Gujarat Ambuja Exports Absolute : LONG ) Regular Coverage...

May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) of 11

Before reading this report, you must refer to the disclaimer on the last page.

Gujarat Ambuja Exports Absolute : LONG

Relative : Overweight

4QFY18 Result: Estimate (), TP (), Rating () Regular Coverage 31% ATR in 13 Months

Focus shifts to profitable growth — maintain LONG Agricultural Products

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 240

Target Price (Rs) 320

Target Date 30th June'19

Target Set On 21st May'18

Implied yrs of growth (DCF) 10

Fair Value (DCF) 369

Fair Value (DDM) 23

Ind Benchmark SPBSMIP

Model Portfolio Position Yes

Stock Information

Market Cap (Rs Mn) 27,515

Free Float (%) 36.24 %

52 Wk H/L (Rs) 309.85/100.05

Avg Daily Volume (1yr) 1,94,825

Avg Daily Value (Rs Mn) 36

Equity Cap (Rs Mn) 229

Face Value (Rs) 2

Bloomberg Code GAEX IN

Ownership Recent 3M 12M

Promoters 63.8 % -2.2 % -2.4 %

DII 0.6 % 0.5 % 0.4 %

FII 0.6 % 0.2 % 0.0 %

Public 35.0 % 1.5 % 2.0 %

Price % 1M 3M 12M

Absolute -13.1 % 2.7 % 81.7 %

Vs Industry -6.2 % 7.4 % 74.9 %

Sukhjit Starch -1.3 % -2.6 % 52.6 %

Gulshan

Polyols -9.3 % -16.1 % -24.5 %

Consolidated Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (18A) 1.5 1.8 5.5 6.9

EPS (19E) 4.1 4.1 5.5 5.6

Gujarat Ambuja Exports (GAEX) reported 4QFY18 revenues of Rs 8.8bn (-17% yoy, -30% vs.

EE). The maize segment continued to show consistent growth (+12% yoy in 4QFY18) even

as the agro processing segment posted a decline (-36% yoy). EBITM jumped 617bps yoy to

11%, beating EE by 346bps, on better profitability in both maize and other agro-processing

segments. PAT stood at Rs 789mn, up 134% yoy/25% qoq and 26% above EE led by better

operating margins and a below-expected tax rate. With the commissioning of GAEX’s new

maize plant in Mar’18, revenue growth should accelerate in FY19. We update our

FY19/FY20 EBITDA estimates by -4%/+1% and roll over to SOTP-based Jun’19 TP to Rs 320

(Mar’19 TP of Rs 330 earlier). Maintain LONG.

Maize segment growth to accelerate on new plant commissioning: Maize division

revenues grew 12% yoy in 4Q18. Growth was largely driven by volumes as realizations

remained stable. Segment EBIT margins improved to 18.5% in 4Q (12.1% in 4QFY17, 16% in

3QFY18) on the back of lower RM prices with almost no change in product mix. As per

management, the segment is operating at 90%+ utilization and meaningful growth would

be seen from 1QFY19 with the new 1,000 MTPD plant commencing operations in Mar’18.

As highlighted in our Apr’18 update note, post commissioning of this plant, GAEX has

become the largest maize processor in India with an installed capacity of 3,000 MTPD and

a market share of ~21%. We expect a 23%/29% CAGR in maize processing revenues/EBITDA

over FY18-FY20E.

Decline in agro revenues compensated by improved profitability: Agro processing

revenues spiraled down 36% yoy in 4Q18 mainly as the company cut down on its oil-

related trading activities. Earlier GAEX used to import crude soybean oil and sell the

refined oil in the domestic market but the recent increase in import duties and

company focus shift towards manufacturing has led to fall in such trading related

activities. EBITM expansion of 785bps yoy was driven by a drop in lower-margin trading

activities (EBITDA for trading is ~4-5% vs. 7-8% for crushing operations). We have argued

that the recent import duty hike on crude and refined edible oils will provide a level-

playing field to domestic crushing companies and help increase their utilization levels.

Currently, GAEL is operating at 30% capacity utilization levels in the agro segment.

Maintain LONG with a revised SoTP - based Jun’19 TP of Rs 320: We have updated

our numbers and revised our FY19/FY20 EBITDA estimates by -4%/+1%. We roll over to a

SoTP-based Jun’19 TP of Rs 320 (from a Mar’19 TP of Rs 330) and maintain LONG on the

stock (Exhibit 9).

Change in Estimates

Rs. Mn FY19E Chg (%) FY20E Chg (%)

Sales 43,806 -5% 52,027 -5%

EBITDA 4,168 -4% 5,210 1%

EPS 19.2 -6% 25.6 1%

Consolidated Financials

Rs. Mn YE Mar FY18A FY19E FY20E FY21E

Sales 33,644 43,806 52,027 58,196

EBITDA 3,173 4,168 5,210 5,873

Depreciation 763 931 988 1,087

Interest Expense 179 179 158 128

Other Income 91 49 69 98

Reported PAT 1,799 2,206 2,934 3,377

Recurring PAT 1,799 2,206 2,934 3,377

Total Equity 10,224 12,270 14,992 18,126

Gross Debt 6,913 6,067 5,517 4,017

Cash 69 165 521 1,537

Rs Per Share FY18A FY19E FY20E FY21E

Earnings 15.7 19.2 25.6 29.5

Book Value 89 107 131 158

Dividends 0.9 1.2 1.5 1.8

FCFF 2.9 12.3 12.1 26.0

P/E (x) 15.3 12.5 9.4 8.1

P/B (x) 2.7 2.2 1.8 1.5

EV/EBITDA (x) 10.8 8.0 6.2 5.1

ROE (%) 19 % 20 % 22 % 20 %

Core ROIC (%) 12 % 13 % 16 % 18 %

EBITDA Margin (%) 9 % 10 % 10 % 10 %

Net Margin (%) 5 % 5 % 6 % 6 %

http://ecrm.equirus.com/EquriusReports/Equirus_Securities_Gujarat%20Ambuja%20Exports_Update%20Note_20.04.2018.pdf

Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months


Exhibit 1: Quarterly revenue trends in the agro processing segment

Source: Company, Equirus Securities

Exhibit 2: EBITM has improved with a sharp fall in oil trading activities


Exhibit 3: Commissioning of new plant to drive growth in maize division


Exhibit 4: Maize EBITM has recovered in 2HFY18 after sharp drop in 1HFY18


3,0

88

3,7

76

4,4

01

2,8

49

4,0

45

2,6

76

5,1

02

6,6

41

3,6

45

3,6

28

6,0

82

4,2

32

12%

62%

-14% -13%

31%

-29%

16%

133%

-10%

36%19%

-36%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

1000

2000

3000

4000

5000

6000

7000

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

Agro Processing Revenue (Rs. mn) Growth (yoy%)(RHS)

145

-19-15 -6

297

-15

340 187 76 282 490 451

5%

-1% 0% 0%

7%

-1%

7%

3%

2%

8%

8%

11%

-2%

0%

2%

4%

6%

8%

10%

12%

-100

0

100

200

300

400

500

600

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

Agro Processing EBIT (Rs mn) EBITM (%)(RHS)

2,6

61

2,7

65

3,1

08

3,2

91

3,1

75

3,2

55

3,1

98

3,4

26

2,8

41

3,3

60

3,4

17

3,8

52

3%

16%

27%

31%

19% 18%

3% 4%

-11%

3%

7%

12%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

Maize Processing Revenue (Rs mn) Growth (yoy%)(RHS)

354

326

387

412

418

343

363

416

189

157

549

712

13%

12%12% 13% 13%

11%11%

12%

7%

5%

16%

18%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

100

200

300

400

500

600

700

800

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

Maize Processing EBIT (Rs mn) EBITM (%)(RHS)



Exhibit 5: After a sharp rise in FY17, corn prices have corrected in FY18

Source: Bloomberg, Equirus Securities

Exhibit 6: Soybean and Soymeal prices are on an uptrend

Source: NCDEX, Equirus Securities

Exhibit 7: Soymeal exports (MT) declined in FY18 due to closure of some bigger players

Source: SOPA, Equirus Securities

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

Apr-

11

Aug-1

1

Dec-1

1

Apr-

12

Aug-1

2

Dec-1

2

Apr-

13

Aug-1

3

Dec-1

3

Apr-

14

Aug-1

4

Dec-1

4

Apr-

15

Aug-1

5

Dec-1

5

Apr-

16

Aug-1

6

Dec-1

6

Apr-

17

Aug-1

7

Dec-1

7

Apr-

18

Corn Prices (Rs/qtl) Growth (Yoy%)

500

550

600

650

700

750

800

850

10000

15000

20000

25000

30000

35000

40000

45000

50000

Nov-1

2

Feb-1

3

May-1

3

Aug-1

3

Nov-1

3

Feb-1

4

May-1

4

Aug-1

4

Nov-1

4

Feb-1

5

May-1

5

Aug-1

5

Nov-1

5

Feb-1

6

May-1

6

Aug-1

6

Nov-1

6

Feb-1

7

May-1

7

Aug-1

7

Nov-1

7

Feb-1

8

May-1

8

Soyameal (Rs/tonne) Soya refined oil (RHS) (Rs/10kg)

0

50,000

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

FY16 FY17 FY18



Valuation and risks

GAEX currently trades at 12x/9x/8x P/E and an EV/EBITDA of 8x/6x/5x on our

FY19/FY20/FY21 estimates. The company has historically traded in the range of 5-15x

P/E on TTM EPS and an EV/EBITDA of 5-7x on TTM EBITDA.

We use the SOTP methodology to value GAEX as follows:

Maize processing: Indian rice and shrimp processing companies are currently trading at a

FY19 median EV/EBITDA multiple of ~14x and 18x respectively. We assign a TTM

EV/EBITDA multiple of 11x (a ~20% and ~40% discount to rice and shrimp processing firms

respectively) to our TTM June’19 maize processing EBITDA estimates as, unlike rice

processing firms, GAEX does not have its own branded business and lags behind aqua

processing firms in terms of asset turns and return ratios (RoE/RoIC).

Agro processing: Global agro processing firms are currently trading at a CY18 median

EV/EBITDA multiple of 11x. Ascribing a ~25% discount, we value GAEX’s agro (soya)

processing business at a June’19 TTM EV/EBITDA multiple of 8x as segment margins and

return ratios have historically been very volatile.

Cotton/Textile (others): We assign a TTM June’19 EV/EBITDA multiple of 4x to other

segments.

Overall, we arrive at a June’19 SOTP-based TP of Rs 320, implying a P/E multiple of

17x/13x/11x and an EV/EBITDA multiple of 10x/8x/7x on our FY19/FY20/FY21 estimates.

Exhibit 9: We arrive at a SOTP-based June’19 TP of Rs 320

TTM June’19E (Rs mn) EBITDA Multiple EV

Agro processing 1,504 8x 12,029

Maize processing 2,684 11x 29,523

Others 225 4x 901

Group's EV

42,452

Total debt

6,067

Total cash

592

Equity value

36,977

No. of shares outstanding(mn)

115

June’19 Target price (Rs)

320

Source: Equirus Securities

Investment risks

Downside risks:

1. Commodity price risk: Factors like political and regulatory changes, seasonal

variations, weather, technology and market conditions can significantly affect

commodity prices. An unexpected movement in commodity prices can have a bearing

on the company’s profitability. GAEX tries to mitigate the risk by covering positions

through hedging at commodity exchanges like CBOT, REFCO, NCDEX, NMCEX and

others.

2. Foreign currency risk: GAEX manages foreign currency exposures through forward

exchange contracts. Forex risks are partly mitigated by purchase of goods/

commodities in respective currencies.

3. Capital misallocation: GAEX has a good business (maize), an average business (oil) and

a bad business (textile). In the last decade, the company has mainly invested in its

maize business and has no intention of investing further in the oil and textile business.

Any major investments in the oil and textile business will be against our investment

thesis.

4. Increased competition: While many players have entered and exited the industry

over the last few years, more number of entrants ahead should not be surprising

given the industry’s growth potential. This would put pressure on pricing and

utilization levels of existing players.



Quarterly performance, consolidated

Rs Mn Q4FY18 Q4FY18E Q3FY18 Q4FY17 % Change

Comments Q4FY18E Q3FY18 Q4FY17

Net Sales 8,808 12,656 10,173 10,637 -30% -13% -17% Revenue decline was mainly due to decrease in oil related trading activities

Raw Materials Consumed 6,155 9,745 7,703 8,689 -37% -20% -29%

Employee benefits expense 285 251 288 226 13% -1% 26%

Other expenses 1,199 1,522 1,078 1,017 -21% 11% 18% Fuel cost and freight expenses have gone up

Total Expenditures 7,639 11,518 9,068 9,932 -34% -16% -23%

EBITDA 1,169 1,138 1,105 705 3% 6% 66%

Depreciation 199 223 194 190 -11% 3% 5%

EBIT 970 915 912 515 6% 6% 88%

Interest 68 50 46 166 36% 48% -59%

Other Income 24 28 40 76 -13% -40% -68%

PBT 926 893 906 425 4% 2% 118%

Tax 137 268 274 89 -49% -50% 55% Reversal of excess provision of ~Rs. 130mn was made earlier

Recurring PAT 789 625 632 337 26% 25% 134%

Extra ordinaries 0 0 0 0

Reported PAT 789 625 632 337 26% 25% 134%

EBITDA Margin 13.3% 9.0% 10.9% 6.6% 428 bps 241 bps 665 bps Margin improvement was mainly due to lower RM prices

EBIT Margin 11.0% 7.2% 9.0% 4.8% 378 bps 205 bps 617 bps

PBT Margin 10.5% 7.1% 8.9% 4.0% 346 bps 161 bps 652 bps

PAT Margin 9.0% 4.9% 6.2% 3.2% 402 bps 274 bps 579 bps

Tax Rate 14.8% 30.0% 30.3% 20.8% -1518 bps -1543 bps -600 bps



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY19E 19.2 - - There are no other estimates available.

FY20E 25.6 - -

Sales FY19E 43,806 - -

FY20E 52,027 - -

PAT FY19E 2,206 - -

FY20E 2,934 - -

Segmental Drivers:

Revenue growth (%) FY18 FY19e FY20e FY21e

Agro processing -5% 33% 23% 13%

Cotton 19% 5% 2% 2%

Maize processing 3% 30% 16% 12%

EBITDA margins (%) FY18 FY19e FY20e FY21e

Agro processing 7.9% 7.0% 6.5% 6.0%

Cotton 0.6% 4.0% 4.0% 4.0%

Maize processing 15.5% 15.0% 17.0% 18.0%

Key downside risks:

a) Volatility in corn and soya prices.

b) Increase in competition which may put pressure on prices and utilization levels

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.8 % 1.3 14.6 % 6.0 % 31.0 %

FY18E FY19E FY20E FY21-27E

Sales Growth 30 % 19 % 15 % 11 %

NOPAT Margin 5 % 6 % 6 % 6 %

IC Turnover 2.45 2.59 3.30 4.40

RoIC 13.3 % 15.8 % 18.0 % 25.8 %

Years of strong growth 1 2 3 10

Valuation as on date (Rs) 97 143 202 317

Valuation as of June'19 112 167 235 369

Based on DCF, we derive 30th June, 2019 fair value of Rs. 369.

Company Description:

Gujarat Ambuja Exports Limited (GAEX) is a leading manufacturer of starch derivatives,

soy derivatives and cotton yarn. It has the second highest crushing capacity in India with

six solvent extraction plants across India with a total capacity of 4,600 MTPD. Currently,

the company’s refining capacity stands at 1,200 MTPD. GAEX’s main focus area has been

wet-milling of corn and it has set up three operational processing plants. With

commencement of operations of its new Chalisgaon plant, the company has become the

largest maize processor in India in terms of installed capacity.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E

Gujarat Ambuja Exports

LONG 240 27,515 320 30th June'19 15.7 19.2 25.6 15.3 12.5 9.4 89.2 2.2 19 % 20 % 22 % 0.4 % 0.5 %

Sukhjit Starch NA 506 3,738 NA NA 24.4 - - 20.8 - - 309.8 - 8 % - - 1.0 % -

Gulshan Polyols NA 66 3,101 NA NA 28.7 - - 2.3 - - 54.7 - 11 % - - 15.1 % -



Consolidated Quarterly Earnings Forecast and Key Drivers

Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E

Revenue 6,904 7,705 10,173 8,808 9,554 9,474 12,669 12,109 13,007 13,007 13,007 13,007 33,644 43,806 52,027 58,196 Raw Materials Consumed 4,869 5,043 7,316 6,234 7,070 7,295 9,819 9,384 10,080 10,080 10,080 10,080 23,492 33,568 40,321 45,102

Increase/Decrease in Stock -6 176 -101 -141 0 0 0 0 0 0 0 0 -72 0 0 0

Purchase of stock-in-trade 605 820 488 62 0 0 0 0 0 0 0 0 1,974 0 0 0

Employee benefits expense 193 218 288 285 283 283 283 283 303 303 303 303 984 1,131 1,210 1,295

Other expenses 845 972 1,078 1,199 1,281 971 1,407 1,280 1,321 1,321 1,321 1,321 4,093 4,939 5,286 5,926 EBITDA 398 476 1,105 1,169 920 925 1,161 1,162 1,302 1,302 1,302 1,302 3,173 4,168 5,210 5,873 Depreciation 183 188 194 199 233 233 233 233 247 247 247 247 763 931 988 1,087 EBIT 215 289 912 970 687 693 928 929 1,055 1,055 1,055 1,055 2,410 3,237 4,222 4,786 Interest 24 41 46 68 45 45 45 45 40 40 40 40 179 179 158 128 Other Income 10 40 40 24 12 12 12 12 17 17 17 17 91 49 69 98 PBT 202 288 906 926 655 660 896 896 1,033 1,033 1,033 1,033 2,322 3,107 4,133 4,756 Tax 33 78 274 137 190 191 260 260 260 262 328 348 523 901 1,198 1,379 PAT bef. MI & Assoc. 168 209 632 789 465 469 636 636 773 771 705 685 1,799 2,206 2,934 3,377 Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Profit from Assoc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Recurring PAT 168 209 632 789 465 469 636 636 773 771 705 685 1,799 2,206 2,934 3,377 Extraordinaries 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Reported PAT 168 209 632 789 465 469 636 636 773 771 705 685 1,799 2,206 2,934 3,377

EPS (Rs) 1.47 1.83 5.51 6.88 4.05 4.09 5.55 5.55 5.54 5.60 7.01 7.44 15.69 19.24 25.59 29.45

Key Drivers

Agro processing revenue (Rs. mn) - - - - - - - - - - - - 17,597 23,421 28,726 32,346 Cotton revenue (Rs. mn) - - - - - - - - - - - - 2,585 2,722 2,776 2,832 Maize processing (Rs. mn) - - - - - - - - - - - - 13,496 17,575 20,436 22,929 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -35 % 12 % 32 % -13 % 8 % -1 % 34 % -4 % 7 % 0 % 0 % 0 % - - - - Raw Materials Consumed -32 % 4 % 45 % -15 % 13 % 3 % 35 % -4 % 7 % 0 % 0 % 0 % - - - - EBITDA -44 % 20 % 132 % 6 % -21 % 1 % 25 % 0 % 12 % 0 % 0 % 0 % - - - - EBIT -58 % 34 % 216 % 6 % -29 % 1 % 34 % 0 % 14 % 0 % 0 % 0 % - - - - Recurring PAT -50 % 24 % 202 % 25 % -41 % 1 % 36 % 0 % 22 % 0 % -9 % -3 % - - - -

EPS -50 % 24 % 202 % 25 % -41 % 1 % 36 % 0 % 0 % 1 % 25 % 6 % - - - -

Yearly Growth (%)

Revenue -10 % 22 % 17 % -17 % 38 % 23 % 25 % 37 % 36 % 37 % 3 % 7 % 1 % 30 % 19 % 12 % EBITDA -51 % -4 % 49 % 66 % 131 % 94 % 5 % -1 % 42 % 41 % 12 % 12 % 17 % 31 % 25 % 13 % EBIT -66 % -10 % 61 % 88 % 219 % 140 % 2 % -4 % 54 % 52 % 14 % 14 % 21 % 34 % 30 % 13 % Recurring PAT -66 % -30 % 39 % 134 % 176 % 124 % 1 % -19 % 66 % 64 % 11 % 8 % 13 % 23 % 33 % 15 %

EPS -66 % -30 % 39 % 134 % 176 % 124 % 1 % -19 % 37 % 37 % 26 % 34 % 13 % 23 % 33 % 15 %

Margin (%)

EBITDA 6 % 6 % 11 % 13 % 10 % 10 % 9 % 10 % 10 % 10 % 10 % 10 % 9 % 10 % 10 % 10 % EBIT 3 % 4 % 9 % 11 % 7 % 7 % 7 % 8 % 8 % 8 % 8 % 8 % 7 % 7 % 8 % 8 % PBT 3 % 4 % 9 % 11 % 7 % 7 % 7 % 7 % 8 % 8 % 8 % 8 % 7 % 7 % 8 % 8 %

PAT 2 % 3 % 6 % 9 % 5 % 5 % 5 % 5 % 6 % 6 % 5 % 5 % 5 % 5 % 6 % 6 %



Consolidated Financials

P&L (Rs Mn) FY18A FY19E FY20E FY21E

Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E

Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E

Revenue 33,644 43,806 52,027 58,196 Equity Capital 229 229 229 229 PBT 2,322 3,107 4,133 4,756

Op. Expenditure 30,472 39,638 46,817 52,323 Reserve 9,994 12,041 14,763 17,896 Depreciation 763 931 988 1,087

EBITDA 3,173 4,168 5,210 5,873 Networth 10,224 12,270 14,992 18,126 Others 88 130 89 29

Depreciation 763 931 988 1,087 Long Term Debt 6,396 5,550 5,000 3,500 Taxes Paid 523 901 1,198 1,379

EBIT 2,410 3,237 4,222 4,786 Def Tax Liability 517 517 517 517 Change in WC -1,266 -1,264 -1,745 -1,341

Interest Expense 179 179 158 128 Minority Interest 0 0 0 0 Operating C/F 1,384 2,003 2,267 3,153

Other Income 91 49 69 98 Account Payables 1,228 1,471 1,767 1,977 Capex -1,288 -771 -1,060 -364

PBT 2,322 3,107 4,133 4,756 Other Curr Liabi 583 583 583 583 Change in Invest 0 0 0 0

Tax 523 901 1,198 1,379 Total Liabilities & Equity 18,948 20,391 22,860 24,702 Others 95 49 69 98

PAT bef. MI & Assoc. 1,799 2,206 2,934 3,377 Net Fixed Assets 7,718 8,101 7,373 7,449 Investing C/F -1,193 -722 -991 -266

Minority Interest 0 0 0 0 Capital WIP 543 0 800 0 Change in Debt 40 -846 -550 -1,500

Profit from Assoc. 0 0 0 0 Others 573 573 573 573 Change in Equity 0 0 0 0

Recurring PAT 1,799 2,206 2,934 3,377

Inventory 7,237 8,277 9,942 11,121 Others -304 -339 -370 -371

Extraordinaires 0 0 0 0 Account Receivables 2,293 2,760 3,136 3,508 Financing C/F -264 -1,185 -920 -1,871

Reported PAT 1,799 2,206 2,934 3,377 Other Current Assets 515 515 515 515 Net change in cash -73 96 356 1,015

FDEPS (Rs) 15.7 19.2 25.6 29.5 Cash 69 165 521 1,537 RoE (%) 19 % 20 % 22 % 20 %

DPS (Rs) 0.9 1.2 1.5 1.8 Total Assets 18,948 20,391 22,860 24,702

RoIC (%) 12 % 13 % 16 % 16 %

CEPS (Rs) 22.3 27.4 34.2 38.9 Non-cash Working Capital 8,234 9,498 11,243 12,584

Core RoIC (%) 12 % 13 % 16 % 18 %

FCFPS (Rs) 2.9 12.3 12.1 26.0 Cash Conv Cycle 89.3 79.1 78.9 78.9 Div Payout (%) 7 % 7 % 7 % 7 %

BVPS (Rs) 89.2 107.0 130.7 158.1 WC Turnover 4.1 4.6 4.6 4.6 P/E 15.3 12.5 9.4 8.1

EBITDAM (%) 9 % 10 % 10 % 10 % FA Turnover 4.1 5.4 6.4 7.8 P/B 2.7 2.2 1.8 1.5

PATM (%) 5 % 5 % 6 % 6 % Net D/E 0.6 0.4 0.3 0.1 P/FCFF 83.5 19.5 19.8 9.2

Tax Rate (%) 23 % 29 % 29 % 29 % Revenue/Capital Employed 2.1 2.5 2.7 2.7 EV/EBITDA 10.8 8.0 6.2 5.1

Sales Growth (%) 1 % 30 % 19 % 12 %

Capital Employed/Equity 1.7 1.6 1.4 1.3

EV/Sales 1.0 0.8 0.6 0.5

FDEPS Growth (%) 13 % 23 % 33 % 15 %

Dividend Yield (%) 0.4 % 0.5 % 0.6 % 0.7 %

TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE

25x

5x

10x

15x

20x

0%

20%

40%

60%

80%

100%

0

400

800

Jun

/11

De

c/11

Jun

/12

De

c/12

Jun

/13

De

c/13

Jun

/14

De

c/14

Jun

/15

De

c/15

Jun

/16

De

c/16

Jun

/17

De

c/17

Jun

/18

De

c/18

Jun

/19

EPS Growth

-20%

-10%

0%

10%

20%

30%

40%

50%

0

24000

48000

72000

96000

120000

Jun

/10

De

c/10

Jun

/11

De

c/11

Jun

/12

De

c/12

Jun

/13

De

c/13

Jun

/14

De

c/14

Jun

/15

De

c/15

Jun

/16

De

c/16

Jun

/17

De

c/17

Jun

/18

De

c/18

Jun

/19

5x

10x

12x

15x

18xEBITDA Growth

0%

10%

20%

30%

0

400

800

1200

Jun

/11

De

c/11

Jun

/12

De

c/12

Jun

/13

De

c/13

Jun

/14

De

c/14

Jun

/15

De

c/15

Jun

/16

De

c/16

Jun

/17

De

c/17

Jun

/18

De

c/18

Jun

/19

RoE

1x

2x

4x

6x

8x



Historical Consolidated Financials

P&L (Rs Mn) FY15A FY16A FY17A FY18A

Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A

Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A

Revenue 25,313 27,365 33,336 33,644 Equity Capital 277 277 229 229 PBT 977 1,194 1,994 2,322

Op. Expenditure 23,668 25,512 30,628 30,472 Reserve 7,996 8,929 8,302 9,994 Depreciation 610 662 714 763

EBITDA 1,645 1,852 2,708 3,173 Networth 8,273 9,206 8,531 10,224 Others 93 -8 108 88

Depreciation 610 662 714 763 Long Term Debt 3,031 3,285 6,356 6,396 Taxes Paid 177 185 467 523

EBIT 1,035 1,191 1,994 2,410 Def Tax Liability 587 494 492 517 Change in WC 1,031 -290 -1,782 -1,266

Interest Expense 150 99 228 179 Minority Interest 0 0 0 0 Operating C/F 2,534 1,374 567 1,384

Other Income 91 103 228 91 Account Payables 629 834 1,015 1,228 Capex -1,234 -1,187 -1,706 -1,288

PBT 977 1,194 1,994 2,322 Other Curr Liabi 325 351 695 583 Change in Invest -84 -176 440 0

Tax 136 190 408 523 Total Liabilities & Equity 12,844 14,170 17,088 18,948 Others 23 39 92 95

PAT bef. MI & Assoc. 841 1,004 1,586 1,799 Net Fixed Assets 5,428 5,681 6,071 7,718 Investing C/F -1,295 -1,324 -1,173 -1,193

Minority Interest 0 0 0 0 Capital WIP 629 1,027 1,587 543 Change in Debt -984 183 3,071 40

Profit from Assoc. 0 0 0 0 Others 778 658 695 573 Change in Equity 0 0 -2,266 0

Recurring PAT 841 1,004 1,586 1,799 Inventory 4,437 4,308 6,244 7,237 Others -258 -210 -214 -304

Extraordinaires 0 0 0 0 Account Receivables 1,081 1,737 2,078 2,293 Financing C/F -1,242 -26 592 -264

Reported PAT 841 1,004 1,586 1,799 Other Current Assets 322 362 356 515 Net change in cash -3 23 -14 -73

EPS (Rs) 7.3 8.8 13.8 15.7 Cash 170 397 58 69

RoE (%) 11 % 12 % 18 % 19 %

DPS (Rs) 0.8 0.8 0.8 0.9

Total Assets 12,844 14,170 17,088 18,948

RoIC (%) 8 % 9 % 12 % 12 %

CEPS (Rs) 10.5 12.0 20.1 22.3 Non-cash Working Capital 4,886 5,222 6,968 8,234 Core RoIC (%) 8 % 8 % 12 % 12 %

FCFPS (Rs) 9.9 1.0 -3.7 2.9 Cash Conv Cycle 70.5 69.7 76.3 89.3 Div Payout (%) 16 % 13 % 7 % 7 %

BVPS (Rs) 59.8 66.5 74.4 89.2 WC Turnover 5.2 5.2 4.8 4.1

P/E 32.7 27.4 17.4 0.0

EBITDAM (%) 6 % 7 % 8 % 9 % FA Turnover 4.2 4.1 4.4 4.1 P/B 4.0 3.6 3.2 0.0

PATM (%) 3 % 4 % 5 % 5 % Net D/E 0.3 0.3 0.7 0.6 P/FCFF 24.3 250.7 -64.8 83.5

Tax Rate (%) 14 % 16 % 20 % 23 % Revenue/Capital Employed 2.1 2.2 2.4 2.1 EV/EBITDA 19.2 16.9 12.8 0.0

Sales growth (%) -18 % 8 % 22 % 1 %

Capital Employed/Equity 1.5 1.4 1.6 1.7

EV/Sales 1.2 1.1 1.0 0.0

FDEPS growth (%) -25 % 19 % 58 % 13 %

Dividend Yield (%) 0.4 % 0.3 % 0.3 % 0.4 %



Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 Viral Desai [email protected] 91-22-43320635

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Viraj Mehta [email protected] 91-22-43320634

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Dealing Room E-mail

Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ashish Shah [email protected] 91-22-43320662

Pranav Mehta Building Materials [email protected] 91-79-61909514 Ilesh Savla [email protected] 91-22-43320666

Praful Bohra Pharmaceuticals [email protected] 91-22-43320611 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

Associates E-mail Compliance Officer E-mail

Ankit Choudhary [email protected] 91-79-61909533 Jay Soni [email protected] 91-79-61909561

Bharat Celly [email protected] 91-79-61909524 Corporate Communications E-mail

Harshit Patel [email protected] 91-79-61909522 Mahdokht Bharda [email protected] 91-22-43320647 Hetal Bhatia [email protected] 91-79-61909532

Meet Chande [email protected] 91-79-61909513

Nishant Bagrecha [email protected] 91-79-61909526

Ronak Soni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

Shreepal Doshi [email protected] 91-79-61909541

Varun Baxi [email protected] 91-79-61909527

Vikas Jain [email protected] 91-79-61909531

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

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