Professional Documents
Culture Documents
"Neutral"
We expect that the company to maintain its leadership position in IBB and ATBS along with its increasing product basket could able to cater to the
growing needs of specialty chemicals industry which in turn to drive revenue. A well experienced and able management coupled along with good
growth in the ATBS segment driven by demand in the water treatment segment projects a positive outlook for the company. The company
currently trades at a P/E of 14x FY18E EPS and P/B of 4.6 x FY18 book value. We Initiate Coverage on the stock . Presently we rate it as 'Neutral' due
to its stretch valuation. Our price target on the stock is Rs 659 rating it as P/B of 3.7 on FY19e. ............................................. ( Page : 2-15)
KEC
"Hold"
In short run, companys revenue growth will remain lackluster but medium to long-term growth remains intact. Efficient working capital
management strengthened balance sheet position and we expect it to continue going forward. We expect to ramp up in an execution of substation
(T&D) projects and railway projects. Robust opportunity in railway segment with improving margin will help KEC to post healthy numbers going
forward. But considering the short-term uncertainty, we maintain HOLD on the stock with unchanged target price of Rs. 164.
......................................................... ( Page : 16-18)
M&M
"BUY"
Management believes that the demonetization issue may have short term negative impact on Farm Equipment segment. They expect this concern
will last for next 4 months but sticks with previous growth guidance of 20% for tractor industry in FY17. We believe that the tractor industry may
not see much slow-down because the monsoon was good during the year and almost 90% of the tractors are financed. New launches in 2HFY18 in
Tractor and SUV segments will make the Mahindras presence further stronger in the domestic market. Ssangyong have also seen recovery on nine
month basis and it may post positive results in the current fiscal after three consecutive years of losses. Considering the strong volume growth and
recovery in the non- performing business we recommend 'BUY' with a target price of Rs.1600. ............................................... ( Page : 19-21)
MARUTI
"BUY"
We expect current demonetization issue may not be impacting much in the long run to the passenger vehicle segment because more than 75%
vehicles are financed. But this issue may be hampering sales in near future due to cash crunch in the economy. We assume volumes in the second
half may be down by 10% in comparison to the first half 2017. Higher sales of premium segment cars will further increase the realization per car,
which will in turn maintain the margins going ahead despite the rising commodity prices. Hence we have positive view on this stock and we
recommend "BUY" with a target price of Rs.6100. .................................... ( Page : 22-24)
IRB
"ACCUMULATE"
Firstly EPC revenue was impacted due to heavy monsoon during Q2FY17 and secondly suspension of toll collection for the period of 24 days
because of demonetization will affect the top line of the company in FY17. We expect top line of Rs. 5627 Cr (Growth of 10% YoY) with healthy
52.7% EBITDA margin in FY17E. Significant reduction in debt post the InvIT IPO and an arbitral award will boost the bottom line of the company. At
a current price of Rs. 191 stock trades at 7.3x to FY17 expected EV/EBITDA and 1.3x to P/B. The stock has corrected nearly 18% post demonetization
announcement which makes this stock attractive at this price with present fundamentals. Hence, we revised our rating from HOLD to ACCUMULATE
with target price of Rs.235 . ............................................ ( Page : 25-27)
BIOCON
"Neutral"
As per the management, exports have not been impacted due to demonetization, Indian business saw lower sales in the month of November. The
dependence of the company on domestic business is ~ 31% in total revenue. Recently Biocon has Submitted Trastuzumab dossier to the United
States Food & Drug Association (USFDA) which is an important milestone for Biocon and its review process is expected to take 18-24 months. The
market size of Trastuzumab injection is valued at about $6.5 billion, according to IMS data. Crestor Generic has been approved by USFDA and
Biocon is on track to launch the product in near future. This will be a huge opportunity for Biocon to take first mover advantage with its bio-similar
products. On the contrary ongoing price control pressure in India and US and discontinuance of key products may put some uncertainties in near
term. Hence we maintain Neutral rating in this stock. . (Page : 18-30)
Narnolia Securities Ltd
923
A Niche play
Neutral
9-Jan-17
Company Update
CMP
625
Target Price
659
NA
Upside
5%
NA
Market Data
BSE Code
524200
NSE Symbol
VINATIORGA
664/361
3,222
6.5
8244
Stock Performance
1Month
1Year
YTD
Absolute
4.6
36.0
34.8
Rel.to Nifty
3.7
30.1
30.4
Q1FY17 Q4FY16
Promoter
74.0
72.6
72.3
Public
26.0
27.4
27.7
Others
0.0
0.0
0.0
100.0
100.0
100.0
Total
Company Vs NIFTY
145
VINATIORGA
NIFTY
135
125
115
105
95
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
May-
Apr-16
Jan-16
Mar-16
Dec-15
75
Jun-16
85
Financials
Sales
EBITDA
PBT
Net Profit
EBIDTA %
PBT %
PAT %
Q2FY17
148
46
41
30
31.1%
27.7%
20.5%
Q1FY17
167
60
54
36
35.6%
32.4%
21.4%
Q2FY16
163
52
47
31
32.2%
28.9%
19.1%
QoQ
-11.4%
-22.7%
-24.2%
-14.8%
(456) Bps
(470) Bps
(83) Bps
Rs,Cr
YoY
-9.1%
-12.1%
-13.0%
-2.1%
(108) Bps
(124) Bps
147Bps
2
Key Risks:
Concern :
De-risk Strategy :
Concern :
De-risk Strategy :
Concern :
De-risk Strategy :
Concern :
De-risk Strategy :
Any Distortion in user Industry & Exposed to Government Policies of other countries
It is expected that the Indian chemical industry is expected to grow to reach US$ 300 Bn by 2021. Indias per
capita consumption of chemicals lower than that of other countries could trigger growth opportunity for the
Industry. Chemical industry is one of the most diversified covering sectors like inorganic chemicals, organic
chemicals, fine and specialties, drugs, agrochemicals; and it has registered a growth of 14% during the last 5
years. It is expected that the industry to hold the growth trajectory with strong government support for R&D,
100% FDI permitted through automatic route, rise in GDP and PPI hasgrowth potential for the domestic market.
VOL is well placed to grab the opportunities from the potential growth poised ahead.
Concern :
De-risk Strategy :
Concern :
De-risk Strategy :
70%
65%
60%
6.0%
8.0%
9.0%
31.0%
50%
45%
40%
30%
46.0%
20%
IBB
ATBS
IB
HPMTBE
FY16
Others
10%
0%
IBB marketShare
Enjoying synergy through strategic backward & forward integration. Capex plan to drive growth
VOL is carrying Rs. 700 Cr capex plan mostly to increase its product portfolio. The market acceptance of the new products is yet to be established. It has a
well track record of selecting products for its launch pipeline which have inherent synergies with the companys existing portfolio. They designed the
ongoing process to give the company competitive advantages for both backward and forward integration (See page no :11) . This ensures a high level of
supply chain control and quality assurance as well cost-efficiencies with better margins.Capacity utilisation, about 80-90 percent and planning a lot of
expansion or rather new product launches in the next two-three years. Announced an investment close to Rs 700 crore. Rs 500 crore is going to be
towards introducing a new product, para-aminophenol (PAP), which is like how IBB is used for ibuprofen, PAP is used for paracetamol. Will also be making
an investment of Rs 160-200 crore to make butylated phenols which are made from phenols and isobutylene. This will add about Rs 350 crore in
revenues, but these two products will come on stream in FY19. In FY18, revenue growth by virtue of ATBS growth as well as the new products that
started this year which include two customised products as well as P-Tert-Butyltoluene (PTBT), P-Tert-Butylbenzoic Acid (PTBBA), Tert-Butylamine (TB
Amine), etc.
ATBS - contributing ~45% to the top line - fully backward integrated. VOLs contribution towards revenue
from three main products.
Basic use of IBB to make ibuprofen which is a mature segment in pain killer drug market, hence demand likely to same. Company also
strategically lowered the IBB revenue segment. ATBS is used for different industries such as water treatment, oil and gas, personal care etc.
Current market shows a dip in demand from Oil Recovery segment. But demand from water treatment segment is good and likely to increase.
In FY17 volume may go in a slow pace but going forward it has to come back through recovery in oil segment backed by strong water
treatment demand. ATBS is having a 46% contribution towards revenue.
IB is a forward integration process to manufacture ATBS and used in agrochemicals where we expect a good growth in demand. This improves
the cost efficiency among its peers. Currently, VOL is the largest player for IBB (65% of the global market share). VOL started manufacturing
ATBS with an initial 1,200 MTPA, through the years it increased the capacity to 26,000 MTPA and is the world's largest manufacturer of ATBS
(45% of the global market share). VOL also commands a leadership position in India in another product it manufactures, HPMTBE (High Purity
Methyl Tertiary Butyl Ether).
Healthy Balance Sheet, Strong returns ratios and Healthy Cash Flows displays strong financial participation.
VOLs cash flow from operations has been consistently positive and never turned negative in the past 20 years. Despite the on-going capex
cycle, the company generated healthy Cash flow from operation for FY15 and FY16 of Rs 113Cr and Rs 167Cr, respectively. We believe VOLs
cash flow from operations or CFO will remain positive and will also continue over FY17E-FY18E. We expect WC days to remain in a similar
range. Company enjoys a D/E ratio at 0.08x and a high interest cover of 26.3. Management believe company will be debt free by FY17.
Management believe internal accrual will manage all the capex plans.
Management Highlights
Management currently enjoys D/E ratio at 0.3x and Will be debt free by end of FY17E.
The company has easily able to pass on crude price movements to customers.
ATBS accounts for 45 percent of the total revenue and makes up for 50 percent market share.
Capacity utilisation, about 80-90 percent and planning of expansion. Company is going to lunch new products in the next two-three years.
Company announced an investment close to Rs 700 crore. Rs 500 crore is going to be towards introducing a new product, para-aminophenol
(PAP), PAP is used for paracetamol. Will also be making an investment of Rs 160-200 crore to make butylated phenols which are made from
phenols and isobutylene. This will add about Rs 350 crore in revenues, but these two products will come on stream in FY19.
In FY18, revenue growth by virtue of ATBS growth as well as the new products that we started this year which include two customised
products as well as P-Tert-Butyltoluene (PTBT), P-Tert-Butylbenzoic Acid (PTBBA), Tert-Butylamine (TB Amine), etc.
IBB is a mature product its very common.about 3-5 percent annual growth rate in IBB, dependence on IBB as a product has been going
down. Initially, it was about 40 % of our revenue mix; today it is close to 25%.
ATBS Growing at about 10 percent and our revenues in ATBS grow at 15 percent.
H2FY17 is going to be in line with the first half. So, as far as revenues and profitability margins go, so company should be able to maintain
that.
5 yr Snapshot of Vinati organics : excellent management with a distinguished track record, making it a
compelling growth story
Net revenue from operation grown at a CAGR of ~20% during FY11-FY16 whereas EBITDA and PAT clocked a CAGR of ~26% and ~22%
respectively over the same period. Vinati organics abled to maintain its EBITDA margins at more than 22%; whereas NPM% recorded more
than 14%. The RoE is in a range 20%-30% and RoCE is at ~20% during the last 5 years. We expect Revenue, EBITDA and PAT to grow at CAGR of
12%, 15% and 15% respectively during FY18 to FY19E. Accordingly, we also expect RoE and ROCE to be intact above 20%
Vinati Organics, established in 1989 by Mr. Vinod Saraf, is a specialty chemicals company producing aromatics, monomers, polymers and
other specialty products. VOL started operations at its first plant in Mahad-Raigad in 1992, with its focus on IBB. In 2002, the company started
commercial production at its second plant in Lote, Ratnagiri, for manufacturing ATBS. Superior technology and strategic capacity expansion
plan made VOL the worlds largest manufacturer of IBB as well as ATBS (with 65% and 45% market share globally, respectively).
Narnolia Securities Ltd
Please refer to the Disclaimers at the end of this Report
QoQ
YoY
-11.4%
-36.8%
-11.6%
-19.0%
2.0%
-0.7%
-26.7%
-44.3%
-26.8%
-49.7%
27.6%
3.1%
-5.1%
-22.7%
1.3%
-25.0%
-66.6%
-24.2%
-42.6%
-14.8%
-14.8%
-31.5%
-13.3%
19.2%
-16.3%
-82.9%
-13.2%
-35.7%
-1.3%
-1.3%
Margin %
EBIDTA %
EBIT %
PAT %
3QFY15
QoQ
3QFY15
Growth calculation
Sales Growth
EBIDTA Growth
EBIT Growth
PAT Growth
3QFY15
26.3%
24.0%
15.3%
58.0%
4.0%
11.7%
73.7%
34.7%
14.8%
33.2%
35.6%
32.7%
4QFY15
28.3%
25.8%
18.5%
4QFY15
52.3%
4.4%
15.0%
71.7%
32.3%
4QFY15
-10.4%
9.7%
9.5%
17.4%
1QFY16
32.5%
29.7%
19.0%
1QFY16
47.8%
5.5%
14.2%
67.5%
34.3%
1QFY16
-17.6%
31.3%
34.4%
28.7%
2QFY16
3QFY16
32.2%
29.3%
19.1%
2QFY16
3QFY16
48.8%
5.4%
13.6%
67.8%
34.0%
2QFY16
4QFY16
33.2%
30.1%
19.8%
32.9%
29.8%
25.4%
4QFY16
47.1%
5.7%
14.0%
66.8%
33.5%
3QFY16
-17.1%
7.7%
8.1%
9.3%
44.7%
6.0%
16.3%
67.1%
16.1%
4QFY16
-24.7%
-4.8%
-5.5%
-2.1%
-11.8%
2.3%
1.8%
21.1%
1QFY17
35.6%
32.5%
21.4%
1QFY17
43.6%
6.1%
14.7%
64.4%
34.0%
1QFY17
2.3%
12.0%
11.7%
15.1%
2QFY17
QoQ
YoY
481Bps
341Bps
529Bps
YoY
QoQ
YoY
Segment Sales
FY08
IBB in Cr
ATBS in Cr
IB In Cr
HPMTBE
Others In Cr
Revenue from Operations in Cr
Domestic Sales in Cr
Export Sales in Cr
FY09
100
40
0
0
7
146
53
93
FY10
184
123
0
0
16
191
46
145
FY11
118
100
0
0
14
232
56
176
FY12
106
184
13
0
19
323
71
252
FY13
179
215
36
0
18
447
107
340
FY14
238
227
55
0
33
553
171
381
FY15
244
285
90
0
77
696
230
466
FY16
232
355
93
31
62
772
247
525
196
290
57
38
50
631
208
423
7
200
Net Sales
196
EBITDA
174
150
144
150
160
149
137
145
100
50
53
31
50
32
53
31
52
31
51
30
51
39
60
36
46
30
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
EBIDTA %
35.5% 36.4% 36.8% 34.0% 37.1%
70
60
40.0%
31.8%
30.0%
27.0% 28.5%
50
40
30
53
53
50
20
52
51
51
20.0%
60
46
10.0%
10
0.0%
0
3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
4.5
Depreciation (Cr)
4.6
4.4
5.4
5.3
Interest (Cr)
4.6
4.6
4.7
4.0
3.0
2.8
2.5
2.2
2.0
2.0
1.4
1.2
0.8
1.0
0.0
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
Gross Margin %
EBIDTA %
EBIT %
60.0%
50.0%
40.0%
30.0%
47.7%
52.2%
51.2%
52.9%
42.0%
26.3%
32.5%
32.2%
33.2%
18.5%
19.0%
19.1%
19.8%
4QFY15
1QFY16
2QFY16
3QFY16
28.3%
20.0%
10.0%
55.3%
PAT %
60.2%
56.4%
32.9%
25.4%
15.3%
35.6%
31.1%
21.4%
20.5%
1QFY17
2QFY17
0.0%
3QFY15
4QFY16
50.0%
800
700
600
500
400
300
200
100
191
232
FY09
FY10
323
447
553
696
772
40.0%
30.0%
20.0%
10.9%
10.0%
0.0%
631
-10.0%
-18.2%
-20.0%
We expect the revenue to grow at a CAGR of 12% during FY18FY19E. We expect a muted growth during FY17E on the back of
falling crude prices that could affect the ATBS realization. We
expect that the recovery of crude prices and increase in demand of
its products other than ATBS could pull the sales.
-30.0%
0
FY11
FY12
FY13
FY14
FY15
FY16
60.2%
60.0%
191
122
232
133
323
183
447
268
553
335
FY09
FY10
FY11
FY12
FY13
300
200
50.0%
40.0%
COGS % to sales
772
400
457
500
47.0%
696
600
70.0%
59.2%
Revenue from
Operations (Net)
COGS
700
100
59.8%
56.8%
FY14
FY15
30.0%
631
57.3%
20.0%
296
64.0%
800
419
900
We expect the falling crude prices could reduce the input cost. We
also expect that with upgraded technologies and with further
R&D, it could achieve better material and energy efficiencies.
10.0%
0.0%
FY16
250
EBITDA
200
21.6%
21.2%
21.8%
35.0%
30.0%
24.8%
22.0%
25.0%
17.8%
FY10
FY12
FY13
153
120
53
FY09
95
34
50
70
100
207
20.0%
192
150
22.7%
EBIDTA%
15.0%
10.0%
5.0%
0.0%
FY11
FY14
FY15
FY16
25.0%
PAT
17.3%
100
20.9%
20.0%
16.1%
13.2%
15.0%
12.2%
12.4%
52
55
40
25
FY11
FY12
10.0%
86
40
69
60
20
15.0%
12.4%
116
80
PAT %
132
120
5.0%
0.0%
FY09
FY10
FY13
FY14
FY15
FY16
ROE %
35.0%
30.0%
ROCE %
24.0%
22.6%
25.0%
20.0%
15.4%
18.5%
21.7%
14.7%
15.0%
36.2%
29.3%
28.5%
27.8%
26.7%
24.3%
10.0%
FY11
FY12
FY13
FY14
FY15
FY16
5.0%
0.0%
0.90
0.83
0.80
0.70
0.60
0.50
0.43
0.39
0.40
0.30
0.20
0.09
D/E Ratio
0.10
0.03
0.00
FY11
FY12
FY13
FY14
FY15
FY16
4.1
4.0
3.5
3.2
3.1
3.0
2.7
2.5
2.8
2.7
Current Ratio
2.0
1.5
1.0
0.5
0.0
FY11
FY12
FY13
FY14
FY15
FY16
17.5%
17.0%
20.9%
21.0%
20.1%
20.0%
14.4%
15.0%
Dividend Payout
10.0%
5.0%
0.0%
FY11
FY12
FY13
FY14
FY15
FY16
10
30.0
25.0
20.0
15.0
10.0
5.0
0.0
EV/EBDITA
10.0
5.0
25.0
20.0
5.0
5.0
0.0
0.0
2.7 2.3
1.9 2.2
30.0
15.0
6.6
4.8
7.5
30.0
10.0
5.8
6.7
5.9
7.3
15.0
8.2
20.0
11.7
7.4 7.3
ROCE
5.7 5.5
13.7
12.912.9
12.411.9 12.8
11.011.4
9.5
9.3 9.9
25.6
21.1
22.0
22.5
27.4
24.6
23.7
21.8
28.2
24.1
20.0
30.0
11.1
11.1
20.6
26.8
23.8
ROCE
3.1
ROCE
25.6
21.1
22.0
22.5
27.4
24.6
23.7
21.8
28.2
24.1
20.0
18.9
18.4
19.4
15.0
18.9
18.4
ROE
P/E
5.0
19.4
35.0
30.0
11.1
10.0
ROE
10.0
14.1
20.0
11.1
15.0
20.0
20.6
0.0
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
25.0
14.1
20.0
25.0
26.8
23.8
14.1
20.6
11.1
19.4
11.1
18.9
18.4
25.6
21.1
22.0
22.5
27.4
24.6
23.7
21.8
28.2
24.1
20.0
25.0
1.9
28.8
2.2
29.3
2.7
28.8
2.3
32.1
3.4
28.8
2.1
28.5
2.0
27.1
1.7
25.0
3.1
26.7
4.5 27.8
4.9 29.2
5.5 26.3
5.2 26.2
6.2 26.7
5.8 26.4
4.7 25.3
4.6 23.7
3.7 24.3
4.9 23.6
4.9 23.6
30.0
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
35.0
P/B
26.8
23.8
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
5.0
6.6 28.8
7.5 29.3
9.3
28.8
7.3 32.1
28.8
11.7
7.4 28.5
7.327.1
6.725.0
26.7
11.8
27.8 16.0
29.2 16.7
26.3
20.9
26.2
20.0
26.7
23.4
26.4
21.9
25.3
18.8
23.7
19.3
24.3 15.2
23.6
20.6
23.6
20.6
10.0
ROE
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
15.0
4.8
28.8
5.8
29.3
6.7
28.8
5.9
32.1
8.2
28.8
5.7
28.5
5.5
27.1
4.9
25.0
7.6
26.7
9.3
27.8
9.9
29.2
12.4 26.3
11.9
26.2
13.7 26.7
12.8 26.4
11.0
25.3
11.4 23.7
9.5
24.3
12.9 23.6
12.9 23.6
35.0
201112
201203
201206
201209
201212
201303
201306
201309
201312
201403
201406
201409
201412
201503
201506
201509
201512
201603
201606
201609
P/B
4.5 4.9
5.5 5.2
25.0
20.9
20.0
16.016.7
23.4
21.9
18.819.3
3.7
4.9 4.9
0.0
P/E
20.620.6
15.2
9.3
11.8
6.7
0.0
EV/EBDITA
4.9
7.6
11
Product Segment : Each product is well positioned through strategic backward integration
Facilities
Location
Products manufactured
Capacity
As On
Plant1
Mahad-Raigad,Maharashtra
IBB and NBB
16000TPA
Total capacity as on 31 March, 2016
Plant2
Lote-Ratnagiri, Maharashtra
ATBS, NaATBS, TBA, IB, HPMTBE, DAAM
47500TPA
Total capacity as on 31 March, 2016
4000
3500
3000
5.1x
2500
3.9x
2000
1500
2.8x
1000
1.6x
500
0
P/B Band
Narnolia Securities Ltd
Please refer to the Disclaimers at the end of this Report
12
Product :
Applications :
C 10 Aromatic (Solvent)
Isobutylene (IB)
13
Product :
Applications :
Methanol
Hexene
Vinflow (HT)
Pharmaceutical industry
Paint and varnish industry
Perfume industry
Manufacture of formaldehyde
Chemical synthesis (sodium methoxide, dimethyl ether and methyated
derivatives)
Low cost solvent in some organic synthesis
Extract solvent for pharmaceutical synthesis
Synthesis of grignards reagent
Low boiling point solvent
Used as thinners
Hydrocarbon resins
Solvent extractions
Tyre re-treading
Octane booster for gasoline
Manufacturing C-5 / C-6 aliphatic petroleum
Construction
Ceramics
Oil drilling
Mining
Leather
Paper
Construction
Ceramics
Oil drilling
Mining
Leather
Paper
14
B/S
FY13
Share capital
Reserves and surplus
Net Worth
Long-term borrowings
Short-term borrowings
Deferred tax liabilities
Trade payables
Short-term provisions
Total Liabilities
Fixed assets (Total )
Longterm Loans advance
Non-current assets
Current investments
Inventories
Trade receivables
Cash and bank balances
Total Assets
10
231
241
136
65
26
16
17
546
304
0
304
13
55
113
34
546
BALANCE SHEET
FY14
FY15
10
300
310
110
12
33
14
21
552
314
5
322
3
47
115
43
552
10
424
434
37
2
39
22
26
599
347
10
358
3
54
129
27
599
FY13
14
49
2.5
21.0%
RATIOS
FY14
FY15
17
23
63
88
3.0
3.5
20.1% 17.5%
FY16
27
110
3.9
17.0%
7.4
2.1
1.2
4.2
1.2
16.0
4.5
2.1
9.0
2.1
22.4
6.0
3.4
13.5
3.4
14.6
3.5
2.9
9.3
2.9
28.5%
14.7%
27.8%
18.5%
26.7%
22.6%
24.3%
21.7%
1.0
75
36
10
0.8
1.3
60
24
7
0.4
1.3
61
26
10
0.1
0.9
61
26
10
0.0
FY16
C/F
10
530
541
13
3
49
22
12
687
407
15
424
3
45
115
72
687
103
10
-22
125
-18
-12
19
92
-156
43
-113
6
-10
22
2
32
34
129
15
-37
158
1
8
3
134
-29
4
-9
7
-12
-113
12
34
45
173
18
-52
188
-11
-8
-4
113
-42
-15
-53
5
-12
-75
-16
43
27
187
18
-45
205
14
10
-16
167
-73
-3
-72
3
-18
-50
45
27
72
15
HOLD
KEC International
6-Jan-17
Result Update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
146
165
13%
-
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Av. Volume
Nifty
532714
KEC
153/97
3,744
30699
8191
Stock Performance
Absolute
Rel.to Nifty
1Month
3 Month
1Year
4.2
3.5
15.4
21.4
-8.0
-10.9
Promoters
Public
51%
49%
1QFY17 4QFY16
51%
49%
51%
49%
KECs Management, in its recent interview, has said that the Q3 will not be
great in terms of revenue growth. The companys domestic business was
impacted due to non availability of labour and trucks. Management is not
sure enough to achieve its revenue guidance of 10% growth in FY17. But
management is confident to maintain 8.5% of EBITDA margin in current
fiscal year. According to our view, in short run, companys revenue growth will
remain lackluster but medium to long run growth remains intact.
Robust Revenu visibility in Railway:Railway Ministry has set target to award 2000 Km, 4000 Km and 6000 km of
overhead electrification orders in FY17, FY18 and FY19 respectively. In
railways, KEC commands 20% market share, which may translate into
approx.2400 Cr of expected new orders in FY18E. Order Intake in Railway
segment is up by 158% in H1FY17 and it is the lowest bidder in 400 Cr of
orders. Railway ministrys focus on execution helps contractor to execute
project smoothly and timely. We expect improvement in EBITDA margin
based on increase volume and speedy execution.
Reduction in Debt through efficient working capital management:KEC has reduced gross debt by Rs. 300 cr with the help of better AR
management (reduction of Rs 485 Cr). Working capital days improved to
229 days from 246 days. Management expects to release retention money
from project in Saudi as project gets completed in next 2-3 months. Hence, it
will lead to further reduction in working capital days. Company aims to bring it
down to 180 days by the year end.
Company Vs NIFTY
120
KEC
NIFTY
110
100
90
80
In short run, companys revenue growth will remain lackluster but medium to
long-term growth remains intact. Efficient working capital management
strengthened balance sheet position and we expect it to continue going
forward. We expect to ramp up in an execution of substation (T&D) projects
and railway projects. Robust opportunity in railway segment with improving
margin will help KEC to post healthy numbers going forward. But considering
the short-term uncertainty, we maintain HOLD on the stock with unchanged
target price of Rs. 164
70
In Rs. Cr
60
50
40
Sandip Jabuani
sandip.jabuani@narnolia.com
Financials
Sales
EBITDA
Net Profit
EBIDTA%
PAT
Q2FY16
2021
155
44
7.7%
2.2%
Q1FY17
1785
150
31
8.4%
1.7%
Q2FY17
2121
185
65
8.7%
3.1%
YoY %
5%
20%
47%
QoQ %
19%
24%
110%
16
Railway business reported robust revenue growth of 94% YoY to Rs. 66 Cr as against Rs. 34 Cr in same period last year.
Railways current order book stands at Rs. 1186 Cr (7x of FY16 Revenue) and management expects to close order book around
Rs. 1200 Cr by year end.
Order Book
Order Intake
Book to bill
10785
10,403
9,487
9,351
9,872
10,537
9,508
8,770
9,320
10,325
37%
2000
1500
1000
500
-5%
-13%
-37%
-7%
-8%
-33%
3103
4,000
42%
2825
63%
2500
1877
6,000
3000
2246
1506
106%
3085
Growth YoY%
3500
2423
8,000
1100
10,000
2,000
Order Intake
1892
12,000
2808
Order Book
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
17
Segmental Revenue
EBITDA margin
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
8.7%
7.3%
5.9%
5.6%
7.5%
7.7%
7.8%
8.4%
8.7%
Managment guided
8.5% EBIDTA margin
for the FY17
5.1%
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
4%
4%
4%
4%
4%
3%
4%
3%
3%
3%
2.8%
3%
3%
2%
2%
1%
1%
0%
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
18
FY14
7902
14
7916
4099
48%
883
493
6%
71
423
263
173
88
51%
67
15
26
Share Capital
Reserves
Net Worth
Long term Debt
Short term Debt
Deferred Tax
Total Capital Employed
Net Fixed Assets
Capital WIP
Debtors
Cash & Bank Balances
Trade payables
Total Provisions
Net Current Assets
Total Assets
FY14
51
1140
1192
603
1207
73
1794
992
18
3808
144
3213
125
1374
7411
FY15
8468
146
8614
4566
46%
917
512
6%
88
424
309
261
100
38%
161
18
26
FY16
8516
10
8527
4148
51%
975
679
8%
88
592
277
325
133
41%
192
57
26
FY17E
8943
10
8954
4561
51%
1020
760
9%
84
676
274
412
144
35%
268
80
26
EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
Profitability Ratios
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Net Debt/Equity (x)
RATIOS
FY14
2.6
46.3
0.6
23%
FY15
6.3
51.7
0.7
11%
FY16
7.4
58.8
2.2
30%
FY17E
10.4
66.1
3.1
30%
26.0
1.5
0.87%
12.8
1.5
0.88%
16.4
2.1
1.82%
15.8
2.5
1.88%
6%
24%
12%
20%
13%
28%
16%
29%
1.1
175.9
45.0
148.4
0.51
1.1
166.1
38.1
143.3
0.55
1.0
192.6
37.8
126.0
0.40
1.1
193.0
38.0
126.0
0.35
FY14
155
71
113
499
(9)
161
(136)
305
263
15
132
(14)
146
132
CASH FLOW
FY15
FY16
261
325
88
88
122
135
596
853
153
(51)
90
78
125
18
640
264
309
277
17
58
(216)
(63)
62
(96)
132
194
194
98
FY17E
412
84
144
770
478
0
0
0
274
80
(354)
124
111
235
BALANCE SHEET
FY15
51
1278
1330
737
1308
70
2067
881
16
3853
206
3325
122
1668
7745
FY16
51
1460
1512
602
1723
66
2114
860
12
4495
111
2939
114
2151
8138
FY17E
51
1648
1700
602
1723
66
2302
860
0
4729
0
3087
114
2187
8322
19
BUY
MAHINDRA & MAHINDRA LIMITED
Result Update
CMP
1221
Target Price
1600
31%
Market Data
BSE Code
500520
NSE Symbol
M&M
1509/1092
75,845
Av. Volume
90339
Nifty
8,191
1Month
1Year
YTD
Absolute
3.9
-12.7
-1.9
Rel.to Nifty
3.3
-6.4
-7.0
2QFY17 1QFY17
PAT Margin was increased by 230 bps YoY to 11% because of higher other
income which came in the form of special dividend received from Tech M,
Mahindra holidays and Swaraj Engines.
4QFY16
26.8
26.8
26.9
73.2
-100.0
73.2
-100.0
73.1
-100.0
Company Vs NIFTY
125
Public
Others
Total
M&M posted strong volume growth in the Farm Equipment segment with a
growth of 22% YoY during the 3QFY17. Good Monsoon and recovery in the
rural areas helped the company to garner strong growth in this quarter. M&M
commands 43% market share in the tractor segment putting Mahindra and
Swaraj brands together. Management expects rural demand to remain robust
on good monsoon. Growing competitiveness in the utility vehicle segment is a
concern for Mahindra because earlier launches by Maruti & Hyundai have taken
the large share from the market leader. The market share has reduced to 29%
from 35% in the UV segment. We assume that M&M will further respond to the
changing dynamics in the utility vehicle segment going ahead. Recovery in the
Ssangyong is a good sign for UV segment. Going forward, the management
has guided for 15-20% growth in the UV segment, 20% growth for tractor
industry and single digit for the commercial vehicle space in FY17.
M&M have reported 14% YoY growth in net revenue in 2QFY17 due to 12%
growth in Automotive and 36% growth in Farm Equipment segment.
Stock Performance
Promoter
5-Jan-17
M&M
NIFTY
120
115
110
105
Outlook
Management believes that the demonetization issue may have short term
negative impact on Farm Equipment segment. They expect this concern will
last for next 4 months but sticks with previous growth guidance of 20% for
tractor industry in FY17. We believe that the tractor industry may not see much
slow-down because the monsoon was good during the year and almost 90% of
the tractors are financed. New launches in 2HFY18 in Tractor and SUV
segments will make the Mahindras presence further stronger in the domestic
market. Ssangyong have also seen recovery on nine month basis and it may
post positive results in the current fiscal after three consecutive years of losses.
Considering the strong volume growth and recovery in the non- performing
business we recommend 'BUY' with a target price of Rs.1600.
100
Rs. In crore
95
90
85
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Jul-16
Aug-16
Jun-16
Apr-16
May-16
Jan-16
Mar-16
Dec-15
80
Financials
2QFY17
1QFY17
2QFY16
QoQ
YoY
Sales
EBITDA
Net Profit
EBIDTA%
PAT %
10609
1233
1163
11.6%
11.0%
11041
1286
955
11.6%
8.7%
9276
1008
915
10.9%
9.9%
-4%
-4%
22%
14%
22%
27%
naveen.dubey@narnolia.com
Narnolia Securities Ltd
Please refer to the Disclaimers at the end of this Report
20
M&M
Investment Arguments
Monsoon has played a significant role in shaping the rural demand in favour of M&M, because about 90% of the tractors and
more than 40% of the utility vehicles have been sold in rural areas by the company. So M&M remains the big beneficiary of
improving rural demand in long run.
Recently launched "Yuvo" brand tractors have made the Farm Equipment segment portfolio stronger and M&M is all set to take
advantage of growing demand of 41-50 HP tractors. This category contributes more than 45% of total tractor sales.
The Company has built adequate manufacturing capacity for the immediate future and is planning to invest in additional capacity
in preparation for the mid to long term.
The company is strengthening its presence in neighbouring markets of Sri Lanka and Bangladesh.
Ssangyong have also seen recovery on nine month basis and it may post positive results in the current fiscal after three
consecutive years of losses. It can be a new growth driver for M&M in utility vehicles segment and this could lead further expansion
in margins of the company going ahead.
Management Highlights
There will be short term negative impact of demonetization on the farm equipment segment and the management expects that
this concern may last for next 4 months.
Rural economy looks positive for Q3 & Q4 on good monsoon. 20% industry volume growth in Tractor segment for FY17.
80-85 percent UVs and 90% Tractors are financed through Banks & NBFCs.
15-20 percent growth in UV segment in next 6 months.
CV segment will end up high single digit for the rest of the year.
There will not be significant price change in the truck segment due to GST.
Other income was higher due to special dividend received from Tech M, Mahindra holidays and Swaraj Engines,
The company will be llaunching 2 new vehicles in UV segment in Q2FY18.
Ssangyong has a capital expenditure plan of more than $700 million for the next three-four years to bring out one new product
every year.
Mahindra and the Ssangyong version of the SUV will drive the Korean brands ambitious entry into the North American market by
2020.
36%
40%
22%
20%
0%
5%
3%
30%
20%
12%
10%
0%
76486
61658
74595
43321
-10%
62666
45246
-16% -26%
62358
38604
59714
61152
-24% -30%
74555
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Growth
-20%
-30%
-40%
21
M&M
Financials Snap Shot
Net Revenue
Other Income
Total Revenue
COGS
GPM
Other Expenses
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
PBT
Tax
Tax Rate (%)
Reported PAT
Dividend Paid
No. of Shares
FY13
68,693
389
69,082
41,892
39%
11,132
9,116
13%
2,080
7,036
2,297
5,128
1,935
38%
4,099
934
61
INCOME STATEMENT
FY14
FY15
74,001
71,949
505
525
74,506
72,474
44,893
42,850
39%
40%
12,342
13,444
10,120
8,793
14%
12%
2,170
2,124
7,951
6,669
2,954
3,157
5,502
4,038
1,496
1,720
27%
43%
4,667
3,137
1,009
872
62
62
Share Capital
Reserves
Net Worth
Long term Debt
Short term Debt
Deferred Tax
Total Capital Employed
Net Fixed Assets
Capital WIP
Debtors
Cash & Bank Balances
Trade payables
Total Provisions
Net Current Assets
Total Assets
FY13
295
19,666
19,961
19,860
3,368
894
39,821
17,941
1,120
5,177
4,937
11,911
4,286
11,462
76,470
BALANCE SHEET
FY14
FY15
295
296
23,012
25,561
23,307
25,856
25,492
22,327
2,781
7,177
1,202
1,287
48,799
48,183
19,228
21,315
1,244
1,273
5,725
5,476
6,523
4,912
11,800
11,355
5,089
5,654
14,817
13,195
88,270
94,844
FY16
78,016
541
78,557
45,340
42%
15,036
9,647
12%
2,582
7,066
3,373
4,234
1,864
44%
3,211
872
62
FY16
296
28,323
28,620
25,096
8,251
1,552
53,716
24,186
806
6,419
4,906
13,628
5,901
14,739
108,223
EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
Profitability Ratios
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Net Debt/Equity (x)
FY13
67
325
15.2
23%
FY16
52
461
14.0
27%
4.0
0.8
5.63%
6.3
1.3
3.43%
12.8
1.6
2.16%
23.4
2.6
1.16%
21%
18%
20%
16%
12%
14%
11%
13%
0.9
27.5
73.3
63.3
1.0
FY13
OP/(Loss) before Tax
5,128
Depreciation
2,085
Direct Taxes Paid
(1,781)
OP before WC changes
7,663
CF from Op. Activity
(922)
(45,661)
Capex
(3,291)
CF from Inv. Activity
(2,788)
Repayment of Long Term Borrowings
(54,392)
Interest Paid
(638)
Divd Paid (incl Tax)
(997)
CF from Fin. Activity
4,508
Inc/(Dec) in Cash
799
Add: Opening Balance
3,139
Closing Balance
3,823
RATIOS
FY14
FY15
76
51
378
416
16.4
14.0
22%
28%
0.8
28.2
67.9
58.2
1.1
0.8
27.8
72.0
57.6
0.9
30.0
85.6
63.8
0.9
22
BUY
MARUTI SUZUKI INDIA LIMITED
3-Jan-17
Result Update
CMP
5466
Target Price
6100
12%
Market Data
BSE Code
532500
NSE Symbol
MARUTI
5972/3202
165120
Av. Volume
52910
Nifty
8,180
Stock Performance
1Month
1Year
YTD
Absolute
7.8
-3.8
18.4
Rel.to Nifty
6.7
2.6
15.5
Royalty stood at Rs.1088 crore (6.1% of sales) during the quarter due to
appreciation in Yen.
4QFY16
56.2
56.2
56.2
43.8
-100.0
43.8
-100.0
43.8
-100.0
Company Vs NIFTY
140
Maruti reported Rs.17843 crore of net sales in 2QFY17 a growth of 29% over
previous year. This was driven by 18% volume growth and 9% realization
growth YoY.
2QFY17 1QFY17
Public
Others
Total
EBITDA margin improved to 17% by 150bps YoY higher steel prices and
employee cost.
MARUTI
NIFTY
130
120
Outlook
We expect current demonetization issue may not be impacting much in the
long run to the passenger vehicle segment because more than 75% vehicles
are financed. But this issue may be hampering sales in near future due to
cash crunch in the economy. We assume volumes in the second half may be
down by 10% in comparison to the first half 2017. Higher sales of premium
segment cars will further increase the realization per car, which will in turn
maintain the margins going ahead despite the rising commodity prices.
Hence we have positive view on this stock and we recommend "BUY" with a
target price of Rs.6100.
110
Rs. In crore
100
90
Dec-16
Nov-16
Oct-16
Sep-16
Jul-16
Aug-16
Jun-16
May-16
Apr-16
Mar-16
Jan-16
Feb-16
Dec-15
80
Financials
2QFY17
1QFY17
2QFY16
QoQ
YoY
Sales
EBITDA
Net Profit
EBIDTA%
PAT %
17843
3037
2398
17.0%
13.4%
14927
2216
1486
14.8%
10.0%
13851
2245
1497
16.2%
10.8%
20%
37%
61%
29%
35%
60%
naveen.dubey@narnolia.com
Narnolia Securities Ltd,
23
MARUTI
Investment Arguments
In the recent past a series of new product launches have been successful for the company. It was a strategic decision to enter in
those segments where it has very few or no products. The same way the company is planning to launch 15 new products till 2020.
Maruti is onset to unleash the potential in the international business by targeting European and Latin American markets. Recently
launched and upcoming new products are technologically sound and competent to the export markets.
Gujarat plant will begin its commercial production in 4QFY17 and this plant will take care of new models and the exports. It will
take 6 months to ramp up the production and there will be some cost pressure going ahead due to higher depreciation and fixed
cost on new plant.
Maruti is also aggressively working towards bringing down the import content in its cars from an average 16% at the end of FY16
to 10% as part of its vision 2.0 plan. Currently about 14 percent of imports are yen denominated. Management expects to bring it
down to 5 percent. Typically, 1% movement in yen leads to around 1% change in the operating profit of Maruti.
Management Highlights
Lower double digit growth guidance for FY17 due to current demonetisation issue. 25% decline in retail sales in rural areas and
25% enquiries have been impacted in urban areas.
Maximum impact on taxi part, specially Ola and Uber. They contributes to 30% of the volumes.
Export may remain flat in FY17
Management expects 50000 Baleno's to be exported to Japan. Apart from Japan, the vehicle is being exported to Europe,
Australia, New Zealand and Latin America.
Maruti's newly launched light commercial vehicle, Super Carry, is also exported to South Africa and Tanzania and will be exported
to SAARC countries in the future.
Gujarat plant is likely to be commissioned in Q4FY17. Management expects it will take 6 months to ramp up.
Steel prices have started going up and its impact may be seen in second half of the year.
Margins can come under pressure once the Gujarat plant becomes operational due to higher fixed cost and depreciation.
Capex- Rs.4500 crore,(Rs.2000 crore for maintenace and R&D, Rs.1000 crore on marketing expenses and Rs.1500 crore on
product development.
The waiting period for Brezza is 27 weeks and for Baleno 33 weeks. Maruti has increased the production for Baleno by 25% to
meet customer requirements.
The company has 15 new models in the pipeline, which will come out by 2020.
Volumes Trend
Volume
Volume Growth
18%
17%
16%
2%
387251
4%
418,470
374182
353335
341329
7%
346712
323,911
321,898
10%
348443
13%
360402
14%
12%
299,894
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
3%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
24
MARUTI
Financials Snap Shot
FY14
Revenue (Net of Excise Duty)44,451
Other Income
831
Total Revenue
45,281
COGS
31,853
GPM
28%
Other Expenses
5,970
EBITDA
5,204
EBITDA Margin (%)
12%
Depreciation
2,116
EBIT
3,088
Interest
185
PBT
3,734
Tax
902
Tax Rate (%)
24%
Reported PAT
2,855
Dividend Paid
424
No. of Shares
30
Share Capital
Reserves
Net Worth
Long term Debt
Short term Debt
Deferred Tax
Total Capital Employed
Net Fixed Assets
Capital WIP
Debtors
Cash & Bank Balances
Trade payables
Total Provisions
Net Current Assets
Total Assets
FY14
151
21,345
21,496
627
1,238
596
22,124
13,673
2,640
1,489
649
5,000
873
7,561
31,411
INCOME STATEMENT
FY15
FY16
50,801
58,612
865
472
51,666
59,084
35,615
39,318
30%
33%
6,741
8,115
6,844
9,119
13%
16%
2,515
2,867
4,329
6,252
218
94
4,976
6,630
1,185
1,999
24%
30%
3,807
4,699
884
1,237
30
30
FY17E
65,460
134
65,594
44,348
32%
8,709
10,068
15%
2,425
7,643
67
7,710
2,513
33%
5,266
1,386
30
EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
Profitability Ratios
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Net Debt/Equity (x)
BALANCE SHEET
FY15
FY16
151
151
24,167
27,598
24,318
27,749
278
147
53
91
484
475
24,597
27,896
14,380
13,989
1,890
1,013
1,144
1,387
43
77
5,657
7,127
1,652
2,137
(234)
(3,965)
34,479
40,270
FY17E
151
31,477
31,628
147
101
475
31,775
15,178
1,549
551
7,960
2,391
(3,850)
45,529
FY14
OP/(Loss) before Tax
3,734
Depreciation
2,116
Direct Taxes Paid
(858)
OP before WC changes
5,111
CF from Op. Activity
4,995
(13,100)
Capex
(3,545)
CF from Inv. Activity
(4,997)
Repayment of Long Term Borrowings
(22)
Interest Paid
(170)
Divd Paid (incl Tax)
(283)
CF from Fin. Activity
(74)
Inc/(Dec) in Cash
(76)
Add: Opening Balance
165
Closing Balance
89
FY14
94
712
14.0
15%
RATIOS
FY15
FY16
126
156
805
919
29.3
41.0
23%
26%
FY17E
174
1,047
45.9
26%
24.0
3.2
0.62%
29.3
4.6
0.79%
23.9
4.0
1.10%
28.1
4.7
0.94%
13%
14%
16%
18%
17%
22%
17%
24%
1.4
12.2
20.2
41.1
0.0
1.5
8.2
27.4
40.6
0.0
1.5
8.6
29.7
44.4
0.0
1.4
8.6
32.0
44.4
0.0
25
ACCUMULATE
IRB Infrastructure Developers Ltd.
Result Update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
196
235
20%
-
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Av. Volume
Nifty
532947
IRB
269/177
6,888
159708
8104
Stock Performance
Absolute
Rel.to Nifty
1Month
3 Month
1Year
3.8
5.3
-24.4
-17.1
-20.0
-22.2
Promoters
Public
57%
43%
1QFY17 4QFY16
57%
43%
58%
42%
Company Vs NIFTY
120
IRB
NIFTY
2-Jan-17
Robust construction revenue visibility:IRB has reported strong construction revenue growth of 28% YoY in H1FY17
despite heavy monsoon. Current order book stands at Rs.11061Cr (including
Kishangarh-Glubpura project) i.e. 4x of FY16 construction revenue. Healthy
order book provides robust construction revenue visibility going forward.
Execution during the Q2FY17 was impacted due to heavy and extended
monsoon but we expect to ramp up in execution in the 2nd half of the year.
Ramp up in the execution of ongoing projects and Agra Etawah will drive the
EPC revenue growth in FY17 and 3 projects in Rajasthan will drive the growth
in FY18.
Arbitration awards:Recently, IRB Goa Tollway Pvt. Ltd. and IRB Ahmadabad-Vadodara super
express tollway Pvt. Ltd, wholly owned subsidiaries of the company, has won
an arbitral award of Rs. 241Cr and Rs. 20 Cr respectively. It will help the
company to reduce its debt.
InvIT will unlock Value:IRB has filed DRHP (Draft Red Hiring Prospectus) for its InvIT with SEBI and
company is in an advanced stage to get approval. IRB is in the process to
raise Rs. 4300 Cr through InvIT IPO. These proceed will be utilized for the
debt reduction and for the future projects.
Demonetization Impact: Toll collection on all national highways remains to suspend for 24 days due to
demonetization. As per our calculation, IRB lost around Rs. 150 Cr of toll
collection across all the projects. Revenue loss will be compensated by NHAI
in two parts (i) some portion in cash and (ii) balance portion will be
compensated by way of extension of the concession period. The company
does not witness any big dip in traffic post the commencement of tolling. we
expect little stretch in working capital on a consolidated level as toll collection
has impacted. Executions of projects remain stable as we do not see any
major challenges on that front.
110
100
In Rs. Cr
90
80
70
60
50
40
Sandip Jabuani
sandip.jabuani@narnolia.com
Financials
Sales
EBITDA
Depreciation
Interest
Net Profit
EBIDTA%
PAT %
TaX % of PBT
Q2FY16
1,149
605
203
240
149
53%
13%
22%
Q1FY17
1,517
774
221
328
182
51%
12%
29%
Q2FY17
1,291
709
227
340
142
55%
11%
19%
YoY%
12%
17%
12%
42%
-5%
QoQ%
-15%
-8%
3%
3%
-22%
26
Concall Highlights :-
No big dip in traffic post the tolling resume on all toll plaza
IRB has secured Kishangarh Udaipur project in December, after winning this project
company has completed its target of acquiring new projects of 330 km in FY17.
IRR of 16-18% on Kishangarh Udaipur project after premium payment to NHAI
IRB is pre-qualified in project worth Rs. 16600 Cr.
The company aims to win 300 km project (including 230 km already won)
NHAI and related State authority will compensate revenue loss by way of adjusting
premium and revenue share payment.
Current Toll collection at Agra-Etwah project is 35lakh/day and likely to go up by 4550% post full completion of the project
IRB has filed DRHP of InvIT and waiting for the Sebis replay and expect to lunch in
January
The Company will have to infuse equity of Rs. 1600-1800 Cr over period of two years.
Tax reversal of Rs.15-18 Cr in Q2FY17
Solapur- Yedeshi and Kaithal Rajasthan project will gets complete by H1FY18
Company has received appointment date for the 1)Gulabpura- Chittorgarh and
Udaipur- Gujarat Border project and work will start from 1 st april 2017
Outlook and Valuation :Firstly EPC revenue was impacted due to heavy monsoon during Q2FY17 and secondly
suspension of toll collection for the period of 24 days because of demonetization will
affect the top line of the company in FY17. We expect top line of Rs. 5627 Cr (Growth of
10% YoY) with healthy 52.7% EBITDA margin in FY17E. Significant reduction in debt post
the InvIT IPO and an arbitral award will boost the bottom line of the company. At a current
price of Rs. 191 stock trades at 7.3x to FY17 expected EV/EBITDA and 1.3x to P/B. The
stock has corrected nearly 18% post demonetization announcement which makes this
stock attractive at this price with present fundamentals. Hence, we revised our rating
from HOLD to ACCUMULATE with target price of Rs.235
About the Comapny :IRB Infrastructure Developers Limited is a road buildoperatetransfer (BOT) operator.
The Company's principal activity is the construction and maintenance of roads. Its
business segments include Road Infrastructure Projects, which includes development and
operation of roadways; Real Estate, which includes real estate development, and Others,
which includes windmill (sale of electricity generated by windmill), hospitality and airport
infrastructure. Its construction business complements its BOT vertical by executing
engineering, procurement and construction, and operation and management (O&M)
aspects of BOT concessions. It has a portfolio of over 20 Road BOT projects. It has inhouse integrated project execution capabilities in both its business verticals, including
construction, and operation and maintenance of highways.
Narnolia Securities Ltd
Please refer to the Disclaimers at the end of this Report
27
Order Book
Order book
Book to bill
17
15
12
10
9,746
17,321
11,468
12,116
12,631
12,954
11,587
11,348
11,974
7,795
8,739
11
10
14
12
11,394
12
7,030
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
20
18
16
15
14
12
10
8
6
4
2
-
As % of Order Book
8%
13%
Yedeshi Aurangabad
Kaithal Rajasthan Border
6%
16%
2%
2%
Solapur Yedeshi
Sindhudurg Airport
Agra Etawah
Gulabpura -Chittorgarh
18%
18%
17%
Revenue Mix
1,200
Construction
BOT Toll
70%
EBITDA M
60%
1,000
56%
800
600
45%
50%
59%
58%
58%
57%
50%
53%
52%
48%
51%
56%
40%
30%
400
755
569
913
601
978
593
808
524
703
476
613
524
516
503
510
483
477
435
606
431
598
320
591
315
20%
690
277
200
50%
10%
0%
28
FY14
3732
121
3853
1650
0
148
1754
47%
477
1277
756
642
182
28%
459
194
33
FY15
3847
113
3960
1306
0
140
2212
57%
707
1505
931
686
144
21%
543
164
35
FY16
5130
124
5254
2054
0
170
2661
52%
853
1807
1063
868
232
27%
636
164
35
RATIOS
FY17E
5627
128
5755
0
0
0
2965
53%
903
2062
1347
843
194
23%
647
164
35
EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
Profitability Ratios
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Net Debt/Equity (x)
FY14
14
107
6
42%
FY15
15
124
5
30%
FY16
18
137
5
26%
FY17E
18
151
5
25%
7
1
5.66%
15
2
2.00%
13
2
2.01%
10
1
2.45%
13%
9%
12%
10%
13%
10%
12%
10%
0.2
0.5
59.4
39.9
2.64
0.1
0.5
72.6
22.2
2.48
0.1
7.4
54.9
21.7
2.62
0.1
7.4
54.9
21.7
2.85
BALANCE SHEET
Share Capital
Reserves
Net Worth
Long term Debt
Short term Debt
Deferred Tax
Total Capital Employed
Net Fixed Assets
Capital WIP
Debtors
Cash & Bank Balances
Trade payables
Total Provisions
Net Current Assets
Total Assets
FY14
332
3228
3561
9398
897
22
12959
13041
48
6
1501
408
289
879
15712
FY15
351
4009
4361
10804
631
19
15165
36599
80
5
1580
234
219
477
39393
FY16
351
4476
4827
12652
1189
16
17479
39169
78
104
1559
305
169
510
42181
CASH FLOW
FY17E
351
4958
5309
15117
1189
16
20427
40594
78
114
0
335
322
-1378
42088
FY14
642
477
232
1749
1656
0
3002
(2743)
888
740
194
1274
186
257
443
FY15
686
707
216
2216
1823
1
2311
(2295)
794
1317
78
474
2
443
445
FY16
868
853
312
2719
2342
0
3161
(3175)
1140
1435
254
667
(165)
445
279
29
FY17E
841
903
194
3091
2116
0
2328
(2328)
0
1347
164
954
742
1559
2301
Neutral
BIOCON LTD
30-Dec-16
Company Update
CMP
930
Target Price
Previous Target Price
880
Upside
Change from Previous
Market Data
BSE Code
532523
NSE Symbol
BIOCON
1020/431
18,604
73
8,693
3M
12M
Absolute
0.5
82.8
67.4
Rel.to Nifty
2.5
80.6
63.1
1QFY17 4QFY16
60.7
37.5
1.8
100.0
Public
Others
Total
60.7
60.7
37.4
1.9
100.0
37.4
-100.0
Company Vs NIFTY
200
Q2FY17_Result Update
EBITDA rose 45% to Rs 277 Cr; Net Profit stood at Rs 147 Cr a growth of
52% over last year.
Stock Performance
1M
2QFY17
BIOCON
NIFTY
180
160
140
120
Financials
2012
2013
2014
2015
Rs,Cr
2016
100
Sales
EBITDA
Net Profit
EPS
P/E
2148
517
338
17
14.1
2538
475
509
25
10.8
2933
518
414
21
20.5
3143
617
497
25
18.9
3570
784
896
30
19.0
Dec-16
Oct-16
Nov-16
Sep-16
Aug-16
Jul-16
Jun-16
Apr-16
May-16
Mar-16
Jan-16
Feb-16
Dec-15
80
Aditya Gupta
aditya.gupta@narnolia.com
30
Segment Revenue
286
638
263
270
526
602
250
576
316
225
581
632
238
587
220
172
527
531
188
535
192
183
513
548
188
166
457
CRAMS(Rs in Cr)
542
140
486
155
129
463
533
122
440
BIOPHARMA(Rs in Cr)
31
2,485
53
2,538
1,045
42%
576
475
19%
179
296
8
408
98
24%
509
116
20
FY13
Share Capital
Reserves and surplus
Shareholders' funds
Long term Debt
Total Borrowings
Non Current liabilities
Long term provisions
Short term Provisions
Current liabilities
Total liabilities
Net Fixed Assets
Non Current Investments
Other non Current assets
Current assets
Total Assets
100
2,595
2,695
164
249
502
4
247
905
4,416
1,823
65
41
2,240
4,416
2,877
56
2,933
1,186
41%
707
518
18%
204
315
2
538
107
20%
414
175
20
3,090
53
3,143
1,256
41%
737
564
18%
221
343
9
519
96
18%
497
119
20
3,485
85
3,570
1,330
38%
831
688
20%
242
446
10
652
257
39%
896
119
20
EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
Dividend Yield (%)
Profitability Ratios
RoE
RoCE
Turnover Ratios
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Net Debt/Equity (x)
BALANCE SHEET
FY14 FY15 FY16
100
2,927
3,027
606
850
656
8
177
1,136
5,751
2,731
65
47
2,639
5,751
100
3,171
3,271
770
1,031
608
15
158
1,294
6,375
3,307
137
2,563
6,375
100
3,956
4,056
2,072
2,467
415
30
88
1,233
8,482
3,910
166
3,993
8,482
FY13
25
135
6
0.23
RATIOS
FY14 FY15
21
151
9
0.42
25
164
6
0.24
FY16
45
203
6
0.13
11
2
2%
21
3
2%
19
3
1%
11
2
1%
19%
10%
14%
9%
15%
8%
22%
7%
0.56
75
59
51
0
0.50
76
48
44
0
0.48
91
53
51
0
0.41
86
54
57
1
610
179
(94)
758
471
1,904
(359)
(376)
(21)
(8)
(100)
(9)
87
387
474
538
204
(149)
672
561
1,642
(789)
(938)
(19)
(1)
(150)
426
49
508
557
624
221
(133)
698
211
2,943
(838)
(509)
(15)
(1)
(100)
186
(112)
574
463
1,227
242
(247)
818
526
2,784
(811)
(954)
(54)
(11)
(200)
1,087
659
468
1,127
32
Risk Disclosure & Disclaimer: This report/message is for the personal information of
the authorized recipient and does not construe to be any investment, legal or taxation
advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any
action based upon it. This report/message is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or
redistributed to any other person in any from. The report/message is based upon publicly
available information, findings of our research wing East wind & information that we
consider reliable, but we do not represent that it is accurate or complete and we do not
provide any express or implied warranty of any kind, and also these are subject to change
without notice. The recipients of this report should rely on their own investigations,
should use their own judgment for taking any investment decisions keeping in mind that
past performance is not necessarily a guide to future performance & that the the value of
any investment or income are subject to market and other risks. Further it will be safe to
assume that NSL and /or its Group or associate Companies, their Directors, affiliates
and/or employees may have interests/ positions, financial or otherwise, individually or
otherwise in the recommended/mentioned securities/mutual funds/ model funds and
other investment products which may be added or disposed including & other
mentioned in this report/message.