Date: 07-Jan-2019...Indian Hume Pipe Company (IHP) was established in 1926. IHP is engaged in the...

Date: 07-Jan-2019

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Equity Research

Pick of the Week – PCG Research

Pioneer in the water supply segment since 1926

Leading player in drainage, irrigation and water supply

Company has a land bank in Tier I & Tier II cities

Indian Hume Pipe Company

INDUSTRY

CMP

RECOMMEND ed

ADD ON DIPS TO

SEQUENTIAL TARGETS

TIME HORIZON ed

Infrastructure

Rs 337

Buy at CMP and add on declines

Rs 295-337

Rs 390-445 Rs. 252

4-6 quarters

Investors may sell ~60% of their holdings on first target being achieved and later keep a stop loss of first target for the balance holdings, in case the second target takes time to be achieved.

Investors may also maintain Rs.252 as level below which investment position needs to be reviewed, including the possibility to exit

Key Highlights

Estimate 9% revenue and 33% PAT CAGR

Robust order book of >Rs 4,000 cr ensures revenue visibility

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HDFC Scrip Code INDIANHUM

BSE Code 504741

NSE Code INDIANHUME

Bloomberg INHP IN

CMP Jan 04 2019 Rs. 337

Equity Capital (cr) 9.7

Face Value (Rs) 2

Eq- Share O/S (cr) 4.85

Market Cap (Rs cr) 1633

Book Value (Rs) 94

Avg.52 Wk Volume 70844

52 Week High 451

52 Week Low 220

Red flag Price Level 252

PCG Risk Rating * Yellow

Shareholding Pattern % (Sep 30, 2018)

Promoters 69.9

Institutions 07.4

Non Institutions 22.7

Total 100.0

FUNDAMENTAL ANALYST

Kushal Rughani [email protected]

Company profile: Indian Hume Pipe Company (IHP) was established in 1926. IHP is engaged in the construction and maintenance of projects relating to water supply, irrigation, sanitation and sewerage systems, and pipe manufacturing. The construction contracts segment includes water supply schemes, pipes supply and laying projects. The company has developed prestressed concrete pipes (non-cylinder), concrete cylinder pipes, bar wrapped steel cylinder pipes, steel pipes, welded steel penstocks, concrete railway sleepers, and has also specialised in the execution of turnkey water supply, and sewerage & sanitation projects. Company has a wide network of over 20 factories and more than 100 projects under execution in India. It employs state-of-the-art technology, stringent quality control measures, timely execution and continuous R&D. Company is actively involved in varied fields viz. water supply, irrigation, drainage, power generation and rail transport by executing numerous turnkey pipeline projects for water supply, sewerage and hydroelectric power generation, and supplying millions of concrete sleepers for the track modernisation of railways in India. IHP has also executed projects in neighbouring countries like Nepal, Sri Lanka, Myanmar (Burma) and Malaysia, apart from other countries. During the last decade, urban area limits are spreading wider to peripheral areas, but at the same time, basic amenities like water supply, drainage, etc. are not keeping pace with the requirement of increased urbanisation. Apart from the above, most of the rural areas in India do not have access to drinking water. The Government of India, state governments and local bodies are making substantial efforts to supply safe drinking water. Hence, the number of water supply schemes are on the anvil. Further, to make cities and rural areas under more hygienic and as a part of the Swachha Bharat mission, a number of sewerage disposals and drainage schemes are also coming up. Considering the above factors, the outlook for the company regarding water supply, and the sewerage and drainage segments is encouraging.

View and valuation:

Estimate ~9% revenue and 33% PAT CAGR over FY18-20E Given a robust order book position of > Rs 4000 cr (as on Dec-18), we believe that the current momentum will accelerate further and expect revenues to witness 9.5% CAGR over the next two years. Margins are expected to improve, while short-term debt is expected to marginally reduce owing to the execution of orders currently categorised as work in progress, resulting in an improvement of the interest coverage ratio. The order book of the company increased ~9.5% YoY to Rs 3737 cr as on Oct-18. The rise in order book could be partially credited to the slowdown in order execution post the implementation of GST. Revenue and earnings are estimated to post strong growth in FY19 and FY20, led by a sturdy pick-up in order execution. Additionally, ahead of the upcoming 2019 general elections, the Government’s spending on infrastructure, water supply schemes and various initiatives under the Swachha Bharat mission are likely to get a boost, which augurs well for the company. The stock currently trades at ~17x FY19E EPS and ~14x FY20E EPS. We recommend BUY on Indian Hume Pipe at CMP of Rs 337, and add on dips to Rs 295 with TP of Rs 390 and Rs 445 over the next 4-6 quarters. We arrive at TP of Rs 445 based on 18.5x FY20E EPS. Moreover, any positive developments on land development would further add value to the company.

mailto:[email protected]

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Financial Summary

YE March (Rs cr) Q2FY19 Q2FY18 YoY (%) Q1FY19 QoQ (%) FY17 FY18 FY19E FY20E

Net Sales 416.3 214.3 94.3 333 25 1705 1526 1608 1825

EBITDA 52.5 25 110 38.5 36.4 207 152 202 235

APAT 29.8 8.3 259 17 75.3 99.7 66 95 117

Diluted EPS (Rs) 20.6 13.7 19.7 24.2

P/E (x) 16.5 24.8 17.3 14

EV / EBITDA (x) 9.4 12.8 10.2 8.5

RoE (%) 28% 15% 19.5% 21%

Key Highlights

Indian Hume Pipe (IHP) is engaged in the construction and maintenance of projects relating to water supply, irrigation, sanitation and sewerage systems, and pipe manufacturing.

IHP is actively involved in varied fields viz.

water supply, irrigation, drainage, power generation and rail transport by executing numerous turnkey pipeline projects for water supply, sewerage and hydroelectric power generation, and supplying millions of concrete sleepers for the track modernization of railways in India.

In FY18, Indian Hume had bagged orders worth > Rs 1000 cr, which has taken its order book to ~Rs 3737cr as on Oct-18. Recent initiatives assert the Government’s strong commitment to infrastructure. Affordable housing was given infrastructure status in the Budget 2018. All these are likely to propel growth momentum in the coming years.

Given robust order book position of > Rs 4000cr, we believe current momentum to accelerate further and expect revenues to see 9% and PAT at ~33% CAGR over the next two years.

(Source: Company, HDFC sec)

Business background:

A) Water supply & sewerage projects: Company is in the business of executing turnkey projects for the supply of drinking water and irrigation water to many parts of India. Company have completed and is in the process of executing a number of prestigious turnkey projects involving various components such as intake wells, electrical transmission lines, pumping stations with pumping machineries, water treatment plants, water transmission mains, ground level reservoirs, elevated service reservoirs along with supplying, laying, jointing, testing, the commissioning of various pipe materials along with allied civil works. B) Bar wrapped steel cylinder (BWSC) pipes / Pre-stressed concrete cylinder pipes (PCCP): The BWSC and PCCP pipes introduced by the company as alternative pipe materials to M.S. and D.I. pipes have become popular amongst various Government authorities. The company has undertaken / is undertaking several projects involving BWSC pipes. To meet the demand of BWSC pipes, the company had set up manufacturing plants at Choutuppal in Telangana, Chilamathur in Andhra Pradesh and Dhule in Maharashtra. Company has also created facilities to manufacture these pipes in its existing factories at Miraj, Rajkot, Kanhan, Patancheru, Yelhanka, Thanjavur, Kekri, Sikar, Karari and Kovvur to cater to the local demand. During the year, these plants produced 276.58 kms of BWSC pipes valued at Rs 78.9 cr, 110.2 kms of PCCP Pipes valued at Rs 83 cr, and 58.3 kms of PSC pipes valued at Rs 28 cr. During the year, the company has received orders worth Rs 99 cr for BWSC pipes, orders worth Rs 43.9 cr for PSC pipes, and orders worth Rs 46 cr for PCCP pipes, along with other civil works. Prestressed concrete railway sleepers IHP introduced Prestressed Concrete Monoblock Sleepers for railways in 1970. Indian railways are one of the largest buyers of IHP’s railway sleepers. The life of an IHP sleeper in track is estimated at not less than 50 years. The heavier sleeper produces higher resistance to lateral movement, and also reduces the vertical movement under traffic of imperfectly packed sleepers. In condition of excessive heat, a concrete sleeper track is less prone to vertical and horizontal distortion, and this has important safety as well as maintenance implications. (C) Railway sleepers: In FY18, the company manufactured 1,53,216 railway sleepers amounting to Rs 25.6 cr against the orders received from the Ministry of Railways, Railway Board, New Delhi.

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(D) National Rifle Division: Since 1970, the company conducts business under the brand of National Air Rifle at Vatva, Ahmedabad which manufactures air rifles / air pistols for sports and target shooting competitions. The company manufactures 10 varieties of air rifles and air pistols of 0.177 (4.5 mm) and 0.22” (5.5 mm) calibres. During the year, the company has shut down its National Rifle Division at Vatva, Ahmedabad, with effect from 1-Jan-18, which was in operation since 1970. This was owing to stringent provisions of the new Arms Rules, 2016, that entailed high compliance and regulatory costs for the company. The business was small, and was not a part of the principal segment of the company’s business. Company’s water supply projects and drainage schemes are progressing well and/or nearing completion. The noteworthy amongst these are:

Providing drinking water to Balkonda, Armoor, Nizamabad, Kamareddy and a part of Yellareddy constituencies from the SRSP reservoir, Nizamabad district in Telangana, which includes the operation and maintenance for 10 years of the value of Rs 1,162 cr.

Providing drinking water to habitations in Gadwal and Alampur constituencies from the Jurala project, Mehaboobnagar district in Telangana, including operation and maintenance for 10 years of the value of Rs 481 cr.

The Madhya Pradesh Urban Development for Bhedaghat Water Supply Scheme (Jabalpur) has awarded an order worth Rs 257 cr in Madhya Pradesh.

The Public Health Engineering Department, Ajmer, for Jahazpur Water Supply Scheme including an overhead tank pumping station of the value of Rs 238 cr in Rajasthan.

In Coimbatore for the Tiruppur Water Supply Scheme of the value of Rs 191 cr in Tamil Nadu.

For the supply, laying, jointing and testing of DI Pipes, DI Specials, Valves etc., and connected civil works of the value of Rs 180 cr for the Bangalore Water Supply & Sewerage Board, Bengaluru, Karnataka.

Some new orders secured by the company in the last 6-9 months are:

Public Health Engineering Department, Ajmer, for the Jahazpur Water Supply Scheme including an overhead tank pumping station worth Rs 261 cr in Rajasthan. Municipal Corporation Bilaspur, Chhattisgarh including a water treatment plant, overhead tanks worth Rs 201 cr in Chhattisgarh. The company got a Rs 186 cr order for the Tiruppur Water Supply Scheme For the supply, laying, jointing and testing of DI Pipes of Rs 177 cr for the Bangalore Water Supply & Sewerage Board, Bengaluru, Karnataka. Municipal Corporation Bilaspur, Chhattisgarh for the Bilaspur Water Supply Scheme worth Rs 100 cr. The company has received Letter of Award of Rs 468 cr from M/s Karnataka Power Corporation, Bangaluru for the manufacture and supply to site, laying, jointing,

testing and commissioning of pipeline and construction of appurtenant works for the water supply pipeline from Kushtagi to Bellary Thermal Power Plant of an approximate length of 103 km.

Madhya Pradesh Jal Nigam for Kundaliya Multi Village Rural Water Supply Scheme District - Rajgarh has awarded order of Rs.578cr including trail run and running & maintenance of the entire scheme for 10 years.

Increasing infrastructure deals Recent initiatives assert the Government’s commitment to infrastructure. Affordable housing was given an infrastructure status in the Budget 2018. All these would likely to propel further growth momentum in the coming years. Approximately 60 mn homes are expected to be built in India between 2018 and 2022 - “Housing for All” under Pradhan Mantri Awas Yojana (PMAY) aims to build 20 mn urban and 30 mn rural houses by 31 Mar-22. The Government is also making an attempt to revive and boost public-private partnership in this sector. 99 cities have been selected under the “Smart Cities Mission” with an outlay of Rs 2.04 lakh cr in Budget 2018. These initiatives are expected to provide a considerable boost to the infrastructure sector though policies and regulations that need to be in place for the effective implementation of such programmes.

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The outlay on the Urban Rejuvenation Mission (AMRUT and Smart Cities) witnessed a hike from Rs 8999 cr in FY18 (RE) to Rs 12169 cr for FY19 (BE). The Government of India is expected to increase its spending on the infrastructure sector prior to the general election in 2019. Furthermore, a number of water supply schemes, sewerage disposal and drainage schemes with regard to the Swachha Bharat mission are pending. These initiatives would doubtlessly spur the order book of the company and thereby propel growth. Increasing population and the expansion of economic activities inevitably lead to increasing demand for water for diverse purposes i.e. domestic, industrial, agricultural, hydro-power, thermal power, navigation, recreation etc. Domestic and industrial water needs have been largely concentrated in or around major cities. However, the demand in rural areas is expected to increase sharply, as the development programmes of state governments to improve the economic conditions of the rural mass are executed. Demand for water for hydro and thermal power generation, and for other industrial uses is also increasing substantially. As a result, water, which is already scarce, will become even scarcer in the future. This underscores the need for the utmost efficiency in water utilisation and its distribution. Waste water treatment in India The wastewater treatment sector has huge potential in the coming years. In the industrial sector, as the demand for water from industrial units grows, there will be a significant demand for water treatment. It is estimated that by 2020, the market for industrial water treatment technologies will grow by 50%. The agricultural sector accounts for 70% of all fresh water consumption, wherein water reuse shall be critical. It is estimated that the 330 km of municipal wastewater generated every year, if treated and used effectively, has the potential to irrigate nearly 40 mn hectares or 15% of all irrigated farm lands. The regulation of wastewater discharges has historically been lax, but many industrial units face closure unless they meet the standards. The Government has proposed zero liquid discharge (ZLD) for highly polluting industries. The thinking behind this is that many small industrial units cannot meet discharge standards, and are therefore going straight to ZLD will help reduce pollution of surface water bodies. Water stress has become a perennial concern in most Indian cities. The latest census reported that only 70% of urban households have access to piped water supply. The average per capita supply to these households is well below the recommended 135 litres per day in many cities. India is expected to add approximately 404 million new urban dwellers between 2015 and 2050. This rapid urban growth will be linked to higher industrial output and greater energy demand. There is a domino effect here, with water demand from households, industries and power plants growing simultaneously and adding to the urban water stress. This is particularly visible in industrial metros such as Chennai, Bengaluru, and Delhi, where acute water shortage has driven up the cost of fresh water production and industrial water tariffs. To mitigate the severity of this impending crisis, there is need for innovative alternatives to fresh water. Reuse of treated wastewater or reclaimed water is one such alternative that is gaining weight. Pilot wastewater reuse plants are already in operation in many states in India. The water treatment infrastructure in India is in the nascent stage. It is estimated that 70% of surface water in India is contaminated by biological, toxic, organic and inorganic pollutants. Nearly 66,700 habitations across the country are affected due to the presence of arsenic and fluorides in drinking water. To counter this, the Government, under a special scheme, has allocated Rs 25,000 crore to provide clean and safe drinking water to its citizens. As India rapidly transforms from an agrarian to an industrial and services-based economy, the demand for water from the industrial sector will significantly rise. By 2050, the demand from the energy sector will grow 3.7 times, and that from the manufacturing sector will grow 2.2 times. The pollution in India’s rivers has become critical, and the Government is attempting to tackle it. Only ~30% of wastewater generated in India is being treated, and millions of litres of untreated wastewater flow into rivers every day. The Government has unveiled initiatives that promise to transform India’s ever-expanding cities and large towns to rival those in developed nations. In order to speed up the construction of water and wastewater projects across the country, the Government is adding new incentive tools – such as priority release of budget allocations on the basis of reforms implemented by states in the previous year – whilst also undertaking a review of water tariffs.

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Development of land parcel to aid growth

The development of the company’s land at Hadapsar (Pune), Wadala (Mumbai) and Badarpur (New Delhi) are at initial stages of obtaining development-related approvals from the authorities.

The Indian Hume Pipe Company has entered into an agreement with Mumbai-based builder Dosti Realty for the development of a ~ 3.5 acres land parcel in Mumbai’s Wadala locality. The total land parcel includes 2.08 acre freehold land, while 1.39 acre is under the slum rehabilitation scheme.

Both the land parcels will be developed by Dosti Realty, at their costs and risk, Indian Hume Pipe Company said in a regulatory filing on the Bombay Stock Exchange. The slum rehabilitation will be developed as Phase I, while the freehold land parcel will be developed as Phase II.

The company, in the current fiscal, has also undertaken initiatives to monetise land it had purchased in Vadgaon, Pune, to set up a pipe manufacturing factory in 1969, which was eventually shut down in 2015 due to lack of demand. This land, measuring ~ 643518 sq. feet, has been proposed for development and sale of developed real estate that would consist of residential group housing as well as commercial/retail areas.

Therefore, the company has approved the proposed revenue-sharing transaction with Kalpataru Gardens Pvt. Ltd. to develop a 15-acre land parcel for a residential project in suburban Pune.

Kalpataru will have 66% of the revenue from the project, while the rest will go to Indian Hume Pipe, which will bear the conversion charges from industrial to residential use. Kalpataru will bear and pay all construction, development, marketing and selling and other project-related costs.

The development of the company’s land at Hadapsar (Pune), Wadala (Mumbai) and Badarpur (New Delhi) are in the initial stages of obtaining development-related approvals from various authorities.

Robust order book ensures strong earnings visibility The Strategic Plans for drinking water supply and sanitation in rural areas have the following timeline:

By 2019: Rural sanitation facilities to attain an Open Defecation Free India by 2-Oct-19.

By 2022: At least 90% of rural households are provided with adequate and safe piped water supply, with at least 80% household connections. In Dec-18, Indian Hume has received orders worth Rs 950 cr from various authorities. With this, the company’s order book surged to > Rs 4000 cr compared to Rs 3413 cr

in Nov-17. I Additionally, in the last several months, the company has secured a few major work orders aggregating to > Rs 1500 cr across the states of Tamil Nadu, MP,

Chhattisgarh, Rajasthan, Andhra Pradesh and Karnataka for water supply and sewerage schemes that have bolstered the order book for the next 24-30 months. The

allocation in the Union Budget 2018 for Swachh Bharat Abhiyan (SBA) at Rs 180 bn would continue to drive strong revenue visibility for the company.

It received a Letter of Acceptance for work worth Rs 503 cr from the Andhra Pradesh Drinking Water Supply Corporation (APDWSC), Vijayawada, Andhra Pradesh for the

work of the construction of drinking water supply projects in Guntur district. The project will be completed within 24 months. The company has received 2 Letters of

Acceptance aggregating to Rs.234 cr from Madhya Pradesh Jal Nigam Maryadit, Bhopal for two separate orders worth Rs 124 cr and Rs 110 cr for the trial, run and

maintenance of the entire scheme for 10 years.

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The company has received a work order of Rs 204.5 cr from the Public Health & Municipal Engineering Department, Government of Andhra Pradesh, for the work of Kurnool

District (NCT) - Package ll - External Aided Project (EAP) - Assistance from Asian lnfrastructure lnvestment Bank (AllB) - Andhra Pradesh Urban Water Supply and Septage

Management lmprovement Project (APUWSSMIP) for providing water supply distribution networks, house service connections, AMR meters and SCADA including operation

& maintenance for 7 years, including a defect liability for 2 years in the municipal towns of Yemmiganur, Atmakuru, Allagadda, Gudur and Nandikotkur in Kurnool District.

Company has got client from various state governments and local bodies like the Indian Railways, Indian Railway Construction Company (IRCON), Rail India Technical And

Engineering Services (RITES), Bharat Heavy Electricals Limited (BHEL), National Hydro Power Corporation (NHPC), National Thermal Power Corporation (NTPC), Indian

Farmers Fertiliser Co Operative Limited (IFFCO), Satlaj Jal Vidyut Nigam (SJVN), Delhi Jal Board, Karnataka Water Supply & Drainage Board, Karnataka Power Corporation

Ltd., Bhopal Municipal Corporation, Indore Municipal Corporation, Kerala Water Authority, Himachal Pradesh State Electricity Board, Chattisgarh Public Health Engineering

Department etc.

Expect ~9% revenue and 33% PAT CAGR over FY18-20E Given the robust order book position of > Rs 4000 cr, we believe the company’s current momentum to accelerate further, and expect revenues to witness 9.5% CAGR over the next two years. Margins are expected to improve, while short-term debt is expected to marginally reduce, owing to the execution of orders currently categorized as work in progress resulting in an improvement of the interest-coverage ratio. Revenue and earnings are estimated to post strong growth in FY19 and FY20, led by a sturdy pickup in order execution. Additionally, ahead of the upcoming 2019 general elections, the Government’s spending on infrastructure, water supply schemes and various initiatives under the Swachha Bharat mission are likely to get a boost, which augurs well for the company. The “pass through” clause established in most of its contacts will help the company cushion itself from volatility in input prices of steel and cement. However, we note that cement prices are largely stable, and domestic steel prices have corrected in the last three months. The stock currently trades at ~17x FY19E EPS and ~14x FY20E EPS. We recommend BUY on Indian Hume Pipe at a CMP of Rs 337, and add on dips to Rs 295 with TP of Rs 390 and Rs 445 over the next 4-6 quarters. We arrive at a TP of Rs 445 based on ~19x FY20E EPS. Moreover, any positive developments on land development would further add value to the company.

Risks and concerns

Deterioration of working capital

Economic & infrastructure growth

Lower pace of order wins and execution may impact revenues and PAT

Severe competition from the manufacturers of alternative pipes like ductile iron, PVC pipes, HDPE and spirally-welded steel pipes is an existing threat and can affect

the company’s business prospects.

Rise in raw material prices may weigh on margins

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Revenues Trend

Source: Company, HDFC sec Research

1010939

1705

15261608

1825

22.7

-7.0

81.6

-10.5

5.4 13.5

-20

0

20

40

60

80

100

200

400

600

800

1000

1200

1400

1600

1800

2000

FY15 FY16 FY17 FY18 FY19E FY20E

Total Income Growth %

EBITDA Trend Over FY18-20E


11096

207

152

191

228

42.1

-12.5

115.0

-26.6

25.7 19.5

-40

-20

0

20

40

60

80

100

120

140

0

50

100

150

200

250


EBITDA EBITDA Growth

Comfortable D/E


298 310 261 336 399 432

1.0

1.0

0.70.7 0.8

0.7

0.0

0.3

0.6

0.9

1.2

1.5

0

100

200

300

400

500

FY15 FY16 FY17 FY18E FY19E FY20E

Gross Debt D/E

Return Ratios


15

10

28

16

19 21

32

14

29

1719 20

0

5

10

15

20

25

30

35


RoE RoCE

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Income Statement Balance Sheet

(Rs Cr) FY17 FY18 FY19E FY20E

Net Revenue 1705 1526 1608 1825

Other Income 3 3 12 8

Total Income 1708 1528 1619 1833

Growth (%) 81.6 -10.5 5.4 13.5

Operating Expenses 1497 1374 1417 1597

EBITDA 211 154 202 235

Growth (%) 115.0 -26.6 25.7 19.5

EBITDA Margin (%) 12.1 9.9 11.9 12.5

Depreciation 11 11 12 13

EBIT 200 144 190 223

Interest expenses 46 43 47 50

PBT 154 100 140 170

Tax 53 34 46 56

RPAT 100 66 95 117

Growth (%) 244.7 -33.9 44.9 21.0

EPS 20.6 13.7 19.7 24.2

As at March FY17 FY18 FY19E FY20E

SOURCE OF FUNDS

Share Capital 9.7 9.7 9.7 9.7

Reserves 390 443 515 601

Shareholders' Funds 400 453 525 610

Total Debt 261 336 399 432

Net Deferred Taxes 5 4 4 4

Long Term Provisions & Others 20 41 46 52

Total Source of Funds 686 835 973 1098

APPLICATION OF FUNDS

Net Block 70 69 74 72

Long Term Loans & Advances 90 91 114 148

Total Non-Current Assets 161 161 189 221

Other Financial Assets 549 745 773 805

Inventories 60 47 53 57

Trade Receivables 401 475 489 545

Cash & Equivalents 44 19 60 112

Other Current Assets 49 93 100 105

Total Current Assets 1117 1381 1480 1630

Trade Payables 318 433 398 430

Other Current Liabs 265 270 257 249

Short-Term Provisions 4 4 6 8

Total Current Liabilities 591 708 696 751

Net Current Assets 526 673 784 878

Total Application of Funds 686 835 973 1098


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Cash Flow Statement Key Ratios


EBITDA Margin 12.1 9.9 11.9 12.5

EBIT Margin 11.7 9.4 11.8 12.2

APAT Margin 5.9 4.3 6.0 6.4

RoE 28.2 15.5 19.5 20.7

RoCE 28.7 17.1 19.3 20.0

Solvency Ratio

Net Debt/EBITDA (x) 1.0 2.1 1.8 1.4

D/E 0.7 0.7 0.8 0.7

Net D/E 0.5 0.7 0.6 0.5

PER SHARE DATA

EPS 20.6 13.7 19.7 24.2

CEPS 22.7 15.9 22.2 26.9

BV 83 94 108 126

Dividend 3.4 3.4 4.2 5.4

Turnover Ratios (days)

Debtor days 86 114 111 109

Inventory days 11 13 12 11

Creditors days 80 122 109 105

VALUATION

P/E 16.4 24.5 17.2 13.8

P/BV 4 3.6 3.1 2.6

EV/EBITDA 9.4 12.5 10 8.4

EV / Revenues 1.1 1.2 1.2 1.0

Dividend Payout 16.5 24.8 21.4 22.3


Reported PBT 154 101 142 172

Non-operating & EO items -3 -3 -12 -8

Interest Expenses 46 43 47 50

Depreciation 11 11 12 13

Working Capital Change 152 106 -16 -14

Tax Paid -53 -34 -46 -56

OPERATING CASH FLOW ( a ) 306 224 128 158

Capex -4 -14 -13 -11

Free Cash Flow 302 210 115 147

Investments -60 -1 -23 -33

Non-operating income 3 3 12 8

INVESTING CASH FLOW ( b ) -61 -13 -25 -37

Debt Issuance / (Repaid) -4 15 9 12

Interest Expenses -46 -43 -47 -50

FCFE 252 182 77 108

Share Capital Issuance 5 0 0 0

Dividend -19 -20 -24 -31

FINANCING CASH FLOW ( c ) -64 -48 -62 -69

NET CASH FLOW (a+b+c) 180 163 41 51


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Ratings Chart

R E T U R N

HIGH

MEDIUM

LOW

LOW MEDIUM HIGH

RISK

Ratings Explanation:

RATING Risk - Return BEAR CASE BASE CASE BULL CASE

BLUE LOW RISK - LOW RETURN STOCKS

IF RISKS MANIFEST PRICE CAN FALL 20%

OR MORE

IF RISKS MANIFEST PRICE CAN FALL 15% &

IF INVESTMENT RATIONALE FRUCTFIES PRICE CAN RISE BY 15%

IF INVESTMENT RATIONALE FRUCTFIES

PRICE CAN RISE BY 20% OR MORE

YELLOW MEDIUM RISK - HIGH RETURN STOCKS


OR MORE





RED HIGH RISK - HIGH RETURN STOCKS


OR MORE





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Price Chart

# Explanation of Red Flag Price Level: If the stock price sustains below red-flag, the premise of investment needs to be reviewed. Risk-averse investors should exit the stock and preserve capital. The downside of following the red-flag level is that if the price decline turns out to be temporary and recovers subsequently, you won’t be able to participate in the gains.

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Rating Definition:

Buy: Stock is expected to gain by 10% or more in the next 1 Year. Sell: Stock is expected to decline by 10% or more in the next 1 Year.

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Research Analyst: Kushal Rughani ([email protected])

HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 3075 3450 Compliance Officer: Binkle R. Oza Email: [email protected] Phone: (022) 3045 3600 SEBI Registration No.: INZ000186937 (NSE, BSE, MSEI, MCX) |NSE Trading Member Code: 11094 | BSE Clearing Number: 393 | MSEI Trading Member Code: 30000 | MCX Member Code: 56015 | AMFI Reg No. ARN -13549, PFRDA Reg. No - POP 04102015, IRDA Corporate Agent Licence No.-HDF2806925/HDF C000222657, Research Analyst Reg. No. INH000002475, CIN-U67120MH2000PLC152193. Disclosure: I, (Kushal Rughani, MBA), authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. 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. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate does not have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock – No HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475. 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Date: 07-Jan-2019...Indian Hume Pipe Company (IHP) was established in 1926. IHP is engaged in the...

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Transcript of Date: 07-Jan-2019...Indian Hume Pipe Company (IHP) was established in 1926. IHP is engaged in the...