Post on 22-Aug-2018
transcript
RURALFOCUS
May30,2018
REPORT - 2018
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1
SR. CO_NAME SECTOR MARKETCAP* PRICE* TARGET UPSIDE
NO POTENTIAL(%)
*CMPason30thMay,2018
1 M&M Automobile 105621.64 868.80 1110.00 28
2 AshokLeyland Automobile 42922.02 149.55 170.00 14
3 HavellsIndia CapitalGoods-ElectricalEquipment 35173.98 547.95 699.00 28
4 MuthootFinance Finance 16023.66 396.25 466.00 18
5 KECIntl. CapitalGoods-ElectricalEquipment 9586.83 373.65 441.00 18
6 GNFC Fertilizers 7516.89 469.60 575.00 22
7 KalpataruPower CapitalGoods-ElectricalEquipment 7106.76 454.00 613.00 35
8 BajajCorp FMCG 6807.86 462.95 534.00 15
9 JainIrrigation Plasticproducts 5370.72 105.85 130.00 23
10 SwarajEngines CapitalGoods-NonElectricalEquipment 2385.68 1944.55 2372.00 22
uralIndiaaccountsforabout70percentofthetotalpopulationandcontributesaroundhalfofthecountry'sGrossDomesticProductR(GDP).TheruralIndiathemewillcontinuetoremainvogueondomesticstockmarketsalongwithanelectionyearbeinginfocus.Afterthreeyearsofsubduedruralconsumption,therearenowincreasingsignsofapickup.Twogoodconsecutivemonsoon,coupledwith
governmentfocusontheruraleconomyintermsofbuildingruralinfrastructure,providingbetteragriculturalsupportprices,focusonincreasingfarmincomes, increasedspendingon irrigationamiddisbursalsof7thpaycommissionhavehelpedpickup inruralconsumption.Besides,Reformssuchasgovernmentextensionoffertilizersubsidyprogramuntil2020coupledwithfarmloanwaiversbysomestategovernmentsarebeingundertakenwithavisionthattheycanhaveamultipliereffectinincreasingmovementsofgoods,servicesandtherebyimproveearningspotentialofruralareassubsequentlyimprovingconsumption.
TheIndiancompaniesareveryoptimisticaboutgrowthoftheruralconsumermarketsasbetternetworkingamongruralconsumersandtheirtendencytoactivelyseekinformationthroughmanysourcestobebetterinformedwhilemakingpurchasedecisions.AlsothewiderreachofmediaandtelecommunicationserviceshashelpedIndia’sruralconsumerstoremaininformedandisinfluencingtheirpurchasedecisions.Owingtoafavorablechangingconsumptiontrendaswellasthepotentialsizeofthemarket,andonexpectationofgoodmonsoon(afterMetprojection)thisyear, rural India provides a large and attractive investment opportunity for private companies from sectors as diverse as Capital Goods, agricultureserviceandfertilizers,financialservicesandconsumerdurablescompanies.
Withincreasingruralincomelevelsinthecomingyears,theruralconsumptionwillgetaboost,whichinturnwouldprovepositivefortheIndianbusinessscenario.Fromtheperspectiveofaninvestor,theinherentqualityofthecompanyorthebusinessisequallyimportanttoplayanytheme.Investinginahigh-qualitybusinessalongwiththe“broadtheme”reducestheoddsoflosingmoneyasthe“theme”hastremendouspotentialinthelong-term.Oneshouldconsiderthefollowingrecommendationstoinvestinastaggeredmannerforalongtermperspective.
HappyInvesting
MAHINDRA&MAHINDRALIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
Mahindra & Mahindra, Ltd., through its subsidiaries, engages in the
manufacture, distribution, and sale of passenger cars, tractors,multi-
utility vehicles, light commercial vehicles, and threewheelers. It also
designs,develops,manufactures,andmarketsimplementsthatareused
inconjunctionwithtractors.
TostrengthentheUVportfolio,thecompanyhaslaunchedanewavatarof
the Scorpio, its iconic SUV— the 'All Powerful Scorpio'. The new “All
PowerfulScorpio”comeswithhigherpower(140bhp)andtorque,new
6-speed transmission, enhanced performance, imposing styling and
luxuriouscomfort.
Thecompanycontinuedtobethe3rdlargestpassengervehiclecompany,
the 2nd largest commercial vehicle company and the largest small
commercialvehicle(LCV<3.5T)companyinIndia.Domesticsalescrossed
the5,00,000mark after a clapof five years. The company achieved its
highesteversalesforScorpioandPik-UpsthisyearandBolerovolumes
crossed1millionsincelaunch.Also,inFY2018,thecompanyhadrecorded
itshighestevertractorvolumesforbothdomesticandexport,andretained
theleadershippositionforthe35thconsecutiveyear.
ForQ4FY2018,thedomesticautoindustry(excluding2W)grew19%,
with the passenger vehicles reporting a growth of 7% and the UV
segmentagrowth25%.Thedomestictractorindustrywitnessedavery
highgrowthof44%.InQ4FY2018,thedomesticAutomotivevolumefor
thecompanygrew20%whilethedomestictractorvolumesgrew44%.
Thegroupwillsupply150ofthe500electricsedansinthefirstphaseofthe
government’sordertoprocure10,000electricvehicles.Itwillmanufacture
allkeycomponentsthatgointoanelectricvehicleitselfasIndia’slargest
utilityvehiclemakerprepares for thenext transition in theautomobile
industryamidthegovernment’spushtocutdependenceonfossilfuels.
For theyearFY2018, improvement inoverall economic sentiment, two
consecutive years of normal monsoon, Government's focus on
development of Agri and Rural sectors, with continued investment in
infrastructure,coupledwitheasyavailabilityofaffordablefinance,helped
drivethedemandfortheautomotiveaswellasthetractorindustry.
2
CMP:Rs.868.80 Target:Rs.1110.00 UpsidePotential:28%
RISK
RisingInterestrate
Changeinmajorregulation
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
Revenue 43785.40 48685.60 54298.70
Ebitda 4769.30 6224.00 7475.00
Ebit 3442.10 4744.60 5896.10
NetIncome 3955.70 4356.00 4616.20
EPS 33.19 36.47 39.65
BVPS 206.65 - 273.36
RoE 14.38 14.53 15.41
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
CurrentMkt.Price(Rs.) 868.80
FaceValue(Rs.) 5.00
52WeekHigh/Low 887.95/612.50
M.Cap(Rs.inCr.) 108008.57
EPS(Rs.) 48.12
P/ERatio(times) 18.06
P/BRatio(times) 2.93
DividendYield(%) 0.75
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 38.12
Institutions 20.08
NonPromoterCorporateHolding 6.49
Promoters 20.45
Public&Others 14.85
SHAREHOLDINGPATTERN
P/ECHART
VALUATION
Thecompany'svolumegrowthisonanuptrendledbystrongdemandfor
tractorsandacyclicalrecoveryinlightcommercialvehicles.Apickupin
ruraleconomyislikelyandthisshouldbenefitM&M.Thus,itisexpected
thatthecompanywouldseegoodgrowthgoingforwardandthestock
willseeapricetargetofRs.1110in8to10monthstimeframeontarget
P/Eof28xandFY19(E)earningsofRs.39.65.
ASHOKLEYLANDLIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
AshokLeylandisoneoftheleadingmanufacturersofmediumandheavy
commercial vehicles in India. Ashok Leyland is the 2nd largest
manufacturer of commercial vehicles in India, the 4th largest
manufacturerofbusesintheworldandthe12thlargestmanufacturerof
trucksglobally.Itofferspowersolutionsforelectricpowergeneration,
agricultural harvester combines, earth moving and construction
equipment,andmarineandothernon-automotiveapplications.
FY17-18,ithasbeenanextremelysatisfactoryyearwithachievementsin
manyfronts.Recorddomestictruckvolumes,substantialgrowthinLCV,
continued growth in marketshare and the transformation which
Intelligent Exhaust Gas Recirculation (i-EGR) brought to the Indian
market.Moreover,exportshaswitnessedahealthyjumpinthecurrent
year and the company will continue to focus on growing
InternationalBusinessaswellasDefenceandAfterMarketportfolios.
DuringFY17-18,Salesvolumesrose20.5%yoyto174,851unitsinFY18
visvis145,066unitsinthepreviousyear.Itssalesvolumesinthemedium
andheavycommercialvehicles(M&HCV)segmentstood16%higherat
131,432units.LCVsalesduringtheperiodrose36.6%to43,419unitsvis
avis31,774unitayearago.
AsBharatStandardsVIemissionnormswillgointoeffectby2020,the
company is working on capacity building and modernization of its
competenciesandtechnologiestomeetthegrowingrequirementsforthe
BS6.IthasreneweditspartnershipwithHinoMotors(Japan)forMutual
Cooperation Agreement (MCA) to utilize Hino’s Euro-VI compliance
engine technology for its new BS-VI (EURO-VI) development. This
partnershipwouldhelpthecompanytobereadyforBSVInorms.
The company is developing new vehicles for the armed forces,
aggressivelybiddingfornewcontractsandsettingupnewinfrastructure
to ready itself for a larger apie of thedefencebusiness.Thedefence
businessisexpectedtoachieveatleast3times(revenuegrowth)infive
years. Recently, the company has bagged tenders formine protected
vehiclesandbulletproofvehiclesfromthesecurityagenciesandtargets
threefoldbusinessincreasefromitsdefencevertical.
3
CMP:Rs.149.55 Target:Rs.170.00 UpsidePotential:14%
RISK
PolicyinterventionbyGovernment
Competition
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
REVENUE 20018.70 26247.90 30469.50
EBITDA 2338.80 2739.00 3346.50
EBIT 1820.90 2184.40 2772.40
PRE-TAXPROFIT 1680.90 2230.72 2829.10
NETINCOME 1573.90 1575.20 1983.10
EPS 5.46 5.36 6.82
BVPS 21.53 24.48 28.37
RoE 27.04 - 25.37
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
CurrentMkt.Price(Rs.) 149.55
FaceValue(Rs.) 1.00
52WeekHigh/Low 167.50/87.35
M.Cap(Rs.inCr.) 43830.58
EPS(Rs.) 5.36
P/ERatio(times) 25.32
P/BRatio(times) 5.91
DividendYield(%) 1.62
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 25.57
Institutions 11.08
Government 0.08
NonPromoterCorporateHolding 2.11
Promoters 51.27
Public&Others 9.91
SHAREHOLDINGPATTERN
P/ECHART
VALUATION
TheCompanycontinuedtooutperformtheCVindustryandhasmade
significant gains in market share and sales volume by focusing on
innovation, intensive marketing strategies and network expansion.
Moreover,themanagementofthecompanyisrapidlyestablishingrobust
businessprocessesacross thecompany takingstrides into theDigital
Age.ThusweexpectthestocktoseeapricetargetofRs170in8to10
monthstimeframeon1yearaverageP/Bvxof6andFY19(BVPS)of
Rs28.37.
HAVELLSINDIALIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
HavellsIndiaLimitedisoneofIndia’slargest&fastestgrowingelectrical
andpowerdistributionequipmentmanufacturerswithproductsranging
fromindustrial&domesticusage.Itownssomeoftheprestigiousglobal
brands like Crabtree, Reo & Standard Electrical. It now operates a
networkof90+branchesandrepresentativeofficesinover50countries
withanetworkof20,000distributors.
The company has 12 state-of-the-art manufacturing plants in India
located at Haridwar, Baddi, Sahibabad, Faridabad, Assam, Alwar and
Neemrana, manufacturing globally acclaimed products, synonymous
withexcellenceandprecisionintheelectricalindustry.
It has pioneered the concept of exclusive brand showroom in the
electrical industry with ‘Havells Galaxy’. It became the first FMEG
Companytoofferdoorstepserviceviaitsinitiative‘HavellsConnect’.
DuringQ4FY17,itslightingandfixturesbusinessgrew20percenttoRs
323croreduringthefourthquarterasagainstRs268croreinthesame
periodpreviousfiscal.Electricalconsumerdurablesgrew19percentto
Rs465crore,switchgearbusinessgrew5percenttoRs394crorewhile
thecablebusinessgrew13percent toRs769croreduring the three
monthsperiodendedMarch2018.Themanagementisconfidentthatthe
growthforthissegmentwillcontinueincomingyears.
Fans, appliances andwaterheatershaveperformedwellwithmarket
leadinggrowth.Thecompanyretainedmarket leadershipinpremium
fansegment,whichcontributes2/3rdof ceiling fanswith thehighest
averagepricerealizationinindustry.InWaterheaters,thecompanyis
firmlyestablishedastop3playerswithpremiumandtechnologyproduct
positioning.
Lloyds,whichwasacquiredbyHavellslastyear,reportedacontribution
ofRs1,414crorestoHavellstoplineinFY18.Salesremainedmutedasthe
demandwasimpactedbyGST.
Asapartofitsexpansionstrategy,itplanstoaddrefrigeratorsunderLloyd’s
portfoliowhichcurrentlyconsistsofair-conditioners,washingmachines,
andtelevisions.ThecompanyisincurringacapitalexpenditureofRs3,000
crorestosetupa600,000unitair-conditionermanufacturingfacility.This
plantisexpectedtobeoperationalbytheendofFY19.
4
CMP:Rs.547.95 Target:Rs.699.00 UpsidePotential:28%
RISK
HighCompetition
ChangeinTechnology
ACTUAL ESTIMATES
FYMar-18 FYMar-19 FYMar-20
Revenue 8,138.60 9,743.10 11,231
Ebitda 1,049.30 1,287.20 1,527
Ebit 909.80 1,150.80 1,350
Pre-TaxProfit - 1,225.80 1,462
NetIncome 712.50 859.50 1,028
EPS 11.40 13.75 16.45
BVPS 59.82 67.12 76.74
RoE 18.02 21.63 22.76
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
CurrentMkt.Price(Rs.) 547.95
FaceValue(Rs.) 1.00
52WeekHigh/Low 592.70/441.30
M.Cap(Rs.inCr.) 34255.01
EPS(Rs.) 10.78
P/ERatio(times) 50.84
P/BRatio(times) 9.19
DividendYield(%) 0.73
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 25.43
Institutions 5.05
NonPromoterCorporateHolding 3.17
Promoters 59.58
Public&Others 6.77
SHAREHOLDINGPATTERN
P/ECHART
VALUATION
Thecompanyhasbeencontinuouslygrowingineachbusinessparameter
anditisexpectedthatitwouldbedirectbenefittedbytheGovernment
initiativessuchas“Housingandpowerforall”.Itisbestplacedtoattain
scale across businesses with its new SBU (Strategic Business Unit)
structure and focused product-wise branding strategy. Thus, it is
expectedthatthestockwillseeapricetargetofRs.699in8to10months
timeframeonancurrentP/Eof50.84xandFY19EPSofRs.13.75.
MUTHOOTFINANCELIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
MuthootFinanceisthelargestgoldfinancingcompanyinIndiainterms
ofloanportfolio.HeadquarteredinKerala,thecompanyisaSystemically
ImportantNon-deposittakingnon-bankingfinancecompany(NBFC).
The consolidated asset under management (AUM) of the company
increasedat improvedpaceof12%yoytoRs32154croreendMarch
2018.Theshareofsubsidiariesintheloanbookhasincreasedto10%end
March2018 from5%endMarch2017,while thecompanyexpects to
furtherraisetheshareofsubsidiariesinloanbookto15%byMarch2019
andfurtherhigherto20%byMarch2020.
ThegrowthofgoldloanAUMhasacceleratedonsequentialbasisto7%to
Rs 29138 crore end March 2018. The gold branch network of the
companyhasincreasedto4325branchesendMarch2018.
GrossNPA increased to6.98%atendMarch2018 from5.62%atend
December2017.Meanwhile,NetNPA also increased to 6.16%at end
March2018from4.93%atendDecember2017.
Muthoot Homefin, the wholly owned subsidiary, increased its loan
portfolio to Rs 1465 crore endMarch 2018 fromRs 440.8 crore end
March2017.TotalrevenuejumpedtoRs126croreinFY2018fromRs24
croreinFY2017.ItachievedanetprofitofRs28croreinFY18asagainst
previousyearprofitofRs3crore.
Netprofitofthecompanyrose40.28%toRs451.39croreinthequarter
ended March 2018 as against Rs 321.78 crore during the previous
quarterendedMarch2017.Salesdeclined9.28%toRs1550.97crorein
thequarterendedMarch2018asagainstRs1709.63croreduringthe
previousquarterendedMarch2017.
5
CMP:Rs.396.25 Target:Rs.466.00 UpsidePotential:18%
RISK
Fallincollateralvalue
Adverseregulatorychanges
Alternativeloanproducts
(Rs.inCr.)FINANCIALPERFORMANCE
CurrentMkt.Price(Rs.) 396.25
FaceValue(Rs.) 10.00
52WeekHigh/Low 525.80/360.00
M.Cap(Rs.inCr.) 15853.62
EPS(Rs.) 43.00
P/ERatio(times) 9.22
P/BRatio(times) 2.04
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 11.26
Institutions 10.81
NonPromoterCorporateHolding 0.73
Promoters 73.61
Public&Others 3.60
SHAREHOLDINGPATTERN
P/ECHART
VALUATION
The company is witnessing healthy financial growth across all the
businesssegmentsandmaintainingtheloangrowthsteady.Accordingto
themanagement,gold loanbusinesswouldgrow15%andsubsidiary
loanbooktogrowfasterat50-60%.Thus,itisexpectedthatthestockwill
seeapricetargetofRs.466in8to10monthstimeframeonacurrent
P/Bvof2.04xandFY19BVPSofRs.228.5.
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
Revenue 3345.70 4221.90 4220.70
Ebitda 2234.00 3040.60 2934.50
Ebit 2185.80 2996.70 3268.90
NetIncome 1179.80 1720.30 1779.50
EPS 29.45 42.85 44.44
BVPS 163.12 193.99 228.50
RoE 19.44 - 20.78
Source:Company'sWebsite,Reuters&Capitaline
KECINTERNATIONALLIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
KEC International, an RPG Group firm, is a global infrastructure EPC
(engineering,procurementandconstruction)majorandhaspresencein
powertransmissionanddistribution,cables,railways,water,renewables
and civil space. Globally, the company has empowered infrastructure
developmentinmorethan63countries.
Fresh ordersworthRs 1392 crorewerewon across various business
verticalsofthecompanysofarinFY2019.Majorjunkofthefreshorderso
farincurrentfiscalhascomefromrailwayaggregatetoRs928crorefor
bothoverheadelectrificationaswellascivilworks.Civilworksverticalof
thecompanyhasbaggedordersworthRs212crorefromleadingtyreand
cementmanufacturingcompanies.WhilecoreT&Dsegmentaccountsfor
Rs159croreworthofordersacrossIndiaandSAARCregion,thebalance
wasaccountedbycablesandsolar.
Order execution is back on track andmargin is expected to stabilize on
account of cost control measures. The management expects traction in
orderingactivityfromSEBs(StateElectricityBoard)mainlyfromsouthIndia
andBihar.Further,railwayelectrificationorderswouldpickupandrevenue
from railway is expected to double in FY19. Healthy order book and
improvement in margins would drive the earnings growth. Moreover,
managementexpectorderbooktogrowby20%forcurrentfiscali.e.FY2019.
ItsdebtlevelshasreducedfromRs.1932croretoRs.1538croreoverthe
last12months ,which ismadeupofcurrentand longtermdebtand
managementexpectsmorereductionofdebtincomingyears.
ThecompanyhasputinbidsforsolarordersinMENAregionanditexpects
one or two solar order in this fiscal from that region. The company is
targetingSAARCandAfricaregionforRailwaysordersandhopetogetat
leastoneprojectthisfiscal.However,theticketsizeofinternationalrailway
orderswillbebiggerascomparedtodomesticmarket.
Consolidatedsalewasupby17%toRs10058.02crore.TheOPMwasup
by50bpsto10.0%andthustheoperatingprofitwasupby23%toRs
1006.18crore.Withtaxratestandlowerat33.3%comparedto34.2%in
correspondingpreviousperiod, thePATwasupby51%toRs460.41
crore.
6
CMP:Rs.373.65 Target:Rs.441.00 UpsidePotential:18%
RISK
Commoditypricevariationsandcurrencyfluctuations
Delaysinexecutionofprojects
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
REVENUE 8584.40 10096.40 11637.70
EBITDA 817.90 1006.20 1183.50
EBIT 688.20 896.40 1096.90
PRE-TAXPROFIT 463.50 690.24 821.50
NETINCOME 304.80 460.40 539.60
EPS 11.85 17.91 20.98
BVPS 61.70 77.70 98.80
RoE 19.67 - 23.37
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
CurrentMkt.Price(Rs.) 373.65
FaceValue(Rs.) 2.00
52WeekHigh/Low 442.60/209.00
M.Cap(Rs.inCr.) 9606.11
EPS(Rs.) 17.91
P/ERatio(times) 20.86
P/BRatio(times) 4.81
DividendYield(%) 0.64
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 11.33
Institutions 20.20
GovtHolding 0.00
NonPromoterCorp.Hold. 3.35
Promoters 50.99
Public&Others 14.14
SHAREHOLDINGPATTERN
P/ECHART
VALUATION
Thecompanyiscontinuouslyperformingwellanddeliveringinallthe
three parameters of revenue, profitability and order intake. The
managementofthecompanyexpectsinternationalbusinesstopickup
with large order inflow from Jordan, Saudi, Far East (Indonesia,
Thailand),etcandinternationalT&D,sub-stationsandcivilinfrawillbe
keydriversforFY18orderintakegrowthof10%.Weexpectthestockto
seeapricetargetofRs.441in8-10monthtimeframeonanexpectedP/E
of21xandFY19(E)EarningsPerShareofRs.20.98.
GUJARATNARMADAVALLEYFERTANDCHEMLIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
GNFCtheleadersinfertilizerindustry,isengagedinmanufacturingand
sellingfertilizerssuchasUreaandAmmoniumNitro-phosphateunder
thebrandnameof"NARMADA".Thecompanyhasinitiatedauniqueand
first of its kind, socio economic project of collection of neem seeds
throughtheruralpoorespeciallywomentosupplementtheirincomeand
encouragethemfororganicfarming.
Onthedevelopmentfront,ithassetupcorechemicalandpetrochemical
plantssuchasMethanol,FormicAcid,NitricAcid,andAcetic;hasIndia’s
largest single stream plant of Aniline and the proposed di-calcium
phosphateprojectinjointventurewithBelgiancompanyEcoPhoswillbe
operational by 2019.Di-CalciumPhosphate ismainly used as dietary
supplement in prepared instant food products including noodles.
Moreover,thecompanyisonlymanufacturerofTolueneDi-Isocyanate
(TDI)inSouthEastAsiaandIndianSubContinent.Itschemicalsenjoy
highbrandvalueinnichemarket.
DuringtheYearendedMarch2018,thecompanyhashighesteverLong
TermDebtextinctionofRs.888crore.Longtermdebtlevelreducedby
100%from2,180crorein2013-14toRs.Nilasofdate.Rs.1,436croreof
totaldebtpaidoffinonesingleyear.GNFCisnowaLongTermDebtFree
company.
Most of the plants performed well. For TDI the combined capacity
utilisationstoodat93%duringtheyearasagainst73%lastyear.Also
duringtheyearAniline,EthylAcetate,FormicAcidandTechnicalGrade
Ureahave also recordedhighestproduction.The realisation inAcetic
Acid,FormicAcidandEthylAcetatewerethehighestinthelast6years.
Thecompanyhasreporteda38percentriseinitsnetprofitatRs329
croreforthefourthquarterendedMarch2018.Netsalesofthecompany
increased46percenttoRs1,764croreduringJanuary-Marchquarterof
2017-18,comparedwithRs1,203croreinthepreviousyear.
7
CMP:Rs.469.60 Target:Rs.575.00 UpsidePotential:22%
VALUATION
Themanagementofthecompanyiscontinuouslyfocusingonincreasing
itscapacityadditionsinchemicalsegmentaswellastoimprovecapacity
utilizationofitsDahejPlantandduringtheyear;ithaspaidallofitslong
termdebtandnowplanningtoreduceitsworkingcapital.Moreover,it
hasdevelopedrequisiteexpertiseandconfidencewithprovenproject
managementcompetencies.Thus,itisexpectedthatthestockwillseea
pricetargetofRs.575in8to10monthstimeframeonacurrentP/Ex9.18
andFY19(EPS)ofRs.62.69.
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
Revenue 4588.80 6837.30 6863.20
Ebitda 652.80 1390.60 -
Ebit 401.40 1120.20 1792.00
Pre-TaxProfit 715.10 1162.00 1434.90
NetIncome 229.10 789.50 974.30
EPS 15.62 60.80 62.69
BVPS 244.60 286.83 331.13
RoE 7.08 19.12 18.93
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
CurrentMkt.Price(Rs.) 469.60
FaceValue(Rs.) 10.00
52WeekHigh/Low 548.50/253.60
M.Cap(Rs.inCr.) 7298.52
EPS(Rs.) 51.15
P/ERatio(times) 9.18
P/BRatio(times) 1.62
DividendYield(%) 1.60
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 11.16
Institutions 15.06
NonPromoterCorporateHolding 4.22
Promoters 41.18
Public&Others 28.38
SHAREHOLDINGPATTERN
P/ECHART
KALPATARUPOWERTRANSMISSIONLIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
KalpataruPowerTransmissionLimited(KPTL)isprimarilyengagedin
the business of Engineering, Procurement and Construction (EPC)
relatingtoinfrastructurecomprisingpowertransmission&distribution,
railwaytracklaying&electrification,oil&gaspipeLinesLaying,etc.
ForFY18-19,thecompanytargetstoachieve15-20%growthonrevenue
andfurtherimproveonprofitabilityandreturnratios,includingexitof
non-coreassets. Itplanstofurtherenhanceinternational footprinton
power transmission, civil contracting, manufacturing, railways and
pipeline divisions. The company will continue to drive of improving
productivity through automation, process re-engineering and
benchmarksoncostefficiency.
Orderinflowwasupby56%inFY18andstoodatRs9341crore.L1in
excessofRs2000crore.OverallorderbookpositionasonMar18for
KPTLstandaloneisaroundRs12404crore.40%ofordersarefromT&D
internationalmarkets, 28% fromdomestic transmissionmarkets and
16%oforderbookisfrominfrastructureand16%fromrailwaysegment.
PGCILaccountedforaround19%oftotalorderbook.
ForJMCProjects,,asubsidiaryofKPTL,thecompanyhasanorderbookof
aroundRs7616croreasonMar18,upby10%.OrderinflowstoodatRs
3339crore.L1standsatRs1500crore.Rs300croreoflegacyordersin
theorderbook.TargetforJMC15-20%growthinnetsalesandmargin
10.5-10.8%inFY19
The company has a global footprint in over 50 odd countries on
transmissionprojects.Itwouldcontinuetoexpandthatglobalfootprint
withthesupportfromEximBankofIndiaandopportunitiescomingfrom
the internationalmarket. The company is currently executing several
contractsinIndia,Africa,MiddleEast,CIS,SAARCandFarEast.
KPTLreportednetsalesgrowthofaround29%toRs1931.44crorein
Mar18quarterandPATforMar18quarterstoodatRs104.83crore,up
by17%YoY.
8
CMP:Rs.454.00 Target:Rs.613.00 UpsidePotential:35%
RISK
RegulatoryComplianceRisk
Executionrisk
CurrencyRisk
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
Revenue 4,838.10 5,741.20 6,608.70
Ebitda 529.10 631.20 739.00
Ebit 451.40 554.60 673.10
Pre-TaxProfit 402.60 491.6 591.00
NetIncome 269.10 322.00 394.70
EPS 17.54 20.98 25.58
BVPS 161.52 180.52 204.00
RoE 11.47 13.19 13.77
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
CurrentMkt.Price(Rs.) 454.00
FaceValue(Rs.) 2.00
52WeekHigh/Low 535.95/322.60
M.Cap(Rs.inCr.) 6967.11
EPS(Rs.) 20.98
P/ERatio(times) 21.64
P/BRatio(times) 2.69
DividendYield(%) 0.00
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 6.17
Institutions 22.20
NonPromoterCorporateHolding 3.57
Promoters 59.32
Public&Others 8.73
SHAREHOLDINGPATTERN
P/ECHART
VALUATION
The company continues to focus on improving profitability, order
visibilityandreturnratiosasaresultofimprovedmarginsandunlocking
ofcapitalfromnon-coreassets.Itsdiversificationfocushasledtosuccess
in securing significant orders in the non-T&D business, with healthy
margins.Thus,itisexpectedthatthestockwillseeapricetargetofRs.614
in8to10monthstimeframeonatargetP/Eof24xandFY19(E)earnings
ofRs.25.62.
BAJAJCORPLIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
BajajCorpisanFMCGcompanywithmajorbrandsinhaircarecategory.It
is engaged in the business activity of trading and manufacturing of
cosmetics,toiletriesandotherpersonalcareproducts.
The company has reduced its dependency on wholesale trade which
accounted for around 35% of total sales, as compared to 55%, pre
demonetizationandalsodirectreachhasincreasedto3.9Mretailoutlets.
The management is hopeful for turnaround of rural demand and it
expects rural growth soon to pick up more than 10% every year.
Currentlyit’sstilllowerthanurbangrowthbutexpectsruralgrowthto
outperformurbangoingforward.Managementfurtherexpectsincrease
inruralgrowthwillleadtoevenhigherandbetterfutureforlighthairoil
segmentingeneralandparticularforthecompany.
Ithasbeenpursuinginorganicopportunitiesforthelastfewyears.For
inorganicgrowthopportunities,itwillfocusonnichebrandswhichcan
benefit from its strong distribution network that would help the
companytomakepanIndiabrands.Themanagementofthecompanyis
lookingtograbinorganicgrowthopportunitiesintheFMCG,Hairoiland
Nomarkscreamorotheranti-blemishcreamcategory.
March18quartersawavaluegrowthofaround5%andvolumegrowthof
5.8%onYoYbasis.Onanannualbasis,thevaluegrowthstoodat2.7%.
BajajAlmondshairoilgrewby7.3%byvolumes.Thecompanyhasgained
inmarketsharewithinthelighthairsegment.Ithas61%marketsharein
volumesinthequarter.
9
CMP:Rs.462.95 Target:Rs.534.00 UpsidePotential:15%
RISK
Frequentfluctuationsinthepricesofitsrawmaterial
HighlycompetitiveFMCGmarketwithcompetitors
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
REVENUE 794.80 828.50 930.40
EBITDA 263.60 253.90 292.10
EBIT 258.30 246.50 294.30
PRE-TAXPROFIT 296.60 269.80 317.90
NETINCOME 236.60 211.10 244.20
EPS 15.97 14.31 16.57
BVPS 33.50 33.39 36.22
RoE 48.53 42.79 48.29
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
CurrentMkt.Price(Rs.) 462.95
FaceValue(Rs.) 1.00
52WeekHigh/Low 525.00/342.50
M.Cap(Rs.inCr.) 6828.51
EPS(Rs.) 14.31
P/ERatio(times) 33.39
P/BRatio(times) 13.86
DividendYield(%) 2.59
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 25.53
Institutions 4.63
NonPromoterCorporateHolding 0.60
Promoters 66.86
Public&Others 2.39
SHAREHOLDINGPATTERN
P/ECHART
VALUATION
Withgoodcashonhandandzerodebt,thecompanyisgaininginitslight
hairoilcategorywhichispremiumhairoil.Ithasincreasednumberof
distributorsinruralareas.Actionsdoneinthepastsuchasincreasein
distribution and direct dealer network, has resulted in increase in
volumes better than the industry. Management aims to continue to
launchnewproducts.Immediatelauncheswillbeinhairoilandskincare.
Currentlyithasnewlaunchesinrelatedcategoryproductsandaimsto
use cash for acquisition to leverage the strong distribution. Thuswe
expectthestocktoseeapricetargetofRs534in8to10monthstime
frameanexpectedP/Exof32.25andFY19(E)earningsofRs16.57.
JAINIRRIGATIONSYSTEMSLIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
Jain Irrigation Systems (JISL) is engaged in providing solutions in
agriculture, piping, infrastructure through manufacturing of micro
irrigationsystems,PVCpipes,HDPEpipes,plasticsheets,agroprocessed
products, renewable energy solutions, tissue culture plants, financial
servicesandotheragriculturalinputs.
Recently,ithasbaggedorderforintegratedirrigationsolutionprojectin
Karnataka. Visvesvaraya Jala Nigam, a division of Water Resources
DepartmentofKarnataka,hasplacedthisorderonthecompanythrough
nationalcompetitivebidding.ThevalueoftheprojectisRs287.66crore.
Thecompanyexpectstocompletetheprojectin24months.
Accordingtothemanagementof thecompany, foodbusinesswillalso
improveduetopickupindemandandexpectdoubledigitgrowthinthis
segment. The company expects strong business in spices andOrange
juice business. Company expects enormous opportunities in water
treatmentplantsandbetterirrigationproducts.
DuringQ4FY18,itsoverallplasticdivisionhasreportedgrowthof19.7%
onaccountofrobustoffakefromdomesticmarketandrevenuefromHi-
techAgriInputproducts
CurrentconsolidatedorderbookstandsatRs4089crorewhichincludes
ordersofRs1807.60croreforHitechAgriInputProductsDivision,Rs
964 crore for Agro Processing (JFFFL) and Rs 1208 crore for Plastic
Division.
10
CMP:Rs.105.85 Target:Rs.130.00 UpsidePotential:23%
RISK
Weatherandcroprelatedrisk
Delayinimplementationofproject
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
REVENUE 6769.80 7999.10 9194.10
EBITDA 940.20 1055.40 1232.70
EBIT 638.90 716.80 870.90
PRE-TAXPROFIT 243.00 299.17 460.70
NETINCOME 176.20 219.30 347.90
EPS 3.29 4.25 6.38
BVPS 90.35 91.76 91.49
RoE 4.29 - 7.50
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
CurrentMkt.Price(Rs.) 105.85
FaceValue(Rs.) 2.00
52WeekHigh/Low 150.40/86.25
M.Cap(Rs.inCr.) 5374.81
EPS(Rs.) 4.46
P/ERatio(times) 23.74
P/BRatio(times) 1.21
DividendYield(%) 0.96
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 41.65
Institutions 6.89
Government 0.11
NonPromoterCorporateHolding 2.77
Promoters 28.46
Public&Others 20.12
SHAREHOLDINGPATTERN
P/ECHART
VALUATION
The company has maintained positive free cash flows and the
managementofthecompanyexpectstofollowthesameinnextquarter.It
expects20%salesgrowthforfullyearFY19duetorobustperformancein
piping business and project business due to strong orders. Thus we
expectthestocktoseeapricetargetofRs130in8to10month’stime
framea3yearaverageP/Bvxof1.42andFY19(BVPS)bookvalueper
shareofRs.91.49.
SWARAJENGINESLIMITED RECOMMENDATION:BUY
INVESTMENTRATIONALE
Swaraj engines limited (SEL) is into manufacturing and supplying of
dieselEngines in therangeof22HP toabove54HP.Thecompany is
equippedwithhighlyproductive&precisequalityanalyzingmachines.It
alsomanufactureshi-techenginecomponents.Tilldate,SELhassupplied
over7,00,000enginesforfitmentintoSwarajtractors.
DuringFY17-18,ithasattaineditshighesteverenginessaleof92,022
units(lastyear82,297units),agrowthof11.8%.Withriseinenginessale
volumecoupledwithincreaseinthesharpofhigherHPenginessale,net
operating revenue for FY18 stood at Rs.771.20 crores as against
Rs.666.10croreforthelastyear-agrowthof15.80%.
Onthedevelopmentfront,SwarajTractorshaslaunchedSwaraj963FE
(60-75HPcategorytractor)whichhasbeenwellacceptedinthemarket.
TheacceptanceofSwaraj’shigherHP tractorswouldhelp toenhance
operatingperformanceof the company. SwarajTractorshasamarket
shareof8–9%inthe60HPsegment.Withthislaunch,thecompanyis
targetingtoenhanceittoover11–12%bytheendoffirstyearofthe
launch. This new launch will further augment SEL's premium priced
enginesalesvolumes.
SEL’snewcapacitylargelyfocusedonhigherHPengines.InFY18,the
companyhasaddedcapacityby15katcostofRs25croremakingtotal
capacity tostandat1.2 lakhunitsofengine.Thecompanywill spend
aroundRs50crore,tofurtherincreasethecapacityto1.5lakhengine
unitsinnext2years.
11
CMP:Rs.1944.55 Target:Rs.2372.00 UpsidePotential:22%
CurrentMkt.Price(Rs.) 1944.55
FaceValue(Rs.) 10.00
52WeekHigh/Low 2545.00/1785.00
M.Cap(Rs.inCr.) 2358.09
EPS(Rs.) 66.05
P/ERatio(times) 29.44
P/BRatio(times) 10.32
DividendYield(%) 2.57
StockExchange BSE
VALUEPARAMETERS
AsonMar’18 %OfHolding
Foreign 2.51
Institutions 13.05
GovtHolding 0.02
NonPromoterCorp.Hold. 0
Promoters 50.74
Public&Others 33.68
SHAREHOLDINGPATTERN
P/ECHART
RISK
Governmentpolicyonprocurement,creditavailability,commodity
pricetrends
Rain-dependentnatureofagriculturesector
VALUATION
SELhasahealthybalancesheetwithnodebtonitsbooksandrobust
returnratiosamidhealthydividendpayouts.Moreover,SwarajTractors
hasastrongbrandrecallandthelargeracceptanceofSwarajbrandof
tractors is primarily on the back of balanced design, low cost of
ownershipoverthelifecycleofproduct,robustservicenetworkandfuel
efficiency among others. A normal monsoon expectation in FY19,
upcomingLoksabha elections and an increase inminimumsaleprice
(MSPs)forRabicrop2017-18wouldaugurwellforagrimachineryand
inputsectors.WeexpectthestocktoseeapricetargetofRs.2372in8-10
monthtime frameona twoyearaverageP/Eof31.14xandFY19(E)
EarningsPerShareofRs.76.18.
ACTUAL ESTIMATES
FYMar-17 FYMar-18 FYMar-19
REVENUE 683.30 771.20 866.80
EBITDA 121.60 121.60 144.90
EBIT 105.30 104.80 139.50
PRE-TAXPROFIT 105.50 122.70 140.50
NETINCOME 68.83 80.10 92.76
EPS 55.38 64.56 76.18
BVPS 228.16 188.43 200.36
RoE 25.18 31.30 38.91
(Rs.inCr.)FINANCIALPERFORMANCE
Source:Company'sWebsite,Reuters&Capitaline
E-mail: smc.care@smcindiaonline.comSMC Research also available on Reuters
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