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  • 7/27/2019 Larsen N Toubro, 1Q FY 2014

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    Please refer to important disclosures at the end of this report 1

    Quarterly highlights - StandaloneY/E March (` cr) 1QFY14 1QFY13 4QFY13 % chg (yoy) % chg (qoq)Net sales 12,555 11,955 20,294 5.0 (38.1)Op. profit 1,071 1,087 2,451 (1.4) (56.3)

    Reported PAT 756 902 1,769 (16.2) (57.3)Source: Company, Angel Research

    Larsen and Toubro (L&T) posted a disappointing set of numbers for 1QFY2014,

    which were below our and street expectation on both, revenue and profitability

    fronts. This was mainly on the back of lower-than-expected execution and

    abysmal operating performance. As of 1QFY2014, L&Ts order book stands at

    `1,65,393cr indicating a growth of 8.0% yoy. Order inflow for the quarterjumped by 28.4% to `25,159cr mainly driven by major orders bagged in the

    infrastructure (70%) and hydrocarbon (11%) segments.

    Performance falls short of estimates: The top-line came in at `12,555cr,registering a growth of 5.0% yoy for the quarter which was lower than our and

    street estimates of`13,100cr and`13,487cr respectively. The slow execution was

    mainly on the back of decline in order book in the power and metal segment,

    lower growth in product business and non-linear project execution. On the

    EBITDA front, the company reported a yoy dip of 56bp to 8.5%, against our

    expectation of 10.5%, owing to lower-than-expected execution and high

    construction and sub-contracting costs. On the bottom-line front, L&T reported a

    yoy decline of 16.2% to `756cr which was lower than our estimate of `911cr.

    This was mainly on the back of lower-than-expected execution and pooroperating performance.

    Outlook and valuation: For FY2014, the Management has given a guidance of15-17% growth in revenue and 20% growth in order inflow and +/- 50bp

    change in EBITDA margin. We believe given its robust order backlog, healthy

    order inflows during the past few quarters, and a strong execution capability, the

    company is well placed to achieve its guidance on the revenue front. However, it

    would be difficult to achieve a 20% growth on the order inflow front, considering

    the challenging macro environment. We believe L&T is best placed to benefit from

    a gradual recovery in the capex cycle, given its diverse exposure to sectors and a

    strong balance sheet. We maintain our Buy rating on the stock with a target priceof `1,128.Key financials (Standalone)Y/E March (`cr) FY2012 FY2013A FY2014E FY2015ENet Sales 52,545 60,373 68,396 77,435% chg 20.7 14.9 13.3 13.2

    Adj.Net Profit 3,937 4,132 4,521 5,096% chg 19.7 4.9 9.4 12.7

    EBITDA (%) 11.8 10.5 10.0 10.0

    FDEPS (`) 42.7 44.8 49.0 55.2P/E (x) 21.1 20.2 18.4 16.3

    P/BV (x) 3.3 2.9 2.6 2.4

    RoE (%) 16.7 15.2 14.9 15.3

    RoCE (%) 17.3 15.2 15.0 15.5

    EV/Sales (x) 1.2 1.0 0.9 0.8EV/EBITDA (x) 10.1 9.8 9.3 8.3

    OB/Sales (x) 2.8 2.5 2.5 2.4

    Order Inflows 70,574 88,035 98,687 111,432

    % chg (11.5) 24.7 12.1 12.9

    Source: Company, Angel Research

    BUYCMP `902

    Target Price `1,128

    Investment Period 12 Months

    Stock Info

    Sector

    Net debt (` cr) 9,483

    Bloomberg Code

    Shareholding Pattern (%)

    Promoters -

    MF / Banks / Indian Fls 36.8FII / NRIs / OCBs 19.9

    Indian Public / Others 43.2

    Abs. (%) 3m 1yr 3yr

    Sensex 6.0 17.5 11.2

    LT (8.1) (2.7) (30.2)

    Infrastructure

    Market Cap (` cr) 83,420

    Beta 1.2

    52 Week High / Low 1146/872

    Avg. Daily Volume 327,309

    Face Value (`) 2

    BSE Sensex 20,159

    Nifty 6,032

    Reuters Code LART.BO

    [email protected]

    Viral Shah022-39357800 Ext: 6842

    [email protected]

    Larsen & ToubroPerformance Highlights

    1QFY2014 Result Update | Infrastructure

    July 22, 2013

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 2

    Exhibit 1:Quarterly performance (Standalone)Y/E March (` cr) 1QFY14 1QFY13 4QFY13 % chg (yoy) % chg (qoq) FY2013 FY2012 % chg (yoy)Net Sales 12,555 11,955 20,294 5.0 (38.1) 60,873 53,171 14.5Total Expenditure 11,484 10,868 17,843 5.7 (35.6) 54,466 46,888 16.2Operating Profit 1,071 1,087 2,451 (1.4) (56.3) 6,407 6,283 2.0OPM (%) 8.5 9.1 12.1 (56)bp (354)bp 10.5 11.8 (129)bp

    Interest and Financial chgs 245 228 281 7.4 (12.7) 982 666 47.5

    Depreciation 210 192 222 9.6 (5.4) 818 699 17.0

    Non Operating Income 473 606 374 (22.0) 26.2 1,851 1,338 38.3

    Nonrecurring items - (38) 19 (100.0) (100.0) 248 55 350.1

    Profit Before tax 1,089 1,234 2,341 (11.8) (53.5) 6,705 6,310 0.8Tax 332 370 553 (10.3) (39.9) 1,794 1,854 (3.2)

    Net Profit before MI 756 864 1,788 (12.5) (57.7) 4,911 4,457 10.2PAT (%) 6.0 7.2 8.8 (116)bp (279)bp 8.1 8.4 (31)bpMinority Interest (MI) - - - - - - -Adjusted net profit after MI 756 902 1,769 (16.2) (57.3) 4,132 3,937 4.9Adj. PAT (%) 6.0 7.5 8.7 (148)bp (270)bp 6.8 7.4 (62)bp

    Adj. FDEPS 8.2 9.8 19.2 (16.2) (57.3) 44.8 42.7 4.9Source: Company, Angel Research

    Exhibit 2:1QFY2014 Actual vs Estimates(` cr) Estimates Actual Variation (%)Net Sales 13,100 12,555 (4.2)EBITDA 1,375 1,071 (22.1)

    Reported PAT 911 756 (17.0)Source: Company, Angel Research

    Key highlights of the concall

    Net Working Capital (NWC) continues to remain weak at 17.3% of salescompared to 15.4% in March 2013. The Management believes that would

    be in the range of 16-20% of sales going forward in light of the current

    scenario.

    L&Ts Management is fairly confident of achieving a 20% growth in orderinflows and 15-17% growth on the revenue front. The company is eyeing

    infrastructure (including roads, metro rails, buildings, DFC and airports),

    hydrocarbon and power T&D projects for drawing orders.

    Further, L&T has removed slow moving orders worth `6,000cr from theorder book in 1QFY2014, which mainly pertain to the ship building

    segment.

    Despite heightened competitive intensity, the Management has clarified thatit has enough levers at its disposal to ensure that the current EBITDA

    margin (+/-50bp) is maintained FY2014.

    L&T has given a capex guidance of `1,000cr for FY2014. It has alsoinfused equity investments of `6,000cr till date into subsidiaries and

    developmental projects.

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 3

    Muted growth in top-line

    The top-line came in at `12,555cr, registering a growth of 5.0% yoy for the

    quarter, which is lower than our and street estimates of `13,100cr and

    `13,487cr respectively. The slow execution was mainly on the back of decline

    in order book in the power and metal segment, lower growth in product

    business and non-linear project execution.

    Company maintains its aggressive order inflow guidance

    The Management has reiterated its guidance of a 15-17% growth in revenue and

    20% growth in order inflow for FY2014. The guidance is mainly based on (a) high

    share of exports in both order inflows and revenues (power T&D and hydrocarbon)

    and (b) continued momentum in the infrastructure segment (building and factories,

    railways, airports, etc). L&T has secure orders worth`25,159cr during 1QFY2014,

    taking the order book to`1,65,393cr (a growth of 8.0% yoy). Order inflows were

    mainly driven by major orders bagged in the infrastructure (70%) and hydrocarbon

    (11%) segments. The Management is confident of achieving an order inflow in

    excess of `100,000cr during FY2014. We believe the company can achieve its

    guidance on the revenue front, given its robust order backlog. However it would be

    difficult to achieve a 20% growth on the order inflow front, considering the

    challenging macro environment.

    Exhibit 3:Muted revenue growth

    Source: Company, Angel Research

    Exhibit 4:Robust order inflows momentum continues

    Source: Company, Angel Research

    11,2

    45

    13,9

    84

    18,4

    61

    11,9

    55

    13,1

    95

    15,4

    29

    20,2

    94

    12,5

    55

    21.4 23.5 22.4

    26.1

    17.3

    10.39.9

    5.0

    0.0

    5.0

    10.0

    15.0

    20.0

    25.0

    30.0

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

    Sales (` cr, LHS) Growth (yoy %, RHS)

    16,0

    96

    17,1

    29

    21,1

    59

    19,5

    94

    20,9

    67

    19,5

    45

    27,9

    29

    25,1

    59(21.3)

    28.2

    (30.2)

    21.0

    30.3

    14.1

    32.028.4

    (40.0)

    (30.0)

    (20.0)

    (10.0)

    0.0

    10.0

    20.0

    30.0

    40.0

    0

    5,000

    10,000

    15,000

    20,000

    25,000

    30,000

    2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

    Order Inflow Growth (yoy %, RHS)

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 4

    EBITDA margin posts a decline, below our estimate

    The company reported an EBITDAM of 8.5%, a yoy dip of 56bp, against our

    expectation of 10.5%. The performance was below our expectation mainly on

    account of (a) muted revenue growth, (b) higher-than-anticipated staff cost owing

    to increased employee base and annual salary revision and (c) higher construction

    expenses. Going ahead, despite heightened competitive intensity, the Management

    has clarified that it has enough levers at its disposal to ensure that the current

    EBITDA margin (+/-50bp) is maintained for FY2014 and believes that EBITDAM

    should be looked at on a yearly basis rather than on a quarterly basis owing to

    volatility based on job mix.

    Abysmal operating performance dents PAT growth

    On the bottom line front, L&T reported a yoy decline of 16.2% to `756cr

    which was lower than our estimate of `911cr. This was mainly on the back oflower-than-expected execution and abysmal operating performance.

    Exhibit 5:EBITDA margin disappoints

    Source: Company, Angel Research

    Exhibit 6:Lower EBITDAM dents profitability

    Source: Company, Angel Research

    1,17

    4.1

    1,36

    7.6

    2,56

    1

    1,08

    7

    1,40

    6

    1,47

    5

    2,45

    1

    1,07

    1

    10.49.8

    13.9

    9.1

    10.79.6

    12.1

    8.5

    0.0

    2.0

    4.0

    6.0

    8.0

    10.0

    12.0

    14.0

    16.0

    0

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

    EBITDA (`cr, LHS) EBITDAM (%, RHS)

    709

    772

    1,86

    5

    902

    871

    1,02

    9

    1,76

    9

    756

    6.35.5

    10.1

    7.5

    6.6 6.7

    8.7

    6.0

    0.0

    2.0

    4.0

    6.0

    8.0

    10.0

    12.0

    0

    200400

    600

    800

    1,000

    1,200

    1,400

    1,600

    1,800

    2,000

    2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

    PAT (` cr, LHS) PATM (%, RHS)

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 5

    Segmental performance

    Engineering and construction (E&C): The E&C segment which comprises ofinfrastructure, hydrocarbon, power, metallurgical and metal handling and heavy

    engineering (contributing ~90% to the companys gross revenue) witnessed strong

    traction in order inflows. The E&C segment recorded a revenue growth of 5.4%

    yoy to `11,450cr in 1QFY2014 mainly driven by strong revenue growth in

    infrastructure (23%) and hydrocarbon segment (23%).

    Machinery and industrial products (MIP): The MIP segment continued to witnesspressure from persistent headwinds, ie sluggish demand in construction and

    mining sectors, and increased competition. The MIP segment reported revenues of

    `539cr in 1QFY2014, an increase of 6.5% yoy, mainly driven by increase in export

    of industrial valves. The EBITDA margin came in at 13.8% (16.1% in 1QFY2013)

    in 1QFY2014 and was impacted by increased input costs and intense competition.

    Electrical and electronics (E&E): On the back of slowdown in investment andindustrial activity and delay in clearances from customers, the E&E segments

    revenue growth was muted at 4.5% yoy to `794cr. The EBIT margin came in at

    8.8%, registering a growth of 354bp on a yoy basis.

    Exhibit 7: Segmental performanceY/E March (` cr) 1QFY14 1QFY13 4QFY13 % chg (yoy) % chg (qoq)Revenues 12,704 12,078 20,485 5.2 (38.0)Engg & Const. (E&C) 11,450 10,866 18,392 5.4 (37.7)

    Mach. & Ind. Products (MIP) 539 507 745 6.5 (27.6)

    Electrical & Electronics (E&E) 794 760 1,117 4.5 (28.9)

    Others 319 375 381 (14.9) (16.1)Intersegment revenue 398 430 150 (7.2) 166.2

    EBIT 1,147 1,210 2,421 (5.2) (52.6)Engg & Const. 1,024 1,028 2,065 (0.4) (50.4)

    Mach. & Ind. Products 63 68 105 (7.3) (39.7)

    Electrical & Electronics 70 40 146 74.2 (51.8)

    Others (11) 73 105 (115.4) (110.6)

    Intersegment margins - - - 0.0 0.0

    EBIT (%) 9.0 10.0 11.8 (131)bp (315)bpEngg & Const. 8.9 9.5 11.2 (47) bp (228)bp

    Mach. & Ind. Products 11.7 13.5 14.1 (98)bp (235)bp

    Electrical & Electronics 8.8 5.3 13.1 354bp (421)bp

    Others (3.5) 19.4 27.6 (3225)bp (3113)bp

    Capital Employed 40,997 37,437 38,219 9.5 7.3Engg & Const. 16,585 12,953 14,971 28.0 10.8

    Mach. & Ind. Products 416 486 596 (14.5) (30.2)

    Electrical & Electronics 1,429 1,335 1,281 7.0 11.5

    Others 1,101 1,121 850 (1.8) 29.5

    Unallocable 21,466 21,542 20,520 (0.3) 4.6

    Source: Company, Angel Research

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 7

    Outlook and valuation

    We recommend Buy with a target price of`1,128

    We believe L&T will continue to occupy a unique position in the Indian E&C space

    as a diversified and large engineering play, with exposure to areas ranging from

    power, defense, nuclear and equipment, in spite of short-term concerns.

    At the current market price of `902, the stock is trading at 16.3x FY2015E

    earnings and 2.4x FY2015E P/BV on a standalone basis. We have used the sum-

    of-the-parts (SOTP) methodology to value the company to capture all its business

    initiatives and investments/stakes in subsidiaries and other businesses. Ascribing

    separate values to its parent business on a P/E basis and investments in

    subsidiaries on P/E, P/BV and mcap basis, our target price works out to`1,128.

    We maintain our Buy rating on the stock.It may be noted here that the L&T stock has historically traded at a premium to the

    BSE Sensex. At our SOTP target price, the stock would trade at 15x FY2015E

    standalone adjusted EPS of `55.2, which is at a premium of 8% over Angels

    FY2015E Sensex P/E multiple of 14x and lower than the historical premium

    commanded by L&T over the BSE Sensex.

    Exhibit 10:L&T Parent historic P/E band

    Source: Company, Angel Research

    On one-year forward P/E basis, historically L&T has traded at an average P/E of

    25.4x, 23.3x and 23.4x over the past seven, five and three years, respectively.

    Thus, our implied target P/E multiple of 20.4x is way below the historical average

    to factor in the prevailing challenging business environment.

    0%

    20%

    40%

    60%

    80%

    100%

    120%

    May-0

    9

    Jul-09

    Sep-0

    9

    Nov-0

    9

    Jan-1

    0

    Mar-10

    May-1

    0

    Jul-10

    Sep-1

    0

    Nov-1

    0

    Jan-1

    1

    Mar-11

    May-1

    1

    Jul-11

    Sep-1

    1

    Nov-1

    1

    Jan-1

    2

    Mar-12

    May-1

    2

    Jul-12

    Sep-1

    2

    Nov-1

    2

    Jan-1

    3

    Mar-13

    May-1

    3

    Jul-13

    L&T Premium/(Discount) to Sensex 7YEAR AVG 5YEAR AVG 3YEAR AVG

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 8

    Exhibit 11:L&T Parent one-year forward P/E band

    Source: Company, Angel Research

    Exhibit 12:Derivation of SOTP-based target price for L&T (FY2015E)Business Segment Methodology Remarks ` cr `/share % to TPL&T- Parent P/E 15x FY2015E Earnings 76,442 828 73.4Infrastructure Subsidiaries 5,850 63 5.6IDPL (stake - 97.5%) P/BV L&T acq. 2.36% stake of IDFC at Rs118cr in 1QFY11 5,850 63 5.6

    Key Subsidiaries - Services 16,080 174 15.4L&T Infotech P/E 10.0x FY2015E Earnings 7,406 80 7.1

    L&T Finance Mcap Basis 20% holding company discount 8,674 94 8.3

    Key Subsidiaries - Manufacturing 3,327 36 3.2Tractor Engineers P/E 5x FY2015E Earnings 98 1 0.1

    Associate Companies P/E 5x FY2015E Earnings 2,000 22 1.9

    L&T MHI Boilers and Turbines (51%) P/E 5x FY2015E Earnings 1,230 13 1.2

    Other Subsidiaries 2,451 27 2.4Satyam Stake Mcap 20% holding company discount 254 3 0.2

    Other Investments P/BV 1x FY2015E Book Value, Mcap 2,197 24 2.1

    Total 104,149 1,128 100Source: Company, Angel Research

    Exhibit 13:Key assumptions (` cr)FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EOrder Inflow 69,572 79,769 70,574 88,035 98,687 111,432

    Revenue 36,675 43,540 52,545 60,373 68,396 77,435

    Order Backlog (Y/E) 100,239 130,217 145,723 153,604 168,258 183,718

    OB/Sales (x) 2.7 3.0 2.8 2.5 2.5 2.4

    Source: Company, Angel Research

    0.0

    10.0

    20.0

    30.0

    40.0

    50.0

    60.0

    Oct-05

    Feb-0

    6

    Jun-0

    6

    Oct-06

    Feb-0

    7

    Jun-0

    7

    Oct-07

    Feb-0

    8

    Jun-0

    8

    Oct-08

    Feb-0

    9

    Jun-0

    9

    Oct-09

    Feb-1

    0

    Jun-1

    0

    Oct-10

    Feb-1

    1

    Jun-1

    1

    Oct-11

    Feb-1

    2

    Jun-1

    2

    Oct-12

    Feb-1

    3

    Jun-1

    3

    P/E 7YEAR AVG 5YEAR AVG 3YEAR AVG

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 9

    Exhibit 14:Angel EPS forecast vs consensusAngel Forecast Bloomberg Consensus Variation (%)

    FY2014E 49.0 55.2 (11.3)

    FY2015E 55.2 61.453 (10.2)

    Source: Company, Angel Research

    Investment arguments

    Best stock to play the Indian infrastructure theme: We believe L&T is bestplaced to benefit from the gradual recovery in the capex cycle, given its

    diverse exposure to sectors, strong balance sheet and cash flow generation as

    compared to its peers, which grapple with issues such as strained cash flow,

    high leverage and limited net worth and technological capabilities.

    Company background

    L&T - the largest Indian infrastructure conglomerate - is present across almost all

    the infrastructure segments and is at the forefront of the Indian infra growth story.

    Over the years, the company has diversified across various segments to encash the

    untapped infra opportunity, not only in India but in other geographies as well, and

    has an excellent track record of achieving the same. Over the past 10 years

    (FY2003-13), L&T has reported a CAGR of 23.0% and 28.5% in its top-line and

    bottom-line, respectively.

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 10

    Exhibit 15:Recommendation summaryCompany CMP TP Rating Top-line (` cr) EPS (`) P/E OB/

    FY13 FY14E FY15E CAGR (%) FY13 FY14E FY15E CAGR (%) FY13 FY14E FY15E Sales(x)ABL 52 84 Buy 1,853 1,928 2,234 9.8 53.3 59.9 73.9 17.7 1.0 0.9 0.7 2.3CCCL 9 - Neutral 1,931 2,281 2,492 13.6 (3.3) 0.7 2.0 - (2.6) 12.5 4.2 2.2

    IRB Infra 94 157 Buy 3,687 3,997 4,312 8.1 16.7 15.7 16.6 (0.3) 5.6 6.0 5.7 2.4

    ITNL 145 230 Buy 6,645 7,444 8,041 10.0 26.8 29.8 32.1 9.4 5.4 4.9 4.5 2.2

    IVRCL 15 29 Buy 3,759 5,673 5,892 8.4 (3.3) 1.4 1.8 - - 10.5 8.3 4.8

    JP Assoc. 49 90 Buy 13,358 14,850 15,631 8.2 2.2 2.5 2.9 13.8 22.4 19.5 17.3 -

    L&T 902 1,128 Buy 60,873 68,946 78,040 13.2 44.8 49.0 55.2 11.1 20.2 18.4 16.3 2.5NCC 26 42 Buy 5,725 6,167 6,945 10.1 2.4 2.7 3.6 22.0 10.6 9.7 7.1 3.2

    Punj Lloyd 30 - Neutral 11,717 12,954 14,740 12.2 (0.2) 0.5 0.9 - - 60.0 32.7 1.9

    Sadbhav 87 139 Buy 1,811 2,462 2,731 22.8 0.9 5.9 6.7 177.2 100.7 14.8 13.1 5.6

    Simplex In. 67 131 Buy 5,897 6,308 7,033 9.2 10.8 11.9 18.7 31.9 6.2 5.6 3.6 2.7

    Unity Infra 24 41 Buy 2,040 2,146 2,339 7.1 12.5 11.0 11.5 (4.0) 1.9 2.2 2.1 1.6

    Source: Company, Angel Research

    Exhibit 16:SOTP break-upCompany Core Const. Real Estate Road BOT Invst. In Subsidiaries Others Total

    ` % to TP ` % to TP ` % to TP ` % to TP ` % to TP `ABL 29 35 - - 55 65 - - - - 84

    CCCL 16 100 - - - - - - - - 16

    IRB Infra 45 29 - - 112 71 - - - - 157

    ITNL 80 35 - - 120 52 - - 30 13 230IVRCL 9 31 - - - - 20 69 - - 29

    JP Assoc. 24 27 23 25 - - - - 43 48 90

    L&T 828 73 - - - - 300 27 - - 1,128NCC 23 55 - - 7 17 - - 12 29 42

    Punj Lloyd 64 100 - - - - - - - - 64

    Sadbhav 47 33 - - 93 67 - - - - 139

    Simplex In. 131 100 - - - - - - - - 131

    Unity Infra 35 85 - - 6 15 - - - - 41

    Source: Company, Angel Research

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    Larsen & Toubro | 1QFY2014 Result Update

    July 22, 2013 11

    Profit & loss statement (Standalone)

    Y/E March (` cr) FY2010 FY2011 FY2012 FY2013A FY2014E FY2015EGross sales 36,675 43,540 52,545 60,373 68,396 77,435Less: Excise duty 360 366 625 500 550 605Net Sales 37,035 43,906 53,171 60,873 68,946 78,040Other operating income 9.1 18.6 21.1 14.5 13.3 13.2

    Total operating income 32,259 38,266 46,888 54,466 62,051 70,250% chg 15,740 10,675 11,175 12,028 14,479 16,388

    Total Expenditure 8,721 9,396 10,747 14,472 17,236 19,510

    Net Raw Materials 2,379 2,830 3,666 4,436 5,102 5,867

    Other Mfg costs 1,574 10,070 12,527 14,581 16,547 18,730

    Personnel 3,845 5,295 8,772 8,948 8,687 9,755

    Other 4,776 5,640 6,283 6,407 6,895 7,790EBITDA 21.8 18.1 11.4 2.0 7.6 13.0% chg 12.9 12.8 11.8 10.5 10.0 10.0

    (% of Net Sales) 416 599 699 818 912 995

    Depreciation & Amortisation 4,360 5,040 5,583 5,589 5,983 6,795EBIT 20.6 15.6 10.8 0.1 7.1 13.6% chg 11.9 11.6 10.6 9.3 8.7 8.8

    (% of Net Sales) 505 619 666 982 1,027 1,137

    Interest & other Charges 2,026 1,147 1,338 1,851 2,038 2,230

    Other Income (incl pft from Ass/JV) 34.5 20.6 21.4 28.7 29.1 28.3

    (% of PBT) - - - - - -

    Recurring PBT 5,881 5,569 6,255 6,457 6,994 7,888% chg 49.2 (5.3) 12.3 3.2 8.3 12.8

    Extraordinary Expense/(Inc.) 135.7 332.9 55.0 247.6 - -

    PBT (reported) 6,016 5,901 6,310 6,705 6,994 7,888Tax 1,640.9 1,943.6 1,853.8 1,794.0 1,871.6 2,110.7

    (% of PBT) 27.3 32.9 29.4 26.8 26.8 26.8

    PAT (reported) 4,376 3,958 4,457 4,911 5,123 5,777Less: Minority interest (MI) - - - - - -

    Prior period items - - - - - -

    PAT after MI (reported) 4,376 3,958 4,457 4,911 5,123 5,777ADJ. PAT (excl. div from Subs) 4,151 3,289 3,937 4,132 4,521 5,096% chg 54.1 (20.8) 19.7 4.9 9.4 12.7(% of Net Sales) 11.2 7.5 7.4 6.8 6.6 6.5

    Basic EPS (`) (Reported) 47.4 42.9 48.3 53.2 55.5 62.6Fully Diluted Adj. EPS (`) 45.0 35.6 42.7 44.8 49.0 55.2% chg 54.1 (20.8) 19.7 4.9 9.4 12.7

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    Balance sheet (Standalone)Y/E March (` cr) FY2010 FY2011 FY2012 FY2013A FY2014E FY2015ESOURCES OF FUNDSEquity Share Capital 120 122 122 123 185 185Share App Money - warrants 25 - - - - -

    Reserves & Surplus 18,166 21,724 25,101 29,020 31,500 34,879

    Shareholders Funds 18,312 21,846 25,223 29,143 31,685 35,063Minority Interest - - - - - -Total Loans 6,801 7,161 9,896 8,834 9,834 10,834

    Deferred Tax Liability 77 263 133 242 242 242

    Total Liabilities 25,190 29,271 35,252 38,219 41,761 46,140APPLICATION OF FUNDSGross Block 7,290 8,957 10,536 11,572 13,072 14,572

    Less: Acc. Depreciation 1,799 2,312 2,931 3,504 4,143 4,839

    Net Block 5,492 6,644 7,605 8,067 8,929 9,733Capital Work-in-Progress 874 771 759 835 918 1,010

    Goodwill - - - - - -

    Investments 13,705 14,685 15,872 16,103 17,603 19,103Current Assets 26,395 35,010 43,457 47,169 52,735 58,756Inventories 1,415 1,577 1,777 2,064 2,380 2,695

    Sundry Debtors 11,158 12,428 18,730 22,613 25,689 29,078

    Cash 1,432 1,730 1,905 1,456 1,279 1,146

    Loans & Advances 6,036 8,225 9,128 9,163 9,605 10,612

    Other 6,353 11,049 11,918 11,873 13,781 15,226

    Current liabilities 21,277 27,839 32,441 33,955 38,424 42,463

    Net Current Assets 5,119 7,170 11,016 13,214 14,311 16,294Mis. Exp. not written off - - - - - -

    Total Assets 25,190 29,271 35,252 38,219 41,761 46,140

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    Cash flow statement (Standalone)

    Y/E March (` cr) FY2010 FY2011 FY2012 FY2013A FY2014E FY2015EProfit before tax 6,016 5,901 6,310 6,705 6,994 7,888

    Depreciation 322 514 619 573 638 697

    Change in Working Capital 1,143 (1,753) (3,671) (2,647) (1,273) (2,117)

    Less: Other income (2,026) (1,147) (1,338) (1,851) (2,038) (2,230)

    Direct taxes paid (1,641) (1,944) (1,854) (1,794) (1,872) (2,111)

    Cash Flow from Operations 3,815 1,571 66 986 2,450 2,127(Inc.)/ Dec. in Fixed Assets (1,494) (1,564) (1,567) (1,111) (1,583) (1,592)

    (Inc.)/ Dec. in Investments (5,442) (979) (1,187) (231) (1,500) (1,500)

    Other income 2,026 1,147 1,338 1,851 2,038 2,230

    Cash Flow from Investing (4,909) (1,396) (1,416) 508 (1,045) (862)Issue of Equity 28 (24) 1 1 62 -

    Inc./(Dec.) in loans 245 360 2,735 (1,062) 1,000 1,000

    Dividend Paid (Incl. Tax) (717) (863) (996) (1,112) (1,145) (2,040)

    Others 2,194 650 (215) 230 (1,497) (359)

    Cash Flow from Financing 1,750 123 1,524 (1,943) (1,581) (1,399)Inc./(Dec.) in Cash 657 298 175 (450) (176) (134)

    Opening Cash balances 775 1,432 1,730 1,905 1,456 1,279Closing Cash balances 1,432 1,730 1,905 1,456 1,279 1,146

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    Key RatiosY/E March FY2010 FY2011 FY2012 FY2013A FY2014E FY2015EValuation Ratio (x)P/E (on FDEPS) 20.1 25.3 21.1 20.2 18.4 16.3

    P/CEPS 18.2 21.4 18.0 16.8 15.3 13.7

    P/BV 4.6 3.8 3.3 2.9 2.6 2.4

    Dividend yield (%) 0.9 1.1 1.2 1.2 2.2 1.8

    EV/Sales 1.6 1.4 1.2 1.0 0.9 0.8

    EV/EBITDA 12.7 10.8 10.1 9.8 9.3 8.3

    EV / Total Assets 2.4 2.1 1.8 1.6 1.5 1.4

    Per Share Data (`)EPS (Basic) 45.0 35.6 42.7 44.8 49.0 55.2

    EPS (fully diluted) 45.0 35.6 42.7 44.8 49.0 55.2

    Cash EPS 49.5 42.1 50.2 53.6 58.9 66.0

    DPS 8.2 9.6 10.9 11.0 19.6 16.5

    Book Value 195.3 236.7 273.2 315.7 343.2 379.8

    Dupont AnalysisEBIT margin 11.9 11.6 10.6 9.3 8.7 8.8

    Tax retention ratio 72.7 67.1 70.6 73.2 73.2 73.2

    Asset turnover (x) 1.7 1.7 1.7 1.7 1.8 1.8

    ROIC (Post-tax) 15.1 13.2 13.0 11.7 11.3 11.6

    Cost of Debt (Post Tax) 5.5 5.9 5.5 7.7 8.1 8.1

    Leverage (x) 0.4 0.3 0.3 0.3 0.3 0.3

    Operating ROE 18.7 15.1 15.1 12.8 12.2 12.6

    Returns (%)ROCE (Pre-tax) 19.7 18.5 17.3 15.2 15.0 15.5

    Angel ROIC (Pre-tax) 21.7 20.3 18.8 16.3 15.9 16.3

    ROE 27.0 16.4 16.7 15.2 14.9 15.3

    Turnover ratios (x)Asset Turnover (Gross Block) 5.8 5.4 5.5 5.5 5.6 5.6

    Inventory / Sales (days) 14 12 12 12 12 12

    Receivables (days) 104 98 107 124 128 128

    Payables (days) 192 213 217 207 196 193

    Wcap cycle (ex-cash) (days) 229 242 257 262 257 255Solvency ratios (x)Net debt to equity 0.3 0.2 0.3 0.3 0.3 0.3

    Net debt to EBITDA 1.1 1.0 1.3 1.2 1.2 1.2

    Interest Coverage 8.6 8.1 8.4 5.7 5.8 6.0

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    Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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