OCL India Ltd - careratings.com€¦ · · 2013-11-25OCL INDIA LIMITED 1 EQUIGRADE Very Good...

FUNDAMENTALS VALUATION

OCL INDIA LIMITED

21 October, 2011

ANALYTICAL CONTACT

Mr. Amod Khanorkar +91-22-6754 3520 [email protected]

BUSINESS DEVELOPMENT CONTACTS

MUMBAI

Mr. Anil Varghese +91-22-6754 3673 [email protected]

KOLKATA

Mr. Sukanta Nag +91-33- 2283 1800 [email protected]

CHENNAI

Mr. V Pradeep Kumar +91-44-2849 7812 [email protected]

AHMEDABAD

Mr. Mehul Pandya +91-79-40265656 [email protected]

NEW DELHI

Ms. Swati Agrawal +91- 11- 2331 8701 [email protected]

BANGALORE

Mr. Dinesh Sharma +91-80-2211 7140 [email protected]

HYDERABAD

Mr. Ashwini Kumar Jani +91-40-40102030 [email protected]

CARE EQUITY RESEARCH OFFERS

Independent Research of equities on fundamentals or valuations or both

IPO Grading

White Label Research

Valuation of companies for Institutional Investors, Asset Managers and Corporates

Sector Write-ups for Offer Documents of securities

OCL INDIA LIMITED

1 www.careratings.com

EQUIGRADE

Financial Information Snapshot

(Rs. Crores) FY11 FY12E FY13E FY14E

Total Revenues 1,474 1,602 1,740 2,020

EBITDA 304 303 340 388

PAT 114 79 104 136

Fully Diluted EPS* (Rs.) 20.1 13.9 18.3 23.9

Dividend Per Share (Rs.) 4.0 4.0 4.0 4.0

P/E (x) 4.6 6.6 5.0 3.9

EV/EBITDA (x) 3.2 3.1 3.0 2.6

* Calculated on Current Face Value of Rs.2/- per share

EQUIGRADE – Analytical Power for Investment Decision

OCL INDIA LTD CEMENT AND REFRACTORY

Very Good Fundamentals, Considerable Upside Potential CMP: 92/ CIV: 1241

Sensex: 16,937

CARE Equity Research assigns 4/5 on fundamental grade to OCL

India Limited (OCL)

CARE Equity Research assigns a fundamental grade of 4/5 to OCL.

This indicates ‘Very Good Fundamentals’. OCL is a key player in the

eastern region and the largest cement player in Orissa with a market

share of around 30%. OCL has one of the lowest freight cost in the

industry on account of its plants being located in the proximity of the

key markets in the eastern region. The company is also setting up a

captive power plant (CPP) which will reduce its dependence on grid

power and in-turn aid the margins. CARE Equity Research believes

key catalysts for OCL would be higher cement demand in the eastern

region on the back of infrastructure and economic growth. The eastern

region currently has lowest per capita consumption (an average of 106

kg, compared with all-India average of 171 kg).

Valuation

CARE Equity Research values OCL using sum of the parts (SOTP)

methodology. Given the cyclical nature and corresponding earnings

volatility of the industry, we have valued OCL’s cement business

based on Enterprise Value (EV)/tonne multiple based valuation

methodology. Consequently, we have assumed USD 45 per tonne to

arrive at the EV for OCL’s cement business. The EV for refractory

business is arrived by EV/EBITDA multiple of 3x to one-year forward

refractory EBITDA. The total EV has thus been arrived at using the

SOTP method, resulting in a Current Intrinsic Value (CIV) of Rs. 124

per share. Based on the Current Market Price (CMP) of Rs.92 per

share we assign a valuation grade of 5/5 to OCL, indicating the shares

of OCL have ‘Considerable Upside Potential’

21st

October 2011

OCL INDIA LIMITED

www.careratings.com 2

EQUIGRADE

Mid-sized player; significant in Eastern region

OCL is a mid-sized player in the Indian cement industry and a key player in the eastern region with a capacity of

5.35 MTPA located at Rajgangpur and Kapilas Road in Orissa. The company has a leadership position in Orissa,

with around 30 per cent market share. The state of Orissa in-turn constitutes around 60 per cent of the annual cement

dispatches for the company.

Player-wise capacity in eastern region (FY11)

Source: Company, CARE Equity Research

The company is further expanding its reach in the neighboring states like West Bengal, Bihar and Jharkhand. The

company currently has a distribution network of around 500 dealers and 35 sales offices.

Regional dynamics dominate; demand in eastern region expected to grow at higher rate

The cement industry is characterized by the regional dynamics primarily on account of high freight cost involved

in the movement of cement. While, the overall industry has been reeling under low demand scenario as dispatches

have risen merely by 5 per cent in FY11 as against the earlier expectations of 10 per cent, demand in the eastern

region grew by 9 per cent during the same period. In the past, the eastern region has lagged behind in terms of

economic growth as compared to other regions. The per capita consumption of cement in the eastern region stood

at around 106 kg in FY11, compared with an all-India average of around 171kg, (world average of around 450

kg). However, over the last few years, key states like Bihar, Orissa and Chhattisgarh have witnessed higher

economic growth than the rest of the country. State GDP for Bihar and Orissa have grown at 10 per cent and 9 per

cent respectively over the last three years as compared with an all India GDP growth of around 8 per cent (cement

demand in is closely related to the economic activity, with a multiplier of around 1 to 1.25 times the GDP).

FUNDAMENTAL GRADE Very Good Fundamentals 4/5

OCL INDIA LIMITED


EQUIGRADE

Demand – Supply in Eastern region

Source: Cement Manufacturers Association (CMA) and CARE Equity Research

Eastern states GDP growth trend (%)

Source: Centre for Monitoring Indian Economy (CMIE) and CARE Equity Research

Going forward, we expect cement demand in the region to grow at 9 per cent to 43 MTPA as compared with an all

-India growth of 7.6 per cent on the back of increased industrialization (rich mineral resource) and infrastructure

spending. The total government expenditure in states of Bihar has increased from Rs.42,796 crore in FY10 to

Rs.57,759 crore in FY11 while in Orissa it has increased from Rs.30,541 crore to Rs.39,389 crore during the same

period. The construction sector’s contribution to the state GDP for Bihar increased from 9.7 per cent in FY08 to 13

per cent in FY11. The demand may get a further push in 2013, on account of Central and State government

elections (in Orissa) in 2014. Cement dispatches in the past have witnessed growth during pre-election years with

the incumbent government speeding up the ongoing/announced projects.

States FY07 FY08 FY09 FY10

Assam 4.7 4.8 6.8 8.1

Bihar 18.1 8.5 13.1 8.6

Chhattisgarh 18.6 8.6 6.8 11.9

Jharkhand 2.4 20.5 4.7 6.6

Meghalaya 7.7 4.0 4.5 7.3

Orissa 13.0 10.9 7.2 10.6

West Bengal 7.4 8.0 5.2 9.0

India 9.6 9.3 6.8 8.0

(mn ton) FY08 FY09 FY10 FY11E FY12E FY13E

Effective Capacity 27 29 34 37 39 43Growth (YoY - %) 6.8 9.7 14.3 9.0 6.8 10.3

Production 24 26 29 30 32 34Capacity utilization (%) 89.5 88.7 86.3 82.2 81.5 80.0

Consumption 25 28 33 36 39 43Growth (YoY - %) 5.7 13.4 17.9 8.8 8.0 10.0

OCL INDIA LIMITED


EQUIGRADE

Captive power to reduce pressure on margins; location advantage results in lower freight cost

OCL is in the process of setting up 54MW Captive Power Plant (CPP) in Rajgangpur, Orissa with an estimated

capital expenditure of Rs.270 crore. Commissioning of power plants will come about in two phases – the first

phase of 27MW, has already been commissioned in September 2011, while the balance is expected to get

commissioned by December 2011. Coal required for power plants will be procured partly from captive mine and

partly through linkages. Addition of CPP will reduce dependence on grid and would enable to save around Rs.20

crore in FY13E. Also, the company would be in a position to sell excess power from FY13 onwards. We expect

OCL to sell around 4 million units and around 7.4 million units in FY13 and FY14, respectively from the CPP,

resulting in a revenue addition from power sale of around Rs.14.6 crore and Rs.31 crore in FY13 and FY14

respectively.

OCL also has the distinct advantage of plants being located in the proximity of its key markets. Consequently, the

average lead distances for the company are much lower compared with its peers, thereby reducing the outward

freight cost per tonne for OCL as compared with the peers. Freight per tonne for OCL was around Rs.400 as

compared with the industry average of around Rs.579. Freight cost per ton in FY11 had witnessed an increase by

around 15 per cent on account of increase in diesel prices by around 14 per cent. We expect lower impact for OCL

in a rising freight cost scenario on account of this location advantage

High coal prices, flat cement realization to result in continued pressure on margins

OCL sources 60 per cent of its coal requirement through linkages while the rest is procured through open market/

e-auction. Coal India raised domestic coal prices in the later part of Q4FY11 by around 30 per cent, the full impact

of which will be seen from FY12 onwards. We expect power and fuel cost per ton to increase from around Rs.700

in FY11 to Rs.840 in FY12.

Region wise trend in cement price*

Source: CMIE and CARE Equity Research

Note: * Cities represent the major markets in each region

OCL INDIA LIMITED


EQUIGRADE

While, the cement prices for the industry have so far remained on the higher side on the back of rise in power &

fuel costs and freight charges, going forward the realization may witness a drop on account of reduced utilization

rates. The industry is expected to increase capacities to the tune of 44 MTPA by FY13E resulting in lower capacity

utilization rates. While the eastern region may not witness pricing pressure on the back of comparatively higher

utilization rates (around 80 per cent in FY13E), the movement of cement from the southern region where the

utilization rates are expected to remain low, may pose a threat to the pricing in the region.

Going forward, we expect EBITDA per ton to decline by 8 per cent from around Rs.850 in FY11 to around Rs.785

in FY12E.

West Bengal facility to help expand reach

OCL is process of setting up a 1.35 MTPA grinding facility at Salvoni, West Bengal with an estimated capital

expenditure of around Rs.450 crore. The capex will be funded through a mix of internal accruals and debt funds.

The grinding unit is expected to be commissioned by Q4FY14. The new capacity will enhance OCL’s market

presence in West Bengal, which is a key consumption centre of cement in the Eastern region. This will also protect

the company against any downward pressure in prices in Orissa.

Cement revenue growth to moderate

During FY09, OCL expanded its clinker capacity from 1.2 MTPA to 2.9 MTPA and cement capacity from 2.9

MTPA to 5.35 MTPA. On the back of this capacity expansion, OCL’s dispatches increased from 2 MTPA in FY08

to 3.4 MTPA in FY11, registering 19.5 per cent CAGR. Going forward, we expect dispatches to grow in line with

the industry average at 9 per cent during FY12-14E. However, cement realization growth would stay muted at 3

per cent during FY12-14E on account of lower capacity utilization.

We expect OCL’s cement revenue to register a CAGR of around 12 per cent over FY11-FY14E period, from

Rs.1,181 crore in FY11 to Rs.1,643 crore in FY14E.

OCL INDIA LIMITED


EQUIGRADE

OCL: Cement Revenue and Growth

Source: Company and CARE Equity Research

Refractory business - no silver lining visible yet

The refractory business is closely linked to the growth in the steel industry as this industry consumes around 70

per cent of the output, with the rest of the demand comes from aluminum and glass industries. Refractory products

are primarily used as heat-resistant material in manufacturing of steel. OCL has a refractory capacity of 106,000

TPA. The segment contributed around 20 per cent to the revenues for the company in FY11. Going forward, we

expect OCL’s refractory business to grow at a CAGR of 5.5 per cent during FY12-14E to Rs.346 crore, thereby

contributing around 17 per cent to the revenues in FY14.

OCL: Refractory Revenue and Growth


OCL INDIA LIMITED


EQUIGRADE

Margins for the business are expected to stay under pressure on the back of increased competition from China,

leading to higher imports corroborated by an increase in key refractory inputs like fused magnesia, bauxite,

graphite, alumina and excess capacity in the industry. While, prices of the inputs have witnessed an increase by an

average of 20-25 per cent in the last couple of years, the price of refractory products have not been revised to a

large extent due to the excess capacity and better negotiating power of the large steel manufacturers. OCL, despite

being one of the leading players in the industry, finds it difficult to pass on any hike in raw material. As a result,

EBITDA margin in this business declined from around 12 per cent in FY09 to 5 per cent in FY11. Going forward,

we expect EBITDA margin to improve to around 7 per cent and forecast EBITDA CAGR of 12 per cent during

FY11-14E.

Margins trend in refractory business


Revenue growth to slow down to 11 per cent over FY11-14E

Lower cement revenue growth coupled with marginal growth in refractory sales would result in slowdown in the

overall revenue growth for the company from 24 per cent during FY08-11 to 11 per cent in FY11-14E. Cement

revenue growth will be impacted due to lower realization growth. We expect revenues to increase from Rs.1,474

crore in FY11 to Rs.2,020 crore in FY14.

OCL INDIA LIMITED


EQUIGRADE

OCL: Revenue and Growth


Return ratios to remain subdued

We believe return ratios for OCL will remain subdued during FY12-14E on account of the ongoing capex and

muted net profit margins. Consequently, we estimate ROE to decline from 14 per cent from FY11 to 11 per cent

in FY13E.

In compliance with the listing agreement 49

The company has eight members in the Board, with two of them being Executive, three Non-Executive and three

Non Executive and Independent Directors. The Board has formed three sub-committees for audit, remuneration

and shareholders/investor’s grievance. As per the annual report, the same is in compliance with the listing

agreement of the stock exchanges.

OCL INDIA LIMITED


EQUIGRADE

CARE Equity Research assigns a valuation grade of 5/5 to OCL

CARE Equity Research has used the sum of the parts (SOTP) methodology to arrive at the valuation for OCL,

since the company has operations in two segments, cement and refractory.

Given the cyclical nature and corresponding earnings volatility we have used the EV/tonne methodology to

value the cement business of OCL. We have assumed an EV/tonne of 45 USD to value OCL’s cement business.

An EV/tonne of 45 USD results in an EV of Rs 1,107 crore for cement business.

For the refractory business, we have used an EV/ EBITDA methodology and a multiple of three times the one-

year forward EBITDA for the refractory business, consequently leading to EV of Rs.61 crore for the refractory

business. Thereby, by the SOTP methodology the company is valued at Rs.1,168 crore and with an outstanding

net debt of Rs.464 crore, the CIV per share for OCL is arrived at Rs.124.

The CIV of Rs.124 results in a valuation grade of 5/5, indicating the shares of OCL has ‘Considerable Upside

Potential’ from the CMP of Rs.92 per share.

OCL: Valuation snapshot

Source: CARE Equity Research

VALUATION GRADE Considerable Potential Upside 5/5

Valuation Multiple

Driver (Average of

FY12 & FY13)

Value

(Rs Crores)

EV of Cement business (A) EV/tonne 45 5.35 1107

EV of Refractory business (B) EV/EBITDA 3 20.20 61

Total EV (A+B) 1168

Less: Net debt 464

Equity value 704

Value per share (Rs.) 124

OCL INDIA LIMITED


EQUIGRADE

OCL: One-year forward rolling EV/EBITDA OCL: One-year forward rolling EV/ton

Source: CMIE and CARE Equity Research

OCL INDIA LIMITED


EQUIGRADE

OCL: Peer Comparison


(Rs. Crores) OCL India Ltd JK Cements Sagar Cements

Financial Statements FY10 FY11 FY10 FY11 FY10 FY11

Total Revenues

1,374.2

1,474.4

2,275.2

2,704.7

529.8

553.9

EBITDA

385.1

303.5

464.8

315.1

84.0

78.1

EBIT

270.6

180.8

379.2

202.3

56.3

50.5

PAT

169.7

114.4

224.6

62.6

19.1

17.4

Margins

EBITDA 28.0% 20.6% 20.4% 11.6% 15.9% 14.1%

EBIT 19.7% 12.3% 16.7% 7.5% 10.6% 9.1%

PAT 12.3% 7.8% 9.9% 2.3% 3.6% 3.1%

Per Share Data

EPS 29.8 20.1 32.1 9.0 12.7 11.6

BVPS (Tangible) 140.0 155.4 154.9 162.2 138.0 147.7

Valuations Ratios (Trailing)

P/E

4.6

12.0

12.0

EV/ EBITDA

3.2

5.6

5.9

EV/ TONNE (Rs)

1842

2336

1952

P/BV

0.6

0.7

0.9

Price /Sales

0.36

0.28

0.38

Market Capitalisation

523

751

209

Profitability Ratios

ROCE

7.6%

8.1%

10.4%

ROE

13.6%

5.6%

8.1%

OCL INDIA LIMITED


EQUIGRADE

OCL India Ltd (OCL), the flagship company of Mr Jai Dayal Dalmia group, was incorporated in October 1949.

The company is into cement and refractory business with facilities located in the eastern part of the country,

primarily in the state of Orissa.

Revenue mix


Cement Business

OCL has evolved from a once modest 500 TPD capacity of ‘single wet process cement kiln’ imported from FL

Smith, Denmark to its current modern dry process cement capacity of 5.35 MTPA. The current capacity is

situated at two locations, Rajgangpur and Kapilas both in Orissa. OCL is predominantly an eastern player with

close to 60 per cent share of its revenues from Orissa itself, thereby commanding a leadership position in the state

with a share of around 30 per cent in FY11. In FY11, cement business contributed 80 per cent to the total

revenues.

OCL mainly manufactures Portland Blast Furnace Slag Cement (PBFSC) which is sold under the brand name

‘Konark’. OCL’s location helps it in the availability of slag from the nearby steel plants. The company has the

highest blending ratio of around 1.9 compared to an average 1.5-1.7 for other Eastern players due to the higher

use of slag.

COMPANY BACKGROUND

OCL INDIA LIMITED


EQUIGRADE

Refractory Business

OCL forayed into refractory manufacturing in 1954 and is currently one of the largest refractory manufacturing

companies in the country. OCL produces a wide range of products which are used in the ferrous and non-ferrous

industries. The company has a capacity of 106,000 MTPA. The refractory’s contribution to the total revenues was

20 per cent in FY11.

Different refractory products made by OCL are

Silica Refractories for Coke Ovens, High Temperature Blast Furnace Stoves and Glass Industries.

High Alumina Refractories for Blast Furnace Stoves.

Basic Refractories.

Magnesia Carbon Bricks.

Continuous Casting Refractories.

New-generation high-performance Castable and Precast Blocks for various applications.

Purging Refractories.

Slide Gate Refractories.

OCL: Board of Directors


Name Designation Category of Director

Mr Pradip Kumar Khaitan Chairman Non Executive & Non Independent

Mr Gaurav Dalmia Managing Director Promoter, Executive & Non Independent

Mr D.D. Atal Whole time Director Executive & Non Independent

Mr D. N. Davar Independent Director Non Executive & Independent

Mr Puneet Yadu Dalmia Non-executive Director Promoter, Non Executive & Non Independent

Dr S. R. Jain Independent Director Non Executive & Independent

Dr R. C. Vaish Independent Director Non Executive & Independent

Mr V. P. Sood Non-executive Non Executive & Non Independent

OCL INDIA LIMITED


EQUIGRADE

Cement Industry Overview

India’s cement demand, is proxy for economic growth and urbanization, remain a long-term story primarily due

to lower per capita consumption. Over the last 15 years cement demand in the India has grown at 1.25x growth

rate of GDP. Cement demand is primarily derived from three segments, viz Housing (55 per cent), Infrastructure

(25 per cent) and Industrial/ Commercial construction (20 per cent).

The Indian Cement industry has been reeling under low demand scenario as dispatches have risen by 5 per cent in

FY11 as against the earlier expectations of 10 per cent. This was primarily due to weak demand on account of

prolonged monsoon, political instability in AP, agitation in states of Rajasthan and Haryana, unavailability of

sand and railway wagons. We believe the overall cement demand for FY12E would remain weak at 6 per cent.

Further, we expect the all-India cement dispatches to grow at 8 per cent in FY13 on account a) increased thrust on

infrastructure sector, b) increase in rural demand housing and c) low base effect.

Cement: All-India demand-supply matrix

Source: CMA and CARE Equity Research

Utilization to remain below 80 per cent level till FY14E

India had an installed capacity base of about 293mt in FY11, and we estimate 60mt will be added over FY11-14.

Since FY96, the average industry-wide utilization levels have been 83-85 per cent. Capacity utilization for FY11

stood at 76 per cent against 87 per cent in FY10 mainly on account of lull demand growth during 2HFY11.

Capacity additions would keep utilization levels subdued at 76 per cent in FY13. Further, we expect recovery in

utilization rates to be achieved in FY14E on the back of increase in demand from housing and infrastructure

spending. However, we do not envisage utilization to grow back to past levels even in FY14.

SNAPSHOT OF THE INDUSTRY

(mn ton) FY08 FY09 FY10 FY11E FY12E FY13E FY14E

Year end capacity 189 218 259 293 310 336 351

Effective Capacity 176 205 230 274 298 313 330Growth (YoY - %) 6.1 16.6 12.2 19.3 8.8 5.0 5.4

Production 168 181 199 209 221 238 262Capacity utilization (%) 96 89 87 76 74 76 79

Domestic Demand 164 178 197 206 218 236 259Exports (net of imports) 4 3 3 3 3 3 3

Total Demand 168 181 199 209 221 238 262Growth (YoY - %) 8.2 7.9 10.1 4.6 5.9 7.9 9.9

OCL INDIA LIMITED


EQUIGRADE

Refractory Industry Overview

Refractory products are heat-resistant materials used in almost all processes involving high temperatures and/or

corrosive environment. These are typically used to insulate and protect industrial furnaces and vessels due to their

excellent resistance to heat, chemical attack and mechanical damage. The refractory products influence the safe

operation, energy consumption and product quality; therefore it is critical to obtain refractory product suited to

each application. Any failure of refractory products could result in a great loss of production time, equipment, and

sometimes the product itself. The value of refractory product is judged not merely by the cost of material itself,

but by the nature of the job and/or its performance in a particular situation.

Key refractory products include fire-clay bricks, castables, ceramic fiber and insulating bricks that are made in

varying combinations and shapes for diverse applications. The steel industry is the major consumer of refractory

products hence the fortunes of the refractory industry depend mainly on the growth of the steel industry. Besides

the steel sector, the demand for quality refractory products is also increasing from industries like aluminum,

cement and glass industries.

Outlook

We expect the Indian refractory industry to grow at around 7-8 per cent annually through FY14 on the back of

growth in the steel industry. The steel industry in India on an average consumes 12-13 kg of refractory per tonne

of steel (around 7 kg in developed countries). However, with the focus of refractory manufacturers in improving

the quality of the refractory products, the need to replace the refractory products will decline leading to lower

demand. This downward trend in the unit consumption of refractory products is likely to continue leading to

overcapacities in the refractory market.

While the ability to develop product suiting specific requirement of the client is an area of concern, the Indian

industry is expected to position itself well by virtue of modernisation and strong technical tie-ups. However, the

competition from the unorganized sector players coupled with the influx of import from China might lead to a

further lower increase in realization.

OCL INDIA LIMITED


EQUIGRADE

Income Statement

(Rs Crores) FY09 FY10 FY11 FY12E FY13E FY14E

Total Revenues 1,119 1,374 1,474 1,602 1,740 2,020

EBITDA 261 385 304 303 340 388

Depreciation and amortisation 57 114 123 142 148 151

EBIT 204 271 181 161 192 236

Interest 38 51 62 86 76 70

PBT 177 255 152 110 145 189

Reported PAT 116 164 114 79 104 136

Recurring PAT 115 170 114 79 104 136

Fully Diluted Earnings Per Share* (Rs.) 20.2 29.8 20.1 13.9 18.3 23.9

Dividend, including tax 17 27 26 26 26 26

* Calculated based on ordinary PAT on Current Face Value of Rs. 2/- per share

Balance Sheet

(Rs Crores) FY09 FY10 FY11 FY12E FY13E FY14E

Tangible Net worth 659 796 884 937 1015 1124

Debt (incl. Preference Shares) 715 826 852 752 702 652

Deferred Liabilities / (Assets) 100 120 114 114 114 114

Capital Employed 1,474 1,742 1,851 1,804 1,831 1,891

Net Fixed Assets, incl. Capital WIP, net of reval

reserve 1218 1309 1292 1321 1442 1491

Investments 6 6 8 8 8 8

Loans and Advances 82 72 77 82 87 92

Inventory 174 203 254 273 295 367

Receivables 116 105 132 125 154 170

Cash and Cash Equivalents 119 354 390 334 193 184

Other current assets 1 1 2 2 2 2

Current Assets, Loans and Advances 490 734 855 815 730 816

Less: Current Liabilities and Provisions 240 307 304 340 349 424

Total Assets 1,474 1,742 1,851 1,804 1,831 1,891

Ratios based on Financials

FY09 FY10 FY11 FY12E FY13E FY14E

Growth in Total Revenues 46.1% 22.8% 7.3% 8.7% 7.7% 15.3%

Growth in EBITDA 30.6% 47.8% -21.2% -0.3% 12.5% 13.9%

Growth in Adj.PAT -1.2% 47.9% -32.6% -31.0% 32.0% 30.3%

Growth in EPS -6.5% 47.9% -32.6% -31.0% 32.0% 30.3%

EBITDA Margin 23.3% 28.0% 20.6% 18.9% 19.6% 19.2%

PAT Margin 10.3% 12.3% 7.8% 4.9% 6.0% 6.7%

RoCE 10.2% 11.2% 7.6% 6.3% 7.6% 9.1%

RoE 18.9% 23.3% 13.6% 8.7% 10.7% 12.7%

Net Debt-Equity (x) 0.9 0.6 0.5 0.4 0.5 0.4

Interest Coverage (x) 5.3 5.3 2.9 1.9 2.5 3.4

Current Ratio (x) 2.0 2.4 2.8 2.4 2.1 1.9

Inventory Days 67 69 71 74 74 74

Receivable Days 34 29 29 29 29 29

Price / Earnings (P/E) Ratio 4.6 6.6 5.0 3.9

Price / Book Value(P/BV) Ratio 0.6 0.6 0.5 0.5

Enterprise Value (EV)/EBITDA 3.2 3.1 3.0 2.6


FINANCIAL ANALYSIS

OCL INDIA LIMITED


EQUIGRADE

CARE EquiGrade Grid (CEG)

Through CEG, CARE Equity Research addresses two critical factors considered by an investor while investing

in a particular company’s equity shares:

1. Fundamentals: Whether the company is fundamentally sound with respect to its business, its financial

position, its management and its prospects.

2. Valuation: What is the Current Intrinsic Value (CIV) of the stock and how it compares vis-a-vis its Current

Market Price (CMP).

These factors are answered assigning quantitative grades to both these parameters. CEG is the snapshot of

‘Fundamental Grade’ and ‘Valuation Grade’ assigned by CARE Equity Research.

Fundamental Grade

This grade represents how sound the company is fundamentally, vis-à-vis other listed companies in India. This

grade captures:

1. Business Fundamentals and Prospects

2. Financial Soundness

3. Management Quality

4. Corporate Governance Practices

The grade is assigned on a five-point scale as under:

CARE Fundamental Grade Evaluation

5/5 Strong Fundamentals

4/5 Very Good Fundamentals

3/5 Good Fundamentals

2/5 Modest Fundamentals

1/5 Weak Fundamentals

EXPLANATION OF GRADES

OCL INDIA LIMITED


EQUIGRADE

Valuation Grade

This grade represents the potential value in the company’s equity share for the investor over a 1-year period. The

Current Intrinsic Value (CIV) or the price arrived by CARE Equity Research on fundamental basis is compared

with the Current Market Price (CMP) of the stock and the grade is assigned based on the gap between CIV and

CMP of the stock.

The grade is assigned on a five-point scale as under:

CARE Valuation Grade Evaluation

5/5 Considerable Upside Potential (>25% upside from CMP)

4/5 Moderate Upside Potential (10-25% upside from CMP)

3/5 Fairly Priced (+/-10% from CMP)

2/5 Moderate Downside Potential (10-25% downside from CMP)

1/5 Considerable Downside Potential (>25% downside from CMP)

Grading determination is a matter of experienced and holistic judgment, based on relevant quantitative and

qualitative factors of the company in relation to other listed companies.

DISCLOSURES

Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no conflict of interest that can

bias the grading recommendation of the company.

This report has been sponsored by the company.

DISLCLAIMER

This report is prepared by CARE Research, a division of Credit Analysis & REsearch Limited [CARE]. CARE Research has taken utmost care to

ensure accuracy and objectivity while developing this report based on information available in public domain or from sources considered reliable.

However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Research operates independently of

the ratings division and this report does not contain any confidential information obtained by the ratings division, which it may have obtained in

the regular course of operations. Opinions expressed herein are our current opinions as on the date of this report.

CARE’s valuation of the security is mainly based on company-specific fundamental factors. Equity prices are affected by both fundamental factors

as well as market factors such as – liquidity, sentiment, broad market direction etc. The impact of market factors can distort the price of the

security thereby deviating from the intrinsic value for extended period of time. CARE EquiGrade on a security should not be construed as

recommendation to buy, sell or hold a security; also it is not a comment on the suitability of the investment to the reader. The subscriber / user

assume the entire risk of any use made of this report or data herein. CARE specifically states that it or any of its divisions or employees do not

have any financial liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised

recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or indirectly in any form to

any other person, especially outside India or published or copied for any purpose.

Published by Credit Analysis & REsearch Ltd., 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya Hospital Road,

Sion East, Mumbai – 400 022.

CARE Research is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information

contained in this report and especially states that CARE (including all divisions) has no financial liability whatsoever to the user of this product.

This report is for the information of the intended recipients only and no part of this report may be published or reproduced in any form or

manner without prior written permission of CARE Research.

OCL INDIA LIMITED


EQUIGRADE

Credit Analysis & REsearch Ltd. (CARE) is a full-service rating company that offers a wide range of rating and grading

services across sectors. CARE has an unparallel depth of expertise. CARE Ratings methodologies are in line with the best

international practices.

CARE Research

CARE Research is an independent research division of CARE Ratings, a full-service rating company. CARE Research is

involved in preparing detailed industry research reports with 5-year demand and 2-year profitability outlook on the industry

besides providing comprehensive trend analysis and the current state of the industry. CARE Research currently offers reports

on more than 26 industries which are updated on a monthly/quarterly basis. Subscribers can access CARE Research reports

online. CARE Research also offers research that is customized to client requirements. Customized Research involves

business analysis and position in the market, financial analysis and market sizing etc.

CREDIT ANALYSIS & RESEARCH LTD

HEAD OFFICE | Mr. Anil Varghese | Cell: +91-9322123311 | Tel: +91-22-6754 3673 | E-mail: [email protected]

4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022 |

Tel: +91-022- 6754 3456 | E-mail: [email protected] | Fax: +91-022- 6754 3457

KOLKATA | Mr. Sukanta Nag | Cell: +91-98311 70075 | Tel: +91-33- 2283 1800/ 1803, 2280 8472 |

E- mail: [email protected] | 3rd Flr., Prasad Chambers (Shagun Mall Bldg), 10A, Shakespeare Sarani, Kolkata -700

071

CHENNAI | Mr. V Pradeep Kumar | Cell: +91 9840754521 | Tel: +91-44-2849 7812/2849 0811 | Fax: +91-44-2849 0876 |

Email: [email protected] | Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai - 600 002

AHMEDABAD | Mr. Mehul Pandya | Cell: +91-98242 56265 | Tel: +91-79-40265656 | Fax: +91-79-40265657 |

E-mail:[email protected] | 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad - 380 015.

NEW DELHI | Ms. Swati Agrawal | Cell: +91-98117 45677 | Tel: +91- 11- 2331 8701/ 2371 6199 |

E-mail: [email protected] | 3rd

Floor, B -47, Inner Circle, Near Plaza Cinema, Connaught Place, New Delhi - 110

001.

BANGALORE | Mr. Dinesh Sharma | Cell: +91 9900041975 | Tel: +91-80-22117140 | Email: [email protected]|

Unit No. 8, I floor, Commander's Place, No. 6, Raja Ram Mohan Roy Road, (Opp. P F Office), Richmond Circle, Bangalore - 560

025.

HYDERABAD | Mr. Ashwini Kumar Jani | Cell: +91-91766 47599 | Tel: +91-40-40102030 |

E-mail: [email protected] | 401, Ashoka Scintilla | 3-6-520, Himayat Nagar | Hyderabad - 500 029

ABOUT US

mailto:[email protected]

OCL India Ltd - careratings.com€¦ · · 2013-11-25OCL INDIA LIMITED 1 EQUIGRADE Very Good...

Documents

Transcript of OCL India Ltd - careratings.com€¦ · · 2013-11-25OCL INDIA LIMITED 1 EQUIGRADE Very Good...