CRISIL Research Ier Report Somany 2013 Q2FY14fc

8/13/2019 CRISIL Research Ier Report Somany 2013 Q2FY14fc

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CRISIL IERIndependentEquityResearch

Enhancing investment decisions

Somany Ceramics Ltd

Q2FY14 Results First Cut




Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process – Analysis

of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a

five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-

point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL

Fundamental Grade Assessment

CRISIL

Valuation Grade Assessment

5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)

4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)

3/5 Good fundamentals 3/5 Align (+-10% from CMP)

2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)

1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)

About CRISIL Limited

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Last updated: May, 2013

Analyst Disclosure

Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias

the grading recommendation of the company.

Disclaimer:

This Company commissioned CRISIL IER report is based on data publicly available or from sources considered reliable. CRISIL Ltd.

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purpose.



Somany Ceramics LtdQ2FY14 results first cut: Margins below expectations

Fundamental Grade 4/5 (Superior fundamentals)

Valuation Grade 4/5 (CMP has upside)

Industry Building Products

The above grades are outstanding ones and are currently under review

1

October 24, 2013

Fair Value ₹109

CMP ₹90

For detailed initiating coverage report please visit: www.ier.co.in

CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

Somany Ceramics Ltd’s (Somany’s) Q2FY14 standalone revenues were in line but margins

and earnings were below CRISIL Research’s expectations. Highlights of the results are

mentioned below; this will be followed by a detailed quarterly update. Our outstanding

fundamental grade is 4/5 and the fair value is ₹109 per share. We may revise our

assessment post discussion with the management.

■ Revenues grew by 18.5% y-o-y and 18.1% q-o-q to ₹3,056 mn driven by growth in

volumes and realisations.

■ EBITDA margin declined by 187 bps y-o-y and 64 bps q-o-q to 6.4%. Margin decline is

mainly on account of higher power and fuel costs, which increased 42.4% y-o-y and

24.9% q-o-q due to rupee depreciation and increase in gas prices.

■

PBT margin declined 142 bps y-o-y and 32 bps q-o-q to 3.1%, in line with the decline inEBITDA margin.

■ Owing to decline in margins, PAT declined 22.1% y-o-y to ₹63 mn in Q2FY14. EPS for

Q2FY14 is ₹1.8 vs ₹2.3 in Q2FY13.

■ As of September 2013, Somany has working capital cycle of 35 days - in line with our

expectations. It has gearing of 1.0x as of Q2FY14.

Valuations: Current market price has upside

Our discounted cash flow-based outstanding fair value estimate for Somany is ₹109 per

share. The fair value implies P/E multiples of 10.1x FY14 and 8.0x FY15 EPS estimates. At

the current market price of ₹90, the valuation grade is 4/5.

KEY FORECAST

(₹ mn) FY11 FY12 FY13 FY14E FY15E

Operating income 7,171 8,779 10,538 12,881 14,790

EBITDA 680 747 871 966 1,131

Adj Net income 229 252 323 370 466

Adj EPS (₹) 6.6 7.3 9.4 10.7 13.5

EPS growth (%) 17.1 9.9 28.3 14.5 25.9

Dividend Yield (%) 0.8 0.9 1.3 1.2 1.6

RoCE (%) 19.5 19.6 21.9 21.7 22.6

RoE (%) 24.6 21.9 23.2 21.9 22.6

PE (x) 13.5 12.3 9.6 8.4 6.7

P/BV (x) 3.0 2.5 2.0 1.7 1.4

EV/EBITDA (x) 7.0 6.2 5.2 4.9 4.3

NM: Not meaningful; CMP: Current market price

Source: Company, CRISIL Research estimates

CFV MATRIX

KEY STOCK STATISTICSNIFTY/SENSEX 6164/20725

NSE/BSE tickerSOMANYCERA/

SOMANY

Face value (₹ per share) 2

Shares outstanding (mn) 34.5

Market cap (₹ mn)/(US$ mn) 3,105/51

Enterprise value (₹ mn)/(US$ mn) 4,554/74

52-week range (₹)/(H/L) 115/59

Beta 0.8

Free float (%) 36.7% Avg daily volumes (30-days) 10,570

Avg daily value (30-days) (₹ mn) 0.9

SHAREHOLDING PATTERN

PERFORMANCE VIS-À-VIS MARKET

Returns

1-m 3-m 6-m 12-m

Somany 17% 18% 27% 0%

NIFTY 5% 3% 6% 8%

ANALYTICAL CONTACTMohit Modi (Director) [email protected]

Ravi Dodhia [email protected]

Bhaskar Bukrediwala [email protected]

Client servicing desk+91 22 3342 3561 [email protected]

1 2 3 4 5

1

2

3

4

5

Valuation Grade

F u n d a m e n t a l G r a d e

Poor

Fundamentals

ExcellentFundamentals

S t r o n

g

D o w n s

i d e

S t r o n g

U p s i d

e

63.3% 63.3% 63.3% 63.3%

0.2% 0.2% 0.2% 0.8%1.7% 1.9% 2.0% 1.9%

34.8% 34.6% 34.5% 34.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-12 Mar-13 Jun-13 Sep-13

Promoter FII DII Others




2

Q2FY14 Results Summary (Standalone)

(₹ mn) Q2FY14 Q1FY14 Q2FY13 q-o-q (%) y-o-y (%) H1FY14 H1FY13 y-o-y (%)

Net sales 3,056 2,588 2,578 18.1 18.5 5,643 4,481 25.9Raw materials cost 1,893 1,594 1,603 18.8 18.1 3,487 2,588 34.7

Raw materials cost (% of net sales) 62% 62% 62% 38bps -22bps 62% 58% 402bps

Power & fuel 432 346 303 24.9 42.4 777 625 24.4

Employees cost 208 200 182 3.7 13.9 408 360 13.1

Other expenses 329 268 277 22.9 18.5 596 518 15.1

EBITDA 194 181 212 7.3 (8.4) 375 389 (3.6)

EBITDA margin 6.4% 7.0% 8.2% -64bps -187bps 6.7% 8.7% -204bps

Depreciation 55 53 50 3.8 9.2 107 99 8.5

EBIT 139.7 128.4 162.1 8.8 (13.8) 268.1 290.4 (7.7)

Interest and finance charges 48 45 49 6.5 (2.7) 93 100 (7.8)

Operating PBT 92 84 113 10.0 (18.7) 175.6 190 (7.6)

Other income 2.6 4.8 3.2 (45.8) (18.8) 7.4 5 48.0

PBT 95 88 116 7.0 (18.7) 183 195 (6.2)

Tax 32 30 36 6.3 (11.1) 62 62 0.2

PAT 63 58 80 7.4 (22.1) 121 133 (9.2)

Adj PAT 63 58 80 7.4 (22.1) 121 133 (9.2)

Adj PAT margin 2.0% 2.2% 3.1% -20bps -107bps 2.1% 3.0% -83bps

No. of equity shares (mn) 34.5 34.5 34.5 - - 34.5 34.5 -

Adj EPS (₹) 1.8 1.7 2.3 7.4 (22.1) 3.5 3.9 (9.2)

Source: Company, CRISIL Research

EBITDA margin under pressure due to high fuel costs... ... which led to decline in PAT

Source: Company, CRISIL Research Source: Company, CRISIL Research

2,175 2,763 1,904 2,578 2,672 3,349 2,588 3,056

8.0% 8.4%

9.3%

8.2% 8.3%7.3%

7.0% 6.4%

0%

2%

4%

6%

8%

10%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

D e c - 1 1

M a r - 1 2

J u n - 1 2

S e p - 1 2

D e c - 1 2

M a r - 1 3

J u n - 1 3

S e p - 1 3

(₹ mn)

Revenue EBITDA margin (RHS)

47 86 53 80 82 101 58 63

2.2%

3.1%

2.8%

3.1% 3.1% 3.0%

2.2%2.0%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

20

40

60

80

100

120

D e c - 1 1

M a r - 1 2

J u n - 1 2

S e p - 1 2

D e c - 1 2

M a r - 1 3

J u n - 1 3

S e p - 1 3

(₹ mn)

PAT PAT margin (RHS)



Somany Ceramics Ltd

3

Share price movement Fair value movement since initiation

-Indexed to 100

Source: NSE, CRISIL Research Source: NSE, BSE, CRISIL Research

0

100

200

300

400

500

600

700

J a n - 0 8

A p r - 0 8

J u l - 0 8

N o v - 0 8

F e b - 0 9

J u n - 0 9

S e p - 0 9

J a n - 1 0

A p r - 1 0

A u g - 1 0

N o v - 1 0

M a r - 1 1

J u n - 1 1

O c t - 1 1

J a n - 1 2

M a y - 1 2

A u g - 1 2

D e c - 1 2

M a r - 1 3

J u l - 1 3

O c t - 1 3

Somany NIFTY

0

100

200

300

400

500

600

700

800

0

20

40

60

80

100

120

140

D e c - 1 0

F e b - 1 1

M a y - 1 1

J u l - 1 1

S e p - 1 1

D e c - 1 1

F e b - 1 2

M a y - 1 2

J u l - 1 2

S e p - 1 2

D e c - 1 2

F e b - 1 3

M a y - 1 3

J u l - 1 3

O c t - 1 3

('000)(₹)

Total Traded Quanti ty(RHS) CRISIL Fair Value Somany




4

Annexure: Financials

*Standalone financials

Source: CRISIL Research

Income statement Balance Sheet

(₹ mn) FY11 FY12 FY13 (₹ mn) FY11 FY12 FY13Operating income 7,171 8,779 10,538 Liabilities

EBITDA 680 747 871 Equity share capital 69 69 69

EBITDA margin 9.5% 8.5% 8.3% Reserves 970 1,190 1,461

Depreciation 175 183 205 Minorities - - -

EBIT 505 563 666 Net worth 1,039 1,259 1,530

Interest 171 207 200 Convertible debt - - -

Operating PBT 334 357 466 Other debt 1,785 1,666 1,624

Other income 0 6 9 Total debt 1,785 1,666 1,624

Exceptional inc/(exp) 9 (1) (3) Deferred tax liability (net) 257 254 262

PBT 344 362 472 Total liabilities 3,081 3,178 3,416

Tax provision 105 111 152 Assets

Share of prof it f rom ass ociates - - - Net f ixed assets 1,730 1,904 1,991

PAT (Reported) 239 251 320 Capital WIP 51 45 102

Less: Exceptionals 9 (1) (3) Total fixed assets 1,780 1,948 2,093

Adjusted PAT 229 252 323 Investments 63 117 165

Current assets

Ratios Inventory 988 1,006 1,205

FY11 FY12 FY13 Sundry debtors 1,293 1,400 1,747

Growth Loans and advances 580 658 811

Operating income (%) 32.4 22.4 20.0 Cash & bank balance 99 151 175

EBITDA (%) 16.8 9.9 16.6 Marketable securities 6 6 7

Adj PAT (%) 17.1 9.9 28.3 Total current assets 2,967 3,221 3,945

Adj EPS (%) 17.1 9.9 28.3 Total current liabilities 1,737 2,115 2,795

Net current assets 1,231 1,105 1,150

Profitability Intangibles/Misc. expenditure 7 8 8

EBITDA margin (%) 9.5 8.5 8.3 Total assets 3,081 3,178 3,416

Adj PAT Margin (%) 3.2 2.9 3.1

RoE (%) 24.6 21.9 23.2 Cash flowRoCE (%) 19.5 19.6 21.9 (₹ mn) FY11 FY12 FY13

RoIC (%) 16.5 17.5 19.5 Pre-tax profit 334 363 475

Total tax paid (80) (114) (144)

Valuations Depreciation 175 183 205

Price-earnings (x) 13.5 12.3 9.6 Working capital changes (249) 177 (20)

Price-book (x) 3.0 2.5 2.0 Net cash from operations 180 609 516

EV/EBITDA (x) 7.0 6.2 5.2 Cash from investm ents

EV/Sales (x) 0.7 0.5 0.4 Capital expenditure (415) (352) (350)

Dividend payout ratio (%) 10.1 11.0 12.9 Investments and others (59) (55) (49)

Dividend yield (%) 0.8 0.9 1.3 Net cash from investments (474) (406) (398)

Cash from financing

B/S rat ios Equity raised/(repaid) - - -

Inventory days 65 52 51 Debt raised/(repaid) 259 (120) (42)

Creditors days 79 75 82 Dividend (incl. tax) (28) (32) (48)

Debtor days 62 55 57 Others (incl extraordinaries) 10 0 (3)

Working capital days 54 37 32 Net cash from financing 241 (151) (93)

Gross asset turnover (x) 2.2 2.4 2.7 Change in cash position (52) 51 25

Net asset turnover (x) 4.7 4.8 5.4 Closing cash 99 151 175 Sales/operating assets (x) 4.3 4.7 5.2

Current ratio (x) 1.7 1.5 1.4 Quarterly financials*Debt-equity (x) 1.7 1.3 1.1 (₹ m n) Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14

Net debt/equity (x) 1.6 1.2 0.9 Net Sales 2,578 2,672 3,349 2,588 3,056

Interest coverage 3.0 2.7 3.3 Change (q-o-q) 35% 4% 25% -23% 18%

EBITDA 212 221 243 181 194

Per share Change (q-o-q) 20% 4% 10% -25% 7%

FY11 FY12 FY13 EBITDA margin 8.2% 8.3% 7.3% 7.0% 6.4%

Adj EPS (₹) 6.6 7.3 9.4 PAT 80 82 101 58 63

CEPS 11.7 12.6 15.3 Adj PAT 80 82 101 58 63

Book value 30.1 36.5 44.4 Change (q-o-q) 52% 2% 23% -42% 7%

Dividend (₹) 0.7 0.8 1.2 Adj PAT margin 3.1% 3.1% 3.0% 2.2% 2.0%

Actual o/s shares (mn) 34.5 34.5 34.5 Adj EPS 2.3 2.4 2.9 1.7 1.8



This page is intentionally l eft blank




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