May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 1 of 11
Before reading this report, you must refer to the disclaimer on the last page.
Gujarat Ambuja Exports Absolute : LONG
Relative : Overweight
4QFY18 Result: Estimate (), TP (), Rating () Regular Coverage 31% ATR in 13 Months
Focus shifts to profitable growth — maintain LONG Agricultural Products
© 2018 Equirus All rights reserved
Rating Information
Price (Rs) 240
Target Price (Rs) 320
Target Date 30th June'19
Target Set On 21st May'18
Implied yrs of growth (DCF) 10
Fair Value (DCF) 369
Fair Value (DDM) 23
Ind Benchmark SPBSMIP
Model Portfolio Position Yes
Stock Information
Market Cap (Rs Mn) 27,515
Free Float (%) 36.24 %
52 Wk H/L (Rs) 309.85/100.05
Avg Daily Volume (1yr) 1,94,825
Avg Daily Value (Rs Mn) 36
Equity Cap (Rs Mn) 229
Face Value (Rs) 2
Bloomberg Code GAEX IN
Ownership Recent 3M 12M
Promoters 63.8 % -2.2 % -2.4 %
DII 0.6 % 0.5 % 0.4 %
FII 0.6 % 0.2 % 0.0 %
Public 35.0 % 1.5 % 2.0 %
Price % 1M 3M 12M
Absolute -13.1 % 2.7 % 81.7 %
Vs Industry -6.2 % 7.4 % 74.9 %
Sukhjit Starch -1.3 % -2.6 % 52.6 %
Gulshan
Polyols -9.3 % -16.1 % -24.5 %
Consolidated Quarterly EPS forecast
Rs/Share 1Q 2Q 3Q 4Q
EPS (18A) 1.5 1.8 5.5 6.9
EPS (19E) 4.1 4.1 5.5 5.6
Gujarat Ambuja Exports (GAEX) reported 4QFY18 revenues of Rs 8.8bn (-17% yoy, -30% vs.
EE). The maize segment continued to show consistent growth (+12% yoy in 4QFY18) even
as the agro processing segment posted a decline (-36% yoy). EBITM jumped 617bps yoy to
11%, beating EE by 346bps, on better profitability in both maize and other agro-processing
segments. PAT stood at Rs 789mn, up 134% yoy/25% qoq and 26% above EE led by better
operating margins and a below-expected tax rate. With the commissioning of GAEX’s new
maize plant in Mar’18, revenue growth should accelerate in FY19. We update our
FY19/FY20 EBITDA estimates by -4%/+1% and roll over to SOTP-based Jun’19 TP to Rs 320
(Mar’19 TP of Rs 330 earlier). Maintain LONG.
Maize segment growth to accelerate on new plant commissioning: Maize division
revenues grew 12% yoy in 4Q18. Growth was largely driven by volumes as realizations
remained stable. Segment EBIT margins improved to 18.5% in 4Q (12.1% in 4QFY17, 16% in
3QFY18) on the back of lower RM prices with almost no change in product mix. As per
management, the segment is operating at 90%+ utilization and meaningful growth would
be seen from 1QFY19 with the new 1,000 MTPD plant commencing operations in Mar’18.
As highlighted in our Apr’18 update note, post commissioning of this plant, GAEX has
become the largest maize processor in India with an installed capacity of 3,000 MTPD and
a market share of ~21%. We expect a 23%/29% CAGR in maize processing revenues/EBITDA
over FY18-FY20E.
Decline in agro revenues compensated by improved profitability: Agro processing
revenues spiraled down 36% yoy in 4Q18 mainly as the company cut down on its oil-
related trading activities. Earlier GAEX used to import crude soybean oil and sell the
refined oil in the domestic market but the recent increase in import duties and
company focus shift towards manufacturing has led to fall in such trading related
activities. EBITM expansion of 785bps yoy was driven by a drop in lower-margin trading
activities (EBITDA for trading is ~4-5% vs. 7-8% for crushing operations). We have argued
that the recent import duty hike on crude and refined edible oils will provide a level-
playing field to domestic crushing companies and help increase their utilization levels.
Currently, GAEL is operating at 30% capacity utilization levels in the agro segment.
Maintain LONG with a revised SoTP - based Jun’19 TP of Rs 320: We have updated
our numbers and revised our FY19/FY20 EBITDA estimates by -4%/+1%. We roll over to a
SoTP-based Jun’19 TP of Rs 320 (from a Mar’19 TP of Rs 330) and maintain LONG on the
stock (Exhibit 9).
Change in Estimates
Rs. Mn FY19E Chg (%) FY20E Chg (%)
Sales 43,806 -5% 52,027 -5%
EBITDA 4,168 -4% 5,210 1%
EPS 19.2 -6% 25.6 1%
Consolidated Financials
Rs. Mn YE Mar FY18A FY19E FY20E FY21E
Sales 33,644 43,806 52,027 58,196
EBITDA 3,173 4,168 5,210 5,873
Depreciation 763 931 988 1,087
Interest Expense 179 179 158 128
Other Income 91 49 69 98
Reported PAT 1,799 2,206 2,934 3,377
Recurring PAT 1,799 2,206 2,934 3,377
Total Equity 10,224 12,270 14,992 18,126
Gross Debt 6,913 6,067 5,517 4,017
Cash 69 165 521 1,537
Rs Per Share FY18A FY19E FY20E FY21E
Earnings 15.7 19.2 25.6 29.5
Book Value 89 107 131 158
Dividends 0.9 1.2 1.5 1.8
FCFF 2.9 12.3 12.1 26.0
P/E (x) 15.3 12.5 9.4 8.1
P/B (x) 2.7 2.2 1.8 1.5
EV/EBITDA (x) 10.8 8.0 6.2 5.1
ROE (%) 19 % 20 % 22 % 20 %
Core ROIC (%) 12 % 13 % 16 % 18 %
EBITDA Margin (%) 9 % 10 % 10 % 10 %
Net Margin (%) 5 % 5 % 6 % 6 %
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 2 of 12
Exhibit 1: Quarterly revenue trends in the agro processing segment
Source: Company, Equirus Securities
Exhibit 2: EBITM has improved with a sharp fall in oil trading activities
Source: Company, Equirus Securities
Exhibit 3: Commissioning of new plant to drive growth in maize division
Source: Company, Equirus Securities
Exhibit 4: Maize EBITM has recovered in 2HFY18 after sharp drop in 1HFY18
Source: Company, Equirus Securities
3,0
88
3,7
76
4,4
01
2,8
49
4,0
45
2,6
76
5,1
02
6,6
41
3,6
45
3,6
28
6,0
82
4,2
32
12%
62%
-14% -13%
31%
-29%
16%
133%
-10%
36%19%
-36%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%
0
1000
2000
3000
4000
5000
6000
7000
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
2Q
FY18
3Q
FY18
4Q
FY18
Agro Processing Revenue (Rs. mn) Growth (yoy%)(RHS)
145
-19-15 -6
297
-15
340 187 76 282 490 451
5%
-1% 0% 0%
7%
-1%
7%
3%
2%
8%
8%
11%
-2%
0%
2%
4%
6%
8%
10%
12%
-100
0
100
200
300
400
500
600
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
2Q
FY18
3Q
FY18
4Q
FY18
Agro Processing EBIT (Rs mn) EBITM (%)(RHS)
2,6
61
2,7
65
3,1
08
3,2
91
3,1
75
3,2
55
3,1
98
3,4
26
2,8
41
3,3
60
3,4
17
3,8
52
3%
16%
27%
31%
19% 18%
3% 4%
-11%
3%
7%
12%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
2Q
FY18
3Q
FY18
4Q
FY18
Maize Processing Revenue (Rs mn) Growth (yoy%)(RHS)
354
326
387
412
418
343
363
416
189
157
549
712
13%
12%12% 13% 13%
11%11%
12%
7%
5%
16%
18%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
100
200
300
400
500
600
700
800
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
2Q
FY18
3Q
FY18
4Q
FY18
Maize Processing EBIT (Rs mn) EBITM (%)(RHS)
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 3 of 12
Exhibit 5: After a sharp rise in FY17, corn prices have corrected in FY18
Source: Bloomberg, Equirus Securities
Exhibit 6: Soybean and Soymeal prices are on an uptrend
Source: NCDEX, Equirus Securities
Exhibit 7: Soymeal exports (MT) declined in FY18 due to closure of some bigger players
Source: SOPA, Equirus Securities
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
Apr-
11
Aug-1
1
Dec-1
1
Apr-
12
Aug-1
2
Dec-1
2
Apr-
13
Aug-1
3
Dec-1
3
Apr-
14
Aug-1
4
Dec-1
4
Apr-
15
Aug-1
5
Dec-1
5
Apr-
16
Aug-1
6
Dec-1
6
Apr-
17
Aug-1
7
Dec-1
7
Apr-
18
Corn Prices (Rs/qtl) Growth (Yoy%)
500
550
600
650
700
750
800
850
10000
15000
20000
25000
30000
35000
40000
45000
50000
Nov-1
2
Feb-1
3
May-1
3
Aug-1
3
Nov-1
3
Feb-1
4
May-1
4
Aug-1
4
Nov-1
4
Feb-1
5
May-1
5
Aug-1
5
Nov-1
5
Feb-1
6
May-1
6
Aug-1
6
Nov-1
6
Feb-1
7
May-1
7
Aug-1
7
Nov-1
7
Feb-1
8
May-1
8
Soyameal (Rs/tonne) Soya refined oil (RHS) (Rs/10kg)
0
50,000
1,00,000
1,50,000
2,00,000
2,50,000
3,00,000
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
FY16 FY17 FY18
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 4 of 12
Valuation and risks
GAEX currently trades at 12x/9x/8x P/E and an EV/EBITDA of 8x/6x/5x on our
FY19/FY20/FY21 estimates. The company has historically traded in the range of 5-15x
P/E on TTM EPS and an EV/EBITDA of 5-7x on TTM EBITDA.
We use the SOTP methodology to value GAEX as follows:
Maize processing: Indian rice and shrimp processing companies are currently trading at a
FY19 median EV/EBITDA multiple of ~14x and 18x respectively. We assign a TTM
EV/EBITDA multiple of 11x (a ~20% and ~40% discount to rice and shrimp processing firms
respectively) to our TTM June’19 maize processing EBITDA estimates as, unlike rice
processing firms, GAEX does not have its own branded business and lags behind aqua
processing firms in terms of asset turns and return ratios (RoE/RoIC).
Agro processing: Global agro processing firms are currently trading at a CY18 median
EV/EBITDA multiple of 11x. Ascribing a ~25% discount, we value GAEX’s agro (soya)
processing business at a June’19 TTM EV/EBITDA multiple of 8x as segment margins and
return ratios have historically been very volatile.
Cotton/Textile (others): We assign a TTM June’19 EV/EBITDA multiple of 4x to other
segments.
Overall, we arrive at a June’19 SOTP-based TP of Rs 320, implying a P/E multiple of
17x/13x/11x and an EV/EBITDA multiple of 10x/8x/7x on our FY19/FY20/FY21 estimates.
Exhibit 9: We arrive at a SOTP-based June’19 TP of Rs 320
TTM June’19E (Rs mn) EBITDA Multiple EV
Agro processing 1,504 8x 12,029
Maize processing 2,684 11x 29,523
Others 225 4x 901
Group's EV
42,452
Total debt
6,067
Total cash
592
Equity value
36,977
No. of shares outstanding(mn)
115
June’19 Target price (Rs)
320
Source: Equirus Securities
Investment risks
Downside risks:
1. Commodity price risk: Factors like political and regulatory changes, seasonal
variations, weather, technology and market conditions can significantly affect
commodity prices. An unexpected movement in commodity prices can have a bearing
on the company’s profitability. GAEX tries to mitigate the risk by covering positions
through hedging at commodity exchanges like CBOT, REFCO, NCDEX, NMCEX and
others.
2. Foreign currency risk: GAEX manages foreign currency exposures through forward
exchange contracts. Forex risks are partly mitigated by purchase of goods/
commodities in respective currencies.
3. Capital misallocation: GAEX has a good business (maize), an average business (oil) and
a bad business (textile). In the last decade, the company has mainly invested in its
maize business and has no intention of investing further in the oil and textile business.
Any major investments in the oil and textile business will be against our investment
thesis.
4. Increased competition: While many players have entered and exited the industry
over the last few years, more number of entrants ahead should not be surprising
given the industry’s growth potential. This would put pressure on pricing and
utilization levels of existing players.
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 5 of 12
Quarterly performance, consolidated
Rs Mn Q4FY18 Q4FY18E Q3FY18 Q4FY17 % Change
Comments Q4FY18E Q3FY18 Q4FY17
Net Sales 8,808 12,656 10,173 10,637 -30% -13% -17% Revenue decline was mainly due to decrease in oil related trading activities
Raw Materials Consumed 6,155 9,745 7,703 8,689 -37% -20% -29%
Employee benefits expense 285 251 288 226 13% -1% 26%
Other expenses 1,199 1,522 1,078 1,017 -21% 11% 18% Fuel cost and freight expenses have gone up
Total Expenditures 7,639 11,518 9,068 9,932 -34% -16% -23%
EBITDA 1,169 1,138 1,105 705 3% 6% 66%
Depreciation 199 223 194 190 -11% 3% 5%
EBIT 970 915 912 515 6% 6% 88%
Interest 68 50 46 166 36% 48% -59%
Other Income 24 28 40 76 -13% -40% -68%
PBT 926 893 906 425 4% 2% 118%
Tax 137 268 274 89 -49% -50% 55% Reversal of excess provision of ~Rs. 130mn was made earlier
Recurring PAT 789 625 632 337 26% 25% 134%
Extra ordinaries 0 0 0 0
Reported PAT 789 625 632 337 26% 25% 134%
EBITDA Margin 13.3% 9.0% 10.9% 6.6% 428 bps 241 bps 665 bps Margin improvement was mainly due to lower RM prices
EBIT Margin 11.0% 7.2% 9.0% 4.8% 378 bps 205 bps 617 bps
PBT Margin 10.5% 7.1% 8.9% 4.0% 346 bps 161 bps 652 bps
PAT Margin 9.0% 4.9% 6.2% 3.2% 402 bps 274 bps 579 bps
Tax Rate 14.8% 30.0% 30.3% 20.8% -1518 bps -1543 bps -600 bps
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 6 of 12
Company Snapshot
How we differ from Consensus
- Equirus Consensus % Diff Comment
EPS FY19E 19.2 - - There are no other estimates available.
FY20E 25.6 - -
Sales FY19E 43,806 - -
FY20E 52,027 - -
PAT FY19E 2,206 - -
FY20E 2,934 - -
Segmental Drivers:
Revenue growth (%) FY18 FY19e FY20e FY21e
Agro processing -5% 33% 23% 13%
Cotton 19% 5% 2% 2%
Maize processing 3% 30% 16% 12%
EBITDA margins (%) FY18 FY19e FY20e FY21e
Agro processing 7.9% 7.0% 6.5% 6.0%
Cotton 0.6% 4.0% 4.0% 4.0%
Maize processing 15.5% 15.0% 17.0% 18.0%
Key downside risks:
a) Volatility in corn and soya prices.
b) Increase in competition which may put pressure on prices and utilization levels
DCF Valuations & Assumptions
Rf Beta Ke Term. Growth Debt/IC in Term. Yr
6.8 % 1.3 14.6 % 6.0 % 31.0 %
FY18E FY19E FY20E FY21-27E
Sales Growth 30 % 19 % 15 % 11 %
NOPAT Margin 5 % 6 % 6 % 6 %
IC Turnover 2.45 2.59 3.30 4.40
RoIC 13.3 % 15.8 % 18.0 % 25.8 %
Years of strong growth 1 2 3 10
Valuation as on date (Rs) 97 143 202 317
Valuation as of June'19 112 167 235 369
Based on DCF, we derive 30th June, 2019 fair value of Rs. 369.
Company Description:
Gujarat Ambuja Exports Limited (GAEX) is a leading manufacturer of starch derivatives,
soy derivatives and cotton yarn. It has the second highest crushing capacity in India with
six solvent extraction plants across India with a total capacity of 4,600 MTPD. Currently,
the company’s refining capacity stands at 1,200 MTPD. GAEX’s main focus area has been
wet-milling of corn and it has set up three operational processing plants. With
commencement of operations of its new Chalisgaon plant, the company has become the
largest maize processor in India in terms of installed capacity.
Comparable valuation Mkt Cap
Rs. Mn.
Price
Target
Target
Date
EPS P/E BPS P/B RoE Div Yield
Company Reco. CMP FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E
Gujarat Ambuja Exports
LONG 240 27,515 320 30th June'19 15.7 19.2 25.6 15.3 12.5 9.4 89.2 2.2 19 % 20 % 22 % 0.4 % 0.5 %
Sukhjit Starch NA 506 3,738 NA NA 24.4 - - 20.8 - - 309.8 - 8 % - - 1.0 % -
Gulshan Polyols NA 66 3,101 NA NA 28.7 - - 2.3 - - 54.7 - 11 % - - 15.1 % -
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 7 of 12
Consolidated Quarterly Earnings Forecast and Key Drivers
Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E
Revenue 6,904 7,705 10,173 8,808 9,554 9,474 12,669 12,109 13,007 13,007 13,007 13,007 33,644 43,806 52,027 58,196 Raw Materials Consumed 4,869 5,043 7,316 6,234 7,070 7,295 9,819 9,384 10,080 10,080 10,080 10,080 23,492 33,568 40,321 45,102
Increase/Decrease in Stock -6 176 -101 -141 0 0 0 0 0 0 0 0 -72 0 0 0
Purchase of stock-in-trade 605 820 488 62 0 0 0 0 0 0 0 0 1,974 0 0 0
Employee benefits expense 193 218 288 285 283 283 283 283 303 303 303 303 984 1,131 1,210 1,295
Other expenses 845 972 1,078 1,199 1,281 971 1,407 1,280 1,321 1,321 1,321 1,321 4,093 4,939 5,286 5,926 EBITDA 398 476 1,105 1,169 920 925 1,161 1,162 1,302 1,302 1,302 1,302 3,173 4,168 5,210 5,873 Depreciation 183 188 194 199 233 233 233 233 247 247 247 247 763 931 988 1,087 EBIT 215 289 912 970 687 693 928 929 1,055 1,055 1,055 1,055 2,410 3,237 4,222 4,786 Interest 24 41 46 68 45 45 45 45 40 40 40 40 179 179 158 128 Other Income 10 40 40 24 12 12 12 12 17 17 17 17 91 49 69 98 PBT 202 288 906 926 655 660 896 896 1,033 1,033 1,033 1,033 2,322 3,107 4,133 4,756 Tax 33 78 274 137 190 191 260 260 260 262 328 348 523 901 1,198 1,379 PAT bef. MI & Assoc. 168 209 632 789 465 469 636 636 773 771 705 685 1,799 2,206 2,934 3,377 Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Profit from Assoc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Recurring PAT 168 209 632 789 465 469 636 636 773 771 705 685 1,799 2,206 2,934 3,377 Extraordinaries 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Reported PAT 168 209 632 789 465 469 636 636 773 771 705 685 1,799 2,206 2,934 3,377
EPS (Rs) 1.47 1.83 5.51 6.88 4.05 4.09 5.55 5.55 5.54 5.60 7.01 7.44 15.69 19.24 25.59 29.45
Key Drivers
Agro processing revenue (Rs. mn) - - - - - - - - - - - - 17,597 23,421 28,726 32,346 Cotton revenue (Rs. mn) - - - - - - - - - - - - 2,585 2,722 2,776 2,832 Maize processing (Rs. mn) - - - - - - - - - - - - 13,496 17,575 20,436 22,929 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - -
Sequential Growth (%)
Revenue -35 % 12 % 32 % -13 % 8 % -1 % 34 % -4 % 7 % 0 % 0 % 0 % - - - - Raw Materials Consumed -32 % 4 % 45 % -15 % 13 % 3 % 35 % -4 % 7 % 0 % 0 % 0 % - - - - EBITDA -44 % 20 % 132 % 6 % -21 % 1 % 25 % 0 % 12 % 0 % 0 % 0 % - - - - EBIT -58 % 34 % 216 % 6 % -29 % 1 % 34 % 0 % 14 % 0 % 0 % 0 % - - - - Recurring PAT -50 % 24 % 202 % 25 % -41 % 1 % 36 % 0 % 22 % 0 % -9 % -3 % - - - -
EPS -50 % 24 % 202 % 25 % -41 % 1 % 36 % 0 % 0 % 1 % 25 % 6 % - - - -
Yearly Growth (%)
Revenue -10 % 22 % 17 % -17 % 38 % 23 % 25 % 37 % 36 % 37 % 3 % 7 % 1 % 30 % 19 % 12 % EBITDA -51 % -4 % 49 % 66 % 131 % 94 % 5 % -1 % 42 % 41 % 12 % 12 % 17 % 31 % 25 % 13 % EBIT -66 % -10 % 61 % 88 % 219 % 140 % 2 % -4 % 54 % 52 % 14 % 14 % 21 % 34 % 30 % 13 % Recurring PAT -66 % -30 % 39 % 134 % 176 % 124 % 1 % -19 % 66 % 64 % 11 % 8 % 13 % 23 % 33 % 15 %
EPS -66 % -30 % 39 % 134 % 176 % 124 % 1 % -19 % 37 % 37 % 26 % 34 % 13 % 23 % 33 % 15 %
Margin (%)
EBITDA 6 % 6 % 11 % 13 % 10 % 10 % 9 % 10 % 10 % 10 % 10 % 10 % 9 % 10 % 10 % 10 % EBIT 3 % 4 % 9 % 11 % 7 % 7 % 7 % 8 % 8 % 8 % 8 % 8 % 7 % 7 % 8 % 8 % PBT 3 % 4 % 9 % 11 % 7 % 7 % 7 % 7 % 8 % 8 % 8 % 8 % 7 % 7 % 8 % 8 %
PAT 2 % 3 % 6 % 9 % 5 % 5 % 5 % 5 % 6 % 6 % 5 % 5 % 5 % 5 % 6 % 6 %
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 8 of 12
Consolidated Financials
P&L (Rs Mn) FY18A FY19E FY20E FY21E
Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E
Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E
Revenue 33,644 43,806 52,027 58,196 Equity Capital 229 229 229 229 PBT 2,322 3,107 4,133 4,756
Op. Expenditure 30,472 39,638 46,817 52,323 Reserve 9,994 12,041 14,763 17,896 Depreciation 763 931 988 1,087
EBITDA 3,173 4,168 5,210 5,873 Networth 10,224 12,270 14,992 18,126 Others 88 130 89 29
Depreciation 763 931 988 1,087 Long Term Debt 6,396 5,550 5,000 3,500 Taxes Paid 523 901 1,198 1,379
EBIT 2,410 3,237 4,222 4,786 Def Tax Liability 517 517 517 517 Change in WC -1,266 -1,264 -1,745 -1,341
Interest Expense 179 179 158 128 Minority Interest 0 0 0 0 Operating C/F 1,384 2,003 2,267 3,153
Other Income 91 49 69 98 Account Payables 1,228 1,471 1,767 1,977 Capex -1,288 -771 -1,060 -364
PBT 2,322 3,107 4,133 4,756 Other Curr Liabi 583 583 583 583 Change in Invest 0 0 0 0
Tax 523 901 1,198 1,379 Total Liabilities & Equity 18,948 20,391 22,860 24,702 Others 95 49 69 98
PAT bef. MI & Assoc. 1,799 2,206 2,934 3,377 Net Fixed Assets 7,718 8,101 7,373 7,449 Investing C/F -1,193 -722 -991 -266
Minority Interest 0 0 0 0 Capital WIP 543 0 800 0 Change in Debt 40 -846 -550 -1,500
Profit from Assoc. 0 0 0 0 Others 573 573 573 573 Change in Equity 0 0 0 0
Recurring PAT 1,799 2,206 2,934 3,377
Inventory 7,237 8,277 9,942 11,121 Others -304 -339 -370 -371
Extraordinaires 0 0 0 0 Account Receivables 2,293 2,760 3,136 3,508 Financing C/F -264 -1,185 -920 -1,871
Reported PAT 1,799 2,206 2,934 3,377 Other Current Assets 515 515 515 515 Net change in cash -73 96 356 1,015
FDEPS (Rs) 15.7 19.2 25.6 29.5 Cash 69 165 521 1,537 RoE (%) 19 % 20 % 22 % 20 %
DPS (Rs) 0.9 1.2 1.5 1.8 Total Assets 18,948 20,391 22,860 24,702
RoIC (%) 12 % 13 % 16 % 16 %
CEPS (Rs) 22.3 27.4 34.2 38.9 Non-cash Working Capital 8,234 9,498 11,243 12,584
Core RoIC (%) 12 % 13 % 16 % 18 %
FCFPS (Rs) 2.9 12.3 12.1 26.0 Cash Conv Cycle 89.3 79.1 78.9 78.9 Div Payout (%) 7 % 7 % 7 % 7 %
BVPS (Rs) 89.2 107.0 130.7 158.1 WC Turnover 4.1 4.6 4.6 4.6 P/E 15.3 12.5 9.4 8.1
EBITDAM (%) 9 % 10 % 10 % 10 % FA Turnover 4.1 5.4 6.4 7.8 P/B 2.7 2.2 1.8 1.5
PATM (%) 5 % 5 % 6 % 6 % Net D/E 0.6 0.4 0.3 0.1 P/FCFF 83.5 19.5 19.8 9.2
Tax Rate (%) 23 % 29 % 29 % 29 % Revenue/Capital Employed 2.1 2.5 2.7 2.7 EV/EBITDA 10.8 8.0 6.2 5.1
Sales Growth (%) 1 % 30 % 19 % 12 %
Capital Employed/Equity 1.7 1.6 1.4 1.3
EV/Sales 1.0 0.8 0.6 0.5
FDEPS Growth (%) 13 % 23 % 33 % 15 %
Dividend Yield (%) 0.4 % 0.5 % 0.6 % 0.7 %
TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE
25x
5x
10x
15x
20x
0%
20%
40%
60%
80%
100%
0
400
800
Jun
/11
De
c/11
Jun
/12
De
c/12
Jun
/13
De
c/13
Jun
/14
De
c/14
Jun
/15
De
c/15
Jun
/16
De
c/16
Jun
/17
De
c/17
Jun
/18
De
c/18
Jun
/19
EPS Growth
-20%
-10%
0%
10%
20%
30%
40%
50%
0
24000
48000
72000
96000
120000
Jun
/10
De
c/10
Jun
/11
De
c/11
Jun
/12
De
c/12
Jun
/13
De
c/13
Jun
/14
De
c/14
Jun
/15
De
c/15
Jun
/16
De
c/16
Jun
/17
De
c/17
Jun
/18
De
c/18
Jun
/19
5x
10x
12x
15x
18xEBITDA Growth
0%
10%
20%
30%
0
400
800
1200
Jun
/11
De
c/11
Jun
/12
De
c/12
Jun
/13
De
c/13
Jun
/14
De
c/14
Jun
/15
De
c/15
Jun
/16
De
c/16
Jun
/17
De
c/17
Jun
/18
De
c/18
Jun
/19
RoE
1x
2x
4x
6x
8x
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 9 of 12
Historical Consolidated Financials
P&L (Rs Mn) FY15A FY16A FY17A FY18A
Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A
Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A
Revenue 25,313 27,365 33,336 33,644 Equity Capital 277 277 229 229 PBT 977 1,194 1,994 2,322
Op. Expenditure 23,668 25,512 30,628 30,472 Reserve 7,996 8,929 8,302 9,994 Depreciation 610 662 714 763
EBITDA 1,645 1,852 2,708 3,173 Networth 8,273 9,206 8,531 10,224 Others 93 -8 108 88
Depreciation 610 662 714 763 Long Term Debt 3,031 3,285 6,356 6,396 Taxes Paid 177 185 467 523
EBIT 1,035 1,191 1,994 2,410 Def Tax Liability 587 494 492 517 Change in WC 1,031 -290 -1,782 -1,266
Interest Expense 150 99 228 179 Minority Interest 0 0 0 0 Operating C/F 2,534 1,374 567 1,384
Other Income 91 103 228 91 Account Payables 629 834 1,015 1,228 Capex -1,234 -1,187 -1,706 -1,288
PBT 977 1,194 1,994 2,322 Other Curr Liabi 325 351 695 583 Change in Invest -84 -176 440 0
Tax 136 190 408 523 Total Liabilities & Equity 12,844 14,170 17,088 18,948 Others 23 39 92 95
PAT bef. MI & Assoc. 841 1,004 1,586 1,799 Net Fixed Assets 5,428 5,681 6,071 7,718 Investing C/F -1,295 -1,324 -1,173 -1,193
Minority Interest 0 0 0 0 Capital WIP 629 1,027 1,587 543 Change in Debt -984 183 3,071 40
Profit from Assoc. 0 0 0 0 Others 778 658 695 573 Change in Equity 0 0 -2,266 0
Recurring PAT 841 1,004 1,586 1,799 Inventory 4,437 4,308 6,244 7,237 Others -258 -210 -214 -304
Extraordinaires 0 0 0 0 Account Receivables 1,081 1,737 2,078 2,293 Financing C/F -1,242 -26 592 -264
Reported PAT 841 1,004 1,586 1,799 Other Current Assets 322 362 356 515 Net change in cash -3 23 -14 -73
EPS (Rs) 7.3 8.8 13.8 15.7 Cash 170 397 58 69
RoE (%) 11 % 12 % 18 % 19 %
DPS (Rs) 0.8 0.8 0.8 0.9
Total Assets 12,844 14,170 17,088 18,948
RoIC (%) 8 % 9 % 12 % 12 %
CEPS (Rs) 10.5 12.0 20.1 22.3 Non-cash Working Capital 4,886 5,222 6,968 8,234 Core RoIC (%) 8 % 8 % 12 % 12 %
FCFPS (Rs) 9.9 1.0 -3.7 2.9 Cash Conv Cycle 70.5 69.7 76.3 89.3 Div Payout (%) 16 % 13 % 7 % 7 %
BVPS (Rs) 59.8 66.5 74.4 89.2 WC Turnover 5.2 5.2 4.8 4.1
P/E 32.7 27.4 17.4 0.0
EBITDAM (%) 6 % 7 % 8 % 9 % FA Turnover 4.2 4.1 4.4 4.1 P/B 4.0 3.6 3.2 0.0
PATM (%) 3 % 4 % 5 % 5 % Net D/E 0.3 0.3 0.7 0.6 P/FCFF 24.3 250.7 -64.8 83.5
Tax Rate (%) 14 % 16 % 20 % 23 % Revenue/Capital Employed 2.1 2.2 2.4 2.1 EV/EBITDA 19.2 16.9 12.8 0.0
Sales growth (%) -18 % 8 % 22 % 1 %
Capital Employed/Equity 1.5 1.4 1.6 1.7
EV/Sales 1.2 1.1 1.0 0.0
FDEPS growth (%) -25 % 19 % 58 % 13 %
Dividend Yield (%) 0.4 % 0.3 % 0.3 % 0.4 %
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 10 of 12
Equirus Securities
Research Analysts Sector/Industry Email
Equity Sales E-mail
Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633
Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631
Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 Viral Desai [email protected] 91-22-43320635
Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Viraj Mehta [email protected] 91-22-43320634
Manoj Gori Consumer Durables [email protected] 91-79-61909523 Dealing Room E-mail
Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ashish Shah [email protected] 91-22-43320662
Pranav Mehta Building Materials [email protected] 91-79-61909514 Ilesh Savla [email protected] 91-22-43320666
Praful Bohra Pharmaceuticals [email protected] 91-22-43320611 Manoj Kejriwal [email protected] 91-22-43320663
Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661
Associates E-mail Compliance Officer E-mail
Ankit Choudhary [email protected] 91-79-61909533 Jay Soni [email protected] 91-79-61909561
Bharat Celly [email protected] 91-79-61909524 Corporate Communications E-mail
Harshit Patel [email protected] 91-79-61909522 Mahdokht Bharda [email protected] 91-22-43320647 Hetal Bhatia [email protected] 91-79-61909532
Meet Chande [email protected] 91-79-61909513
Nishant Bagrecha [email protected] 91-79-61909526
Ronak Soni [email protected] 91-79-61909525
Samkit Shah [email protected] 91-79-61909520
Shreepal Doshi [email protected] 91-79-61909541
Varun Baxi [email protected] 91-79-61909527
Vikas Jain [email protected] 91-79-61909531
Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.
Registered Office:
Equirus Securities Private Limited
Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,
N M Joshi Marg, Lower Parel,
Mumbai-400013.
Tel. No: +91 – (0)22 – 4332 0600
Fax No: +91- (0)22 – 4332 0601
Corporate Office:
3rd floor, House No. 9,
Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,
S.G. Highway Ahmedabad-380054
Gujarat
Tel. No: +91 (0)79 - 6190 9550
Fax No: +91 (0)79 – 6190 9560
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 11 of 12
© 2018 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not
be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited
Analyst Certification
I, Depesh Kashyap/Harshit Patel, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their
securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures
Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the
Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock
Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers
Regulations, 1993 (Reg. No.INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP-324-2017). There are no disciplinary actions taken by any regulatory
authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to
merchant banking services, private equity, mergers & acquisitions and structured finance.
As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for
investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have
received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their
directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in
their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or
Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor
Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.
The Research Analyst engaged in preparation of this Report:-
(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c)
has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or
services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject
company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject
company.
This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein
may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable
restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this
document without subjecting ESPL and affiliates to any registration or licensing requirement within such jurisdiction.
This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on
this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to
its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information
contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information
current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the
securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives,
financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or
anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its
Gujarat Ambuja Exports Absolute – LONG Relative – Overweight 31% ATR in 13 Months
May 21, 2018 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) Page 12 of 12
research report. Thus, investors should be aware that the firm may have conflict of interest.
A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the
“three years” period in the price chart).
Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest
Research Analyst’ or Relatives’ financial interest No
Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No
Research Analyst’ or Relatives’ material conflict of interest No
Disclaimer for U.S. Persons
ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a
registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended
for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition on
soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective contents
do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons"
are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under
certain rules