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Dhanuka Agritech Ltd. Capacity expansion and normal monsoon to drive earnings

INITIATING COVERAGE

BUY

Relative Capital Market Strength

Dhanuka Agritech Ltd. (Dhanuka) manufactures a wide range of agro-chemicals such as herbicides, insecticides, fungicides, plant growth regulators in various forms – liquid, dust, powder and granules. The company has been performing well since the past two years even though it has been subject to headwinds such as unpredictable monsoon and volatile currency movements. Dhanuka has displayed stellar growth with unparalleled ROE of ~28% and ROCE of ~33% in FY15.

Investment Rationale:

• Above average monsoon forecast for FY17

• New launches in recent times to drive growth

• Commencement of production at Keshwana facility and doubled up capacity at Udhampur

• Positive long term outlook of industry

• Favorable government policies to aid future growth

Risk and Concerns:

• Volatile and unseasonal rainfall.

• Acceptance of GM crops

• Decline in farm profitability due to fall in global agro-commodity prices.

Valuation:

Dhanuka is planning to launch 3-4 products in FY17, thereafter two new products each year. The company is expected to benefit from its pan-India presence, wide distribution network, international tie-ups and robust performance of its existing and new products.

Supported by strong growth drivers such as favorable monsoons, production capacity expansion from its recently commissioned Keshwana plant, increasing demand of food grains coinciding with declining farmlands will result in the stock outperforming the market.

We estimate Dhanuka’s total operating income to grow at 14.2% CAGR over FY15-18 to Rs. 11,774.8mn, while reported PAT to grow at 13.5% CAGR over the same period to Rs. 1,551.7mn. Moreover, EBITDA margin to expand by 186bps to 19.2% in FY18E, however due to higher tax incidence, PAT margin is likely to report a modest decline of 25bps to 13.2% in FY18E from 13.4% in FY15. Based on relative valuation, we arrive at the target price of Rs. 793.8 per share, translating into an upside potential of 35.3% from its current level. Thus we recommend a “BUY” rating on the stock.

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May 11, 2016

Rating Matrix

CMP (Rs.) 590.9

Rating Buy

Target Price (Rs.) 793.8

Target period 18 months

Upside potential 35.3%

52 week H/L (Rs.) 411.1 / 700

Face value (Rs.) 2

Category Mid Cap

Sector Agro Chemicals

Shareholding Pattern as on 31st Dec. 2015

Particulars Dec-15 Sep-15 Jun-15 Mar-15

Promoters 75.0% 75.0% 75.0% 75.0%

FIIs 6.4% 6.1% 6.3% 5.8%

DIIs 6.4% 5.9% 5.3% 5.3%

Non institutions 12.3% 13.1% 13.4% 13.9%

Financial Snapshot (Rs. mn)

Projections FY14 FY15 FY16E FY17E FY18E

Revenue 7,394.6 7,902.1 8,419.5 10,150.7 11,774.8

EBITDA 1,216.1 1,369.0 1,525.6 1,896.9 2,259.3

Adjusted PAT 931.4 1,061.3 1,063.9 1,300.5 1,551.7

EBITDA (%) 16.4% 17.3% 18.1% 18.7% 19.2%

PAT (%) 12.6% 13.4% 12.6% 12.8% 13.2%

EPS 18.6 21.2 21.3 26.0 31.0

BVPS 66.5 82.4 98.3 117.7 140.8

RoNW (%) 31.3% 28.5% 23.5% 24.1% 24.0%

RoCE (%) 37.0% 33.4% 30.9% 32.3% 32.2%

P/E 27.5 22.5 18.9

P / BVPS 6.0 5.0 4.2

EV/EBIDTA 18.8 14.9 12.3

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Dhanuka Agritech Ltd. Sensex

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Company Introduction:

Dhanuka Agritech Ltd. (Dhanuka) manufactures a wide range of agro-chemicals like herbicides, insecticides, fungicides, miticides, plant growth regulators in various forms – liquid, dust, powder and granules with a pan-India presence through its marketing offices in all major states in India. Sales network comprises of more than 8500 distributors / dealers selling to over 80,000 retailers across India and reaching out to more than 10mn farmers. The company has strong portfolio of over 85 products across different segments. Its business is segmented into four areas with insecticides and herbicides contributing approximately 43% and 32% of its FY15 revenues. Further, fungicides and plant growth nutrients contribution stood at 14% and 11% respectively. Geographically, southern and western regions together contributed 62% to top-line, followed by northern (25%) and eastern (13%) regions. Among states, Andhra Pradesh, Maharashtra and Madhya Pradesh contributed 43% to top-line in FY15.

Dhanuka Agritech Ltd.

Dhanuka achieved a revenue CAGR of around 15% over FY09-15 and EBITDA CAGR of around 17%. Dhanuka has an asset light model of producing formulations only and not technicals (which it sources from international partners). It has tie-ups with several leading agrochemical companies in the USA and Japan which provides it with a strong product portfolio and a robust product pipeline. It has been able to create a strong rural visibility and brand on the back of its advertising and marketing efforts and strong farmer engagement initiatives.

May 11, 2016

43%

32%

14%

11%

Product Portfolio

Insecticides Herbicides

Fungicides Plant growth nutrients

32.0% 30.0%

25.0%

13.0%

10%

15%

20%

25%

30%

35%

WesternRegion

SouthernRegion

NorthernRegion

EasternRegion

Regional Revenue Breakup

Source: Choice Broking Research Source: Choice Broking Research

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Company Introduction (Contd…) Focus on product launches to augment growth: Over last few years, Dhanuka has been consistently strengthening its product portfolio across crops, benefitting from tie-ups with eight global agrochemical manufacturers and in-house R&D expertise. After launching 15 products over FY13-15, it has launched four products in H1FY16 targeting multiple crops. Our interaction with distributors suggests that while most launches have been well-received, they could have garnered a better response had monsoons been adequate. Going ahead, the company has indicated a pipeline of two new 9(3) products, each year. Once registration for new 9(3) molecules is approved, Dhanuka would receive the license from global players to market these products exclusively in India, initially for three-five years. As the product mix improves (with higher contribution from exclusive products, offering better margin), we expect the company’s gross margin to improve 100-150 bps, over next four-five years and inch closer to that of other large players such as Bayer, Rallis and PI Industries.

Focus on brand building, increasing distribution reach augur well: Enhancing brand recall among end-users, via promotional campaigns, is a key focus area. Despite having Amitabh Bachchan as its brand ambassador, our research suggests Dhanuka still lags MNC peers in brand recall. We expect the continued association with Mr. Bachchan will strengthen the brand and attract more distributors. The company has doubled its distribution network to ~8,500 pan-India dealers, over last five years, reaching over 625 districts and 10 million farmers. Going forward, Dhanuka plans to increase its distribution network by 300-400 dealers per year.

Product launches in recent year

Product Segment Product Segment Product Segment

Sempra Herbicide Danfuron Insecticide Fluid Insecticide

Morter Insecticide Fdefend Insecticide Fuzi Super Herbicide

Sakura Herbicide Maxyld PGR Lustre Fungicide

Oxykill Herbicide Media Super Insecticide Danzyme Gold Granule PGR

Pager Insecticide Protocol Fungicide One-Star Insecticide

FY13FY14FY15

May 11, 2016

Source: Choice Broking Research

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Agrochemical Sector Overview


An attractive market driven by compelling macro drivers and a strong footprint in export markets: Agricultural productivity has been a key concern globally, driving significant research efforts across the various aspects, including crop protection chemicals. Global agrochemicals players spend a sizable proportion of their revenue towards development of novel crop protection molecules. As a result, agrochemicals is sometimes referred to as “knowledge chemicals”, and shares several similarities with pharmaceuticals. At the same time, generic and off patent proprietary agrochemicals also constitute a significant part of the market (52% and 26% respectively of the total global agrochemical consumption in terms of value as of 2013). India is the fourth largest producer and amongst the fastest growing markets of agrochemicals in the world. The Indian agrochemicals industry is dominated by a host of global giants with local operations as well as a number of scaled up Indian players catering to domestic as well as export markets. The Crop Care Federation of India (CCFI) estimates that 85% of India’s crop loss (worth ~ USD 20 bn) is caused by pest infestation, disease and weeds which is avoidable by the use of agrochemicals. This, coupled with rising awareness amongst farmers and growing rural income, and the resultant willingness to spend on crop protection chemicals, are expected to provide a significant fillip to the domestic consumption of agrochemicals. At the same time, supported by availability of skilled manpower, low labour costs and the ability to offer quality products meeting international quality standards, India is also emerging as a manufacturing hub to cater to the global markets.

There are four key components in the agrochemicals value chain: 1. R&D: R&D for novel molecule discovery commands humongous investments in capital and manpower. Major global agrochemicals MNCs spend as much as 8-10% of their revenue in this area. Most Indian companies spend only 1-2% in R&D and are not globally competitive in this field but some companies have recently started focusing on select areas.

2. Technical Grade Manufacturing: Involves production of active ingredients used to make commercial agrochemicals. These chemicals are often quite toxic and require strong chemistry and skilled manpower. India has ~ 125 technical grade manufacturers. 3. Formulation Manufacturing: They use the technicals to produce formulations which are the end-use agrochemicals sold commercially to farmers. India has around 800 formulators. Most of the Indian agrochemical companies and MNCs having sales and distribution presence in India produce their own formulations which they package and label under their brand name. 4. Marketing and Distribution: They are responsible for distributing and selling commercial agrochemical products across the country. India has over 150,000 distributors of various sizes across the country. Many of these are regional players who have tie ups with one or more agrochemical companies for distribution and sale of their products.

Agrochemicals Value Chain

May 11, 2016


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Market Size And Market Growth The global agrochemicals market is estimated at USD 54.5 bn in 2014, up from USD 43.0 bn in 2009, growing at a CAGR ~ 5% in the last five years. It is expected to continue a steady growth over the next five years to reach USD 71.3 bn by 2019. The key drivers contributing to the growth of the global market include decreasing arable land, increasing global population and consequent requirement to improve crop yields. Further, new demand for agricultural products would also be created by the use of agricultural products for industrial applications such as in fuel blending and polymer manufacturing, opening up new avenues of applications for agrochemicals.

Vast potential in India driven by the need for food security and the current penetration levels: Agriculture accounts for ~ 14% of the total GDP of India, employing almost 50% of India’s workforce. With a population of nearly 1.25bn growing at an estimated 1.5% annually, of which 23% falls below poverty line, India faces significant strain on achieving food security. An estimated 85% of India’s crop loss (worth ~ USD 20bn) is caused by pest infestation, disease and weeds and is avoidable by the use of agrochemicals, as per the estimates by the Crop Care Federation of India (CCFI). This exemplifies the critical role of agrochemicals in India’s effort to achieve national food security.

Estimated growth rates of agrochemicals 2014-19 Global market for agrochemicals (USD Bn)


May 11, 2016

Agrochemical Sector Overview (Contd…)


Indian agrochemical production (USD bn)

Indian agrochemicals market in 2014 (USD Bn)

Agrochemicals consumption (kg/ha)

Source: Choice Broking Research Source: Choice Broking Research Source: Choice Broking Research

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India is the fourth largest manufacturer of agrochemicals after the USA, Japan and China. However, the Indian agricultural market witnesses a very low agrochemical penetration (at 0.6 kg/ha) compared to developed nations such as USA (7 kg/ha) and Japan (11 kg/ha). This indicates the huge headroom for growth of agrochemical penetration in India. The agrochem space in India comprises several scaled up Indian and global companies, including significant market presence of global giants such as Bayer, Syngenta, Monsanto, DuPont. The market leader is UPL Limited (earlier known as United Phosphorous Limited) which is an MNC of Indian origin. It is not only the market leader in the domestic market but has a customer base in 123 countries across the globe with 14 of its 23 manufacturing sites outside India, having grown rapidly through organic and inorganic routes. Bayer Crop Science (Germany) and Rallis (subsidiary of Tata Chemicals) are the other two in the top 3 players in the Indian market. Other key companies are BASF (German Chemical giant), and Indian players including Indofil Industries Ltd., Coromandel International Ltd., PI Industries, Crystal Crop Protection, Dhanuka, Excel Crop Care and Insecticides India Ltd. The 3 year average EBITDA margin for the leading agrochemical companies in India is 14.6%, making it quite an attractive segment. The segment enjoys high margins driven by the price premium that a strong customer interface and strength of brand command.

Herbicides in India : A small but rapidly growing segment

Herbicides in India - A small but rapidly growing segment: Globally, herbicides constitute the largest part of agrochemicals market, accounting for ~ 45% of the total consumption. This segment is largely driven by the significant focus on production of high value crops in global markets, including horticulture, where the use of these chemicals is of particular importance to prevent loss of such high value crops. However, the Indian market structure is very different. Unlike the global market, herbicides account for a mere 16% of the market. Instead, the largest part of the production is constituted by insecticides ( ~ 60% of the total market), followed by fungicides (18% of the market). Historically the use of herbicides has not been necessary in India, primarily because of the availability of cheap labour, as manual weeding effectively acts as a substitute for herbicides.

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However, herbicides have started demonstrating impressive growth with the rise in labor cost and cost efficiency of chemical against manual weeding. This trend is expected to continue going forward, with strengthening demand arising for herbicides from increased mechanization and reduced labor intensity of agricultural practices, higher labor cost arising from urbanization and reduction in rural population, as well as strengthening of India as a manufacturing hub to cater to export markets (herbicides comprising a major proportion of the export demand in line with global consumption structure).

Global and Indian production segmentation for Agrochemicals (by value)

While insecticides and fungicides have largely dominated the Indian agrochemical demand, herbicides have overtaken them in terms of recent growth. However, in spite of the size and penetration, insecticides and fungicides are expected to continue to demonstrate attractive growth rates (10% and 12%, respectively) over 2014-19. The production value of insectides in India has been growing at a modest pace, despite a decline in sales volumes resulting from the replacement of conventional insecticides by newer, high value generic insecticides which are more potent, less toxic and are required to be applied in lower volumes compared to their traditional counterparts. Fungicides are expected to grow at ~ 12% CAGR over 2014-19, almost in line with their historical growth. The growth is slightly muted due to better control and reduced incidence of fungal diseases in key crops such as potato.

Going forward, the demand for fungicides is expected to be driven by the growth of fruits and vegetables segment and other cash crops where return to the farmers is higher and they are willing to spend more on protecting the crops. Biopesticides are other significant agrochemicals – they are mass-produced agents manufactured from living micro-organisms or natural products and constitute a niche and emerging segment. A very small market currently comprising of around 3% of the total crop protection market, this segment has a bright future over a longer term with growing environmental concerns and awareness, and increasing adoption of modern agricultural practices such as integrated pest management.

May 11, 2016




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Investment Rationale:

• Above average monsoon forecast for 2016: After two consecutive years of poor rainfall in many parts of the country, the monsoon is expected to remain above normal. As per India Meteorological Department’s (IMD) forecast for 2016 southwest monsoon, rainfall is likely to be 106% of the long period average (LPA) with a model error of ± 5%. The LPA of the seasonal rainfall over the country as a whole for 1951-2000 is 89 cm. A normal monsoon in 2017 kharif season, which IMD predicts, should drive higher demand for premium agri-inputs as farmers scale up investments on quality inputs to capitalize on favorable agri-climate, after two years of deficient rainfall.

• New launches in recent times to drive growth: Over last few years, Dhanuka has been consistently strengthening its product portfolio across crops, benefitting from tie-ups with eight global agrochemical manufacturers and in-house R&D expertise. After launching 15 products over FY13-15, it has launched four products in H1 FY16 targeting multiple crops. Going ahead, the company is planning three new 9(3) molecules in FY17. Apart from that the company is going to launch Conika, which is a fungicide from Hokko Chemicals, Japan as well as an insecticide from Otsuka Chemicals of Japan.

• Commencement of production at Keshwana facility and doubled up Udhampur capacity: Dhanuka has received license to manufacture insecticides at its newly set-up Keshwana plant in Rajasthan. We are of the view that the new plant to add around Rs. 10bn in revenues and targets 17.5-18.5% EBITDA margin from the insecticides business. Once Keshwana plant reaches full capacity utilization, the company is targeting to double its revenue in the next 4-5 years.

Dhanuka also received approval from J&K State Pollution Control Board to handle the hazardous waste for pesticide formulation, which has now been doubled to 11,800mn tonne per annum, from the existing capacity of 5,800mn tonne per annum. Already functional, Dhanuka expects the growth capacity of Udhampur unit to go up by 20-25 percent every year.

• Positive long term outlook of industry: Despite having the world’s largest area under cultivation for rice, wheat and other pulses, India with 2.5% of the world land mass and 16% of the world population faces alarming hunger issues. According to latest FAO estimates in ‘The State of Food Insecurity in the World, 2015’ report, 194.6mn people are undernourished in India. As the Indian population expands further and the per capita size decreases, the Indian Agrochemical industry finds itself in a sweet spot. Currently, India as compared to the world uses a minimum amount of crop protection products i.e. 0.6 kg/ha compared to world average of 3 kg/ha, thereby indicating scope for growth.

• Favorable government policies to aid future growth: Union budget’s emphasis on agricultural growth will bolster Indian consumption story. The recently launched crop insurance scheme as well as increase in MSP will aid agrochemical growth story going forward.

Risk and Concerns: • Volatile and unseasonal monsoon : Volatile and unseasonal monsoons are a perennial problem faced by industry. India

has received deficient rainfall in the past two years, however it is likely to receive a normal rainfall in June-Sept. monsoon period. Historically there hasn’t been deficient rainfall for three consecutive years. Also, recently the Climate Forecast System of the Indian Institute of Tropical Meteorology and Private Firm Weather Risk Management Services have said that the El-Nino effect is waning and that India is set to receive normal rainfall during the June-September monsoon season. However, any unexpected development with respect to monsoon projection and progress will be negative for the economy as well as the company..

• Acceptance of genetically modified (GM) crops : The use of GM crops is affecting the agrochemicals industry across the world by impacting the types and volumes of agrochemicals required for such crops. In India, currently GM technology is allowed only in cotton. In 2002, Bt cotton was allowed in India and it has penetrated to 90% of the total cotton cultivated in India. GM technology has not been permitted in food crops so far, but such crops are already being accepted across the world, and it may not be long before it is adopted in India to enhance food security of the country. Thus the acceptance of the GM crop in future will reduce the usage of agrochemicals.

• Decline in farm profitability due to fall in global agri commodity prices : The recent onset of low agricultural commodity prices and faltering economic growth in emerging economies has weakened demand for crop protection chemicals. Further, for farm products influenced by export-import dynamics, any unfavorable movement in global realizations would impact domestic profitability.

Dhanuka Agritech Ltd. May 11, 2016

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Recent Quarterly and Annual Financial Performance:

Recent Quarter Analysis: During Q3 FY16, Dhanuka reported a strong performance, mainly on account of new product launches. Despite difficult market conditions owing to continued stress on farm incomes, the company reported 15% Y-o-Y increase in revenue to Rs. 2,060mn. EBITDA margin rose 148bps Y-o-Y (down 411bps Q-o-Q) to 16%, driven by lower raw material cost. Adjusted PAT rose 3% Y-o-Y to Rs. 225mn, as a higher tax outgo offset the impact of margin expansion.



Recent Quarter Performance Recent Annual Performance

17,912

15,304

18,043

27,023

20,599

14.4% 18.0%

13.9%

20.0%

15.9%

12.3%

18.6%

10.1%

14.0%

10.9%

5%

10%

15%

20%

25%

0

5,000

10,000

15,000

20,000

25,000

Q3 CY15 Q4 CY15 Q1 CY16 Q2 CY16 Q3 CY16

Total Operating Income (Rs. mn)

EBITDA Margin (%)

PAT Margin (%)

Expectations for FY17E and FY18E: Dhanuka has already commenced production at its new Keshwana facility in Q4FY16 and plans to launch three products in FY17, aimed at multiple crops. The company is expecting a better business prospects in FY17 after the better monsoon forecast and is anticipating a sales growth of more than 20%. Its business is directly dependent on monsoon and if the monsoon is good, there will be better sowing throughout India thereby leading to more consumption of pesticides. Launch of three new products coupled with capacity expansion in Jammu & Kashmir unit will also drive growth. Going forward, the performance of Dhanuka depends upon its ability to create brands, robustness of distribution network and strategic partnerships that provide a strong product portfolio and a robust product pipeline.

73,946.4 79,021.2 84,195.4

101,506.7

117,747.8

16.4% 17.3% 18.1% 18.7% 19.2%

12.6% 13.4%

12.6% 12.8% 13.2%

0%

7%

13%

20%

26%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

FY14 FY15 FY16E FY17E FY18E

Total Operating Income (Rs. mn)

EBITDA Margin (%)

PAT Margin (%)

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Peer Group Valuation:

Valuation: Dhanuka is planning to launch 3-4 products in FY17, thereafter two new products each year. The company is

expected to benefit from its pan-India presence, wide distribution network, international tie-ups and robust performance of its existing and new products. Supported by strong growth drivers such as favorable monsoons, production capacity expansion from its recently commissioned Keshwana plant, increasing demand of food grains coinciding with declining farmlands will result in the stock outperforming the market. We estimate Dhanuka’s total operating income to grow at 14.2% CAGR over FY15-18 to Rs. 11,774.8mn, while reported PAT to grow at 13.5% CAGR over the same period to Rs. 1,551.7mn. Moreover, EBITDA margin to expand by 186bps to 19.2% in FY18E, however due to higher tax incidence, PAT margin is likely to report a modest decline of 25bps to 13.2% in FY18E from 13.4% in FY15. Based on relative valuation, we arrive at the target price of Rs. 793.8 per share, translating into an upside potential of 35.3% from its current level. Thus we recommend a “BUY” rating on the stock.





Companies CMP (Rs.) MCAP (Rs.mn) Stock Return (%) LTM Revenue

(Rs. mn) LTM EBIDTA Margin (%)

LTM PAT Margin (%) 1M 3M 6M 12M

Dhanuka Agritech Ltd. 587 29,349 -3.7% 12.9% 39.2% 5.1% 8,097 17.2% 13.2% PI Industries Ltd. 622 85,307 7.1% -5.7% -2.0% -5.0% 20,412 20.6% 13.6% Insecticides (India) Ltd. 420 8,670 20.4% 22.6% 14.4% -18.0% 9,709 9.9% 4.6% Rallis India Ltd. 197 38,369 16.2% 21.8% 1.7% -5.7% 16,116 14.3% 8.9% Bayer CropScience Ltd. 3,882 137,235 4.9% 14.6% 14.2% 8.9% 36,839 12.2% 8.9% UPL Ltd. 589 252,555 28.0% 49.3% 30.1% 16.5% 130,827 20.7% 9.9% Sharda Cropchem Ltd. 280 25,262 14.6% 27.1% 10.7% -13.0% 7,735 21.6% 15.3%

Companies FV (Rs.) EPS (Rs.) BVPS (Rs.)

DPS (Rs.)

Debt Equity Ratio (x)

RoE (%) RoCE (%) P / E (x)

P / B (x)

EV / EBITDA (x)

Dhanuka Agritech Ltd. 2 21.4 82.4 2.3 0.0 26.0% 30.7% 27.4 7.1 20.8

PI Industries Ltd. 1 20.3 64.4 2.5 0.1 31.5% 39.4% 30.6 9.7 20.4

Insecticides (India) Ltd. 10 21.8 198.1 2.3 0.7 11.0% 23.0% 19.3 2.1 12.0

Rallis India Ltd. 1 7.4 46.4 2.5 0.1 15.8% 19.5% 26.8 4.3 16.9

Bayer CropScience Ltd. 10 92.7 575.0 21.8 0.0 16.1% 20.3% 41.9 6.8 27.9

UPL Ltd. 2 30.3 159.4 5.0 0.6 19.0% 23.1% 19.4 3.7 10.4

Sharda Cropchem Ltd. 10 13.1 65.1 2.5 0.1 20.2% 23.2% 21.3 4.3 14.4

Particular (Rs. mn) Multiple FY18E

EBITDA 2,259.3

Enterprise Value 17.0 38,426.3

Non Equity Claims 0.0

Cash & Cash Equivalents 1,281.1

Equity Value 39,707.4

Total Shares O/s 50.0

Target Price 793.8

Current price 586.8

Potential Upside 35.3%

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Financial Statements:



Profit and Loss Statement Particulars FY14 FY15 FY16E FY17E FY18E

Total Income from Operations 7,394.6 7,902.1 8,419.5 10,150.7 11,774.8 Cost of Materials Consumed 4,670.0 4,920.8 5,157.1 5,845.5 6,780.8 Employee Benefits Expense 581.7 648.9 719.0 816.0 946.6 Purchase of Traded good 327.3 185.9 847.7 238.8 277.1 Other Expenses 926.8 963.5 1,017.8 1,249.8 1,449.7 EBITDA 1,216.1 1,369.0 1,525.6 1,896.9 2,259.3 Depreciation and Amortisation Expense (48.4) (58.5) (61.7) (74.0) (83.9) EBIT 1,167.7 1,310.4 1,463.8 1,823.0 2,175.4 Finance Costs (41.7) (26.0) (14.4) (17.3) (20.1) Other Income 37.3 9.9 39.2 26.0 30.2 PBT 1,163.4 1,294.4 1,488.6 1,831.7 2,185.4 Tax Expenses 232.0 233.1 424.7 531.2 633.8 Adjusted PAT 931.4 1,061.3 1,063.9 1,300.5 1,551.7

Balance Sheet

Particulars FY14 FY15 FY16E FY17E FY18E

Share Capital 100.0 100.0 100.0 100.0 100.0

Reserves and surplus 3,224.9 4,022.8 4,815.8 5,785.1 6,941.7

Deferred Tax Liabilities (Net) 36.4 34.2 36.5 43.9 51.0

Other Long-Term Liabilities 153.4 169.5 180.6 217.8 252.6

Long-Term Provisions 0.0 4.2 4.5 5.4 6.3

Short-Term Borrowings 394.1 161.1 0.0 0.0 0.0

Trade Payables 481.6 622.5 619.0 735.6 882.2

Other Current Liabilities 634.9 517.8 667.7 806.8 937.3

Short-Term Provisions 147.7 307.6 327.7 395.1 458.3

Total Liabilities 5,173.0 5,939.7 6,751.8 8,089.9 9,629.5

Tangible Assets 657.8 679.0 782.6 892.4 1,029.9

Intangible Assets 12.8 22.5 19.7 16.9 14.1

Capital Work-in-Progress 222.6 384.9 472.1 494.2 511.1

Non-Current Investments 10.0 51.5 53.5 64.2 82.7

Long-Term Loans and Advances 200.7 302.9 278.9 334.6 431.0

Other Non-Current Assets 2.6 3.1 19.7 23.8 27.6

Current Investments 0.0 418.1 434.7 521.6 671.9

Inventories 2,113.3 1,916.6 2,247.2 2,690.7 3,039.9

Trade Receivables 1,703.3 1,938.6 2,055.7 2,435.6 2,863.0

Cash and Cash Equivalents 23.0 38.7 159.8 342.4 609.2

Short-Term Loans and Advances 192.1 165.3 208.0 249.6 321.5

Other Current Assets 34.8 18.5 19.7 23.8 27.6

Total Assets 5,173.0 5,939.7 6,751.8 8,089.9 9,629.5


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Financial Statements (Contd…)


Cash Flow Statement Particulars FY14 FY15 FY16E FY17E FY18E

PBT 1,163.4 1,294.4 1,488.6 1,831.7 2,185.4 Depreciation / Amortization 48.4 58.5 61.7 74.0 83.9 Dividend Income (2.4) (6.0) 0.0 0.0 0.0 Finance Costs 41.7 26.0 14.4 17.3 20.1 Interest Income (19.5) (2.8) (67.5) (70.2) (84.2) Change in Working Capital (659.3) (37.9) (301.2) (560.1) (569.5) Others 978.2 1,060.1 1,107.6 1,303.0 1,509.9 Cash Flow From Operations Activities 333.6 1,099.1 771.3 761.5 1,002.0

Capex (288.1) (253.1) (252.6) (203.0) (235.5) Dividend Received 2.4 6.0 0.0 0.0 0.0 Interest Received 19.5 2.8 67.5 70.2 84.2 Change in Investments 72.12 (459.06) (18.74) (97.56) (168.8) Cash Flow From Investing Activities (194.1) (703.4) (203.8) (230.4) (320.0)

Repayment / Proceeds from Short-Term Borrowings 64.0 (237.0) (161.1) 0.0 0.0 Interest Paid (41.7) (26.0) (14.4) (17.3) (20.1) Dividend Paid on Equity Shares (165.1) (100.0) (225.1) (275.1) (328.3) Tax on Equity Dividend Paid (27.6) (17.0) (45.8) (56.0) (66.8) Cash Flow From Financing Activities (170.3) (380.0) (446.4) (348.5) (415.2)

Net Cash Flow (30.9) 15.7 121.1 182.6 266.7 Opening Balance of C&CE 53.8 23.0 38.7 159.8 342.4 Closing Balance of C&CE 23.0 38.7 159.8 342.4 609.2


Financial Ratios FY14 FY15 FY16E FY17E FY18E

Profitability & Return Ratios EBITDA Margin (%) 16.4% 17.3% 18.1% 18.7% 19.2% PAT Margin (%) 12.6% 13.4% 12.6% 12.8% 13.2% RoNW (%) 31.3% 28.5% 23.5% 24.1% 24.0% RoCE (%) 37.0% 33.4% 30.9% 32.3% 32.2%

Working Capital & Liquidity Ratios Payables (Days) 23.8 28.8 26.8 26.5 27.3 Inventory (Days) 104.3 88.5 97.4 96.8 94.2 Receivables (Days) 84.1 89.5 89.1 87.6 88.7 Current Ratio (X) 2.8 3.0 3.0 3.0 3.1

Turnover & Leverage Ratios Fixed Asset Turnover (X) 8.3 7.3 6.6 7.2 7.6 Total Asset Turnover (X) 1.4 1.3 1.2 1.3 1.2 Debt Equity Ratio (X) 0.0 0.0 0.0 0.0 0.0 Dividend Pay Out Ratio 0.2 0.1 0.3 0.3 0.3

Valuation Ratios BVPS (Rs.) 66.5 82.4 98.3 117.7 140.8 EPS (Rs. Cr) 18.6 21.2 21.3 26.0 31.0 P / E (X) 31.4 27.6 27.5 22.5 18.9 P / BVPS (X) 8.8 7.1 6.0 5.0 4.2 EV / EBITDA (X) 34.0 24.4 21.1 18.8 14.9


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