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Emkay Global Financial Services Ltd. January 06, 2010 | 1

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Result UpdateMay 30, 2011

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Contents

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2/43Emkay Global Financial Services Ltd 2

May 30, 2011

Reco

Buy

Previous Reco

BuyCMP

Rs120

Target Price

Rs149

EPS change FY12E/13E (%) -3.6 / -1.5

Target Price change (%) -4%

Nifty 5,476

Sensex 18,266

Price Performance

(%) 1M 3M 6M 12M

Absolute (1) 9 (6) 13

Rel. to Nifty 7 6 0 4

Source: Bloomberg

Relative Price Chart

100

110

120

130

140

150

May -10 J ul -10 Sep- 10 Nov -10 J an-11 Mar -11

Rs

-10

-4

2

8

14

20%

Jagran Prakashan (LHS) Rel to Nifty (RHS)

Source: Bloomberg

Stock DetailsSector Print Media

Bloomberg JAGP@IN

Equity Capital (Rs mn) 633

Face Value(Rs) 2

No of shares o/s (mn) 316

52 Week H/L 148/104

Market Cap (Rs bn/USD mn) 38/840

Daily Avg Volume (No of sh) 104862

Daily Avg Turnover (US$mn) 0.3

Shareholding Pattern (%)

Mar-11 Dec-10 Sep-10

Promoters 52.7 55.3 55.3

FII/NRI 10.6 11.0 10.4

Institutions 17.4 18.3 18.8

Private Corp 7.4 6.5 3.7

Public 11.8 8.9 11.8

Source: Capitaline

St r ong ad r evenue g r ow t h o f 19 . 7% yoy t o Rs Rs1 .9bn , on t he

back o f imp r ov ing y ie lds. Ci r cu la t i on r ev . up 6 . 3% t o

Rs558mn . O t he r bus iness r ev . g r ew 47 . 8% t o Rs292mnEBITDA im proved by 12 .9% yoy , how ever , EBITDA marg i n

d e c l i n e d b y 1 5 0b p s . L e d b y h i g he r r a w m a t e r i a l c o s t & o t h e r

expenses w h ich esc a la t ed 34 . 8% yoy 13 . 7% yoy

Mid-Day rev . g rew 7 .6% yoy t o Rs1.1bn fo r FY11. EBITDA &

PAT we r e l ow e r a t Rs145mn and Rs20mn , r esp . Dec l i ne i s

a t t r i bu t ed t o change o f acc oun t i ng po l i c i es t o same as JPL s

Given t he esc a la t i on i n c os t s , we cu t EPS es t . by 3 . 6 /1 . 5% f o r

FY12E/13E. Va lua t ions a t 15 .3x /12 .1 fo r FY12E 13E. Reta in

BUY r a t i ng w i t h r ev i sed TP o f Rs 149 ( ea r l i e r Rs155 )

Revenue better than estimates but with dented margin

Jagran Prakashan reported better than expected results on the top line front. Revenue

growth of 19.6% yoy to Rs2826mn, driven by strong ad revenue growth coupled with

improvement in circulation and better performance from other businesses (Event, Digital

and Outdoor). EBITDA was up 12.9% yoy to Rs714mn but EBITDA margin declined by

150bps to 25.3%. Higher newsprint cost and escalation in other expenditure (higher

opex in other businesses) led to low margins during Q4FY11. PAT growth of 15.7% yoy

to Rs 420mn (our estimate of Rs433mn) was partly aided by lower tax rate of 27.9%.

JPL has announced final dividend of Rs3.5.

Strong advertisement revenue growth

Ad revenue for the quarter stood at 1.9bn, up 19.7% yoy. It was better than our

expectations of 16% growth, led by improvement in yields . As JPL is consolidating itsposition in all the markets, we expect it to post strong ad revenue for next financial also.

Mid-Day financials re-aligned as per JPLs accounting policies

JPL reported Mid-Day financials for FY11. Revenue grew by 7.6% yoy to Rs1.1bn,

driven by 6.97% growth in ad revenue and 4.4% yoy growth in circulation revenue.

EBITDA declined from Rs193mn to Rs145mn and PAT was at Rs20mn v/s 93mn in

FY10. Decline in both EBITDA and PAT is attributed to change in accounting policies to

align with JPLs accounting policy. Revenue recognition and higher provisioning for the

doubtful debts has impacted ~Rs50mn at EBITDA level. One time adjustment in

depreciation policy (changed to WDV from SLM) led to increase in depreciation cost to

Rs90mn v/s 2.7mn in FY10. JPL has also re-financed Mid-Day debt from 14% to 10%.

Other businesses on track

Event and outdoor revenues stood at Rs292mn v/s 197mn in Q4FY10. Digital revenue

grew 65.9% to Rs22mn. For FY11 Event and outdoor revenues grew 32.6% to Rs939mn

and Digital 169.3% to Rs82mn. Both outdoor and Event business reported net profit

Retain BUY rating with revised target price Rs149 (earlier Rs155)

Given the cost escalations, we cut EPS est. by 3.6/1.5% for FY12E/13E. Maintain BUY

rating on the stock with revised target price of Rs149. At CMP of Rs120, stock trades at

15.3x /12.1x our EPS estimate for FY12E/13E.

Financial Snapshot Rs Mn

Y/E Net EBITDA PAT EPS EPS ROE EV/

Mar Sales (Core) (%) (Rs) (Rs) % chg (%) P/E EBITDA P/BV

FY10 9419 2823 30.0 1759 5.6 92.0 28.6 21.6 13.4 6.2

FY11P 12211 3568 29.2 2078 6.6 18.2 29.8 18.2 10.9 5.4

FY12E 13786 4082 29.6 2484 7.9 19.4 28.5 15.3 9.3 4.4

FY13E 15509 4988 32.2 3132 9.9 26.1 28.2 12.1 7.5 3.4

Re

sultUpdate

Jagran Prakashan

Mixed bag, Maintain BUY

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Jagran Prakashan Result Update

Emkay Research 30 May 2011 3

Mid-Day Financials Rs Mn

Mid-Day FY10 FY11P

Revenue 989.9 1,065.2

EBITDA 193.0 145.8

EBITDA% 19.5 13.7

PAT 93.4 20.6

PAT% 9.4 1.9

Quarterly financials

Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 YoY (%) QoQ (%) YTD11 YTD10 YoY (%)

Sales 2,363 2,698 2,769 2,860 2,826 19.6 (1.2) 11,153 9,418 18.4

Raw Material 675.8 755.7 801.2 863.4 911.1 34.8 5.5 3,331 2,736 21.8

as % of sales 28.6 28.0 28.9 30.2 32.2 29.9 29.0

Employee Cost 319.5 347.4 353.7 363.2 365.5 14.4 0.6 1,430 1,212 17.9

as % of sales 13.5 12.9 12.8 12.7 12.9 12.8 12.9

SG&A expenses 735.0 693.4 705.3 736.2 835.5 13.7 13.5 2,970 2,648 12.2

as % of sales 31.1 25.7 25.5 25.7 29.6 26.6 28.1

Total operating exp 1730.3 1796.5 1860.1 1962.9 2112.0 22.1 7.6 7731 6596 17.2

EBITDA 632.5 901.7 908.4 897.5 714.2 12.9 (20.4) 3,422 2,822 21.2

Depreciation 134.9 124.9 132.7 146.2 160.4 19.0 9.7 564.3 507.5 11.2

EBIT 497.7 776.8 775.7 751.3 553.7 11.3 (26.3) 2857 2315 23.5

Other Income 66.0 57.5 64.0 55.3 55.1 (16.5) (0.4) 231.9 342.5 (32.3)

Interest 23.9 12.3 14.0 20.9 24.8 3.8 18.7 72.0 65.7 9.6

PBT 539.8 822.0 825.7 785.7 584.0 8.2 (25.7) 3017.4 2591.5 16.4

Tax 175.9 266.0 270.6 259.3 163.2 (7.2) (37.1) 959.1 833.2 15.1

Effective tax rate% 32.6 32.4 32.8 33.0 27.9

PAT 363.8 555.9 555.1 526.4 420.8 15.7 (20.1) 2058.3 1758.3 17.1

EPS 1.2 1.8 1.8 1.7 1.3 15.7 (20.1) 6.5 5.6 17.1

Margin % (bps) (bps)

EBIDTA 26.8 33.4 32.8 31.4 25.3 (150) (611) 30.7 30.0 71

EBIT 21.1 28.8 28.0 26.3 19.6 (147) (667) 25.6 24.6 104

EBT 22.8 30.5 29.8 27.5 20.7 (218) (680) 27.1 27.5 (46)

PAT 15.4 20.6 20.0 18.4 14.9 (51) (351) 18.5 18.7 (21)

ETR 32.6 32.4 32.8 33.0 27.9 (465) (505) 31.8 32.2 (36)

Cut in EPS estimates by 3.6/ 1.5% for FY12E/13EWith the recent spike in newsprint prices and managements guidance on expansion of

Inquilab and launch of Punjabi Jagran edition, we have cut our EBITDA margin by 123bps

for FY12E and 112bps for FY13E. We believe the margin pressure would ease post FY12E

as it would complete its lined up expansion of new editions and cost increase due to launch

of DB corps Bihar launch would also happen in FY12E.

Particulars FY12E FY13E

Old New % Change Old New % Change

Revenue 1,357.8 1378.6 1.5 1,524.6 1550.9 1.7

EBITDA 418.8 408.2 -2.5 507.4 498.8 -1.7

EBITDA Margin % 30.8 29.6 -123 bps 33.3 32.2 -112 bps

PAT 257.5 248.4 -3.6 318.0 313.2 -1.5

EPS 8.1 7.9 -3.6 10.1 9.9 -1.5

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Financials

Income statement Balance Sheet

Y/E, Mar (Rs. mn) FY10 FY11P FY12E FY13E Y/E, Mar (Rs. mn) FY10 FY11P FY12E FY13E

Net Sales 9,419 12,211 13,786 15,509 Equity share capital 602 633 633 633

Growth (%) 14.4 29.6 12.9 12.5 Reserves & surplus 5,551 6,333 8,077 10,469

Raw material 2,736 3,590 3,857 4,169 Net worth 6,153 6,966 8,709 11,101

Employee cost 1,212 1,727 1,875 1,987 Loan Funds 1,214 1,794 1,594 1,194

SG&A expenses 2,648 3,327 3,971 4,365 Net deferred tax liability 580 620 620 620

Total Liabilities 7,947 9,379 10,923 12,915

Total operating expenditure 6,596 8,643 9,704 10,520 Gross Block 5,635 7,245 8,335 9,425

EBITDA 2,823 3,568 4,082 4,988 Less: Depreciation 1,945 2,555 3,200 3,901

Growth (%) 80.1 26.4 14.4 22.2 Net block 3,690 4,690 5,135 5,524

Depreciation 507 655 687 743 Capital work in progress 251 250 300 300

EBIT 2,315 2,913 3,396 4,245 Investment 1,666 2,366 2,366 2,366

EBIT margin (%) 24.6 23.9 24.6 27.4 Current Assets 4,201 4,773 5,326 6,990

Other Income 343 256 329 429 Inventories 533 567 617 665

Interest expenses 66 91 72 72 Sundry debtors 1,812 2,122 2,410 2,943

Exceptional items 0 25 0 0 Cash & bank balance 880 479 561 1,249

PBT 2,592 3,054 3,652 4,602 Loans & advances 717 1,376 1,459 1,754

Tax 833 976 1,169 1,470 Other current assets 259 229 279 379

Effective tax rate (%) 32.1 32.0 32.0 31.9 Net Current liabilities 1,861 2,700 2,205 2,265

PAT 1,759 2,078 2,484 3,132 Provisions 0 0 0 0

Growth (%) 92.0 18.1 19.5 26.1 Net current assets 2,340 2,073 3,122 4,725

Total Assets 7,946 9,379 10,923 12,915

Cash Flow Ratios

Y/E, Mar (Rs. mn) FY10 FY11P FY12E FY13E Y/E, Mar FY10 FY11P FY12E FY13E

PBT 2,250 2,800 3,324 4,173 Profitability (%)

Depreciation 507 655 687 743 Core EBITDA Margin 30.0 29.2 29.6 32.2

Interest 66 91 72 72 Net Margin 16.7 16.2 16.7 18.6

Other Non-Cash items 59 38 0 0 ROCE 31.4 33.3 33.0 34.5

Chg in working cap -311 -134 -966 -915 ROE 28.6 29.8 28.5 28.2

Tax paid -833 -976 -1,169 -1,470 RoIC 48.3 51.0 48.6 50.9

Operating Cashflow 1,738 2,473 1,947 2,603 Per Share Data (Rs)

Capital expenditure -459 -1,654 -1,182 -1,132 EPS (adjusted) 5.6 6.6 7.9 9.9

Free Cash Flow 1,280 819 765 1,471 CEPS 7.2 8.6 10.0 12.3

Other income 343 256 329 429 BVPS 19.5 22.0 27.5 35.1

Investments -98 -700 0 0 DPS 3.3 3.5 2.0 2.0

Investing Cashflow -214 -2,098 -853 -703 Valuations (x)

Equity Capital Raised 0 30 0 0 PER 21.6 18.2 15.3 12.1

Loans Taken / (Repaid) -201 580 -200 -400 P/CEPS 16.7 13.9 12.0 9.8

Interest Paid -66 -91 -72 -72 P/BV 6.2 5.4 4.4 3.4

Dividend paid (incl tax) -1,233 -1,295 -740 -740 EV / Sales 4.0 3.2 2.8 2.4

Financing Cashflow -1,500 -776 -1,012 -1,212 EV / EBITDA 13.4 10.9 9.3 7.5

Net chg in cash 24 -401 82 688 Dividend Yield (%) 2.8 2.9 1.7 1.7

Opening cash position 856 880 479 561 Gearing Ratio (x)

Closing cash position 880 479 561 1,249 Net Debt/ Equity 0.1 0.2 0.1 0.0Net Debt/EBIDTA -0.5 -0.3 -0.3 -2.2

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Recommendation History: Jagran Prakashan JAGP IN

Date Reports Reco CMP Target

28/02/2011 Jagran Prakashan Management Meet Update Buy 112 155

31/01/2011 Jagran Prakashan Q3FY11 Result Update Buy 120 155



Recent Research Reports


23/05/2011 LMW Q4FY11 Result Update Accumulate 2,126 2,535

19/05/2011 DB Corp Q4FY11 Result Update Hold 240 271

18/05/2011 HT Media Q4FY11 Result Update Buy 156 183

13/05/2011 Tulip Telecom Q4FY11 Result Update Buy 163 218

http://reports.emkayshare.com/downloads/researchreports/Jagran%20Prakashan%20Management%20Meet%20Update_280211.pdfhttp://reports.emkayshare.com/downloads/researchreports/Jagran%20Prakashan%20Q3FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Jagran%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Jagran%20Prakashan%20Q1FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Lakshmi%20Machine%20Works%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/DB%20Corp%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/HT%20Media%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Tulip%20Telecom%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Jagran%20Prakashan%20Management%20Meet%20Update_280211.pdfhttp://reports.emkayshare.com/downloads/researchreports/Jagran%20Prakashan%20Q3FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Jagran%20Prakashan%20Q1FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Jagran%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Tulip%20Telecom%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/HT%20Media%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/DB%20Corp%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Lakshmi%20Machine%20Works%20Q4FY11%20Result%20Update.pdf

8/2/2019 8 Stocks Emkay 310511


May 30, 2011

Reco

Accumulate

Previous Reco

AccumulateCMP

Rs1,836

Target Price

Rs1,960

EPS change FY11E/12E (%) NA / -85.4

Target Price change (%) NA

Nifty 5,473

Sensex 18,232

Price Performance

(%) 1M 3M 6M 12M

Absolute (9) 8 (8) (6)

Rel. to Nifty (3) 5 (1) (12)

Source: Bloomberg


1500

1660

1820

1980

2140

2300

May -10 J ul -10 Sep-10 Nov -10 J an-11 Mar- 11

Rs

-30

-22

-14

-6

2

10%

Shree Cements (LHS) Rel to Nifty (RHS)

Source: Bloomberg

Stock DetailsSector Cement

Bloomberg SRCM@IN


Face Value(Rs) 10


52 Week H/L 2,324/1,505

Market Cap (Rs bn/USD mn) 64/1,420





Promoters 64.8 64.8 64.8

FII/NRI 16.8 17.4 16.7



Public 4.0 4.0 4.2

Source: Capitaline

Re

sultUpdate

Shree CementOperating level performance in line-Maintain ACCUMULATE

n EBITDA o f Rs2 .96bn (+88% qoq) - in l ine w i th es t imat es .

How eve r acce le r a t ed dep r ec ia t i on ( on Ja ipu r g r i nd ing un i t

cap i t a l i sed in Q4FY11) , d rags APAT t o a meag er Rs102m n

n Revenues o f Rs10.7bn (+13.4% yoy) cam e in exa c t ly in l ine ,

l ed by 6 . 8% r evenue g r ow t h i n c emen t r evenues ( Rs9 .5bn )

and imp r ess i ve 121% yoy g r ow t h i n pow er r evenues ( Rs1 .2bn )

n Upgrade FY12 EBITDA by 3 .8%, bu t c u t FY12E EPS es t im ates

by t o EPS o f Rs13.8 on acc oun t o f r ev i sed dep r ec ia t i on

gu idance .I n t r oduce FY13 es t im a t es w i t h EPS o f Rs175

n Change in FY12 EPS does no t a f f ec t ou r t a r ge t as i t s d r i ven

by dep r ec ia t i on ( non c ash cha r ge ) . Con t i nue t o va lue Sh r ee

on 6X FY12 EV /E. Maint a in ACCUMUL ATE. Targ et - Rs1,960

Q4FY11 operating performance meets expectation

Shrees Q4FY11 EBITDA of Rs2.96bn grew 88% qoq (-17.1% yoy), in line with

estimates , with 744bps sequential improvement in EBIDTA margins at 27.7%.

Revenues of Rs10.7bn (+13.4% yoy) came in exactly in line, led by 6.8% revenue

growth in cement division (Rs9.5bn) and impressive 121% yoy growth in power

revenues (Rs1.19bn). Cement volumes grew 7.5% yoy (2.88mnt) while realizations

though stood flat yoy, improved 15.7% sequential ly. Pure Grey Cement realizations at

Rs3432/t, improved 16.2% qoq.

Sharp improvement in realization boost cement EBIDTA/t to Rs847

Cement EBITDA/t at Rs847, improved 52% qoq, as 16% sequential improvement in

cement realization helped protect margins against cost increases. Total cost /t of

Rs2380 increased 13% yoy led by 24% increase in higher raw material cost/t and 28%

increase in P&F costs per tonne (As Shree completely relies on imported petcoke,

prices of which have gone up by 44% yoy and 16% qoq).

2.3X jump in power volumes drives 68% jump in power EBIDTA

Power revenues grew on the back of impressive 2.3X jump in volumes (257mn units vs

78 mn sold in Q4FY10). Power volumes increased as Shree commissioned ~100 MW of

earlier in the year and as power offtake improved in the usually deficit 4Q. Power

realisation came in better than expected at Rs4.65/unit leading to power EBIDTA of

Rs520 mn, +68% yoy and up 3.3X qoq . Cost of power/unit declined 9% yoy & 7.5% qoq

with resultant EBITDA/unit at Rs2, sequential improvement of 24%.

Accelerated depreciation drags net profit to a meager Rs102 mn

Shrees depreciation charges jump 2x sequentially to Rs2.65bn, (higher than estimates

of Rs1.4bn) as it charged accelerated depreciation (on Jaipur grinding unit capitalised in

Q4FY11). This coupled with lower than expected other income (Rs209mn vs 428mn)

and higher assets write off (Rs343mn vs estimated 60mn) led to a APAT of just

Rs102mn, (adjusted for prior period tax of Rs555 mn). Reported net profit of Rs657mn

(-192% yoy) was lower than estimates of Rs1016m.

Financial Snapshot

YE- Net EBITDA EPS RoE EV/ EV/

Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA Tonne

FY10 36,321 14,919 41.1 7,197 206.6 24.5 47.3 8.9 4.4 126.7

FY11P 35,118 8,857 25.2 1,506 43.2 -79.1 7.9 42.5 7.6 103.2

FY12E 44,918 11,429 25.4 482 13.8 -68.0 2.4 132.6 5.6 90.9

FY13E 53,713 13,842 25.8 6,109 175.4 1166.8 27.0 10.5 3.8 61.8

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Shree Cement Result Update


Result Tables

Y/E, Mar (Rs. m) Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 YoY (%) QoQ (%) FY11P FY10 YoY (%)

Net Sales 9,440 9,445 7,176 7,796 10,701 13.4 37.3 35,119 36,321 -3.3

Total Expenditure 5,871 6,550 5,749 6,221 7,742 31.9 24.5 26,262 20,992 25.1

as % of sales 62% 69% 80% 80% 72% 75% 58%

Consumption of RM 842 927 757 919 1,121 33.1 22.0 3,723 3,238 15.0

as % of sales 9% 10% 11% 12% 10% 11% 9%

Stock Adjustement -29 -299 186 -49 -175 506.3 258.4 -336 -197 70.9

as % of sales 0% -3% 3% -1% -2% -1% -1%

Purchase of traded goods 22 484 115 11 15 -33.7 32.1 625 92 580.4

as % of sales 0% 5% 2% 0% 0% 2% 0%

Employee Cost 408 478 491 479 537 31.8 12.0 1,985 1,495 32.8

as % of sales 4% 5% 7% 6% 5% 6% 4%

Power, Oil & Fuel 1,779 2,274 1,762 2,068 3,020 69.8 46.0 9,123 6,105 49.4

as % of sales 19% 24% 25% 27% 28% 26% 17%

Freight expenses 2,043 1,783 1,639 2,016 2,313 13.2 14.7 7,751 7,404 4.7

as % of sales 22% 19% 23% 26% 22% 22% 20%

Other expenditure 807 903 799 777 912 13.0 17.4 3,390 2,856 18.7

as % of sales 9% 10% 11% 10% 9% 10% 8%

EBIDTA 3,569 2,895 1,427 1,575 2,959 -17.1 87.8 8,857 15,329 -42.2

Depreciation 2,898 1,517 1,360 1,373 2,993 3.3 118.0 6,758 5,704 18.5

EBIT 671 1,378 67 203 -33 -105.0 -116.5 2,099 9,625 -78.2

Other Income 212 287 429 319 209 -1.6 -34.5 1,243 1,161 7.0

Interest 321 420 311 504 519 61.7 3.1 1,753 818 114.3

PBT 562 1,244 185 18 -344 -161.2 -2017.7 1,588 9,968 -84.1

Total Tax 330 185 80 -222 -446 -235.0 101.0 -403 2,063 -119.5

Adjusted PAT 232 1,059 106 240 102 -56.1 -57.5 1,991 7,904 -74.8(Profit)/loss from JV's/Ass/MI

APAT after MI 232 1,059 106 240 102 -56.1 -57.5 1,991 7,904 -74.8

Extra ordinary items 946 0 0 -35 -555 -158.7 1470.4 -106 1,143 -109.3

Reported PAT -714 1,059 106 275 657 -192.1 139.1 2,097 6,761 -69.0

Reported EPS 6.7 30.4 3.0 6.9 2.9 -56.1 -57.5 43.2 221.2 -80.5

Margins (%) (bps) (bps)

EBIDTA 37.8% 30.6% 19.9% 20.2% 27.7% -1,015 744 25.2% 42.2% -1,698

EBIT 7.1% 14.6% 0.9% 2.6% -0.3% -742 -291 6.0% 26.5% -2,052

EBT 6.0% 13.2% 2.6% 0.2% -3.2% -917 -344 4.5% 27.4% -2,292

PAT 2.5% 11.2% 1.5% 3.1% 1.0% -151 -212 5.7% 21.8% -1,609

Effective Tax rate 58.7% 14.9% 43.0% -1236.6% 129.6% 7,093 136,626 -25.4% 20.7% -4,606

Execution on 2x 150 MW TPP on track

Shrees power plants with capacity of 300MW (150 MW X2) at a capex of Rs12 bn is on

track for commissioning by June-11 & Sept-11. Post the completion of this project Shree

total power capacity will reach to 565 MW, out of this will 115 mw be used for the self

consumption and the rest will be available for sale.

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Segmental Results

Segmental Results Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 YoY (%) QoQ (%) FY11P FY10 YoY (%)

Revenue

Cement 8,900 8,138 6,860 7,461 9,505 6.8 27.4 31,965 34,552 -7.5

Power 1,476 2,576 925 860 2,296 55.5 166.9 6,656 6,317 5.4

10,376 10,714 7,785 8,321 11,801 13.7 41.8 38,621 40,869 -5.5

Less: Intersegment revenue 935 1,269 609 525 1,099 17.5 109.5 3,502 4,547 -23.0

Net segment revenue 9,440 9,445 7,176 7,796 10,701 13.4 37.3 35,119 36,321 -3.3

Net power revenues 541 1,307 315 335 1,196 121.3 256.9 3,154 1,770 78.2

EBIT

Cement 534 802 422 882 175 -67.2 -80.2 2,281 6,286 -63.7

Power -54 585 -288 -612 159 -394.1 -125.9 -156 3,065 -105.1

480 1,387 134 271 334 -30.5 23.3 2,125 9,351 -77.3

EBIT margin

Cement 6.0% 9.9% 6.2% 11.8% 1.8% -69.3 -84.4 7.1% 18.2% -1,106

Power -3.7% 22.7% -31.2% -71.1% 6.9% -289.1 -109.7 -2.3% 48.5% -5,086

Per tonne analysis

Per tonne analysis Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 YoY (%) QoQ (%) FY11P FY10 YoY (%)

Cement sales (mnt) 2.68 2.49 2.28 2.62 2.88 7.5 10.1 10.26 10.26 0.0

Raw Material 314 373 332 351 389 23.8 10.8 363 316 15.0

Stocks -11 -120 82 -19 -61 464.1 225.6 -33 -19 70.9

Employee 152 192 216 183 186 22.6 1.8 193 146 32.8

Power and fuel 578 742 718 708 814 40.9 14.9 748 539 38.7

Freight expenses 762 717 719 770 803 5.3 4.2 755 722 4.7

Freight on interunit clinker 132 149 149 153 173 30.6 12.7 157 129 21.3

Freight & Selling Expenses 630 568 570 617 630 0.0 2.1 598 592 1.0

Other exp 301 363 350 297 317 5.2 6.6 330 278 18.7

Total Cost per tonne 2,105 2,272 2,422 2,294 2,453 16.5 6.9 2,418 1,991 21.5

Realisation 3,321 3,274 3,010 2,851 3,300 -0.6 15.7 3,115 3,368 -7.5

EBIDTA 1,216 1,003 588 556 847 -30.4 52.1 697 1,377 -49.4

Source: Company. Emkay Research

Power segment analysis

Power Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 YoY (%) QoQ (%) FY11P FY10 YoY (%)

Sales 541 825 210 335 1196 121.3 256.9 2566 1770 45.0

Realization 6.9 5.8 4.2 4.5 4.6 -33.1 2.2 4.9 6.7 -26.7

EBITDA 310 394 86 120 520 67.7 332.9 1120 1200 -6.6

EBITDA/unit 4.0 2.8 1.7 1.6 2.0 -49.3 23.9 2.1 4.5 -52.8

EBIDTA margin 57.3% 47.8% 40.8% 35.8% 43.5% -1,387 763 43.7% 67.8% -2,416

Source: Company

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Upgrade FY12 EBITDA by 3.8%, but cut EPS estimates on account of revised

accelerated depreciation

On account of higher than expected FY11 exit cement prices, we upgrade our FY12

EBITDA estimates by 3.8% to Rs11.4bn. However, adjusting for revised accelerated

depreciation charges as guided by management, we cut our earnings estimates for FY12 by

85.4% to an EPS of Rs13.8 (Rs95 earlier). The accelerated depreciation in FY12 would

reduce the burden in FY13 with much lesser depreciation charges. We introduce our FY13estimates with a EPS of Rs175. The change in earnings for FY12 does not affect our target

for Shree as earnings change in driven by higher deprecation (non cash charges ). We

continue to value Shree on 6X FY12E EV/EBITDA (currently 5.6X FY12). We maintain

ACCUMULATE rating on the stock with price target of Rs1,960.

Rs mn FY12E FY13E

Earlier Revised % change Introduce

Sales 45248 44918 -0.7 53713

EBIDTA 11014 11429 3.8 13842

EBIDTA (%) 24.3 25.4 25.8

Net Profit 3314 482 -85.4 6109

EPS 95.1 13.8 -85.4 175.4

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Financials

Income Statement Balance Sheet

Y/E, Mar (Rs. m) FY10 FY11P FY12E FY13E Y/E, Mar (Rs. m) FY10 FY11P FY12E FY13E


Growth (%) 34.0 (3.3) 27.9 19.6 Reserves & surplus 17,984 19,552 19,505 25,085

Total Expenditure 21,504 26,261 33,489 39,872 Net worth 18,332 19,900 19,853 25,433

Raw Materials Cost 3,238 3,722 4,349 4,800 Minority Interest

Employee costs 1,586 1,983 2,181 2,399 Secured Loans 17,885 16,907 15,657 14,407

Power & Fuel cost 6,105 9,125 14,555 19,017 Unsecured Loans 3,177 3,177 3,177 3,177

Freight 5,889 6,000 6,882 7,575 Loan Funds 21,062 20,084 18,834 17,584

Others 4,687 4,933 5,523 6,081 Net Deferred Taxes 124 723 723 723

EBIDTA 14,919 8,857 11,429 13,842 Total Liabilities 39,270 39,261 37,965 42,295

Growth (%) 56.9 -40.6 29.1 21.1

EBIDTA % 41.1 25.2 25.4 25.8 Gross Block 29,509 42,072 54,072 54,072

Depreciation 5,902 7,243 9,999 5,515 Less: Acc Depreciation 21,989 29,232 39,231 44,746

EBIT 9,016.6 1,613.9 1,430.6 8,326.3 Net block 7,520 12,840 14,841 9,326

EBIT margin (%) 24.8 4.6 3.2 15.5 Capital WIP 9,674 9,129 3,500 3,500

Other income 1,284 1,243 1,243 1,243 Investment 15,922 11,965 11,965 11,965Interest 1,185 1,753 2,070 1,933 Current Assets 15,822 14,412 18,491 29,905

EBT 9,116 1,103 603 7,636 Inventories 3,581 4,042 5,170 6,183

Tax 1,918 (403) 121 1,527 Sundry Debtors 824 1,082 1,384 1,655

Effective tax rate (%) 21.0 -36.5 20.0 20.0 Cash and Bank 4,164 4,631 7,281 17,411

Adj PAT 7,197 1,506 482 6,109 Loans and Advances 7,140 4,431 4,431 4,431

Growth (%) 24.5 -79.1 -68.0 1,166.8 Other current assets 112.784 224.827 224.827 224.827

Net Margin (%) 19.8 4.3 1.1 11.4 Current Liab & Prov 9,666 9,084 10,832 12,401

(Profit)/loss from JV's/Ass/MI Current liabilities 4,667 6,264 8,012 9,581

Adj. PAT After JVs/Ass/MI 7,197 1,506 482 6,109 Provisions 4,999 2,820 2,820 2,820

Extra-ordinary 437 (591) 0 0 Net current assets 6,156 5,328 7,659 17,505

Reported PAT 6761 2097 482 6109 Miscellaneous Exps 0 0 0 0

Growth (%) 17.0 -69.0 -77.0 1,166.8 Total Assets 39,272 39,261 37,965 42,295

Cash Flow Key Ratios

Y/E, Mar (Rs . m) FY10 FY11P FY12E FY13E Y/E, Mar FY10 FY11P FY12E FY13E

PBT (Ex-Other income) 9,313 -140 -640 6,393 Profitability (%)

Depreciation 5,704 7,243 9,999 5,515 EBITDA Margin 41.1 25.2 25.4 25.8

Interest Provided 766 1,753 2,070 1,933 Net Margin 19.8 4.3 1.1 11.4

Other Non-Cash items -1,286 -9 0 0 ROCE 31.1 7.3 6.9 23.8

Chg in working cap -61 1,295 318 285 ROE 47.3 7.9 2.4 27.0

Tax paid -1,897 403 -121 -1,527 RoIC 97.4 14.0 9.9 67.6


Capital expenditure -11,710 -12,018 -6,371 0 EPS 206.6 43.2 13.8 175.4

Free Cash Flow 830 -1,472 5,256 12,600 CEPS 363.5 268.1 300.9 333.7

Other income 489 1,243 1,243 1,243 BVPS 526.2 571.2 569.9 730.1

Investments -5,663 3,958 0 0 DPS 13.0 13.0 13.0 13.0

Investing Cashflow -16,885 5,200 1,243 1,243 Valuations (x)


Loans Taken / (Repaid) 5,729 -978 -1,250 -1,250 P/CEPS 5.1 6.8 6.1 5.5

Interest Paid -1,332 -1,753 -2,070 -1,933 P/BV 3.5 3.2 3.2 2.5

Dividend paid (incl tax) -611 -529 -529 -529 EV / Sales 1.8 1.9 1.4 1.0

Income from investments 0 0 0 0 EV / EBITDA 4.4 7.6 5.6 3.8

Others 0 0 0 0 Dividend Yield (%) 0.7 0.7 0.7 0.7

Financing Cashflow 3,786 -3,260 -3,849 -3,712 Gearing Ratio (x)

Net chg in cash -559 467 2,649 10,131 Net Debt/ Equity 0.1 0.2 (0.0) -0.5

Opening cash position 4,723 4,164 4,631 7,281 Net Debt/EBIDTA 1.1 1.7 1.0 0.0

Closing cash position 4,164 4,631 7,281 17,411 Working Cap Cycle (days) -3 -12 -12 -12

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Recommendation History: Shree Cement SRCM IN


31/01/2011 Shree Cement Q3FY11 Result Update Accumulate 1,660 1,960






27/05/2011 Aban Offshore Q4FY11 Result Update Accumulate 541 645

26/05/2011 Century Plyboards Q4FY11 Result Update Buy 65 75

25/05/2011 Madras Cement Q4FY11 Result Update Accumulate 93 100

25/05/2011 IRB Infrastructure Q4FY11 Result Update Buy 152 255

http://reports.emkayshare.com/downloads/researchreports/Shree%20Cement%20Q3FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Shree%20Cement%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Shree%20Cement%20Q1FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Shree%20Cement%20Q4FY10%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Aban%20Offshore%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Century%20Plyboards%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Madras%20Cement%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/IRB%20Infrastructure%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/IRB%20Infrastructure%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Madras%20Cement%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Century%20Plyboards%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Aban%20Offshore%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Shree%20Cement%20Q4FY10%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Shree%20Cement%20Q1FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Shree%20Cement%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Shree%20Cement%20Q3FY11%20Result%20Update.pdf

8/2/2019 8 Stocks Emkay 310511


May 30, 2011

Reco

Hold

Previous Reco

HoldCMP

Rs465

Target Price

Rs497

EPS change FY12E/13E (%) - 3 / NA

Target Price change (%) 8

Nifty 5,473

Sensex 18,232

Price Performance

(%) 1M 3M 6M 12M

Absolute (0) 11 3 42


Source: Bloomberg


300

340

380

420

460

500

J un-10 A ug-10 O ct -10 Dec -10 J an-11 A pr -11

Rs

-10

0

10

20

30

40%

Sun Pharma (LHS) Rel to Nifty (RHS)

Source: Bloomberg

Stock DetailsSector Pharmaceuticals

Bloomberg SUNP@IN


Face Value(Rs) 1


52 Week H/L 511/325






Promoters 63.7 63.7 63.7

FII/NRI 18.5 19.1 19.1



Public 5.6 5.5 5.6

Source: Capitaline

Re

sultUpdate

Sun Pharma

Taro holds the key; Maintain Hold

n Sun Pha r ma s Q4 11 was above ex pec t a t i ons w i t h Revenues

at Rs14.6bn (up 32% YoY) , EBITDA a t Rs4 .44bn (up 6% YoY)

and PAT a t Rs4 .43bn (up 12% YoY)

n Revenue g r ow t h w as l ed by 20% g r ow t h i n domes t i c b r anded

bus iness and 21% YoY grow th in Taro . Ex -Taro , revenues

dec l i ned by 13%

n Tar o s con t r i bu t i on o f 34% t o t he t op -l i ne a t US$108m n and

PAT a t US$25mn was above expec t a t i ons

n Tar o r ema ins t he key t o f u t u r e pe r f o r mance ; Ma in t a in Ho ld

w i th a rev ised t a rge t p r ic e o f Rs497 (22xFY13 Core EPS)

Result Highlights

Export formulations grew 98% YoY in Q4FY11 (contributed 52%) driven by Taro

consolidation. Taro revenues grew 21% YoY to US$108mn (contributed 33%). Ex-

Taro, revenues de-grew by 28%

Domestic branded formulations grew 20% YoY (contributed 40%), ahead of the

industry growth rate in Q4FY11 on account of strong growth in the chronic portfolio

Operating margins at 30% expanded 280bps QoQ on account of

Taro consolidation Taro performed better on the operational front as it incurredlower R&D expenses this quarter. Ex-Taro, base EBITDA margins stood at a

healthy 33% during the quarter

Remediation related cost at the companys manufacturing facilities led to 264bps

QoQ and 311bps YoY expansion in other expenses

Future growth drivers

Domestic formulations is expected to grow at 18% and operating margins are

expected to improve once the additional field force becomes productive

377 ANDA filings till date with 152 pending for approval. Management has guided for

25 ANDA filings during FY12E

MSD JV has already commenced operation with Sitagliptin & Sitagliptin+Metformin

being launched in Indian markets

Management has guided for top-line growth of 28-30% along with Rs4.5bn of capex

and 6%+ R&D spend for FY12E. We believe strong growth in FY12E will be on

account of Taro clocking sales in excess of US$400mn and 18% growth in thedomestic branded business. Ex-Taro, revenues are likely to grow by 9% in FY12E

Valuation

We expect Sun Pharma to report 23% growth in revenues in FY12E and 15% growth in

FY13E. EBIDTA margins are expected to decrease from 34.4% in FY11 to 33.2% in

FY12E and 33.9% in FY13E. Earnings will grow by 15% CAGR over FY11-13E. We

revise our target price to Rs497 (22xFY13E core earnings of Rs22.6). At CMP, the stock

trades at 23x FY12E and 20x FY13E EPS.

Financials Rs mn

YE- Net EBITDA EPS EPS RoE EV/

Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BVFY10 40,103 13,662 34.1 12,590 12.2 (30.7) 18.1 38.2 34.9 6.2

FY11 57,214 19,672 34.4 18,161 17.5 44.2 22.0 26.5 23.6 5.1

FY12E 70,282 23,303 33.2 20,694 20.0 14.0 21.1 23.3 19.9 4.3

FY13E 80,722 27,360 33.9 23,857 23.0 15.3 20.6 20.2 16.6 3.7

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Sun Pharma Result Update


Quarterly break-up

Rs mn Q4FY10 Q1FY11 Q2FY11 Q3FY12 Q4FY12 YoY (%) QoQ (%) FY10 FY11 YoY (%)

Revenue 11,092 13,997 13,701 16,011 14,633 31.9 (8.6) 40,103 57,214 43%

Expenditure 6,907 7,837 9,030 11,605 10,197 47.6 (12.1) 26,441 37,543 42%

as % of sales 62.3 56.0 65.9 72.5 69.7 65.9 65.6

Consumption of RM 2,662 3,357 3,794 4,324 3,132 17.7 (27.6) 10,977.3 14,606.9 33%

as % of sales 24.0 24.0 27.7 27.0 21.4 27.4 25.5

Employee Cost 1,160 1,246 1,456 2,754 2,540 119.0 (7.8) 4,007.9 7,995.6 99%

as % of sales 10.5 8.9 10.6 17.2 17.4 10.0 14.0

Other expenditure 3,085 3,235 3,780 4,528 4,525 46.7 (0.1) 11,456.0 14,940.2 30%

as % of sales 27.8 23.1 27.6 28.3 30.9 3.11 2.64 28.6 26.1

EBITDA 4,185 6,160 4,670 4,405 4,436 6.0 0.7 13,662 19,672 44%

Depreciation 419 402 352 805 482 14.9 (40.1) 1,533.1 2,040.6 33%

EBIT 3,766 5,758 4,319 3,601 3,954 5.0 9.8 12,129 17,631 45%

Other Income 138 115 924 580 1,108 705.6 90.9 1,686.2 2,727.2 62%

Non-recurring income 0 0 0 0 0 333.7 -

PBT 3,903 5,873 5,242 4,181 5,062 29.7 21.1 14,148 20,358 44%

Total Tax (12) 97 172 545 22 (280.5) (95.9) 678.6 1,284.4 89%

Adjusted PAT 3,916 5,776 5,070 3,636 5,039 28.7 38.6 13,470 19,074 42%

Minority Interest -29 133 33.7 134.4 612 - (880.0) (913.1) -

APAT after MI 3,945 5,643 5,037 3,502 4,427 12.2 26.4 12,590 18,161 44%

Extra ordinary items 0 0 0 0 0 921.0 0.0

Reported PAT 3,945 5,643 5,037 3,502 4,427 12.2 26.4 13,511 18,161 34%

Reported EPS 3.8 5.4 4.9 3.4 4.3 12.2 26.4 12.2 17.5 44%

Margins (%) (bps) (bps) (bps)

EBIDTA 37.7 44.0 34.1 27.5 30.3 (741) 280 34.1 34.4 32EBIT 33.9 41.1 31.5 22.5 27.0 (693) 453 30.2 30.8 57

EBT 35.2 42.0 38.3 26.1 34.6 (60) 848 35.3 35.6 30

PAT 35.6 40.3 36.8 21.9 30.3 (531) 839 31.4 31.7 35

Effective Tax rate (0.3) 1.7 3.3 13.0 0.4 76 (1,259) 4.8 6.3 151

Quarterly trend

11,092 13,997 13,701 16,011 14,633

37.7

44.0

34.127.5

30.3

35.640.3

36.8

21.9

30.3

0

3,000

6,000

9,000

12,000

15,000

18,000

Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11

0

510152025

303540

4550

Sales (Rs mn) EBITDA % PAT %

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Financial Snapshot

Rs mn FY12E FY13E

Sun Pharma Taro Consol. Sun Pharma Taro Consol.

Sales 50,915 19,367 70,282 59,502 21,220 80,722

EBITDA 19,236 4,067 23,303 22,479 4,881 27,360

EBITDA % 37.8% 21.0% 33.2% 37.8% 23.0% 33.9%

EBITDA % Ex-One-offs 37.8% 21.0% 33.2% 37.2% 23.0% 33.5%

PAT 17,402 3,292 20,694 19,825 4,032 23,857

EPS 16.8 3.2 20.0 19.1 3.9 23.0

Core EPS 16.8 3.2 20.0 18.7 3.9 22.6

Rs mn FY11 FY12E YoY % FY13 YoY %

Formulations 51932 64070 23.4% 73406 14.6%

Domestic 23801 28087 18.0% 33278 18.5%

Taro 10,467 19,367 85.0% 21,220 9.6%

Ex-Taro 17664 16615 -5.9% 18908 13.8%

Base 10938 16615 51.9% 17929 7.9%

FTF 6726 0 - 979 -

API 5212 6119 17.4% 7221 18.0%

Domestic 1130 1220 8.0% 1342 10.0%

Exports 4082 4899 20.0% 5879 20.0%

Others 70 93 32.5% 95 2.0%

Total Sales 57214 70282 22.8% 80722 14.9%

EBITDA 19,672 23,303 18.5% 27,360 17.4%EBITDA % 34.4 33.2 33.9

PAT 18,161 20,694 14.0% 23,857 15.3%

PAT % 31.7 29.4 - 29.6 -

EPS 17.5 20.0 14.0% 23.0 15.3%

PE @ CMP 26.5 23.3 - 20.2 -

Core EPS 14.1 20.0 41.5% 22.6 13.0%

PE @ CMP 32.9 23.3 - 20.6 -

Valuation

Sun Pharma continues to remain a good long-term fundamental story in our view, howeverstock valuations are likely to limit upside. We expect Sun Pharma to report 23% growth in

revenues in FY12E and 15% growth in FY13E. EBIDTA margins are expected to decrease

from 34.4% in FY11 to 33.2% in FY12E and 33.9% in FY13E. Earnings will grow by 15%

CAGR over FY11-13E. We revise our target price to Rs497 (22xFY13E core earnings of

Rs22.6). At CMP, the stock trades at 23x FY12E and 20x FY13E EPS.

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Financials


Y/E, Mar (Rs. mn) FY10 FY11 FY12E FY13E Y/E, Mar (Rs. mn) FY10 FY11P FY12E FY13E

Net Sales 40,103 57,214 70,282 80,722 Equity share capital 1,036 1,036 1,036 1,036

Growth (%) -4.2 42.7 22.8 14.9 Reserves & surplus 77,254 93,987 110,859 130,309

Expenditure 26,441 37,543 46,979 53,362 Net worth 78,289 95,023 111,894 131,344

Raw Materials 10,977 14,607 18,642 22,602 Minority Interest 1,932 8,472 9,561 10,816

SGA 9,146 11,869 15,040 16,411 Secured Loans 479 1,179 679 179

Employee Cost 4,008 7,996 9,115 10,027 Unsecured Loans 1,233 3,077 2,577 2,077

Other Exp 2,311 3,071 4,182 4,322 Loan Funds 1,712 4,256 3,256 2,256

EBITDA 13,662 19,672 23,303 27,360 Net deferred tax liability -890 -3,652 -3,652 -3,652

Growth (%) -26.8 44.0 18.5 17.4 Total Liabilities 81,042 104,098 121,059 140,764

EBITDA margin (%) 34.1 34.4 33.2 33.9

Depreciation 1,533 2,041 2,557 2,871 Gross Block 27,401 43,947 48,447 53,447

EBIT 12,129 17,631 20,746 24,489 Less: Depreciation 8,013 10,287 12,844 15,715

EBIT margin (%) 30.2 30.8 29.5 30.3 Net block 19,388 33,660 35,603 37,732

Other Income 1,686 2,727 2,932 2,807 Capital work in progress 1,448 2,000 2,000 1,000

Interest expenses 0 0 0 0 Investment 30,664 22,310 22,310 22,310

PBT 14,148 20,358 23,678 27,296 Current Assets 37,121 60,397 77,147 96,639

Tax 679 1,284 1,894 2,184 Inventories 10,739 14,794 17,571 23,409

Effective tax rate (%) 4.8 6.3 8.0 8.0 Sundry debtors 11,748 11,716 23,193 29,060

Adjusted PAT 13,552 17,248 19,605 22,601 Cash & bank balance 6,073 22,162 22,197 28,599

(Profit)/loss from JV's/Ass/MI 962 -913 -1,089 -1,256 Loans & advances 8,562 11,726 14,186 15,570

Adjusted PAT after MI 12,590 18,161 20,694 23,857 Other current assets 0 0 0 0

Growth (%) -30.7 44.2 14.0 15.3 Current liab & Prov 7,579 14,269 16,000 16,916

Net Margin (%) 31.4 31.7 29.4 29.6 Current liabilities 4,095 9,203 10,366 11,108

E/O items 334 0 0 0 Provisions 3,484 5,065 5,635 5,808

Reported PAT 13,511 18,161 20,694 23,857 Net current assets 29,542 46,129 61,146 79,722

Growth (%) -25.7 34.4 14.0 15.3 Total Assets 81,042 104,098 121,059 140,764


Y/E, Mar (Rs. mn) FY10 FY11P FY12E FY13E Y/E, Mar FY10 FY11P FY12E FY13E

PBT (Ex-Other income) 12,462 17,631 20,746 24,489 Profitability (%)


Interest Provided 0 0 0 0 Net Margin 31.4 31.7 29.4 29.6

Other Non-Cash items 0 0 0 0 ROCE 18 21 20 20

Chg in working cap -4,675 -498 -14,982 -12,174 ROE 18 22 21 21

Tax paid -1,106 -1,284 -1,894 -2,184 RoIC 29.9 33.6 29.7 28.7


Capital expenditure -2,920 -13,205 -4,500 -4,000 EPS 12.2 17.5 20.0 23.0

Free Cash Flow 5,295 4,685 1,926 9,002 CEPS 13.3 19.5 22.5 25.8

Other income 1,686 2,727 2,932 2,807 BVPS 75.6 91.8 108.0 126.8Investments -12,069 8,354 0 0 DPS 3.2 4.6 5.1 5.2

Investing Cashflow -13,302 -2,123 -1,568 -1,193 Valuations (x)


Loans Taken / (Repaid) -77 2,544 -1,000 -1,000 P/CEPS 34.9 23.8 20.7 18.0

Interest Paid 0 0 0 0 P/BV 6.2 5.1 4.3 3.7

Dividend paid (incl tax) -3,321 -3,347 -3,823 -4,407 EV / Sales 11.9 8.1 6.6 5.6

Others -2,131 1,126 0 0 EV / EBITDA 34.9 23.6 19.9 16.6

Financing Cashflow -5,529 323 -4,823 -5,407 Dividend Yield (%) 0.7 1.0 1.1 1.1

Net chg in cash -10,618 16,089 35 6,402 Gearing Ratio (x)

Opening cash position 16,690 6,073 22,162 22,197 Net Debt/ Equity -0.1 -0.2 -0.2 -0.2

Closing cash position 6,073 22,162 22,197 28,599 Net Debt/EBIDTA -0.3 -0.8 -0.7 -0.9

8/2/2019 8 Stocks Emkay 310511

16/43


Recommendation History: Sun Pharma SUNP IN


01/02/2011 Sun Pharma Q3FY11 Result Update Hold 441 460

10/11/2010 Sun Pharma Q2FY11 Result Update Hold 2,318 2,300

29/07/2010 Sun Pharma Q1FY11 Result Update Hold 1,775 1,866

08/09/2010 Sun Pharma Event Update Hold 1,756 1,866



26/05/2011 Dishman Pharma Q4FY11 Result Update Accumulate 96 125

25/05/2011 Ipca Laboratories Q4FY11 Result Update Buy 301 409

20/05/2011 Divis Lab Q4FY11 Result Update Buy 710 927

19/05/2011 Panacea Biotec Q4FY11 Result Update Hold 181 185

http://reports.emkayshare.com/downloads/researchreports/Sun%20Pharma%20Q3FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Sun%20Pharma%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Sun%20Pharma%20Q1FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Sun%20Pharma%20Event%20Update_080910.pdfhttp://reports.emkayshare.com/downloads/researchreports/Dishman%20Pharma%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Ipca%20Laboratories%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Divis%20Lab%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Panacea%20Biotec%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Sun%20Pharma%20Q3FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Sun%20Pharma%20Event%20Update_080910.pdfhttp://reports.emkayshare.com/downloads/researchreports/Sun%20Pharma%20Q1FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Sun%20Pharma%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Dishman%20Pharma%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Panacea%20Biotec%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Divis%20Lab%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Ipca%20Laboratories%20Q4FY11%20Result%20Update.pdf

8/2/2019 8 Stocks Emkay 310511


May 30, 2011

Reco

Hold

Previous Reco

HoldCMP

Rs 896

Target Price

Rs 826

EPS change FY11E/12E (%) NA


Nifty 5,473

Sensex 18,232

Price Performance

(%) 1M 3M 6M 12M

Absolute (0) 11 4 22


Source: Bloomberg


750

790

830

870

910

950


Rs

-10

-4

2

8

14

20%

Colgate-Palmolive (LHS) Rel to Nifty (RHS)

Source: Bloomberg

Stock DetailsSector Consumers

Bloomberg CLGT@IN


Face Value(Rs) 1


52 Week H/L 996/732

Market Cap (Rs bn/USD mn) 122/2,707




Mar-11 Dec-10 Sep-10Promoters 51.0 51.0 51.0

FII/NRI 19.0 17.7 16.5



Public 21.4 21.5 21.5

Source: Capitaline

L o w e r v o l u m e g r o w t h i n t o o t h b r u s h r es t r i c t s r e v e n ue g r o w t h

a t 12 . 6% t o Rs 5 .8 bn , ma r g ina l l y be low ou r expec t a t i on .

APAT a t Rs 1 . 1 bn i s above ou r f o r ecas t sModer a t i on i n vo lume g r ow t h - Too t hpas t e mar k e t sha r es

impr oved YoY , how eve r dec l i ned sequen t i a l l y - new launches

l i ke l y t o a id f u r t he r mar ke t sha r e imp r ovemen t

N e w l a u nc h e s , s k e w e d t o w a r d s p r e m i u m /n i c h e c a t e g o r y , w i l l

r esu l t i n h ighe r A& P spends , w h ich a long w i t h h ighe r t ax

r a t es , w i l l r es t r i c t PAT CAGR t o 13% ove r FY11 -13E

Reta in FY13E earn ings o f Rs37.6 /Share- Va lua t ions a t 24X

FY13E EPS appear fa i r - Ma in t a in HOLD ra t ing w i th t a rge t

p r ic e o f Rs826/Share

Operational performance marginally below expectationsWhile toothpaste continues to witness healthy growth, lower volumes in toothbrush have

restricted overall revenue growth to 12.6%, which is marginally below our expectations.

Although operational performance is not comparable YoY as 4QFY10 has accounted for

the consolidation of Professional Oral Care for the full year FY10, results indicate that

higher input costs have arrested margin expansion, despite lower A&P spends (13.8%

in 4QFY11 versus 16.1% in 4QFY10). While EBITDA margins at 21.5% and PBT growth

at 13% is below our expectations, lower-than-estimated tax provisioning has resulted

in a muted PAT growth to Rs 1.1bn, lower than our forecast of 6% decline.

Toothpastes continue to outperform toothbrush reports weak performance

Toothpastes continue to witness robust volume growth of 12% driven by healthy growth

in its flagship brands Colgate Dental Cream, MaxFresh, Active Salt, etc. Increasingpenetration of toothpastes (64.3%) and higher per capita consumption (127 gms/year)

are aiding healthy and sustainable growth in this segment. However, toothbrush

witnessed weak performance with volumes growing in single-digits for the quarter after

two consecutive quarters of 24% volume growth. This has resulted in moderation of

overall volume growth to 10% for the company in 4QFY11 against 12% for FY11.

Sequential dip in market shares expect new launches to provide respite

Market shares in toothpaste have increased by 20 bps to 53.1% YoY however, a 30

bps fall from November 2010. Market shares in toothbrush segment at 40.3% reported a

decline of 60 bps since November 2010. Nevertheless, new product launches like the

Colgate Sensitive Pro-Relief toothpaste and a similar toothbrush along with continuing

brand investments will likely result in a healthy improvement in future. With new

launches skewed towards premium/niche categories, we expect A&P spends to remainhigh in the coming quarters.

Expect PAT CAGR at 13%... Maintain HOLD

While we forecast a moderation in overall volume growth, we expect Colgate to maintain

its leadership position in the market aided by healthy new product launches and regular

brand activation programmes. We expect the company to post PAT CAGR of 13% over

FY11-13E with unchanged FY13E earnings of Rs37.6/Share. Valuations at 24X FY13E

EPS appear fair and hence, we maintain our HOLD rating on the stock with target price

of Rs826/Share.



Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

FY10 19,625 4,254 21.7 4,233 31.1 45.8 156.1 28.8 27.8 37.4

FY11E 22,206 4,507 20.3 4,026 29.1 (6.4) 113.9 30.7 25.1 31.6

FY12E 25,365 5,368 21.2 4,431 32.6 11.8 115.0 27.5 21.5 29.3

FY13E 28,479 6,097 21.4 5,107 37.6 15.3 122.3 23.9 18.7 27.0

Re

sultUpdate

Colgate-Palmolive

Volumes witness moderation Maintain Hold

8/2/2019 8 Stocks Emkay 310511

18/43

Colgate-Palmolive Result Update


Quarterly Results

Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 YoY (%) QoQ (%) FY11 FY10 YoY (%)

Net Sales 5,166 5,288 5,518 5,582 5,818 12.6 4.2 22,206 19,625 13.2

Expenditure 3,919 3,898 4,396 4,836 4,569 16.6 (5.5) 17,699 15,370 15.1

Material Cost 1,543 1,966 2,201 2,160 2,393 55.0 10.8 8,720 7,768 12.2

% of Sales 29.9 37.2 39.9 38.7 41.1 1,125 bps 243 bps 39.3 39.6 -32 bps

Employee Expenses 421 444 533 524 432 2.5 (17.6) 1,932 1,591 21.5

% of Sales 8.1 8.4 9.7 9.4 7.4 -73 bps -196 bps 8.7 8.1 60 bps

Advertising and Promotion spends 834 694 789 1,206 804 (3.5) (33.3) 3,493 2,994 16.7


Other Expenses 1,121 795 872 947 940 (16.1) (0.7) 3,554 3,017 17.8


Ebidta 1,247 1,390 1,122 746 1,249 0.2 67.4 4,507 4,254 5.9

Depreciation 206 79 84 91 88 (57.3) (3.4) 343 376 (8.8)

EBIT 1,041 1,311 1,038 655 1,161 11.5 77.3 4,164 3,878 7.4

Other Income 222 263 256 277 272 22.7 (1.7) 1,068 985 8.5

Interest 4 3 6 19 4 10.0 (76.8) 33 15 118.7

PBT 1,259 1,570 1,288 913 1,429 13.5 56.5 5,200 4,848 7.3

Tax 115 350 285 250 288 150.5 15.1 1,174 615 90.7

PAT 1,144 1,220 1,003 662 1,141 (0.3) 72.2 4,026 4,233 (4.9)

REPS 8.4 9.0 7.4 4.9 8.4 (0.3) 72.2 29.1 31.1 (6.4)


EBIDTA 24.1 26.3 20.3 13.4 21.5 -267 811 20.3 21.7 -138

EBIT 20.2 24.8 18.8 11.7 20.0 -20 823 18.8 19.8 -101

EBT 24.4 29.7 23.3 16.4 24.6 19 821 23.4 24.7 -129

PAT 22.1 23.1 18.2 11.9 19.6 -254 774 18.1 21.6 -344Effective Tax rate 9.1 22.3 22.1 27.4 20.2 1,103 -726 22.6 12.7 988

Moderation in volume growth

8

10

12

14

16

18

20

1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11

%

Overall volume growth Toothpaste volume growth

Source: Company

8/2/2019 8 Stocks Emkay 310511

19/43

Colgate-Palmolive Result Update


Financials


Y/E, Mar (Rs. mn) FY10 FY11 FY12E FY13E Y/E, Mar (Rs. mn) FY10 FY11E FY12E FY13E

Net Sales 19625 22206 25365 28479 Equity Share Capital 136 136 136 136

Growth 15.8 13.2 14.2 12.3 Reserves 3125 3722 4025 4370

Expenses 15370 17699 19997 22382 Networth 3261 3858 4161 4506

Growth 8.3 15.1 13.0 11.9 Secured Loans 0 0 0 0Raw Materials 7768 8720 9808 11047 Unsecured Loans 46 1 1 1

% Of Sales 39.6 39.3 38.7 38.8 Loan Funds 46 1 1 1

Employee Cost 1591 1932 2280 2509 Total Liabilities 3307 3859 4162 4507

% Of Sales 8.1 8.7 9.0 8.8

Manufacturing Expenses 644 755 840 917 Gross Block 5345 5470 5670 5918

% Of Sales 3.3 3.4 3.3 3.2 Less: Depreciation 2876 3281 3716 4165

Admin Expenses 1866 2187 2276 2522 Net Block 2469 2189 1955 1753

% Of Sales 9.5 9.8 9.0 8.9 Capital Work In Progress 62 100 100 100

Selling & Distribn Expenses 3502 4105 4793 5387 Investments 14 14 14 14

% Of Sales 17.8 18.5 18.9 18.9 Current Assets 6097 7799 9224 10537

Ebidta 4254 4507 5368 6097 Inventories 1106 1201 1359 1520

Growth 54.4 5.9 19.1 13.6 Debtors 98 104 118 132Ebidta% 21.7 20.3 21.2 21.4 Cash&Bank 3672 5275 6470 7551

Other Income 985 1068 1241 1465 Loans&Advances 1222 1219 1277 1334

Interest 15 33 20 20 Current Liabilities & Provisions 5515 6423 7310 8077

Depreciation 376 343 434 449 Net Current Assets 582 1377 1914 2460

PBT 4848 5200 6154 7094 Miscellaneous Expenditure 0 0 0 0

Tax 615 1174 1723 1986 Deferred Tax 179 179 179 179

PAT (Before EO Item) 4233 4026 4431 5107 Total Assets 3307 3859 4162 4507

Growth 43.4 -4.9 10.1 15.3

Net Margin% 21.6 18.1 17.5 17.9

E/O Item 0 0 0 0

Reported PAT 4233 4026 4431 5107


Y/E, Mar (Rs. mn) FY10 FY11E FY12E FY13E Y/E, Mar (Rs. mn) FY10 FY11E FY12E FY13E

Pre-Tax Profit 4848 5285 6154 7094 Profitability %

Depreciation 376 406 434 449 Ebidta Mgn 21.7 20.3 21.2 21.4

Chg in W Cap 754 471 476 468 PAT Mgn 21.6 18.1 17.5 17.9

Tax Paid -767 -1141 -1621 -1919 ROCE 157.8 133.1 137.7 145.2

Operating CashFlow 5211 5020 5443 6091 ROE 156.1 111.3 110.5 117.8

Capex -1121 -163 -200 -248 Per Share Data

Free Cash Flow 4090 4857 5243 5844 EPS 31.1 29.1 32.6 37.6

Investments 173 0 0 0 CEPS 33.9 32.1 35.8 40.9

Equity Capital 0 0 0 0 BVPS 24.0 28.4 30.6 33.1

Loans -1 -45 0 0 DVPS 20.0 22.0 26.0 30.0

Dividend -3336 -3334 -4048 -4763 Valuations

Others 39 126 0 0 PER 28.8 30.7 27.5 23.9

Net Change in Cash 964 1604 1195 1081 CPER 26.4 27.9 25.1 21.9

Opening Cash Position 2511 3476 5079 6275 P/BV 37.4 31.6 29.3 27.0

Closing Cash Position 3476 5079 6275 7356 Ev/Sales 6.0 5.2 4.5 4.0

Ev/Ebidta 27.8 25.1 21.5 18.7

Dividend Yield 2.2 2.5 2.9 3.3

Turnover X Days

Debtor TO 1.8 1.7 1.7 1.7

Inventory TO 20.6 19.6 19.6 19.5

Gearing RatioNet Debt/Equity -105.2 -131.6 -150.8 -163.2

Total Debt/Equity 1.4 0.0 0.0 0.0

8/2/2019 8 Stocks Emkay 310511

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Result Update

Recommendation History: Colgate CLGT IN


07/04/2011 Colgate; Consumer Sector Report Hold 846 826



11/05/2011 Asian Paints Q4FY11 Result Update Accumulate 2,697 2,923

09/05/2011 Hindustan Unilever Q4FY11 Result Update Accumulate 284 312

02/05/2011 Marico Q4FY11 Result Update Accumulate 136 142

02/05/2011 GCPL Q4FY11 Result Update Accumulate 394 420

Colgate-Palmolive

http://reports.emkayshare.com/downloads/researchreports/Consumer%20Sector%20Report_Rule%20of%20the%20game...%20Monopoly%20to%20win!!!.pdfhttp://reports.emkayshare.com/downloads/researchreports/Asian%20Paints%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Hindustan%20Unilever%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Marico%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Godrej%20Consumer%20Products%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Consumer%20Sector%20Report_Rule%20of%20the%20game...%20Monopoly%20to%20win!!!.pdfhttp://reports.emkayshare.com/downloads/researchreports/Asian%20Paints%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Hindustan%20Unilever%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Marico%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Godrej%20Consumer%20Products%20Q4FY11%20Result%20Update.pdf

8/2/2019 8 Stocks Emkay 310511


May 30, 2011

Reco

Buy

Previous Reco

BuyCMP

Rs 356

Target Price

Rs 530

EPS change FY12E/13E (%) 11/NA


Nifty 5,473

Sensex 18,232

Price Performance

(%) 1M 3M 6M 12M

Absolute (4) 6 6 60


Source: Bloomberg


200

240

280

320

360

400

J un-10 A ug-10 Oct -10 Dec -10 J an-11 A pr -11

Rs

0

12

24

36

48

60%

GSFC (LHS) Rel to N if ty (RHS)

Source: Bloomberg

Stock DetailsSector Agri-input & Chemicals

Bloomberg GSFC@IN


Face Value(Rs) 10


52 Week H/L 413/215






FII/NRI 10.4 8.6 6.9



Public 15.7 15.9 16.3

Source: Capitaline

Q4FY11 r esu l t s w e r e i n l i ne w i t h es t im a t es - Revenues o f

Rs11.1bn,+43% yoy , APAT (ad jus t ed fo r Rs 145 m n EO

incom e) o f Rs 1 .95bn, +52% yoy

Chemica l s segmen t m ar g ins a t 34 .7% con t i nues t o r ema in

s t r ong ( +320bps yoy ) w h i l e f e r t i l i se r segmen t w i t nessed

mar g ins o f 21 . 7% aga ins t l osses i n p r ev ious yea r

Upgr ade FY12E es t ima t es by 11% t o Rs 73 . 6 and i n t r oduce

FY13E (EPS o f Rs 78 .8 ). Com pany ho lds cash in book s and

inves t m en t s o f Rs 150 / sha r e ( 42% o f cmp)

Despi t e ex pec t ed dece le r a t i on i n ea r n ings by 18% in FY12

due t o so f t en ing chemic a l p r i ces , va lua t i ons r ema in

com pe l l i ng w i t h EV /EBITDA of 1 . 8x and 20% d i scoun t t o BV

Strong momentum continues

GSFCs Q4FY11 results were in line with our estimates. Adjusted revenues of Rs 11.1bn

(adjusted for Rs 76.2mn of subsidy received related to 1997-98), +43% yoy, were in line

with our estimates of Rs 10.8bn. Adjusted EBITDA of Rs 3.1bn, +98% yoy, was

marginally higher than our estimates of Rs 2.9bn led by higher than expected fertilizer

margins. APAT of Rs 1.95bn, +52% yoy, was marginally higher than our estimates of Rs

1.76bn. AEPS for the quarter stood at Rs 24.5, +52% yoy, and was marginally higher

than our estimates of Rs 22.1.

Upgrade FY12E estimates by 11%, introduce FY13E

We have revised our FY12E earnings estimates by 11% to Rs 73.6 (from Rs 66.3) due

to firm margins in chemicals segment in H1FY12E. Though chemical prices have

recently declined, they are still higher by ~30% yoy and spreads remain favourable. We

have also introduced FY13E estimates and expect company to post an EPS of Rs 78.8

with growth driven by higher fertiliser volumes.

Softening chemical prices to lead deceleration in earnings in FY12

It is to highlight that though we expect GSFCs earnings to decline by 18% yoy in

FY12E, it is due to decline in chemical prices. In FY11, caprolactam prices saw there

peak level (increased upto US$ 3560 / mt by Mar2011, +75% over FY10 average) and

boosted companys earnings. However prices have started softening from Q1FY12E

and margins to follow suit resulting into decline in earnings.

Reiterate BUY on compelling valuationsOn the valuations front, GSFC has current cash on its book of Rs 6.7 bn (84 / share)

with negligible long term debt. Further it has liquid investments of Rs 5.4 bn (Rs 68/

share). With 42% of cmp in cash and equivalents and FY12 EV/EBITDA of 1.8x, P/E of

4.8x and 20% discount to book value, we believe that the stock offers attractive

investment opportunity on compelling valuations. However due to volatile earnings

driven by unpredictable chemical prices in FY12E, we maintain our price target of Rs

530 which discounts 7.2x FY12E EPS and we reiterate our BUY recommendation.


Net EBITDA EPS EPS RoE EV/YE-Mar

Sales (Core) (%) PAT (Rs) % chg (%) P/E EBITDA P/BV

FY10 40,192 4,477 11.1 2,545 31.9 (49.0) 12.5 11.1 6.8 1.3

FY11 47,095 11,259 23.9 7,131 89.5 180.2 28.6 4.0 1.9 1.0

FY12E 57,925 9,671 16.7 5,863 73.6 (17.8) 18.9 4.8 1.8 0.8

FY13E 61,577 10,478 17.0 6,277 78.8 7.1 17.2 4.5 1.3 0.7

Re

sultUpdate

GSFC

Reiterate BUY on compelling valuations

8/2/2019 8 Stocks Emkay 310511

22/43

G S F C Result Update


Quarterly Results

Rs mn Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 YoY (%) QoQ (%) FY11 FY10 YoY (%)

Revenue 7,825 10,668 13,007 12,272 11,149 42.5 (9.2) 47,095 40,192 17.2

Expenditure 6261 8831 9834 9115 8055 28.7 (11.6) 35836 34796 3.0

as % of sales 80.0 82.8 75.6 74.3 72.3 76.1 86.6

Consumption of RM 4,530 6,223 7,366 6,727 5,511 21.6 (18.1) 25,827 25,422 1.6

as % of sales 57.9 58.3 56.6 54.8 49.4 54.8 63.3

Power & Fuel 678 818 792 794 803 18.5 1.1 3,207 3,019 6.2

as % of sales 8.7 7.7 6.1 6.5 7.2 6.8 7.5

Employee Cost 853 625 772 675 569 (33.3) (15.7) 2,641 2,902 (9.0)

as % of sales 10.9 5.9 5.9 5.5 5.1 5.6 7.2

Other expenditure 200 1,165 905 919 1,172 486.3 27.6 4,161 3,453 20.5

as % of sales 2.6 10.9 7.0 7.5 10.5 8.8 8.6

EBITDA 1,564 1,836 3,172 3,157 3,093 97.7 (2.0) 11,259 5,396 108.7

Depreciation 352 343 358 374 388 10.2 3.7 1,464 1,409 3.9

EBIT 1,212 1,493 2,814 2,783 2,705 123.2 (2.8) 9,795 3,987 145.7

Other Income 365 146 438 130 229 (37.3) 76.3 943 1,130 (16.5)

Interest 56 41 41 25 32 (43.2) 28.2 138 306 (55.0)

PBT 1,521 1,598 3,212 2,888 2,902 90.8 0.5 10,600 4,811 120.4

Total Tax 233 512 1,142 981 948 306.2 (3.3) 3,583 1,346 166.1

Adjusted PAT 1,288 1,086 2,070 2,021 1,954 51.7 (3.3) 7,131 3,464 105.9

(Profit)/loss from JV's/Ass/MI - - - - - - -

APAT after MI 1,288 1,086 2,070 2,021 1,954 51.7 (3.3) 7,131 3,464 105.9

Extra ordinary items -920 0 0 265 97 363 -920

Reported PAT 368 1,086 2,070 2,286 2,051 457.3 (10.3) 7,494 2,544 194.5

Reported EPS 4.6 13.6 26.0 28.7 25.7 457.3 (10.3) 94.0 31.9 194.5


EBIDTA 20.0 17.2 24.4 25.7 27.7 776 202 23.9 13.4 1,048

EBIT 15.5 14.0 21.6 22.7 24.3 877 159 20.8 9.9 1,088

EBT 14.8 13.6 21.3 22.5 24.0 920 151 20.5 9.2 1,135

PAT 16.5 10.2 15.9 16.5 17.5 107 106 15.1 8.6 652

Effective Tax rate 15.3 32.0 35.6 34.0 32.7 1,732 (130) 33.8 28.0 581

8/2/2019 8 Stocks Emkay 310511

23/43



Fertiliser segment margins at 21.7% was a positive surprise

Fertiliser segment reported revenues of Rs 7.1bn (adjusted for subsidy received of Rs

76.2mn), +51% yoy, marginally ahead of our expectations of Rs 6.7bn. Adjusted EBIT of Rs

1.5bn (adjusted for subsidy received of Rs 76.2mn included in revenues and Rs 68.8mn

included in other income) was ahead of our estimates of Rs 1bn. Adjusted EBIT margin

improved 560bps qoq/2700bps yoy to 21.7% against our expectation of 15%.

Implementation of NBS last year in the complex fertilizer space has benefited all players

and their margins have increased considerably. GSFC has also benefited from its low cost

captive ammonia production.

Chemicals segment margins decline qoq- yet remain healthy

Chemicals segment revenues increased 30% yoy to Rs 4.1bn and were in line with our

estimates. Segment EBIT increased to Rs 1.4bn, 43% yoy and was marginally below our

estimates of Rs 1.6bn. EBIT margins increased to 34.7% as against 31.5% last year.

However, margins declined ~500bps qoq to 34.7% as against 39.6% because of recent

correction in caprolactam-benzene spreads (as highlighted last quarter, caprolactam -

benzene spreads at US$ 1,825 / mt in Q3FY11 were near their peak). We believe spread

between Caprolactam and Benzene (raw material) would decline further in Q1FY12E,

however it should remain healthy.

Caprolactam-benzene spread

500

750

10001250

1500

1750

2000

2250

2500

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

US$ / mt

Source: Fibre2Fashion, Emkay Research

FY11 achieved highest ever profit of Rs 7.1 bn driven by all time high

chemical prices and strong margins in fertiliser

GSFCs revenues increased by 17% yoy to Rs 47 bn in FY11 backed by increasing

chemical prices . Chemicals segment revenues increased by 27% yoy while fertilizers

segment revenues increased by 13% yoy. Adjusted EBITDA for the year grew by 109% yoy

to Rs 11.3bn led by improvement in margins in both the chemicals & fertilizers segment.

Fertiliser segment achieved revenues of 32 bn while segment reported EBIT of Rs 5.7 bn,

+200% yoy with EBIT margins of 17.7% as against 6.7% previous year. Sharp improvement

in fertiliser margins was on account of ammonia cost benefit since company meets its

requirement for ammonia captively in manufacturing of complex fertiliser.

Chemical segment revenues at Rs 14.6 bn was up by 27% yoy but the segment reported

EBIT of Rs 4.8bn, +116% yoy with EBIT margins of 33%. Margins in chemicals segment

was at all time high due to extraordinarily high caprolactam prices in H2FY11.

Consequently, adjusted PAT grew by 106% yoy to Rs 7bn and AEPS for the year stood at

Rs 89.4.

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Revision in estimates

We have revised our estimates for FY12E to reflect high chemicals prices in H1FY12E.

Though chemical prices have recently declined, they are still higher by ~30% yoy and

spreads remain favorable. Consequently, we have revised our revenue estimates for

FY12E by 18% and our PAT estimates by 11%. We have also introduced FY13E estimates

and expect company to report EPS of Rs 78.8, +7% yoy.

FY12E FY13E

Rs mn Old

Estimates

New

Estimates

%

Change

Introducing

Estimates

%

yoy

Net sales 49,220 57,925 17.7 61,577 6.3

EBITDA 8,928 9,671 8.3 10,478 8.4

EBITDA % 18.1 16.7 -144 bps 17.0 32 bps

PAT 5,285 5,863 10.9 6,277 7.1

EPS 66.3 73.6 11.0 78.8 7.1

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Key Financials


Y/E, Mar (Rs. mn) FY10 FY11 FY12E FY13E Y/E, Mar (Rs. mn) FY10 FY11E FY12E FY13E


Growth (%) (31.7) 17.2 23.0 6.3 Reserves & surplus 20,644 27,647 32,857 38,481

Expenditure 35,715 35,836 48,254 51,099 Net worth 21,441 28,444 33,654 39,278

Materials Consumed 25,422 25,827 35,971 38,239 Minority Interest 0 0 0 0

Power & Fuel 3,019 3,207 3,765 4,002 Secured Loans 1,748 798 798 798

Employee Cost 2,902 2,641 2,896 3,079 Unsecured Loans 5,128 3,128 3,128 3,128

Other Exp 4,372 4,161 5,621 5,778 Loan Funds 6,876 3,926 3,926 3,926

EBITDA 4,477 11,259 9,671 10,478 Net deferred liabilities 1,497 1,497 1,497 1,497

Growth (%) (47.4) 151.5 (14.1) 8.4 Total Liabilities 29,814 33,867 39,077 44,701

EBITDA margin (%) 11.1 23.9 16.7 17.0

Depreciation 1,409 1,464 1,780 2,000 Gross Block 32,316 34,135 38,785 41,785

EBIT 3,067 9,795 7,891 8,478 Less: Depreciation 21,501 22,965 24,745 26,745

EBIT margin (%) 7.6 20.8 13.6 13.8 Net block 10,815 11,170 14,040 15,040

Other Income 1,130 943 1,170 1,250 Capital work in progress 1,819 4,650 3,000 3,000

Interest expenses 306 138 310 360 Investments 4,250 4,250 4,250 4,250

PBT 3,891 10,600 8,751 9,368 Current Assets 21,037 23,070 28,350 33,225

Tax 1,346 3,469 2,888 3,092 Inventories 6,111 5,648 8,728 9,279

Effective tax rate (%) 34.6 32.7 33.0 33.0 Sundry debtors 6,216 8,881 6,348 6,748

Adjusted PAT 2,545 7,131 5,863 6,277 Cash & bank balance 601 6,679 10,378 14,119

Growth (%) (49.0) 180.2 (17.8) 7.1 Loans & advances 8,109 1,862 2,896 3,079

Net Margin (%) 6.3 15.1 10.1 10.2 Other current assets - - - -

(Profit)/loss from JVs/Ass/MI - - - - Current lia & Prov 8,107 9,273 10,563 10,814

Adjusted PAT After JVs/Ass/MI 2,545 7,131 5,863 6,277 Current liabilities 4,217 5,384 6,674 6,924

E/O items - 363 - - Provisions 3,889 3,889 3,889 3,889

Reported PAT 2,545 7,494 5,863 6,277 Net current assets 12,930 13,797 17,787 22,411

PAT after MI 2,545 7,131 5,863 6,277 Misc. exp - - - -

Growth (%) (49.0) 180.2 (17.8) 7.1 Total Assets 29,814 33,867 39,077 44,701


Y/E, Mar (Rs. mn) FY10 FY11E FY12E FY13E Y/E, Mar FY10 FY11E FY12E FY13E

PBT (Ex-Other income) 2,761 9,657 7,581 8,118 Profitability (%)


Interest Provided 306 138 310 360 Net Margin 6.3 12.2 10.1 10.2

Other Non-Cash items (692) 392 (95) (95) ROCE 15.5 33.7 24.8 23.2

Chg in working cap (6,658) 5,211 (291) (883) ROE 12.5 28.6 18.9 17.2

Tax paid -1,346 -3,631 -2,888 -3,092 RoIC 15.2 47.3 39.7 37.9

Operating Cashflow -4,220 13,231 6,397 6,409 Per Share Data (Rs)

Capital expenditure (1,472) (4,650) (3,000) (3,000) EPS 31.9 89.5 73.6 78.8

Free Cash Flow -5,692 8,581 3,397 3,409 CEPS 49.6 88.2 95.9 103.9Other income 1,130 943 1,170 1,250 BVPS 269.0 356.9 422.3 492.8

Investments 1,811 - - - DPS 4.5 7.0 7.0 7.0

Investing Cashflow 2,941 943 1,170 1,250 Valuations (x)

Equity Capital Raised - - - - PER 11.1 4.0 4.8 4.5

Loans Taken / (Repaid) 3,636 (2,950) - - P/CEPS 7.2 4.0 3.7 3.4

Interest Paid (306) (138) (310) (360) P/BV 1.3 1.0 0.8 0.7

Dividend paid (incl tax) (359) (359) (558) (558) EV / Sales 0.8 0.5 0.3 0.2

Income from investments 0 0 0 0 EV / EBITDA 6.8 1.9 1.8 1.3

Others 0 0 0 0 Dividend Yield (%) 1.3 2.0 2.0 2.0

Financing Cashflow 2,971 -3,446 -868 -918 Gearing Ratio (x)

Net chg in cash 220 6,078 3,699 3,741 Net Debt/ Equity 0.1 -0.2 -0.3 -0.4

Opening cash position 381 601 6,679 10,378 Net Debt/EBIDTA 0.5 -0.6 -1.1 -1.4

Closing cash position 601 6,679 10,378 14,119 Working Cap Cycle (days) 73.6 70.9 52.9 54.0

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Result Update

Recommendation History: Gujarat Sate Fertilisers GSFC IN


21/02/2011 Gujarat Sate Fertilisers Company Update Buy 335 530

31/01/2011 Gujarat Sate Fertilisers Q3FY11 Result Update Buy 327 530

16/12/2010 Gujarat Sate Fertilisers Company Update Buy 349 530

22/10/2010 Gujarat Sate Fertilisers Q2FY11 Result Update Buy 370 530



24/05/2011 Tata Chemicals Q4FY11 Result Update Accumulate 352 400

12/05/2011 Deepak Fertilisers Q4FY11 Result Update Buy 167 250

11/05/2011 Chambal Fertilisers Q4FY11 Result Update Accumulate 81 86

02/05/2011 Rallis India Q4FY11 Result Update Buy 1,390 1,735

G S F C

http://reports.emkayshare.com/downloads/researchreports/GSFC%20Company%20Update_21-Feb-2011.pdfhttp://reports.emkayshare.com/downloads/researchreports/GSFC%20Q3FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/GSFC%20Company%20Update_161210.pdfhttp://reports.emkayshare.com/downloads/researchreports/GSFC%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/GSFC%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Tata%20Chemicals%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Deepak%20Fertilisers%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Chambal%20Fertilisers%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Rallis%20India%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/GSFC%20Company%20Update_21-Feb-2011.pdfhttp://reports.emkayshare.com/downloads/researchreports/GSFC%20Q2FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/GSFC%20Company%20Update_161210.pdfhttp://reports.emkayshare.com/downloads/researchreports/GSFC%20Q3FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Rallis%20India%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Chambal%20Fertilisers%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Deepak%20Fertilisers%20Q4FY11%20Result%20Update.pdfhttp://reports.emkayshare.com/downloads/researchreports/Tata%20Chemicals%20Q4FY11%20Result%20Update.pdf

8/2/2019 8 Stocks Emkay 310511


May 30, 2011

Reco

Buy

Previous Reco

BuyCMP

Rs70

Target Price

Rs 93

EPS change FY12E/13E (%) -9 / 0

Target Price change (%) 8

Nifty 5,473

Sensex 18,232

Price Performance

(%) 1M 3M 6M 12M

Absolute (11) 2 (41) (55)

Rel. to Nifty (6) 0 (37) (58)

Source: Bloomberg


60

88

116

144

172

200


Rs

-70

-54

-38

-22

-6

10%

IVRCL (LHS) Rel to N if ty (RHS)

Source: Bloomberg

Stock DetailsSector Construction

Bloomberg IVRC@IN


Face Value(Rs) 2


52 Week H/L 194/60






FII/NRI 51.2 57.9 58.2



Public 14.9 11.7 11.6

Source: Capitaline

Re

sultUpdate

IVRCL Infrastructure & Project

Execution challenges persist- valuation attractive

IVRCL Q4FY11 APAT a t Rs908 mn (+6 .5% yoy) in l i ne . RPAT a t

Rs642 mn , impac t ed by wr i t e o f f s & p r ov i s ions . Execu t i on

r ema ins s lugg i sh , r evenue g r ow t h o f 8 .7% , be low es t im a t es

Adj . EBITDA a t Rs2 .16 bn (+11%yoy) cam e in l ine , even a f te r a

r evenue m iss as m ar g ins a t 10 .6% ( +21 bps yoy ) su r p ri sed

pos i t i ve ly

Or de r back log a t Rs238 bn t hough s t ands a t 4 . 2X FY11 r evenue ,

40% o f t he back log f aces ex ecu t i on cha l l enges . W e cu t 12E

EPS by -8 .7% le d by s low er exec u t ion . Cut TP by 8% to Rs93

Sharp unde r pe r f o r mance ( ~37% ove r l as t 6 m on t hs ) a l r eady

f ac t o r s i n execu t i on headw inds . Va lua t i ons a t 10x ( 6X ex t he

va lue o f subs ) seem t o f ac t o r i n nega t i ves . Ma int a in Buy

Execution headwinds slows revenue growth to 8.7%

With ~40% of the order backlog facing execution headwinds, IVRCLs revenue grew by just

8.7% with revenues of Rs20.5 bn, below our estimate of Rs21.7 bn. Key order/project

where IVRCL is facing execution issues are

Project Execution Issues

Goa Karnataka Road Project Land acquisition yet to be completed

Sion Panvel Road Project Financial Closure not Done by IVR Assets * Holding

Koyna Hydro Project Clearances yet to happen

AP Irrigations works Continue to faces payment issues. Hence slower executionSaudi Arabia Project Turbulence in middle east.

The above mentioned orders constitute ~ 40% of IVRCl Rs238 bn order backlog. Though

IVRCl Asset & Holdings (IVR AH) is about to set financial closure of the Sion-Panvel

project, Goa-Karnataka Project continues to face land acquisition issues. Further though

receivables from AP Govt have significantly come down over last 12 months, the

management is still adopting prudent strategy of not ramping up execution to full throttle in

these projects. Hence we believe execution is likely to remain muted over next 2-3

quarters.

EBITDA margins surprise positively -leading to in line 4Q numbers

Though IVRCLs execution remained muted during the quarter, 4Q adjusted EBIDTA(Adjusting for a one time write offs & provision of Rs390 mn on account of doubtful debts &

uncleared cost overruns related to Jharkhand Rural Electrification works) at Rs2.16 bn

(+11% yoy), came in line with estimates, with margins at 10.55% (+21 bps yoy) surprising

positively (vs expectations of 9.7%). IVRCL reported its best quarterly margin in the last 12

quarters, due to higher proportion of execution from the high margin Buildings and

Industrial segment. With in line 4Q EBIDTA, APAT at Rs907 mn (+6.5% yoy) also came in

line with our estimates. RPAT at Rs643 mn declined 24.6% yoy.

Financial Snapshot (consolidated) Rs Mn


Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

FY10 54,923 5,313 9.7 2,067 7.7 -11.4 11.3 9.2 6.3 1.0

FY11E 56,174 4,805 8.6 1,579 5.9 -23.6 8.2 12.0 8.0 1.0

FY12E 65,376 6,047 9.2 1,891 7.1 19.8 9.1 10.0 6.4 0.9

FY13E 73,562 6,804 9.3 2,235 8.4 18.2 9.9 8.5 6.1 0.8

Source: Emkay Research

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IVRCL Infrastructure & Projects Result Update


Quarterly Results

Rs mn Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11A YoY (%) QoQ (%) FY11P FY10 YoY (%)

Revenue 18870 11062 10502 14104 20516 8.7 45.5 56184 54524 3.0%

Expenditure 16920 10057 9797 12664 18351 8.5 44.9 50869 49341 3.1%

as % of sales 89.7 90.9 93.3 89.8 89.4

Consumption of RM 6847 3606 4095 5325 6907 0.9 29.7 19934 20147 -1.1%

as % of sales 36.3 32.6 39.0 37.8 33.7

Construction Expenses 3575 1901 1684 1894 4049 13.3 113.8 9529 10845 -12.1%

as % of sales 18.9 17.2 16.0 13.4 19.7

Masonry and Other labour 5159 3614 3033 4551 6234 20.9 37.0 17432 15020 16.1%

as % of sales 27.3 32.7 28.9 32.3 30.4

Employee Cost 716 652 633 604 735 2.6 21.6 2623 2026 29.5%

as % of sales 3.8 5.9 6.0 4.3 3.6

Other expenditure 624 283 352 291 426 -31.7 46.5 1351 1303 3.7%

as % of sales 3.3 2.6 3.3 2.1 2.1

EBITDA 1950 1005 706 1440 2165 11.0 50.3 5315 5183 2.5%

Depreciation 141 157 184 199 217 54.7 9.4 758 542 39.8%

EBIT 1810 848 521 1241 1947 7.6 56.9 4557 4641 -1.8%

Other Income 54 11 304 95 49 -8.6 -48.1 460 284 61.9%

Interest 525 453 480 592 656 24.9 10.9 2182 1641 33.0%

PBT 1338 406 345 744 1340 0.1 80.1 2836 3285 -13.7%

Total Tax 486 125 112 238 432 -11.0 81.9 908 1176 -22.8%

Adjusted PAT 852 281 233 506 908 6.5 79.3 1928 2109 -8.6%

Order-book backlog and Order inflow details

Order book details Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11A % yoy % qoq

Opening order backlog 220000.0 233750.0 233750.0 240000.0 242000.0 10.0 0.8Order inflow 32626.8 11069.4 16754.7 16112.0 16465.7 -49.5 2.2

Revenue Booked 18876.8 11069.4 10504.7 14112.0 20565.7 8.9 45.7

Closing Orderbacklog 233750.0 233750.0 240000.0 242000.0 237900.0 1.8 -1.7

Source: Company. Emkay Research

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Though Order backlog at Rs 238 bn stands at 4.2x FY11 revenues, 40% of

the backlog remains slow moving

With order inflow of Rs16.5 bn order backlog stands at Rs 238 billion, which is at 4.2x FY11

revenues. However ~40% of the order backlog which includes Rs 61bn from the

transportation vertical and Rs 27bn from AP is slow moving and face execution issues . AP

is facing execution delays due to state government finances and pending receivables.

Transportation vertical which includes road projects from IVR assets holding is facingdelays due to lack of financial closures and tardy process of land acquisition and other

clearances.

Conference call Highlights

n Management remains confident on executing all the road projects and has indicated that

the subsidiary (IVR Asset) remains well funded to meet the capex obligations of FY12E.

Also the management is confident that dilution of minority stakes in BOT SPVs will take

care of any additional equity requirement post FY12E.

n IVRCL Asset & Holdings (IVR AH) is about to see financial closure of the Sion-Panvel

project which should help company ramp up execution on the project.

n Goa-Karnataka Project continues to face land acquisition issues with only ~45% of theland required for the project in hand. Though NHAI is pursuing the matter with the Goa

Govt, it is not sure when the entire land acquisition will be completed.

n Though receivable from AP Govt have significantly come down (Rs0.75 bn) over last 12

months, the management is still adopting prudent strategy of not ramping up execution

full throttle in these projects. Hence we believe execution is likely to remain muted over

next 2-3 quarters.

n Turbulence in Middle East has significantly impacted execution on the Saudi Arabia

project, IVRCL first major overseas project. IVRCL has not submitted performance

guarantees for the project and hence the works have been impacted. The company

expects the work to see ramp up over next 2-3 quarter.

n Though IVRCL management remains confident of pick up in the pace of execution, itshas refrained from giving any revenue guidance for FY12. Management highlighted that

the company is re-working execution plans and will be able to give revenue guidance

over next 3-6 months. The management also remains confident of holding onto EBIDTA

margins of ~10%.

Cut FY12E EPS estimates by 9%, target by 8% to Rs93

As mentioned earlier that though IVRCLs order backlog at 4.2x FY11 revenues, provides

good revenue visibility, ~40% of the order backlog is witnessing tardy progress and faces

execution headwinds , hurting that visibility. We remain skeptical on the pace of ramp up of

these projects. We also built in lower order inflow assumptions in the transportation vertical

due to aggressive competition in the road BOT space, which we believe will restrict IVRCL

AH to aggressively bid for road projects. Consequently we cut our EPS estimates by -8.7%for FY12E and target by 8% to Rs93 (valuing core construction business at 9X FY12 PER .

We introduce our FY13E EPS at Rs8.4.

Downgrading FY11/12 EPS estimates by -1%/-16%

Rs mn FY12E FY13E

Earlier Revised % change Introduce

Sales 67710 65376 -3.4 73562

EBIDTA 6263 6047 -3.4 6804

EBIDTA (%) 9.2 9.2 9.3

Net Profit 2071 1891 -8.7 2235

EPS 7.8 7.1 -8.7 8.4

Source: Emkay Research

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IVRCLs SOTP value at Rs 93

BusinessValuation

Basis Multiple (x)Value

(Rsmn)

Valueper share

(Rs)

Construction business FY12E, PE (x) 9.0x 17020 64

Hindustan Dorr Oliver MCap 25% discount to M Cap 1866 7

IVR Asset Holding MCap 25% discount to M Cap 5874 22

Total Fair value 24760 93.0

Source: Emkay Research, Capitaline

Execution headwinds remain, however valuation offers comfort - BUY

Though IVRCL continue to face execution headwinds issues, we believe the 37%

underperformance of the stock over last 6 months already factors in all these issues.

Further we believe valuation at 10x its FY12E earnings, (which are expected to decline by

2% on adjusted FY11 earnings) and 6X ex the value of subs profit offers comfort. Maintain

Buy.

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Key Financials


Y/E, Mar (Rs. m) FY10 FY11P FY12E FY13E Y/E, Mar (Rs. m) FY10 FY11P FY12E FY13E

Net Sales 54923 56174 65376 73562 Equity share capital 534 534 534 534

Growth (%) 10.3 2.3 16.4 12.5 Reserves & surplus 17999 19340 21094 23142

Expenditure 49610 51369 59329 66758 Networth 18533 19874 21628 23676

Materials Consumed 19151 19975 23993 26997 Minority Interest

Construction

8 stocks emkay 310511

Documents