360)
FY14
2,073
2,812
3,237
1,820
(1,107)
(809)
8,026
(3,673)
4,353
1,164
FY15
884
2,880
3,553
‐
(9,630)
(805)
(3,118)
5,794
2,676
‐
FY16E
6,371
3,089
3,708
‐
3,827
(1,593)
15,402
(3,085)
12,317
‐
FY17E
8,528
3,247
3,358
‐
750
(2,132)
13,751
(3,453)
10,298
‐
(4,233)
‐
(992)
(2,957)
(548)
(2,509)
‐
(550)
(3,345)
(552)
5,794
‐
‐
(3,553)
21
(3,085)
‐
(5,000)
(3,708)
(1,142)
(3,453)
‐
(3,500)
(3,358)
(1,843)
(4,498)
968
(38)
2,631
‐
3,561
(4,447)
1,070
114
3,561
(10)
4,795
(3,532)
(856)
‐
4,795
‐
3,939
(9,850)
2,467
‐
3,939
‐
6,405
(8,701)
1,597
‐
6,405
‐
8,002
ROCE
ROE
11.1%
21.2%
9.5%
12.2%
5.7%
1.6%
12.2%
22.6%
14.0%
26.1%
Inventories Days
Sundry Debtors Days
Trades Payable Days
79
50
188
86
51
107
78
52
96
78
52
96
78
52
96
PER (x)
P/BV (x)
EV/EBITDA (x)
Dividend Yield %
m cap/sales (x)
net debt/equity (x)
net debt/ebitda (x)
7.5
1.1
6.4
2.0%
0.6
1.5
3.6
19.7
2.4
11.4
0.9%
1.1
1.6
4.5
‐659.5
2.6
17.2
0.0%
1.1
1.9
7.3
14.0
2.3
8.5
1.8%
0.9
1.6
3.5
10.4
2.0
7.2
2.9%
0.8
1.3
2.8
Source: Company Filings; IndiaNivesh Research (contd...) October 30, 2015 | 4 NTPC
Above our expectation STOCK INFO Co. Name Bse 532555 Nse NTPC Bloomberg NTPC.IN Reuters NTPC.BO Sector POWER Industry POWER Face Value (Rs) 10 Equity Capital (Rs Mn) 82454 Mkt Cap (Rs Mn) 1,071,902 52w H/L (Rs) 164.7/ 107 Avg Daily Vol (Bse+Nse) 2,536,896 SHAREHOLDING PATTERN (as on Sep.. 2015) Institutions Others, Incl Public Promoters % 22.7 2.34 74.96 Source: BSE STOCK PER. (%) NTPC Sensex 1m 7.0 5.6 3m 12m ‐5.3 ‐12.3 ‐1.5 0.6 Source: Capitaline, IndiaNivesh Research NTPCv/s SENSEX 130.00
120.00
110.00
100.00
90.00
NTPC
Sensex
Source: Capitaline, IndiaNivesh Research 16/10/2015
02/10/2015
18/09/2015
04/09/2015
21/08/2015
07/08/2015
24/07/2015
10/07/2015
26/06/2015
12/06/2015
29/05/2015
15/05/2015
01/05/2015
17/04/2015
03/04/2015
20/03/2015
06/03/2015
20/02/2015
06/02/2015
23/01/2015
09/01/2015
26/12/2014
12/12/2014
70.00
October 29, 2015
NTPC reported Q2FY16 numbers (Standalone) above our expectation. Adjusted Revenue (excluding prior period sales and recovered tax) stood at Rs. 174.35 bn (above our expectation of Rs. 170.44 bn) due to higher than expected generation along with better realization. Power generation went up by 8.5% YoY due to new capacity addition and higher PLF. Adjusted PAT stood at Rs. 21.68 bn, above our expectation of Rs. 16bn due to lower fuel cost (contracted by 250 bps YoY). Other income slid by 48% YoY as interest provided in bonus debenture was offset with other income. On operational front, the company has produced 60.15 bn units, up 8.5% YoY. Average PLF for coal based power plant stood at 77.27% in Q2FY16 (Vs 76.8% Q2FY15). Rs.mn
Q2FY16
Q1FY16
Q2FY15
Q‐o‐Q %
Revenue
177229
170187
165824
Adjusted Revenue
174357
161710
158579
4
8
Y‐o‐Y % INSPL Q2FY16e
170,442
7
10
Variance(%)
170,442
3.98
2.30
EBIDTA
40306
34377
32423
7
15
36,110
11.62
Adjusted EBITDA
PAT
Adjusted PAT
40306
28983
21686
34377
21354
20713
32423
20716
17025
23
23
5
30
30
27
36,110
11.62
80.60
35.13
16048
16048
Source: Company Filings; IndiaNivesh Research
EBITDA margin expanded 315 bps YoY and 240 bps QoQto 22.5% (vs our expectation of 21.2%) due to lower fuel cost and decline in staff cost. Fuel cost decreased by 250 bps YoY to 65.11% (as a percentage of sales). Other expenses increased from 6.85% to 7.9% YoY (as a percentage of sales) while staff cost decreased from 5.5% to 5.2%. Interest cost increased by 9% YoY to Rs. 8.14 bn and depreciation was higher by 15% YoY to Rs 13.22 bn on account of new capacity addition. During H1FY16 the company added1300 MW (1 unit of 500 MW at Vindhyachal, 4 Hydro units of 200 MW each at Koldam) in its power portfolio and total installed capacity reached at 45548 MW. In renewable side, NTPC to develop 10,000 mw of solar power capacity in the next five years. The company will bundle solar power with thermal power (older than 25 years plants) and sell out energy at average price to discoms (~Rs. 3.2 /unit), therebythe company will earn 15.5% equity. We have not included any numbers of proposed solar powers in our valuation. Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Abhishek Jain Research Analyst Tel: +91 22 66188832 [email protected] IndiaNivesh Research Q2FY16 Result Update 80.00
28/11/2014
Previous Rating :BUY Target : Rs.162 14/11/2014
Current CMP : Rs.130 Rating :BUY Target : Rs.162 31/10/2014
IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Q2FY16 Result Update(contd...) Quick Fundamentals (Rs. Mn)
NTPC
Standalone
Q2FY16
Q1FY16
Q2FY15
Net sales
Other Operating Income
Total sales
Cost of Revenues
Fuel Cost
Other Expenditure Staff cost
EBIDTA
Depreciation
EBIT
Interest Expense
Other income
PBT
Exceptional item
Provision for taxation
PAT
Minority Int.
Adjusted PAT
EPS (RS.)
Margin %
EBITDA %
EBIT %
PBT %
177,229
1,756
178,985
138,679
115,408
14,054
9,217
40,306
13,229
27,077
8,145
2,754
21,686
0
‐7,297
28,983
170,187
659
170,846
136,469
115,091
12,150
9,228
34,377
12,380
21,997
7,309
2,387
17,076
0
‐4,278
21,354
165,824
1,543
167,366
134,943
114,393
11,370
9,180
32,423
11,516
20,908
6,674
5,307
19,540
0
‐1,176
20,716
4.1
166.5
5
2
0
16
0
17
7
23
11
15
27
7
14
7
3
1
24
0
24
15
30
22
‐48
11
71
36
520
40
21,686
2.63
20,713
2.51
17,025
2.06
22.5
15.1
12.1
12.1
20.1
12.9
10.0
12.1
19.4
12.5
11.7
10.2
5
5
BPS
240
225
212
‐1
PAT %
Consolidated
FY15
FY14
Q‐o‐Q % Y‐o‐Y %
27
27
799,440
6,781
806,220
631,098
514,611
77,590
38,897
175,123
55,646
119,477
35,704
20,789
104,562
0
4,638
99,924
60
99,984
12.13
784,510
4,707
789,217
592,403
477,903
73,941
40,560
196,814
47,700
149,114
32,031
27,774
144,858
0
30,824
114,034
‐2
114,032
13.83
315
264
44
194
21.7
14.8
13.0
12.4
24.9
18.9
18.4
14.4
Y‐o‐Y %
2
44
2
7
8
5
‐4
‐11
17
‐20
11
‐25
‐28
‐85
‐12
NA
‐12
‐12
BPS
‐322
‐407
‐539
‐205
Source: Company Filings;BSE India; IndiaNivesh Research Operational Performance Particulars
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Group capacity added (MW)
1255
650
500
Capacity added - NTPC (MW)
1060
660
500
Capacity added - JV (MW)
195
Group capacity com m ercialized (MW)
1019
Capacity commercialized - NTPC (MW)
660
Capacity commercialized - JV (MW)
359
500
800
800
500
PLF (%)
Coal based
84.3
73.2
80.8
82.7
77.58
77.27
Gas based
39.8
33.4
31.8
26.7
28.47
25.73
Coal based
89.3
76.8
91
97.2
91.61
88.09
Gas based
90.1
89.1
93.2
96.5
96.58
97.58
Units generated (MU)
63133
55421
61340
61313
58696
60159
Energy sent out (MU)
58852
51465
57247
57385
54475
55891
Realization per unit (Rs/unit)
2.9
3.1
3.2
3.3
3.26
3.29
Fuel cost per unit (Rs/unit)
2.2
2.2
2.1
2.2
2.1
1.91
Domestic coal(MT
36.2
34.0
40.0
41.0
38.4
34.6
Imported coal(MT)
3.7
3.0
5.0
5.0
3.9
2.6
Total coal
39.8
37.0
45.0
46.0
42.3
37.2
PAF (%)
Source: Company Filings;BSE India; IndiaNivesh Research Adjusted Revenue grew by 10% YoY Adjusted Revenue (excluding prior period sales and recovered tax) stood at Rs. 174.35 bn (above our expectation of Rs. 170.44 bn) due to higher than expected generation along with better realization. On operational front, the company has produced 60.15 billion units, up 8.5% YoY. Average PLF for coal based power plant stood at 77.27% in Q2FY16 (Vs 76.8% Q2FY15). Adjusted Sales (standalone)
Electricity Sales(Adjusted)
Previous Yr sales + Sales out of AAD
Deferred Tax Recovered / (paid)
Prior Tax Recovered / (Paid)
Reported Revenues
Q2FY15
158,579
900
295
6,050
165,824
Q3FY15
185,887
1,208
295
187,390
Q4FY15
189,658
2,387
254
102
192,299
Q1FY16
161,710
430
127
7,920
170,187
Q2FY16 Q‐o‐Q %
174,357
8
2,745
538
128
0
9,016
14
177,229
4
Y‐o‐Y %
10
205
‐57
49
7
Source: Company Filings;BSE India; IndiaNivesh Research Adjusted Profit Calculation(standalone)
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16 Q‐o‐Q %
Reported Profit
20,716
30,740
29,503
21,354
28,983
Add: other provision
Less: Other extraordinary income Tax on Extra‐ordinaries & others
Adjusted PAT
Sales/Tax of earlier years
Adjusted PAT after tax
3,097
2,082
18,634
‐1,609
17,025
Source: Company Filings;BSE India; IndiaNivesh Research 6,636
24,104
‐887
23,217
6,024
23,479
‐1,866
21,613
Y‐o‐Y %
36
40
‐100
NA
4,278
20,173
7,297
21,686
71
8
250
16
20,173
21,686
8
27
NTPC (contd...) October 29, 2015 | 2 Q2FY16 Result Update(contd...) Valuation While the power sector continues to face constraints in terms of fuel availability and pricing, delayed clearances and rising debt, NTPC is much better placed compared to IPPs to face these challenges. At CMP of Rs. 130, NTPC is trading at 1.1xFY17E BV. We maintain our BUY rating on the stock with target price of Rs 162(1.4xFY17E BV) Financials Income Statement
Balance Sheet
Y E March (Rs mn)
FY13
FY14
FY15
FY16e
FY17e
Net sales
720,981
789,506
806,220
831,301
853,268
Y/Y Ch %
9.4
9.5
2.1
3.1
2.6
Operati ng expenditure
540,118
592,692
631,100
640,102
657,017
EBITDA
180,863
196,814
175,120
191,199
196,252
Y E March (Rs mn)
Share Capital
FY13
FY14
FY15
FY16e
FY17e
82,455
82,455
82,455
82,455
82,455
Reserves & Surplus
729,955
787,580
752,429
815,650
873,417
Net Worth
812,410
870,035
834,884
898,104
955,872
6448
6804
8879
8879
8879
704188
814554
1060185
1090185
1120185
44578
59145
46252
46252
46252
Minority Long‐term + ST loans
Others Y/Y Ch %
18.8
8.8
‐11.0
9.2
2.6
EBITDA Margin %
25.1
24.9
21.7
23.0
23.0
Interest 24,912
32,030
35,704
38,156
39,206
Intangible Deprecaition
38,232
47,700
55,646
61,066
69,946
Investments
117,720
117,084
83,770
91,977
87,099
Defered tax (net)
16.3
14.8
10.4
11.1
10.2
Current Assets
429,029
428,225
564,315
495,374
446,113
48,390
27,774
20,789
20,789
20,789
Sundry Debtors
60,962
67,257
92,499
68,326
74,807
Extra Ordinary Exps/(Inco 1,127
‐
‐
‐
‐
Cash & Bank Balance
187381
170507
142516
148012
90912
PBT
164,983
144,858
104,559
112,766
107,888
Loans & advances
134,278
129,847
190,883.2
139,658.6
140,789.3
Tax
40,247
30,824
4,638
24,808
23,735
24.4
21.3
4.4
22.0
22.0
124,735
114,034
99,921
87,957
84,153
27.0
‐8.6
‐12.4
‐12.0
‐4.3
Minority & Exceptional ‐5
‐0
Adj. PAT (APAT)
124,740
114,034
99,921
87,957
84,153
RPAT Margin %
17.3
14.4
12.4
10.6
9.9
Y/Y Ch %
27.0
‐8.6
‐12.4
‐12.0
‐4.3
FY13
FY14
FY15
FY16e
FY17e
142,631
149,114
119,474
130,133
126,306
38,232
47,700
55,646
61,066
69,946
‐24,912 ‐32,030 ‐35,704 ‐38,156 ‐39,206 24,429
61,618
6,860
5,187
Cash Flow After Chang in W135,639
189,213
201,035
159,903
162,232
ROCE %
9.4
Tax
‐40,247 ‐30,824 ‐4,638 ‐24,808 ‐23,735 ROE %
15.4
48,390
27,774
20,789
20,789
20,789
ROIC %
4.9
3.8
Cash flow from operations 143,781
186,163
217,186
155,883
159,285
25.1
24.9
21.7
23.0
23.0
10.3x
8.7x
10.7x
12.2x
12.7x
Total Liabilities
Net Block
EBIT
EBIT Margin %
Other Income (Inc Forex)
Reported PAT
Y/Y Ch %
‐
‐
Depreciation
Interest Exp
Changes in Working Capit ‐20,313 Others Capital expenditure (net) ‐240,297 ‐261,877 ‐268,935 ‐240,000 ‐220,000 Free Cash Flow
‐96,515 ‐75,714 ‐51,750 ‐84,117 ‐60,715 Other income
0
0
0
0
0
Investments
0
0
0
0
0
Cash flow from investmen ‐240,297 ‐261,877 ‐268,935 ‐240,000 ‐220,000 Long‐Term Debt (Decrease 106,152
110,366
245,631
30,000
30,000
‐47,918 ‐20,614 ‐24,736 ‐26,385 Share Issue / Repurchase &
Net change in cash
125625
49,229 159571
33,004 173108
19,015 173108
19,015 173108
19,015 ‐10807
‐12393
‐12393
‐12393
‐12393
‐ ‐ ‐ ‐ ‐ 46,409
60,616
62,016.9
‐ ‐ 76,400.0 62,977.4
76,400.0 63,205.1
76,400.0 Current Liabilities
51,435
72,841
349,506
329,879
340,924
Provisions
73,541
76,482
38,414
74,817
76,794
304,054
278,902
176,395
90,678
28,394
1,651,974
1,839,418
1,950,200
2,043,421
2,131,188
Total assets
Key Ratios
Y E March (Rs mn)
Others
Net Current Assets
‐
Cash Flow
Operaing Profit Inventories
1,567,624 1,750,538 1,950,200 2,043,421 2,131,188
1,183,874 1,380,329 1,594,071 1,773,005 1,923,059 ‐48,123 2404
60,433
‐36,083 ‐8135 ‐112384
54,314
‐21,400 112,634
60,884
0
5,264
0
3,615
‐78,853 ‐57,100 Cash at the beginning of th 180,874
187,381
165,981
226,865
148,012
Cash at the end of the yea 144,791
165,981
226,865
148,012
90,912
Y E March (Rs mn)
FY13
FY14
FY15
FY16e
FY17e
Adj.EPS (Rs)
13.9
13.8
12.1
10.7
10.2
Cash EPS (Rs)
19.8
19.6
18.9
18.1
18.7
5.8
5.8
2.5
3.0
3.2
98.5
105.5
101.3
108.9
115.9
8.9
6.3
6.5
6.1
13.1
12.0
9.8
8.8
4.1
3.1
2.7
DPS (Rs)
BVPS
EBITDA Margin %
PER (x)
P/BV (x)
1.3x
1.2x
1.3x
1.2x
1.1x
P/CEPS (x)
6.6x
6.6x
6.9x
7.2x
7.0x
EV/EBITDA (x)
Dividend Yield %
9.1x
4.5
9.0x
4.5
11.6x
1.9
10.8x
2.3
11.0x
2.5
m cap/sales (x)
1.6x
1.4x
1.4x
1.3x
1.3x
net debt/equity (x)
0.6x
0.7x
1.1x
1.0x
1.1x
net debt/ebitda (x)
5.2x
2.9x
3.3x
5.2x
4.9x
Debtors (Days)
30
31
30
30
32
Creditors (Days)
26
33
74
73
75
Inventory (Days)
23
28
28
28
27
Cash Conversion Cycle (Days)
28
25
‐16
‐15
‐16
Source: Company Filings; IndiaNivesh Research NTPC (contd...) October 29, 2015 | 3 Ltd Crompton Greaves
Current CMP : Rs.179 Rating : BUY Target : Rs.210 STOCK INFO BSE 500093 NSE CROMPGREAV INDEX S&P BSE 100 Bloomberg CRG Reuters CROM.BO Sector Heavy Electrical Equipment Face Value(Rs) 2.00 Equity Capital(Rs mn) 1,254 Mkt Cap(Rs mn) 115,276 52w H/L 206/145 3m Avg Daily Volume(BSE+NSE) 2,317,240 34.38 16.70 31.62 17.30 1m 3m 12m 7.85 3.99 2.18 5.55 (1.53) 0.59 Source: Capitaline, IndiaNivesh Research Crompton Greaves Ltd v/s SENSEX 140 120 100 80 60 40 20 ‐
CG
Sensex
Source: Capitaline, IndiaNivesh Research Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Rahul Koli Research Associate Rs mn
Net Revenue
EBITDA
Net Profit
Adj Net Profit
EBITDA margin %
Net margin %
Q2FY16
32,161
1,567
521
347
4.9%
1.6%
Q2FY15
34,303
1,684
696
696
Q1FY15 Y‐o‐Y Q‐o‐Q
31,658 ‐6.2%
1.6%
791 ‐6.9% 98.1%
160 ‐25.1% 225.7%
63 ‐50.1% 451.4%
bps
bps
4.9%
2.5% ‐4 237
2.0%
0.5% ‐39 111
Estimates Variance
30,316
6.1%
1,523
2.9%
552
‐5.6%
552
‐37.1%
bps
5.0% ‐15
1.8% ‐21
Consolidated, Bloomberg Estimates Source: Company, IndiaNivesh Research
Highlights: Led by de‐growth in power systems business, Sales of the company declined by 6.2% to Rs 32,161 mn. Operating costs of the company declined in‐line with top‐
line resulting in flat EBITDA margin of 4.9% for the quarter. EBITDA of the company declined by 6.9% to Rs 1,567 mn. Adjusted net profit for the quarter (adjusted for forex and exceptional item) declined by 50.1% to Rs 347 mn on account of lower lower other income, higher finance cost and higher tax burden. Rs mn
Net Revenue
Material cost
Employee cost
Other expenses
EBITDA
EBITDA margin %
Other Income
Depreciation
EBIT
Finance cost
Exceptional item
PBT
Tax expense
effective tax rate %
PAT
Minority/Associate
Net Profit
Adj Net Profit
Net margin %
Adj EPS (Rs)
Q2FY16
32,161
21,579
4,792
4,223
1,567
4.9%
195
676
1,086
347
317
1,056
557
52.8%
499
23
521
347
1.6%
0.55
Q2FY15
34,303
23,412
4,868
4,340
1,684
4.9%
455
661
1,478
225
‐
1,252
570
45.5%
682
14
696
696
2.0%
1.11
Q1FY15
31,658
21,602
4,721
4,545
791
2.5%
456
680
566
280
517
804
653
81.2%
151
9
160
63
0.5%
0.10
Consolidated Source: Company, IndiaNivesh Research
Y‐o‐Y Q‐o‐Q
‐6.2%
1.6%
‐7.8% ‐0.1%
‐1.5%
1.5%
‐2.7% ‐7.1%
‐6.9% 98.1%
‐4 237
‐57.1% ‐57.2%
2.3% ‐0.6%
‐26.5% 91.8%
54.0% 24.0%
‐15.7%
31.3%
‐26.9% 230.4%
‐25.1%
‐50.1%
‐39
‐50.1%
225.7%
451.4%
111
451.4%
H1FY16
63,819
43,181
9,513
8,695
2,431
3.8%
578
1,356
1,653
627
834
1,860
1,210
65.1%
649
32
681
390
1.1%
0.62
H1FY15
Y‐o‐Y
68,719
‐7.1%
46,533
‐7.2%
9,939
‐4.3%
8,814
‐1.3%
3,433 ‐29.2%
5.0% ‐119
840 ‐31.3%
1,332
1.8%
2,942 ‐43.8%
470
33.4%
‐22
2,451 ‐24.1%
1,119
45.7%
1,331 ‐51.2%
5
1,336 ‐49.0%
1,358 ‐71.3%
1.9% ‐86
2.17 ‐71.3%
Tel: +91 22 66188833 [email protected] IndiaNivesh Research % Source: BSE STOCK PER. (%) Crompton Greaves Sensex October 30, 2015 Top‐line and operating profits were in‐line with estimates. However net profit was below estimates due to lower other income, high interest cost and higher tax rate. Previous Rating : BUY Target : Rs.210 SHAREHOLDING PATTERN (as on Sept. 2015) Promoters FIIs DIIs Public & Others Q2FY16 Result Update IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Q2FY16 Result Update (contd...) Segment Financials: Net Revenue Break‐up Rs Mn Power Systems Consumer Products Industrial Systems Others Less: Intersegment Total Net Revenue EBIT Break‐up Rs Mn Power Systems Consumer Products Industrial Systems EBIT margin % Power Systems Consumer Products Industrial Systems Q2FY16 Q2FY15 Q1FY15 Y‐o‐Y Q‐o‐Q H1FY16 H1FY15 Y‐o‐Y 35,303 17,752 9,351 1,679 267 63,819 41,571 16,042 9,144 2,184 221 68,719 18,950 8,044 4,765 562 160 32,161 21,378 16,353 ‐11.4%
15.9%
7,431 9,708 8.3%
‐17.1%
4,618 4,587 3.2%
3.9%
972 1,117 ‐42.1%
‐49.7%
95 107 68.0%
49.9%
34,303 31,658 ‐6.2%
1.6%
372 478 ‐717 740 889 1,387 469 423 341 ‐22.2%
‐151.9%
‐16.8%
‐46.7%
2.0% 2.2% ‐4.4%
9.2% 12.0% 14.3%
9.8% 9.2% 7.4%
Consolidated Source: Company, IndiaNivesh Research 10.9%
37.6%
‐
27 634 ‐
276 ‐509 69 241 ‐
345 2,126 810 ‐1.0% 12.0% 8.7% ‐15.1%
10.7%
2.3%
‐23.1%
20.7%
‐7.1%
834 ‐141.4%
1,976 7.6%
731 10.8%
‐
2.0% 298 ‐
12.3% 34 8.0% 67 Sales impacted by de‐growth in Power Systems Segment: Crompton Greaves reported sales de‐growth of 6.2% to 32,161 mn. Power systems performance was negatively affected by strike at Nasik factory. Power Systems sales showed de‐growth of 11.4% to 18,950 mn. Consumer products business has reported a decent growth of 8.3% to 8,044 mn, largely driven by lighting (+14% y‐o‐y) and pumps (+10% y‐o‐y). Industrial segment reported marginal growth of 3.2% to Rs 4,765 mn. Flat operating margin on consolidated basis: Both power systems and consumer products segment has shown EBIT margin de‐
growth for the quarter. Power systems EBIT margin has declined by 27 bps to 2%. Whereas consumer product has reported larger contraction of 276 bps in EBIT margin to 9.2% due to higher other expense in the segment. Industrial system has improved its margin by 69 bps to 9.8%. Overall EBITDA margin of the company has remained flat at 4.9% on y‐o‐y basis. However decline in top‐line led to 6.9% decline EBITDA to Rs 1,567 mn. (contd...) October 30, 2015 | 2 Q2FY16 Result Update (contd...) Net Profit declined by 50.1%: Adj net profit for the quarter declined by 50.1% to Rs 347 mn, led by lower operating profit, lower other income (Rs 195 mn) and higher tax rate (52.8%) for the quarter. Interest cost for the quarter has also increased by 54% to Rs 347 mn. Depreciation expense reported marginal growth of 2.3% to Rs 676 mn. Standalone order inflow for the quarter stood at Rs 11.6 bn (+6% y‐o‐y) and order book stood at Rs 37 bn (+5% y‐o‐y) Sale of power business: The committee of directors of the company has approved the sale of company’s power systems business in Canada for an enterprise value of Canadian $20 mn. This was loss making subsidiary of the company.In the year FY15 this subsidiary reported sales of Rs 4,162 mn and net loss of Rs 497.6 mn CG is in the process of restructuring/selling its international power system business. As company was unable to turnaround many of its foreign subsidiaries, we believe this development is positive for the company in medium to long term. CG would like to concentrate on growing its India Business, export, industrial and global Automation business. Interest burden can reduce going forward due to lower borrowings: Company has reduced its long term debt from 19 bn (Q4FY15) to 17 bn (Q2FY16). Working capital loan has also declined from 6.2 bn (Q4FY15) to 4.8 (Q2FY16). Downward trajectory of interest rates and reduced borrowing should help company in reducing interest cost going forward. Outlook and Valuation: At CMP of Rs 179, stock is trading at FY16E and FY17E, PE multiple of 25.0x and 17.0x. We maintain Buy rating on the stock with TP of Rs 210. : (contd...) October 30, 2015 | 3 October 30, 2015
Current CMP : Rs.95 Rating : BUY Target : Rs.128 Previous Rating : BUY Target : Rs.128 Rs.mn
Revenue
EBIDTA
PAT
Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Amar Mourya Research Analyst Tel: +91 22 66188836 [email protected] Q2FY16
Q1FY16
Q2FY15
Q‐o‐Q %
2,070
393
13
2,018
351
‐2
2,075
278
‐12
2.6%
12.0%
NM
Y‐o‐Y % INSPL est Variance(%) Comments ‐0.2%
41.7%
NM
2,060
363
9
0.5% In‐lin Est
8.4% Above‐Est
40.0% Above‐Est
Source: Company Filings; IndiaNivesh Research
 In Q2FY16, the company reported revenue growth of 2.6% Q/Q (‐0.2% Y/Y) to Rs.2,070 mn. The revenue growth on sequential basis was due to outperformance in international (+2.8% Q/Q) and domestic business (+1.6% Q/Q). On year‐over‐year basis, domestic revenue went down 21.7%; partially offset by 8.1% growth in international segment.  Headcount optimization resulted in a reduction of manpower cost by 23.6% y/y and 3.9% q/q in Q2FY16. The employee base at the end of Sep‐15 was 1,075.  EBITDA grew by 41.7% y/y (12.0% Q/Q) to Rs.393 mn in Q2FY16. This growth is inclusive of new expenditure to support the development of new products and brand. In Q2FY16, EBITDA margin stood at 19.0% (v/s 13.4% in Q2FY15 and 17.4% in Q2FY16). Excluding the impact of newer products initiatives (~2% of Revenue to Rs.41 mn) the EBITDA margin would have been closer to 21.0% in Q2FY16.  Depreciation during the quarter stood at Rs.371 mn (v/s Rs.362 mn in Q4FY15 and Rs.373 mn in Q2FY15). The depreciation also includes the amortization (Rs.195 mn) of upfront fees paid by the company in last deal with Telefonica Group. The company will do additionally Rs.390 mn of amortization in 2HFY16. In FY17, the depreciation and amortization cost expected to decline by Rs.195 mn per quarter.  Interest stood at Rs.5 mn (v/s Rs.5 mn in Q4FY15 and Rs.10 mn in Q2FY15). Other income went down to Rs.80 mn (v/s Rs.87 mn in Q2FY16 and Rs.157 mn in Q2FY15) despite forex gain of Rs.45 mn. Tax rate during the quarter was high at 87% to Rs.85 mn (Rs.74 mn in Q4FY15 and Rs.62 mn in Q2FY15) because of the foreign currency taxes that get written off in India.  During the quarter, Onmobile reported net profit of Rs.13 mn (v/s loss of Rs.2 mn in Q1FY16 and loss of Rs.12 mn in Q2FY15). In our view, net profit was positively impacted by higher revenue and EBITDA base. IndiaNivesh Research Efforts to move from B2B to B2C looks positive; Maintain BUY with TP of Rs.128 Q2FY16 Result Update OnMobile Global Ltd (OGL) IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Q2FY16 Result Update (contd...) Quarterly Analysis (Rs Mn) 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 Q1FY16
Q2FY16
Q/Q %
Y/Y %
Net Sales
1,897 2,250 2,255 2,251 1,988 2,075 2,268 2,140 2,018 2,070 2.6%
‐0.2%
Employee Expenses
Content Fee & Royalty
Other Expenses
Total EBITDA
752 173 553 1,478 419 911 377 627 1,915 335 929 925 ‐ 394 1,030 1,870 1,959 3,189 296 ‐938 850 418 563 1,831 157 726 478 593 1,797 278 621 748 435 1,803 465 588 651 573 1,812 328 577 638 452 1,667 351 555 676 446 1,676 393 ‐3.9%
5.9%
‐1.4%
0.6%
12.0%
‐23.6%
41.3%
‐24.7%
‐6.7%
41.7%
Interest
Other Income
Depreciation
PBT
4 123 296 241 12 126 360 89 11 ‐15 343 ‐74 5 21 371 ‐199 10 157 362 62 7 25 349 134 5 11 355 ‐21 5 87 373 61 5 80 371 97 ‐2.0%
‐8.7%
‐0.5%
59.9%
‐53.4%
‐49.2%
2.4%
57.3%
Tax
NetProfit 101 74 10 ‐3 40 74 60 92 62 85 141 15 ‐84 ‐1,392 ‐239 ‐12 74 ‐113 ‐2 13 35.6%
NM
14.5%
NM
EPS
O/Shares
1.2
117
9 ‐79 368 ‐1,395 0.1
152
EBITDA Margin %
PAT Margin %
Tax Rate 22.1%
7.4%
41.7%
‐0.7
‐12.2
120
114
Margin %
14.9% 13.1% ‐41.7%
0.7%
‐3.7% ‐61.8%
83.0% ‐13.3%
0.2%
Employee Expenses
Content Fee & Royalty
Other Expenses
39.6%
9.1%
29.2%
40.5%
16.7%
27.9%
41.2%
0.0%
45.7%
41.1%
17.5%
83.1%
Source: Company; Filings; IndiaNivesh Research ‐2.1
114
‐0.1
121
7.9% 13.4%
‐12.0%
‐0.6%
‐20.2% 119.6%
42.7%
21.0%
28.3%
35.0%
23.0%
28.6%
0.6 ‐0.9 ‐0.0 0.1 121
121
121
121
20.5% 15.3% 17.4%
3.3%
‐5.3%
‐0.1%
45.0% ‐438.1% 102.6%
NM
NM
0.0%
0.0%
BPS 19.0% 207 953 0.6% 520 1,193 87.0% 54,073 12,281 27.4%
33.0%
19.2%
26.8%
32.6%
21.6%
27.5%
30.4%
26.8%
28.6%
31.6%
22.4%
Key Result Takeaway Revenue performance update  During the quarter, international segment grew 2.8% Q/Q. Followed by 1.6% Q/Q increase in India business. In international segment revenue growth was largely driven by Europe (+4.1% Q/Q), Africa & ME (+8.9% Q/Q), Asia (+23.1% Q/Q); partially offset by 1.6% Q/Q de‐growth in Latam.  The company’s next generation RBT service in Vodafone Spain attracted ~70 mn paid subscribers in three months. The management intent to launch two more new product in Converged VAS and RBT in FY16. Onmobile expect new service to pick‐up over medium‐
term and likely to bode well on revenue growth. Further, this new stream of revenue would transit OnMobile business model (moving from B2B to B2C). Given the increasing penetration of smart phones these services to bring material positive impact on revenue & profitability. EBITDA Update…  During the quarter, OnMobile’s content cost (as % of Rev) increased to 32.6% (v/s 31.6% in Q1FY16) due to new product initiatives. The company’s employee cost (as % of Rev) went down to 26.8% (v/s 28.6% in Q4FY15) due to cost rationalization initiatives. Additionally, other expenditure during the quarter declined to 21.6% (v/s 22.4% in Q4FY15) of revenue. As a result, the company delivered EBITDA margin of 19.0% in Q2FY16.  Adjusting the new product related expenditure (~2% of Rev to Rs.40 mn) EBITDA margin stood at 21.0% in Q2FY16. We maintain our EBITDA margin estimate of 18.7%/21.7 in FY16E/FY17E on back of expected uptick in high margin new product business (which will be launched in FY16E). (contd...) October 30, 2015 | 2 Q2FY16 Result Update (contd...) Strong Balance Sheet Position  On 30th Sep, 2015 the company reported cash balance of Rs.2,896 mn (v/s Rs. 2,941 mn in 30st Jun, 2015). The company’s total debt further declined to Rs.339 mn (v/s Rs.400 in Q1FY16). Management will continue to reduce debt consistently from here‐on. The company has taken shareholder friendly step by doing a share buy‐back of 5.8 mn shares (spend Rs.490 mn). Consequently, the company’s equity capital reduced to Rs.1092 mn in FY15 (v/s Rs.1142 mn in FY14). Chart: Debt Profile 1400
1.6x
1000
1.4x
1.4x
1200
1.2x
1.1x
1.0x
800
0.9x
0.3x
0.8x
0.3x
600
0.6x
0.2x
0.4x
400
0.6x
0.4x
200
0.2x
1325
883
847
715
537
611
400
339
0.0x
0
Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16
Debt (Rs Mn)
D/EBITDA
Source: Company; Filings; IndiaNivesh Research Other Highlights  Expect tax rate in the range of 40‐45% in FY16  Appointed Mr. Sanjay Baweja as an independent director ‘earlier with Flipkart’  MTN deployment will contribute to revenue in FY17 New Deal Wins  India ‐ Won new deal from Airtel India for RBT business ‐ launched CVAS (D2C) product in one of the large operators in India.  Nigeria ‐ New business win for RBT in Airtel Nigeria  South African ‐ New business win for RBT with the leading operator in South African  Sri‐lanka – Signed CVAS deal with 2 major operators in Sri‐lanka  Bangladesh – Seen robust growth of RBT in a major operator in Bangladesh with 16% Penetration. Valuation At CMP of Rs.95, the stock in trading at P/E multiple of 9.5x FY17E earnings estimate. We continue to like the story due to following reasons: (1) operational turnaround on back of restructuring, (2) top management reorganization, and (3) strong cash generating business model. The cash per share of Rs.25 bring cushion to investors. Based on the various available triggers, we maintain ‘BUY’ with target price of Rs.128 (Valuing 12.8x FY17E) on the stock. (contd...) October 30, 2015 | 3 Q2FY16 Result Update (contd...) Income Statement
Y E March (Rs m)
Balance Sheet
FY13
FY14
FY15
FY16e
FY17e
Y E March (Rs m)
FY13
FY14
FY15
FY16e
Net sales
7,253
8,653
8,687
9,555
10,893
Share Capital
1,142
1,142
1,142
1,142
1,142
Y/Y Ch %
13.7
19.3
0.4
10.0
14.0
Reserves & Surplus
7,949
6,527
6,459
6,160
7,133
Net Worth
9,090
7,670
7,602
7,302
8,275
COGS
4,526
6,569
5,765
5,813
6,296
Minority 0
0
0
0
0
SG&A
1,223
1,960
1,998
1,959
2,233
Long‐term loans
491
883
883
883
883
EBITDA
1,503
125
924
1,784
2,365
Others 6.8
‐91.7
641.8
93.1
32.6
20.7
1.4
10.6
18.7
21.7
37
50
96
96
96
Deprecaition
986
1,367
823
2,240
749
EBIT
480
‐1,292 5
‐552 1,520
6.6
‐14.9
0.1
‐5.8
13.9
Y/Y Ch %
EBITDA Margin %
Interest EBIT Margin %
Other Income (Inc Forex)
220 154 150 151 163
Extra Ordinary Exps/(Income)
‐
‐
‐
‐
FY17e
147
88
88
88
88
9,729
8,640
8,572
8,273
9,246
Gross Block
9,389
10,285
10,425
11,525
14,025
Less Depreciation
4,054
5,255
6,078
8,318
9,067
Net Block
5,335
5,030
4,347
3,208
4,959
Capital Work in Progress
0
1,651
0
1,990
0
1,990
0
1,990
0
1,990
Defered tax (net)
0
0
0
0
0
Others 0
0
0
0
0
Total Liabilities
Investments
‐
PBT
701
‐1,138 154
‐401 1,683
Current Assets
6,002
4,849
5,388
6,461
6,026
Tax
229
182
51
‐272
539
Sundry Debtors
1,787
2,030
1,999
2,199
2,507
32.7
‐15.9
33.0
68.0
32.0
Cash & Bank Balance
1671
834
1478
2160
1123
Reported PAT
472
‐1,320 103
‐128 1,144
Loans & advances
2,543
1,980
1,911
2,102
2,397
‐43.2
‐379.8
‐107.8
‐223.9
‐992.6
Inventories
0
5
0
0
0
2,716
2,932
2,856
3,089
3,432
542
297
297
297
297
Net Current Assets
2,743
1,620
2,235
3,075
2,297
Total assets
9,729
8,640
8,572
8,273
9,246
Y/Y Ch %
Minority & Exceptional ‐
‐
‐
‐
‐
Current Liabilities
Adj. PAT (APAT)
472
‐1,320 103
‐128 1,144
RPAT Margin %
6.5
‐15.3
1.2
‐1.3
10.5
‐43.2
‐379.8
‐107.8
‐223.9
‐992.6
Y/Y Ch %
Provisions
Source:Company filings; IndiaNivesh Research
Cash Flow
Key Ratios
Y E March (Rs m)
FY13
FY14
FY15
FY16e
FY17e
Y E March
Operaing Profit 517
‐1,242 101
‐456 1,615
Adj.EPS (Rs)
Depreciation
986
1,367
823
2,240
749
Cash EPS (Rs)
Interest Exp
‐37 ‐50 ‐96 ‐96 ‐96 DPS (Rs)
Changes in Working Capital 670
‐32 ‐40 33
35
Cash Flow After Chang in WCapital
BVPS
FY13
FY14
FY15
FY16e
4.1
‐11.6
0.9
‐1.1
FY17e
10.0
12.8
0.4
8.1
18.5
16.6
1.5
1.5
1.5
1.5
1.5
79.6
67.1
66.5
63.9
72.4
17.6
2,137
42
788
1,721
2,304
ROCE %
5.4
‐14.5
1.2
‐5.6
Tax
‐229 ‐182 ‐51 272
‐539 ROE %
29.2
17.8
33.6
33.6
34.6
Others ‐470 483
218
‐40 ‐131 ROIC %
3.1
‐17.3
‐0.8
‐3.6
10.5
21.7
Cash flow from operations
1,438
344
955
1,954
1,634
‐761 ‐1,063 ‐140 ‐1,100 ‐2,500 Free Cash Flow
677
‐719 815
854
‐866 Other income
‐517 ‐339 0
0
0
0
0
0
0
1
Capital expenditure (net)
Investments
‐1,278 ‐1,402 ‐140 ‐1,100 ‐2,499 Long‐Term Debt (Decrease) Increase
‐322 392
0
0
0
‐171 ‐171 ‐171 ‐171 ‐171 ‐9
1
0
0
1
Share Issue / Repurchase & Others EBITDA Margin %
20.7
1.4
10.6
18.7
PER (x)
23.0x
‐8.2x
104.9x
‐84.7x
9.5x
P/BV (x)
1.2x
1.4x
1.4x
1.5x
1.3x
P/CEPS (x)
7.4x
229.4x
11.7x
5.1x
5.7x
EV/EBITDA (x)
7.3x
87.6x
11.8x
6.1x
4.6x
Dividend Yield %
m cap/sales (x)
1.6
1.6
1.6
1.6
2.5x
2.2x
1.6x
1.6x
net debt/equity (x)
‐0.1x
0.0x
‐0.1x
‐0.2x
0.0x
net debt/ebitda (x)
‐0.8x
0.4x
‐0.6x
‐0.7x
‐0.1x
‐502 222
‐171 ‐171 ‐170 Net change in cash
‐343 ‐837 643
682
‐1,035 Creditors (Days)
2,014
1,671
834
1,478
2,160
Inventory (Days)
1,671
834
1,478
2,160
1,125
1.6
Debtors (Days)
2.6x
89
84
84
84
84
135
122
120
118
115
0
0
0
0
0
‐46
‐37
‐36
‐34
‐31
(contd...) October 30, 2015 | 4 Result Preview Daljeet S. Kohli Head of Research Atul Auto Ltd. | Rating: Hold| Target: Rs. 471 (Result on 31 October 2015) Tel: +91 22 66188826 [email protected] Quick Fundamentals (Rs. Mn)
Volume(Unit)
Revenue
Average realization
EBIDTA
PAT
EPS (RS.)
Abhishek Jain Research Analyst Tel: +91 22 66188832 [email protected] Aman Vij Research Analyst Tel: +91 22 66188818 [email protected] EBITDA
PAT
Source: Company Filings; IndiaNivesh Research Q2FY16e
11925
1431
120000
188
128
5.85
Margin %
13.1
9.0
Q1FY16
8838
1059
119869
119
71
3.24
Margin %
11.2
6.7
Q2FY15 QoQ % YoY %
11088
35 8 1307
35 9 117911
0
2 158
58 19 110
81 17 5.00
81 17 Margin % Basis Points (BPS)
12.1
188 105 8.4
226 57  Atul Auto’s revenue is expected to increase by 9% YoY (35% QoQ) to Rs 1.43bn led by 8% volume growth.  EBITDA margins likely to expand by 105 bps YoY due to lower commodity prices  Key things to watch out for (1) Progress on domestic launch of petrol version (2) Volume guidance (3) comment on exports Valuation We believe with further capacity addition and new petrol product launch, Atul can efficiently tap export markets along with urban markets in India and, thereby, continue the strong growth momentum. The entry into petrol segment, increasing capacity and overseas footprint could lead to faster growth in market share in the coming years. However we will wait for Q2FY16 numbers and management commentary to know the progress on petrol version for domestic market before changing our estimates. At CMP of Rs 488 the stock is trading at PE multiple of 18.6x FY17E EPS. We maintain hold with target price of Rs. 471 (18x FY17E EPS). Daljeet S. Kohli Head of Research ICICI Bank | Rating: BUY | Target: Rs 390/‐ (Rs mn) Q2FY16E Net Interest Income 52,784 Pre Provisioning Profit 51,872 Net Profit 29,594 EPS (Rs) 5.1 Tel: +91 22 66188826 [email protected] Kaushal Patel Research Associate Q1FY16 51,151
50,378
29,762
5.1 Source: Company Filings, IndiaNivesh Research; Standalone Tel: +91 22 66188834 [email protected] Q2FY15 % QoQ % YoY 46,566 3 13 46,979 3 10 27,090 (1) 9 4.6 (1) 9 We expect advances to grow at 15% y‐o‐y mainly driven by higher growth in retail advances (+23% y‐o‐y). However, higher retail credit growth will be offset by slower traction in wholesale credit growth (+9% y‐o‐y). We expect deposits to grow at 9% y‐o‐y mainly driven by growth in CASA deposits. We expect CASA deposits ratio to remain at 44% as of Q2FY16E. NIM is likely to remain stable at 3.6%. Net Interest Income (NII) is expected to grow at 13% y‐o‐y to Rs 52.8 bn. Fee income is expected to grow by 7% y‐o‐y due to subdued corporate activity. As a result, Pre Provisioning Profit (PPP) to increase 10% y‐o‐y to Rs 51.9 bn. Net profit of the bank to increase 9% y‐o‐y to Rs 29.6 bn. We expect asset quality pressure to remain on ICICI Bank. However, higher loan growth and higher provisioning against bad assets will help the bank to maintain NPA ratios at current level. As a result, we expect Gross NPA and Net NPA to remain at 3.7% and 1.7% as of Q2FY16E, respectively. Valuation At CMP of Rs 271/‐, as per our estimates, the stock (standalone) is trading at P/ABV of 1.9x and 1.7x for FY16E and FY17E respectively. We have a BUY rating on the stock with target price of Rs 390/‐. Key things to watch out for  Slippages from standard restructured accounts  Repatriation of profits from any of the international subsidiaries can aid earnings Coromandel International Ltd (COIL)
In‐line performance; Maintain BUY with TP of Rs.304 Q2FY16 Concall Update Current CMP : Rs.227 Rating : BUY Target : Rs.304 Previous Rating : BUY Target : Rs.304 Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Amar Mourya Research Analyst Tel: +91 22 66188836 [email protected] October 30, 2015
Rs.mn
Q2FY15
Q‐o‐Q %
Revenue 35,889 21,812 34,660 64.5%
3.5% 36,193 ‐0.8%
in‐line
265.9%
‐2.5% 3,221 5.0%
in‐line
EBIDTA
Q2FY16
Q1FY16
3,381 924 3,467 Y‐o‐Y % INSPL Est. Variance(%) Comments
PAT
1,735 145 1,799 1096.3%
‐3.6% 1,670 3.9%
in‐line Coromandel International Ltd (COIL) Q1FY16 performance was mixed‐bag; revenue above estimate; EBITDA and PAT below expectation. Revenue went up 15.8% Y/Y to Rs.21.9 bn (v/s INSPL est. Rs.20.6bn). Fertilizer segment contributed 81% and Non‐
subsidy business contributed 19% of total revenue (as % of Sales). (Rs Mn)
Fertilizer Non Fertilizer Total Q1FY16
Q1FY15
17,792 15,599
4,173 3,373
21,965 18,972
Y/Y %
14.1%
23.7%
15.8%
 EBITDA (Inc. other income) went down22.2% Y/Y to Rs.1,077mn (INSPL Est. Rs.1,340 mn) translating to margin contraction of 240 bps Y/Y (to 4.9% v/s 7.3% in Q1FY15).The key reasons for lower EBITDA margin was change in revenue mix (lower DAP & NPK sales), lower margin in Non‐Subsidy business, and higher forex expenditure (~Rs.180 mn). As a result, the company’s other expenditure increased 15.9% Q/Q to Rs.3,849 mn.DAP business during the quarter suffered due to supply issue of raw material (Phosphoric acid) from Foskor, South Africa &Tifert, Tunisia. During the quarter, Fertilizer business contributed 56% to the overall EBITDA.  Net profit went down55.6% Y/Y to Rs 145mn (v/s INSPL est. of Rs. 546 mn) led by lower EBITDA base. The consolidated numbers include Coromandel International, Sabero Organics, and Liberty Phosphate.  During the quarter, interest/depreciation expenditure stood at Rs.598/Rs.262 mn (v/s Rs.609/Rs.257 mn in Q1FY15). The company reported tax expenditure of Rs 74mn leading to tax rate of 33% (v/s 33% in Q1FY15). We believe industry wide challenges like higher inventories, instability in raw material price, and low pricing power is behind for the company. The weak non‐
subsidy business performance in Q1FY16 due to high channel inventory in Latin America remains the concern. We maintain BUY with previous target price to Rs.304 on COIL. IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511 IndiaNivesh Research 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Q2FY16 Concall Update (contd...) Quarterly Analysis (Conso)
(Rs Mn)
Total Income Q2FY16
Q1FY16
Q2FY15
Q/Q %
Y/Y %
35,889 21,965 34,800 63.4 3.1
Raw Materials
28,404
Less: Stock Adjustments
1,330
Employee Cost
724
Other Manufacturing Expenses 4,710
Total Operating Exp
32,508
EBITDA
3,381
Margin %
9.4%
18,044
1,723
719
3,849
20,888
1,077
4.9%
22,373
‐3,823
694
4,305
31,194
3,606
10.4%
57.4
‐22.8
0.7
22.4
55.6
213.9
27.0
NM
4.4
9.4
4.2
‐6.2
Exceptional Items
Interest
Depreciation
Profit Before Tax
Margin %
‐
497
282
2,603
7.3%
‐
598
262
217
1.0%
‐
NM
NM
601 ‐17.0 ‐17.4
264 7.7 6.7
2,741 1,097.8 ‐5.0
7.9%
Total Tax
Tax Rate %
868 73 911 1,095.9 ‐4.7
33.4%
33.4%
33.2%
Net Profit
Margin %
1,735 145 1,830 1,098.8 ‐5.2
4.8%
0.7%
5.3%
Minority Interest (after tax)
‐
‐
31
NM
NM
Net Profit to Equity Shareholder 1,735 145 1,799 1,098.8 ‐3.6
Margin %
4.8%
0.7%
5.2%
EPS
6.1 0.5 6.4 1,098.8 ‐3.6
O/shares 283 283 283 ‐
‐
Source: Company Filing; IndiaNivesh Research Key Conference Call Take Away  COIL’s reported 15% y/ytotal fertilizer volume growth to 0.65 mn tonnes (v/s 0.57 mn tonnes in Q1FY15). The key driver for rise in complex fertilizer volume was higher imported NPK (to 0.13 mn tonnes v/s 0.006 mn tonnes in Q1FY15). This was partially offset by 7% Y/Y (to 0.43 mn tonnes v/s 0.46 mn tonnes in Q1FY15) decline in DAP. During the quarter, manufactured DAP declined 73% Y/Y to 0.026 mn tonnes (v/s 0.095mn tonnes in Q1FY15). The decline in manufactured DAP volume was due to the non‐availability of phosphoric acid during the quarter.MOP delivered 34%Y/Y growth in Q1FY16. Whereas SPP volume during the quarter went down 11% Y/Y. Volume (000'T)
DAP mfg
Dap imp
DAP Total Other NPK mfg
Other NPK imp
Other NPK total MOP
SSP
Complex total Urea
Fertilisers total Mfg (%) in DAP+NPK
FY12
363
133
496
2035
228
2263
138
118
3015
273
3288
87%
FY13
236
197
433
1425
184
1609
80
91
2213
542
2755
81%
Source: Company Filing; IndiaNivesh Research FY14
586
42
628
1594
27
1621
123
106
2478
834
3312
97%
Q1FY15
95
6
101
325
0
325
16
23
465
105
570
99%
Q2FY15
29
72
101
720
1
721
65
41
928
205
1133
91%
Q3FY15
56
68
124
562
1
563
32
32
751
278
1029
90%
Q4FY15
83
35
118
571
0
571
41
130
860
0
860
95%
FY15
263
181
444
2178
2
2180
154
226
3004
588
3592
93%
Q1FY16 Y/Y Ch %
26
‐73%
97
1522%
123
22%
359
10%
34
NM
393
21%
21
34%
21
‐11%
558
20%
97
‐8%
655
15%
75%
‐24%
 COIL reported 240bps Y/Y contraction in EBITDA margin due to rise in phosphoric acid and ammonia prices and low margin in non‐subsidised business. The ammonia price started moderating from its peak level ($550/tons). In our view, decline in raw material cost, higher utilization level, increasing share of manufactured volume, and stable rupee may positively impact the EBITDA margin performance going‐ahead.We estimate EBITDA margin of 8.2%/8.7% in FY16E/FY17E, respectively. (contd...) October 30, 2015 | 2 Q2FY16 Concall Update (contd...) Chart: Cost Break‐up Quarterly Analysis (Conso)
(As % of Rev)
Material Expenses
Employee Expenses
Traded Goods
Others Expenses
EBITDA Margin Q1FY16
Q4FY15
52.9 64.1
3.3
2.4
21.4
14.9
17.5
13.3
4.9
5.3
Q1FY15
47.4
3.3
24.4
17.5
7.3
BPS
Q/Q %
‐1116
87
646
422
‐40
Y/Y %
553
‐7
‐307
2
‐240 Source: Company Filing; IndiaNivesh Research  According to the company’s management complex fertiliser inventory declined in the system from 7.3 mn tonnes in CY14 to 3.4 mn tonnes in CY15. Meaning access inventory position on c3.9 mn tonnes was liquidated from the system. However, still c1.5 mn tonnes of access inventory remains in the system relative to the normal level. In our view, normal ‘Rabi Crop’ could deplete the inventory in the system and boost overall sales volumes going ahead. Additionally, the company’s initiatives to improve working capital cycle along with timely payment of government subsidy could lead to expansion in return on capital employed (ROCE). Chart: Industry Wide Inventory Position Source: Company Filing; IndiaNivesh Research Other Key Conference Highlights:  Market share in DAP declined from 18% to 13% in Q1FY16.  Market share in SSP increased to 16% from 12% in Q1FY15.  The total outstanding government subsidy is ~Rs.15000 mn (out of which Rs.7000 mn is pending from last many years).  During the quarter, the government subsidy to the total revenue was Rs.6130 mn.  The company had signed the forward contract with few global suppliers for Phosphoric acid at $810 MT.  The farm gate price of DAP is in the range of Rs.24,500‐24,000/tonnes, which is largely in line with imported DAP price of Rs.26,076 per tonnes.  Management expect the slowdown L.America export could be offset by higher exports in other geographies.  The management expect normal monsoon and expect stronger Q2/Q3 in FY16. (contd...) October 30, 2015 | 3 Q2FY16 Concall Update (contd...) Valuations At CMP of Rs.227, the stock is trading at EV/EBITDA multiple of 8.2x FY16E and 6.8x FY17E. We remain positive on Coromandel due to (1) expanded capacity and distribution network after acquisition of Liberty Phosphate, (2) Pick in Sabero’sutilization level,(3) strong growth in non‐subsidy business, and (4) expected rise in shares of manufactured fertilizers. The sharp depreciation in Brazilian currency and delay in monsoon could impact the performance. However, we believe most of the bad news is very much factored in the price. We maintain BUY on stock with target price to Rs.304 (8.9x FY17E EV/EBITDA) on COIL. Income statement
Balance sheet
Y E March (Rs m)
Net sales
Growth %
FY13
91,038
‐8.8
FY14
1,01,140
11.1
FY15
1,13,630
12.3
FY16e
FY17e
1,22,685 1,32,987
8.0
8.4
COGS
SG&A
EBITDA
Growth %
EBITDA Margin %
73,166
9,492
8,380
‐26.0
9.2
77,511
14,969
8,660
3.3
8.6
89,004
15,526
9,101
5.1
8.0
1,03,055 1,11,045
9,569 10,373
10,060 11,570
10.5
15.0
8.2
8.7
711
7,669
8.4
961
7,699
7.6
1,046
8,055
7.1
Deprecaition
EBIT
EBIT Margin %
Interest Other Income
PBT
Tax
Adjusted PAT
Growth%
1,330
10,240
7.7
2102
2403
2096
2106
1770
‐
‐126 ‐
‐
‐
5,567
5,171
5,959
6,727
8,470
1,231
1,521
1,902
2,018
2,541
22.1
29.4
31.9
30.0
30.0
4,337
‐31.7
Minority Interest
Reported PAT
RPAT Margin %
Growth%
1,227
8,833
7.2
3,649
‐15.8
4,057
11.2
4,709
16.1
5,929
25.9
‐17 ‐84 ‐39 ‐24 ‐30
4,320
3,565
4,018
4,686
5,899
4.7
3.5
3.5
3.8
4.4
‐31.5
‐17.5
12.7
16.6
25.9
Y E March (Rs m)
Share Capital
Reserves & Surplus
Net Worth
Minority Long‐term loans
Others Total Liabilities
Gross Block
Less Depreciation
Net Block
Investments
Defered tax (net)
Other non‐current assets FY13
283
21,683
21,966
1063
29458
0
52,486
25,960
7,397
18,563
4201
1,597
‐1877
527 FY14
283
22,529
22,812
254
18790
473
42,329
FY15
291
21,729
22,020
0
21061
468
43,550
FY16e
284
25,102
25,386
0
21061
0
46,448
FY17e
284
29,350
29,634
0
17699
0
47,333
26,442
23,755
34,154
34,096
8,358
9,494
10,721
12,051
18,085
14,261
23,433
22,045
0
0
0
2386
4,193
460
1,674
1,708
189
1875
1875
‐1877
‐ ‐ ‐ ‐ Current Assets
Sundry Debtors
Inventories
Cash & Bank Balance
Loans & advances
58,745
18,201
14775
5,346
20,423
53,771
14,835
17529
4,722
16,686
65,145
14,464
22592
3,176
24,913
53,972
14,699
15881
3,967
19,425
60,348
13,668
16536
5,394
24,750
Current Liabilities
Provisions
Net Current Assets
Total assets
27,462
1,808
29,475
52,486
27,081
6,826
19,863
42,329
37,133
1,060
26,953
43,550
33,587
920
19,465
46,448
36,161
1,117
23,071
47,333
(contd...) October 30, 2015 | 4 KEC International Ltd Current CMP : Rs.138 Rating : BUY Target : Rs.182 Q2FY16 Concall Update October 30, 2015 ConCall Updates:
Previous Rating : BUY Target : Rs.182 We attended the concall of KEC International. Key points to note from concall are:  Lower commodity prices explain company’s lower sales and higher operating margins for the quarter. Company has 50:50, fixed price and variable price contacts. STOCK INFO BSE 532714 NSE KEC INDEX S&P BSE 500 Bloomberg KECI Reuters KECL.BO Sector Heavy Electrical Equipment Face Value(Rs) 2.00 Equity Capital(Rs Mn) 514 Mkt Cap(Rs Mn) 36,494 52w H/L 160/72 3m Avg Daily Volume(BSE+NSE) 915,622  Company expects to deliver a top‐line growth of 10% in FY16E. Management also expects to deliver ~8% EBITDA margin for FY16E and more than 8% for FY17E.  PBT level profitability of SAE, infra and cable businesses of the company has improved for the quarter. SHAREHOLDING PATTERN (as on Sept. 2015) Promoters FIIs DIIs Public & Others %  Company continues to bid for intrastate transmission projects, and is active in states like Karnataka, Tamil nadu and West Bengal. 50.54 5.87 25.98 17.61  Most of legacy orders of the company are completed, which is likely to help company in improving margins. As on Q2FY16, company has legacy orders worth Rs 200 mn, which will be completed in next couple of quarters. Source: BSE STOCK PER. (%) KEC International Sensex 1m 3m 12m 2.55 (4.83) 33.46 5.37 (1.12) 1.87  As on Q2FY16, Company’s order book stood at Rs 98.72 bn. 73% of the order book is contributed by T&D segment (excl SAE) and 47% of orders are from international businesses. Source: Capitaline, IndiaNivesh Research KEC International Ltd v/s SENSEX 140 120 100 80 60 40 20 ‐
KEC
Sensex
Source: Capitaline, IndiaNivesh Research Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Rahul Koli Research Associate Tel: +91 22 66188833 [email protected] Outlook and Valuation: KEC continue to improves its profitability due to turnaround in its SAE and infra business. We remain positive on the stock due to leading position of company in T&D tower segment, robust order book and likely improvement in profitability. At CMP of Rs 138, stock is trading at FY16E and FY17E, EV/EBITDA multiple of 8.3x and 6.7x. We maintain Buy rating on the stock with TP of Rs 182. IndiaNivesh Research IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511
52wLl(Rs) Avg Daily Vol (Bse+Nse) Torrent Pharmaceuticals’ (TRP IN) adjusted PAT was better‐than‐
estimates, led by increased proportion of niche opportunity in US market resulting in better operating margin for the quarter. Sales were slightly below‐estimates due to flat domestic formulation sales on y‐y basis. Currently, we have BUY rating with price target of Rs1,673, based on 21x FY17E earnings. We would review our estimates and price target upwards post concall scheduled today (30 October 2015) at 5pm. At CMP of Rs1,590, the stock is trading at 21.4x FY16E EPS of Rs74.1 and 20x FY17E EPS of Rs79.7. 855 420,425 SHAREHOLDING PATTERN (as on Sept. 2015) Promoters FIIs DIIs Public & Others Rs.mn
Revenue
EBIDTA
Adjusted PAT
PAT
% 71.3 12.4 6.0 10.3 Source: BSE STOCK PER. (%) TRP Sensex 1m 3m 12m 12.2 11.1 82.1 4.1 (2.6) (1.0) Source: Capitaline, IndiaNivesh Research Torrent Pharma v/s SENSEX 250 200 150 100 October 30, 2015
Q2FY16
Q2FY15
Q1FY16
Y‐O‐Y %
Q‐o‐Q % INSPL Est Variance(%)
16,550 12,030 18,860 37.6 (12.2) 17,500 (5.4)
6,780 2,590 8,480 161.8 (20.0) 4,874 39.1 5,150 1,980 4,490 160.1 14.7 3,729 38.1 5,680 1,980 4,490 186.9 26.5 3,729 52.3  Niche opportunity drives earning for the quarter: TRP’s sales came in at Rs16.5bn, up 37.6% y‐y. Sales for the quarter were driven by 326% y‐y increase in US sales. Sales in India were flat y‐y to Rs4.4bn for the quarter. Brazil revenue declined by 18% y‐y to Rs1.3bn dragging overall sales growth. India sales growth was impacted due to discontinuance of certain promotional schemes and hygiene initiatives. Though Brazil sales showed decline in sales in Rupee terms, it showed growth of 19% in constant currency basis. 50 ‐
TORRENT PHARMA
SENSEX Index
Source: Capitaline, IndiaNivesh Research  Gross margin improved 895bps y‐y to 77.3%, probably due to higher proportion of limited competition opportunity – g‐Abilify and g‐Detrol. EBITDA margin improved at higher rate at 1,944bps y‐y to 41% for the quarter mainly due to decline in employee cost and lesser increase in other expense.  TRP has exceptional gain of Rs530mn on account of write back of provision for diminution in value of investments of Rs370mn and profit on sale of investment of Rs160mn. Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Tushar Manudhane Research Analyst Tel: +91 22 66188835 [email protected] IndiaNivesh Research Increased US sales maintains momentum in earnings for second consecutive quarter Q2FY16 First Cut Analysis Previous Current CMP : Rs.1,590 Rating : BUY Rating : BUY Target : Rs.1,673 Target : Rs.1,673 STOCK INFO 500420 Bse Nse TORNTPHARM Bloomberg TRP IN TORP.BO Reuters Sector Pharmaceutical 5 Face Value (Rs) Equity Capital (Rs mn) 846 Mkt Cap (Rs mn) 267,130 1,720 52w H(Rs) Torrent Pharma
 Increased US sales coupled with lower interest cost led 160% y‐y increase in adjusted PAT to Rs5.15bn for the quarter. Adding exceptional gain led reported PAT to be at Rs5.7bn for the quarter. Valuation: At CMP of Rs1,590, the stock is trading at 21.4x FY16E EPS of Rs74.1 and 20x FY17E EPS of Rs79.7. We have factored such strong growth in sales and adjusted PAT for FY16E to some extent and maintain positive bias on the stock based on niche opportunity, robust ANDA pipeline and increase capacity post commissioning of Dahej facility. Currently, we have BUY rating with price target of Rs1,673 on TRP, based on 21x FY17E earnings. We would review our estimates and price target upwards post concall scheduled today (30 October 2015) at 5pm. IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Q2FY16 First Cut Analysis (contd...) Quarterly financial summary Rs mn
Net Sales
Other operating income
Consumption of raw material
Employee Cost
Manufacturing & Other Expenditure
Operating Expenses
EBITDA
Other income
Depreciation and Amortization
EBIT
Net Interest Expenses
Profit Before Tax
Tax
Net Profit After Tax Minority Interest
Adj. PAT
Adj. EPS (Rs)
EO items
Reported PAT Rep. EPS (Rs)
Q2FY16
16,550
360
3,760
2,100
3,910
9,770
6,780
740
610
7,270
480
6,790
1,640
5,150
‐
5,150
30.4
530.0
5,680
33.6
Q2FY15
12,030
140
3,810
2,240
3,390
9,440
2,590
720
560
2,890
540
2,350
370
1,980
‐
1,980
11.7
‐
1,980
11.7
Y‐y (%)
37.6
157.1
(1.3)
(6.3)
15.3
3.5
161.8
2.8
8.9
151.6
(11.1)
188.9
343.2
160.1
NA
160.1
160.1
Q4FY15
11,340
200
3,610
2,350
3,960
9,920
1,420
1,000
600
2,020
470
1,550
250
1,300
‐
1,300
7.7
‐
186.9 1,300
186.9 7.7
68.3
21.5
16.3
31.7
18.6
28.2
15.7
895
1,944
1,419
(895)
(593)
(455)
841
Q‐q (%)
45.9
80.0
4.2
(10.6)
(1.3)
(1.5)
377.5
(26.0)
1.7
259.9
2.1
338.1
556.0
296.2
NA
296.2
296.2
H1FY16
35,410
970
7,940
4,200
8,010
20,150
15,260
1,410
1,200
16,440
1,060
15,380
5,740
9,640
‐
9,640
57.0
530.0
336.9 10,170
336.9 60.1
H1FY15
22,950
360
6,820
4,080
6,230
17,130
5,820
1,210
770
6,620
780
5,840
1,300
4,540
‐
4,540
26.8
‐
4,540
26.8
Y‐y (%)
54.3
169.4
16.4
2.9
28.6
17.6
162.2
16.5
55.8
148.3
35.9
163.4
341.5
112.3
NA
112.3
112.3
70.3
25.4
19.5
29.7
17.8
27.1
22.3
729
1,774
702
(729)
(592)
(453)
1,506
124.0
124.0 Key ratios Ratios
77.3
41.0
30.5
22.7
12.7
23.6
24.2
Adj Gross Margins
Adj EBITDA margin
Net Margin
Material cost/Net Sales
Employee Cost/ Net Sales
Other Expenditure/ Net Slaes
Tax Rate
( Rs Mn)
Q2FY16
Branded business
Contract Manufacture
Total Domestic Sales
Brazil
USA
Europe
ROW
Net Sales
4,420
1,000
5,420
1,310
7,114
1,700
970
16,514
Q2FY15
4,420
980
5,440
1,600
1,670
2,480
980
12,170
Y‐y (%)
‐
2.0
(0.4)
(18.1)
326.0
(31.5)
(1.0)
35.7
68.2 912
12.5 2,844
11.3 1,919
31.8 (912)
20.7 (803)
34.9 (1,130)
16.1 802
Q4FY15
3,960
630
4,590
1,408
2,200
2,200
1,000
11,398
Q‐q (%)
11.6
58.7
18.1
(7.0)
223.4
(22.7)
(3.0)
44.9
77.6
43.1
26.5
22.4
11.9
22.6
37.3
H1FY16
9,350
2,040
11,390
2,690
16,018
4,069
1,817
35,984
H1FY15
7,940
1,240
9,230
3,090
4,360
4,780
1,850
23,310
Y‐y (%)
17.8
64.5
23.4
(12.9)
267.4
(14.9)
(1.8)
54.4
(contd...) October 30, 2015 | 2 Q2FY16 First Cut Analysis (contd...) Standalone Financial Statements Balance sheet Y E March (Rs m)
FY13
FY14
FY15
FY16E
FY17E
Share Capital
Reserves & Surplus
Net Worth
Minority Interest
423
13,796
14,219
4
846
18,178
19,024
4
846
24,060
24,906
4
846
34,102
34,948
4
846
44,792
45,639
4
Secured Loans
Unsecured Loans
Total debt
Net defered tax liability
Total Liabilities
5,474
1,587
7,061
258
21,542
8,890
2,464
11,354
(182)
30,201
30,376
2,464
32,840
1,050
58,801
28,376
2,464
30,840
1,050
66,842
26,376
2,464
28,840
1,050
75,533
Gross Block
Less: Depreciation
Net Block
Investments
Current Assets
Inventories
Sundry Debtors
Cash & Bank Balance
Loans & advances
12,955
4,757
8,198
3,273
844
14,200
5,447
8,753
6,177
2,464
38,900
7,357
32,243
6,057
2,980
40,883
9,352
32,231
6,057
2,980
45,203
11,454
34,449
6,057
2,980
9,239
6,878
6,270
1,859
968
25,213
10,060
10,994
7,694
2,590
1,209
32,547
10,670
15,950
5,671
4,730
3,160
40,181
19,018
14,852
16,184
4,730
1,630
56,414
20,712
16,175
21,952
4,730
1,775
65,345
12,266
3,720
15,986
9,227
21,542
16,202
3,538
19,740
12,807
30,201
18,280
4,380
22,660
17,521
58,801
26,460
4,380
30,840
25,574
66,842
28,918
4,380
33,298
32,047
75,533
FY13
25.6
30.5
11.5
84.0
FY14
39.2
44.4
10.0
112.4
FY15
44.4
55.7
5.5
147.2
FY16E
74.1
85.9
12.7
206.5
FY17E
79.7
92.1
14.2
269.7
ROCE
ROE
13.4%
30.5%
16.9%
34.9%
8.6%
30.2%
16.3%
35.9%
15.8%
29.5%
EBITDA Margin %
Net Margin %
17.5%
15.4%
19.9%
16.5%
20.8%
16.4%
25.5%
19.0%
25.2%
18.7%
PER (x)
P/BV (x)
P/CEPS (x)
EV/EBITDA (x)
Dividend Payout (%)
62.1
18.9
52.1
38.94
45.6
40.5
14.1
35.8
28.65
27.0
35.8
10.8
28.6
29.04
20.0
21.4
7.7
18.5
15.83
20.0
20.0
5.9
17.3
1.03
20.0
m cap/sales (x)
net debt/equity (x)
net debt/ebitda (x)
8.8 6.7 5.9 4.1 3.7
0.1 0.2 1.1 0.4 0.2
0.1
0.4
2.7
0.8
0.0
Current Liabilities & provisions
Current Liabilities
Provisions
Net Current Assets
Total assets
Profit & Loss
Y E March (Rs m)
Net sales
Growth %
Other Operating Income
Total sales
Expenditure
Raw Material
Employee cost
Other expenses
EBITDA
Growth %
EBITDA Margin %
Depreciation
EBIT
EBIT Margin %
Other Income
Interest
PBT
Tax
Extraordinary items
Minority Interest
Adjusted PAT
Growth%
PAT margin %
Reported PAT
Growth%
FY13
FY14
FY15
FY16E
FY17E
30,540 40,360 45,850 66,110 71,999
17.7%
32.2%
13.6%
44.2%
8.9%
1,580 1,480 680 1,090 1,137
32,120 41,840 46,530 67,200 73,136
9,260
6,230
9,700
6,930
38.4%
17.5%
830
6,100
20.0%
430
340
6,190
1,470
23.7%
(370)
(20)
4,700
34.5%
15.4%
4,330
52.4%
12,430
7,410
12,480
9,520
37.4%
19.9%
870
8,650
21.4%
380
590
8,440
1,800
21.3%
‐
‐
6,640
41.3%
16.5%
6,640
53.3%
14,150
8,420
13,760
10,200
7.1%
20.8%
1,910
8,290
18.1%
2,860
1,750
9,400
1,890
20.1%
‐
‐
7,510
13.1%
16.4%
7,510
13.1%
20,990
10,716
17,568
17,926
75.7%
25.5%
1,995
15,930
24.1%
1,800
1,850
15,880
3,335
21.0%
‐
‐
12,545
67.0%
19.0%
12,545
67.0%
21,600
12,014
20,239
19,283
7.6%
25.2%
2,102
17,182
23.9%
1,500
1,615
17,067
3,584
21.0%
‐
‐
13,483
7.5%
18.7%
13,483
7.5%
Cash Flow
Y E March (Rs m)
FY13
PBT
5,820
Depreciation
827
Interest
‐
430
(4,218)
Tax
(1,325)
1,535
Capital expenditure
(2,929)
Free Cash Flow
(1,394)
Other income
425
Investments
87
(2,417)
‐
1,343
Interest paid
(312)
(834)
197
Net change in cash
(685)
Cash at the beginning of the yea 7,608
Foreign currency exchange impa (49)
6,270
FY14
8,440
870
312
186
(1,197)
(2,617)
5,994
(4,001)
1,994
337
106
(3,558)
‐
4,149
(610)
(2,674)
865
3,301
6,270
(624)
7,694
FY15
6,494
1,910
1,750
‐
(6,738)
(1,249)
2,167
(25,400)
(23,232)
‐
700
(24,700)
‐
21,486
(1,750)
(1,083)
18,653
(3,880)
9,550
‐
5,671
FY16E
15,880
1,995
1,850
‐
2,460
(3,335)
18,851
(1,983)
16,867
‐
‐
(1,983)
‐
(2,000)
(1,850)
(2,504)
(6,354)
10,513
5,671
‐
16,184
FY17E
17,067
2,102
1,615
‐
(704)
(3,584)
16,495
(4,320)
12,175
‐
‐
(4,320)
‐
(2,000)
(1,615)
(2,792)
(6,407)
5,768
16,184
‐
21,952
Key ratios Y E March
EPS (Rs)
Cash EPS (Rs)
DPS (Rs)
BVPS
(contd...) October 30, 2015 | 3 SKF India Ltd.
Numbers below estimates,maintain HOLD with TP of Rs.1,335
Previous Current CMP : Rs.1,258 Rating : HOLD Rating : HOLD Target : Rs.1,335 Target : Rs. 1,335 STOCK INFO 500472 Bse Nse SKFINDIA SKF IN Bloomberg Reuters SKFB.BO Sector Industrial Goods Auto Industry Index S&P BSE 200 Face Value (Rs) 10 Equity Capital (RsMn) 527 Mkt Cap (RsMn) 66,314 1540/790 26,973 SHAREHOLDING PATTERN (as on Sep. 2015) Institutions Others, Incl Public Promoters % STOCK PER. (%) SKF INDIA SENSEX 1m 0% 4% 3m ‐4% ‐3% 12m 6% ‐1% Source: Capitaline, IndiaNivesh Research SKF INDIAv/s SENSEX 140.00
120.00
100.00
80.00
60.00
40.00
20.00
SKF India
Sensex
Source: Capitaline, IndiaNivesh Research 28/10/2015
14/10/2015
30/09/2015
16/09/2015
02/09/2015
19/08/2015
05/08/2015
22/07/2015
08/07/2015
24/06/2015
10/06/2015
27/05/2015
13/05/2015
29/04/2015
15/04/2015
01/04/2015
18/03/2015
04/03/2015
18/02/2015
04/02/2015
21/01/2015
07/01/2015
24/12/2014
10/12/2014
0.00
26/11/2014
October30, 2015
SKF India Q3CY15results were below our expectations. Top‐line degrewby 2.3% YoY to Rs5.99 bn against our estimate of Rs 6.14bn due to lower than expected volume growth. EBITDA margin contracted 213 bps YoY to 11.3% (below our est. of 12.5%) in Q3CY15, due to higher raw material cost and higher purchase of traded goods.Higher purchase of traded goods indicates towards poor product mix (higher proportion of industrial bearings). Reported PAT degrew by 8.8% YoY to Rs500mn (our estimates was Rs 587mn). PAT de‐growth was lower than EBITDA de‐growth due to higher other income. Quick Fundamentals (Rs. Mn)
Revenue
Q3CY15
5,987
Q2CY15
6,104
Q3CY14
6,128
Q‐o‐Q %
‐1.9 Y‐o‐Y % INSPL Est
‐2.3 6,140
Variance
‐2.5%
EBIDTA
677
646
823
4.8 ‐17.8 768
‐11.9%
PAT
500
466
587
7.5 ‐14.7 549
‐8.8%
EPS (RS.)
9.49
8.83
11.12
7.5 ‐14.7 10.41
‐8.8%
Source: Company, IndiaNivesh Research Valuation and Outlook The company has an equal presence across the industrial (46% of CY14sales) and automotive segment (54% of sales), spread across OEMs (55% of sales) and aftermarket. Hence, SKF is well diversified to weather the cyclical downturns in any segment. A healthy balance sheet, robust cash flow generation, strong parentage & product profile and strong distribution reach are other key positives. However, currently, the company is facing moderation in demand from automotive segment and industrial segment. Although this year performance will be muted, we expect demand scenario to improve in CY16 in both Automotive as well as Industrial segment on the back of softening in interest rate and revival in economy. At CMP of Rs. 1258 stock is trading at 18.8x CY17E EPS. We maintain HOLD rating on the stock with target price of Rs. 1335 (20xCY17E EPS). Daljeet S. Kohli, Head of Research Tel: +91 22 66188826 [email protected] Abhishek Jain, Research Analyst Tel: +91 22 66188832 [email protected] Aman Vij, Research Analyst Tel: +91 22 66188818 [email protected] IndiaNivesh Research Q3CY15 First Cut Analysis 32.37 14.05 53.58 Source: BSE 12/11/2014
52w H/L (Rs) Avg Daily Vol (Bse+Nse) 29/10/2014
IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511 601 & 602, SukhSagar, N. S. Patkar Marg, GirgaumChowpatty, Mumbai 400 007. Tel: (022) 66188800
Q3CY15 First Cut Analysis (contd...) Quick Fundamentals (Rs. Mn)
Q3CY15
Revenue
5,987
Cost of Revenues
5,310
Increase /decrease stock in trade
14
Consumption of Raw Materials
1,431
Other Expenditure
1,021
Staff cost
490
Purchase of Traded Goods
2,354
EBIDTA
677
Depreciation
134
EBIT
543
Interest Expense
0
Other income
225
Exceptional item
0
PBT
767
Provision for taxation
267
PAT
500
EPS (RS.)
9.49
Margin %
EBITDA %
11.3
EBIT %
9.1
PBT %
12.8
PAT %
8.4
Q2CY15
6,104
5,458
281
1,401
1,011
524
2,240
646
139
507
0
202
0
709
244
466
8.83
Margin %
10.6
8.3
11.6
7.6
Standalone
Q3CY14
6,128
5,305
‐68
1,644
1,059
517
2,153
823
135
688
0
200
0
888
301
587
11.12
Margin %
13.4
11.2
4.9
11.1
Source: Company, IndiaNivesh Research Q‐o‐Q %
‐1.9
‐2.7
NA
2.1
1.0
‐6.6
5.1
4.8
‐3.3
7.0
Y‐o‐Y %
‐2.3
0.1
NA
‐12.9
‐3.6
‐5.3
9.3
‐17.8
‐0.7
‐21.1
11.3
12.4
8.2
‐13.6
9.6
‐11.4
7.5
‐14.7
7.5
‐14.7
Basis Points (BPS)
72
‐213
75
‐216
120
790
73
‐270 EBITDA margin contracted 213 bps YoY EBITDA margin contracted 213 bps YoY to 11.3% (below our est. of 12.5%) in Q3CY15, due to higher raw material cost andhigher purchase of traded goods. Raw material cost increased 261 bps YoY to 63.5% (as a percentage of revenue)% from 60.9% in Q3CY14 and traded goods increased 418 bps YoY to 39.3% from 35.1% in Q3CY14.Other expenses decreased 22 bps YoY to 17.1% (as a percentage of revenue) from 17.3% in Q3CY14 and staff cost decreased 26 bps to 8.2% (as percentage of revenue) from 8.4% in Q3CY14. Cost Analysis
Q3CY15
63.5%
39.3%
17.1%
8.2%
Adj. Raw Materials
Traded Goods
Other Expenses
Staff Cost
Q2CY15
64.3%
36.7%
16.6%
8.6%
Q3CY14
60.9%
35.1%
17.3%
8.4%
bps QoQ
‐80
262
49
‐41
bps YoY
261
418
‐22
‐26 Source: Company, IndiaNivesh Research Revenues to grow at 12.5% CAGR during CY14‐17E SKF’s revenues grew at 12.5% CAGR during CY08‐11. However, given the overall slowdown in the economy affecting the industrial as well as automotive segments, revenues grew at 4% CAGR over the last three years (CY12‐14).Revenue growth, going ahead, would driven by economic recovery, which, in turn, would boost the industrial and automotive segment demand. We build in an overall revenue growth of 12.5% CAGR over CY14‐17E. SKF India Ltd.(contd...) Oct30, 2015 | 2 Q3CY15 First Cut Analysis (contd...) 40,000
20.0
Revenue (Rs mn)
35,000
25.0
20.0
30,000
12.0
25,000
6.2
20,000
15.0
10.0
6.0
2.1
15,000
Growth In %
5.0
0.0
10,000
‐5.0
‐8.5
5,000
‐10.0
0
CY12
CY13
CY14
CY15e CY16e CY17e
Net sales
Y/Y Ch %
Source: Company, IndiaNivesh Research EBITDA to grow at 15% CAGR during CY14‐17E We expect the EBITDA to grow at 15% CAGR during CY14‐17E led by higher operating leverage through higher utilization and increasing share of domestically produced bearings sale as the company moves towards localization of imports. We expect EBITDA margins to be at11.9% in CY16E vs. 11.7% in CY14. 12.2
13.0
12.5
11.6
3,000
11.5
11.7
11.7
11.9
12.0
11.5
2,000
4,358 3,414 3,006 2,832 2,614 2,584 1,000
11.0
10.5
10.0
0
CY11 CY12 CY13 CY14 CY15e CY16e CY17e
EBITDA
Source: Company, IndiaNivesh Research Growth in percentage
4,000
12.7
2,979 EBITDA( Rs. mn)
5,000
Valuation We expect financial and operational numbers would improve in coming quarters on the back of revival in economy. At CMP of Rs. 1258 stock is trading at 18.8x CY17E EPS. We maintain HOLD rating on the stock with target price of Rs. 1335 (20xCY17E EPS) SKF India Ltd.(contd...) Oct30, 2015 | 3 Q3CY15 First Cut Analysis (contd...) Standalone Financials Income Statement
Y E March (Rs m)
Balance Sheet
CY13
CY14
CY15e
CY16e
CY17e
Net sales
22,750
24,156
25,605
28,678
34,414
Y/Y Ch %
2.1
6.2
6.0
12.0
20.0
COGS
16,182
17,155
18,246
20,389
24,206
SG&A
3,954
4,169
4,353
4,875
5,850
EBITDA
2,614
2,832
3,006
3,414
4,358
Y E March (Rs m)
CY13
CY14
CY15e
CY16e
Share Capital
527
527
527
527
527
Reserves & Surplus
12,228
13,634
15,288
17,195
19,795
Net Worth
12,755
14,161
15,815
17,722
20,322
Deferred tax liabilities,net
1.2
8.4
6.1
13.6
27.6
Long‐term + ST loans
EBITDA Margin %
11.5
11.7
11.7
11.9
12.7
Others Deprecaition
494
540
577
593
629
Total Liabilities
2,120
2,293
2,429
2,821
3,729
9.3
9.5
9.5
9.8
10.8
0
0
0
0
0
Y/Y Ch %
EBIT
EBIT Margin %
Interest Other Income (Inc Forex)
632 769
1,024
1,147
1,377
Extra Ordinary Exps/(Income)
‐221 ‐
‐
‐
‐
PBT
2,751
3,062
3,453
3,968
5,106
Tax
863
1,031
1,139
1,270
1,583
Reported PAT
Y/Y Ch %
31.4
33.7
33.0
32.0
31.0
1,888
2,031
2,313
2,699
3,523
‐0.7
7.6
13.9
16.6
30.5
Adj. PAT (APAT)
1,888
2,031
2,313
2,699
3,523
RPAT Margin %
8.3
8.4
9.0
9.4
10.2
7.6
13.9
16.6
30.5
Y/Y Ch %
Net Block
Intangible Investments
Deferred tax (net)
40
1
0
0
0
0
0
0
0
0
0
0
0
0
0
12,795
4,011 14,162
3,849 15,815
4,234 17,722
4,657 20,322
5,123 0
0 0
0 0
0 0
0 0
0 0 0 0 0 0 Current Assets
12,918
15,260
16,826
18,939
22,247
Sundry Debtors
3,298
3,730
3,954
4,428
5,314
Cash & Bank Balance
Loans & advances
Inventories
Other current assets
Current Liabilities
CY17e
Provisions
Net Current Assets
Total assets
3758
3,225
5347
3,125
6388
3,243
7464
3,417
8896
3,682
2,552
2,929
3,105
3,477
4,173
86 129 136 153 183 3,271
4,224
4,477
5,015
6,018
862
723
767
859
1,031
8,785
10,313
11,581
13,065
15,199
12,795
14,162
15,815
17,722
20,322
Cash Flow
Key Ratios
Y E March (Rs m)
CY13
CY14
CY15e
CY16e
CY17e
Y E March
CY13
CY14
CY15e
CY16e
2,751
3,062
3,453
3,968
5,106
494
540
577
593
629
Adj.EPS (Rs)
35.8
38.5
43.8
51.1
66.8
Interest Exp
‐470 ‐623 ‐1,024 ‐1,147 ‐1,377 Cash EPS (Rs)
45.2
48.7
54.8
62.4
78.7
Changes in Working Capital ‐464 316
75
68
34
2,312
3,294
3,081
3,482
4,392
Tax
‐874 ‐1,117 ‐1,139 ‐1,270 ‐1,583 Others ‐221 0
0
0
0
1,218
2,177
1,941
2,213
2,809
Profit before tax and exceptional item
Depreciation
Cash Flow After Chang in WCapital
Cash flow from operations
Capital expenditure (net)
DPS (Rs)
CY17e
6.0
6.0
6.0
6.0
6.0
241.9
268.5
299.9
336.1
385.4
ROCE %
16.6
16.2
15.4
15.9
18.4
ROE %
14.8
14.3
14.6
15.2
17.3
ROIC %
11.1
7.8
8.4
8.5
10.5
BVPS
‐489 ‐342 ‐385 ‐423 ‐466 Du Point Analysis
729
1,835
1,556
1,789
2,343
Others ‐1,161 315
474
474
474
Net profit margin
8.3
8.4
9.0
9.4
10.2
‐1,650 ‐27 89
50
8
Asset turnover
1.8
1.7
1.6
1.6
1.7
0
0
0
0
0
Financial leverage
1.0
1.0
1.0
1.0
1.0
‐463 ‐925 ‐989 ‐1,187 ‐1,385 35.1x
32.7x
28.7x
24.6x
18.8x
Free Cash Flow
Long‐Term Debt (Decrease) Increase
Share Issue / Repurchase & Others Cash flow from Financing
Net change in cash
0
0
0
0
0
‐463 ‐925 ‐989 ‐1,187 ‐1,385 PER (x)
P/BV (x)
5.2x
4.7x
4.2x
3.7x
3.3x
P/CEPS (x)
27.8x
25.8x
23.0x
20.2x
16.0x
13.2x
‐895 1,225
1,041
1,076
1,432
EV/EBITDA (x)
23.9x
21.5x
19.9x
17.2x
1,601
706
5,347
6,388
7,464
Dividend payout %
16.8
15.6
13.7
11.7
9.0
706
1,931
6,388
7,464
8,896
m cap/sales (x)
2.9x
2.7x
2.6x
2.3x
1.9x
Reconciliation with other balances
3,052
3,416
0
0
0
Cash as per balance sheet
3,758
5,347
6,388
7,464
8,896
net debt/equity (x)
‐0.3x
‐0.4x
‐0.4x
‐0.4x
‐0.4x
net debt/ebitda (x)
‐1.4x
‐1.9x
‐2.1x
‐2.2x
‐2.0x
Debtors (Days)
53
56
56
56
56
Creditors (Days)
74
90
90
90
91
Inventory (Days)
41
44
44
44
44
20
11
11
11
10 SKF India Ltd.(contd...) Oct30, 2015 | 4 Ltd Alstom T&D India
Flat top‐line, better margins Current CMP : Rs.514 Rating : HOLD Target : Rs.485 STOCK INFO BSE 522275 NSE ALSTOMT&D Index S&P BSE 200 Bloomberg ATD IN Reuters ALST.NS Sector Heavy Electrical Equipment Face Value(Rs) 2 Equity Capital(Rs mn) 512 Mkt Cap(Rs mn) 131,813 52w H/L 656/364 3m Avg Daily Volume(BSE+NSE) 85,203 % Rs mn
Q2FY16 Q2FY15 Q1FY15
Net Revenue
EBITDA
Net Profit
9,053 9,137 8,115
1,048 938 626
463 355 196
EBITDA margin %
Net margin %
11.6%
5.1%
‐0.9%
11.7%
30.4%
bps
7.7% 130
2.4% 123
10.3%
3.9%
INSPL Variance
Estimate
11.6% 11,136 ‐18.7%
67.4% 759
38.0%
136.3% 318
45.7%
bps
bps
386
6.8% 475
270
2.9% 226
Y‐o‐Y Q‐o‐Q
Standalone, Source: Company, IndiaNivesh Research
Highlights: 75.00 1.61 14.09 9.30  Net Sales for the quarter remained flat at Rs 9,053 mn, reflecting lower execution for the quarter. As company has large order book in hand variation in pace of execution is reflected in uneven sales for past few quarters. 1m 3m 12m 1.54 (8.51) 40.48 5.55 (1.53) 0.59  Company reported very high EBITDA margin of 11.6% for the quarter, which is highest in last 14 quarters. This expansion in EBITDA margin was mainly due to 16.1% decline in other expenses to 1,192 mn. Led by better operating margin, EBITDA of the company has increased by 11.7% to Rs 1,048 mn. Source: BSE STOCK PER. (%) Alstom T&D India Sensex Source: Capitaline, IndiaNivesh Research Alstom T&D India Ltd v/s SENSEX 190 170 150 130 110 90 70 50 Alstom T&D
Sensex
Source: Capitaline, IndiaNivesh Research Daljeet S. Kohli Head of Research Tel: +91 22 66188826 [email protected] Rahul Koli Research Associate Tel: +91 22 66188833 [email protected] IndiaNivesh Research October 30, 2015 Top‐line below estimates; however operating results improved due to operating margin expansion for the quarter. Previous Rating : HOLD Target : Rs.485 SHAREHOLDING PATTERN (as on Sept. 2015) Promoters FIIs DIIs Public & Others Q2FY16 First Cut Analysis Rs mn
Net Revenue
Expenses:
Material costs
Employe expense
Other expenses
EBITDA
EBITDA Margin %
Other Income
Depreciation
EBIT
EBIT margin %
Finance Cost
Exceptional Item
PBT
Tax expense
Net Profit
Net margin %
EPS (Rs)
Q2FY16 Q2FY15 Q1FY15 Y‐o‐Y Q‐o‐Q H1FY16 H1FY15 Y‐o‐Y
9,053 9,137 8,115 ‐0.9% 11.6% 17,168 15,870 8.2%
5,855
959
1,192
1,048
11.6%
1
215
833
9.2%
143
‐
691
228
33.0%
463
5.1%
1.81
5,964
815
1,420
938
10.3%
1
191
749
8.2%
211
‐
538
183
34.0%
355
3.9%
1.39
5,523
902
1,065
626
7.7%
2
212
417
5.1%
117
‐
300
104
34.6%
196
2.4%
0.76
‐1.8%
17.6%
‐16.1%
11.7%
130
‐61.5%
12.7%
11.3%
101
‐32.5%
6.0%
6.3%
11.9%
67.4%
386
‐78.3%
1.5%
100.1%
407
21.9%
28.5%
24.8%
‐97
30.4%
123
30.4%
130.6%
119.8%
‐162
136.3%
270
136.3%
11,378
1,861
2,256
1,673
9.7%
3
426
1,250
7.3%
259
‐
991
332
33.5%
659
3.8%
2.57
10,015
1,657
2,494
1,704
10.7%
3
384
1,322
8.3%
354
‐
969
329
34.0%
640
4.0%
2.50
13.6%
12.3%
‐9.5%
‐1.8%
‐99
‐6.7%
10.9%
‐5.5%
‐105
‐26.6%
2.2%
3.0%
‐19
3.0%
Standalone, Source: Company, IndiaNivesh Research
IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511
Q2FY16 First Cut Analysis (contd...)  Interest cost for the quarter declined by 32.5% to Rs 143 mn. Company reported normal tax rate of 33% for the quarter. Better operating profitability and lower finance Cost led to impressive jump of 30.4% in net profit to Rs 463 mn. Outlook and Valuation: Alstom T&D has reported volatile operating margins in last 4 quarters, due to differing pace and phases of execution. Company has large order book of Rs 78.4 bn (‐1% y‐o‐y) as of Q2FY16. At CMP of Rs 514, stock is trading at FY16E and FY17E, PE multiple of 50.1x and 36.1x. We remain positive on the company, however due near term volatility in results and high valuation; we maintain Hold rating on the stock with TP of Rs 485. (contd...) October 30, 2015 | 2 Dharmesh Kant Global Markets – Outlook VP‐ Equity and Derivatives Strategist  US Markets: U.S. stocks finished slightly lower on Thursday, succumbing to weaker‐than‐
expected readings on gross domestic product and pending home sales a day after the Federal Reserve signaled a December rate increase remains possible. The U.S. economy slowed to annual growth rate of 1.5% in the third quarter from 3.9% in the spring, mostly due to a smaller buildup in warehouse inventories. The economic readings came after the Federal Reserve on Thursday hinted that a rate increase this year is a possibility—a move that would mark the first rise in nearly a decade. Investors maintained caution throughout the session, exemplified by muted action and tight trading ranges. Market participants are now pricing in a 50% chance of a rate increase in December, according to the CME Group’s FedWatch tool. Tel: +91 22 66188890 [email protected] The U.S. economy slowed to annual growth rate of 1.5% in the third quarter from 3.9% in the spring, mostly owing to a smaller buildup in warehouse inventories. Yet the main engine of U.S. economic growth, consumer spending, rose a much healthier 3.2% after an even larger gain in the second quarter. The steady pace of spending is likely to extend into the fourth quarter, helped by cheaper gas prices, rising inflation‐adjusted incomes and a big burst in hiring over the past several years. Business investment in equipment, meanwhile, rose 5.3% in the third quarter, more than offsetting a 4% drop in spending on structures such as oil platforms or commercial buldings. Outlays on home construction climbed 6.1%. Inflation as measured by the PCE index rose at a 1.2% annual pace in the third quarter, or 1.3% minus food and energy. Pending home sales fell in September, the second drop in a row. It comes on the heels of a report showing new‐home sales tumbled 11.5% last month. Housing has been one of the hottest performers in the economy. Furthermore, housing — along with automobiles — has been the big beneficiary of the low‐interest‐rate environment. Meanwhile, weekly jobless claims ticked up slightly but remained at very low levels. Initial jobless claims in the period running from Oct. 18 to Oct. 24 edged up by 1,000 to a seasonally adjusted 260,000, the government said Thursday. New claims are registered when a person loses a job and applies for unemployment benefits. Weekly claims settled below the key 300,000 benchmark almost seven months ago and have fallen to levels last seen in the early 1970s, when the working‐age population was much smaller. The average of initial claims over the past month, meanwhile, declined by 4,000 to 259,250 and touched the lowest level since December 1973. The four‐week average smooths out fluctuations in the volatile weekly report and is seen as a more accurate predictor of labor‐market trends.  Day’s Performance: The S&P 500 finished basically flat, or less than 0.1% lower, at 2,089.41. Five of the S&P 500’s 10 main sectors closed in negative territory, while the energy and health‐care sectors posted the strongest gains. The Dow Jones Industrial Average declined 23.72 points, or 0.1%, to finish at 17,755.80, while the Nasdaq Composite lost 21.42 points, or 0.4%, to close at 5,074.27.  Set ups on S&P 500, Dow Industrial Average and Nasdaq 100 are in pull back mode. We are cautious on this pull back and expect volatility around 2060‐2090 levels in S&P 500.  Emerging markets: Most of Asian indices are trading with mild cuts this morning on muted global cues tapering global growth and concerns on probable Fed rate hike in December this year.  Bullions & Commodities: Gold is trading at $1147 per troy ounce this morning down (0.03%) from previous close. WTI Crude future is trading at $45.82 per barrel while Brent Crude future is trading at $48.64 per barrel.  Currencies: The U.S. Dollar Index tracking the U.S. currency against a basket of six others currencies trading at 97.21 this morning down (0.01%) from previous close. Long term set up on Dollar Index remain strong, a break above 100 on a weekly closing basis will initiate a new up move for a target of 120. The dollar and U.S. stocks often trade on opposite paths, with a weak dollar seen as providing investors with cheap funding to buy stocks. Plus the dollar’s drop generally helps U.S. companies’ overseas sales. Source: Bloomberg Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document. This report is based / focused on fundamentals of the Company and forward‐looking statements as such, may not match with a report on a company’s technical analysis report Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Daljeet S Kohli, Amar Maurya, Abhishek Jain, Yogesh Hotwani, Prerna Jhunjhunwala, Kaushal Patel, Rahul Koli, Tushar Manudhane, Aman Vij, Abhitesh Agarwal, Harshraj Aggarwal & Dharmesh Kant. Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter: Disclosure of Interest Statement 1 Details of business activity of IndiaNivesh Securities Limited (INSL) 2 Details of Disciplinary History of INSL 3 Details of Associates of INSL 4 Research analyst or INSL or its relatives'/associates' financial interest in the subject company and nature of such financial interest Research analyst or INSL or its relatives'/associates' actual/beneficial ownership of 1% or more in securities of the subject company, at the end of the month immediately preceding the date of publication of the document. Research analyst or INSL or its relatives'/associates' any other material conflict of interest at the time of publication of the document Has research analyst or INSL or its associates received any compensation from the subject company in the past 12 months Has research analyst or INSL or its associates managed or co‐managed public offering of securities for the subject company in the past 12 months Has research analyst or INSL or its associates received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months Has research analyst or INSL or its associates received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months Has research analyst or INSL or its associates received any compensation or other benefits from the subject company or third party in connection with the document. Has research analyst served as an officer, director or employee of the subject company Has research analyst or INSL engaged in market making activity for the subject company Other disclosures 5 6 7 8 9 10 11 12 13 14 INSL is a Stock Broker registered with BSE, NSE and MCX ‐ SX in all the major segments viz. Cash, F & O and CDS segments. INSL is also a Depository Participant and registered with both Depository viz. CDSL and NSDL. Further, INSL is a Registered Portfolio Manager and is registered with SEBI. No disciplinary action is / was running / initiated against INSL Please refer to the important 'Stock Holding Disclosure' report on the IndiaNivesh website (investment Research Section ‐http://www.indianivesh.in/Research/Holding_Disclosure.aspx?id=10 link). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. INSL and its affiliates may have investment positions in the stocks recommended in this report. No (except to the extent of shares held by Research analyst or INSL or its relatives'/associates') Please refer to the important 'Stock Holding Disclosure' report on the IndiaNivesh website (investment Research Section ‐ http://www.indianivesh.in/Research/Holding_Disclosure.aspx?id=10 link). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. INSL and its affiliates may have investment positions in the stocks recommended in this report. No No No No No No No No No INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time. Definitions of ratings BUY. We expect this stock to deliver more than 15% returns over the next 12 months. HOLD. We expect this stock to deliver ‐15% to +15% returns over the next 12 months. SELL. We expect this stock to deliver <‐15% returns over the next 12 months. Our target prices are on a 12‐month horizon basis. Other definitions NR = Not Rated. The investment rating and target price, if any, have been arrived at due to certain circumstances not in control of INSL CS = Coverage Suspended. INSL has suspended coverage of this company. UR=Under Review. Such e invest review happens when any developments have already occurred or likely to occur in target company & INSL analyst is waiting for some more information to draw conclusion on rating/target. NA = Not Available or Not Applicable. The information is not available for display or is not applicable. NM = Not Meaningful. The information is not meaningful and is therefore excluded. Research Analyst has not served as an officer, director or employee of Subject Company One year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock‐quotes. (Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart) IndiaNivesh Securities Limited Research Analyst SEBI Registration No. INH000000511 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800 / Fax: (022) 66188899 e‐mail: [email protected] | Website: www.indianivesh.in

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