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Reuters code Bloomberg Code BSE Sensex 52week H/L (Rs) Monthly H/L (Rs) MktCap (Rs mn) MktCap (US$ mn) EV (Rs mn) ABRL.BO ABNL IN 500303 16,748 994/710 994/869 99,049 2,226 172,724
Q1FY12 CONSOLIDATED PERFORMANCE
Aditya Birla Nuvo continued its strong performance across its various businesses. Its life insurance business contributed significantly to the bottomline during Q1FY12 because of its growing in-force book, lower new business strain and better expense management. The company reported:
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Revenues at Rs. 47,675 mn were up by 23.6% YoY EBITDA was up significantly by 45.5% YoY to Rs. 7,475 as EBITDA margin improved from 13.3% in Q1FY11 to 15.7% in Q1FY12 on account of improved operational performance of the life insurance, telecom, fashion & lifestyle and manufacturing businesses Depreciation was up by 17.9% YoY to Rs. 2,608 mn and interest costs were up 43.2% YoY to Rs. 1,938 mn. Profit before tax was up substantially by 77.2% YoY to Rs. 3,530 mn; net profit at Rs. 2,532 mn was up by 70.1% YoY
OUTLOOK
Life Insurance business to continue its strong performance The life insurance business continues to build on its strong performance during FY11. While new business premium de-grew by 39% YoY for the life insurance industry on account of new guidelines, Birla Sun Life Insurance reported second lowest de-growth among the top 7 private life insurers. Its market share among private players in terms of weighted new business premium increased to 8.8% from 8.1% in Q1FY11.
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Shareholding Pattern
We expect the life insurance business to continue its strong performance on the back of its growing in-force book, lower new business strain, balanced product mix between non-ULIP and ULIP products and better expense management. Idea Cellular to add value through margin expansion Idea Cellular, which is serving a large base of over 95 mn subscribers currently, is expected to see margin expansion as it benefits from improving pricing environment in the telecom sector as witnessed in the recent tariff hikes. Further, its rising revenue share and cost efficiencies are also expected to help improve margins. Capacity and margin expansion to drive manufacturing businesses We expect capacity expansion in Carbon Black, Caustic Soda and Insulators businesses and robust demand in textiles business to drive revenue growth for this segment. Improvement in operational efficiencies, along with ability to pass on rise in input and fuel costs, is expected to improve margins across its various manufacturing businesses. 1
PRIME BROKING
VALUATION
Our sum-of-the-parts (SOTP) valuation of Aditya Birla Nuvo is Rs. 1,335 implying an upside potential of about 53% over CMP. Exhibit: SOTP Valuation Business Financial Services - Life Insurance Enterprise ABNLs ABNLs Share Valuation Methodology Value (Rs. mn) Stake (%) of EV (Rs. mn) 98,894 74.0 73,182 As on March 31, 2012: Embedded Value: Rs. 51,453 mn VNB: Rs. 3,403 mn VNB Margin: 18.0% Multiplier: 14.0x 11,620 3.0% of AUM 9,930 P/B of 2.0x FY12E BV 849 EV/EBITDA of 5.0x FY12E no.s 77,782 @ Idea Cellulars CMP of Rs. 92.8/share 10,082 MCap/Sales of 0.6x FY12E Sales 12,482 EV/Sales of 0.6x FY12E Sales 39,744 EV/EBITDA of 5.0x FY12E no.s 235,671 57,401 178,269 15.0% 151,529 114 1,335
- Asset Management - Non-Banking Finance - Other Financial Services (Broking, WM, Ins. Advisory) Telecommunication IT/ITeS Fashion & Lifestyle Manufacturing Total Enterprise Value (Rs. mn) Less: Net Debt (Rs. mn) Business Value (Rs. mn) Conglomerate Discount Adjusted Business Value (Rs. mn) No. of Shares Outstanding Per Share Value (Rs./share)
Source: Prime Broking KEY RISKS
The key downside risks are: 1) Exposure to the risk of fluctuation in prices of raw materials as well as finished goods across its various business segments 2) Exposure to fluctuations in exchange rates of various foreign currencies on its revenues/expenses as well as it multi-currency debt portfolio 3) Price controls and other regulatory risks
PRIME BROKING
Annexure I: Quarterly Consolidated Performance
Rs mn Sales EBITDA margin (%) Depreciation PBIT Interest Other income EO PBT Tax PAT Share in profit in associates/JV Minority Interest Adjusted PAT NPM (%) Source: Company, Prime Broking Q1FY12 47,675 7,475 15.7% 2,608 5,468 1,938 602 3,530 614 2,916 0 384 2,532 5.2% Q1FY11 38,570 5,137 13.3% 2,213 3,345 1,354 422 1,992 445 1,547 0 58 1,489 3.8% 557.2% 70.1% 77.2% 38.1% 88.5% 17.9% 63.4% 43.2% 42.6% YoY 23.6% 45.5%
PRIME BROKING
Annexure III: Consolidated Balance Sheet Statement
Rs mn Share Capital, Warrants, etc Reserves & Surplus Networth Loan Funds Minority Interest Deferred Tax Liability Policyholders Fund Fund for Future Appropriations Total Liabilities Net Fixed Assets Goodwill on Consolidation Investments, etc Cash & Bank Balances Other Current Assets Current Liabilities Net Current Assets Total Assets FY09 (A) 5,049 52,374 57,423 88,868 1,793 2,220 85,969 1,290 237,561 66,720 34,226 110,846 15,344 41,035 30,609 25,769 237,561 FY10 (A) 2,853 51,894 54,748 74,386 1,858 2,440 153,535 2,984 289,951 69,884 28,923 169,599 7,948 47,466 33,869 21,545 289,951 FY11 (A) 1,611 65,172 66,783 93,009 2,785 2,645 185,201 4,570 354,992 89,914 28,923 208,049 8,506 60,949 41,348 28,106 354,992 FY12 (E) 1,611 76,322 77,933 85,009 4,385 2,645 228,863 4,570 403,405 90,989 28,923 251,711 11,333 64,232 43,784 31,782 403,405 FY13 (E) 1,611 91,844 93,455 75,009 6,225 2,645 283,844 4,570 465,747 90,501 28,923 306,693 15,861 74,558 50,788 39,631 465,747
PRIME BROKING
Annexure V: Key Financial Ratios
FY09 (A) Net Sales Growth EBITDA Growth EBIT Margin Net Profit Margin Debt to Equity Ratio Interest Coverage Ratio Inventory Turnover (Days) Debtor Turnover (Days) Return on Asset Return on Equity 14.3% -41.2% -0.7% -3.1% 1.5 24 34 -1.8% -0.4% FY10 (A) 43.0% 138.0% 2.9% 0.8% 1.3 0.9 18 24 0.5% 2.0% FY11 (A) 0.7% 74.9% 8.0% 4.1% 1.3 2.8 23 26 2.3% 4.4% FY12 (E) 16.2% 21.9% 9.1% 5.1% 1.0 3.2 23 28 2.9% 5.1% FY13 (E) 16.2% 16.8% 9.6% 6.0% 0.8 4.4 22 27 3.5% 5.5%
PRIME BROKING
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Prime / Prime Subsidiaries Key Prime Management &/or Other Employees Any Other Corporate Finance Conflict of Interest
No Yes No
Expect 25% CAGR return Expect a CAGR return 15% and 25% Expect 15% CAGR return Expect 5% CAGR return
This document has been prepared by Prime Broking Company (India) Limited (Prime). The information, analysis and estimates contained herein are based on Primes assessment and have been obtained from sources believed to be reliable. This document is meant for the use of the intended recipient only.This document, at best, represents Primes opinion and is meant for general information only. Prime, its Directors, Officers or Employees shall not in any way be responsible for the contents stated herein. Prime expressly disclaims any and all liability that may arise from information, errors or omissions in this connection. This document is not to be considered as an offer to sell, or a solicitation to buy any securities. Prime, its affiliates and their employees may from time to time hold positions in the securities referred to herein. Prime or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document.