We initiate coverage on Petronet LNG Limited(Petronet) as a BUY with a Price Objective of Rs 151 (target PE of 11x FY2013) over a period of 15-18 months. At CMP of Rs 132.1, the stock is trading at 13.6x and 9.6x its estimated earnings for FY2012E & FY2013E representing a potential upside of ~13.6%. Petronet LNG is majorly engaged in the business of LNG procurement, transportation and regasification. Burgeoning natural gas demand supply mismatch in the country makes it inevitable that the additional demand would be met by imported LNG. Petronet LNG, with its Kochi terminal set to commission in Q4FY12 and expansion at its Dahej terminal, is all set to benefit from the current scenario. In addition, diversification plans into the power segment add further value to the company. We expect revenue & earnings growth of 26.1% & 36.5% CAGR respectively over the next three years.Favourable natural gas demand and supply to augur well for PLNG On the back of growing consumption, demand for natural gas is expected to grow at a faster rate of 16.3% (5 year CAGR) to 381 mmscmd compared to supply which is expected to grow at a 5 year CAGR of 6.8% to 202.9 mmscmd. This burgeoning demand supply gap is expected to be met through LNG imports and Petronet LNG with its expanded capacity is well placed to garner a major portion of this incremental demand. We expect the revenues of Petronet LNG to grow at a CAGR of 26.1% to Rs 21343.7 crore over the forecast period. Kochi terminal & Dahej expansion to drive volume growth The USD 850 mn Kochi LNG terminal of 2.5 MMTPA capacity is expected to commission in Q4FY12 which would be later expanded to 5.0 MMTPA by the end of FY13. Kochi terminal can help serve the Southern market where the landed cost of domestic gas is higher. The Dahej expansion to 12.5 MMTPA is expected to commence by FY13 with an additional jetty at Dahej at a cost of ~USD 980 million. Both these projects are to funded in a 70:30 Debt to Equity ratio. We expect the LNG volumes to grow from the 7.6 MMTPA in FY10 to 10.4 MMTPA in FY13. LNG pricing not a major concern Although the LNG pricing is linked to JCC, over the forecast period we do not expect significant cost increases as there is a fixed formula for pricing the sourced LNG. Also, with the company having back to back off-take agreements, we do not foresee any risk in passing on any of the increased costs. While the recent nuclear
Stock Pointer - 1 - Wednesday, 13 th April, 2011 This document is for private circulation, and must be read in conjunction with the disclaimer on the last page. Petronet LNG Ltd. CMP Rs 132.1 P/E 9.6x FY2013E BUY PRICE TARGET Rs 151 (15-18 Months) Index Details Sensex 19,697 Nifty 5,912 BSE 500 7610 Industry Utilities Scrip Details Mkt Cap (Rs in crore) 9907 Book Value (Rs) 29.8 Eq Shares O/s (Cr) 75 Avg Vol (Lacs) 2.6 52 Week H/L 136/75 Dividend Yield (%) 2.5 Face Value (Rs) 10.0 BSE Code 532522 NSE Code PETRONET Shareholding Pattern (31 st Mar, 2011) Shareholders % holding Promoters 50.0 Indian Institutions 9.9 FII’s 11.4 Non Promoter Corporate 2.0 Public 26.7 Total 100.0 Petronet LNG vs. Sensex Favourable natural gas demand and supply to augur well for PLNG On the back of growing consumption, demand for natural gas is expected to grow at a faster rate of 16.3% (5 year CAGR) to 381 mmscmd compared to supply which is expected to grow at a 5 year CAGR of 6.8% to 202.9 mmscmd. This burgeoning demand supply gap is expected to be met through LNG imports and Petronet LNG with its expanded capacity is well placed to garner a major portion of this incremental demand. We expect the revenues of Petronet LNG to grow at a CAGR of 26.1% to Rs 21343.7 crore over the forecast period. Kochi terminal & Dahej expansion to drive volume growth The USD 850 mn Kochi LNG terminal of 2.5 MMTPA capacity is expected to commission in Q4FY12 which would be later expanded to 5.0 MMTPA by the end of FY13. Kochi terminal can help serve the Southern market where the landed cost of domestic gas is higher. The Dahej expansion to 12.5 MMTPA is expected to commence by FY13 with an additional jetty at Dahej at a cost of ~USD 980 million. Both these projects are to funded in a 70:30 Debt to Equity ratio. We expect the LNG volumes to grow from the 7.6 MMTPA in FY10 to 10.4 MMTPA in FY13. Power generation venture to be value accretive Petronet LNG is planning a foray into power generation by setting up a gas based 1200 MW power plant at Dahej at a cost of ~Rs 3,000 crore. The absence of VAT, zero transmission tariff and use of cold energy would ensure competitive pricing and would be value accretive. However, since no timeline is assigned, we have not factored this in our valuations. LNG pricing not a major concern Although the LNG pricing is linked to JCC, over the forecast period we do not expect significant cost increases as there is a fixed formula for pricing the sourced LNG. Also, with the company having back to back off-take agreements, we do not foresee any risk in passing on any of the increased costs. While the recent nuclear mishap in Japan would lead to increased demand for LNG and fossil fuels which could lead to price increases, long term with new supply centres opening up there would exist ample supply which would help keep prices benign. We initiate coverage on Petronet LNG Limited (Petronet) as a BUY with a Price Objective of Rs 151 (target PE of 11x FY2013) over a period of 15-18 months. At CMP of Rs 132.1, the stock is trading at 13.6x and 9.6x its estimated earnings for FY2012E & FY2013E representing a potential upside of ~13.6%. Petronet LNG is majorly engaged in the business of LNG procurement, transportation and regasification. Burgeoning natural gas demand supply mismatch in the country makes it inevitable that the additional demand would be met by imported LNG. Petronet LNG, with its Kochi terminal set to commission in Q4FY12 and expansion at its Dahej terminal, is all set to benefit from the current scenario. In addition, diversification plans into the power segment add further value to the company. We expect revenue & earnings growth of 26.1% & 36.5% CAGR respectively over the next three years. Key Financials Y/E Mar (Rs Crore) Net Revenue EBITDA PAT EPS EPS Growth (%) RONW (%) ROCE (%) P/E (X) EV/ EBITDA(X) 2010 10649.1 846.5 404.5 5.4 -28.2 18.1 18.7 24.5 14.3 2011E 13065.5 1206.8 582.1 7.8 43.9 22.3 20.2 17.0 10.0 2012E 15952.6 1495.9 728.4 9.7 25.1 23.6 20.4 13.6 8.1 2013E 21343.7 2020.2 1028.7 13.7 41.2 27.4 24.2 9.6 6.0
Transcript
Stock Pointer
- 1 - Wednesday, 13th April, 2011
This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
PRICE TARGET Rs 151 (15-18 Months) Index Details Sensex 19,697 Nifty 5,912 BSE 500 7610 Industry Utilities
Scrip Details Mkt Cap (Rs in crore) 9907 Book Value (Rs) 29.8 Eq Shares O/s (Cr) 75 Avg Vol (Lacs) 2.6 52 Week H/L 136/75 Dividend Yield (%) 2.5 Face Value (Rs) 10.0 BSE Code 532522 NSE Code PETRONET
Shareholding Pattern (31st Mar, 2011)
Shareholders % holding Promoters 50.0 Indian Institutions 9.9 FII’s 11.4 Non Promoter Corporate 2.0 Public 26.7 Total 100.0
Petronet LNG vs. Sensex
Favourable natural gas demand and supply to augur well for PLNG On the back of growing consumption, demand for natural gas is expected to grow at a faster rate of 16.3% (5 year CAGR) to 381 mmscmd compared to supply which is expected to grow at a 5 year CAGR of 6.8% to 202.9 mmscmd. This burgeoning demand supply gap is expected to be met through LNG imports and Petronet LNG with its expanded capacity is well placed to garner a major portion of this incremental demand. We expect the revenues of Petronet LNG to grow at a CAGR of 26.1% to Rs 21343.7 crore over the forecast period. Kochi terminal & Dahej expansion to drive volume growth The USD 850 mn Kochi LNG terminal of 2.5 MMTPA capacity is expected to commission in Q4FY12 which would be later expanded to 5.0 MMTPA by the end of FY13. Kochi terminal can help serve the Southern market where the landed cost of domestic gas is higher. The Dahej expansion to 12.5 MMTPA is expected to commence by FY13 with an additional jetty at Dahej at a cost of ~USD 980 million. Both these projects are to funded in a 70:30 Debt to Equity ratio. We expect the LNG volumes to grow from the 7.6 MMTPA in FY10 to 10.4 MMTPA in FY13. Power generation venture to be value accretive Petronet LNG is planning a foray into power generation by setting up a gas based 1200 MW power plant at Dahej at a cost of ~Rs 3,000 crore. The absence of VAT, zero transmission tariff and use of cold energy would ensure competitive pricing and would be value accretive. However, since no timeline is assigned, we have not factored this in our valuations. LNG pricing not a major concern Although the LNG pricing is linked to JCC, over the forecast period we do not expect significant cost increases as there is a fixed formula for pricing the sourced LNG. Also, with the company having back to back off-take agreements, we do not foresee any risk in passing on any of the increased costs. While the recent nuclear mishap in Japan would lead to increased demand for LNG and fossil fuels which could lead to price increases, long term with new supply centres opening up there would exist ample supply which would help keep prices benign.
We initiate coverage on Petronet LNG Limited (Petronet) as a BUY with a Price Objective of Rs 151 (target PE of 11x FY2013) over a period of 15-18 months. At CMP of Rs 132.1, the stock is trading at 13.6x and 9.6x its estimated earnings for FY2012E & FY2013E representing a potential upside of ~13.6%. Petronet LNG is majorly engaged in the business of LNG procurement, transportation and regasification. Burgeoning natural gas demand supply mismatch in the country makes it inevitable that the additional demand would be met by imported LNG. Petronet LNG, with its Kochi terminal set to commission in Q4FY12 and expansion at its Dahej terminal, is all set to benefit from the current scenario. In addition, diversification plans into the power segment add further value to the company. We expect revenue & earnings growth of 26.1% & 36.5% CAGR respectively over the next three years.
This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
���� Company Background Petronet LNG incorporated in 1998 by the Government of India, is primarily engaged into LNG procurement, transportation and regassification. The four promoters ONGC, GAIL, BPCL and IOCL each hold 12.5% stake in the company. The company operates India’s first LNG terminal at Dahej and is in the process of setting up the second terminal at Kochi. LNG Value Chain The LNG value chain represents four levels of activities beginning with exploration and production and culminating in storage and regassification. Exploration and production is an upstream activity involving extraction of natural gas from underground reservoirs and is then sent to liquefaction plants through gas pipelines. At the liquefaction plant, the gas is freed from its inborn impurities and is liquefied at a temperature of -162
oC
through a set of three cooling processes. The Liquefied gas, LNG, is then loaded onto specially designed tanker ships (cryogenic vehicles) and is transported to the destination where it is re-gassified. The gas is moved into pipelines which then deliver the natural gas to consumers, power plants and industrial customers across the country. LNG Value Chain Source: Petronet LNG & Ventura Research estimates
Business Model Petronet LNG finds its presence in the downstream segment of the LNG value chain and is majorly into reception, storage & regasification of LNG. With the help of its three cryogenic vessels Raahi (138,077 cubic metres), Disha (138,097 cubic metres) and Aseem (154,000 cubic metres) the company receives LNG at its Dahej terminal, regasifies the LNG and then transmits it through the promoter’s gas transmission network to its
Stock Pointer
- 3 - Wednesday, 13th April, 2011
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Total 100% 7.50 100% 1.50 The company has recently ventured into marketing of LNG and has launched a pilot project in Gujarat. The company is also looking to expand the supply of gas by road and is also evaluating creation of small storage hubs along the highways. It further plans to vertically integrate through ports and powers. Petronet is also mulling with the idea of setting up a LNG terminal on the east coast of India and is carrying out feasibility studies on the same. ���� Investment highlights ���� Favourable natural gas demand and supply augur well for PLNG On the back of growing consumption, demand for natural gas is expected to grow at a faster rate of 16.3% (5 year CAGR) to 381 mmscmd compared to supply which is expected to grow at a 5 year CAGR of 6.8% to 202.9 mmscmd. This burgeoning demand supply gap is expected to be met through LNG imports. Petronet LNG with its expanded capacity is well placed to garner a major portion of this incremental demand. We expect the revenues of Petronet LNG to grow at a CAGR of 26.1% to Rs 21343.7 crore over the forecast period.
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Natural Gas Supply
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Source: Industry Sources & Ventura Research estimates
Source: Industry Sources & Ventura Research estimates
Stock Pointer
- 4 - Wednesday, 13th April, 2011
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Revenue and PAT
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Natural gas contribution to the national energy mix set to increase With increased focus on clean energy worldwide, Natural gas on account of its non polluting nature is increasingly gaining importance. India’s natural gas demand has grown significantly and supply is unable to keep pace with the demand due to low availability of natural gas and inadequate transmission and distribution infrastructure. Currently, the natural gas has a 14% share in the domestic energy mix which compares poorly to that of 24% worldwide consumption. With increased focus on the development of gas pipeline infrastructure and around 349 mmscmd of pipeline expected to come up in the next five years, the contribution of natural gas in the energy mix is expected to increase to 20% by 2025 in which LNG volumes are expected to be sizeable.
Break up of India’s Energy Mix
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Uptick in consumption across segments Driven primarily by uptick in consumption in the power and the fertilizer segment, the natural gas demand is expected to grow at 16.3% (5 year CAGR) to 381 mmscmd. With 23 GW of gas based power plants expected
Source: Ministry of Petroluem & Natural Gas
Source: Petronet & Ventura Research estimates
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- 5 - Wednesday, 13th April, 2011
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to commission by FY15, the natural gas demand for power generation would remain upbeat and lack of sufficient production from domestic sources would shift focus more towards the use of LNG. The fertilizer sector would benefit from the use of natural gas as it is cheaper than other feed stock viz: naptha and furnace-oil. Further with fertilizer spending being clubbed as an infrastructure sub category, higher investments would spur growth leading to increased gas demand. In addition the development of city gas distribution infrastructure is expected to boost gas demand as the cost effectiveness of LNG is expected to replace LPG and other traditional auto fuels.
Supply to lag demand Due to the decline in the production of natural gas and lack of pipeline infrastructure, the natural gas supply is expected to grow at a slower rate of 6.8% (5 year CAGR) to 202.9 mmscmd by 2014 compared to the demand of 381 mmscmd. Uncertainty regarding the production ramp up at the prolific KG D6 basin; ONGC’s KG block & GSPC’s Deen Dayal fields expected to reach peak production only after FY15, the domestic supply
Source: Industry Sources & Ventura Research estimates
Sector wise demand break up of natural gas in India
Sector demand growth rate
Source: Industry Sources & Ventura Research estimates
Source: Industry Sources & Ventura Research estimates
Natural gas demand & demand growth rate
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Stock Pointer
- 6 - Wednesday, 13th April, 2011
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scenario is expected to remain under pressure due to declining trends from the ageing onshore fields.
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New production coming on stream Production from ONGC KG Basin is expected to come on stream from May this year with a production of 2 mmscmd which is expected to rise to 3 mmscmd in the near term. However the peak production of 20 mmscmd is expected to come on stream only after FY15. The GSPC Deen Dayal fields in the KG Basin are at an exploratory stage and would take more than a year to come on stream. RIL’s KG D6 field is suffering problems of excessive water cut and the company has scaled downward its production target to 38mmscmd. This is diabolic to the recent upgrades announced by DGH to 67 mmscmd for production from the KG D6 basin. CBM fields are expected to raise production to 6 mmscmd by FY15e from the 3 mmscmd levels of FY11e.
Natural Gas Onshore Production
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Supply gaps – Advantage LNG The burgeoning demand - supply gap would be met through LNG imports which are expected to play a crucial role in meeting India’s energy
Source: Industry Sources & Ventura Research estimates
Upward trend in supply of Natural Gas
Source: Industry Sources & Ventura Research estimates
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- 7 - Wednesday, 13th April, 2011
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requirement. LNG imports are expected to grow at a 5 year CAGR of 26.1%. The share of LNG in total gas supply is expected to increase from 23.1% to ~27.5% by 2015. Petronet LNG with its expanded capacity is well placed to garner a major portion of this incremental demand.
Demand Supply mismatch in favour of Petronet
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Firm supply agreement with Ras Gas, Qatar & Gorgon gas, Australia augurs well for Petronet LNG Firm supply agreements with Ras Gas, Qatar and Gorgon Gas, Australia places Petronet LNG is a sweet place with assured supply at a pre decided pricing formula. For the Dahej Terminal, it has a contract with Ras Gas for a contracted volume of 7.5 MMTPA with prices linked to JCC (Japanese Crude Cocktail). In addition Petronet has 2.5 MMTPA supply agreement with Gorgon Gas for its Kochi Terminal.
LNG supply agreements
Supplier Duration (In Years) Period
Qty. Contracted (In MMTPA)
RasGas, Qatar 25 2004-29 5
RasGas, Qatar 25 2009-34 2.5
Gorgon LNG, Aus 20 2014-34 1.5-2.5 � Kochi terminal & Dahej expansion to drive volume growth The USD 850 mn Kochi LNG terminal of 2.5 MMTPA capacity is expected to commission in Q4FY12 which would be later expanded to 5.0 MMTPA by the end of FY13. Kochi terminal can help serve the Southern market where the landed cost of domestic gas is higher. The Dahej expansion to 12.5 MMTPA is expected to commence by FY13 with an additional jetty at Dahej at a cost of ~USD 980 million. Both these projects are to funded in a 70:30 Debt to Equity ratio. We expect the LNG volumes to grow from the 7.6 MMTPA in FY10 to 10.4 MMTPA in FY13. Subsequently, we expect the revenues to grow at a 3 year CAGR of 26.1% to Rs 21342.7 crore over the forecast period.
Source: Industry Sources & Ventura Research estimates
Stock Pointer
- 8 - Wednesday, 13th April, 2011
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Petronet’s capacity and production (In MMTPA)
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In MMTPA
Higher margins for Kochi operations Lack of gas infrastructure in Southern India makes it difficult for the domestic gas producers to serve the market and increases the landed cost of domestic gas. However, Petronet LNG with its Kochi terminal is well placed to serve the market. Higher regasification margins of Rs 57.1/mmbtu (as against Rs 37/mmbtu
Terminal
Capacity in (mmtpa) Capex (USD
million) Present To be added Post expansion Production Schedule
Dahej Terminal 10 2.5 12.5 Q2FY14 800
Kochi Terminal-Greenfield - 2.5 2.5 Q4FY12 850
Kochi Terminal-Expansion - 2.5 5.0 Q2FY13
Total 10 7.5 20.0 1650
Petronet Expansion Plan
No existing gas pipeline indicates opportunity for Kochi Terminal
Kochi Terminal help serve Southern Markets
Source: Petronet & Ventura Research estimates
Source: Petronet & Ventura Research estimates
Source: Industry Sources
Stock Pointer
- 9 - Wednesday, 13th April, 2011
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prevalent at Dahej) and 25% volume growth would help boost revenue and margins. This should lead to improved EBITDA & Net profit margins to 9.5% (+130 bps) and 4.8% (+ 100 bps) respectively by FY13. � Power generation venture to be value accretive Petronet LNG is planning a foray into power generation by setting up a gas based 1200 MW power plant at Dahej at a cost of ~Rs 3,000 crore. The absence of VAT, zero transmission tariff and use of cold energy would ensure competitive pricing and would be value accretive. However, since no timeline is assigned, we have not factored this in our valuations. � LNG pricing not a major concern Although the LNG pricing is linked to JCC, over the forecast period we do not expect significant cost increases as there is a fixed formula for pricing the sourced LNG. Also, with the company having back to back off-take agreements, we do not foresee any risk in passing on any of the increased costs. While the recent nuclear mishap in Japan would lead to increased demand for LNG and fossil fuels which could lead to price increases, long term with new supply centres opening up there would exist ample supply which would help keep price hikes benign.
LNG prices linked to JCC prices
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LNG CIF Prices (USD/mmbtu) JCC prices (USD/bbl)
Sensitivity of LNG Prices to Crude Oil prices
LNG Prices ( in $/mmbtu) Jan-11 Jan-12 Jan-13 Jan-14
JCC @ USD 85/bbl
Fixed Component 1.5 1.0 0.5 0.0
Variable Component 3.3 5.2 7.0 8.5
LNG Price 4.8 6.2 7.4 8.5
JCC @ USD 100/bbl
Fixed Component 1.5 1.0 0.5 0.0
Variable Component 4.2 6.2 8.2 10.0
LNG Price 5.6 7.1 8.6 10.0
JCC @ USD 115/bbl
Fixed Component 1.5 1.0 0.5 0.0
Variable Component 4.8 7.1 9.4 11.5
LNG Price 6.3 8.1 9.9 11.5
Source: Bloomberg
Source: Ventura Research estimates
Stock Pointer
- 10 - Wednesday, 13th April, 2011
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Long term LNG pricing to remain benign The recent nuclear mishap in Japan is expected to pressure global growth of atomic energy which in turn would lead to increased dependence of the Japanese on LNG. This should impact the pricing of ‘spot’ LNG. However long term the prices of LNG are expected to remain benign given the fact that new supply centres are emerging and the new initiatives of shale gas, particularly in the United States should lead to lowered demand for LNG. The current US demand for LNG which constitutes ~11% of its total energy requirements is expected to decline to 1% of total energy demand by 2035.
Global LNG Demand Supply Scenario
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Global LNG imports, driven majorly by new demand centres is expected to reach 360 - 400 MMTPA by 2020.The new supply coming up from Qatar, Australia, Nigeria and Iran is expected to be absorbed till 2015. Post 2015, the supply is expected to exceed demand leading to a surplus of ~90MMTPA by 2020.
LNG Demand Centres
19%
35%14%
11%
6%
5%5%
5%
Others Japan South Korea Spain France US India Taiwan
Source: Industry Sources
Source: Industry Sources
Stock Pointer
- 11 - Wednesday, 13th April, 2011
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� Key Concerns
• Volumes sensitive to LNG prices
In the past LNG volumes have been negatively affected by sharp spikes in LNG prices. However given the fact that energy costs of other competing sources is also rising we do not expect volumes to dip. In addition back to back off take agreements with GAIL, IOC & BPCL ensure that the risk is minimal.
Co-relation between LNG Volume and Price
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Increase in prices led to an lower up take in gas volume
• Any change in the government policies in respect to bring under review the regasification margins or change in LNG trade policy would have a negative impact on the stock.
� Financial Performance Driven by higher regasification volumes and average realizations, Petronet posted a rise of 61.6% (YoY) in net sales to Rs 3627.6 crore for Q3FY11 while the EBITDA margins improved to 9.5% (+20 bps yoy), on the back of higher spot volumes and lower than expected other expenses. The net margins increased by 100bps to 4.7%. For 9MFY11, Net Sales grew by 11.5 %( YoY) to Rs 9211.3 crore as compared to Rs 8263.6 crore in the corresponding period of last year. EBITDA margin for 9MFY11 improved by 160 bps to 9.4%. For 9MFY11, the company reported a net margin of 4.5% against 3.9% in 9MFY10.
Source: Bloomberg
Stock Pointer
- 12 - Wednesday, 13th April, 2011
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Quarterly Financial Performance Financial Outlook On account of higher realizations and enhanced capacities, we expect the total revenues to grow at CAGR of 26.1% from Rs 10649.1 crore in FY10 to Rs 21343.7 crore in FY2013. Higher regasification margins and improved utilization rates should help boost EBITDA and net margins from current levels of 7.9% & 3.8% to 9.5% & 4.8%, respectively by end of FY2013.
Petronet Performance forecast FY2010-2013
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Source: Petronet & Ventura Research estimates
With increased cash flows and part financing of capex through internal accruals, the Debt/Equity ratio is expected to be lowered from current levels. Along with this, the share holder return ratios of ROE and ROCE are also expected to improve to 27.4% & 24.2% respectively by end of FY2013.
Reported PAT 170.8 83.2 105.3 413.3 324.8 27.3 404.5
PAT Margin 4.7 3.7 4.5 3.9 3.8 Source: Petronet
Stock Pointer
- 13 - Wednesday, 13th April, 2011
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Debt/Equity, ROE and ROCE all set to improve
1.0
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15
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ROE (%) ROCE (%) Debt / Equity (x)
In %
Source: Petronet & Ventura Research estimates
� Valuation & Recommendation
We initiate coverage on Petronet LNG as a BUY with a Price Objective of Rs 151 (target PE of 11.0x FY2013) over a period of 15-18 months. At CMP of Rs 132.1, the stock is trading at 13.6x and 9.6x its estimated earnings for FY2012E & FY2013E representing a potential upside of ~13.6%. Strong revenue growth (26.1%) to Rs 21343.7 crore, 36.5% earnings growth to Rs 1028.7 crore in FY13 validates a re-rating of the stock.
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4/2
008
6/1
1/2
008
11/5
/2008
4/9
/2009
9/2
/2009
2/2
/2010
6/2
8/2
010
11/1
6/2
010
4/1
/2011
7/1
0/2
011
10/1
8/2
011
1/2
6/2
012
5/5
/2012
8/1
3/2
012
11/2
1/2
012
3/1
/2013
CMP 5x 8x 11x 14x 17x
Stock Pointer
- 14 - Wednesday, 13th April, 2011
This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
P/BV bands
020406080
100120140160180200
Dat
e
8/2
2/200
7
1/1
4/200
8
6/1
1/200
8
11/
5/200
8
4/9/
2009
9/2/
2009
2/2/
2010
6/2
8/201
0
11/
16/2
010
4/1/
2011
7/1
0/201
1
10/
18/2
011
1/2
6/201
2
5/5/
2012
8/1
3/201
2
11/
21/2
012
3/1/
2013
CMP 1x 2x 3x 4x 5x
EV/EBITDA bands
-1000
1000
3000
5000
7000
9000
11000
13000
15000
Dat
e
8/22
/200
7
1/14
/200
8
6/11
/200
8
11/5
/200
8
4/9/
2009
9/2/
2009
2/2/
2010
6/28
/201
0
11/1
6/20
10
4/1/
2011
7/10
/201
1
10/1
8/20
11
1/26
/201
2
5/5/
2012
8/13
/201
2
11/2
1/20
12
3/1/
2013
EV 4x 6x 8x 10x 12x
Source: Ace Equity, Ventura
Stock Pointer
- 15 - Wednesday, 13th April, 2011
This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
Profit & Loss Statement Key Ratios Y/E March, Fig in Rs. Cr FY2010 FY2011e FY2012e FY2013e
Net Sales 10649.1 13065.5 15952.6 21343.7
% Chg. 26.3 22.7 22.1 33.8
Total Expenditure 9802.6 11858.7 14456.7 19323.5
% Chg. 30.2 21.0 21.9 33.7
EBIDTA 846.5 1206.8 1495.9 2020.2
EBIDTA Margin % 7.9 9.2 9.4 9.5
Other Income 97.8 53.5 55.9 97.8
EBIT 944.3 1260.3 1551.8 2118.0
Depreciation 160.9 185.6 194.8 237.8
Interest 184.0 200.0 264.1 335.5
PBT 599.5 874.6 1092.9 1544.6
Tax Provisions 195.0 292.6 364.5 515.9
Profit After Tax 404.5 582.1 728.4 1028.7
Minority Interest - - - -
Reported PAT 404.5 582.1 728.4 1028.7
PAT Margin (%) 3.8 4.5 4.6 4.8
Raw Materials / Sales (%) 90.8 89.5 89.3 89.3
Employee Exp / Sales (%) 0.2 0.2 0.2 0.2
Other Mfr. Exp / Sales (%) 0.1 0.1 0.1 0.1
Tax Rate (%) 32.5 33.4 33.4 33.4
Y/E March, Fig in Rs. Cr FY2010 FY2011e FY2012e FY2013e
Per Share Data (Rs)
EPS 5.4 7.8 9.7 13.7
Cash EPS 7.5 10.2 12.3 16.9
DPS 3.2 3.0 3.0 3.0
Book Value 29.8 34.8 41.1 50.0
Capital, Liquidity, Returns Ratio
Debt / Equity (x) 1.1 1.3 1.4 1.2
Current Ratio (x) 1.4 1.4 1.5 1.4
ROE (%) 18.1 22.3 23.6 27.4
ROCE (%) 18.7 20.2 20.4 24.2
Dividend Yield (%) 2.5 2.3 2.3 2.3
Valuation Ratio (x)
P/E 24.5 17.0 13.6 9.6
P/BV 4.4 3.8 3.2 2.6
EV/Sales 1.1 0.9 0.8 0.6
EV/EBIDTA 14.3 10.0 8.1 6.0
Efficiency Ratio (x)
Inventory (days) 8.4 15.0 15.0 15.0
Debtors (days) 17.3 18.0 18.0 18.0
Creditors (days) 22.8 23.0 23.0 23.0
Balance Sheet Cash Flow Statement
Y/E March, Fig in Rs. Cr FY2010 FY2011e FY2012e FY2013e
Share Capital 750.0 750.0 750.0 750.0
Reserves & Surplus 1484.9 1862.7 2335.4 3003.0
Minority Interest - - - -
Total Loans 2499.8 3301.7 4194.1 4665.6
Deferred Tax Liability - - - -
Total Liabilities 4734.7 5914.4 7279.5 8418.7
Gross Block 3549.5 4363.7 6589.7 7437.5
Less: Acc. Depreciation 666.7 852.3 1047.0 1284.9
Net Block 2882.9 3511.4 5542.7 6152.6
Capital Work in Progress 1318.4 1568.4 613.7 883.7
Y/E March, Fig in Rs. Cr FY2010 FY2011e FY2012e FY2013e
Profit After Tax 404.5 582.1 728.4 1028.7
Depreciation 160.9 185.6 194.8 237.8
Working Capital Changes 225.1 -171.2 -33.9 -64.1
Others 107.6 0.0 0.0 0.0
Operating Cash Flow 898.1 596.6 889.2 1202.4
Capital Expenditure -1046.1 -1064.2 -1271.4 -1117.7
Change in Investment -234.4 -96.0 -114.0 -135.5
Cash Flow from Investing -1280.4 -1160.1 -1385.4 -1253.2
Proceeds from equity issue 0.0 0.0 0.0 0.0
Inc/(Dec) in Debt 218.1 801.9 892.4 471.5
Dividend Paid -153.1 -204.3 -255.6 -361.1
Cash Flow from Financing 65.1 597.6 636.8 110.5
Net Change in Cash -317.3 34.1 140.6 59.7
Opening Cash Balance 657.8 340.5 374.5 515.2
Closing Cash Balance 340.5 374.5 515.2 574.8
Ventura Securities Limited Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai – 400079 This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation.
