Date: 14th January 2019 - i.marketsmojo.com fileAndhra Pradesh, Telangana, Karnataka and...

Date: 14th January 2019

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Equity Research Pick of the Week – Retail Research

Robust position in India's phosphatic fertiliser market

Government initiatives likely to increase demand

DBT scheme for fertiliser subsidies to reduce borrowings

Coromandel International Ltd

INDUSTRY

CMP

RECOMMEND

ADD ON DIPS TO

SEQUENTIAL TARGETS

TIME HORIZON

Fertilisers

Rs 462

Buy at CMP and add on declines

Rs 410-415

Rs 521-567 Rs 397

3-4 quarters

Investors may sell 60-65% 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 397 as level below which investment position needs to be reviewed, including the possibility to exit

Key highlights

Strategic global alliances for ensuring raw material

supplies and introducing new products

Retail foray to improve branding

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HDFC Scrip Code CORINTEQNR

BSE Code 506395

NSE Code COROMANDEL

Bloomberg CRIN IN

CMP Jan 11 2019 Rs 461.95

Equity Capital (cr) 29.24

Face Value (Rs) 1

Eq- Share O/S (cr) 29.24

Market Cap (Rs cr) 13509.2

Book Value (Rs) 106.9

Avg.52 Wk Volume 200,000

52 Week High 588.0

52 Week Low 340.0

Shareholding Pattern % (Sept 30, 2018)

Promoters 61.8

Institutions 16.6

Non Institutions 21.6

Total 100.0

FUNDAMENTAL ANALYST

Atul Karwa [email protected]

Company profile: Coromandel International Ltd. (CIL), India’s second-largest phosphatic fertiliser player, is in the business segments of fertilisers, specialty nutrients, crop protection and retail. The company manufactures a wide range of fertilisers, and markets ~4.5 mn tonnes, making it a leader in its addressable markets. CIL is a part of the Rs 329 bn Murugappa Group and a subsidiary of EID Parry, which holds 60.58% in the company. It was ranked among the top 20 best companies to work for by Business Today magazine, and was also voted as one of the ten greenest companies in India by TERI. CIL operates a network of ~800 retail outlets across 4 states.

Investment rationale: • Robust position in India's phosphatic fertiliser market. • Government initiatives likely to increase demand. • DBT scheme for fertiliser subsidies to reduce borrowings. • Strategic global alliances for ensuring raw material supplies and introducing new products. • Retail foray to improve branding.

Concerns: • Regulated nature of the fertiliser industry. • Volatility in raw material prices. • Improved varieties of seeds. • Forex fluctuations/translation losses. • Seasonality during the year.

View and valuation: CIL is the second-largest phosphatic fertiliser player and a complete crop-solution provider with a strong presence in Andhra Pradesh, Telangana, Karnataka and Maharashtra. The regular launch of new products and differentiated molecules should help maintain growth momentum. Initiatives taken by the Government to double farm income are likely to benefit companies like CIL. The company is moving away from subsidy-linked products and focussing on increasing its share of higher-margin products in the crop protection segment. Recent price hikes would ease margin pressure, while lower borrowings once DBT-related issues get ironed out should lead to higher profitability. Global alliances reduce issues of raw material availability and price volatility to an extent. CIL has proposed production capacity enhancement from 19.25 lakh MTPA to 22 lakh MTPA at its Kakinada plant through process improvements and debottlenecking.

With improved reservoir levels in southern markets and prediction of normal north-east monsoons, CIL expects a favourable agri environment during the second half of the year. Further, with the stabilisation of Direct Benefit Transfer in fertilisers and a reduction in GST rates on phosphoric acid, the working capital situation is likely to improve, going forward. In FY20, it could benefit from the correction in raw material prices and the fresh capacity of phosphoric acid coming on stream.

We feel investors could buy the stock at the CMP, and add on dips to the Rs 410-415 band (13.5x FY20E EPS) for sequential targets of Rs 521 (17x FY20E EPS) and Rs 567 (18.5x FY20E EPS). At the CMP of Rs 462, the stock trades at 15.1x FY20E EPS.

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Financial Summary YE March (Rs cr) Q2FY19 Q2FY18 YoY (%) Q1FY19 QoQ (%) FY17 FY18 FY19E FY20E Net Sales 5008.3 3675.3 36.3 2528.5 98.1 10030.8 10946.7 13613.0 15425.1 EBITDA 646.1 574.5 12.5 213.6 202.4 982.7 1226.9 1456.6 1650.5 APAT 365.6 348.6 4.9 90.2 305.2 477.0 663.6 759.8 896.4 Diluted EPS (Rs) 12.5 11.9 3.1 16.4 22.7 26.0 30.7 P/E (x) 28.3 20.4 17.8 15.1 EV / EBITDA (x) 15.8 12.7 10.7 9.2 RoE (%) 17.3 22.1 22.5 22.7

Key Highlights

Coromandel is the second-largest player in the phosphatic fertiliser industry in India, with a market share of ~ 16%. The increasing share of non-subsidy and higher margin products will drive margin expansion.

The changing demographic profile in

India is likely to put stress on land availability for agriculture, driving demand for complex fertilisers and crop-protection chemicals.

DBT for fertiliser subsidy payments to

reduce working capital and borrowing costs.

Retail foray through Gromor stores

would increase CIL’s reach and branding.

(Source: Company, HDFC sec)

Company profile: Coromandel International Ltd. (CIL), India’s second-largest phosphatic fertiliser player (with the ability to manufacture 12 grades), is in the business segments of fertilisers (no. 1 in SSP), specialty nutrients, crop protection (5th largest in India) and retail. The company manufactures a wide range of fertilisers, and markets ~ 4.5 mn tonnes, making it a leader in its addressable markets. CIL has 15 manufacturing facilities located in Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh, Uttar Pradesh, Rajasthan, Gujarat and Jammu & Kashmir. The company is a part of the Rs 329 bn Murugappa Group, and a subsidiary of EID Parry which holds 60.58% in the company. It was ranked among the top 20 best companies to work for by Business Today magazine, and was also voted as one of the ten greenest companies in India by TERI. CIL operates a network of ~800 retail outlets across 4 states. CIL operates through two major segments: Nutrients and other allied businesses, and crop protection, offering agriculture solutions across the farmer value chain. In its endeavour to be a complete plant nutrition solution company, Coromandel has also introduced a range of specialty nutrient products including organic fertilisers. The nutrient business accounted for 86% of revenues in FY18. The crop protection business produces insecticides, fungicides, and herbicides, and CIL markets these products in India and abroad. Coromandel is the second-largest manufacturer of Malathion, and the major manufacturer of phenthoate in Asia. By taking over M/s Sabero Organics in 2011, Coromandel has added many technicals to its range of products, and has climbed to a coveted position among the top 5 Indian companies in the Indian pesticide industry. The company has global registrations in 62 countries, and a strong presence in the export markets of Latin America, SE Asia and Africa. Crop protection contributed to 14% of revenues in FY18. Exports form 44% of crop protection sales. Coromandel has strategic partnerships with leading companies across the globe including: A Technical Assistance Agreement with Foskor (Pty) Ltd. of South Africa, one of the largest phosphoric acid producing

companies, for extending Coromandel's technical assistance.

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A joint venture agreement with Groupe Chimique Tunisien (GCT) and CPG of Tunisia to set up a phosphoric acid plant at La Skhira, Tunisia, at an estimated cost

of US$ 180 mn. A 50:50 joint venture with Sociedad Quimicay Minera to set up a Water Soluble Fertiliser (WSF) plant for manufacturing WSF at Coromandel's Kakinada plant.

CIL has set up subsidiaries in Brazil, Australia, Mexico, Argentina and Europe. The roles of these is mainly to get product registrations and procure orders for supplies from India. In addition, the company, along with its wholly-owned subsidiary CFL Mauritius Ltd, holds 14% equity stake in Foskor Pty Ltd, South Africa, and a 15% equity stake in TIFERT, which are strategic investments to secure the supply of phosphoric acid.

Revenue and Margin Trend

(Source: FAI, Company, HDFC sec)

Key Milestones In The Last Decade Year Milestone 2006 Entry into Specialty Nutrient and Organic Fertiliser segment 2007 Merger with erstwhile Godavari Fertiliser and Chemicals Ltd. 2008 Expansion in Retail segment through opening 300 outlets in Andhra 2010 Established JV with SQM Chile for realizing the growth opportunities in Water Soluble Fertiliser space 2011 Acquisition of erstwhile Sabero Organics providing access to international markets 2012 Technology tie up with Shell Technology for new product development 2013 Acquisition of erstwhile Liberty Phosphate Ltd providing foothold in West, Central and North India markets 2014 Established JV with Yanmar and Mitsui for capturing growth opportunities in farm mechanization space 2015 Set up Crop Protection R&D Center at Hyderabad for new product development and process improvement 2016 Strengthened marketing structure by setting up Integrated Nutrient Management team with Agronomist support 2017 Expansion of Retail operations in Maharashtra 2018 Acquisition of Bio Pesticide business from EID Parry


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Investment rationale

Robust position in India's phosphatic fertiliser market Coromandel is the second-largest player in the phosphatic-fertiliser industry in India, with a market share of ~ 16%. Its market position is underpinned by its entrenched and leading position in Andhra Pradesh and Telangana - India's largest complex-fertiliser market and its wide product portfolio. The company has also been gradually increasing sales of non-subsidy based products, including pesticides, speciality nutrients (secondary and micro-nutrients [bentonite sulphur, zinc, sulpho zinc, and boron], water-soluble fertilisers, and compost), and gypsum (a by-product from the manufacture of phosphoric acid), in its portfolio. In FY18, Coromandel's non-subsidy business had a revenue share of 22% and EBITDA share of 32%. Company's brand 'Gromor' has a strong recall among customers, and commands premium in its key markets. It also has its own retail outlets, 'Mana Gromor Centers', through which it sells fertilisers, pesticides, speciality nutrient products, seeds, sprayers, veterinary products, etc. It has ~ 800 stores located in Andhra Pradesh, Telangana, Karnataka and Maharashtra.

Market For Phospatic Fertilisers Has Remained Stable… …But Coromandel Is Gaining Market Share

(Source: FAI, Company, HDFC sec)

Government initiatives likely to increase demand The changing demographic profile in India is likely to put stress on the land availability for agriculture, driving the demand for crop protection and fertilisers. The Government has announced various measures in an effort to double farm income by 2022, such as (i) MSP at 1.5x Cost of Production; (ii) Institutional credit at US$ 17 bn; (iii) Increased allocation under crop insurance; (iv) Upgrade existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs) etc. Higher support prices coupled with rural wage growth is likely to drive a shift in the consumption pattern. According to a Mckinsey report, India’s food consumption is expected to more than double from US$ 160 bn in 2010 to US$ 350 bn by 2030, with the consumption of premium foods growing at a faster rate. Also, with a growing population, India’s food requirement is expected to grow at 1% CAGR to 333 mn MT by 2030. The availability of land being limited and probably shrinking for agricultural use, India would have to increase the yield of crops through the proper use of nutrients, increasing mechanisation and protecting crops from diseases. This is likely to drive the demand for complex fertilisers and crop protection chemicals going forward.

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DBT scheme for fertiliser subsidies to reduce borrowings The Government, in Mar-18, decided to implement the direct benefit transfer (DBT) for fertiliser subsidy payments across India, seeking to prevent diversion of fertilisers for commercial use and generate data on the usage of the nutrients to help farmers. The department of fertilisers has already rolled out the programme in most states. DBT would entail 100% payment to fertiliser companies on the sale of fertilisers to farmers at subsidised rates. The subsidy amount will be settled within a few days with the manufacturer, which will end the precedence of subsidy in the fourth quarter spilling over to the next fiscal. As per the policy, the disbursement of subsidy is linked to sale of fertilisers to farmers through POS machines by retailers on a weekly basis. Companies have had teething issues like the inability to generate DBT bills due to system failures, software glitches, poor power and internet connectivity in the rural areas, maintenance of POS machines, etc. These issues are expected to be resolved in the near future, post which the subsidy payments are likely to be quicker and smoother. This would free up working capital requirements and also reduce their interest expenses, thereby leading to higher profitability in the coming years. Increasing share of non-subsidy products Over the past few years, CIL has made a strategic shift in expanding its presence in the non-subsidy segment. It has diversified through its crop protection business which now has operations in 81 international geographies and over 900 registrations. The crop protection business produces insecticides, fungicides, herbicides and markets these products in India and abroad. CIL is the second-largest manufacturer of malathion and is the major manufacturer of phenthoate in Asia. By taking over M/s Sabero Organics in 2011, CIL has added many technicals to its range of products, and climbed to a coveted position among the top 5 Indian companies in the Indian pesticide industry. Crop Protection Business Gaining Strength… …Driven By Higher Sales Of Specialities


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The crop protection segment has grown at a CAGR of 20.7% over FY13-FY18, and now accounts for 13.7% of gross revenues in FY18 as compared to 6.9% in FY13. CIL acquired the bio pesticide business from E.I.D Parry (India) Ltd., which would enable the company to gain entry in the high-growth bio-pesticide business and expand its market presence and product offerings in the Indian, North American and European markets. Falling Share Of Subsidy Segment Revenues…. …Leading To Declining Share Of NBS In Realisations


Besides crop protection, CIL has also expanded its market presence by venturing into specialty nutrients, organic manure, the retail and farm mechanisation businesses. In FY18, CIL derived ~22% of its revenues and 32% of its EBITDA from non-subsidised products and services. EBITDA contribution of non-subsidised business has gradually increased from 23% in FY09 to 32% in FY18. Retail foray to improve branding CIL forayed into the retail segment in 2007 with 2 outlets in Andhra Pradesh to improve its reach and brand recall in regions where it has a strong presence. It currently operates ~800 stores known as Gromor in Andhra Pradesh, Telangana, Karnataka and Maharashtra (7 lakh sq feet) and has evolved as a ‘Complete Farming Solution Multi-Brand Platform’ offering the entire range of agri-input products and services to around 3 mn farmers with a customer value proposition of ‘Quality, Trust and Farm Advice’. This will help CIL in saving distributors’ margins and getting business insights from the ground level. In addition to the company’s products which accounts for ~70% of the turnover, the retail outlets provide services such as farm mechanisation, agri insurance, soil testing, credit and other extension services. Coromandel continuously educates and creates awareness to farmers on optimal usage of fertilisers and effects of usage of higher dosage of fertilisers and crop protection through meetings and campaigns at these stores. Strategic global alliances CIL has formed some strategic global alliances for ensuring supply of raw materials for its manufacturing plants and also for supply of finished goods. It has picked up 14% stake in FOSKOR, South Africa and 15% stake in TIFERT, Tunisia ensuring supply of phosphoric acid and rock phosphates. This also mitigates raw material availability and price volatility risk to an extent. CIL has a requirement of ~0.8-0.85mn tons of phosphoric acid and it has a manufacturing capacity of 0.20mn tons at Vizag and

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0.05mn tonnes at Ennore. It is augmenting its capacity of phosphoric acid at Vizag by 0.1 mn tonnes, which is expected to commission by FY20. The company also has supply agreements for ammonia and sulphur with Mitsui, and for potash with Canpotex. Strategic Global Alliance To Mitigate Raw Material Volatility


Attractive dividend payouts and return ratios CIL has an attractive dividend policy, as it pays out ~30-35% of the profit in the form of dividends. Strong profitability has also resulted in its return ratios improving from mid-teens to over 20% in FY18.

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Attractive Dividend Payout Strong Return Ratios (%)


Concerns

Regulated nature of the fertiliser industry The fertiliser industry in India is controlled by the Government, with subsidies being an important component while retail prices are market driven. The complex fertiliser industry was brought under the nutrient based subsidy (NBS) regime from 1-Apr-10. Dependence on monsoon and geographical concentration Farming in India is still to a large extent dependent on adequate and well-distributed monsoons. Further, AP and Telangana constitute a large portion of sales for CIL. Any region-specific environmental, social or political disturbance in these two states can impact the sales of CIL. Improved varieties of seeds Researchers in agriculture are coming up with improved varieties of seeds which are resistant to infections. This could dent prospects of the crop protection segment. Volatility in raw material prices and its availability Manufacturers of phosphatic fertilisers are dependent on imports for their key raw material, such as rock phosphate and phosphoric acid, which account for ~70% of the operating income. Due to the regulated nature of the industry, raw material price volatility under the NBS regime and its availability continues to remain a key rating sensitivity factor. Phosphoric Acid prices (forms ~40% of raw material costs) have risen 26-29% in YTDFY19, resulting in pressure on margins.

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Key Raw Material Prices (Rs/tonne)

(Source: Industry, HDFC sec) Forex fluctuations/Translation losses CIL exports significant volumes of crop protection chemicals. It also imports a large quantum of raw materials. Any sharp appreciation or depreciation of the US$ or Euro would thus impact operating results. Seasonality during the year The company’s business is seasonal in nature as there is huge demand during Q2 i.e. during the monsoon season.

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Q2FY19 Result Review

CIL reported strong growth in consolidated revenues in Q2FY19, driven by the nutrient business segment. Net sales increased by 36.3% YoY to Rs 5008 cr. Revenues from the nutrient segment were up 38.8% to Rs 4473 cr, while the crop protection business posted 12.8% revenue growth to Rs 570 cr. Segmental EBIT for nutrient/crop protection increased by 19%/3% YoY. However, the segmental EBIT margin contracted by 212/173 bps to 12.7%/18.4%. Consolidated EBITDA increased by 12.5% YoY to Rs 646 cr, while EBITDA margins contracted 273 bps to 12.9%, impacted by higher input costs. Finance expenses increased by 69% YoY and higher tax rate of 34.7% against 33.7% in Q2FY18 led to 218 bps decline in PAT margins. On the volume front, phosphatic fertilisers reported a 28% YoY growth, with the share of unique grade increasing to 43% as compared to 40% in the previous year. The phosphatic fertiliser business of CIL has improved its market share and registered 28% YoY growth in sales volumes during Q2. Crop protection business registered YoY revenue growth of 14% during the quarter. CIL has introduced four new products during H1, including two in-house patented combination molecules that have received a very encouraging response from the market. Further, the integration of the bio pesticide business has supported its expansion into complimentary product segments and geographies. CIL’s focus on R&D and technology has helped in introducing four differentiated product offerings in water soluble fertiliser and value-added single super phosphate. A price hike in NPK (nitrogen, phosphorous and potassium) from 1-Nov onwards to the tune of 10-15% and the passing on of increased cost in crop protection chemicals should offset margin pressure for CIL to some extent.

(Rs cr) Q2FY19 Q2FY18 YoY-% Q1FY19 QoQ-% H1FY19 H1FY18 YoY-% Operating Income 5008.3 3675.3 36.3 2528.5 98.1 7536.8 5936.2 27.0 Material consumed 3636.9 2479.7 46.7 1720.0 111.4 5356.9 4048.7 32.3 Employee expenses 106.3 90.1 18.0 99.2 7.2 205.5 176.1 16.7 Other expenses 619.0 531.0 16.6 495.6 24.9 1114.7 968.1 15.1 Total expenses 4362.2 3100.8 40.7 2314.8 88.4 6677.0 5192.9 28.6 EBITDA 646.1 574.5 12.5 213.6 202.4 859.7 743.3 15.7 Depreciation 26.3 25.3 3.8 25.6 2.7 51.8 50.2 3.3 Other Income 9.8 18.0 -45.6 8.8 10.9 18.6 30.6 -39.0 Interest 69.6 41.3 68.6 64.4 8.1 134.0 85.4 56.9 PBT 560.0 525.9 6.5 132.5 322.7 692.5 638.2 8.5 Tax expenses 194.4 177.4 9.6 42.3 359.8 308.6 167.5 84.3 Reported PAT 365.6 348.6 4.9 90.2 305.2 383.9 470.7 -18.5 EPS 12.5 11.9 4.8 3.1 305.2 13.1 16.1 -18.5 EBITDA (%) 12.9% 15.6% -273 bps 8.4% 445 bps 11.4% 12.5% -111 bps PAT (%) 7.3% 9.5% -218 bps 3.6% 373 bps 5.1% 7.9% -284 bps

Quarterly Financials

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(Rs cr) Q2FY19 Q2FY18 YoY-% Q1FY19 QoQ-% H1FY19 H1FY18 YoY-% Revenues Nutrient and other allied business 4473.4 3223.2 38.8 2130.2 110.0 6603.7 5201.6 27.0 Crop Protection 570.4 505.5 12.8 422.2 35.1 992.6 870.6 14.0 EBIT Nutrient and other allied business 566.9 476.8 18.9 171.6 230.4 738.5 603.5 22.4 Crop Protection 105.1 101.9 3.1 57.1 83.9 162.2 155.4 4.4 EBIT Margin Nutrient and other allied business 12.7% 14.8% -212 bps 8.1% 462 bps 11.2% 11.6% -42 bps Crop Protection 18.4% 20.2% -173 bps 13.5% 489 bps 16.3% 17.9% -151 bps

View and valuation

CIL is the second-largest phosphatic fertiliser player and a complete crop-solution provider with a strong presence in Andhra Pradesh, Telangana, Karnataka and Maharashtra. The regular launch of new products and differentiated molecules should help maintain growth momentum. Initiatives taken by the Government to double farm income are likely to benefit companies like CIL. The company is moving away from subsidy-linked products and focussing on increasing its share of higher-margin products in the crop protection segment. Recent price hikes would ease margin pressure, while lower borrowings once DBT-related issues get ironed out should lead to higher profitability. Global alliances reduce issues of raw material availability and price volatility to an extent. CIL has proposed production capacity enhancement from 19.25 lakh MTPA to 22 lakh MTPA at its Kakinada plant through process improvements and debottlenecking.

With improved reservoir levels in southern markets and prediction of normal north-east monsoons, CIL expects a favourable agri environment during the second half of the year. Further, with the stabilisation of Direct Benefit Transfer in fertilisers and a reduction in GST rates on phosphoric acid, the working capital situation is likely to improve, going forward. In FY20, it could benefit from the correction in raw material prices and the fresh capacity of phosphoric acid coming on stream.

We feel investors could buy the stock at the CMP, and add on dips to the Rs 410-415 band (13.5x FY20E EPS) for sequential targets of Rs 521 (17x FY20E EPS) and Rs 567 (18.5x FY20E EPS). At the CMP of Rs 462, the stock trades at 15.1x FY20E EPS.

Segment Financials

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(Rs cr) FY16 FY17 FY18 FY19E FY20E Income from operations 11481.4 10030.8 10946.7 13613.0 15425.1 Material Cost 8723.1 7121.0 7559.3 9692.4 10936.4 Employee Cost 291.9 310.8 351.0 408.4 462.8 Other expenses 1699.7 1616.3 1809.4 2055.6 2375.5 Total expenses 10714.6 9048.1 9719.8 12156.4 13774.6 EBITDA 766.8 982.7 1226.9 1456.6 1650.5 Depreciation 106.1 100.7 97.6 103.9 115.8 EBIT 725.0 936.1 1187.1 1393.6 1565.5 Other Income 64.3 54.1 57.8 40.8 30.9 Interest 220.9 223.8 178.3 242.4 207.3 Profit before tax 504.1 712.3 1008.8 1151.2 1358.2 Tax Expenses 171.6 235.3 345.2 391.4 461.8 Profit After Tax 332.4 477.0 663.6 759.8 896.4 Adj. PAT 332.4 477.0 663.6 759.8 896.4 EPS 11.4 16.4 22.7 26.0 30.7

(Rs cr) FY16 FY17 FY18 FY19E FY20E Profit Before Tax 529.1 712.3 1008.8 1151.2 1358.2 Depreciation 106.1 100.7 97.6 103.9 115.8 Others 307.6 180.3 228.1 228.5 197.7 Change in working capital -750.9 187.0 -732.0 -238.3 -201.6 Tax expenses -173.5 -265.1 -347.0 -391.4 -461.8 CF from Operating activities 18.4 915.2 255.6 853.9 1008.3 Net Capex -107.8 -91.2 -124.1 -250.0 -200.0 Other investing activities 41.1 47.3 47.1 -15.0 -15.0 CF from Investing activities -80.4 -79.8 40.6 -265.0 -215.0 Proceeds from Eq Cap 0.3 1.9 16.7 0.0 0.0 Borrowings / (Repayments) 309.8 -498.5 443.7 -300.0 -300.0 Dividends paid -87.6 -140.3 -281.3 -245.6 -280.7 Interest paid -214.0 -227.5 -180.1 -242.4 -207.3 CF from Financing activities 8.5 -864.4 -1.0 -788.0 -788.0 Net Cash Flow -53.5 -29.0 295.2 -199.1 5.3

Financials: Income Statement

Cash Flow

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(Rs cr) FY16 FY17 FY18 FY19E FY20E EQUITY AND LIABILITIES Share Capital 29.1 29.2 29.2 29.2 29.2 Reserves and Surplus 2604.8 2861.6 3096.6 3610.8 4226.5 Shareholders' Funds 2634.0 2890.8 3125.9 3640.0 4255.7 Long Term borrowings 94.1 0.0 0.0 0.0 0.0 Deferred Tax Liabilities (Net) 167.9 149.5 129.0 129.0 129.0 Other Long Term Liabilities 12.3 11.5 11.0 14.6 16.6 Long Term Provisions 17.8 14.2 14.4 20.5 21.9 Non-current Liabilities 292.1 175.1 154.4 164.1 167.4 Short Term Borrowings 2582.6 2228.4 2728.4 2428.4 2128.4 Trade Payables 3232.9 2934.5 3359.0 4289.0 4648.7 Other Current Liabilities 393.5 385.1 328.6 465.9 527.7 Short Term Provisions 46.6 31.1 31.0 44.2 47.1 Current. Liabilities 6255.6 5579.1 6447.0 7227.6 7352.0 TOTAL 9181.7 8645.0 9727.3 11031.7 11775.1 Net Fixed Assets 1319.5 1327.5 1304.9 1358.1 1470.2 Capital work-in-progress 41.7 21.9 46.5 139.4 111.5 Non current Investments 476.9 388.4 221.3 221.3 221.3 Long-Term Loans and Advances 30.2 9.4 18.4 23.8 22.4 Other Non-current Assets 66.0 61.1 71.2 83.3 96.2 Non-current Assets 573.1 458.9 310.9 328.3 339.9 Current Investments 0.3 0.1 0.1 15.1 30.1 Inventories 2345.8 1724.6 2227.1 2610.7 2831.5 Trade Receivables 1641.9 1621.7 1523.4 2014.0 2197.6 Cash and Bank Balances 197.8 167.8 550.8 351.7 357.0 Short-Term Loans and Advances 2989.6 3258.8 3241.9 3655.0 3803.5 Other Current Assets 72.2 63.6 521.6 559.4 633.9 Current Assets 7247.4 6836.7 8065.0 9205.9 9853.5 TOTAL 9181.7 8645.0 9727.3 11031.7 11775.1

Balance Sheet

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Particulars FY16 FY17 FY18 FY19E FY20E EPS (Rs) 11.4 16.4 22.7 26.0 30.7 Cash EPS (Rs) 15.1 19.8 26.0 29.5 34.6 BVPS (Rs) 90.4 99.1 106.9 124.5 145.5

PE (x) 40.5 28.3 20.4 17.8 15.1 P/BV (x) 5.1 4.7 4.3 3.7 3.2 Mcap/Sales (x) 0.0 0.0 0.0 0.0 0.0 EV/EBITDA (x) 20.8 15.8 12.8 10.7 9.2

EBITDAM (%) 6.7 9.8 11.2 10.7 10.7 EBITM (%) 6.3 9.3 10.8 10.2 10.1 PATM (%) 2.9 4.8 6.1 5.6 5.8

ROCE (%) 14.8 18.0 21.6 23.4 25.1 RONW (%) 13.7 17.3 22.1 22.5 22.7

Current Ratio (x) 1.2 1.2 1.3 1.3 1.3 Quick Ratio (x) 0.8 0.9 0.9 0.9 1.0 Debt-Equity (x) 1.0 0.8 0.9 0.7 0.5

Debtor days 49 59 52 47 50 Inventory days 73 74 66 65 64 Creditor days 100 112 105 103 106

Key Ratios

Daily Closing Price Chart

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Fundamental Research Analyst: Atul Karwa ([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, (Atul Karwa, MMS), 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. Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation.The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published for any purposes without prior written approval of HSL. Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report.

HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business. HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. This report is intended for non-Institutional Clients only. The views and opinions expressed in this report may at times be contrary to or not in consonance with those of Institutional Research or PCG Research teams of HDFC Securities Ltd. and/or may have different time horizons. Disclaimer : HDFC securities Ltd is a financial services intermediary and is engaged as a distributor of financial products & services like Corporate FDs & Bonds, Insurance, MF, NPS, Real Estate services, Loans, NCDs & IPOs in strategic distribution partnerships. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Customers need to check products &features before investing since the contours of the product rates may change from time to time. HDFC securities Ltd is not liable for any loss or damage of any kind arising out of investments in these products. Investments in Equity, Currency, Futures & Options are subject to market risk. Clients should read the Risk Disclosure Document issued by SEBI & relevant exchanges & the T&C on www.hdfcsec.com before investing. Equity SIP is not an approved product of Exchange and any dispute related to this will not be dealt at Exchange platform.

Date: 14th January 2019 - i.marketsmojo.com fileAndhra Pradesh, Telangana, Karnataka and...

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Transcript of Date: 14th January 2019 - i.marketsmojo.com fileAndhra Pradesh, Telangana, Karnataka and...