SKIPPER LTD Result Update (PARENT BASIS): Q2 FY16 CMP 209.90 Target Price 241.00 JANUARY 6th 2016 ISIN: INE439E01022 BUY 12th h, 2013

Index Details Stock Data SYNOPSIS Sector Construction & Engineering BSE Code 538562 Face Value 1.00 Skipper Ltd manufactures transmission towers, 52wk. High / Low (Rs.) 218.30/105.20 telecom towers, PVC, GI, and SWR pipes and fittings, Volume (2wk. Avg.) 204000 tubular poles, and scaffolding systems primarily in Market Cap (Rs. in mn.) 21476.13 . Annual Estimated Results (A*: Actual / E*: Estimated) Revenue for the quarter rose by 19.93% to Rs. YEARS FY15A FY16E FY17E 3680.45 mn from Rs. 3068.93 mn, when compared Net Sales 13127.96 14440.76 15884.83 with the prior year period. EBITDA 2168.17 2298.82 2494.51 Net Profit 891.70 972.10 1070.54 During Q2 FY16, net profit stood at Rs. 302.93 mn EPS 8.71 9.50 10.46 against Rs. 352.94 mn in Q2 FY15. P/E 24.09 22.09 20.06 EPS of the company stood at Rs. 2.96 a share during Shareholding Pattern (%) the quarter, as against Rs. 3.45 over previous year As on Sep-15 As on Jun-15 period. PROMOTER 72.38 72.38 During Q2 FY16, EBIDTA is Rs. 635.97 mn as against FIIs 0.00 0.00 Rs. 717.55 mn in Q2 FY15. DIIs 0.02 0.00 The company has commenced production of PVC OTHERS 27.60 27.62 products at its new unit in Assam. 1 Year Comparative Graph The company’s external credit rating has been upgraded two notches by CARE from A- to A+ on account of improved operational & financial performance. For the H1 FY16, the company reported revenue of Rs. 6047.04 mn as compared to Rs. 4901.17 mn in H1 FY15, an increase of 23.38%. Net Sales and PAT of the company are expected to SKIPPER LTD S&P BSE SENSEX grow at a CAGR of 15% and 58% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Skipper Ltd 209.90 21476.13 8.71 24.09 6.71 130.00 Welspun Corp Limited 111.10 29238.90 2.24 49.60 1.56 10.00 Maharashtra Seamless Ltd 173.00 11590.90 9.12 18.97 0.51 100.00 Man Industries (India) Ltd 94.50 5396.20 14.83 6.37 0.75 20.00 QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q2 FY16,

Months (Rs. in Mn) Sep-15 Sep-14 % Change

Revenue 3680.45 3068.93 19.93

PAT 302.93 352.94 (14.17)

EPS 2.96 3.45 (14.17)

PBIDT 635.97 717.55 (11.37)

Revenue for the quarter rose by 19.93% to Rs. 3680.45 million from Rs. 3068.93 million, when compared with the prior year period. The net profit stood at Rs. 302.93 million against Rs. 352.94 million in the corresponding quarter ending of previous year. Reported earnings per share of the company stood at Rs. 2.96 a share during the quarter as against Rs. 3.45 over previous year period. Profit before interest, depreciation and tax is Rs. 635.97 million as against Rs. 717.55 million in the corresponding period of the previous year. Break up of Expenditure

Value in Rs. Million Break up of Expenditure % Q2 FY16 Q2 FY15 Change

Consumption of Raw 2486.44 1853.13 34% Material

Employee cost 123.60 89.35 38%

Depreciation 57.79 50.52 14%

Other Expenditure 657.19 481.10 37% Segment revenue

Latest updates

The company has commenced production of PVC products at its new unit situated at Village - Kahikuchi Gaon, Mouza - Dakhin Rani, Azara Revenue Circle, Dist - Kamrup (Metro), Assam. This is the Company's third manufacturing unit for PVC products after Kolkata and Ahmadabad, taking the Company's combined installed capacity for PVC products to 29000 MT. New PVC products manufacturing plants by Q3 FY16

As a top three PVC pipe manufacturing companies in Eastern India and one of the fastest growing across India, The upcoming PVC pipe manufacturing facilities of Skipper Limited at Sikandrabad near NCR, and Guwahati in North East are to enhance the capacity in the PVC products segment to 40,000 tonnes. The company has plans to take the total capacity to 100,000 TPA by FY 2018, addressing the need of the Country for superior quality of PVC pipes and products. Order Book

The company’s current Engineering products order book position stands at approx. INR 2,400 Crores (March 2015). International orders make up about 45% out of this and the rest are domestic. The company’s rightful prerogative of strengthening its business presence in overseas markets, namely in , , North America and Lat-Am region, resulting in healthy growth in both top line and bottom line. For 2015-16, the Company has over INR 1,150 crores worth of export orders and is targeting to enter newer geographies. Credit Rating Upgrade

The company’s external credit rating has been upgraded two notches by CARE from A- to A+ on account of improved operational & financial performance in conjunction with better growth prospects. COMPANY PROFILE

Skipper Limited was established in 1981 and is based in Kolkata, India. The Company is one of the leading manufacturers and suppliers of towers and monopoles for Power transmission and telecom, High Mast Poles and Swaged Poles for power distribution, PVC, GI and SWR Pipes & Fittings in India. Skipper differentiates its offerings with high quality but cost effective solution for infrastructure providers and telecom operators who are looking to roll out smart economical networks in the shortest possible time. On the business front, from being a National player, Skipper has been continuously expanding to reach out to more international markets. The Company’s global presence spans across , Europe, Africa, Middle East, south and south East Asia and . In the PVC pipe vertical with consistent expansion, Skipper is moving on to become a national entity from being one of the leaders in PVC pipe business in Eastern India. The performance and sustained growth of Skipper Limited over the last few years is a testimony of the strong foundation that the company has been built upon. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March 31, 2014 -2017E FY14A FY15A FY16E FY17E SOURCES OF FUNDS Shareholder's Funds Share Capital 102.32 102.32 102.32 102.32 Reserves and Surplus 2209.44 2936.34 4068.53 5139.07 1. Sub Total - Net worth 2311.76 3038.66 4170.85 5241.39 Non Current Liabilities Long term Liabilities 2306.80 1706.93 1433.82 1276.10 Deferred Tax Liabilities 217.75 264.66 299.07 328.97 Other Long term Liabilities 9.69 0.00 0.00 0.00 2. Sub Total - Non Current Liabilities 2534.24 1971.59 1732.89 1605.07 Current Liabilities Short term borrowings 1755.49 1724.08 2982.66 3400.23 Trade Payables 1562.62 2415.03 2849.74 3248.70 Other Current Liabilities 625.72 1277.33 1520.02 1717.63 Short Term Provisions 25.37 210.21 185.50 211.47 3. Sub Total - Current Liabilities 3969.20 5626.65 7537.92 8578.02 Total Liabilities (1+2+3) 8815.20 10636.90 13441.66 15424.49 APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets 3373.51 3500.77 3850.85 4197.42 Intangible assets 11.64 11.90 12.85 13.62 Capital Work in Progress 82.94 34.68 38.84 42.34 a) Sub Total - Fixed Assets 3468.09 3547.35 3902.54 4253.38 b) Other non-current assets 21.11 30.60 135.50 159.89 1. Sub Total - Non Current Assets 3489.20 3577.95 4038.04 4413.27 Current Assets Inventories 2290.11 2282.40 3537.72 4245.26 Trade receivables 2318.19 3757.81 4480.79 5103.07 Cash and Bank Balances 263.07 560.94 611.42 672.57 Short-terms loans & advances 454.63 457.80 773.68 990.31 2. Sub Total - Current Assets 5326.00 7058.95 9403.62 11011.21 Total Assets (1+2) 8815.20 10636.90 13441.66 15424.49 Annual Profit & Loss Statement for the period of 2014 to 2017E

Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 10415.05 13127.96 14440.76 15884.83 Other Income 21.25 16.55 60.50 64.13 Total Income 10436.30 13144.51 14501.26 15948.96 Expenditure -9312.95 -10976.34 -12202.44 -13454.45 Operating Profit 1123.35 2168.17 2298.82 2494.51 Interest -605.42 -582.57 -559.27 -581.64 Gross profit 517.93 1585.60 1739.55 1912.87 Depreciation -150.78 -219.92 -246.31 -270.94 Profit Before Tax 367.15 1365.68 1493.24 1641.93 Tax -98.05 -473.98 -521.14 -571.39 Net Profit 269.10 891.70 972.10 1070.54 Equity capital 102.32 102.32 102.32 102.32 Reserves 2170.84 3096.43 4068.53 5139.07 Face value 1.00 1.00 1.00 1.00 EPS 2.63 8.71 9.50 10.46

Quarterly Profit & Loss Statement for the period of 31st Mar, 2015 to 31st Dec, 2015E

Value(Rs.in.mn) 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15E Description 3m 3m 3m 3m Net sales 4999.37 2366.59 3680.45 3864.47 Other income 0.81 6.13 25.98 16.89 Total Income 5000.18 2372.71 3706.43 3881.36 Expenditure -4312.48 -2013.15 -3070.46 -3284.80 Operating profit 687.70 359.57 635.97 596.56 Interest -153.55 -147.27 -114.26 -132.54 Gross profit 534.15 212.30 521.71 464.02 Depreciation -63.40 -58.80 -57.79 -60.10 Profit Before Tax 470.75 153.50 463.92 403.91 Tax -168.19 -53.28 -160.99 -139.75 Net Profit 302.56 100.22 302.93 264.16 Equity capital 102.32 102.32 102.32 102.32 Face value 1.00 1.00 1.00 1.00 EPS 2.96 0.98 2.96 2.58 Ratio Analysis

Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 2.63 8.71 9.50 10.46 EBITDA Margin (%) 10.79 16.52 15.92 15.70 PBT Margin (%) 3.53 10.40 10.34 10.34 PAT Margin (%) 2.58 6.79 6.73 6.74 P/E Ratio (x) 79.81 24.09 22.09 20.06 ROE (%) 11.84 27.88 23.31 20.42 ROCE (%) 20.11 36.02 29.64 27.88 Debt Equity Ratio 1.79 1.07 1.06 0.89 EV/EBITDA (x) 22.50 11.23 11.00 10.21 Book Value (Rs.) 22.22 31.26 40.76 51.23 P/BV 9.45 6.71 5.15 4.10

Charts OUTLOOK AND CONCLUSION

. Rs.209.90

At the current market price of , the stock P/E ratio is at 22.09 x FY16E and 20.06 x FY17E respectively. .

Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs. 9.50 and Rs. 10.46 respectively. .

Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 58% over 2014 to 2017E respectively. .

On the basis of EV/EBITDA, the stock trades at 11.00 x for FY16E and 10.21 x for FY17E. .

Price to Book Value of the stock is expected to be at 5.15 x and 4.10 x for FY16E and FY17E respectively. . BUY Rs.241.00

We recommend ‘ ’ in this particular scrip with a target price of for Medium to Long term investment. INDUSTRY OVERVIEW

The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to India’s economy.

India on its quest to become a global superpower has made significant strides towards the development of its engineering sector. The Government of India has appointed the Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products and services from India. India exports transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners to various countries of the world.

India became a permanent member of the Washington Accord (WA) in June 2014. The country is now a part of an exclusive group of 17 countries who are permanent signatories of the WA, an elite international agreement on engineering studies and mobility of engineers.

The capital goods & engineering turnover in India is expected to reach US$ 125.4 billion by FY17. Engineering exports from India are expected to cross US$ 70 billion in FY 15 registering a growth of 15 per cent over the previous fiscal, as demand in key markets such as the US and the UAE is on the rise. Apart from these traditional markets, markets in Eastern and Central European countries such as Poland also hold huge promise.

India exports its engineering goods mostly to the US and Europe, which accounts for over 60 per cent of the total exports. Recently, India's engineering exports to Japan and South Korea have also increased with shipments to these two countries rising by 16 and 60 per cent respectively. Outlook

The engineering sector is a growing market. Spending on engineering services is projected to increase to US$ 1.1 trillion by 2020. With development in associated sectors such as automotive, industrial goods and infrastructure, coupled with a well-developed technical human resources pool, engineering exports are expected to touch US$ 120 billion by 2015.

Also, the Union Budget 2014-15 has allocated funds for several infrastructure projects which are further expected to provide a boost to the engineering sector. The industry can also look forward to deriving revenues from newer services and from newer geographies with Big Data, Cloud, M2M and Internet of Things becoming a reality.

Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document. Firstcall India Equity Research: Email – [email protected] C.V.S.L.Kameswari Pharma & Diversified U. Janaki Rao Capital Goods B. Anil Kumar Auto, IT & FMCG M. Vinayak Rao Diversified G. Amarender Diversified

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