Technofab Engineering Ltd (Technofab)

RETAIL RESEARCH Page | 1

Technofab Engineering Ltd (Technofab)

Scrip Code Industry CMP Recommendation Add on Dips to band Sequential Targets Time Horizon TECENGEQNR Construction & Engineering 170.0 Buy at CMP and add on declines Rs. 150-158 Rs. 210 & Rs. 236 3-4 quarters

Incorporated in 1971, Technofab Engineering Ltd (Technofab) was promoted by Mr. Avinash Gupta. Technofab provides engineering, procurement, and construction services on a turnkey basis.

Triggers Strong Order Book which is diversified across 5 segments Diversified across geographies Venturing into Railways Prudent and transparent Management

Risks/Concerns

Rising Interest costs Economic Slowdown Setback in a project can affect the company’s revenue and profitability Execution mix has deteriorated recently leading to lower margins

Conclusion and Recommendation At the current market price of Rs 170, Technofab is trading at 15.8x FY16E EPS of Rs 10.8 and at 9.7x FY17E EPS of Rs 17.5. A sharper turnaround is expected in FY17 and we believe there is a significant head room for re-rating taking FY17 projections into consideration. We feel investors can buy the stock at CMP (Rs 170) and add on dips in the range of Rs 150-158 (~8.5-9x FY17E EPS) for sequential targets of Rs 210-236 (12-13.5x FY17E EPS) in next 3-4 quarters.

Financial Summary (Standalone)

Particulars (Rs in Cr) FY11 FY12 FY13 FY14 FY15E FY16E FY17E Total Operating Income 290.1 377.3 426.8 407.2 440.0 497.2 586.7 Operating Profit 41.7 50.9 56.1 25.0 30.8 37.3 48.7 OPM (%) 14.4 13.5 13.1 6.1 7.0 7.5 8.3 Other Income 1.3 4.3 1.9 4.1 0.5 0.0 0.0 Reported Profit After Tax 26.0 34.2 32.5 6.9 7.3 11.3 18.4 PATM (%) 9.0 9.1 7.6 1.7 1.7 2.3 3.1 Reported EPS (Rs.) 24.8 32.6 31.0 6.6 6.9 10.8 17.5

(Source: Company, HDFCSec; E-Estimates)

RETAIL RESEARCH

STOCK NOTE 04 Mar, 2015

Price Chart

S N D F11 A J A O D J12 M M J S N D F13 A J A O N J14 M M J S O D F15

33032031030029028027026025024023022021020019018017016015014013012011010090807060504030

D

D

D

1-533216.TECHNOFAB.BSE - 03/03/15 Trend7

Weekly

Stock Details BSE Code 533216

NSE Code TECHNOFAB

Bloomberg TECE:INPrice (Rs) as on 04 Mar, 2015 170

Equity Capital (Rs Cr) 10.49

Face Value (Rs) 10

Eq. Shares O/s (Cr) 1.05Market Cap (Rs. Cr.) 178.3

Book Value (Rs) 199.7

Avg. Volume (52 Week) 2772

52 wk H/L (Rs) 201.1/59.9

Shareholding Pattern (As on Dec, 31 2014)

Indian Promoters 48.16

Institutions 0.14

Non Institutions 51.70

Total 100

Zececa Mehta – Fundamental Research Analyst

[email protected]


Company Profile Incorporated in 1971, Technofab Engineering Ltd (Technofab) was promoted by Mr. Avinash Gupta. Technofab provides engineering, procurement, and construction services on a turnkey basis. The company undertakes a variety of balance-of-plant (BoP) and electro-mechanical projects in the power, oil and gas, water and waste-water treatment, electrical distribution and rural electrification and other industrial and infrastructure sectors in India as well as the international market. The Company’s operations outside India include several countries in sub Saharan Africa like Ethiopia, Ghana, Kenya, Malawi and Zambia. In 1994, Mr. Nakul Gupta (son of Mr. Avinash Gupta) joined the company. Aged 42 years, he is a Science Graduate and holds more than 19 years of experience in the field of Engineering & Construction business. In 1998, Mr. Arjun Gupta (elder son of Mr. Avinash Gupta) joined the company. Aged 43 years, he is an Engineering Graduate (USA) and holds more than 20 year experience in the field of Engineering & Construction business With an impressive track record of over 135 completed and 49+ ongoing assignments, the company has an equally impressive customer list, which includes: Power Sector - NTPC / BHEL / LANCO / SEB’s / DVC / Reliance / ABB / Siemens / Alstom / IndiaBulls Nuclear Power - NPCIL Industrial Sector - NALCO / SAIL / RINL / NMDC / NFL / Maruti / IFFCO / L&T / HINDALCO Oil & Gas - TEMA Oil Refinery / GAIL / IOC / FUEL TRADE Water Systems and Water Treatment - Municipalities / NBCC / World Bank / ADB / AFDB aided Projects The company in the course of its business has dealt with leading engineering consultants like Development Consultants Pvt Ltd (DCPL), Desein, Fichtner, Mecon, Tata Consulting Engineers, Engineers India Ltd, M.N. Dastur, L&T Sargent & Lundy, Udhe, Lurgi, Toyo, Genzl New Zealand, Saur International France, BCEOM France etc. The company has 3 wholly owned subsidiaries namely Rivu Infrastructure Developers Pvt. Ltd., Woodlands Instruments Pvt. Ltd., Arihant Flour Mills Pvt. Ltd. However, all these three were acquired either to buy land parcels or to get required qualification for bidding for a project. These companies do not have any financial impact on Technofab as they are largely dormant.


(Source: Company PPT)

(Source: Company PPT)


The projects taken up fall in the following broad categories: Industrial, Utility and Low Pressure Piping Systems wherein the scope of service includes the detailed engineering, procurement, fabrication, erection, testing and inspection, commissioning of the piping system along with all related civil/structural works for over-ground and underground piping supports like sleepers, pipe racks and bridges. Fuel Oil, Unloading, Storage and Handling Systems wherein the scope of service includes design, engineering, manufacturing, works-based testing, shop painting, transportation packing, works loading, on-site reception and unloading, site storage, in-plant transportation, on-site fabrication and assembly, erection, commissioning and testing. Fire Detection, Alarm and Protection Systems wherein the scope of service includes design, systems engineering, procurement, supply, erection, testing and commissioning of fire detection, alarm and protection systems. The systems encompass hydrants, automatic high and medium velocity water spray systems, gas extinguishing systems, intelligent alarm and control systems, etc. Water, Wastewater and Effluent Treatment and Recycling Systems wherein the company undertakes water and liquid waste, effluent treatment & recycling systems, sewage treatment plants to collect, treat and recycle raw water and effluent discharges. The Plants are designed, supplied, constructed, erected and commissioned on a turnkey basis, meeting applicable pollution control norms. Tankages wherein the scope of service includes design & engineering, procurement, supply, erection, testing, and commissioning of site fabricated bulk storage tanks for storing petroleum products and other liquids such as DM water, condensate water, etc. on a total turnkey basis Raw / Sea Water Intake Systems wherein Technofab takes up the plant water intake system and associated cross country pipeline from river / sea to the plant including associated pumping station, civil works, maintenance roads on a complete turnkey basis. Plant Electrification / Transmission & Distribution / Rural Electrification wherein the package involves design and detailed engineering, sizing and specifications for procurement, installation, testing, commissioning of a variety of electrical and control items like HT & LT switchgear, control panels, transformers, metering, cabling and lighting along with associated civil works. Technofab Engineering IPO During July 2010, Technofab came up with its IPO. Technofab Engineering Ltd had fixed the Issue Price at Rs. 240 per equity share i.e. the upper end of the Price Band, for its Initial Public Offer of 29.90 lakh equity shares of Rs. 10 each. The Company had fixed the Price Band at Rs. 230 to Rs. 240 per equity share. The issue was oversubscribed 12.78 times.


Shareholding Pattern Particulars (%) Dec-14 Sep-14 Jun-14 Mar-14 Dec-13 Indian Promoters 48.16 48.00 47.83 47.76 47.67 FIIs 0.14 1.24 2.27 5.29 5.29 Foreign Companies 0.00 7.03 0.00 0.00 0.00 Corporate 27.26 27.31 27.56 25.37 25.22 Public & Others 24.44 16.42 22.34 21.58 21.82 Totals 100.0 100.0 100.0 100.0 100.0

From last few quarters, the promoters have been increasing their stake gradually from 47.67% in December 2013 to 48.16% in December 2014. This shows the confidence of the promoters in its business. Gammon India and its promoters are holding about 13-14% stake in the company (clubbed under Public). Triggers Strong Order Book which is diversified across 5 segments Technofab has strong order book of Rs 1503 as on 9MFY15 with Electrical and Water segment contributing about 45% and 42% respectively to this order book. Recently in Q3FY15, Technofab has won new orders worth Rs. 54 crores for a waste water rehabilitation project in Kenya and for Rs. 208 crores for a rural electrification project in Bihar. So at the end of 9MFY15, order book position is Electrical has Rs 721 crore orders, Water has Rs 631 crore of orders, Thermal power has Rs 105 crore of orders, Oil & Gas has Rs 30 crore order and Industrial has Rs 15 crore orders. As on 9MFY15, the company has received fresh orders worth Rs 557 crore which is majorly contributed by the Electrical segment followed by Water segment catering to the domestic demand. Foreign orders account for 20% of the order book. The order book of the company is regionally well diversified. The company has been successfully operational in the overseas markets (specially the sub-Sahara African region). With the current order book of Rs 1503 crore, it is approximately 3.7x FY14 revenues which gives us revenue visibility for next 2-3 years.


Diversified across geographies Earlier when the company was started way back in 1971 by Mr. Avinash Gupta, he had a clear vision that he wanted to cater to the mechanical engineering space. The company until recently was only a BoP player. But lack of orders in the BoP space in FY11-FY14 and its capabilities in other industries, it turned itself to an EPC player. Domestically the company was able to maintain a strong foot print in the EPC space. In order to diversify its geographical presence, in 1993, the company executed its first overseas order in Kenya for executing a piping project. With the on time completion of the project with good efficiency, Technofab kept on getting good overseas projects. The next logical geographical expansion for the company would have been venturing in the Middle East. But the company did not venture there as the projects to be executed are large jobs and one requires setting up local agents, office in order to secure more businesses there. However, knowing its capabilities, the company decided not to cater to this market. It ventured into the African markets executing those businesses which have multi-lateral funding (aid provided by a group of countries or an institution representing group of countries like World Bank). During FY14 Technofab executed business secured in Ethiopia, Fiji, Ghana, Kenya, Liberia Mozambique and Tanzania. The company is looking for new businesses in the sub-Saharan Africa, Fiji and closer home in South Asia. Executing of overseas projects is beneficial for the company both in terms of higher margins and faster completion of work. Venturing into Railways Due to the slowdown in the Indian economy from past 2-3 years in terms of policy paralysis, high interest rates, high inflation, low demand and poor health of SEBs, Technofab has been facing a tough time to carry out business operations. However, having said that, due to its diversified business mix, its one time high revenue contributor (i.e. Power) is replaced by Water and Waste Water treatment segment in FY14. Also considering the slack in domestic business opportunities, its revenue from overseas has been consistently increasing. Both these strategies have augured well for the company and has helped it to remain above water and be profitable. So now, seeing the growing opportunities in the Railway segment, the company has now started to bid in Railway track electrification projects. It has now learnt the tricks of trade and is confident of bagging good orders from this sector as well in future. The table below shows the contribution of individual sectors as a percentage to total revenue

Segment FY09 FY10 FY11 FY12 FY13 FY14 9MFY15 Conventional Power 22 25 20 33 27 7 8 Nuclear Power 18 27 10 4 3 2 0 Oil & Gas 13 1 4 23 13 6 3 Water & Waste Water Treatment 35 20 12 12 40 58 38 Industrial & Infrastructure Sectors 12 19 49 27 10 3 4 Electrical Distribution and Rural Electrification 0 8 5 1 7 24 47 % revenue from overseas biz 39 10 21 34 52 55 38


Prudent and transparent Management The company has been since inception managed by Mr. Avinash Gupta (aged 74 years). He is Science Graduate and holds more than 53 years of experience in the field of Engineering & Construction business. Under his able leadership and guidance, the Company has been able to successfully come out with its IPO (in 2010) and has today become a multi-location profit generating company. The company has always been prudent in its approach in terms of bidding for projects. In spite of the turmoil experienced by the entire Construction & Engineering industry in last 2-3 years, Technofab has been able to remain profitable and continue to reward its shareholders by way of dividends (FY14 was an exception where no dividend was declared due to steep fall in profits on account of an extraordinary write-off). While the Company largely pursues funded projects mainly in the water infrastructure, non-funded projects are also pursued though with a degree of caution. In fact during FY14, the company had dropped two fairly large private overseas projects from its order book, as they did not seem to have any prospect of achieving financial closure. The company does not have any BOOT projects on its books and also follows an asset light model. Also the company is very transparent in terms of notifying the investors about receiving orders and giving quarterly information updates which summarizes the company’s current position in the market in terms of order wins, order books as well as gives a futuristic approach towards the business operations. Possible revival in power sector could benefit Technofab in getting fresh orders and improving its margin profile In the Financial Budget 2015-16, the Finance Minister has given impetus to the power sector as a whole. The Government has proposed to set up 5 new Ultra Mega Power Projects, each of 4000 MWs in the plug-and-play mode. All clearances and linkages will be in place before the project is awarded by a transparent auction system. This should unlock investments to the extent of Rs 1lakh crore. Also it has proposed electrification of the remaining 20,000 villages in the country will be done by 2020. Rs 4230 crore has been allocated to Deen Dayal Upadhyaya Gram Jyoti Yojana for boosting rural electrification in order to achieve the goals like improvement in the hours of power supply in rural areas. Further the ongoing coal auctions would also bring some movement to the power projects that are stuck currently. All these measures would boost the power sector and would help the company in getting good number of orders along with improving its margin profile.

Technofab could turn around its margins post an abnormal FY14 As a pure service EPC Company, the business opportunities are linked with investments taking place in the sectors that the company operates in. For the last 2-3 years, the investments in India have remained severely impaired and there was no fresh business opportunities in the traditional (Thermal) Power and Industrial sectors. This was compounded by a slowdown in several ongoing projects in the


power sector as the customers faced severe problems across the business spectrum - on account of raw material and environmental issues, land acquisition issues or financial closure. The last factor even made its presence felt in one of the company’s overseas assignments. Due to the slowdown in the power and industrial sector, Technofab evolved a business strategy of diversifying market opportunities by focusing on newer sectors and geographies whilst adhering to its core domain competence of undertaking EPC projects on turnkey basis. This strategy aimed at insulating the company from any downturn in the traditional power and industrial sectors and compensating the same through business in newer sectors and geographies. The benefits of this strategy became obvious in the last year, as the company’s success in securing business in the rural sectors and in newer geographies in sub Saharan Africa ensured a reasonably healthy order book throughout this period. However in part due to increase in competition and in part due the intrinsic nature of some of these newer sectors, there has concurrently been a pressure on margins. Hence whilst a dip in profits was expected, there was a mild dip in turnover along with a steep fall in profits in FY14. The revenue fell by 5% to Rs 407.2 crore while the profit nosedived by 79% to Rs 6.9 crore. This has been on account of the unexpected cessation of funding in one of the company’s overseas projects. The project was largely funded by Millennium Challenge Account (MCA) which is a bilateral US development assistance program to help support economic growth and poverty reduction in the poorest countries in the world. The project was for 6 years period and half the money was spent when the project was shutdown. This resulted in losses on account of several factors like inability to realise adequate value for the substantial inventory/Work in Progress, non-recovery of the substantial investment in Plant and Machinery and of fixed costs, along with expenses associated with closing our various subcontracts and some loss on account of exchange rate variation associated with unadjusted advances. As a direct consequence, instead of a modest increase in turnover and slight fall in profit, the company had a slight fall in turnover and a steep fall in profit. The company had to write off Rs 40-50 crore due to this loss in FY14 and it further expects Rs 15-16 crore of write off in FY15 (partly written off in 9MFY15) to record the full effect of the loss. Post FY15, profitability would start to improve going forward. Financials Q3FY15 and 9MFY15 Review During Q3FY15, the company recorded a turnover of Rs 113.7 crore, an increase of 37% YoY. Due to the significant reduction in other expenses as a percentage of sales (8.7% from 20.8% in Q3FY14), the operating profit rose by 81% YoY to Rs 9.6 crore. Finance cost rose by 52% to Rs 5 crore as against Rs 3.3 crore in Q3FY14. This however did not affect the PAT which came in at Rs 2.1 crore as against Rs 0.6 crore in Q3FY14. For 9MFY15, the company recorded a growth of 23% YoY to Rs 295.7 crore contributed majorly by Electrical (47% of revenue) and Water (38% of revenue) segments. Overseas business contributed 38% to the total revenue and came in at Rs 112.2 crore. The operating profit stood at Rs 22.2 crore, an increase of 30% YoY. The operating profit margin has come in at 7.5% as against


7.1% in 9MFY14. However, due to lower other income (reduced by 85%) and higher finance charges (rose by 25%), the reported PAT for 9MFY15 came in at Rs 4.7 crore as against Rs 5.3 crore in 9MFY14. By 9MFY15, the company received fresh orders worth Rs 557 crore contributed by Electrical sector, Water sector and Power sector. At the end of 9MFY15, the order book stood at Rs 1503 crore with Electrical having Rs 721 crore of order book, Water segment having Rs 631 crore of order book, Thermal power having Rs 105 crore order book, Oil & Gas having Rs 30 crore order and Industrial having Rs 15 crore of order book. During Q3FY15, the management informed that the work on the Liberian project is not yet resumed due to Ebola epidemic. But now the situation has considerably improved and that business can see some traction from April 2015. There continues to be pressure on outstandings as retentions increase on ongoing projects and old outstandings are not getting cleared due to last stages of several domestic projects being stuck. According to the management, there is still no visible improvement in the business environment but hopefully the success of the ongoing coal block auction (retention money can come back, once the blocks are allocated and pending orders get completed) and recent budget announcements with respect to boosting of infrastructure sector can benefit the company. FY15/FY16/FY17 According to the management, it may end FY15 with revenue of Rs 440-450 crore (in 9MFY15 it has already recorded Rs 295.7 crore) with an EBITDA margin of 6.5-7%. For the financial year 2016, we have assumed that the company would record revenue growth of 13% YoY to Rs 497.2 crore. Operating profit is expected to grow by 21% to Rs 37.3 crore, thus yielding an OPM of 7.5%. We expect a minor decline in the interest cost as the interest rates would go down across the industry. The company would record PAT of about Rs 11.3 crore. For FY17, we have assumed that the company would record revenue growth of 18% YoY to Rs 586.7 crore. Operating profit is expected to grow by 31% to Rs 48.7 crore, thus yielding an OPM of 8.3%. Increase in OPM is due to a better revenue growth and business operations expected by the company. The company is expected to record PAT of about Rs 18.4 crore with PAT margin of 3.1%. Though the company aims at returning to ~6% profit after tax margin by FY17, our estimates are on a conservative side. Risks/Concerns High Interest costs As on H1FY15, the company had short term borrowing of about Rs 100 crore. Its long term borrowing is negligible. The company has been facing high finance charges due to the stressed cash flow. Due to the macro economic situation, the company’s cash flow has been affected as it is not able to receive the retention money in time from some of its customers like Lanco, Reliance, Indiabulls, Hindalco, etc due to project specific delays faced by the customers. As on date, the total retention money (from all


customers including the above) accounts to ~Rs 140 crore out of receivables of Rs.292 cr. Once this money is received by the company, its borrowings would reduce which in turn will reduce its finance cost.

Economic slowdown As mentioned earlier, the business operations of Technofab is dependent on the construction and engineering industry as a whole. Earlier, the performance was mainly dependent on the power sector, which the company has reduced its exposure to citing negative sentiments in that sector. Any further slowdown in the industrial activity will affect the performance of the company. Setback in a project can affect the company’s revenue and profitability During FY14, the company faced a tough situation not only in the domestic market, but also in the overseas space where one of its projects faced funding issues (as explained in detail above). If in future the company faces such a situation again, it would hit the profitability. Foreign exchange fluctuation The company is subject to forex risks as it has an overseas presence in the African and South Asian region. Also its exposure in executing overseas projects is also rising giving the higher contribution from it to the overall revenue. Low-Mid margins business contributing majorly to revenue, currently As mentioned earlier, Electrical and Water segments contribute the most to Technofab’s revenue. However, domestic water and rural electrification businesses contribute to low-mid margins. Hence, overall the margins of the company tend to be on a lower side. Overseas projects give the best margins followed by Power & Oil & Gas segment. Thus the management has to get more number of orders in these segments in order to boost the overall margins. Low volume of shares on the exchange At present, Technofab stock does not trade in much higher volumes. Hence the impact cost on entry/exit could be higher. Conclusion and Recommendation The problems besetting virtually all the sectors where Technofab operates; in particular the thermal and nuclear power sectors and the industrial sector are well known and don’t need repetition here. The company‘s order book is healthy, thanks to the healthy order book position by 9MFY15 which amounts to almost four times trailing revenue. This gives visibility of steady increase in turnover, whilst preparing to take advantage of the expected upturn which may occur in FY16. FY17 would be a much better year for Technofab in terms of higher revenue and profitability than FY16. The company continues to see the Water Sector as a major contributor to its business, both domestically and overseas. Technofab will also maintain its focus on enhancing qualifications in the railway segment so as to increase the addressable


market. Internationally it remains focused on Sub Saharan Africa and South Asia, and while the company gives highest importance to projects funded by multilateral funding agencies, they could also pursue privately funded projects, albeit in a cautious manner. Despite the turmoil Technofab has faced in past few years in terms of business operations, it has kept intact its balance sheet strength. The debt/equity ratio is the lowest amongst its competitors like Sunil Hitech Engineering, Shriram EPC and Hindustan Dorr-Oliver. Also its FY14 book value is at Rs 199.7 giving P/BV at 0.9x, below 1x. As per FY14 balance sheet, cash on books is Rs 46.4 crore thus yielding cash per share at Rs 44.2. All these factors result in an attractive valuation for Technofab. At the current market price of Rs 170, Technofab is trading at 15.8x FY16E EPS of Rs 10.8 and at 9.7x FY17E EPS of Rs 17.5. A turnaround is expected in FY17 by the company and we believe there is a significant head room for re-rating taking FY17 projections into consideration. We feel investors can buy the stock at CMP (Rs 170) and add on dips in the range of Rs 150-158 (~8.5-9x FY17E EPS) for sequential targets of Rs 210-236 (12-13.5x FY17E EPS) in next 3-4 quarters.

Particulars (Rs in Cr) FY11 FY12 FY13 FY14 FY15E FY16E FY17E Total Operating Income 290.1 377.3 426.8 407.2 440.0 497.2 586.7 Operating Profit 41.7 50.9 56.1 25.0 30.8 37.3 48.7 OPM (%) 14.4 13.5 13.1 6.1 7.0 7.5 8.3 Other Income 1.3 4.3 1.9 4.1 0.5 0.0 0.0 Reported Profit After Tax 26.0 34.2 32.5 6.9 7.3 11.3 18.4 PATM (%) 9.0 9.1 7.6 1.7 1.7 2.3 3.1 Reported EPS (Rs.) 24.8 32.6 31.0 6.6 6.9 10.8 17.5

(Source: Company, HDFCSec, E: Estimates) Financials

Quarterly (Standalone)

Particulars (Rs cr) Q3FY15 Q3FY14 % chg Q2FY15 % chg 9MFY15 9MFY14 % chg Net Sales 113.59 82.81 37.2% 90.87 25.0% 295.22 239.33 23.4% Other Operating Income 0.1 0.0 0.3 0.5 0.6 Total Income 113.7 82.8 37.3% 91.2 24.7% 295.7 239.9 23.3% Raw Material Cost 86.2 54.0 59.5% 62.9 37.1% 209.8 154.2 36.1% Employee Expenses 8.1 6.3 29.3% 8.2 -0.7% 24.1 20.3 18.9% Other Expenses 9.9 17.2 -42.8% 13.4 -26.5% 39.6 48.4 -18.3% Total Expenditure 104.2 77.5 34.3% 84.4 23.4% 273.5 222.9 22.7% Operating Profit 9.6 5.3 80.7% 6.8 41.2% 22.2 17.0 30.1% Other Income 0.0 0.4 -93.2% 0.4 0.5 3.4 PBIDT 9.6 5.7 67.4% 7.2 33.9% 22.7 20.5 10.8%


Interest 5.0 3.3 3.3 11.7 9.4 PBDT 4.6 2.4 88.1% 3.9 18.4% 10.9 11.0 -1.1% Depreciation 1.4 1.4 4.4% 1.9 -23.9% 4.1 5.0 -18.5% PBT 3.1 1.1 2.0 6.8 6.0 Tax (including DT & FBT) 1.1 0.5 0.5 2.1 0.7 Reported PAT 2.1 0.6 248.3% 1.5 44.1% 4.7 5.3 -11.3% Reported EPS (Rs.) 2.0 0.6 1.4 4.5 5.1 Equity 10.5 10.5 10.5 10.5 10.5 bps bps bps OPM (%) 8.42 6.39 202.81 7.45 96.60 7.51 7.11 39.18 PATM (%) 1.84 0.72 111.54 1.60 24.43 1.60 2.22 -62.45

(Source: Company, HDFCSec)

Profit & Loss (Standalone) Particulars (Rs in Cr) FY12 FY13 FY14 FY15E FY16E FY17E Income from Operations 376.3 425.7 406.3 440.0 497.2 586.7 Other Operating Income 1.1 1.1 0.9 0.0 0.0 0.0 Total Operating Income 377.3 426.8 407.2 440.0 497.2 586.7 Raw material consumed 272.1 283.8 284.4 310.2 347.5 408.3 Employee expense 23.7 31.2 28.9 37.4 40.8 45.8 Other Expenses 30.7 55.8 69.0 61.6 71.6 83.9 Total Operating Expenses 326.5 370.7 382.2 409.2 459.9 538.0 Operating Profit 50.9 56.1 25.0 30.8 37.3 48.7 Other Income 4.3 1.9 4.1 0.5 0.0 0.0 EBITDA 55.2 58.0 29.1 31.3 37.3 48.7 Interest 3.7 7.3 12.0 15.5 14.9 16.3 Depreciation 2.1 3.6 6.3 5.4 5.8 6.1 PBT 49.4 47.1 10.8 10.4 16.6 26.3 Tax (including FBT & DT) 15.2 14.7 3.9 3.1 5.3 7.9 Reported PAT 34.2 32.5 6.9 7.3 11.3 18.4

(Source: Company, HDFCSec, E: Estimates)

Balance Sheet (Standalone)

Particulars (Rs in Cr) FY12 FY13 FY14 FY15E FY16E FY17E Equity & Liabilities Shareholder’s Funds 173.1 202.6 209.5 215.5 225.0 240.3 Share Capital 10.5 10.5 10.5 10.5 10.5 10.5 Reserves & Surplus 162.6 192.1 199.0 205.0 214.5 229.8


Non-Current Liabilities 2.5 5.1 24.6 44.3 49.7 57.3 Long Term borrowings 0.4 0.0 0.5 0.7 0.8 1.0 Deferred Tax Liabilities (Net) 0.7 1.4 1.4 2.1 2.5 3.0 Other Long Term Liabilities 0.2 2.1 21.2 40.2 45.0 51.8 Long Term Provisions 1.3 1.5 1.5 1.3 1.4 1.6 Current Liabilities 185.2 256.0 261.0 321.5 331.2 346.0 Short Term Borrowings 43.9 70.0 80.0 100.0 98.0 90.2 Trade Payables 96.1 152.4 143.7 130.5 133.1 143.8 Other Current Liabilities 27.7 16.5 33.6 89.5 98.4 110.2 Short Term Provisions 17.5 17.1 3.7 1.5 1.7 1.8 Total Equity & Liabilities 360.8 463.7 495.0 581.3 605.9 643.6 Assets Non-Current Assets 35.7 49.6 55.9 58.6 62.4 67.2 Fixed Assets 17.3 26.9 35.2 37.1 39.8 43.5 Gross Block 20.5 33.1 40.3 48.0 57.0 67.3 Depreciation 3.5 6.2 11.1 16.5 22.3 28.4 Net Block (Tangible Assets) 17.0 26.9 29.2 31.5 34.7 38.9 Intangible Assets 20.7 32.7 34.8 41.8 49.2 56.6 Capital Work-in-Progress 0.4 0.0 5.9 5.4 5.0 4.5 Non-Current Investments 10.1 9.1 9.0 9.0 9.0 9.0 Long -term Loans and Advances 3.7 5.2 6.0 9.2 9.9 10.7 Other Non-Current Assets 4.5 8.3 5.7 3.4 3.7 4.1 Current Assets 325.1 414.1 439.1 522.7 543.5 576.5 Current Investments 37.7 49.5 12.0 10.0 10.0 11.2 Inventories 11.5 45.4 51.1 81.2 89.3 96.4 Trade Receivables 166.8 212.0 272.5 302.0 326.2 358.8 Cash & Cash Equivalents 63.4 46.6 46.4 66.3 56.1 51.2 Short Term Loans & Advances 45.6 60.6 57.1 63.2 61.9 58.8 Total Assets 360.8 463.7 495.0 581.3 605.9 643.6

(Source: Company, HDFCSec, E: Estimates) Key Ratios (Standalone)

Particulars FY12 FY13 FY14 FY15E FY16E FY17E No of Equity Shares 1.0 1.0 1.0 1.0 1.0 1.0 Current Market Price 170.0 170.0 170.0 170.0 170.0 170.0 Market Capitalization 178.3 178.3 178.3 178.3 178.3 178.3


Enterprise Value 121.5 152.2 200.4 202.7 211.0 207.1 FD EPS 32.6 31.0 6.6 6.9 10.8 17.5 Cash EPS (PAT + Depreciation) 34.6 34.4 12.6 12.1 16.3 23.4 PE(x) 5.2 5.5 25.7 24.5 15.8 9.7 Book Value (Rs.) 165.0 193.1 199.7 205.4 214.4 229.1 P/BV (x) 1.0 0.9 0.9 0.8 0.8 0.7 OPM (%) 13.5 13.1 6.1 7.0 7.5 8.3 PBT (%) 13.1 11.0 2.7 2.4 3.3 4.5 NPM (%) 9.1 7.6 1.7 1.7 2.3 3.1 ROCE (%) 24.4 20.0 7.9 8.2 9.7 12.9 RONW (%) 19.7 16.0 3.3 3.4 5.0 7.7 Debt-Equity 0.3 0.3 0.4 0.5 0.4 0.4 Current Ratio 1.8 1.6 1.7 1.6 1.6 1.7 Mcap/Sales(x) 0.5 0.4 0.4 0.4 0.4 0.3 EV/EBITDA 2.2 2.6 6.9 6.5 5.7 4.3

(Source: Company, HDFCSec, E: Estimates)

One Year Price Chart


Fundamental Research Analyst: Zececa Mehta

RETAIL RESEARCH Tel: (022) 3075 3400 Fax: (022) 2496 5066 Corporate Office

HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email: [email protected]

Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation. This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such. We may have from time to time positions or options on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform investment banking, or other services for, any company mentioned in this document. This report is intended for non-Institutional Clients

This report has been prepared by the Retail Research team of HDFC Securities Ltd. The views, opinions, estimates, ratings, target price, entry prices and/or other parameters mentioned in this document may or may not match or may be contrary with those of the other Research teams (Institutional, PCG) of HDFC Securities Ltd.

Disclosure by Research Analyst: Research Analyst or his relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate does not have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock - No

Disclosure by Research Entity: HDFC Securities Ltd. may have received any compensation/benefits from the subject company, may have managed public offering of securities for the subject company in the past 12 months. Further, Associates of the Company may have financial interest from the subject company in the normal course of Business. The subject company may have been our client during twelve months preceding the date of distribution of the Research report. Research analyst has not served as an officer, director or employee of the subject company. Research entity has not been engaged in market making activity for the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report.

Technofab Engineering Ltd (Technofab)

Documents

Transcript of Technofab Engineering Ltd (Technofab)