everest industries limited fiber cement roofing industry in india has a capacity of 5‐5.5m mtpa...

1

December 7, 2017

Everest Industries Limited Initiating Coverage Report

Research Analyst:

Pratim Roy (Midcap)

[email protected]

2

Sections Page No.

Brief Overview & Investment Rationale 3-4

Company Overview & Risk 5-6

Board of Directors—Management Team & Shareholding Pattern 7

Industry Structure 8

Quarterly Financial Snapshot 9

Business Prospects 10-11

Con-call Highlights Q2 12

Financial Details 13-16

Valuation 17

Disclaimer & Disclosures 18-19

Table of Contents

Investment%20Highlights

3

Everest Industries Limited Sector: Cement and Cements Product

7 December 2017

Everest Industries Limited – About to Deliver

We initiate coverage on Everest Industries Limited with a Strong Buy rating. Mounting rural demand, spending on affordable housing and industrial infrastructure offers immense scope for growth that is related to Indian economy.

Financial Performance at a glance (consolidated)

Investment Rationale

Diversified portfolio across categories and locations: They have 6 Building Products plants and 3 Steel Building Plants, 40 Sales Depot, over 6,000 Dealer Outlets, serving over 600 cities & 100,000 villages, export to over 35 countries (Green solutions – Fibre cement boards).

Key pillars: Speed, Strength and Safety Their large customer base includes inspiring companies who believe that complexity is a way of life and fast execution of projects is the key to their success and high growth. They provides building products and building solutions for commercial, industrial and residential sectors.

They have the best alternative construction method which is 3 times faster than the conventional construction. Everest smart steel buildings are 100% customized, aesthetic, durable and green buildings with inbuilt stability.

GST impact on the company: Their product have been kept at 18% bracket, GST council to reduce the tax impact from 27% to the 18% slab under the GST regime and bring it on par with metal roofing.

Normal monsoon in the country: The monsoon so far across the country has been normal and since there is a high degree of correlation between monsoon and rural incomes, leading to better farm output and more disposable income in the hands of rural customers and sale of roofing sheets. (Rationale continued…)

CMP (INR): 522.8

Target (INR): 632

Upside(%): 21%

Recommendation: STRONG BUY

BSE Code 508906

NSE Code EVERESTIND

Bloomberg Ticker EVI IN

Reuters Ticker EVRI.BO

Shareholding Pattern (%)

Sept-2017 June-2017 Mar-2017

Promoters 48.66 48.76 48.76

Institution’s 6.88 8.78 8.51

Public & Others 44.46 42.46 42.73

Market Cap (INR Cr.) 805.68

Outstanding Shares (Cr.) 1.54

Face Value (INR) 10.00

Dividend Yield(%) 0.21

P/E (x) 283.21

Industry P/E (x) 35.78

Debt/Equity 0.57

Beta vs. Sensex 0.24

52 Week High/ Low (INR) 580/180.3

Avg. Daily Volume (NSE)/1 year 101662

Stock Scan

Stock Vs. Nifty (Relative Return)

Particulars (INR in Lakhs) FY15 FY16 FY17 FY18 (E) FY19 (E)

Net Sales 124172.28 132630.20 117703.62 134566.83 145381.08

Growth (%) 18.53% 6.81% -11.25% 14.33% 8.04%

EBITDA 9241.84 9521.46 4536.29 8395.26 8646.49

EBITDA Margins (%) 10.42% 4.98% 7.44% 6.30% 6.04%

Net Profit 3422.97 3444.13 123.70 2660.94 3118.74

EPS 22.54 22.38 0.80 17.29 20.27

BVPS 208.95 225.20 225.73 226.26 237.77

P/E 14.27 10.60 283.21 29.8 25.5

P/BV 1.53 1.05 1.01 2.28 2.17

EV/EBITDA 7.80 5.63 11.69 8.44 9.70

ROE (%) 10.71% 9.94% 0.36% 7.63% 8.50%

Source: Company Data, ACE Equity & Smifs Research

75.00

125.00

175.00

225.00

275.00

325.00

EVI Nifty 50

Source: Company Data, SMIFS Research

Research Analyst:

Pratim Roy [email protected]

4

Investment Rationale Continued

Everest Industries Limited

New product line: The steady efforts on Research & Development they are planning to introduce newer products and application in FY18 and roll out Everest Super color Anti fungal roofing sheets. They have received excellent response for “Everest Super” – which create positive impact on their revenue.

Government initiatives towards Indian infrastructure growth: Government initiatives like “Swatch Bharat Abhiyan”, “Housing for all by 2022” & “Smart City Mission” would drive additional demand for Building Products. Strong time bound push and increase in government focus on rapid development of Smart Cities across the country will put pressure on smarter, safer and speedier construction methods, which will help in increase in demand for Boards & Panels in urban and semi urban areas. Government focus to connect Tier II and Tier III towns via air routes will help the company to promote its modern Smart Steel Building Technologies.

Implementation of “Parivartan Project” to cut cost: The number one Project Parivartan was a onetime exercise in which they had engaged a consultant, BCG, helping them with improving their roofing business and their procurement processes. This is a onetime expense, they do not expect any major payouts to happen in this regards in future. Having said that the basic objective of Project Parivartan was actually to work on various levels to improve their sales in terms of volumes, improve our realizations, reduce procurement cost, reduce logistics cost, they expect the benefits of these two to accrue over long-term.

Strong R&D: Everest’s Research and Development division based in Lakhmapur works has received recognition from Department of Science and Industrial Research (DSIR) and Ministry of Science and Technology (MoST). The R&D department is actively involved in process and product development with a clear focus on cost and value optimization. Key R&D activities during the year included development of special quality solutions and colour application for fibre cement products and new designs for fiber cement boards. In the steel building division, the R&D department initiated projects for faster manufacturing throughout, scrap reduction and better material flow for faster erection planning.

Reducing the debt significantly: Their debt equity ratio has been decreased from 0.34 to 0.26 YoY basis, They have paid DBS bank’s outstanding debt in April 2017 which will create positive impact on the bottom line of the company.

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Company Overview

Everest was established in 1934 and has over 8 decades of experience in building products. It is the pioneer of fiber cement products in India. The company offers a complete range of roofing, ceiling, wall flooring & cladding products and pre-engineered steel buildings for industrial, commercial and residential applications. The Company has introduced modern products & solutions to meet the contemporary requirements of the construction industry. The Company’s building products and solutions are available in more than 1,00,000 villages and 600 cities in India and also in many countries globally. The Company has designed anderected more than 2,000 Pre-Engineered steel buildings across 275 cities in India.

THEY ARE MAINLY DEALING WITH THREE PRODUCT LINE LIKE Steel Building: They offers a wide range of products for residential, commercial and industrial roofing. Its products are installed over more than 1 billion sqm of industrial and residential roofs in India. With 6 state-of-the art Roofing sheet manufacturing plants spread across the country and distribution reach of more than 1 lakh villages and 600 towns, Everest today is a brand synonymous to roofing in India.

They launched Pre Engineered Steel Buildings in 2008 and over the last few years it has emerged as one of the most prominent players in India. On average, Everest manufactures and supplies one Pre-Engineered Steel Building every working day. The company provides end to end PEB solutions from design to installation and has executed more than 2000 projects till date. They offers Everest Smart Steel Buildings as PEB solution for low rise, low span buildings. With Everest Smart Steel Buildings, construction of a building can be completed at a three times faster rate than conventional methods of construction even in seismic, hilly, coastal and high-wind areas.

Boards & Panels: They offers a range of Fiber Cement based new-age building products and solutions which enable strong, light and rapid construction of residential, commercial and industrial infrastructure. Everest has two manufacturing facilities for Boards & Panels. Boards business offers ample opportunities for value addition by way of different designs, colours, finishes and inherent properties of the product.

Manufacturing Facilities: They have 6 operational manufacturing plants serving the Building Products division (7 roofing lines – including 1 dual use line, 3 Boards line and 2 Panel lines) located across India with total capacity of 8,65,000 MTPA and three facilities catering to the Steel Building division (2 steel building plants, 1 metal roofing plant) with total capacity of 72,000 MTPA. This includes the recently commissioned Dahej plant with capacity of 30,000 MTPA which will cater to projects in Western, Central and Southern region. Proximity to markets is important in ACS due to bulk and breakage risk.

Manufacturing Capacity

Business Division

Division Manufacturing Units

Total Capacity

Building Products

Roorkee (Uttarakhand)

865000 MTPA

Kolkata (West Bengal)

Kymore Madhya Pradesh)

Nashik (Maharashtra)

Podanur (Tamil Nadu)

Somnathpur (Odisha)

Steel Buildings

Roorkee (Uttarakhand)

72000 MTPA

Dahej (Gujarat) 72,000 MTPA

Ranchi (Jharkhand)


Revenue Break Up

Geographic Revenue Break Up


37%

63%

Business Mix

Steel Product

Building Product

3%

97%

Gepgraphical Mix

Export

Domestic

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Risk and Concern:

Sustaining growth momentum: Adequate investments have ensured that the company’s growth trajectory will accelerate over the next few years. However, economic environment, competitive activities, monsoon and such other external factors brings the risk to sustenance of the growth momentum.

Increasing competition: The company’s products face competition in the form of roofing tiles and metal roofing, gypsum boards, plywood, wood substitutes, and brick & mortar construction.

Volatile raw material price: The main raw materials for fiber cement products are cement, pulp, fly ash and imported fibers. Steel is the major raw material of PEB segment, hence volatility in global steel prices will also affect margins accordingly. There is limited pricing power due to large number of players operating in both its segment and hence pass through of increased costs is not possible. Any increase in the raw material prices or the inability of the company to pass on the price rise to the customers can affect the company’s profitability. There are concerns that exposure to Chrysotile fiber leads to health risks and its usage is banned in certain countries.

Maintaining product consistency: The company’s manufacturing facilities have been producing quality products that meet the required technical aspects and aesthetics. Any change in the quality offered can affect the brand and hence the sales.

Dependence on single segment: The Company has traditionally been dependent on its Roofing products which has been highly concentrated within the Rural consumer segment. Any slowdown in the Rural economy of the country would impact the revenues of the Company.


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Board of Directors & Share Holding Pattern

Mr A.V.Somani (Promoter & Chairman): Mr. Somani has pursued MBA from University of Pittsburg, USA & PGDBM from SP Jain. He has varied experience in areas of Textile, Construction, Real Estate and Information management.

Mr Y.S.Rao (Executive Director, Operations): Mr. Rao is with the company since 1997 with hands‐on experience of handling manufacturing, project management, technology transfer and R&D initiatives. He has an experience of around three decades in multi‐cultural and international environment.

Mr Manish Sanghi (M.D): Mr Sanghi is with the organization since 2001 and looks after day‐to‐day operations of the organisation. He is an IIM Ahmedabad alumnus and has an experience of 25 years with leading organizations like Castrol, BHEL, Eicher Motors etc.

Mr Rakesh Gupta (CFO): Mr Gupta is with EIL since 2007 and looks after finance function of the organization. He is a quali‐fied CA and CWA with three decades of domestic and international experience.


Source: BSE

49.52% 49.49% 49.18% 48.87% 48.76%

41.60% 41.94%

36.63% 35.38%

42.73%

8.88% 8.57%

14.19%15.75%

8.51%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2013 2014 2015 2016 2017

Promoters

Public

Institutions

Share Holding Pattern (%)

Source: BSE

48.1

48.1

43.7 2.2

Key Share‐Holders % holding

FALAK INVESTMENT PVT LTD

HDFC AMC

SBI FUNDS MANAGEMENT

RELIANCE CAPITAL AMC

EVEREST STAFF WELFARE TRST

Top Five Fund house holdings (%)

8

Industry Structure

The fiber cement roofing industry in India has a capacity of 5‐5.5m MTPA consisting of 30 major players and is an oligopoly market with top five players collectively controlling 60% of the market. Prominent players in the industry include Hyderabad Industries (HIL), Visaka Industries, Everest Industries, Ramco Industries and Utkal Industries. The roofing industry is valued at INR42bn and is expected to grow between 6‐8% depending on the GDP growth and monsoons. According to the 2011 census, almost 39% of Indian population is still living without a Pucca roof. This presents a significant opportunity for growth in the future. The cost of a pucca roof using Fibre Cement Roofing is one‐third the cost of an RCC ceiling slab.

The key raw materials used are cement, fly ash, wood pulp and dry waste the cost depends on the demand with suppliers and the parity between USD and INR.

With increased urbanization in India there is a growing demand for affordable houses. The Urban population in India is estimated to reach a staggering 600 million by 2031. The total urban housing shortfall is estimated at 18.78 million units as per the 12th five year plan. The major chunk of the shortfall is amongst the Economically Weaker Section and Low Income Group contributing 96% to the shortfall.

Fiber Cement Roofing Sheets are majorly used in the rural housing segment along with applications in warehousing and logistics. The industry is estimated to grow at 8-10% in the coming years driven by sustainable growth in the domestic economy.

The roofing industry is valued at

INR42bn and is expected to grow

between 6‐8% depending on the GDP

growth and monsoons.

The industry is estimated to grow at

8-10% in the coming years driven by

sustainable growth in the domestic

economy.


9


Quarterly Financial Snapshot (Consolidated)

The Company closed the quarter under review on a positive note showing significant improvement over the quarter. Consolidated sales rose by 17% to INR261.51 crores in Q2-18 from INR224.12 crores in Q2-17. As the business returned to normalcy and consumer demand rebounded in rural markets, EBITDA Margin expanded by 800 bps to INR13.83 crores, during the quarter. Half yearly sales rose by 6% to INR639.53 crore in H1-18 from INR603.79 crore in H1-17.PAT Margin expanded by 572 bps YoY basis.

In Q2FY18 the BP division’s revenue was up 8% YoY. EBITDA margin expanded 1100 bps point basis with a view to improve the performance of the division, management is taking various measures such as a focus on launches, widening reach (distribution channel, architects) and improving working-capital management. Better volumes in Boards and Panels as compared to Q2-FY17 in Domestic Markets.

In Q2FY18 the Steel building segment's EBITDA margin expanded by 602 bps to INR2.31 crores and turns into positive number as per management expectation. They have dispatched 14,299 MT material in Q2-FY18, 40% higher than Q2-FY17.

They have stable order book, stands at 26518 MT as on 30th September 2017. We are expecting a better performance in the coming quarters.

Particulars (in Lakh) Q3FY17 Q4FY18 Q1FY18 Q2FY18 Q3FY18(F)

Total Revenue 25375.24 32694.71 37930 26151 30924.54

QoQ Growth(%) 10.73% 28.84% 16.78% -31.47% 18.19%

Total Expenses 26701.00 30504.00 35155.00 25566.00 28168.89

QOQ Expense(%) 11.54% 14.24% 15.25% -27.28% 10.18%

EBITDA -1325.76 2190.71 3420.45 1383.00 3401.10

EBITDA Margin(%) -5.28% 6.77% 9.05% 5.34% 11.11%

PAT -1404 1409 2127 505 1468.36

PAT Margin(%) -5.53% 4.31% 5.61% 1.93% 4.75%

Paid Up Capital 1539 1539 1539 1539 1539

EPS(INR) -9.12 9.16 13.82 3.28 9.54

ROE(%) -4.21% 4.22% 6.38% 1.51% 4.40%

QoQ Revenue & Revenue Growth (lakhs)

25375.24

32694.71

37930

26151

30924.54

10.73%

28.84%

16.78%

-31.47%

18.19%

-40.00%

-20.00%

0.00%

20.00%

40.00%

0

10000

20000

30000

40000

Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18(F)

Total Revenue QoQ Growth(%)


QoQ EBITDA & EBITDA Growth (%)

-1325.76

2190.71

3420.45

1383.00

3401.10

-5.28%

6.77%

9.05%

5.34%

11.11%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

-2000.00

-1000.00

0.00

1000.00

2000.00

3000.00

4000.00


EBITDA EBITDA Margin(%)

QoQ PAT VS PAT Margin (%)

-1404

1409

2127

505

1468.36

-5.53%

4.31%

5.61%

1.93%

4.75%

-10.00%

-5.00%

0.00%

5.00%

10.00%

-2000

-1000

0

1000

2000

3000


PAT PAT Margin(%)

10

The business is expected to perk up from FY18

Secrete Behind the Growth: This is one stop solution for building products. There is a huge opportunity in the rural market. Their product is used in villages, towns, and metropolitan cities. It touches the lives of all classes in the society. However, they have done a mistake 2-3 years ago by diversifying in a Gulf country which did not do well and impacted the balance sheet negatively. They have now closed down and shifted the plant to India.

Agriculture Growth: There is still more than 60% of the population dependent on agriculture. The monsoon plays a very important role in the progress of rural economy and a good monsoon will help rural economy grow and thereby generating good demand for their product.

Migration from ‘Kuccha’ To ‘Pucca’ Roofs: As per the population census 2011, 54% of the Indian population still lives in the houses made from kuchha roofs. As farm incomes improve, so do aspirations of the people to improve the quality of their living. Roofing caters to the basic human requirement of providing shelter in the form of Pucca roof. The ‘Infrastructure’ status being accorded to the affordable housing sector in Budget 2018 should be a big boost to the entire low cost housing segment.

Modernization in housing development: Now days Indian people are coming out from their conservative mind and start getting involved into the new age products, replacing the traditional products in applications like walls, flooring, façade cladding, ceiling and paneling. Fiber Cement boards have some inherent advantages over other dry construction products. They are water resistant, termite resistant and have fantastic acoustic insulation properties, good thermal insulation and above all, can be used both indoors and outdoors. Fiber Cement Boards are slowly but surely changing the construction industry in India.

Steel Building Segment: The building and construction scenario in India is evolving at a steady pace. Pre-Engineered steel buildings are today used not only for factories and warehouses but also for hospitals, hotels, educational institutes, IT centers, malls and airports. Clients opt for PEBs as it allows them to install productive capacity much faster without compromising on any of the functional requirements. The growth of PEB is directly linked to the growth of India. India is the fastest growing large economy and that also makes the Indian PEB market the most interesting in the world.


Business Prospects

Product Line Diagram


Product Wise Sales in lakhs (YoY)

4815151712

4619749893

54134

7686382548

7865983342

89099

0

20000

40000

60000

80000

100000

Mar-15 Mar-16 Mar-17 Mar-18 E Mar-19 E

Building Product Steel Building

Revenue VS Revenue Growth (%)

124172.28132630.20

117703.62

134566.83145381.08

18.53%

6.81%

-11.25%

14.33% 8.04%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

0.00

40000.00

80000.00

120000.00

160000.00

Mar-15 Mar-16 Mar-17 Mar-18 E Mar-19 E

Total Revenue Revenue Growth

11

The company continues to remain committed towards smarter, safer, and speedier construction technology which is fast catching momentum in India. The government focus to connect tier 2 and tier 3 cities with roads, rails and air should help them promote the modern building methods across the country. They had through their subsidiaries in Mauritius and Middle East planned a project for making fiber cement boards in the Middle East. They are very bullish about a program called Pehchaan which is intended to cover a very large number of contractors for their boards and panel product range across the country. Going forward with the GST rollout, they anticipate a spurt in building products segment. They anticipate occasional logistic cost to come down due to the multiple effect of smoothing the flow of material and optimization of the requirement, it is going to take some time before these effects start showing up.

Everest Solar: Sun is the power house of the Earth, so their new product Everest solar believes in technology innovation and state of art manufacturing. There main USP is no risk, no investment and predictable supply.

They are already operating in roofing segment and they have enough market penetration in this domain so this solar power roof will provide clean, efficient and affordable power supply to the end user.

They are following EPC business model for this particular segment. As per the analysis 1 KW system can help save up to INR8250 per year compare to grid electricity, which is providing huge cost advantage for the heavy electricity consumption industry. So, considering cost cutting and Go Green concept we can expect a very good future prospect for this segment.

Solar rooftops will be new growth driver the government has announced a target of 40000 MW solar rooftops. India offer a big opportunity for solar power given its 750 GW potential on account of enjoying 300 sunny days a year with an average solar radiation range of 4-7 KWH. According to news report EVI is in talk with Engie, the French behemoth, to set up a partnership to manufacture solar ready rooftops.


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Their Q2 earning has faced a GST pressure which may not impact their coming earrings.

Building product’s production is 14100 MT up by 6% YoY basis and revenue from this segment up by 2%.

They are presently focusing on system selling rather than product selling. Value added product has much more

penetration rather than basic product.

Their present order book stands at 4600 MT which is INR250 Cr also they have strong pipeline for their PEB

segment stand at 2600 MT.

Good roofing business is expected in the coming year due to government projects.

They are trying to improve their EBITDA margin by several dynamic steps towards it.

They are expecting 19% growth in cement product business.

Their capital expenditure will be allocated towards the improvement of the product and their modernization.

They are using the FY16 number as their FY18 benchmark.

Adding more products in their bucket as “Everest Jali”, “Water proof board” for Mumbai region and many more.

Their existing product “Everest Super” is running in the market successfully.

“Housing for All” is fundamentally good for them, ‘Pakka’ house can be constructed by sloping roof and that

make them qualified for this government project.

They have diversified product range to compete with their domestic competitors however they need to put

more effort to make them suitable in international market.

Other expenses declined INR15 Cr which drive their bottom line significantly.

They are positive on partition wall which may generate four time revenue compare with present numbers in the

coming future.

In BP business their capacity utilization is nearly 65% and they are expecting good outlook in the coming 3-5

years.

In PEB segment their capacity utilization is almost full and this business is not cyclical in nature like cement, so

they are expecting a good out come from this segment.

They will try to catch international market with new developments and products in future.

Key Takeaways and Con-call highlights for Q2FY18


13

Financial Details


Income Statement (Consolidated)


Income from Operation 130138.15 139762.97 124856.27 133234.49 143232.59

Excise Duty 7011.72 8425.63 8060.68 0.00 0.00

Other Income 1045.85 1292.86 908.03 1332.34 2148.49

Total Revenue 124172.28 132630.20 117703.62 134566.83 145381.08

Revenue Growth 18.53% 6.81% -11.25% 14.33% 8.04%

Raw materials consumed 70566.32 70044.04 62478.26 67915.88 73373.83

Purchases of stock-in-trade (traded goods) 1542.54 1234.53 1539.62 2018.50 2180.72

Changes in inventories of finished goods, WIP and SIP -1428.43 1948.69 985.67 992.57 998.53

Employee benefits expense 10909.58 12724.36 12875.77 14356.48 16007.48

Depreciation and amortization expense 2542.36 2562.70 2513.60 2581.80 2662.88

Other expenses 33340.43 37157.12 35288.01 40888.13 44174.04

Total Expenses 117472.80 125671.44 115680.93 128753.36 139397.47

EBITDA 9241.84 9521.46 4536.29 8395.26 8646.49

EBITDA Margin(%) 7.44% 7.18% 3.63% 6.30% 6.04%

Gross Profit Margin(%) 20.16% 23.30% 21.70% 18.34% 17.93%

Finance Cost 1869.47 2284.49 1889.53 2437.97 1907.53

PBT 4830.01 5048.48 133.61 3375.49 4076.08

TAX 1407.04 1604.35 9.91 714.56 957.34

PAT 3422.97 3444.13 123.70 2660.94 3118.74

PAT Margin 2.76% 2.60% 0.11% 1.98% 2.15%

Paid Up Capital 1518.73 1538.89 1538.89 1538.89 1538.89

No. of O/S Share 151.87 153.89 153.89 153.89 153.89

EPS(INR) 22.54 22.38 0.80 17.29 20.27

ROE(%) 10.71% 9.94% 0.36% 7.63% 8.50%

DPS(INR) 7.65 7.72 0 5.76 6.75


14

Balance Sheet (Consolidated)



Equity and liabilities

Share capital 1529.11 1538.89 1542.29 1542.29 1542.29

Reserves and surplus 30421.53 33117.48 33271.59 33354.06 35128.11

Net Worth 31950.64 34656.37 34813.88 34896.35 36670.40

Minority interest 0.00 92.06 18.84 10.39 6.40

Non-current liabilities

Long-term borrowings 9478.58 11823.94 9169.27 7992.35 6084.82

Deferred tax liabilities (Net) 2951.13 3226.35 3124.21 3364.17 3634.53

Long-term provisions 598.83 452.89 0.00 0.00 0.00

Current liabilities

Short-term borrowings 18570.17 11249.76 8835.25 10765.35 13084.30

Trade payables 13218.91 17310.93 17455.56 20185.02 21807.16

Other current liabilities 13520.26 11612.41 11650.85 13456.68 14828.87

Short-term provisions 4695.31 3023.56 551.68 551.68 551.68

Total Current liabilities

Total Liabilities 94983.83 93448.27 85619.54 91221.99 96668.16

Assets

Property, plant and equipment 31380.35 34778.60 33648.47 35048.92 35932.80

Intangible assets 706.16 249.24 78.97 71.27 64.32

Capital work in progress 3216.56 942.66 2628.88 2812.90 3023.87

Total Asset 35303.07 35970.50 36356.32 37933.09 39020.99

Long-term loans and advances 8739.80 6205.22 4780.57 478.06 47.81

Other non-current assets 336.34 324.07 14.53 14.53 14.53

Total Fixed Asset 44379.21 42499.79 41151.42 38425.68 39083.33

Current Assets

Inventories 27184.70 25252.69 23708.02 26913.37 29076.22

Trade receivables 10431.41 11311.05 10785.72 11438.18 12357.39

Cash and cash equivalents 6788.29 6333.71 1841.78 6353.59 9264.26

Short-term loans and advances 6097.56 7964.42 7781.34 8091.18 6886.97

Other current assets 102.66 86.61 351.26 0.00 0.00

Total Current Assets 50604.62 50948.48 44468.12 52796.31 57584.83

Total Asset 94983.83 93448.27 85619.54 91221.99 96668.16


15


Cash Flow (Consolidated)


Particular Mar-15 Mar-16 Mar-17 Mar-18 E Mar-19 E

A. Cash flow from operating activities

Net profit before tax 4830.01 5048.48 133.61 3375.49 4076.08

Depreciation and amortization expense 2542.36 2562.70 2513.60 2581.80 2662.88

Finance cost 1869.47 2284.49 1889.53 2437.97 1907.53

Interest income -325.73 -927.99 -242.41 -241.70 -241.70

Liabilities / provisions no longer required written back -599.93 -234.34 -520.47 -540.00 -540.00

Provision for doubtful receivables 188.72 326.18 791.13 791.13 791.32

Net unrealized (gain)/loss on exchange rate fluctuation -13.79 408.92 -288.16 -176.45 -255.22

Operating profit before working capital changes 8489.55 9437.33 4276.81 8228.24 8400.89

Adjustment for (increase)/decrease in operating assets: -2652.64 694.63 3070.56 4234.10 2075.11

Cash generated from operations 5836.91 10131.96 7347.37 12462.34 10476.00

Net income tax paid -1520.54 -856.05 -691.22 -714.56 -957.34

Net cash flow from operating activities (A) 4316.37 9275.91 6656.15 11747.78 9518.66

B. Cash flow from investing activities

Capital expenditure on fixed assets, including capital advances -3927.84 -2896.94 -2911.84 1345.67 726.91

Placed (deposits and unclaimed dividend accounts) 0.00 0.00 0.00 -175.22 -175.22

Proceeds from sale of fixed assets 28.90 59.67 0.02 0.00 0.00

Bank balances not considered as Cash and cash equivalents 2.91 -87.68 -175.22 -175.22 -175.22

Interest received 270.32 943.21 247.26 247.26 247.26

Net Cash from/(used in) investing activities (B) -3625.71 -1981.74 -2839.78 1242.49 623.73

C. Cash flow from financing activities

Proceeds from issue of equity shares 9.64 9.78 1.38 1.38 1.38

Repayment of long-term borrowings -2623.00 -2060.13 -4750.60 -2053.85 -1684.48

Proceeds/(repayment) from short-term borrowings 2014.69 -7320.41 -2414.51 -2414.51 -2414.51

Finance costs -1917.11 -2306.63 -1936.55 -2437.97 -1907.53

Dividends paid -381.32 -763.52 -766.11 -886.89 -1039.48

Tax on dividend -64.76 -156.10 -156.64 -159.64 -187.11

Net Cash flow from/(used) in financing activities (C) 3553.65 -7840.50 -8483.52 -7951.48 -7231.72

Net increase/(decrease) in cash and cash equivalents 4244.31 -546.33 -4667.15 5038.79 2910.67

Cash as on Previous year 2279.90 6524.21 5981.95 1314.80 6353.59

Cash and cash equivalents 6524.21 5981.95 1314.80 6353.59 9264.26

16

Ratio Analysis (Consolidated)



Profitability Ratios(%)

Return on Assets (ROA) 3.60% 3.69% 0.14% 2.92% 3.23%

Return on Capital Employed (ROCE) 16.17% 15.78% 4.60% 13.55% 14.00%

Return on Equity (ROE) 10.71% 9.94% 0.36% 7.63% 8.50%

Per Share

Earning Per Share 22.54 22.38 0.80 17.29 20.27

Dividend Per share 7.65 7.72 0.00 5.76 6.75

Cash Earning Per Share 28.42 60.28 43.25 76.34 61.85

BVPS 210.38 225.20 226.23 226.76 238.29

Valuation Parameters

Adj. P/E ratio 14.27 10.60 283.21 29.8 25.5

Normalized P/BVPS 1.53 1.05 1.01 2.28 2.17

EV/EBITDA 7.81 5.63 11.69 8.44 9.70

Liquidity Ratios

Current Ratio 1.01 1.18 1.16 1.17 1.15

Acid Test Ratio

Debt-Equity Ratio 0.30 0.34 0.26 0.23 0.17

Efficiency Ratios(%)

Asset turnover Ratio 1.31 1.42 1.37 1.48 1.50

Inventory Turnover Ratio

Margin Ratios(%)

EBITDA Margin 7.44% 7.18% 3.63% 6.30% 6.04%

EBIT Margin

PBT Margin 3.89% 3.81% 0.11% 2.51% 2.80%

Net Profit Margin 2.76% 2.60% 0.11% 1.98% 2.15%

PBT Margin 3.89% 3.81% 0.11% 3.51% 2.77%

Net Profit Margin 2.76% 2.60% 0.11% 2.45% 1.94%


17

Valuation

Conclusion: For Everest Industries Ltd. we have used DCF (FCFE) valuation method the assumption of which include, cost of equity at 13.1% and perpetual growth rate at 2% came out with a target price of INR632 with a holding period of one year.


As per DCF method: There is steady cash flow in their balance sheet, as per DCF valuation method values of the company is coming around INR632.

We have used WACC 9.18%, perpetual growth 2%, cost of equity 13.1% and beta of the stock 0.24. Expecting 8% Boards and Panel segment growth, 8% PEB and steel building segment growth and 5% BP segment

growth in the coming year with EBITDA margin 6.3%.

Peer's Comparison

Historical 5 yr Average Ratio P/E P/BV EV/EBITDA EV/SALES

HIL 13.13 0.88 4.60 0.47

VISAKA Industry 6.62 0.57 4.59 0.46

Ramco Industries 4.41 0.71 10.88 1.37

Sahyadri Industries 2.84 0.55 5.91 0.61

Everest Industry 14.57 1.17 7.77 0.49


Cost of Equity

12.10% 12.60% 13.10% 13.60% 14.10%

1% 649 621 596 572 551

1.50% 670 640 613 588 565

2% 694 662 632 605 581

2.50% 720 685 653 624 598

3% 749 711 676 645 616

Sensitivity Analysis

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Source: Smifs Research

18

Members: NSE | BSE | MCX | NCDEX | NSDL | CDSL | Repository (For Disclosures and Disclaimers please follow the page below)

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MUMBAI Mr. Vaibhav Wadke

Office No. 5G, New Marine Lines, Court Chamber, Mumbai - 400 020,

Maharashtra, India Phone: +91-9967642795

BHUBANESHWAR

Mr. Jeetendra Nath Sahoo Plot No. 15-B, Bapuji Nagar,

Unit-I, Ashok Nagar, Bhubaneswar - 751009, Odissa, India.

Phone: +91 9668257514

LYONS RANGE Mr. Deepak Gupta

7, Lyons Range, CSEA Building, 3rd Floor, Kolkata - 700001, India. Phone: +91 9674793553

BANGALORE Mr. S. Srikanth

No.153, 2nd Floor, Sheela Arcade, 7th Block Koramangala, (Opp.—Sai Baba Mandir)

Bangalore - 560095, India. Phone: +91 9845020017

KANPUR

Mr. Amit Kumar Gupta Office No.212 - 213, 2nd Floor, KAN Chamber, Adjacent to UP Stock Exchange, 14/113, Civil Lines, Kanpur - 208001, Uttar Pradesh, India.

Phone: +91 9151104767

PATHANKOT Ms. Anuradha Marwaha

SCO G - 69, Netaji Market, Opp. Hindu Co.op. Bank, Dalhousie Road,

Pathankot - 145001, Punjab, India. Phone: 0186 - 2222201/ 2222205

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Vaibhav, 4 Lee Road, Kolkata 700020, India.

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Stock Recommendation Expected absolute returns (%) over 12 months Strong Buy >20%

Buy between 10% and 20%

Hold between 0% and 10%

Sell 0 to <-10%

Neutral No Rating

Mr. Aditya Jaiswal Research Analyst Aviation and Hospitality [email protected] +91 33 30515433 / 30515468 Mr. Abhishek Roy Research Analyst FMCG/Retail [email protected] +91 33 30515468 Mr. Jaydeb Dey Technical Analyst Equities [email protected] +91 33 30515433

Mr. Ajay Jaiswal President: Strategies and Head Research [email protected] +91 33 30515408 / 40115408 Mobile: +91 9836966900

Mr. Ashiwini Kumar Tripathi Director [email protected] +91 33 30515415 / 40115415 Mobile: +91 9831155058

Mr. Shivaji Roy Sr. VP – Retail Sales [email protected] +91 33 30515400/40115400 Mobile: +91 9830173200

Mr. Monal Desai Sr. VP—Institutional Sales [email protected] +91 2242005555 Mobile: +91 9821137303

Mr. Jaydeep Pattanayak Plot No. 15-B, Bapuji Nagar, Unit-I, Ashok Nagar, Bhubaneswar - 751009, Odissa, India. [email protected] Phone: +91 9583099025

NEW DELHI Mr. Rajesh Kumar Jha

6th Floor, 654, Aggarwal Metro Heights, Netaji Subhash Place, Pitampura,

New Delhi – 110034, India. Phone: +91 9999243622

PATNA

Mr. Ram Singh 606/A, Ashiana Plaza, Budha Marg,

Patna – 800001, Bihar, India. Phone: +91 9570507409

NOIDA Mr. Prakash Srivastava

1st, Floor, Wave Silver Tower, Sector-18, Noida - 201301, Uttar Pradesh, India.

Phone: +91 9910497783

LUCKNOW Mr. Ashish Verma

6 Park Road, UGF 4, Hazratganj, Lucknow - 226001, Uttar Pradesh, India.

Phone: +91 9870398545

BALASORE

Mr. Jyoti Bhusan Das Plot No. 891/1632, Bhaskarganj – A, Station Chhak, Municipality Holding No. 648 (32),

Balasore – 756001, Odissa. India. Phone: +91 9776265566

PORT BLAIR Mr. Gulam Hassan

24, S.J.Lane, 8/3, Sahajeevan Housing, Co-operative, P.O. Haddo, Port Blair 744102, India.

Phone: 233-175 Mobile No. 9932081381/9933236406

CHENNAI Mr. K.K.Raja Gopalan

New No.4/2, Bajaj Apartments, Seethamal Colony, 1st Cross Corner, Alwarpet,

Chennai – 600018, India. Phone: +91 9383931590

DHANBAD

Mr. Vinay Kumar Singh Room No. 308, 3rd Floor, Shriram Plaza Bank More, Dhanbad - 826001, Jharkhand, India.

Phone: +91 9835351951

MANALI

Mr. Sachin Jolly Village & Post Office - Bahang, Tehsil Manali,

Rohtang Pass Road, District - Kullu, Pin - 175103, Himachal Pradesh, India

Phone: +91 9816036136

Research & Development Strategies

Research Team

Sales Leadership Team

Contact Details

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everest industries limited fiber cement roofing industry in india has a capacity of 5‐5.5m mtpa...

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