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February 2, 2018
ICICI Securities Ltd | Retail Equity Research
Result Update
Recommend HOLD on margin headwinds…
Bharat Electronics (BEL) reported weak Q3FY18 numbers, which were
below estimates on the EBITDA and PAT front. These were mostly on
account of a weak operational performance and lower other income
for the quarter
The company reported revenues of | 2513 crore up 14.7% YoY (our
estimates | 2387 crore for the quarter)
EBITDA came in at | 445.2 crore, down 7.8% YoY. We estimated
EBITDA of | 524 crore for the quarter. EBITDA margins came in at
17.7% vs. our estimate of 22% crore for the quarter. We believe lower
EBITDA margins were on account of order booking low margin orders
during the quarter. As a result, gross margins for the quarter declined
to 42.2% from 50.7% YoY
PAT came in | 302.8 crore, down 19.5% YoY, due to a weak
operational performance and lower other income. Other income
declined 36.6% YoY due to lower cash balance on account of buyback
and dividend. We expected other income of | 60 crore for the quarter
The company has also declared an interim dividend of | 1.60 per share
and a buyback of 2,03,97,780 equity shares (0.83% of equity). Outgo
due to buyback is likely to be | 372.3 crore at | 182.5 per share
Continues strong execution, albeit on lower margin orders
BEL continued its strong execution for the quarter, albeit on lower margin
orders like Battlefield Surveillance system (BSS), Integrated Air command
and control system (IACCS), etc. The quarter also witnessed some
execution of orders like Akash weapon system (Army), weapon locating
radar, etc. Order inflows for Q3FY18 were at ~ | 1,146 crore. This has
taken the BEL order backlog to 40,469 crore as on January 1, 2018. The
export order book was also healthy at $96.9 million.
New opportunities, healthy capex, focus on exports
BEL has forayed into new opportunities like homeland security, cyber
security and smart cities. We believe these new areas will act as new
growth triggers, going forward. BEL has already received some orders in
this area. The same has potential to contribute ~20% to the topline albeit
with lower margins over the next three to five years. With a planned
capex of ~| 1500 crore in FY17-20E, BEL is well placed to capitalise on
the emerging defence sector. BEL spends ~9% of sales on R&D for
developing new products. New products have historically helped BEL
achieve up to 25% of its turnover. With R&D spend likely to rise to 12% of
sales, new product development is likely to gain further momentum.
Exports for BEL came in at ~| 425 crore for FY17 (~5.1% of turnover).
BEL has also set up a dedicated business unit to become key supply chain
partner of global defence contractors. This is likely to increase exports
contribution to 10% of topline by FY20E. BEL also has a strong balance
sheet with near nil debt and cash balance of over | 2000 crore.
Recommend HOLD on margin softening over FY17-20E
Going forward, BEL is likely to execute large orders like IACCS, VVPAT
and Akash. We believe these orders will help BEL clock double digit
revenue growth in FY17-20E. However, we expect margins to moderate
going forward as some of the large integration projects have a margin
profile of 5-15%. Thus, we expect BEL to deliver revenue, EBITDA and
PAT CAGR of 16.7%, 12.5% and 5.9%, respectively, in FY17-20E. We
value the company at 19x P/E on FY20E EPS of | 8.2 to arrive at a target
price of | 155 per share. We have a HOLD recommendation on the stock.
Bharat Electronics (BHAELE) | 151
Rating matrix
Rating Matrix
Rating : Hold
Target : | 155
Target Period : 12 - 15 months
Potential Upside : 4%
What’s changed?
Target Changed from | 215 to | 155
EPS FY19E Changed from | 7.9 to | 7.4
EPS FY20E Changed from | 8.6 to | 8.2
Rating Unchanged
Quarterly performance
Q3FY18 Q3FY17 YoY (%) Q2FY18 QoQ (%)
Revenue 2,512.8 2,191.3 14.7 2,476.2 1.5
EBITDA 445.2 482.8 -7.8 595.0 -25.2
EBITDA (%) 17.7 22.0 -430 bps 24.0 -630 bps
PAT 302.8 376.2 -19.5 412.4 -26.6
Key financials
| Crore FY17 FY18E FY19E FY20E
Revenue 8,612 10,833 12,545 14,465
EBITDA 1,762 2,034 2,224 2,508
EBITDA (%) 20.5 18.8 17.7 17.3
Net Profit 1,548 1,453 1,650 1,838
EPS (|) 6.9 6.5 7.4 8.2
Valuation summary
(x) FY17 FY18E FY19E FY20E
P/E 21.8 23.2 20.4 18.3
Target P/E 22.4 23.8 21.0 18.8
EV / EBITDA 17.0 15.2 13.7 12.2
P/BV 4.5 4.0 3.5 3.2
RoNW (%) 21 17.2 17.4 17.2
RoCE (%) 27.1 23.8 23.1 22.9
Stock data
Stock Data
Average Volumes (shares) 894000
Market Capitalization | 33727.8 Crore
Total Debt (FY18E) | 26.9 Crore
Cash and Investments (FY18E) | 2858.4 crore
EV (FY18E) | 30896.3 Crore
52 week H/L (|) 1624 / 1009
Equity capital | 223.4 Crore
Face value | 1
MF Holding (%) 16.5
FII Holding (%) 8.6
Promoter Holding (%) 66.7
Price performance
Return (%) 1M 3M 6M 12M
Bharat Electronics (11.0) (13.1) (1.8) 13.3
Astra Microwave 2.9 4.1 1.1 5.1
Centum Electronics (5.4) (5.0) (16.1) (5.0)
Research Analyst
Chirag J Shah
Sagar K Gandhi
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
Q3FY18 Q3FY18E Q3FY17 YoY (%) Q2FY18 QoQ (%) Comments
Operating Income 2,513 2,387 2,191.3 14.7 2,476 1.5
Strong revenue growth due to booking of orders like Battlefield Surveillance system,
IACCS, etc.
Other income 49 60 77.6 -36.6 51 -3.5
Reduced other income due to lower cash balance on account of buyback and
dividend
Total Revenue 2,562 2,447 2,268.9 12.9 2,527.2 1.4
Raw materials costs 1,416 1,190 1,029.9 37.5 1,144 23.8
Employees Expenses 456 420 343.2 33.0 472 -3.3
Other Expenses 195 252 335.5 -41.9 265 -26.5
Total Expenditure 2,068 1,863 1,708.5 21.0 1,881 9.9
EBITDA 445.2 524.0 482.8 -7.8 595.0 -25.2
EBITDA margins (%) 17.7 22.0 22.0 -432 bps 24.0 -631 bps
Interest 0.0 0.0 10.6 0.0
Depreciation 59.4 55.0 45.5 30.6 59.0 0.7
Tax 132.2 121.7 128.0 3.2 174.6 -24.3
Other Income 49.2 60.0 77.6 -36.6 51.0 -3.5
PAT 302.8 407.3 376.2 -19.5 412.4 -26.6
Source: Company, ICICIdirect.com Research
Change in estimates
FY17 FY18E FY19E FY20E
(| Crore) Old New % Change Old New % Change Old New % Change
Revenue 8,612 10,848 10,833 -0.1 12,174 12,545 3.0 14,025.0 14,465 3.1
EBITDA 1,762 1,964 2,034 3.6 2,158 2,224 3.1 2,431.0 2,508 3.2
EBITDA Margin (%) 20.5 18.1 18.8 67 bps 17.7 17.7 3 bps 17.3 17.3 4 bps
PAT 1,548 1,489 1,453 -2.4 1,765 1,650 -6.5 1,917.0 1,838 -4.1
EPS (|) 6.9 6.7 6.5 -2.9 7.9 7.4 -6.5 8.6 8.2 -4.3
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Key takeaways for Q3FY18
Strong order book: Order book at the end of Q3FY18 was at | 40,469
crore. Orders received during the quarter were at | 1,146 crore
Major orders acquired in Q3FY18:
Akash Weapon System
GE Medical Systems
Spares for THD 1955 radar
Radar Finger Printing system
Battery and Battery Pack
The export order book as on January 1, 2017 was at US$96.9 million.
Export turnover for Q3FY18 was US$6.3 million.
Major supplies during Q3FY18:
Homeland Security
Hand held thermal imager - MKII,
L 70 gun upgrade,
Weapon locating radar
Integrated air command and control system
Mobile communication terminal
Electronic voting machine – Voter verifiable paper audit trail
(VVPAT)
Ship borne EW system
Major orders expected in FY18
Akash missile system (seven squadron),
Long range surface to air missile (LRSAM) for P17A,
ICICI Securities Ltd | Retail Equity Research Page 4
Annual report takeaways FY16-17
For BEL, R&D has been the main focus area, which helped the
company increase indigenisation and value addition in its
products/systems. For FY17, total investment in R&D as a percentage
of turnover during the year was 8.81%, which is one of the highest
among defence PSUs. Efforts in this direction helped it achieve 87%
of turnover from indigenous products
Defence being the mainstay of the company, contributed to 88% of
sales revenue, with the balance 12% coming from the civilian sector
Some of the major products/systems introduced during FY17 include
Akash Missile System (seven squadron),
Weapon Locating Radar
BFSR-XR (Extended Range)
IFF MK XII
USHUS-2
HUMSA NG for P15B
Gigabit Ethernet based Integrated Communication System for P15
ACCS for Indigenous Aircraft Carrier
Missile two way Data link for QRSAM
RRF upgradation (High band)
BEACON MKIII for Army
CIDSS phase 2 (Build 2- Software)
Air traffic control software
SoTM
Dual Frequency IP Modem
2KW SSPA (for Tropo Communication)
Modern EW system (noncom) (Varuna)
VVPAT MKII
Point of Sale (POS) device
Border Surveillance System (BoSS)
High Resolution TI for Directed Energy Weapon
IACCS Beta version
VCCS for IACCS
RCWS
Pressurised container
BEL received orders worth | 16,300 crore during 2016-17. The order
book of the company as on April 1, 2017 was | 40,242 crore. The
order book comprises mainly major programs like integrated air
command control system, long range surface to air missile,
battlefield surveillance system, weapon locating radar, EW suite,
hand held thermal imager with laser range finder, advance
composite communication system, ground based mobile ELNIT,
command information decision support system, electronic voting
machine, fire control system, gun/tank upgrades communication
sets, new generation radars, sonars, etc
Major orders received during the year include
Long Range Surface to Air Missile (LR-SAM) with MFSTAR
Advanced Composite Communication System for P17
Electronic Voting Machine
Static Tropo Upgrade
Electronic Warfare Suite for Naval application
Giga Bit Ethernet based Ship Data Network for P17
Hand Held Thermal Imager
Low Intensity Con ict EW System
Homeland Security
ALG Communication
ICICI Securities Ltd | Retail Equity Research Page 5
On the export front, the order book as on April 1, 2017 was US$85
Million including offset orders of US$17 million. BEL has submitted
proposals for various products/systems to countries like Myanmar,
Vietnam, Sri Lanka, Malaysia, and Egypt. Accordingly, the company is
envisaging strong growth from this segment going forward. (As
highlighted in our earlier updates, the company is targeting revenues
of $100 mn by FY19E)
In the civil segment BEL is pursuing opportunities in the field of solar
energy, homeland security, smart city elements, smart cards, cyber
security, telecom and space electronics.
On the working capital front, the company continued to maintain 180
days of receivables at the end of March 2017
New addressable opportunities which BEL plans to capitalise on:
Homeland Security Solutions: BEL is planning to address the
Border Management solution requirements as part of the
Homeland Security business
Solar: BEL is setting up utility scale solar power plants for captive
consumption in the estates of ordnance Factories at 17 locations
spread across eight states for a total capacity of 150 MW. The
commissioning of first solar power plant of 15 MW capacity is
expected to happen soon at ordnance factory, Medak. In the near
future, this sector is expected to contribute significantly to BEL’s
business
Space: BEL is exploring collaboration with Isro leveraging their
technological capabilities in design and development of various
products/systems for possible use in defence applications
ICICI Securities Ltd | Retail Equity Research Page 6
Company Analysis
Order inflows, strong execution to drive revenue growth of 16.7% CAGR
in FY17-20E
We expect standalone revenues to increase from | 8612 crore in FY17 to
| 14465 crore in FY20E mainly on the back of strong order inflows and
execution of backlog orders over the next two years. Order backlog as on
FY17 was at | 40,242 crore. We expect order inflows of ~| 12000 crore, |
11000 crore and ~| 11000 in FY18E, FY19E and FY20E, respectively.
Assuming, execution rate of ~30% for backlog orders and ~12%
execution rate for current year order inflows, we estimate BEL will post
revenues of | 12545 crore in FY19E and | 14465 crore in FY20E.
Exhibit 1: Revenue trend
7,295
8,612
10,833
12,545
14,465
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
FY16 FY17 FY18E FY19E FY20E
| c
rore
Source: Company, ICICIdirect.com Research
Order book growth to keep ticking
Exhibit 2: Order backlog trend
21617
32022
40000 4077539365
36054
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
FY15 FY16 FY17 FY18E FY19E FY20E
| c
rore
Order Backlog
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
Strong order inflows over next five to seven years
BEL is expected to receive significant number of orders over the next five
to seven year. Major orders are expected to be finalised in FY17-19E
including orders Akash Missile (~| 4700 crore), Samyukta upgrade,
mobile cellular communication system, L- band Tropo upgrade, low level
lightweight radar, integrated sonar suite, passive night vision devices, etc.
Apart from the above-mentioned orders the company is also a contender
for large orders like battlefield management system (BMS), the order size
of which is | 35,000 crore. Also, with Hindustan Aeronautics (HAL)
commencing its production line for indigenous aircraft Tejas, BEL is
expected to receive significant orders for its electronic components and
systems. Thus, we expect the order pipeline for BEL to remain strong in
FY17-20E. For FY18E, FY19E and FY20E, we have estimated order inflows
of | 12,000 crore, 11,000 crore & | 11,000 crore, respectively.
Exhibit 3: Order inflows robust over FY17-19E
5260
1709416300
12000
11000 11000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
FY15 FY16 FY17 FY18E FY19E FY20E
| cro
re
Orders Inflows
Source: Company, ICICIdirect.com Research
EBIDTA margins to stabilise to 17.3% in FY20E
BEL reported strong EBITDA margins of 20.5% for FY17. A sharp increase
in margins was due to an overall reduction in material consumption
mainly because of commodity correction and indigenisation initiatives of
the company. However, we believe the same is unsustainable, going
forward. Also, BEL has got transformed from a pure product-selling
company to one that takes the contract as a system integrator. For
instance, BEL used to win 25-30% of the contract for Akash missiles to
supply its radars and related electronics. However, now BEL receives
turnkey orders to supply Akash missiles. From just supplying the product,
it now purchases equipment i.e. missiles from HAL and launchers from
L&T, assembles the product and then supplies it to the air force. Though
this has increased revenues and order inflows for the company, margins
are expected to come off as the profitability on purchased equipment is
not as high as its own product.
EBITDA has grown at 28.7% CAGR in FY13-17. Going ahead, we expect
growth rates to soften on account moderation in margins from 20.5% in
FY17 to 17.3% in FY20E. Accordingly, we expect EBITDA to grow 12.5%
over FY17-20E.
ICICI Securities Ltd | Retail Equity Research Page 8
Exhibit 4: EBITDA and EBITDA margin trend
7,2
95
8,6
12
10,8
33
12,5
45
14,4
65
1,4
61
1,7
62
2,0
34
2,2
24
2,5
08
20.0
20.5
18.817.7
17.3
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
FY16 FY17 FY18E FY19E FY20E
| cro
re
15
16
17
18
19
20
21
%
Revenues EBITDA EBITDA margin (%)
Source: Company, ICICIdirect.com Research
PAT to grow at 5.9% CAGR in FY17-20E
In FY13-17, PAT grew at 14.8% CAGR. This was mostly due to healthy
topline growth and improvement in execution in FY16 and FY17. Going
forward, we expect the bottomline to grow at 5.9% CAGR in FY17-20E.
Exhibit 5: PAT trend
1,3
58
1,5
48
1,4
53
1,6
50
1,8
38
18.6
18.0
13.413.1
12.7
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY16 FY17 FY18E FY19E FY20E
| c
rore
10
11
12
13
14
15
16
17
18
19
20
%
Net Profit Margins (%)
Source: Company, ICICIdirect.com Research
RoE, RoCE of 17.7% and 23.5% in FY20E
With moderate capex plans (| 1500 crore over FY18E-20E) and demand
growth revival, capacity utilisation levels are expected to improve leading
to stable return ratios. BEL has been a consistent debt-free company with
a cash balance of over ~| 2000 crore in FY18E (even after the buy-back of
~| 2100 crore in H1FY17 and a proposed buyback of | 372 crore in
H2FY18). However, due to dilution of operating margins, we expect RoE
and RoCE to marginally head southwards. Accordingly, we expect RoE
and RoCE to drop from 20.6% and 27.1% in FY17 to 17.2% and 22.9%,
respectively, in FY20E.
ICICI Securities Ltd | Retail Equity Research Page 9
Exhibit 6: RoE, RoCE trend
20.3
27.1
23.823.1 22.9
15.1
20.6
17.2 17.4 17.2
-
5
10
15
20
25
30
FY16 FY17 FY18E FY19E FY20E
%RoCE (%) RoE (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
Outlook and valuation
BEL is among the few defence PSUs that has strong financials and a long
history of efficient capital allocation. The company has delivered a topline
and bottomline CAGR of ~6% and 7.3% over the past 15 years (FY01-16),
with average RoCEs and RoEs of 21% and 18.8%, respectively. The
company is characterised by consistent dividend payout of 20%, clean
corporate governance, efficient working capital management, adequate
R&D spend, ability to absorb latest technologies, timely execution of large
projects, strong cash flow generation and prudent capital allocation.
With large participation of private sector players kicking in the defence
space, there have been apprehensions about BEL’s ability to bag large
orders in this space. However, we believe the same is not a major threat
as BEL has proactively taken major steps including technology tie-ups
with foreign majors to bid for the upcoming platform-based orders.
Going forward, BEL is likely to execute large orders like IACCS, VVPAT
and Akash. We believe these orders will help BEL clock double digit
revenue growth over FY17-20E. However, we expect margins to
moderate, going forward, as some of the large integration projects have a
margin profile of 5-15%. Thus, we expect BEL deliver revenue, EBITDA
and PAT CAGR of 16.7%, 12.5% and 5.9% over FY17-20E. We value the
company at 19x P/E on FY20E EPS of | 8.2 to arrive at a target price of |
155 per share. We recommend HOLD on the stock.
BEL is among the few defence PSUs that has strong
financials and a long history of efficient capital allocation.
The company has delivered a topline and bottomline CAGR
of ~6% and 7.3% over the past 15 years (FY01-16), with
average RoCEs and RoEs of 21% and 18.8%, respectively.
The company is characterised by consistent dividend
payout of 20%, clean corporate governance, efficient
working capital management, adequate R&D spend, ability
to absorb latest technologies, timely execution of large
projects, strong cash flow generation and prudent capital
allocation
ICICI Securities Ltd | Retail Equity Research Page 11
Recommendation history vs. consensus
0
10
20
30
40
50
60
70
80
90
0
50
100
150
200
250
Feb-18Nov-17Sep-17Jun-17Apr-17Feb-17Nov-16Sep-16Jun-16Apr-16Jan-16Nov-15Aug-15Jun-15Apr-15Jan-15
(%
)
(|)
Series1 Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research, Initiated coverage on 27th Jan 2016
Key events
Date/Year Event
Dec-12 BEL signs an MoU with Israel Aerospace Industries (IAI) for cooperation on future Long Range Surface to Air Missile (LRSAM) Ship-defence Systems
Sep-14 BEL establishes a Joint Venture Company (JVC) with M/s. Thales Air Systems SA, France and M/s. Thales India Pvt. Ltd in Radar Business Area.
Nov-15 BEL delivers L70 upgraded guns to Indian Army
Feb-15 Ministry of Defence selects BEL - Rolta consortium as a Development Agency for the Battlefield Management System Project
Mar-15 BEL issues bonus shares in the ratio of 2:1
Oct-15 BEL signs | 8000 crore IACCS (Integrated Air Command and Control System) deal with Indian Air Force
Mar-16 BEL, Rosoboronexport sign defence offset partnership agreement
May-16 BEL and HAL sign deal to co-develop avionics
May-16 BEL registers highest-ever order inflow of | 17,094 for FY16.
May-16 BEL inaugurates 8.4 MW wind energy power plant at Harappanahalli, Karnataka. With this wind energy plant, 90% of BEL's energy requirement will be met through
renewable energy resources.
Jan-17 BEL announces split, new face value at | 1 per share, from existing | 10 per share
Feb-17 BEL order book touches all-time of | 40000 crore
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date O/S Position Position Change
1 Government of India 30-09-2017 61.76% 1,517.46M -157.89M
2 Life Insurance Corporation of India 30-09-2017 3.45% 84.84M -8.48M
3 HDFC Asset Management Co., Ltd. 30-11-2017 1.80% 44.27M 0
4 Aditya Birla Sun Life AMC Limited 31-12-2017 1.42% 34.88M +0.36M
5 SBI Funds Management Pvt. Ltd. 30-11-2017 1.29% 31.74M -1.07M
6 ICICI Prudential Asset Management Co. Ltd. 31-12-2017 1.23% 30.18M +0.76M
7 The Vanguard Group, Inc. 30-11-2017 0.87% 21.37M 0
8 Kotak Mahindra Asset Management Company Ltd. 30-11-2017 0.75% 18.47M -0.56M
9 DSP BlackRock Investment Managers Pvt. Ltd. 30-11-2017 0.75% 18.42M -0.93M
10 UTI Asset Management Co. Ltd. 30-11-2017 0.53% 12.91M -0.37M
(in %) Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
Promoter 74.4 68.2 68.2 67.9 66.7
FII 4.3 6.7 7.6 8.1 8.6
DII 15.8 17.7 16.8 16.1 16.5
Others 5.6 7.4 7.4 7.8 8.2
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value Shares Investor name Value Shares
Morgan Stanley Investment Management Inc. (US) +10.31M +3.58M Government of India -393.60M -157.89M
CI Investments Inc. +4.48M +1.80M Life Insurance Corporation of India -21.15M -8.48M
Grantham Mayo Van Otterloo & Co LLC +2.84M +1.05M Reliance Nippon Life Asset Management Limited -14.42M -5.00M
William Blair Investment Management, LLC +2.82M +0.98M Goldman Sachs Asset Management (US) -5.11M -2.02M
William Blair & Company, L.L.C. (Research) +2.21M +0.97M Goldman Sachs Asset Management International -3.59M -1.42M
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 12
.
Financial summary (Standalone)
Profit and loss statement | Crore
(| Crore) FY17 FY18E FY19E FY20E
Net Sales 8,296 10,615 12,287 14,167
Other operating income 316 219 258 298
Revenue 8,612 10,833 12,545 14,465
% Growth 25.9 25.8 15.8 15.3
Other income 471.0 220.0 240.0 250.0
Total Revenue 9,109 11,079 12,545 14,465
% Growth 24.4 21.6 13.2 15.3
Total Raw Material Costs 4,413 5,647 6,672 7,735
Employee Expenses 1,548 2,017 2,334 2,692
other expenses 889 1,136 1,315 1,530
Total Operating Expenditure 6,850 8,800 10,321 11,957
Operating Profit (EBITDA) 1,762 2,034 2,224 2,508
% Growth 54.1 15.4 9.3 12.8
Interest 12 25 30 35
PBDT 2,221 2,229 2,434 2,723
Depreciation 192 238 263 304
PBT before Exceptional Items 2,029 1,990 2,170 2,419
Total Tax 482 537 521 581
PAT before MI 1,548 1,453 1,650 1,838
Minority Interest - - - -
PAT 1,548 1,453 1,650 1,838
% Growth 32.6 (6.1) 13.5 11.4
EPS 6.9 6.5 7.4 8.2
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
(| Crore) FY14 FY17 FY18E FY19E FY20E
Profit after Tax 1,548 1,548 1,650 1,838
Depreciation 192 192 263 304
Interest 12 12 30 35
Cash Flow before WC changes 1,751 1,751 1,943 2,177
Changes in inventory (737) (734) (891) (999)
Changes in debtors (643) (1,136) (867) (973)
Changes in loans & Advances 519 (786) (137) (154)
Changes in other current assets (549) 521 (14) (15)
Net Increase in Current Assets (1,781) (2,135) (1,909) (2,141)
Changes in creditors 185 345 267 300
Changes in provisions 139 (1,131) 27 30
Net Inc in Current Liabilities 314 432 1,492 950
Net CF from Operating activities 285 47 1,526 986
Changes in deferred tax assets (160) - - -
(Purchase)/Sale of Fixed Assets (546) (450) (450) (450)
Net CF from Investing activities (903) (450) (450) (450)
Dividend and Dividend Tax (741) (490) (556) (620)
Net CF from Financing Activities (3,016) (529) (619) (692)
Net Cash flow (3,634) (932) 457 (156)
Opening Cash/Cash Equivalent 7,424 3,790 2,858 3,315
Closing Cash/ Cash Equivalent 3,790 2,858 3,315 3,160
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
(| Crore) FY17 FY18E FY19E FY20E
Equity Capital 223.4 223.4 223.4 223.4
Reserve and Surplus 7,285 8,219 9,280 10,461
Total Shareholders funds 7,509 8,443 9,503 10,685
Minority Interest - - - -
Other Non Current Liabilities 14.7 14.7 14.7 14.7
Total Debt 25 27 27 27
Total Liabilities 7,549 8,485 9,545 10,727
Gross Block 1,616 2,222 2,672 3,122
Acc: Depreciation 361 599 863 1,166
Net Block 1,255 1,623 1,810 1,956
Capital WIP 657 500 500 500
Total Fixed Assets 1,912 2,123 2,310 2,456
Non Current Assets 677 677 677 677
Inventory 4,905 5,639 6,530 7,530
Debtors 4,355 5,491 6,358 7,331
Loans and Advances 81 867 1,004 1,157
Other Current Assets 608 87 100 116
Cash 3,790 2,858 3,315 3,160
Total Current Assets 14,108 15,312 17,678 19,663
Current Liabilities 1,347 1,692 1,959 2,259
Provisions 1,300 169 196 226
Net Current Assets 4,501 5,273 6,147 7,182
Total Assets 7,549 8,485 9,545 10,727
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY17 FY18E FY19E FY20E
Per Share Data
EPS 6.9 6.5 7.4 8.2
Cash per Share 17.0 12.8 14.8 14.1
BV 33.6 37.8 42.5 47.8
Dividend per share 2.8 1.8 2.1 2.3
Dividend payout ratio 0.4 0.3 0.3 0.3
Operating Ratios
EBITDA Margin 20.5 18.8 17.7 17.3
PAT Margin 18.7 13.7 13.4 13.0
Return Ratios
RoE 20.6 17.2 17.4 17.2
RoCE 27.1 23.8 23.1 22.9
RoIC 41.9 32.0 31.5 29.2
Valuation Ratios
EV / EBITDA 17.0 15.2 13.7 12.2
P/E 21.8 23.2 20.4 18.3
EV / Net Sales 3.5 2.9 2.4 2.1
Sales / Equity 1.1 1.3 1.3 1.4
Market Cap / Sales 3.9 3.1 2.7 2.3
Price to Book Value 4.5 4.0 3.5 3.2
Turnover Ratios
Asset turnover 1.1 1.3 1.3 1.4
Debtors Turnover Ratio 2.1 2.2 2.1 2.1
Creditors Turnover Ratio 6.9 7.1 6.9 6.9
Solvency Ratios
Debt / Equity 0.0 0.0 0.0 0.0
Current Ratio 3.1 4.9 5.1 5.2
Quick Ratio 1.6 2.6 2.7 2.8
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 13
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 14
Disclaimer
ANALYST CERTIFICATION
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issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
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