Result Update May 2, 2016
Rating matrix Rating : Hold Essel Propack (ESSPAC) |185 Target : | 198 Target Period : 12 months Lower realisation hits revenue growth… Potential Upside : 7%
• Essel Propack’s sales growth remained under pressure in Q4FY16, as What’s Changed? Amesa revenues continued to decline due to divestment of its Target Changed from | 165 to | 198 flexible business. EAP and America regions revenue were largely hit EPS FY17E Changed from | 13.9 to | 13.6 by lower realisation and currency devaluation. However, capacity EPS FY18E Changed from | 15.1 to | 15.8 addition coupled with good traction of non oral care products have Rating Changed from Buy to Hold helped the Europe region to grow ~8% YoY • Benefit of lower raw material prices was partially offset by higher Quarterly Performance other expenses and employee expenses. As result, the EBITDA Q4FY16 Q4FY15 YoY (%) Q3FY16 QoQ (%) margin improved only 100 bps YoY. However, for FY16, margins Revenue 561.4 611.7 -8.2 513.4 9.3 recorded sharp growth of 230 bps YoY due to higher gross margin EBITDA 103.1 106.2 -2.9 102.8 0.3 and hiving off of the lower margin business. Additionally, improved EBITDA (%) 18.4 17.4 101bps 20.0 -165bps utilisation in the European region further added to EBITDA margins PAT 41.5 45.4 -8.7 42.9 -3.5 • Despite a margin improvement and reduction in interest outgo by 21% YoY (due to debt reduction), PAT recorded a decline of ~9% Key Financials YoY mainly due to exceptional loss of | 11 crore | Crore FY15 FY16E FY17E FY18E Net Sales 2,323 2,185 2,430 2,727 Revival in European region - key trigger for future growth EBITDA 396.2 423.9 459.3 515.4 The European region contributes ~18% to the consolidated topline (lower Net Profit 140.6 182.1 213.4 247.7 than other regions) largely due to ongoing expansion in that region. EPS (|) 9.0 11.6 13.6 15.8 However, EBIT losses in Europe reduced substantially from | 93 crore in CY08 to profit of ~| 23 crore in FY16, due to implementation of different Valuation summary cost effective programmes, stabilisation of the Poland unit and addition of FY15 FY16E FY17E FY18E new clients in various geographies. The Polish unit is a hub for extruded P/E 20.7 16.0 13.6 11.7 plastic tubes. It is also expanding into a major supplier of laminated tubes. Target P/E 28.8 22.1 17.1 14.6 The Polish unit turned positive from Q1FY15 onwards with an EV / EBITDA 9.0 8.2 7.4 6.4 improvement in utilisation rate and addition of new clients. Stabilisation P/BV 3.7 3.0 2.6 2.2 of the unit and new long term contracts are expected to translate to RoNW (%) 18.0 19.0 19.0 19.0 higher operating leverage and reducing fixed cost. RoCE (%) 17.7 19.5 20.6 21.2
Focus on non-oral care category to drive volume growth Stock data Non-oral care categories, dominated by toiletries, skin care and shampoo, Particular Amount use laminated tubes as packing material. Contribution of non-oral care in Market Capitalization (| Crore) 2,905.7 total revenue is expected to increase from 39.1% in FY14 to 50% in the Total Debt (FY16) (| Crore) 636.6 next two years. Contribution of non-oral in overall revenue increased to Cash and Investments (FY16) (| Crore) 85.0 41.8% in FY16. Emerging markets would be the key driver for oral and EV (| Crore) 3,457.3 non-oral care categories due to lower product penetration. Essel Propack 52 week H/L 192/ 120 (EPL) is focusing on emerging markets of Asia, Africa and Latin America Equity capital (| Crore) 31.4 to drive revenue from the non-oral care category. Face value (|) 2.0 Proceeds from sale to help reduce debt burden, interest outgo
Price performance (%) We expect the company to reduce its existing debt (from sale of its 1M 3M 6M 12M subsidiary) and saving in interest outgo to the tune of ~34% over FY15 Essel Propack Ltd 13.8 12.7 13.7 42.1 while the company is expected to fund capex with internal accrual. This Time Technoplast 2.9 -8.7 -14.9 4.7 will finally aid EPS, which is expected to record CAGR of ~17% FY16-18E. Ess Dee Aluminum -12.1 -48.7 -72.7 -60.9 Recent run up in prices near term positive; change rating to HOLD Paper Product 11.3 1.5 -17.4 2.8 We model moderate revenue growth of ~12% in FY16-18E led by stabilisation of performance in Amesa, EAP and Americas regions. However, contribution of non oral care segment (relatively higher margin) Research Analyst remained flat in FY16. We expect consolidated PAT CAGR of ~17% in FY16-18E, supported by better margin and lower interest outgo. Sanjay Manyal Historically, EPL has traded at an average one year forward EV/EVBITDA [email protected] multiple of 5.7x due to lower debt level (average D/E of 0.6x). We believe Hitesh Taunk [email protected] the recent run up of stock discounts all near term positives. Hence, we value the stock at 6.8x its FY18E EBITDA (~20% premium than historical average) and change our recommendation from BUY to HOLD with a revised target price of | 198/share.
ICICI Securities Ltd | Retail Equity Research
Variance analysis Q4FY16 Q4FY16E Q4FY15 YoY (%) Q3FY16 QoQ (%) Comments
Sales were affected by divestment of its flexible business, pass through of Revenue 561.4 591.7 611.7 -8.2 513.4 9.3 raw material prices to customers and lower volume offtake in Egypt region
Other Income 10.4 7.7 6.7 54.5 4.2 145.2 Better realisation from COCO model yield higher other income
Benign raw material prices helped in saving overall raw material cost as Raw Material Exp 258.1 299.2 308.5 -16.3 214.3 20.5 percentage of sales
Employee Exp 93.2 90.9 88.5 5.2 94.3 -1.3
Decline in manufacturing cost is largely attributable to saving in cost from Manufacturing & Other exp 107.0 86.0 108.5 -1.4 102.0 4.9 divestment of flexible business
EBITDA 103.1 115.7 106.2 -2.9 102.8 0.3 Saving in raw material cost was partially offset by higher employee cost and EBITDA Margin (%) 18.4 19.5 17.4 101 bps 20.0 -165 bps other expenses (as a percentage of sales), which restricted expansion in EBITDA margin to 101 bps YoY Depreciation 31.9 30.1 30.6 4.4 32.1 -0.5 Interest 15.5 12.8 19.5 -20.7 12.6 23.2 Repayment of debt helped in reducing overall tax outgo Exceptional items 11.4 0.0 -4.2 NM 1.2 PBT 54.7 80.4 67.0 -18.3 61.2 -10.6 Total Tax 13.8 24.5 19.5 -29.4 18.7 -26.3 Despite an increase in EBITDA margin and other income, decline in PAT was PAT 41.5 54.9 45.4 -8.7 42.9 -3.5 on account of exceptional item arised due to reversal of overstated gain from the divestment of PIPL Key Metrics Divestment of flexible business, and lower offtake by key customers in Egypt AMESA 208.0 227.1 270.5 -23.1 205.3 1.3 have hit the sales of AMESA regions Muted growth in the EAP region is attributable to lower realisation due to EAP 127.4 142.2 134.6 -5.3 136.0 -6.3 pass through of RM price reduction to the extent of 6% Sales largely impacted by pass through of RM prices reduction and closure of Americas 126.3 132.1 129.3 -2.3 112.5 12.3 plastic tuge operation in the US Addition of new capacity and traction more towards non-oral care categories Europe 110.2 114.2 102.0 8.1 97.3 13.3 helped revenue growth
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore) FY17E FY18E Comments Old New % Change Old New % Change We have marginally tweaked our revenue estimate for FY17E and FY18E considering Revenue 2,502.0 2430.0 (2.9) 2,813.7 2726.9 (3.1) lower-than-expected volume offtake in the Amesa region EBITDA 502.9 459.3 (8.7) 551.5 515.4 (6.5) We have modelled EBITDA margin of ~19% for FY17E and FY18E each, attributable to EBITDA Margin % 20.1 18.9 -120bps 19.6 18.9 -70bps gradual stabilisation of raw material prices coupled with lower offtake of non oral care segment PAT 217.9 213.4 (2.1) 236.9 247.7 4.6 Better margin with lower interest outgo helped in improving PAT in FY18E EPS (|) 13.9 13.6 (2.0) 15.1 15.8 4.6 Source: Company, ICICIdirect.com Research
Assumptions Current Earlier Comments FY15E FY16E FY17E FY18E FY17E FY18E Performance of the Amesa regions remained under pressure due to divestment of flexible business and lower offtke of volume under non oral categories. However, growth in the AMESA Growth (%) 11.9 -19.4 10.8 12.4 12.4 12.4 Amesa region would be largely supported by rising disposable income, growing urbanisation and lower penetration of personal care products
Demand for oral care products remained sluggish in the EAP region while non oral care EAP Growth (%) 7.1 2.3 11.3 12.4 14.5 14.5 recorded strong growth of 24% YoY during FY16. We believe stabilisation of the new unit l d i h d d f h l b i ld d i h li
ICICI Securities Ltd | Retail Equity Research Page 2
Company Analysis Concern on European region subsides The performance of the European region has remained subdued since 2008 when the company decided to shift its manufacturing base from the United Kingdom to Poland. The move was largely to rationalise its cost of production through sourcing from its cost efficient manufacturing base. However, the decision backfired due to the economic slowdown and EPL incurred substantial losses from the Polish unit in CY08.
However, EBIT losses from the European unit reduced substantially from During Q4FY16, the European region recorded revenue | 93 crore in CY08 to profit of ~| 23 crore in FY16. This was largely due to growth of ~8% YoY to | 110 crore while the EBIT margin improved utilisation of loss making units (Poland) and implementation of declined ~100 bps YoY. This was mainly due to cost different cost effective programmes over the years. The European region incurred on consolidation of plastic tube operation from US recorded a strong performance with revenue CAGR of ~23% in FY12-16. into Europe We believe EPL’s performance in the regions will improve further with the increase in utilisation rate of the Poland plant and addition of new clients. Stabilisation of the unit and new long term contracts are expected to translate into higher operating leverage and reducing fixed cost. We have modelled revenue CAGR of ~15% for FY16-18E in the European region led by introduction of premium products.
Exhibit 1: Expect European region revenue CAGR of 15% in FY16-18E
600 CAGR ~15% 500 538
400 463
CAGR ~23% 405
300 359 311 (| crore) 200 243
100 178
0 FY12 FY13 FY14 FY15E FY16E FY17E FY18E
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Rising concentration of non oral care segment
During Q3FY16, contribution of non oral care products In order to de-risk its business model, EPL plans to increase its focus on sales has increased ~20 bps YoY to 41.4% into topline. For the non-oral care category. The non-oral care category, which is largely 9MFY16, contribution of non oral care products increased dominated by toiletries, skin care and shampoo, uses laminated tubes as 120 bps YoY to 42.7% packing materials. Contribution of the non-oral care category to total sales has increased from 40% in FY12 to 42% in FY16. The company further plans to increase the revenue contribution from the non-oral care category to 50% in the next two years. EPL’s non oral care contribution increased ~200 bps YoY in FY15. It is focusing on emerging markets of Asia, Africa and Latin America to drive revenue from the non-oral care category. However, in FY16, contribution of the non-oral care segment remained flat YoY, mainly due to sluggishness in demand, which hurt overall volume growth from key customers. Further, the management has reiterated that revenue contribution from the non-oral care category is expected to be 50% in the next two years. Exhibit 2: Rising contribution of non oral-care segment Exhibit 3: Sharp jump in non-oral care revenue against oral care revenue
120 1600 1297.2 1365.9 1352.0 100 1400 1200 957.1 971.0 80 829.4 60 61 59 58 1000 60 800 (%)
40 (| crore) 600 400 42 20 40 39 41 200 0 0 FY13 FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16
Non oral care Oral Care Non oral care Oral Care
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research
Asset light business model COCO to reduce capex In addition to the above, the company has also increased its focus on replacing plastic tubes with specialised laminated tubes in the European and American regions. The EAP region witnessed a sluggish offtake from key customers in FY14, resulting in lower operating leverage. To address the issue, EPL entered the value-added non-oral category and won prestigious orders from FMCG cosmetic brands in China. In order to tap the large cosmetic industry in South East China, EPL has set up a new facility in the region, which started operations from Q2FY15 onwards on a trial basis. Besides, under a new business model i.e. customer owned company operated (COCO) model, Essel has won a long term contract for supply of oral care tubes to a large FMCG player. The COCO model is an asset light one wherein maximum capex is done by customers while Essel will provide materials and expertise to manufacture tubes at their factory and takes full responsibility for technology, process efficiencies and supplies. We have modelled revenue CAGR of 11.6%, 11.8%, 8.7% and 15.3% in FY16-18E for Amesa, EAP, Americas and Europe, respectively.
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Major revenue flow to come from EAP, Europe EPL recorded net sales CAGR of ~8% in FY12-16, lower than historical growth due to divestment of its flexible business and muted performance in the EAP and Americas region. In addition, growth in non oral care segment remained subdued in FY16 due to lower volume offtake in the Middle East and India region. Currently, revenue from the oral care category dominates the contribution with 58% (in FY16) in the consolidated pie. However, over the years, contribution of the non-oral care category increased substantially to ~42% in FY16 (35% in FY12) in consolidated revenue. On the geographic front, net sales growth from EAP and Europe are expected to be higher (~12% CAGR and ~15% CAGR in FY16-18E, respectively) compared to other regions supported by healthy volume growth. The revenue growth is expected to be largely driven by volumes from Amesa and Europe backed by demand from emerging markets remaining intact (dominated by domestic business) and stabilisation of plant and new contract wins from Europe, respectively.
Regional performance Exhibit 4: Region wise performance CAGR CAGR Revenue (| crore) Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY12 FY13 FY14E FY15 FY16E FY17E FY18E FY12-16 FY16-18E Amesa 270.5 262.9 208.0 205.3 208.0 Revenue (| crore) (%) (%) EAP 134.6 134.0 148.5 136.0 127.4 Americas 129.3 121.0 112.1 112.5 126.3 Amesa 779.0 883.0 980.7 1097.4 884.2 979.9 1101.9 3.2 11.6 Europe 102.0 92.9 104.2 97.3 110.2 EAP 369.0 421.0 498.4 533.8 545.9 607.6 682.7 10.3 11.8 Total 611.7 574.6 535.3 513.4 561.4 Americas 371.0 426.0 456.9 478.2 471.9 515.2 557.2 6.2 8.7 Europe 178.0 243.0 310.8 358.5 404.6 463.2 537.8 22.8 15.3 Total* 1583.7 1831.8 2126.6 2323.0 2184.7 2430.0 2726.9 8.4 11.7 * adjusting with eliminations
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 5
Stabilisation of raw material prices may restrict further benefits We have modelled an EBITDA margin of ~19% for FY16-FY18E (up ~200 bps from FY15), respectively. We believe the EBITDA margin expansion During the quarter, EBITDA margins witnessed growth of would largely be on account of recovery in volume growth from the ~100 bps YoY mainly due to benign raw material prices European region (due to stabilisation of the Poland plant) and sustained volume growth in the EAP region. In addition, stabilisation of the new plant in China would also aid EBITDA margin, going forward. During the quarter, the EBITDA margin increased 101 bps YoY to 18.4%, on the back of saving in raw material expense to the tune of ~445 bps YoY, which was partially offset by higher employee cost and other income.
Exhibit 5: EBITDA margin to inch up, going forward
600 25.0 515.4 459.3 500 423.9 20.0 396.2 400 354.1 313.1 15.0 300 10.0 (%) (| crore) 200 114.1 83.692.190.088.8 88.6106.992.0106.2 103.9 102.8103.1 100 5.0 - - FY13 FY14 FY15E FY16E FY17E FY18E Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16
EBITDA (| crore) EBITDA Margin (%)
Source: Company, ICICIdirect.com Research
Sharp increase in EBITDA margin, lower interest cost to drive PAT… We believe a recovery in margin coupled with improved cash flow on account of stabilisation of European operations would help drive EPL’s bottomline, going forward. We believe the bottomline of the company will witness ~17% CAGR in FY16-18E. We expect increasing operational efficiency in the EAP and European region to help drive overall profitability.
We believe the bottomline of the company will grow at a Exhibit 6: Recovery in Europe, saving in interest cost aid PAT growth CAGR of 17% in FY15-18E 300 12.0 247.7 250 213.4 10.0 200 182.1 8.0 140.6 150 6.0
107.8 (%)
(| crore) 81.0 100 59.3 4.0 38.5 45.4 38.4 42.941.5 50 23.529.928.327.3 26.4 30.4 2.0 - - FY13 FY14 FY15E FY16E FY17E FY18E Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16
PAT (| crore) PAT Margin
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 6
Outlook and valuation EPL is one of the dominant plays in the packaging (tube) industry with 65% and 33% market share in the domestic and international market, respectively. The stock had been punished severely in 2009 (down ~85% from its closing price of March 2006) largely due to a mounting debt burden, economic slowdown in its major markets in the US and Europe in addition to an inflationary environment. Historically, in 2003-07, the company has traded at an average one year forward EV/EVBITDA multiple of 5.7x considering lower debt level and average D/E of 0.6x. However, the EV/EBITDA multiple shrank sharply during FY10-13 (average one year forward EV/EBITDA multiple of 2.9x) considering the sharp rise in D/E to 1.1x and margin erosion. On an EV/EBITDA basis, the stock is currently trading at 7.4x FY17E and 6.4x FY18E EBITDA. We expect consolidated sales and earning CAGR of ~12% and ~17% in FY16-18E, respectively supported by an improvement in margin and lower interest outgo.
However, contribution of the non oral care segment (relatively higher margin) remained flat in FY16. Historically, EPL has traded at an average one year forward EV/EVBITDA multiple of 5.7x due to lower debt level (average D/E of 0.6x). We believe the recent run up of stock discounts all near term positives. Hence, we value the stock at 6.8x its FY18E EBITDA (~20% premium than historical average) and change the rating from BUY to HOLD with a revised target price of | 198/share.
Exhibit 7: One year forward EV/EBITDA (x) Exhibit 8: One year forward P/E(x)
3000 120 2500 6x 100 11x 2000 5x 80 9x 1500 4x 60 7x 3x (| crore) 5x 1000 2x 40 500 20 3x 0 0 1-Jul-09 1-Jul-10 1-Jul-11 1-Jul-12 1-Jul-13 1-Jul-09 1-Jul-10 1-Jul-11 1-Jul-12 1-Jul-13 1-Jan-09 1-Jan-10 1-Jan-11 1-Jan-12 1-Jan-13 1-Jan-14 1-Jan-09 1-Jan-10 1-Jan-11 1-Jan-12 1-Jan-13 1-Jan-14
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research
Exhibit 9: Valuation Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%) FY15 2323.0 9.0 20.7 9.0 18.0 17.7 FY16E 2184.7 -6.0 11.6 29.5 16.0 8.2 19.0 19.5 FY17E 2430.0 11.2 13.6 17.2 13.6 7.4 19.0 20.6 FY18E 2726.9 12.2 15.8 16.1 11.7 6.4 19.0 21.2 Source: Company, ICICIdirect.com Research
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Company snapshot
Target Price - | 198 220 200 180 160 140 120 100 80 60 40 20 0 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Source: Bloomberg, Company, ICICIdirect.com Research
Key events Date Event May-09 Stock jumps sharply on rumours EPL is planning to acquire UK based tube manufacturer Betts Aug-09 Company decides to exit non-core activities namely medical devices business which is located in US and Singapore Sep-09 EPL's Chinese subsidiary, EP China, renews long term contract with a leading FMCG player in China. The total volume involved in these contracts is ~600 million tubes per year Jan-10 EPL starts new production unit in Tianjin city of North East China Mar-11 EPL plans to close down two of its plants each in the US and Egypt and consolidate its operations in Europe to rationalize costs and streamline its global operations in line with its clients Mar-11 The company starts new manufacturing plant in Mexico Jun-11 EPL signs long-term agreement with Colgate-Palmolive India to supply the tubes. Company has also planned to set up a manufacturing plant in Goa with the investment of | 40 crore. Feb-13 Essel Propack's subsidiary in Poland bags long term contract from a leading multinational FMCG player for supply of tubes in Europe Apr-13 Essel Propack's manufacturing plant at Danville VA in US reports minor fire Jan-14 Company records profit at EBIT level from European region during Q3FY14, first time since shift of its manufacturing base from UK to Poland Dec-14 As part of a modified family arrangement Subhash Chandra (Chairman of Essel group), his immediate family members and entities controlled by him and his immediate family members cease to be part of promoter group of the company Jul-15 Essel Propack sells wholly-owned subsidiary Packaging India Pvt Ltd (entire 100% stake) at an enterprise value of | 165 crore to Amcor Flexible India
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m)n Change (m) (in %) Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 1 Whitehills Advisory Services Pvt. Ltd. 31-Dec-15 0.57 88.9 0.0 Promoter 56.6 56.8 56.8 56.8 57.0 2 Clareville Capital Partners LLP 31-Dec-15 0.03 4.8 0.0 FII 9.3 6.4 7.0 10.5 11.2 3 M. M. Warburg Bank (Schweiz) AG 31-Dec-15 0.03 3.9 -0.4 DII 4.5 8.0 8.0 4.4 3.9 4 Gagandeep Credit Capital Pvt. Ltd. 31-Dec-15 0.02 3.5 0.0 Others 29.7 28.7 28.1 28.3 27.9 5 DSP BlackRock Investment Managers Pvt. Ltd. 31-Dec-15 0.02 2.5 0.0 6 Amrit Petroleums Pvt. Ltd. 31-Dec-15 0.02 2.4 0.0 7 FIL Investment Management (Singapore) Ltd. 29-Feb-16 0.01 2.2 0.1 8 Dimensional Fund Advisors, L.P. 31-Jan-16 0.01 2.1 0.0 9 UTI Asset Management Co. Ltd. 31-Dec-15 0.01 2.0 0.0 10 Veena Investment Pvt. Ltd. 31-Dec-15 0.01 1.9 1.9
Source: Reuters, ICICIdirect.com Research
Recent Activity Buys Sells Investor name Value(m) Shares(m) Investor name Value(m) Shares(m) Veena Investment Pvt. Ltd. 4.8 1.9 Essel Group -10.8 -4.2 Ashok Goel Trust 0.7 0.3 M. M. Warburg Bank (Schweiz) AG -1.0 -0.4 FIL Investment Management (Singapore) Ltd. 0.2 0.1 Goldman Sachs Asset Management (India) Private Ltd. 0.0 0.0 Dimensional Fund Advisors, L.P. 0.1 0.0 Fidelity Management & Research Company 0.0 0.0
Source: Reuters, ICICIdirect.com Research
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Financial summary
Profit and loss statement | Crore Cash flow statement | Crore (Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E Net Sales 2323.0 2184.7 2430.0 2726.9 Profit after Tax 140.6 182.1 213.4 247.7 Growth (%) 9.2 -6.0 11.2 12.2 Depreciation 131.8 127.0 131.2 147.3 Expenses CF bef working capital chag 351.8 371.4 400.9 444.1 Raw Material Expenses 1136.2 955.7 1154.2 1295.3 Employee Expenses 362.8 378.8400.9 449.9 Net Increase in Current Assets -0.9 44.9 -84.1 -111.2 Marketing Expenses 0.0 0.0 72.9 81.8 Net Increase in Current Liabilities -41.9 -93.1 14.7 23.4 Administrative Expenses 0.0 0.0 72.9 81.8 Manufacturing & Other Exp 427.7 426.3269.7 302.7 Net CF from operating act 309.0 323.2 331.6 356.3 Total Operating Expenditure 1926.7 1760.8 1970.7 2211.5 EBITDA 396.2 423.9459.3 515.4 (Purchase)/Sale of Fixed Assets -174.1 -148.6 -140.0 -140.0 Growth (%) 11.9 7.0 8.4 12.2 Minority Interest 0.5 0.1 5.7 5.7 Interest 79.4 62.3 56.3 49.1 Others 9.2 -5.2 0.0 -20.0 Other Income 21.0 23.7 21.2 21.2 Depreciation 131.8 127.0131.2 147.3 Net CF from Investing act -164.4 -153.7 -134.3 -154.3 PBT before Exceptional Items 206.1 258.3293.0 340.2 Less: Exceptional Items 0.0 4.4 0.0 0.0 Equity Capital 0.0 0.0 0.0 0.0 PBT 206.1 253.9293.0 340.2 Loan -26.9 -149.4 -100.0 -50.0 Total Tax 61.1 71.6 76.9 89.0 Total Outflow on account of dividend -36.3 -49.9 -68.0 -68.0 PAT before MI 145.0 182.4216.1 251.2 Others -106.6 -1.7 -56.3 -49.1 Minority Interest 4.7 3.0 5.4 6.3
Profit from Associates 0.3 2.7 2.7 2.7 Net CF from Financing Act -169.8 -200.9 -224.4 -167.2 Less: Prior Period Items 0.0 0.0 0.0 0.0 PAT 140.6 182.1213.4 247.7 Net Cash flow -25.1 -31.4 -27.0 34.9 Growth (%) 30.4 29.5 17.2 16.1 Cash and Cash Equ at the beg 141.6 116.4 85.0 58.0 EPS 9.0 11.6 13.6 15.8
Cash 116.4 85.0 58.0 92.9 Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research
Balance sheet | Crore Key ratios (Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E Equity Capital 31.4 31.4 31.4 31.4 Per Share Data Reserve and Surplus 751.5 944.4 1089.7 1269.3 EPS 9.0 11.6 13.6 15.8 Total Shareholders funds 782.9 975.8 1121.1 1300.8 Cash EPS 17.3 19.7 21.9 25.1 Total Debt 786.0 636.6 536.6 486.6 BV 49.8 62.1 71.4 82.8 Minority Interest 8.1 8.1 13.9 19.6 DPS 2.3 3.2 4.3 4.3 Other Non Current Liabilities 0.0 0.0 0.0 0.0 Operating Ratios Total Liabilities 1608.3 1647.5 1698.6 1833.9 EBITDA Margin 17.1 19.4 18.9 18.9 PAT Margin 6.1 8.5 8.8 9.1 Assets Return Ratios Total Gross Block 2612.6 2761.1 2901.1 3041.1 RoE 18.0 19.0 19.0 19.0
Less Total Accumulated Depreciation 1672.1 1799.1 1930.3 2077.6 RoCE 17.7 19.5 20.6 21.2 Net Block 940.5 962.1 970.8 963.6 RoIC 15.3 17.2 18.4 19.5 Total CWIP 35.5 35.5 35.5 35.5 Valuation Ratios Total Fixed Assets 976.0 997.6 1006.4 999.1 EV / EBITDA 9.0 8.2 7.4 6.4 P/E 20.7 16.0 13.6 11.7 Other Investments 45.8 47.6 47.6 67.6 EV / Net Sales 1.5 1.6 1.4 1.2 Inventory 231.8 207.0 242.5 261.5 Market Cap / Sales 1.3 1.3 1.2 1.1 Debtors 376.1 335.5 393.5 440.8 Price to Book Value 3.7 3.0 2.6 2.2 Loans and Advances 334.9 341.9 345.1 387.2 Turnover Ratios Cash 116.4 85.0 58.0 92.9 Asset turnover 1.4 1.3 1.4 1.5 Other Current Assets 20.8 34.3 21.8 24.5 Debtor Days 59.1 56.0 59.1 59.0 Total Current Assets 1080.1 1003.7 1060.8 1206.8 Creditor Days 25.3 21.8 25.3 25.0 Creditors 161.1 130.6 168.5 186.8 Solvency Ratios Provisions 63.4 75.1 66.3 73.5 Debt / Equity 1.0 0.7 0.5 0.4 Total Current Liabilities 519.8 426.6 441.4 464.8 Current Ratio 4.3 4.5 4.3 4.3 Quick Ratio 3.3 3.5 3.2 3.3 Net Current Assets 560.3 577.1 619.4 742.0 Total Assets 1608.3 1647.5 1698.6 1833.9 Source: Company, ICICIdirect.com Research . Source: Company, ICICIdirect.com Research
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ICICIdirect.com coverage universe (Consumer Discretionery)
CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%)
Sector / Company (|) TP(|) Rating (| Cr) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E
Asian Paints (ASIPAI) 862 951 Buy 82,683 18.3 21.6 24.6 47.2 39.9 35.0 29.1 25.9 23.5 48.9 47.7 46.9 35.2 35.7 35.7 Bajaj Electricals (BAJELE) 227 230 Buy 2,264 11.0 13.0 15.4 20.7 17.4 14.8 8.9 8.4 7.5 25.0 24.1 24.4 14.4 15.2 15.8 Havells India (HAVIND) 339 315 Hold 21,150 7.3 10.5 12.3 41.3 32.2 27.5 23.9 19.3 16.5 25.6 31.0 31.4 18.2 22.7 23.4 Kansai Nerolac (GOONER) 286 346 Buy 15,413 5.0 24.8 8.0 56.7 17.3 35.8 34.7 26.1 22.9 23.3 22.0 23.1 17.0 58.5 16.4 Pidilite Industries (PIDIND) 602 645 Buy 30,861 14.1 15.6 17.6 42.7 38.5 34.1 27.1 24.6 21.7 38.5 38.1 38.1 27.9 27.4 27.3 Essel Propack (ESSPAC) 185 198 Hold 2,906 11.6 13.6 15.8 16.0 13.6 11.7 8.2 7.4 6.4 19.5 20.6 21.2 19.0 19.0 19.0 Supreme Indus (SUPIND)* 804 924 Buy 10,213 17.4 30.0 39.6 46.2 26.8 20.3 23.4 14.0 10.8 21.6 31.0 36.8 17.2 24.6 28.3 Symphony (SYMCOM)* 2,384 2,745 Buy 8,339 33.4 58.6 74.5 71.3 40.7 32.0 55.0 30.8 24.8 36.7 50.0 47.3 29.6 39.5 38.4 V-Guard Ind (VGUARD) 940 880 Hold 2,806 31.6 36.0 43.3 29.7 26.1 21.7 18.3 16.3 13.8 27.8 27.1 27.8 21.0 20.3 20.5 Voltas Ltd (VOLTAS) 296 350 Buy 9,790 11.5 12.5 13.9 25.7 23.7 21.3 20.1 16.7 14.4 16.2 17.5 18.3 15.7 16.1 16.3 * FY16E for nine months Source: Company, ICICIdirect.com Research
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RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]
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