GTPL Hathway BUY -...

JM Financial Institutional Securities Limited

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GTPL reported consolidated quarterly financials for the first time since listing. 1QFY19 top-

line growth of 15.4% yoy was led by video subscription revenue [VSR: +30% yoy], while

broadband growth was muted [+3.2%]. 1Q EBITDA growth of c.19% was on the lower side

versus full-year expectations, because of muted activation revenues [-3%] and higher growth

in content cost [+18%]. Nonetheless, growth in adjusted EBITDA (i.e. ex-activation) was fairly

robust at 31%. Net profit [-16%] was impacted by FX losses and higher tax rate.

We raise VSR forecasts assuming higher STB additions, but reduce BB revenues based on

lower ARPU assumptions; we conservatively forecast BB ARPU of INR 400 in FY20 and

beyond, down 12.5% from INR 457 in FY18. Our medium-term capex forecasts are also

higher, based on higher STB additions (including inorganic). Net-net, our revised Jun-19 TP is

INR 200 versus 215 previously. GTPL remains the best run and the most undervalued video

business among listed MSOs, trading at FY19E/20E EV/EBITDA multiples of 3.9x/3.3x.

We forecast GTPL’s RoAIC to continue its upward march, and exceed the cost of capital from

FY20, compared to 10.2% in FY18 and 11.3% in FY19E. Low-gearing (0.7x net debt-to-

EBITDA) and FCF-generation from FY20E indicate significant potential to ramp up dividends

and/or BB growth rates. Downside risks: (1) poor BB execution; (2) BB competition from Jio.

1QFY19 review—strong video, muted BB: GTPL’s 15.4% revenue growth in 1QFY19 was

powered by 30% growth in cable or video subscription revenue [VSR]; C&P growth was

c.6%, while BB revenues were up 3% (+11% in FY18). VSR growth of 30% was driven

by 18.5% growth in average active STB base and c.10% growth in blended ARPU to INR

75 from INR 68 in 1QFY18. Exit 1QFY19 ARPU on billed-subs in Phase I/II/III/IV was INR

103 [+3% yoy], 102 [+7.4%], 63 [+17%] and 54 [+32%], while billed-customer mix was

8%/23%/30%/38%. During 1QFY19, increase in total STBs, active STBs and billed STBs

was 0.2mn, 0.2mn and 0.11mn, respectively. On a qoq-basis, GTPL saw flat ARPUs in

Phase I and II, but increase of 1.6% and 3.8% in Phase III and IV respectively. BB revenue

growth slowed down further to 3.2% yoy; while BB subscriber base was up 16% yoy

[40K net additions], the ARPU declined by 11.3% to INR 420 from 473. Management

attributed the ARPU erosion to: (1) continued absence of sustained activity/recharging by

‘low speed’ or MEN customers (5 Mbps or lower) in the wake of highly aggressive 4G

mobile pricing; and (2) company’s owns strategy of upgrading existing subs to high speed

broadband or FTTB [40 Mbps] at very competitive rates—starting at INR 388 net of taxes.

Model revisions: We cut BB revenues by 6.5% in FY19 and 15-20% thereafter, as we

bring down BB ARPU to INR 400 in FY20E (zero growth thereafter) from 457 in FY18. BB

ARPU upside may come from adoption of 100 Mbps product, priced at INR 700 (ex-tax)

Other details: GTPL maintained its 15% growth guidance for PC cost in FY19, implying

flattish PC expenses in coming quarters. 1Q capex was 450mn, and mgmt. maintained its

guidance of INR 1.5-1.6bn capex for FY19 (excluding acquisitions), whereas our capex

forecast is 2.1bn (including acquisitions). Net debt was INR 2.26bn as of end-1Q.

GTPL—key consolidated financials [IND AS] Exhibit 1.Fiscal-end March, INR mn FY17 FY18 FY19E FY20E FY21E

Revenues 9,077 10,913 12,599 14,336 15,810

Revenue growth (%) 23.3 20.2 15.4 13.8 10.3

EBITDA 2,064 2,923 3,485 4,088 4,450

EBITDA margin (%) 22.7 26.8 27.7 28.5 28.1

Adjusted EBITDA [a] 1,313 1,984 2,429 2,962 3,456

EBITDA growth (%) 36.1 41.6 19.2 17.3 8.9

Adj. PAT 403 886 893 1,450 1,717

EPS (INR) 4.1 8.1 7.9 12.9 15.3

EV/EBITDA (x) 7.2 4.7 3.9 3.3 2.9

P/E (x) 22.5 11.3 11.6 7.1 6.0

Dividend yield (%) 1.1 1.1 2.2 2.7 3.3

RoAE (%) 11.1 17.0 12.8 18.3 18.7

Source: Company, JM Financial.

Sanjay Chawla [email protected] | Tel: (91 22) 6630 3155

Recommendation and Price Target

Current Reco. BUY

Previous Reco. BUY

Current Price Target (12M) 200

Upside/(Downside) 114%

Previous Price Target 215

Change -7.0%

Key Data – GTPL IN

Current Market Price INR 92

Market cap (bn) INR10.5/US$0.2

Free Float 26.15%

Shares in issue (mn) 112.5

Diluted share (mn) 112.5

3-mon avg daily val (mn) INR7.1/US$0.1

52-week range 187/79

Sensex/Nifty 38,024/11,471

INR/US$ 68.7

Price Performance % 1M 6M 12M

Absolute 3.5 -44.3 -34.1

Relative* 0.5 -49.3 -45.4

* To the BSE Sensex

GTPL Hathway | BUY

13 August 2018 India | Media | Company Update

1QFY19 review—video robust, BB muted; revised TP is INR 200

https://euromoney.com/brokers

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/TeamJM-Flyer_1June2018.pdf

GTPL Hathway 13 August 2018


GTPL—quarterly financials Exhibit 2.March year-ends, INR mn

1QFY18 4QFY18 1QFY19 QoQ (%) YoY (%)

Revenues 2,573 2,806 2,969 6 15

CATV subscription 1,293 1,549 1,680 8 30

Carriage & Placement 626 650 661 2 6

Broadband 348 362 359 (1) 3

Activation 240 188 232 23 (3)

Other revenues (incl. ad, devices) 66 57 37

Operating costs

Pay channel cost (1,074) (1,144) (1,264) 10 18

Other opex incl. video BW (254) (213) (215) 1 (15)

SG&A (294) (392) (362) (8) 23

Employee costs (298) (320) (353) 10 19

Total operating costs (1,919) (2,070) (2,194) 6 14

EBITDA 654 737 775 5 19

EBITDA margin (%) 25 26 26 -15bps 69bps

EBITDA (ex-activation) 414 549 543 (1) 31

Depreciation & Amortization (393) (447) (476) 6 21

EBIT 260 289 299 3 15

Share of associate profits (4) (5) (4)

Interest & other income 52 73 66

Finance cost (103) (128) (161) 26 57

PBT 206 230 201 (13) (2)

XO & prior period items 0 (233) 0

Current Tax (89) (77) (139)

Deferred Tax 10 201 64

Minority Interest 33 16 8

Reported PAT 160 137 134 (2) (16)

Recurring net profit 160 370 134

Cash profit 514 605 541

Cash profit (ex-activation) 357 482 389

EPS (INR) 2 1 1

Shares outstanding (mn) 98 112 112

Average # of shares (mn) 98 112 112

Effective ARPU - consol. (INR/month) 59 60 64 6 8

Billed exit ARPU - consol. (INR/month)

ARPU on active subs (INR/month) 68 71 75 6 10

EBITDA margin (ex-activation) 18 21 20

Video subscription gross margin 219 405 416

PC cost-to-video subscription rev (%) 83 74 75

Net content cost 448 494 603

NCC-to-subscription revenue (%) 35 32 36

Non content opex [NCO] 845 925 930 0 10

Capex [consol.] 780 610 450




GTPL—consolidated operating metrics Exhibit 3.March year-ends, INR mn

Video 1QFY18 4QFY18 1QFY19 QoQ (%) YoY (%)

EOP STB base (mn) 7.76 8.70 8.90 2.3 15

Active digital subs (mn) 6.69 7.40 7.60 2.7 14

Active subs-to-STB seeded (%) 86.2 85.1 85.4

Billed digital subs (mn) 5.70 7.00 7.11 1.6 25

Billed-to-active digital subs (%) 85.2 94.6 93.6

Broadband

Broadband homes passed (mn) 1.11 1.30 1.53 17.7 37.8

Broadband subscribers (mn) 0.25 0.28 0.29 3.6 16.0

BB HP penetration (%) 22.5 21.5 19.0 -258bps -357bps

Exit BB ARPU (INR/month) 486 480 465 (3.1) (4.3)


GTPL video business—phase wise annual exit ARPUs net of taxes (INR) Exhibit 4.

Source: Company.



GTPL—summary DCF Exhibit 5.INR mn, year-end March

FY16 FY17 FY18 FY19E FY20E FY21E FY22E FY23E FY24E FY25E FY26E

Key assumptions (%)

Revenue growth 19.2 23.3 20.2 15.4 13.8 10.3 6.0 6.0 5.6 5.4 5.8

EBITDA growth 7.6 36.1 41.6 19.2 17.3 8.9 2.3 4.8 5.0 5.4 7.7

Adj. EBITDA growth ex- activation (5.7) 18.5 51.1 22.4 22.0 16.7 10.8 11.9 10.4 8.3 8.3

EBITDA margin 20.6 22.7 26.8 27.7 28.5 28.1 27.2 26.9 26.8 26.8 27.2

FCF growth (417) (81) (170) (49) 281 61 20 5 5 2 4

FCF margin (50) (8) 4 2 7 10 11 11 11 10 10

FCFF as % of EBITDA (242) (34) 17 7 23 34 40 40 40 39 38

RoAIC 5 8 10 11 14 15 15 16 18 20 22

DCF

EBIT X (1-tax rate) (1,488) 504 574 952 1,698 1,907 1,803 1,802 1,848 1,964 2,210

Depreciation & Amortization 1,073 1,394 1,711 2,006 2,130 2,217 2,267 2,301 2,315 2,314 2,304

Change in net working capital 523 181 1,076 (602) (657) (797) (261) (98) 52 89 77

Operating FCF 108 2,080 3,361 2,356 3,171 3,327 3,808 4,005 4,214 4,368 4,591

Capex (3,778) (2,778) (2,870) (2,107) (2,223) (1,806) (1,988) (2,090) (2,196) (2,315) (2,449)

Free cash flows [FCFF] (3,670) (697) 490 249 947 1,521 1,820 1,914 2,018 2,053 2,141

Sensitivity of Jun-19E DCF value to WACC, Terminal Growth

DCF for GTPL Hathway Jun-19E

WACC (%)

WACC (%) 12.0

200 11.50 11.75 12.00 12.25 12.50

Terminal growth (%) 6.0

5.0 192 184 176 169 163

Implied Exit EV/FCF multiple (X) 16.7

5.5 205 196 187 179 172

Implied Exit EV/EBITDA multiple (X) 6.3

6.0 221 210 200 191 183

PV of cash flows (2019E-2026E) 8,199

6.5 239 227 215 205 195

PV of Terminal value 17,591

7.0 262 247 233 221 210

Enterprise Value (EV) 25,790

Terminal value as % of EV 68

Sensitivity of EV/EBITDA multiple to WACC, Terminal growth

Less: Net debt/(cash) 1,934

WACC (%)

Less: Value attributed to minority interest 1,362

6 11.50 11.75 12.00 12.25 12.50

Equity value (INR mn) 22,495

5.0 5.8 5.6 5.4 5.2 5.0

Equity value (USD mn) 331

5.5 6.3 6.0 5.8 5.6 5.4

Number of shares (mn) 112.5

6.0 6.8 6.5 6.3 6.0 5.8

DCF equity value (INR/share) 200.0

6.5 7.5 7.2 6.8 6.5 6.3

Jun-19E TP (INR/share) 200

7.0 8.4 7.9 7.5 7.2 6.8




GTPL—key assumptions and forecasts Exhibit 6.

Video segment FY17 FY18 FY19E FY20E FY21E FY22E FY23E

Video universe (mn) 8.4 9.0 10.0 11.0 11.2 11.4 11.7

Total STBs (mn) 6.9 8.7 10.0 11.0 11.2 11.4 11.7

Digitised base (%) 82 97 100 100 100 100 100

Effective video subscription ARPU (INR) 48.6 55.5 62.2 66.8 71.3 75.0 78.8

ARPU growth (%) 12.2 14.3 12.1 7.4 6.7 5.2 5.0

Active STBs (mn) 6.0 7.4 8.5 9.4 9.5 9.7 9.9

Video ARPU on active subs (INR/month) 70 72 74 79 84 88 93

C&P revenue per sub (INR/month) 26 25 23 21 21 20 20

Activation fee per STB (INR) 864 789 818 330 141 153 166

Video subscription gross margin (%) 15 24 28 32 34 35 36

Pay channel cost per sub (INR/month) 41 42 45 45 47 49 51

Net content cost per sub (INR/month) 16 18 21 24 27 29 31

Net Video ARPU (INR/month) 33 38 41 43 45 46 48

NCC to VSR (%) 32 32 34 36 37 38 39

Bad debt expense-to-video revenues (%) 5.2 5.1 4.8 4.5 4.4 4.3 4.1

Broadband segment

Homes passed (mn) 1.1 1.3 1.8 2.3 2.8 3.2 3.7

BB HPs to digital video subs (%) 16 15 18 21 25 28 32

BB subs incl. inactive ('000) 240 280 346 440 540 640 740

Home pass penetration (%) 22.2 21.5 19.2 19.3 19.5 19.8 20.0

Effective ARPU (INR/month) 520 457 430 400 400 400 400

ARPU growth (%) 10.2 (12.2) (5.9) (5.0) 0.0 0.0 0.0

Revenue growth (%)

Video subscription 33 29 22 19 13 7 7

C&P income (11) 8 3 2 1 1 1

Broadband subscription 75 11 13 17 25 20 17

Other forecasts

Share of BB in adjusted revenues (%) 15 14 14 14 16 18 19

Growth in content or PC costs (%) 16.6 15.3 15.3 12.5 10.0 6.2 5.4

Growth in net content cost (%) 138 27 32 24 18 10 8

Growth in non content opex (%) 24 12 13 12 12 9 8

Content cost-to-revenue (%) 42 40 40 40 40 40 40

NCO-to-revenue (%) 35 33 32 32 32 33 34

EBITDA margin (%) 22.7 26.8 27.7 28.5 28.1 27.2 26.9

Adjusted EBITDA margin (%) 15.8 19.9 21.0 22.4 23.3 23.9 24.8

Capex-to-revenue (%) 29.2 26.3 16.7 15.5 11.4 11.9 11.8


GTPL—video business (excluding activation and ad revenues) Exhibit 7.

Fiscal-end March FY17 FY18 FY19E FY20E FY21E FY22E FY23E

Active digital subs (mn) 6.0 7.4 8.5 9.4 9.5 9.7 9.9

Average active digital subs (mn) 5.3 6.7 8.0 8.9 9.4 9.6 9.8

Growth (%) 42 26 19 12 6 2 2

INR per average sub per month

ARPU [A] 70 72 74 79 84 88 93

PC cost (60) (55) (53) (53) (55) (58) (60)

C&P revenue 37 32 28 25 24 24 24

NCC [B] (23) (23) (25) (28) (31) (34) (36)

Net Video ARPU [A] + [B] 48 49 49 51 53 55 57




GTPL—summary of key model revisions Exhibit 8.Year end Mar, INR mn

FY19E FY20E FY21E FY22E FY23E

Operating metrics

Total CATV universe (mn) old 9.7 10.0 10.2 10.4 10.6

Total CATV universe (mn) new 10.0 11.0 11.2 11.4 11.7

Revision (%) 3.1 10.0 10.0 10.0 10.0

Video subscription ARPU (INR) old 62.4 67.0 70.8 74.4 78.1

Video subscription ARPU (INR) new 62.2 66.8 71.3 75.0 78.8

Revision (%) (0.3) (0.2) 0.7 0.9 0.9

Financial revisions

Video subscription revenue old 7,005 7,915 8,585 9,193 9,845

Video subscription revenue new 7,096 8,420 9,510 10,202 10,924

Revision (%) 1.3 6.4 10.8 11.0 11.0

C&P revenue old 2,656 2,682 2,709 2,736 2,764

C&P revenue new 2,651 2,704 2,744 2,772 2,799

Revision (%) (0.2) 0.8 1.3 1.3 1.3

BB revenues old 1,728 2,209 2,782 3,405 4,051

BB revenues new 1,615 1,886 2,352 2,832 3,312

Revision (%) (6.5) (14.6) (15.4) (16.8) (18.3)

Consol. revenues old 12,890 14,110 15,231 16,234 17,336

Consol. revenues new 12,599 14,336 15,810 16,752 17,755

Revision (%) (2.3) 1.6 3.8 3.2 2.4

EBITDA old 3,751 3,920 4,138 4,302 4,600

EBITDA new 3,485 4,088 4,450 4,555 4,774

Revision (%) (7.1) 4.3 7.5 5.9 3.8

EBITDA margin old 29.1 27.8 27.2 26.5 26.5

EBITDA margin new 27.7 28.5 28.1 27.2 26.9

Revision (bps) (143.9) 73.1 97.7 68.9 35.0

22 22

Adjusted EBITDA old 2,500 2,886 3,266 3,700 4,236

Adjusted EBITDA new 2,429 2,962 3,456 3,829 4,286

Revision (%) (2.8) 2.6 5.8 3.5 1.2

PAT old 1,218 1,442 1,528 1,534 1,660

PAT new 893 1,450 1,717 1,692 1,767

Revision (%) (26.6) 0.6 12.4 10.3 6.5

Capex old 1,926 1,675 1,796 2,014 2,094

Capex new 2,107 2,223 1,806 1,988 2,090

Revision (%) 9.4 32.7 0.5 (1.3) (0.2)




GTPL—consolidated P&L statement Exhibit 9.

CAGR (%)

FY-ending March, INR mn FY17 FY18 FY19E FY20E FY21E FY22E

FY18-21E

Video subscription 4,490 5,799 7,096 8,420 9,510 10,202

18

Carriage & Placement 2,375 2,566 2,651 2,704 2,744 2,772

2

Broadband subscription 1,279 1,425 1,615 1,886 2,352 2,832

18

Activation 751 939 1,056 1,126 994 725

2

Other revenues (incl. ad, devices) 182 184 180 200 210 221

5

Revenues 9,077 10,913 12,599 14,336 15,810 16,752

13

Revenue (ex-activation) 8,326 9,974 11,542 13,210 14,816 16,026

14

Pay channel cost (3,821) (4,406) (5,079) (5,714) (6,287) (6,674)

13

Other opex (1,144) (1,352) (1,448) (1,614) (1,842) (2,046)

11

SG&A (964) (969) (1,098) (1,218) (1,333) (1,394)

11

Employee costs (1,084) (1,261) (1,488) (1,703) (1,899) (2,083)

15

Total operating costs (7,013) (7,989) (9,113) (10,248) (11,360) (12,197)

12

EBITDA 2,064 2,923 3,485 4,088 4,450 4,555

15

EBITDA margin (%) 22.7 26.8 27.7 28.5 28.1 27.2

EBITDA (ex-activation) 1,313 1,984 2,429 2,962 3,456 3,829

20

D&A (1,394) (1,711) (2,006) (2,130) (2,217) (2,267)

EBIT 670 1,213 1,479 1,959 2,233 2,288

23

Share of associate profits (23) (20) (18) (12) (6) 0

Other income 280 155 125 135 138 140

Finance income 61 66 79 78 96 140

Finance cost (581) (393) (404) (280) (234) (188)

PBT 408 1,020 1,262 1,879 2,227 2,380

30

Current Tax (182) (422) (499) (344) (429) (613)

Deferred Tax 36 241 100 (75) (50) (25)

Minority Interest 140 47 30 (10) (30) (50)

Reported PAT 403 611 893 1,450 1,717 1,692

41

Recurring net profit 403 886 893 1,450 1,717 1,692

25

Shares outstanding (mn) 98.3 112.5 112.5 112.5 112.5 112.5

EPS (Rs) 4.1 8.1 7.9 12.9 15.3 15.0

Growth rates (%)

Revenue 23 20 15 14 10 6

EBITDA 36 42 19 17 9 2

Revenue (ex-activation) 20 20 16 14 12 8

EBITDA (ex-activation) 19 51 22 22 17 11

EBIT 51 81 22 32 14 2

Net profit 447 120 1 62 18 (1)

Cost-to-revenue ratio (%)

Pay channel cost 42.1 40.4 40.3 39.9 39.8 39.8

Other opex 12.6 12.4 11.5 11.3 11.6 12.2

SG&A 10.6 8.9 8.7 8.5 8.4 8.3

Employee costs 11.9 11.6 11.8 11.9 12.0 12.4

Margins (%)

EBITDA margin 22.7 26.8 27.7 28.5 28.1 27.2

EBITDA (ex-activation) 15.8 19.9 21.0 22.4 23.3 23.9

EBIT 7.4 11.1 11.7 13.7 14.1 13.7

PBT 4.5 9.4 10.0 13.1 14.1 14.2

Net profits 4.4 8.1 7.1 10.1 10.9 10.1

Effective tax rate (%) 35.7 17.8 31.6 22.3 21.5 26.8

Source: Company, JM Financial



GTPL—consolidated balance sheet Exhibit 10.FY-ending March, INR mn FY17 FY18 FY19E FY20E FY21E FY22E

Equity

Share capital 983 1,125 1,125 1,125 1,125 1,125

Reserves & surplus 2,889 5,452 6,210 7,390 8,768 10,054

Total equity 3,872 6,577 7,335 8,514 9,893 11,179

Minority interest 285 303 273 283 313 363

Deferred tax liability 124 170 70 145 195 220

Total debt 5,500 3,282 3,282 2,782 2,282 1,782

Total capital 9,781 10,331 10,959 11,723 12,682 13,543

Assets

Cash & cash equivalents 1,122 1,348 1,291 1,316 1,895 2,773

Trade Receivables 3,035 3,262 3,861 4,436 4,875 5,126

Other Current assets 1,181 989 1,038 1,090 1,145 1,202

Total Current assets (ex-cash) 4,216 4,251 4,899 5,526 6,020 6,328

Currrent liabilities and provisions 4,782 5,907 5,886 6,570 7,162 7,816

Deferred revenue (STB activation) 2,648 2,947 3,014 2,299 1,404 796

Net Current Assets (ex-cash) (3,214) (4,603) (4,001) (3,344) (2,546) (2,285)

Net fixed assets 10,638 11,998 12,099 12,193 11,781 11,502

Long term investments 175 109 91 79 73 73

Goodwill (on consolidation) 498 488 488 488 488 488

Other non-current assets 116 239 239 239 239 239

Deferred tax asset 447 752 752 752 752 752

Total assets 9,781 10,331 10,959 11,723 12,682 13,543

Gearing and profitability ratios (%)

Net debt/(cash) 4,378 1,934 1,991 1,465 386 (992)

Debt/Equity

Net-debt/Equity 105 28 26 17 4 (9)

Net-debt/capital 51 22 21 14 4 (9)

Net-debt/EBITDA (x) 2.1 0.7 0.6 0.4 0.1 (0.2)

RoE 10.4 13.5 12.2 17.0 17.4 15.1

RoAE 11.1 17.0 12.8 18.3 18.7 16.1

RoACE 6.7 8.9 9.9 12.1 12.8 12.3

RoAIC 7.5 10.2 11.3 13.7 14.8 15.0




GTPL—consolidated cash flow statement Exhibit 11.FY-ending March, INR mn FY17 FY18 FY19E FY20E FY21E FY22E

Profit before tax 408 1,020 1,262 1,879 2,227 2,380

Depreciation & amortisation 1,394 1,711 2,006 2,130 2,217 2,267

Interest Income (67) (66) (79) (78) (96) (140)

Interest expense 519 393 404 280 234 188

Interest paid (519) (393) (404) (280) (234) (188)

Other non-cash items 340 (256) 18 12 6 0

Taxes paid (145) (422) (499) (344) (429) (613)

Working capital changes 181 1,076 (602) (657) (797) (261)

CF from operations 2,111 3,064 2,106 2,941 3,127 3,632

Purchase of Fixed assets (2,778) (2,870) (2,107) (2,223) (1,806) (1,988)

Other investments, JV, minorities 1 32 0 0 0 0

Interest/dividend received 67 66 79 78 96 140

CF from investments (2,710) (2,772) (2,028) (2,145) (1,709) (1,848)

Net proceeds from issue of equity 0 2,320 0 0 0 0

Net proceeds from borrowings 802 (2,218) 0 (500) (500) (500)

CF from financing 802 102 0 (500) (500) (500)

Net change in cash 204 258 (58) 26 579 878

Opening cash 858 1,062 1,320 1,263 1,288 1,867

Closing cash 1,062 1,320 1,263 1,288 1,867 2,746




Financial Tables (Consolidated)

Income Statement (INR mn)

Y/E March FY17A FY18A FY19E FY20E FY21E

Net Sales 9,077 10,913 12,599 14,336 15,810

Sales Growth 23.3% 20.2% 15.4% 13.8% 10.3%

Other Operating Income 0 0 0 0 0

Total Revenue 9,077 10,913 12,599 14,336 15,810

Cost of Goods Sold/Op. Exp 3,821 4,406 5,079 5,714 6,287

Personnel Cost 1,084 1,261 1,488 1,703 1,899

Other Expenses 2,107 2,322 2,546 2,832 3,174

EBITDA 2,064 2,923 3,485 4,088 4,450

EBITDA Margin 22.7% 26.8% 27.7% 28.5% 28.1%

EBITDA Growth 36.1% 41.6% 19.2% 17.3% 8.9%

Depn. & Amort. 1,394 1,711 2,006 2,130 2,217

EBIT 670 1,213 1,479 1,959 2,233

Other Income 341 221 204 213 234

Finance Cost 581 393 404 280 234

PBT before Excep. & Forex 430 1,040 1,280 1,891 2,233

Excep. & Forex Inc./Loss(-) 0 0 0 0 0

PBT 430 1,040 1,280 1,891 2,233

Taxes 145 181 399 419 479

Extraordinary Inc./Loss(-) 0 -275 0 0 0

Assoc. Profit/Min. Int.(-) -163 -67 -48 -2 24

Reported Net Profit 403 611 893 1,450 1,717

Adjusted Net Profit 403 886 893 1,450 1,717

Net Margin 4.4% 8.1% 7.1% 10.1% 10.9%

Diluted Share Cap. (mn) 98.3 112.5 112.5 112.5 112.5

Diluted EPS (INR) 4.1 7.9 7.9 12.9 15.3

Diluted EPS Growth 446.5% 92.4% 0.8% 62.4% 18.4%

Total Dividend + Tax 135 135 271 338 406

Dividend Per Share (INR) 1.1 1.0 2.0 2.5 3.0


Cash Flow Statement (INR mn)


Profit before Tax 408 1,020 1,262 1,879 2,227

Depn. & Amort. 1,394 1,711 2,006 2,130 2,217

Net Interest Exp. / Inc. (-) 452 327 324 202 138

Inc (-) / Dec in WCap. 181 1,076 -602 -657 -797

Others 340 -256 18 12 6

Taxes Paid -145 -422 -499 -344 -429

Operating Cash Flow 2,630 3,457 2,509 3,222 3,361

Capex -2,780 -2,870 -2,107 -2,223 -1,806

Free Cash Flow -150 587 402 999 1,555

Inc (-) / Dec in Investments 3 32 0 0 0

Others 67 66 79 78 96

Investing Cash Flow -2,710 -2,772 -2,028 -2,145 -1,709

Inc / Dec (-) in Capital 0 2,320 0 0 0

Dividend + Tax thereon 0 -135 -135 -271 -338

Inc / Dec (-) in Loans 802 -2,218 0 -500 -500

Others -519 -393 -404 -280 -234

Financing Cash Flow 284 -427 -539 -1,051 -1,073

Inc / Dec (-) in Cash 204 258 -58 26 579

Opening Cash Balance 858 1,062 1,320 1,263 1,288

Closing Cash Balance 1,062 1,320 1,263 1,288 1,867


Balance Sheet (INR mn)


Shareholders’ Fund 3,872 6,577 7,335 8,514 9,893

Share Capital 983 1,125 1,125 1,125 1,125

Reserves & Surplus 2,889 5,452 6,210 7,390 8,768

Preference Share Capital 0 0 0 0 0

Minority Interest 285 303 273 283 313

Total Loans 5,500 3,282 3,282 2,782 2,282

Def. Tax Liab. / Assets (-) -323 -582 -682 -607 -557

Total - Equity & Liab. 9,334 9,579 10,207 10,971 11,930

Net Fixed Assets 10,638 11,998 12,099 12,193 11,781

Gross Fixed Assets 13,324 16,193 18,054 20,087 21,642

Intangible Assets 1,392 1,742 1,887 2,027 2,162

Less: Depn. & Amort. 4,678 6,322 8,242 10,271 12,373

Capital WIP 599 385 400 350 350

Investments 234 137 119 107 101

Current Assets 5,891 6,299 6,889 7,541 8,614

Inventories 0 0 0 0 0

Sundry Debtors 3,035 3,262 3,861 4,436 4,875

Cash & Bank Balances 1,062 1,320 1,263 1,288 1,867

Loans & Advances 774 401 421 442 464

Other Current Assets 1,020 1,315 1,344 1,375 1,407

Current Liab. & Prov. 7,429 8,854 8,900 8,869 8,566

Current Liabilities 1,199 1,959 1,873 2,106 2,334

Provisions & Others 6,230 6,896 7,027 6,764 6,232

Net Current Assets -1,538 -2,556 -2,011 -1,328 48

Total – Assets 9,334 9,579 10,207 10,971 11,930


Dupont Analysis


Net Margin 4.4% 8.1% 7.1% 10.1% 10.9%

Asset Turnover (x) 1.0 1.1 1.2 1.3 1.3

Leverage Factor (x) 2.5 1.9 1.5 1.4 1.3

RoE 11.1% 17.0% 12.8% 18.3% 18.7%

Key Ratios


BV/Share (INR) 39.4 60.4 65.2 75.7 88.0

ROIC 5.6% 11.7% 11.2% 15.5% 16.9%

ROE 11.1% 17.0% 12.8% 18.3% 18.7%

Net Debt/Equity (x) 1.1 0.3 0.3 0.2 0.0

P/E (x) 22.9 11.9 11.8 7.3 6.2

P/B (x) 2.4 1.6 1.4 1.2 1.1

EV/EBITDA (x) 7.4 4.4 3.7 3.0 2.5

EV/Sales (x) 1.7 1.2 1.0 0.9 0.7

Debtor days 122 109 112 113 113

Inventory days 0 0 0 0 0

Creditor days 62 89 75 75 75




History of Earnings Estimate and Target Price

Date Recommendation Target Price % Chg.

7-Nov-17 Buy 200

15-Feb-18 Buy 225 12.5

28-May-18 Buy 225 0.0

29-May-18 Buy 215 -4.4

Recommendation History



APPENDIX I

JM Financial Inst itut ional Secur it ies Limited ( fo rmer l y known as JM F inanc ia l Secur i t i e s L im i ted)

Corporate Identity Number: U67100MH2017PLC296081

Member of BSE Ltd., National Stock Exchange of India Ltd. and Metropolitan Stock Exchange of India Ltd. SEBI Registration Nos.: Stock Broker - INZ000163434, Research Analyst – INH000000610

Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India. Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: [email protected] | www.jmfl.com

Compliance Officer: Mr. Sunny Shah | Tel: +91 22 6630 3383 | Email: [email protected]

Definition of ratings

Rating Meaning

Buy Total expected returns of more than 15%. Total expected return includes dividend yields.

Hold Price expected to move in the range of 10% downside to 15% upside from the current market price.

Sell Price expected to move downwards by more than 10%

Research Analyst(s) Certification The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report. Important Disclosures This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide information about the

company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for the purpose of information of the select

recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written

consent of JM Financial Institutional Securities. This report has been prepared independent of the companies covered herein.

JM Financial Institutional Securities is registered with the Securities and Exchange Board of India (SEBI) as a Research Analyst and a Stock Broker having trading

memberships of the BSE Ltd. (BSE), National Stock Exchange of India Ltd. (NSE) and Metropolitan Stock Exchange of India Ltd. (MSEI). No material disciplinary

action has been taken by SEBI against JM Financial Institutional Securities in the past two financial years which may impact the investment decision making of the

investor.

JM Financial Institutional Securities renders stock broking services primarily to institutional investors and provides the research services to its institutional

clients/investors. JM Financial Institutional Securities and its associates are part of a multi-service, integrated investment banking, investment management,

brokerage and financing group. JM Financial Institutional Securities and/or its associates might have provided or may provide services in respect of managing

offerings of securities, corporate finance, investment banking, mergers & acquisitions, broking, financing or any other advisory services to the company(ies)

covered herein. JM Financial Institutional Securities and/or its associates might have received during the past twelve months or may receive compensation from

the company(ies) mentioned in this report for rendering any of the above services.

JM Financial Institutional Securities and/or its associates, 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) covered under this report or (c) act as an advisor or lender/borrower to,

or may have any financial interest in, such company(ies) or (d) considering the nature of business/activities that JM Financial Institutional Securities is engaged in,

it may have potential conflict of interest at the time of publication of this report on the subject company(ies).

Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individually own one per cent or

more securities of the company(ies) covered under this report, at the relevant date as specified in the SEBI (Research Analysts) Regulations, 2014.

The Research Analyst(s) principally responsible for the preparation of this research report and members of their household are prohibited from buying or selling

debt or equity securities, including but not limited to any option, right, warrant, future, long or short position issued by company(ies) covered under this report.

The Research Analyst(s) principally responsible for the preparation of this research report or their relatives (as defined under SEBI (Research Analysts) Regulations,

2014); (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receive any compensation from the company(ies) covered

under this report, or from any third party, in connection with this report or (c) do not have any other material conflict of interest at the time of publication of this

report. Research Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.

While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or

developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM Financial Institutional Securities may

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This

report is provided for information only and is not an investment advice and must not alone be taken as the basis for an investment decision.



The investment discussed or views expressed or recommendations/opinions given herein may not be suitable for all investors. The user assumes the entire risk of

any use made of this information. The information contained herein may be changed without notice and JM Financial Institutional Securities reserves the right to

make modifications and alterations to this statement as they may deem fit from time to time.

This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official confirmation of any transaction.

This report is not directed or intended for distribution to, or use by any person or entity who is a citizen or resident of or located in any locality, state, country or

other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject JM Financial Institutional

Securities and/or its affiliated company(ies) to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be

eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession this report may come, are required to inform themselves of

and to observe such restrictions.

Persons who receive this report from JM Financial Singapore Pte Ltd may contact Mr. Ruchir Jhunjhunwala ([email protected]) on +65 6422 1888 in

respect of any matters arising from, or in connection with, this report.

Additional disclosure only for U.S. persons: JM Financial Institutional Securities has entered into an agreement with JM Financial Securities, Inc. ("JM Financial

Securities"), a U.S. registered broker-dealer and member of the Financial Industry Regulatory Authority ("FINRA") in order to conduct certain business in the

United States in reliance on the exemption from U.S. broker-dealer registration provided by Rule 15a-6, promulgated under the U.S. Securities Exchange Act of

1934 (the "Exchange Act"), as amended, and as interpreted by the staff of the U.S. Securities and Exchange Commission ("SEC") (together "Rule 15a-6").

This research report is distributed in the United States by JM Financial Securities in compliance with Rule 15a-6, and as a "third party research report" for

purposes of FINRA Rule 2241. In compliance with Rule 15a-6(a)(3) this research report is distributed only to "major U.S. institutional investors" as defined in Rule

15a-6 and is not intended for use by any person or entity that is not a major U.S. institutional investor. If you have received a copy of this research report and are

not a major U.S. institutional investor, you are instructed not to read, rely on, or reproduce the contents hereof, and to destroy this research or return it to JM

Financial Institutional Securities or to JM Financial Securities.

This research report is a product of JM Financial Institutional Securities, which is the employer of the research analyst(s) solely responsible for its content. The

research analyst(s) preparing this research report is/are resident outside the United States and are not associated persons or employees of any U.S. registered

broker-dealer. Therefore, the analyst(s) are not subject to supervision by a U.S. broker-dealer, or otherwise required to satisfy the regulatory licensing

requirements of FINRA and may not be subject to the Rule 2241 restrictions on communications with a subject company, public appearances and trading

securities held by a research analyst account.

JM Financial Institutional Securities only accepts orders from major U.S. institutional investors. Pursuant to its agreement with JM Financial Institutional Securities,

JM Financial Securities effects the transactions for major U.S. institutional investors. Major U.S. institutional investors may place orders with JM Financial

Institutional Securities directly, or through JM Financial Securities, in the securities discussed in this research report.

Additional disclosure only for U.K. persons: Neither JM Financial Institutional Securities nor any of its affiliates is authorised in the United Kingdom (U.K.) by the

Financial Conduct Authority. As a result, this report is for distribution only to persons who (i) have professional experience in matters relating to investments

falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"), (ii)

are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Promotion Order, (iii) are outside

the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial

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be engaged in only with relevant persons.

Additional disclosure only for Canadian persons: This report is not, and under no circumstances is to be construed as, an advertisement or a public offering of the

securities described herein in Canada or any province or territory thereof. Under no circumstances is this report to be construed as an offer to sell securities or as

a solicitation of an offer to buy securities in any jurisdiction of Canada. Any offer or sale of the securities described herein in Canada will be made only under an

exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable

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sale is made. This report is not, and under no circumstances is it to be construed as, a prospectus or an offering memorandum. No securities commission or

similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the information contained herein or the merits of the securities

described herein and any representation to the contrary is an offence. If you are located in Canada, this report has been made available to you based on your

representation that you are an “accredited investor” as such term is defined in National Instrument 45-106 Prospectus Exemptions and a “permitted client” as

such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Under no circumstances is the

information contained herein to be construed as investment advice in any province or territory of Canada nor should it be construed as being tailored to the

needs of the recipient. Canadian recipients are advised that JM Financial Securities, Inc., JM Financial Institutional Securities Limited, their affiliates and authorized

agents are not responsible for, nor do they accept, any liability whatsoever for any direct or consequential loss arising from any use of this research report or the

information contained herein.

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