Thermax
SELL
Banking on strategic transition towards clean energy CMP Rs 1,422 Thermax (TMX) FY21 AR emphasizes on company’s strategic plans to shift Target / Downside Rs 1,205 / 15% its dependence from Sunset to Sunrise industries (Clean Energy/ Water) BSE Sensex 52,861 with ESG as a center stage. Notably, the change in leadership has instilled a new belief as company is looking to play a decisive role in bridging the NSE Nifty 15,854 gap between energy availability and sustainability. TMX is aligning its Scrip Details product offerings to green energy needs (Mobility applications, Solar film, Equity / FV Rs 225mn / Rs 2 Fuel cells, Waste to Energy), though questions on initial capital requirement, technology risk, potential scalable opportunities & execution Market Cap Rs 169bn timeline remain unanswered. Though TMX witnessed demand green US$ 2bn shoots from Metal & Cement sectors in H2FY21, energy segment outlook 52-week High/Low Rs 1,578/Rs 704 for FY22 remains challenging as demand continues to be uncertain in the backdrop of the second wave of Covid. Environment segment expected to Avg. Volume (no) 73,295 benefit from increased enforcement of emission norms and regulatory NSE Symbol THERMAX discharge norms. Chemical Segment outlook remains positive & TMX is Bloomberg Code TMX IN scouting for acquisition opportunities which will help in enhancing its Shareholding Pattern Mar'21(%) geographical presence. We retain ‘SELL’ rating with a TP of Rs1,205 given the hyper-rich valuations (56x/ 41x at FY22E/ FY23E EPS vs. LT avg. P/E of Promoters 62.0 28x) & unfavorable risk-reward ratio. MF/Banks/FIs 14.6 FIIs 12.5 Incubating new technologies in the evolving sphere of energy shift Public / Others 10.9 The increasing demand for energy efficiency and reducing carbon footprints has placed TMX in a sweet spot. The company’s solutions in Thermax Relative to Sensex waste to energy, waste heat recovery, and renewables for domestic and international players, have positioned it ideally to harness the opportunities in these areas. To remain ahead of the curve, management 170 has undertaken serval strategic initiative which are still in nascent stage, i) Fuel Cells for Indian Navy – the company has supplied fuel cell stacks for 150 India’s home-grown Air Independent Propulsion (AIP) system to be used in submarines, ii) T-HVAC (Mobility application) – utilizes exhaust gas from 130 heavy vehicles, to cool their cabins in summer and heat them in winter, iii) atoM - Water and Waste Solutions (WWS) to treat sewage water efficiently 110 in confined spaces, iv) Increasing Biofuel’s share in India Energy Mix by utilizing carbon-neutral technology, and v) Partnered with Power Roll to 90 develop the Solar film market in India.
Annual Report Analysis FY21 70
Bright prospects for Chemical business
Jul-21 Jul-20
Oct-20 Apr-21
Jan-21 Jun-21
Feb-21 Mar-21
Aug-20 Sep-20 Nov-20 Dec-20
Chemicals business had remained resilient amid challenging environment May-21 given the better product mix (specialty resins), cost controls & low price of TMX SENSEX styrene. Notably, the manufacturing capacity has been ramped up to 20000 m3 per year (from 10,000 m3 in FY20) with commissioning of Phase II of resin production at Dahej plant. TMX is focusing on to, i) Expand market presence and broaden the portfolio of specialty resins, ii) Widen the market reach of water treatment chemicals, by focusing on VP - Research: Umesh Raut digitalization and remote monitoring of water treatment systems, iii) Tel: +91 22 40969753 Explore partnerships for scaling waterproofing and flooring segment. E-mail: [email protected] Management believes near term margins will be subdued due to ramp up of standard resins, but over longer term share of specialty chemicals should improve margins profile. Associate: Tanay Rasal Tel: +91 22 40969700 Healthy OCF in FY21 E-mail: [email protected] TMX’s operating cash flow improved to Rs7.7bn in FY21 (vs Rs3.3bn in FY20) mainly due to negative working capital on the back of better collections & increase in creditor’s days from 61 in FY20 to 87 in FY21. Contingent liabilities as % of net worth jumped from 8% in FY20 to 14% in FY21, mainly due to sharp jump in legal dispute claims while provision also increased by 26% YoY mainly due to higher warranties.
July 14, 2021
Annual Report Macro View
Ashish Bhandari was appointed as the Joint Managing Director effective April 7, Change in Management 2020, and later as the Managing Director and Chief Executive Officer effective September 1, 2020. The Board of the company comprises nine directors - one non-executive and non- Independent Director independent chairperson, one non-executive director, one executive director and six independent directors (out of whom one is a woman independent director).
No changes. Auditors SRBC & Co. LLP continue to be the auditors of the company
Pledged Shares No pledged shares during the year Rating Agency Type of instrument Rating Credit Ratings CRISIL Ltd Long-term Rating CRISIL AA+/Stable Short-term Rating CRISIL A1+
Covid-19 dominated the major part of 2020, resulting in periodic lockdowns, limited travel, and curtailed economic activities, leading to 7.3% drop in Indian GDP for the fiscal year 2020-21. For TMX, the year's business environment was also harmed by commodity price increases, logistical challenges (container unavailability and increased freight costs), and supply issues from China. Following the initial wave of Macroeconomic factor Covid, the company's diverse and broad customer base aided in capitalizing on the momentum in the food, pharma, and chemicals sectors. Following the recovery, green shoots appeared in other sectors such as cement, steel, sponge iron, and refinery and petrochemical. Going forward, TMX is aligning its long-term goal with the needs of a cleaner, greener, and healthier world with more impetus on clean energy, clean water, and clean air company. Category of Shareholder (%) FY21 Promoter Holding 62.0 DII 14.6 Key Holders FII/FPI 12.5 Public 5.5 Others 5.4 Total 100 Source: Company, DART
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Key takeaways from MD&A Reducing Carbon footprints - The company plans to increase scale of company’s green offering and reduce 25% of carbon footprint by 2025. The orders received by TBWES during second half of FY21 were all ‘green’. There has been visible shift from Capex to Opex model with TOESL playing a key role to decarbonize and reduce water footprint.
During the year, the share of green offering was 68% of the total orders booked. This was mainly on account of several non-fossil orders bagged by TBWES, a major bio refinery order for Power EPC, besides orders for biomass based boilers, and ‘green’ outsourced utilities.
Sizeable order booking from green offerings 100 90 29 30 32 80 38 70 60 50 40 71 70 68 30 62 20 10 0 FY18 FY19 FY20 FY21
Green Others Source: DART, Company
Digital Initiatives - Investments in digitalization has helped Thermax improve its internal process efficiencies and customer experience. Investments in ThermaxNXT, its transformation project, the company is aiming to reach 100% of the installed base with technology enabled services. The project is focused on building an organization that drives excellence, inclusivity and innovation. Notably, Digitalization initiatives helped in remote operation to ensure seamless execution of commissioning. Besides, the company is looking at offering IoT services, leasing, technology collaborations and R&D to drive sustainable solutions in new energy areas, such as fuel cells and Thermal-HVAC.
Restructuring - To consolidate its global operations, the company undertook restructuring exercise which included – i) Closing down China Subsidiary – TZL, ii) has proposed liquidation of Thermax Senegal S.A.R.L, post winding up of operations, iii) sold a non-profitable service business segment of Boilerworks A/S, iv) Impairment of assets worth Rs747mn and Rs225mn in Thermax Netherlands B. V. and Thermax Engineering Singapore Pte Ltd respectively, and iv) established entities in Thailand and Nigeria to steer the expansion of the project business overseas.
Product and Services portfolio - The company’s order booking from products and services for FY21 stood at Rs25.5bn, as against Rs. 27.5bn in FY20. Though the order book has declined in FY21, the proportionate reduction in order book from products and services is less in comparison to the project business.
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Growing products and services portfolio 75 68.4 70 65 60 52.0 55 50.0 50 45 39.0 40 35 30 FY18 FY19 FY20 FY21
Order booking from Product & Services (%) Source: DART, Company
Order inflows - TMX’s order booking in FY21 stood at Rs13.6bn, as against Rs14.7bn in FY20. Currently, the international segment contributes 28.5% to the total booking. Thermax won its first export order for the Flue Gas Desulphurization unit during the year, from a customer in Saudi Arabia. This first-of-its-kind order to supply air pollution equipment for lignin fired boilers and alumina calcination added a new layer to the company’s strength in this niche domain. The Steam Engineering division secured orders from a Malaysia-based rubber glove manufacturer for steam accessories and services. Power O&M continued to expand its reach, with its first ever order from Tanzania. On the renewable energy front, Thermax executed a 1 MW solar rooftop project for an African company, optimally combining energy from solar, steam turbine, DG and grid.
Order inflows composition FY20 Order inflows composition FY21 Power Refinery and 19% Petrochem Others 16% Others F/B & 42% 43% Packaging Cement 11% 14%
Chemical Chemical Metal and 9% F/B & Metal & 10% Steel Cement Packaging Steel 7% 11% 8% 10% Source: DART, Company Source: DART, Company
VRS scheme - The group, as on October 05, 2020, announced a Voluntary Retirement Scheme (VRS) for its eligible employees. The present value of the amount payable to employees who opted for it is Rs91.5mn (gross value Rs. 109.6 mn)
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Segment Analysis Energy Impacted due to weak execution - The Energy segment contributed 74.8% of the group’s gross operating revenue in FY21. Operating revenue (net) at the group level stood at Rs36bn for the year, while segment profit for the same period was at Rs.2.2bn. Order booking for FY21 was Rs37bn, compared to Rs.32.8bn in the previous year
Focus on increasing efficiency – Energy segment now encompasses the areas of renewables, efficient use of fuels, capturing of waste heat, and new energy applications. This transformation has provided Thermax with the opportunity to also transit to a ‘clean energy’ company. Going forward, incremental opportunities are expected to be driven by – i) Demand from infra segment (cement and steel) driven by infrastructural development and government policy, ii) emphasis on clean energy driving shift in energy mix, creating opportunities for brownfield replacements, iii) focus on waste to energy based projects, including biomass, iv) Shift from Capex to Opex, and v) Impetus on local manufacturing
Order inflows trend Segment Revenue and Margin profile 55,000 60 50,000 12 47,500 11 50,000 40 45,000 10 45,000 20 42,500 9 40,000 8 40,000 0 37,500 7 35,000 (20) 35,000 6 32,500 5
30,000 (40) 30,000 4
FY11
FY12
FY13
FY14
FY15
FY16
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FY18
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FY20 FY21 OI - Energy (Rs mn) Growth YoY (%) - RHS Energy (Rs mn) EBIT margin (%) - RHS
Source: DART, Company Source: DART, Company
Environment Execution of FGD order improves revenue - Operating revenue (net) at the group level stood at Rs7.9bn for the year, while segment profits for the same period was at Rs. 0.38bn. Order booking for the segment stood at Rs6.4bn in FY21, compared to Rs17.8bn in the previous year. There was an improvement in revenue, due to partial revenue recognition from the two major FGD orders received in FY20, though the profit margin was lower on account of project execution costs.
FGD order to remain a key - Environmental business is looking at incremental opportunities from Air Pollution Control business and Waste & Water Solutions through its advanced technological. Primarily, the growth is expected to be driven by – i) Enforcement of emission norms globally, ii) GoI’s mandate to power companies for installing FGD systems within a stipulated time to mitigate SOx emission, iii) Fuel shift from coal to biomass or agro based fuels, iv) Stringent regulatory norms for water and effluent treatment, v) Increased requirement for pure and ultra-pure water in sectors such as food, pharma and electronics, and vi) Increased government push for water recycling and greater infrastructure investment
July 14, 2021 5 Thermax
Order inflows trend Segment Revenue and Margin profile 19,000 200 14,000 14 17,000 150 13,000 12 15,000 12,000 100 11,000 10 13,000 50 10,000 8 11,000 9,000 0 6 9,000 8,000 7,000 (50) 7,000 4
5,000 (100) 6,000 2
FY14 FY11 FY12 FY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
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FY20 FY21 OI - Environment (Rs mn) Growth YoY (%) - RHS Environment (Rs mn) EBIT margin (%) - RHS
Source: DART, Company Source: DART, Company
Chemical Better Product mix and efficiency boost profitability - The Chemical business posted an operating revenue of Rs4.3bn. Profit for the year stood at Rs1.bn, compared to Rs0.78bn in the previous year. The increase in profits is attributable to a better product mix, cost controls, and the low price of styrene. Order booking for the Chemical segment during the year totaled Rs4.2bn.
In a sweet spot – Chemical business remains in sweet spot due to increasing demand for solvent-free and low Total Organic Carbon (TOC) resins for applications such as ultrapure water. Rise in demand for RO, MEE (multi effect evaporator) and incinerators, to boost business for water treatment chemicals that help in achieving zero liquid discharge and effluent treatment. And, Stringent regulations for industrial water treatment, urbanization, and stricter effluent discharge norms are driving the demand for specialty chemicals globally.
Segment Revenue and Margin profile 4,400 25 24 4,200 23 4,000 22 21 3,800 20 3,600 19 18 3,400 17 16 3,200 15 3,000 14 FY16 FY17 FY18 FY19 FY20 FY21
Chemical (Rs mn) EBIT margin (%) - RHS Source: DART, Company
July 14, 2021 6 Thermax
Execution scales up at Subsidiaries The international subsidiaries continue to focus on improving overseas manufacturing and consolidating presence in Europe and Southeast Asia. Besides, company is also building local EPC capabilities in select countries, while continuing our plug-and-play modular engineering solutions, that enable customers to minimize onsite construction work, thus offering new possibilities for growth.
Thermax Babcock & Wilcox Energy Solutions (TBWES) – TBWES reported a robust revenue growth of 35% at Rs12.3bn with PAT at Rs30mn (vs loss of Rs238mn). It was an eventful year for TBWES with subsidiary receiving order for – i) a large modularized waste heat recovery boiler from a refinery in Latin America, ii) largest fired heaters from an Indian refinery, and iii) two orders for the supply of economizers from a large power utility. In addition, TBWES signed know-how transfer and license agreement with Germany based Steinmüller Babcock Environment GmbH (SBE) for waste to energy technology.
Danstoker – Danstoker reported a flat growth in revenues at Rs1.7bn, though it continued to suffered losses. The Order booking was impacted in the first half due to Covid, though it improved during the latter half. During the year, The Danstoker Group sold the service business of Boilerworks A/S (specialized in the manufacture and supply of high pressure boilers) during the year, owing to its cyclical nature and continuous losses, however, it strategically retained the profitable portfolio of heat exchanger line of products.
PT TI, Indonesia (PT TII) – A significant improvement in ordering activities was witnessed with subsidiary receiving orders for – i) steam supply order under BOO model, and ii) couple of turnkey projects from glove, biodiesel and F&B industries. Though revenue and profitability continued to be impacted due to lower order carry forward with low profitability.
Thermax Europe - The subsidiary has been beneficiary of shift from coal to natural gas in the East European countries with potential demand for gas-driven chillers and heat pumps. The subsidiary reported a strong growth of 43% at Rs648mn with profits increasing from Rs10mn to Rs37mn. The business secured order for large order from a chemical company in Hungary, and a large heat pump order for a district heating plant in Copenhagen.
TOESL – TOESL reported a strong growth in order inflows at 3x as subsidiary secured maiden deals for international, multi-utility, cogeneration and treated effluent supply. TOESL reported revenues at Rs1.2bn with PAT at Rs112mn mainly due to opportunities in new sector and utilities driving the growth in services segment.
Thermax Inc (USA) – The subsidiary reported a strong growth of 19% led by rise in the cooling business in territories like Puerto Rico and increased demand for Ion exchange resins from water treatment applications. The subsidiary reported PAT at Rs130mn backed by increasing contribution from chemicals. Going forward, management see incremental opportunities from Energy and Chemical segment in F&B, chemical & petrochemical industry.
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Performance of major subsidiaries Particulars (Rs mn) % Stake Revenue PAT Subsidiaries FY19 FY20 FY21 FY19 FY20 FY21 Thermax Babcock & Wilcox 100 490 9,116 12,300 2,392 (238) 90 Energy Solutions Private Limited Danstoker Group 100 1,562 1,779 1,731 (272) (60) (87) PT Thermax International, 100 377 992 522 (136) (54) (144) Indonesia (PT TII) Thermax Europe 100 569 452 648 49 10 37 Thermax Onsite Energy Solutions 100 803 1,190 1,168 114 127 112 Limited (TOESL) Thermax Inc (USA) 100 1,282 1,291 1,541 97 39 122 Source: DART, Company Better collections help improve working capital position TMX’s working capital intensity has improved significantly with company operating at negative working capital. This was mainly due to collection of old receivable and use old inventory, which resulted in release of Working Capital worth Rs4.7bn. Also, company Contract Liabilities (unearned revenues and customer advances) continues to exceed Contract Assets (unbilled revenue). Resultantly, company’s Cash Flow from operation improved to Rs7.7bn (vs Rs3.3bn in FY20) with FCF at Rs7bn.
Prudent collection policies helps improve WC position Standalone Consolidated Particulars (Rs mn) FY9 FY20 FY21 FY19 FY20 FY21 Inventories 2,304 2,550 2,459 5,066 4,546 4,047 Trade Receivable 8,369 7,534 8,235 13,781 13,863 12,371 Unbilled revenue (contract assets) 3,831 617 1,036 11,209 3,473 3,015 Advance to supplier 710 472 693 1,867 1,501 1,287
Trade Payable 7,989 6,026 8,413 13,707 9,602 11,380 Unearned revenues 1,889 2,718 2,547 3,034 3,839 3,790 Customer advances 5,507 4,642 5,862 14,584 8,931 8,883 Core working Capital (2,475) (4,763) (6,858) (4,468) 1,010 (3,333) Source: DART, Company Contingent liabilities Contingent liabilities jumped sharply from Rs2.6bn in FY20 to Rs4.7bn, mainly due to sharp jump in Claims (not acknowledged as Debt). As a net worth, it increased from 8.3% in FY20 to 14.3% in FY21. Besides, there has been sharp jump in provision by 26% mainly due to increase in Provision for warranties.
Sharp jump in CL due to increase in Claims Particulars (Rs mn) FY20 FY21 Claims (not acknowledged as debt) 33 2,083 Sales tax/ Excise tax/ Income tax liabilities 1,794 1,856 Liability for export obligations 730 714 CL as a % of net worth 8.4 14.3 Source: DART, Company
July 14, 2021 8 Thermax
Movement in Provisions Provision for Particulars (Rs mn) Provision for Provision for onerous contracts warranties decommissioning liability As on April 1, 2020 149.3 902.2 96 Additional provision recognized 46.2 536.1 1.8 Unused amounts reversed (5.1) (190.7) 0 Unwinding of discount 0 71.7 8.8 Utilized during the year (50.7) (119.9) 0 As on March 31, 2021 139.7 1199.4 106.6 Source: DART, Company
Loan given to subsidiaries Particulars (Rs mn) FY20 FY21 Thermax Babcock & Wilcox Energy Solutions Private Limited 3,010 3,010 First Energy Private Ltd 36.2 41.2 Source: DART, Company Decarbonization road map
Source: DART, Company
July 14, 2021 9 Thermax
Financial Analysis Profit and Loss Analysis Revenue – TMX’s revenue declined by 16% in FY21, this was mainly due to the frequent lockdowns that impacted the operations for large part of the year. Energy segment reported a decline in revenues at 22%, while Environment/ Chemical segment improved by 10%/2% respectively.
Reduction in Employee expense – The employee cost dropped by 4% mainly due to scaling-down of operations of the Danstoker group, along with short-term salary reductions undertaken to navigate the COVID crisis. This decrease was partly offset due to an increase in provision for incentive payment to employees, in addition to one-time ex gratia payment to the outgoing managing director. Adjusted for one- time ex gratia payment, we expect remunerations savings of ~Rs125mn, an improvement of ~25bps.
Remuneration of TMX’s MD on a higher side Companies Managing Director Remuneration Remuneration as a % (Rs mn) of EBITDA Thermax Ashish Bhandari 74 2.1 Cummins India Ashwath Ram 18 0.3 ABB India Sanjeev Sharma 76 2.7 ABB Power Products Venu Nuguri 29 1.2 Siemens Sunil Mathur 194 1.9 Honeywell Ashish Gaikwad 34 0.6 Source: DART, Company
EBITDA margin – EBITDA margin improved by ~30bps to 7.4%, this was mainly due to lower other expense resulting from reduced travelling and conveyance cost, and decreased freight and forwarding charges. EBIT margin for Energy/Environment/ Chemical stood at 6%/4.7%/24.1% respectively.
Net Profit – Adj. Net Profit increased by 22%, this was mainly due to lower Tax rate at 23% (vs 43% in FY20). EPS stood at Rs21.8 vs Rs17.8 in FY20.
Balance Sheet and Cash Flow Analysis Share Capital - The paid-up Equity Share Capital of the Company as on March 31, 2021 was Rs252mn. There was no change in the company’s share capital during the year under review.
Net block marginally declined to Rs10.43bn in FY21 from Rs10.6bn in FY20.
Long term borrowing stands at Rs222mn as of March ’21, with Short term borrowings at Rs2829mn.
Working capital- Inventories reduced by 11% YoY to Rs4bn. Inventory days remained stable at 31 days. Debtors declined 11% YoY to Rs12bn. Debtor days increased to 94 days from 88 days last year. Creditors increased to 19% YoY to Rs11bn with payable days at 87 days compared to 61 days last year.
Cash flow from operations improved to Rs7.7bn in FY21 (vs Rs 3.3bn in FY20). Capital expenditure stood at Rs834mn in FY21. FCF increased to Rs7bn (vs Rs2.9bn in FY20).
July 14, 2021 10 Thermax
Financial Metrics and Charts
Order backlog Order inflows 60,000 1.4 65,000 50 57,500 1.3 62,500 40 55,000 60,000 30 52,500 1.2 57,500 50,000 1.1 55,000 20 47,500 52,500 10 1.0 45,000 50,000 0 42,500 0.9 47,500 40,000 (10) 0.8 45,000 37,500 42,500 (20) 35,000 0.7 40,000 (30) FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Order backlog (Rs mn) Book-to-Bill (x) - RHS Order inflows (Rs mn) Growth YoY (%) - RHS
Source: Company, DART Source: Company, DART
Net sales trend EBITDA and EBITDA margin 60,000 40 4,750 10.0 57,500 30 4,500 9.5 55,000 4,250 9.0 52,500 20 4,000 8.5 50,000 10 3,750 8.0 47,500 0 45,000 3,500 7.5 42,500 (10) 3,250 7.0 40,000 (20) 3,000 6.5 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Revenue (Rs mn) - LHS Growth YoY (%) - RHS EBITDA (Rs mn) - LHS EBITDA Margin (%) - RHS Source: Company, DART Source: Company, DART
Net profit trend PE chart 4,300 100 70 4,050 80 60 3,800 60 50 3,550 40 3,300 40 3,050 20 30 20 2,800 0 2,550 10 (20) 2,300 0 2,050 (40)
1,800 (60)
Jul-07 Jul-14 Jul-21
Jan-11 Jan-18
Jun-10 Jun-17
Oct-05 Oct-19 Oct-12
Apr-09 Apr-16
Feb-15 Feb-08 Sep-08 Sep-15
Dec-06 Dec-13 Dec-20
Aug-04 Aug-11 Aug-18
Nov-09 Nov-16
Mar-05 Mar-12 Mar-19
May-20 May-13 FY15 FY16 FY17 FY18 FY19 FY20 FY21 May-06 1 Yr Forward P/E Average P/E SD+1 SD-1 Adj. Profit (Rs mn) - LHS Growth YoY (%) - RHS Source: Company, DART Source: Company, DART
July 14, 2021 11 Thermax
Profit and Loss Account (Rs Mn) FY20A FY21A FY22E FY23E Revenue 57,313 47,913 52,046 61,353 Total Expense 53,251 44,361 47,845 55,888 COGS 30,857 25,386 28,365 33,131 Employees Cost 7,990 7,588 7,570 9,404 Other expenses 14,404 11,387 11,910 13,353 EBIDTA 4,062 3,552 4,201 5,465 Depreciation 1,166 1,146 1,158 1,187 EBIT 2,896 2,406 3,043 4,278 Interest 150 206 210 220 Other Income 1,000 1,077 1,185 1,339 Exc. / E.O. items 0 (525) 0 0 EBT 3,745 2,752 4,018 5,397 Tax 1,621 686 964 1,295 RPAT 2,125 2,066 3,054 4,102 Minority Interest 0 0 0 0 Profit/Loss share of associates 0 0 0 0 APAT 2,125 2,591 3,054 4,102
Balance Sheet (Rs Mn) FY20A FY21A FY22E FY23E Sources of Funds Equity Capital 225 225 225 225 Minority Interest 0 0 0 0 Reserves & Surplus 30,054 32,289 34,185 36,732 Net Worth 30,279 32,514 34,410 36,957 Total Debt 2,115 3,051 1,597 1,597 Net Deferred Tax Liability 1,078 1,627 1,767 2,083 Total Capital Employed 33,472 37,191 37,774 40,637
Applications of Funds Net Block 12,830 12,451 12,493 12,507 CWIP 553 211 211 211 Investments 6,404 7,742 8,410 9,914 Current Assets, Loans & Advances 39,773 44,665 40,187 45,740 Inventories 4,546 4,047 4,278 5,043 Receivables 13,863 12,371 12,120 14,288 Cash and Bank Balances 12,922 20,545 17,768 19,312 Loans and Advances 8,442 7,702 6,021 7,098 Other Current Assets 0 0 0 0
Less: Current Liabilities & Provisions 26,087 27,878 23,528 27,735 Payables 9,602 11,380 8,556 10,085 Other Current Liabilities 16,484 16,497 14,972 17,649 sub total Net Current Assets 13,686 16,787 16,660 18,006 Total Assets 33,472 37,191 37,774 40,637 E – Estimates
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Important Ratios Particulars FY20A FY21A FY22E FY23E (A) Margins (%) Gross Profit Margin 46.2 47.0 45.5 46.0 EBIDTA Margin 7.1 7.4 8.1 8.9 EBIT Margin 5.1 5.0 5.8 7.0 Tax rate 43.3 24.9 24.0 24.0 Net Profit Margin 3.7 4.3 5.9 6.7 (B) As Percentage of Net Sales (%) COGS 53.8 53.0 54.5 54.0 Employee 13.9 15.8 14.5 15.3 Other 25.1 23.8 22.9 21.8 (C) Measure of Financial Status Gross Debt / Equity 0.1 0.1 0.0 0.0 Interest Coverage 19.3 11.7 14.5 19.4 Inventory days 29 31 30 30 Debtors days 88 94 85 85 Average Cost of Debt 6.6 8.0 9.0 13.8 Payable days 61 87 60 60 Working Capital days 87 128 117 107 FA T/O 4.5 3.8 4.2 4.9 (D) Measures of Investment AEPS (Rs) 17.8 21.7 25.6 34.4 CEPS (Rs) 27.6 31.4 35.3 44.4 DPS (Rs) 7.0 7.0 9.7 13.0 Dividend Payout (%) 39.3 32.2 37.9 37.9 BVPS (Rs) 254.1 272.9 288.8 310.2 RoANW (%) 7.0 6.6 9.1 11.5 RoACE (%) 6.8 7.9 8.7 11.0 RoAIC (%) 13.6 12.9 16.6 20.7 (E) Valuation Ratios CMP (Rs) 1422 1422 1422 1422 P/E 79.8 65.4 55.5 41.3 Mcap (Rs Mn) 169,434 169,434 169,434 169,434 MCap/ Sales 3.0 3.5 3.3 2.8 EV 158,628 151,940 153,263 151,719 EV/Sales 2.8 3.2 2.9 2.5 EV/EBITDA 39.1 42.8 36.5 27.8 P/BV 5.6 5.2 4.9 4.6 Dividend Yield (%) 0.5 0.5 0.7 0.9 (F) Growth Rate (%) Revenue (4.0) (16.4) 8.6 17.9 EBITDA (11.2) (12.6) 18.3 30.1 EBIT (20.8) (16.9) 26.5 40.6 PBT (9.0) (26.5) 46.0 34.3 APAT (48.8) 22.0 17.9 34.3 EPS (48.8) 22.0 17.9 34.3
Cash Flow (Rs Mn) FY20A FY21A FY22E FY23E CFO 3,256 7,695 1,563 5,487 CFI (1,685) (6,357) (1,728) (2,388) CFF (2,325) 772 (2,612) (1,555) FCFF 2,861 7,021 522 4,454 Opening Cash 11,441 12,922 20,545 17,768 Closing Cash 12,922 20,545 17,768 19,312 E – Estimates
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DART RATING MATRIX Total Return Expectation (12 Months)
Buy > 20% Accumulate 10 to 20% Reduce 0 to 10% Sell < 0%
Rating and Target Price History
Month Rating TP (Rs.) Price (Rs.) (Rs) TMX Target Price May-21 SELL 1,205 1,462 1,570 1,390
1,210
1,030
850
670
Jul-20 Jul-21
Oct-20 Apr-21
Jan-21 Jun-21
Feb-21 Mar-21
Nov-20 Dec-20 Sep-20 Aug-20 May-21 *Price as on recommendation date
DART Team
Purvag Shah Managing Director [email protected] +9122 4096 9747
Amit Khurana, CFA Head of Equities [email protected] +9122 4096 9745 CONTACT DETAILS Equity Sales Designation E-mail Direct Lines Dinesh Bajaj VP - Equity Sales [email protected] +9122 4096 9709 Kapil Yadav VP - Equity Sales [email protected] +9122 4096 9735 Jubbin Shah VP - Equity Sales [email protected] +9122 4096 9779 Yomika Agarwal VP - Equity Sales [email protected] +9122 4096 9772 Lekha Nahar AVP - Equity Sales [email protected] +9122 4096 9740 Anjana Jhaveri VP - FII Sales [email protected] +9122 4096 9758 Equity Trading Designation E-mail P. Sridhar SVP and Head of Sales Trading [email protected] +9122 4096 9728 Chandrakant Ware VP - Sales Trading [email protected] +9122 4096 9707 Shirish Thakkar VP - Head Domestic Derivatives Sales Trading [email protected] +9122 4096 9702 Kartik Mehta Asia Head Derivatives [email protected] +9122 4096 9715 Dinesh Mehta Co- Head Asia Derivatives [email protected] +9122 4096 9765 Bhavin Mehta VP - Derivatives Strategist [email protected] +9122 4096 9705
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