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Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 1Awanish Chandra awanishc@eisec.com 022-22721083
Pushkaraj Jamsandekar pushkarajj@eisec.com 022-22722364
Grauer and Weil (India) Ltd
Market Leader in Surface Treatment embedded with high value Hard Assets
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 2
Contents
Executive Summary ........................................................................................................................................................................... 4
Grauer and Weil (India) Ltd - A brief .................................................................................................................................................. 5
One stop shop for all surface protections with extensive dealer's network ..................................................................................... 6
Very strong revenue visibility ............................................................................................................................................................ 7
New technical collaboration improve exports further ...................................................................................................................... 9
Growel's 101 - High assets valuation with potential to propel the margins ................................................................................... 10
Relocation of paint manufacturing plant would help improve the margins .................................................................................... 11
Strong research and development .................................................................................................................................................. 11
All set to become zero debt company ............................................................................................................................................. 12
Valuation and Concerns ...................................................................................................................................................................... 12
Industry Overview ............................................................................................................................................................................ 13
SWOT Analysis ................................................................................................................................................................................... 14
Financial Summary ........................................................................................................................................................................... 15
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 3
Grauer & Weil (India) Ltd (GWIL), incorporated in 1957, is a market leader in Rs 7000 mn electroplating chemical industry with
38% market share. GWIL is the only company in India and one of few in the world, which offers as wide an array of surface
treatment products and solutions under one roof - Chemicals, Equipments, Paints & Lubricants. GWIL had a large tract of 10
acres Surplus land in Mumbai's western suburb Kandivali, which has been developed into a Mall - Growel’s 101, which is a highly
valuable asset generating significant cash flows for the company. This will grow significantly over next couple of years as they
utilize the balance development potential (only 60% of the development potential utilized till now). Over the years, the company
has paid most of the debt that was taken to develop the mall and GWIL is all set to become a debt free company by FY16.
GWIL's sales & profits have grown, 14% CAGR and 17% CAGR during FY10-FY14 despite slowdown in the economy. Low gearing
& no major capex required in next 2 to 3 years coupled with the recovering economic condition and good growth in auto and
auto ancillary companies (main drivers of chemical business), GWIL is all set to generate healthy free cash flow in next couple of
years. Revenues from real estate business will also see a sharp jump as renewal of ~ 40% of lease, due next year, and is likely to
happen at ~75% increment We initiate coverage on Grauer and Weil India Ltd (GWIL) with BUY rating and DCF valuation based
price target of Rs 28 (11.2x to FY16 EPS).
Investment Rationale
• Economic recovery and good growth in auto and auto ancillaries companies, (drives 73% of the total revenues), will boost
revenue from surface treatment business at a CAGR of 19% over a period of FY14-FY16.
• Renewal of old lease agreement will propel overall rental income from real estate segment at a CAGR of 20% over a period
of FY14-FY16.
• Shifting of paint manufacturing plant from Mumbai to other plants located in Vapi, Barotiwala (H.P.) and Dadra would help
improve margins further.
• GWIL is focusing on the Industrial paint & Engineering business as the future growth drivers as their market share is low in
these segments providing enough room for growth.
Risk & Concern
• Low cost products from Chinese market are the major concern in chemical business.
• Online shopping and heavy discount on products via e-shopping may change the dynamics of mall business unfavorably.
Grauer and Weil (India) Ltd BUYMarket Leader in Surface Treatment embedded with high value Hard Assets
Pushkaraj Jamsandekar
pushkarajj@eisec.com
022-22722364
Recommendation
CMP Rs. 15
Target Rs 28
Upside(%) 82%
Share Holding (%)
Promoter 68.68
Public 31.30
FII -
DII 0.02
Key Data
Average Vol ( 6m) in '000 262.5
FV 1
Beta 1.2
Mcap (Rs Mn) 3,455.0
52 week H/L 16.6 / 4.3
Bloomberg / Reuters GW IN / GRWN.BO
Group B
Sensex/Nifty 26,745 / 8,022
Stock Performance (%)
Abs(%) Sensex GWIL
3M 6.9 82.6
1Y 34.5 245.9
Analysts:
Awanish Chandra
awanishc@eisec.com
022-22721083
Year Revenue (Rs Mn) EBIDTA margin (%) PAT (Rs Mn) EPS PE PBV EV/EBIDTA ROCE % ROE %
FY12 3,332 16.7% 232 1.0 14.9 2.2 8.2 22.2 16.1
FY13 3,350 15.0% 198 0.9 17.4 2.0 8.8 18.3 12.2
FY14 3,859 14.8% 308 1.4 11.2 1.8 7.3 21.2 16.8
FY15E 4,599 15.1% 417 1.8 8.3 1.5 5.6 24.7 19.5
FY16E 5,474 15.4% 559 2.5 6.2 1.2 4.2 27.6 21.8
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 4
Executive SummaryInvestment RationalOne-stop-shop for various surface protection solutions with extensive dealernetwork
• GWIL manufactures more than 600 chemicals which includes pre treatmentchemicals, general plating, conversion coating, speciality chemicals and basicchemicals. GWIL offer wide array of chemical products which make themunique in electroplating industry.
• The Company has well organized dealer network and strong distribution
system in multiple locations in India which covers the major states such asMaharashtra, Gujarat, Madhya Pradesh, Uttar Pradesh, Haryana, Rajasthanand west Bengal. Together these states contribute 85% of business.
• The wide array of surface treatment products with well organized dealernetworks and strong distribution system in multiple locations, GWIL enjoysadvantageous geographical and customer mix which reduce the risk of highdependency on limited buyers and improve the pricing power of organization.
• All these help the company not only grow its business but also do the businessin a profitable manner.
Very strong revenue visibility
• Stable economic condition and good growth in auto and auto ancillary
companies which are the main drivers of chemical business, are expected toboost the segment revenue at a CAGR of 19% over a period of FY14-FY16.
• The order book at the Engineering Division is reasonably encouraging stood
at Rs 420 mn, out of which 95% would be executed during this fiscal. Also, theenquiries under discussion hold lot of promises.
• The renewal of old lease agreement would propel rental income from Growel's
101 Mall at a CAGR of 20% over the period FY14-FY16.
• On the consolidated basis, we expect top-line and bottom-line numbers togrow at a CAGR of 19% and 35% respectively, over the same period.
Growel's 101 - high asset valuations with potential to propel the Margins
• Under the real estate segment company owns and manages the 10 acres of
land with 0.47 mn Sqft of Mall (Usable area ~ 0.28 mn Sqft) & a developmentpotential to construct additional 0.25 mn usable area. At present the leasablearea is 0.25mn Sqft of which 85% is occupied.
• The renewal of its 9 year old lease agreement with Big Bazaar & Cinemax, duenext year, should happen at ~75% increment.
• Recovery in economy & consumer sentiment should improve the occupancy
ratio which would further improve the margins.
Relocation of paint manufacturing plant would help improve the margins
• The existing paint manufacturing plant in Mumbai, has heavy octroi dutywhich increases the cost of materials. Plus, the labor charges at Mumbaiplant are also higher which adversely impact the margins.
• Shifting of paint manufacturing plant from Mumbai to J&K would improvethe margins on account of absence of octroi duty and low labor charges.
• The company will get some more benefits like tax exemption, low cost of
power, free water availability etc in new location.
• All this would help the company increase its profitability in the long run.
New technical collaboration should improve the export further
• The company enjoys several foreign technical collaborations.
• Foreign collaborations not only help the company to gain more technical
know-hows but also help increase its footprints in the overseas markets.
• We believe that several strong collaborations would continue to help thecompany grow its business in domestic as well as overseas markets.
All set to become zero debt company
• GWIL had taken debt to fund their Mall expansion projects few years backwhich will be fully repaid within next 2-3 years.
• The management has strong focus on repayment of debt which wouldcontinue to improve the PAT margin.
• Repayment of debt and strong cash positions in the coming years would
lessen the financial risk in the business.
Outlook & ValuationRecovery in the economy and early good signs from auto industry definitely bodewell for GWIL. Its market leadership position in the surface protection businessputs the company on the strong footing to capitalize on the improving businessscenario. The mall business is doing well and going to be stronger in the future.Hence, we find the company's growth prospect very sound in the coming years.We initiate coverage on GWIL with BUY rating, having DCF valuation based pricetarget of Rs.28 per share (11.2x to FY16 EPS) over a period of 15 to 18 months,representing the potential upside 82%.
Risk & Concern• Low cost products from Chinese market are the major concern in chemical
business. This may hurt the margin profile of the company.
• Online shopping and heavy discount on products while doing e-shoppingmay hurt the growth prospect of the mall business.
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 5
Grauer and Weil (India) Ltd - A briefAbout company
• A group of entrepreneurs comprising two traders of long standing repute
in the plating industry and a financer, joined hands together to form a
young company in collaboration with Grauer & Weil of UK, thus creating
Grauer & Weil (India) (G&W) in 1957.
• Promoted by Ramanlal Shah and Kanchanlal Shah, as a private limited
company, Grauer & Weil (India) Ltd was converted into a public limited
company in Feb'61.
• GWIL is one of the very few metal finishing houses the world over, capable
of offering an integrated package of chemicals, plants, effluent treatment
systems and waste recovery techniques from spent solutions - truly a
One-Stop-Shop for end-to-end solutions.
• GWIL manufactures metal finishing paints, equipment chemicals, buffing
and finishing compounds, mops, wheels and brushes.
• Its engineering division sets up various types of plants and equipment
for other industries such as aerated soft drinks, heat-treatment systems
and other chemical plants.
• The company also manages the 10 acres of land with 0.47 mn Sqft of
Mall (Usable area ~ 0.28 mn Sqft) & a development potential to construct
additional 0.25 mn usable area.
Business segments
• Chemical Segment
GWIL continues to maintain its leadership position in the segment of
surface treatment chemicals, their intermediates and other specialty
chemicals. The competition from international companies is intensifying;
however, GWIL was able to effectively counter the competitive pressure.
New products introduced by the company met with good success. The
Company continued to focus on excellence. All its plants manufacturing
finished formulations are certified under IMS and ISO 14000.
Source: Company, EISEC Research
Electro Plating Rust Preventives Growl's Mall
Filteration systems Cutting Oils 470000 Sqft
Phosphating Hydraulic Oils
Dacrotizing Lubricating Oils
Effuent Treatment Spindle Oils
Industrial Degreasing Circulating Oils
Spare Parts Ms & Steel Wire Drawing Oil
Gear Oil
Vanish & Deep Draw Oils
Edm Oil
Heat Treatment
Cu Tube Drawing Fluids
Cu Wire Drawing Fluids
Al Wire Drawing Oil
Blanking Oil
Continuous Plating Chem
Process Sequence
Glass Grinding Fluids
Conversion Coating
General Plating
Electronics
Basic Chemicals
Precious Metal
Lacquers
Speciality Chemicals
Strippers
Grauer & weil (I) ltd.
Chemical Products
Pre Treatment
Engineering Produ & Serv. Paint & Lub and Oil Entertainment
• Engineering Segment
This division supplies customized turnkey solutions for Electroplating
Plants and their components, Effluent and Waste Water Treatment Plants
and other engineering products, from its plant located at Alandi, Pune.
• Paint & Lubrication Segment
The Company's diversification into oils & lubricants is now poised for a
significant push. The Joint Venture with SIDASA of Spain has converted
into a Technology Licensing arrangement. This business segment offers
an attractive long term opportunity.
• Real Estate Segment (Growel’s 101 Mall)
Under the entertainment segment company owns and manages a 10
acres of land with 4,70,000 Sqft of Mall in the heart of the western
Mumbai, at kandiwali.
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 6
Plant Locations
GWIL constructed six well developed manufacturing plants for formulation of
chemicals which are widely demanded in various surface finishing industries.
These manufacturing plants are well equipped with technologically advanced
machines.
Plant Facility Capacity
Dadra Plant Chemicals, Lubricants and Paints 25200 MT
Barotiwala Plant Chemicals and Lubricants 4200 MT
Vapi Plant Chemical Intermediates, Lubricants and Paints 2400 MT
Samba Plant Chemicals 6800 MT
Alandi Plant Engineering NA
Bombay paint Plant Paints 5900 MT
Growel's 101 Mall 470000 Sqft
Source: Company, EISEC Research
Technical Collaboration
• In association with its international partners like Nippon Denro
Shamrock., Sidasa and such other international renowned
manufacturers, the company has established a position of undisputed
leadership in India with many 'firsts' in the metal finishing industry,
academically, as well as, in applied sciences.
• Recently, GWIL signed a Technology License Agreement with SIDASA,
Division of Cromogenia Units SA, Spain under which SIDASA will make
available its technical expertise in the area of industrial oils and
lubricants.
One stop shop for all surface protections with extensive dealernetwork
• GWIL is a leading player in the electroplating industry. It manufactures
more than 600 chemicals which includes pre treatment chemicals,
general plating, conversion coating, speciality chemicals and basic
chemicals. GWIL offer wide array of chemical product which make them
unique in electroplating industry.
• More than 7 decade of experience in electroplating industry make the
GWIL capable to build such a huge array of surface treatment products
under one roof.
• The major strength of the GWIL is well organized dealer networks and
strong distribution system in multiple locations across India which
covered the major states such as Maharashtra, Gujarat, Madhya Pradesh,
Uttar Pradesh, Haryana, Rajasthan and west Bengal. Together these
states contribute 85% of business.
Pre Treatment Conversion Coating Precious Metal
Cleaners Blackening Gold Plating
Pickling Agents/Additives Chromatization Gold Stripper / Recovery
Phospating Nickel Free technology
General Plating Post Treatment Silver Plating
Brass Nano Ceramic Coating
Cadmium Strippers
Chrome Electronics Electroless Nickel Stripper
Copper Ammonical Etchant Nickel Stripper
Electroless Nickel Electroless Nickel Tin Lead Stripper
Nickel Emmension Gold
Plating on Aluminium Multi PCB Lacquers
Plating on Plastic Pattern Plating Speciality Chemicals
Tin & Tin Alloys Thru-Hole Plating Basic Chemicals
Zinc & Zinc Alloys Tin/Lead strippers Continuous Plating Chem
Process Sequence
Major chemical Products
Source: Company, EISEC Research
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 7
• The wide array of surface treatment products with well organized dealer
networks and strong distribution system in multiple locations, GWIL
enjoys advantageous geographical and customer mix which reduce the
risk of high dependency on limited buyers and improve the pricing power
of organization.
• All these help the company not only grow its business but also do the
business in a profitable manner.
Strong Geographic Presence
Source: Company, EISEC Research
Very strong revenue visibility
• The order book at the Engineering Division is reasonably encouraging
stood at Rs 420 mn, out of which 95% would be executed during this
fiscal. Also, the enquiries under discussion hold lot of promises.
• Despite of slowdown in the economy the revenue of engineering division
has grown, at a CAGR of 11% during FY11-FY14 respectively.
Engineering Revenue (Rs mn)
• Stable economic condition and good growth in auto and auto ancillary
companies which are the main drivers of chemical business, are expected
to boost the segment revenue at a CAGR of 19% over a period of FY14-
FY16.
Source: Company, EISEC Research
418 408484
580
678
17%
-2%
19%20%
17%
-8%
0%
8%
16%
24%
0
200
400
600
800
FY12 FY13 FY14 FY15E FY16E
Engineering Growth (%)
Cochin
Coimbotorai
Bangalore
Madhurai Chennai
Trichy Secundarabad
Salem Pune
Nasik Aurangabad
Jaipur Indore
Lucknow Ahemadabad
Allahabad Kolkata
Mathura Noida
Varanasi Ludhiana
Kanpur
Aligarh
Agra Location
Faridabad 25200 MT
Morahabad 6800 MT
Delhi 4200 MT
Gurgaon 2400 MT
Meerut NA
Vchandighar 5900 MTPaints Plant Chembur, Mumbai
Barotiwala Plant Barotiwala, HP
Vapi Plant Vapi, Gujarat
Engineering Plant Pune
Jammu Plant Samba, Jammu
Maj
or
tech
serv
ise
s
Plant Location
Dadra Plant Dadra & Nagar
Bra
nch
off
ice
Growel's 101 Mall
Mumbai In Mumbai at Kandiwali
Head office
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 8
Total Chemical Revenue (Rs mn)
Source: Company, EISEC Research
Source: Company, EISEC Research
Electroplating Chemical Revenue (Rs mn)
2624 26573174
3766
447013%
1%
16% 16% 16%
0%
6%
12%
18%
0
1500
3000
4500
6000
FY12 FY13 FY14 FY15E FY16E
Gross Chemical % Growth
2315 2315
2821
3373
4035
14%
0%
18%16% 16%
0%
6%
12%
18%
24%
0
1200
2400
3600
4800
FY12 FY13 FY14 FY15E FY16E
Electroplating Chemical % Growth
• The renewal of old lease agreement would propel rental income from
entertainment segment (Growel's 101 Mall) at a CAGR of 20% over the
period FY14-FY16.
Source: G&WILManagement, EISEC Research
Basic Chemical Revenue (Rs mn)
Source: Company, EISEC Research
Intermediatory Chemical Revenue (Rs mn)
199 193 201227
258
10%
-3%
4%
12% 12%
-5%
0%
5%
10%
15%
0
75
150
225
300
FY12 FY13 FY14 FY15E FY16E
Basic Chemical % Growth
110
149 153165
178
2%
26%
2%
8% 8%
0%
7%
14%
21%
28%
0
60
120
180
240
FY12 FY13 FY14 FY15E FY16E
Intermediatory Chemical % GrowthIntermediatory Chemical
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 9
Revenue (In mn) FY12 FY13 FY14 FY15E FY16E
Chemical Division
Electroplating Chemicals 2315 2315 2821 3373 4035
Basic Chemicals 199 193 201 227 258
Intermediatory Chemicals 110 149 153 165 178
Segment Revenue
Total Chemical 2624 2657 3174 3766 4470
Engineering 418 408 484 580 678
Paints and Oil 597 494 567 684 818
Other 97 239 99 138 164
Growel mall 101 177 193 219 252 316
Segment EBITDA
Chemical, Engineering & Paint 430 351 405 495 585
Mall 126 150 166 198 260
Total EBITDA 556 501 571 693 845
EBIT 457 391 456 573 719
Post Tax Income 232 198 308 417 559
Source: Company, EISEC Research
Segment Revenue (%)
Source: Company, EISEC Research
2%
70%
11%
12%
5%
FY14
Total Chemical
Engineering
Paints and Oil
Other
Growel mall 101
69%
10%
13%
3%
5%
FY16E
Total Chemical
Engineering
Paints and Oil
Other
Growel mall 101
• On the consolidated basis, we expect top-line and bottom-line numbers
to grow at a CAGR of 15% and 23% respectively, over the same period.
Financial Performance (In mn)
Source: Company, EISEC Research
New technical collaboration should improve the export further
• The company has already several technical collaborations with many
overseas companies.
• Recently, GWIL signed a Technology License Agreement with SIDASA,
Division of Cromogenia Units SA, Spain under which SIDASA will make
available its technical expertise in the area of industrial oils and
lubricants.
• Foreign collaborations not only help the company to gain more technical
know-hows but also help increase its footprints in the overseas markets.
• The GWIL has been placing a higher emphasis on exports for the last
few years. Its export sales grew by approximately 29% during the year.
• We believe that several strong collaborations would continue to help
the company grow its business in domestic as well as overseas markets.
3332 3350
3859
4599
5474
556 501 571 693845
232 198 308 417559
15%
1%
13%
16%16%16.7%
15.0% 14.8%
15.1% 15.4%
7.0%5.9%
8.0%
9.1%
10.2%
0%
5%
10%
15%
20%
0
1500
3000
4500
6000
FY12 FY13 FY14 FY15E FY16E
Net Sales EBITDA PAT % Growth % EBITDA Margin % PAT Margin
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 10
Growel's 101 - high asset valuation with potential to propel theMargins
• Under the real estate segment company owns and manages the 10 acres
of land with 0.47mn Sqft of Mall (Usable area ~ 0.28mn Sqft) & a
development potential to construct additional 0.25mn usable area. At
present the leasable area is 0.25mn Sqft of which 85% is occupied.
• The renewal of its 9 year old lease agreement with Big Bazaar & Cinemax,
due next year, should happen at ~75% increment.
• Recovery in economy & consumer sentiment should improve the
occupancy ratio which would further improve the margins.
Real Estate Revenue & EBITDA (In mn)
Source: Company, EISEC Research
177193 219
252
316
126150
166198
260
13% 13% 14% 15%26%
72% 78% 76% 79%
82%
0%
25%
50%
75%
100%
125%
0
90
180
270
360
FY12 FY13 FY14A FY15E FY16E
Mall Segment EBITDA % Growth % EBITDA Margin
• The mall is well classified into two major verticals, Golden Petal Banquets
hall having the capacity of house 500 guests with the strategically
designed to transform itself from a board meeting venue to an intimate
round table dinner gathering. And the balance leasable area is leased to
the major leading brand which gives the strong confidence of sturdy
rental income.
Average Rent (Per Sqft a Month In Rs)
Source: Company, EISEC Research
7683 88 94
11919%
8%
6%7%
20%
0%
6%
12%
18%
24%
0
40
80
120
160
FY12 FY13 FY14 FY15E FY16E
Average Rent (Per Sqft a Month) % Growth
Pantaloon Books & Gifts Mcdonald
Celio Crossword SubWay
Arrow Karigar acosta Coffee
Provogue US Pizza
BlackBerrys Wellness KFC
Basics Life Enrich Café Bolltwood
Planet Fashion Café Coffee Day
Unitede Colors Electronics Kailash Parbat
Cotton Culture Reliance Digital Bistro
Ethnicity APEX Pizza Hut
AND Universal Ele Swirl's
Jashn Chyna
Bombay high Kids
Globaldesi Barbie
Peter england United Colors
Kazo
Globus Entertainment
Spykar Cine Max
Timezone
Hypermarket
BIG Bazaar
Fash
ion
Ca
fé&
rest
au
ran
ts
Accessories
Foresight Optical
ESBEDA
Navanya
Office Linc
Nike
Rhysetta
Sports & Foodwear
Mochi Kiosk
Puma Juice World
Source: Company, EISEC Research
Leading Brands in Growel 101
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 11
Relocation of paint manufacturing plant would help improve themargins
• The performance of the company's paint division has been subdued on
many accounts.
• The existing paint manufacturing plant is in Mumbai, has heavy octroi
duty which increases the cost of materials. The labor charges at Mumbai
plant is also higher which adversely impact the margins
• Shifting of paint manufacturing plant from Mumbai to other plants
located in Vapi, Barotiwala (H.P.) and Dadra would improve the margins
on account of absence of octroi duty and low labor charges in that state.
• The company will get some more benefits like tax exemption, low cost
of power, free water availability etc.in new location. All this would help
the company increase its profitability in the long run.
Paint Revenue (In mn)
Strong research and development
• Along with various technological collaborations, the company lays a
strong emphasis on R&D division.
• The Company's R&D facility at Mumbai is approved by the Department
of Science & Technology, Government of India.
• During the fiscal 2013-14 company introduce 19 new products in
domestic market. This kind of introduction of new products would help
the company to win consumers and maintain its growth trajectory.
Addition during the year 2013-14
Source: Company, EISEC Research
Ginplate Ni 414 A (ABS)
Ginplate Ni 414 B (ABS)
Ginplate Ni 414 Stabilizer (ABS)
Highly stable.
Designed primarily for platig on plastics.
Very econmical to operate.
Nic
kelP
rod
uct
s
25th Dec, 2013
Zinc Products Introduced
Ginbond 814 SPL
Highly efficient mild alkaline cleaner.
No attacked on the surface even after longer
contact time.
Easy to operate.
Better gloss at LCD areas.
Stable performance with broad working window –
frequency between carbon treatments could be
25th Dec, 2013
Designed to provide excellent brightness and
leveling.
No harmful breakdown products.
Application for plating on artificial jewellary is
found very suitable.
25
thD
ec,
20
13
Co
pp
er
Pro
du
cts
Intr
od
uce
d
Cuprobrite 2702
Cuprobrite 2703
Cuprobrite 3008 Part A
Cuprobrite 3008 Part B
Cuprobrite 3008 Make up
Copper Products
Cuprobrite 3008 Make up
Cuprobrite 2703
Cuprobrite 2702
Better gloss at LCD areas.
Stable performance with broad working window
– frequency between carbon treatments could
be enhanced.
7th
Au
g,2
01
3
Aquazinc WS 910 R
1) Fully aqueous.
2) Brightener system
3) Lower in consumption.
Production proven at automatic plating
installations for bigger / longer components.
Surfix Zn 602 B
Gibonol B 39
Heavy duty zinc phosphating chemical which
produces uniform, dense, crystalline zinc
phosphate coating on metal surface.
Application of rust preventive oil enhances the
protection against corrosion.
Ph
osp
hat
ing
Pro
du
cts in replenishment additive in satin tin
plating process.
Satin Tin Replinisher Salt
4th Jan, 2014
Zinc Products
16
thJa
n,2
01
4
4th
Jan
,2
01
4
Tin
Pro
du
cts
Aquazinc WS 910 M
Surseal SS 715
Organic acid based passivation chemical suitable
for passivation of Stainless steel.
Source: Company, EISEC Research
597
494567
684
818
15%
-17%
15%
21% 20%
-30%
-15%
0%
15%
30%
0
250
500
750
1000
FY12 FY13 FY14 FY15E FY16E
Paint Growth (%)
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 12
All set to become zero debt company
• GWIL has taken debt to fund their Mall expansion projects few years
back which will be fully repaid within next 2-3 years. By FY16, net of
cash, the company would be almost debt free.
• The management has strong focus on repayment of debt which would
continue to improve the PAT margin.
• Repayment of debt and strong cash positions in the coming years would
lessen the financial risk in the business. It will also help the company get
cheaper loans in future, in case they need.
Total Debt & Interest Cost (In mn)
Valuation and Concerns
Outlook & Valuation
Recovery in the economy and early good signs from auto industry definitely
bodes well for the company. Its market leadership position in the surface
protection business puts the company on the strong footing to capitalize on
the improving business scenario. The mall business is doing well and going to
be stronger in the future. Hence, we find the company's growth prospect very
sound in the coming years.
We initiate coverage on GWIL with BUY rating, having DCF valuation base price
target of Rs.28 (11.2x to FY16 EPS) over a period of 15 to 18 months, representing
the potential upside 82%.
Source: Company, EISEC Research0
7
14
21
28
35
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-08
Jul-
08
De
c-0
8
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-09
Ma
r-1
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Au
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Jan
-11
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-11
No
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Ap
r-1
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p-1
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Feb
-13
Jul-
13
De
c-1
3
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PE Band Chart
15x
12x
9x
6x
3x
Risk & Concern
• Low cost products from chine's market are the major concern in chemical
business. This many hurt the margin profile of the company.
• Online shopping and heavy discount on products while doing e-shopping
may change the behavior of Indian customer as far as mall visits are
concerned. This may hurt the growth prospect of the mall business.
1146992
771
611476
183174
132
8365
0
50
100
150
200
0
400
800
1200
1600
FY12 FY13 FY14 FY15E FY16E
Debt Interest Cost
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 13
Industry Overview
Electroplating Industry Overview
Based on different applications, the Electroplating industry can be categorized
into two categories (I) Primary User and Original Equipment Manufacturers
(OEM) who carry out electroplating as one of their overall manufacturing
activities, and (II) job work units, which are responsible for the plating of a
large variety of components meant for both domestic and export purposes.
The industry has a diversified product base and a majority of the electroplating
units are small and medium enterprises (SMEs). Approximately the market size
of the industry is Rs 7000 mn.
Four wheeler
Defense
Electroplating Industry
Automobile & Ancillary Furniture & Fixtures Cold Forming
Bicycle
Auto ancillaries
Two wheeler
Wire
Tube drawing
Extrusion
Forging
Marine & AviationRailways
Source: Company, EISEC Research
Mall Industry Overview
• According to the global consultancy, Cushman & Wakefield, the total
fresh mall supply by the end of 2014, is projected to be approximately
14 million Sqft in the top eight cities of India, of which 13.6 million sq ft
is under construction. This is nearly 2 times more than the supply
received in 2013. Approximately 60 per cent or 8.2 million Sqft of fresh
mall supply is expected to be received by the National Capital Region
(NCR) followed by Bangalore at 2.86 million Sqft.
• However, the total mall supply received in Q1 2014 (January-March,
2014) was merely 22 per cent of the total expected in this quarter,
registered a year-on-year drop of 65 per cent in the total mall supply in
Q1 2014, over the same time last year. Fresh mall supply of 350,000 sqft
became operational, all of which was received by Pune. The rest of the
cities saw no new mall development activity.
• Developers are cautious in entering into new locations. Thus, no new
project is created or even announced before a thorough study of the
potential of the location is done. With retail FDI in place, developers are
expecting demand from foreign brands to start pointing northwards.
Mumbai
Steady demand for retail space in suburban locations like Andheri, Malad,
Goregaon, Ghatkopar, Thane and Vashi, resulted in stable mall rentals.
Meanwhile, enquiry levels from apparels and F&B retailers for mall space in
the western suburbs, remained high but limited churn resulted in transaction
activity remaining low in these malls. Overall mall vacancy remained stable
during this year and expected to be maintained at a level of 15.3%.
Current scenario of Mall Industry
• Despite the absence of new mall supply during the Q2 2014 (April -
June 2014), overall mall vacancy increased by 0.1 percentage point to
15.4% at the end of the second quarter. Vacancy levels increased in a
few poor quality malls at Andheri, where existing vacancy levels were
already high due to exits and low preference by other retailers.
• Declining availabilities and high demand for space by domestic and
international retailers in quality malls at Goregaon and Vashi led to
rentals appreciating by 10% and 5% respectively during the 2014 (April
- June 2014).
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 14
Source: Company, EISEC Research
SWOT Analysis
Strength
• Well diversified in chemical, engineering and real estate segment
• Market leader in Rs 7000 mn electroplating chemical industry with 38%
market share
• Manufacturing more than 600 chemicals under one roof
• Well organised dealer networks & strong distribution system in multiple
locations across India
• By FY16, net of cash, the company would be almost debt free
• Strong R&D with innovation and addition in product
Weakness
• Small size of mall with single location
• Slow down in economy will adversely impact chemical as well as mall
business
Opportunity
• Has potential to construct additional 0.25 mn usable area in Growel’s
101 mall
• New technical collaboration should improve the export further
Threat
• Online shopping and heavy discount on products via e-shopping may
change the dynamics of mall business unfavorably
• Low cost products from Chinese market are the major concern in
chemical business
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 15
Financial Summary
Income statement, Rs mn FY12 FY13 FY14 FY15E FY16E
Total revenues 3332 3350 3859 4599 5474
% growth 18% 1% 15% 19% 19%
Operating expenses 2776 2849 3287 3906 4629
EBITDA 556 501 571 693 845
% growth 41% -10% 14% 21% 22%
Depreciation 99 110 115 120 126
EBIT 457 391 456 573 719
Interest 183 174 132 83 65
Other Income 29 21 34 39 54
Exceptional items 0 1 2 3 4
PBT 302 239 358 528 708
Tax 70 40 51 111 149
PAT 232 198 308 417 559
% growth 61% -15% 55% 36% 34%
EPS 1.02 0.87 1.36 1.84 2.47
Cash flow, Rs mn FY12 FY13 FY14 FY15E FY16E
PBT 302 239 358 528 708
Tax 70 40 51 111 149
Depreciation 99 110 115 120 126
Chg. W.C. -132 98 -54 -23 -80
Other 180 170 116 0 0
OCF 379 576 485 515 605
Capex -101 -187 -96 -164 -181
Investment -23 -8 0 -1 0
Other 34 16 40 0 0
CFI -90 -179 -56 -165 -181
Net Debt -83 -154 -220 -160 -135
Net Equity 0 0 0 0 0
Dividend Payout -40 -32 -42 -55 -76
Other -215 -199 -163 0 0
CFF -337 -385 -425 -215 -211
Increase/(Decrease) in Cash -49 12 4 135 213
Opening Cash 90 38 57 62 197
Closing Cash 38 57 62 197 410
Balance Sheet, Rs mn FY12 FY13 FY14 FY15E FY16E
Share Capital 227 227 227 227 227
Reserves & Surplus 1312 1473 1733 2096 2579
Total Neworth 1538 1700 1960 2322 2806
Prefernce Capital 0 0 0 0 0
Total Debt 1146 992 771 611 476
Deferred tax liabilities 144 169 178 178 178
Other non-current liabilities 161 198 226 251 281
Current Liabilities & Prov 896 1080 1121 1287 1513
Total Liabilities 3886 4138 4257 4650 5254
Gross Block 2697 2896 2950 3083 3222
Net Fixed Assets 2242 2310 2264 2275 2288
Investments 39 48 47 48 48
Other non-current assets 150 160 187 220 262
Total current assets 1454 1621 1759 2107 2657
Total Assets 3886 4138 4257 4650 5254
Ratio analysis (%) FY12 FY13 FY14 FY15E FY16E
EBIDTA margin 16.7 15.0 14.8 15.1 15.4
PAT margin 7.0 5.9 8.0 9.1 10.2
ROCE 22.2 18.3 21.2 24.7 27.6
ROE 16.1 12.2 16.8 19.5 21.8
Inventory (days) 46 50 49 49 49
Payable (days) 54 60 59 59 59
Receivables (days) 63 70 69 69 69
Debt to equity 0.75 0.58 0.39 0.26 0.17
Net debt to equity 0.72 0.55 0.36 0.18 0.02
Valuation parameters FY12 FY13 FY14 FY15E FY16E
EPS 1.0 0.9 1.4 1.8 2.5
P/E (x) 14.9 17.4 11.2 8.3 6.2
EV/ EBIDTA (x) 8.2 8.8 7.3 5.6 4.2
P/BV 2.2 2.0 1.8 1.5 1.2
Institutional Research
September 25, 2014
Initiating Coverage - Grauer and Weil (India) Ltd 16
Corporate Office : 701, 7th Floor, Ruby Crescent Business Boulevard, Ashok Nagar, Kandivali (East), Mumbai - 400 101. Tel: +91 22 2272 1083
Head Office : DA-14, Salt Lake City, Sector-I, Kolkata-700064 Tel: +91 33 40205901
Web: www.eisec.com
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Stock rating (1 year target scale)
<0% - Sell
0-10% - Reduce
10-30% - Accumulate
>30% - Buy
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