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India Research
Sector: Indian Auto Ancillary
Motor Industries Co. Ltd.(MICO.IN/ MICO.BO)
Initiating Coverage
Long-term Outperform (CMP: Rs. 2696.6, Mkt. Cap: Rs. 86.4 bn, $1.9, Feb 08, 06)Relevant Index: CNX Nifty: 3008.95 (Feb 8, 06)
The stock is currently trading at a P/E of 24.2 FY05E. We expect MICO to resumeposting strong numbers once its expansion program is completed. Over the nextthree years, we expect its revenues and EPS to grow at a CAGR of 21.5% and 15.4%respectively. Considering the long-term earnings visibility, a result of its leadershipposition in the diesel fuel injection equipment space, as well as its exports growth,we rate MICO as Long-term Outperform.
February 9, 2006
Research Contact: Associate Director, Research: Hitesh Kuvelkar Email: [email protected]
Sales Offices: US Sales: Tel. No: 1-212-2276611 Email: [email protected]
Asia & Europe Sales: Tel.: 44-207-959 5300 Email: [email protected]
Research Note issued by First Global Securities Ltd., India
FG Markets, Inc. is a member of NASD/SIPC and is regulated by the
Securities & Exchange Commission (SEC), US
First Global (UK) Ltd. is a member of London Stock Exchange and is regulated byFinancial Services Authority (FSA), UK
First Global Stockbroking is a member of Bombay Stock Exchange & National Stock Exchange, India
IMPORTANT DISCLOSURES CAN BE FOUND AT THE END OF THIS REPORT.
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Price and Rating History Chart
Ratings Key
Positive Ratings B = Buy BD = Buy at decline OP = Outperform
Neutral Ratings H = Hold MP = Market perform
Negative Ratings S = Sell SS = Sell into strength UP = Underperform
A = Avoid
Motor Industries Company Ltd. (MICO)
8-Feb-06
MP
80
140
200
260
320
380
440
500
560
1-
Jan-
02
13-
Mar-
02
29-
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02
9-
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02
17-
Jan-
03
2-
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03
18-
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03
29-
Aug-
03
10-
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03
21-
Jan-
04
6-
Apr-
04
18-
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04
30-
Aug-
04
10-
Nov-
04
25-
Jan-
05
8-
Apr-
05
20-
Jun-
05
1-
Sep-
05
18-
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05
31-
Jan-
06
100
300
500
700
900
1100
1300
1500
1700
1900
2100
2300
2500
2700
2900
(Rs.)
Relative to NIFTY (LHS) FG Reco MICO Share Price (RHS)
1-Jan-2002 =100
Represents an Upgrade
Represents a Downgrade
Represents Reiteration of Existing Rating
Details of First Globals Rating System given at the end of the report
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Financial Snapshot - Standalone
(YE December 31st) (Rs. mn) 2001 2002 2003 2004 2005 2006ETotal Revenue 14,668 15,761 19,511 23,991 29,961 35,886
Revenue Growth (Y-o-Y) 7.4% 23.8% 23.0% 24.9% 19.8%
EBIDTA 2,266 2,817 4,639 5,907 6,537 8,258
EBIDTA Growth (Y-o-Y) 24.3% 64.7% 27.3% 10.7% 26.3%
Reported Net Profit 817 1,348 2,350 3,748 3,524 4,471
Proforma Net Profit 782 1,320 2,345 3,558 3,579 4,471
Net Profit Growth (Y-o-Y) 68.8% 77.7% 51.7% 0.6% 24.9%
Shareholders Equity 6,342 7,055 9,154 12,539 15,701 17,971
Number of Diluted shares(mn) 32 32 32 32 32 32
Key Operating Ratios
(YE December 31st) 2001 2002 2003 2004 2005 2006E
Reported EPS (Rs) 25.50 42.07 73.33 116.93 109.96 139.50
Proforma EPS (Rs) 24.39 41.18 73.15 111.00 111.66 139.50
EPS Growth (Y-o-Y) 68.8% 77.7% 51.7% 0.6% 24.9%
CEPS (Rs.) 66.0 74.6 104.8 141.9 167.9 211.8
OPM (%) 15.4% 17.9% 23.8% 24.6% 21.8% 23.0%
NPM (%) 5.3% 8.4% 12.0% 14.8% 11.9% 12.5%
RoE (%) 24.7% 19.7% 28.9% 32.8% 25.3% 26.6%
RoCE (%) 18.7% 26.5% 29.7% 20.2% 18.8%
RoCE (Operating Assets) (%) 26.7% 60.6% 75.2% 48.6% 46.3%
Book Value per share (Rs.) 197.9 220.1 285.6 391.2 489.9 560.7
Debt/Equity (x) 0.08 0.11 0.11 0.12 0.41 0.50
Valuation Ratios
(YE December 31st) 2001 2002 2003 2004 2005 2006E
P/E (x) 24.2 19.3
P/BV (x) 5.5 4.8
P/CEPS (x) 16.1 12.7
EV/EBIDTA (x) 12.7 10.1
Market Cap./ Sales (x) 2.9 2.4
DuPont Model
(YE December 31st) 2001 2002 2003 2004 2005 2006E
EBIDTA/Sales (%) 15.6% 18.2% 24.4% 25.4% 22.2% 23.3%
Sales/Operating Assets (x) 6.1 3.9 5.4 5.6 5.0 4.7
EBIDTA/Operating Assets (%) 95.1% 70.1% 132.5% 142.7% 111.5% 108.6%
Operating Assets/ Net Assets(x) 85.7% 67.2% 46.6% 39.5% 35.5% 32.8%
Net Earnings/ EBIDTA (%) 34.5% 46.9% 50.5% 60.2% 54.7% 54.1%
Net Assets/ Equity (x) 0.9 0.9 0.9 1.0 1.2 1.4
Return on Equity (%) 24.7% 19.7% 28.9% 32.8% 25.3% 26.6%
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Common Sized Profit & Loss Account
(YE December 31st) 2001 2002 2003 2004 2005 2006E
Total Revenues 100% 100% 100% 100% 100% 100%
Net Raw Materials Consumed 42.7% 40.8% 39.8% 42.9% 49.7% 49.0%
Manufacturing Expenses 8.9% 8.9% 8.6% 8.1% 6.7% 6.6%
SG&A Expenses 21.0% 19.7% 16.5% 14.1% 12.7% 12.5%
Personnel 13.6% 13.2% 11.7% 11.1% 9.1% 8.9%
EBITDA 15.4% 17.9% 23.8% 24.6% 21.8% 23.0%
Depreciation and Amortization 9.1% 6.8% 5.2% 4.1% 6.0% 6.5%
Interest -0.3% -0.9% -1.2% -1.4% -1.9% -1.6%
PBT 8.4% 12.5% 19.6% 22.3% 18.5% 19.0%
PAT 5.3% 8.4% 12.0% 14.8% 11.9% 12.5%
# No of shares has been adjusted for stock split
Key Statistics
Shareholdoing pattern (as on 31/12/2005)
Total Promoters
61%
Total Non Promoter
Corporate Holding
2%
Total Institutions21%
Total Foreign
7%
Total Public & Others
9%
Total ForeignTotal InstitutionsTotal Non Promoter Corporate HoldingTotal PromotersTotal Public & Others
Industry: Auto-Components
52 Week Hi:Lo: Rs.2997/1730
CMP: Rs.2696.6
Avg Daily Vol (20 days): 0.08 mn
Avg Daily Val (20 days): Rs.24.319 mn
Performance over 52 weeks:
Mico : up 38.8%
Nifty: up 47.0%
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MICOs Business in Pictures (FY04)(All figures are in Rs. Mn except where stated otherwise. All percentages are percent of revenues,
unless otherwise stated)
Balance Sheet
2066.61 (100%)Assets
Fixed Assets: 2590(13%)
Investments: 5541 (28%)
L& A: 1973 (10%),
Debtors: 2142 (11%),
Inventory: 2841 (14%)
Cash: 4958 (25%),Others Current Assets: 21 (0.1%)
Long-Term
1479 (7%)
Short-Term
0 (0.0%)
Liabilities
Equity: 321 (2%)
Reserves: 12219 (61%)
Debt: 1479 (7%)
Sundry Liabilities: 4962 (25%)
Provisions: 2783 (14%)
Net Deferred Liability: -1696 (-8%)
Operations/ Value added
Total Revenues: Rs. 23,991 mn
Manpower:
3382 (15%)
Mfg Expenses:
1954 (8%)
Other Expenses:
2654 (11%)Raw Materials
Components, other
tools, Filters,
Hydraulics, spark
plugs and
Lubricating oilsEBIDTA
5907
(25%)
Profit Before Tax
5350 23%
Interest: -325 (-1%)
Depreciation: 989 (4%)
Other Income: 106 (0.5%)
Taxes
1888 (8%)
Proforma PAT
3558 (15%)
Finished Products:
Filters, Nozzle, Fuel
Injection pump, Spark
Plugs
Volumes (FY05)
Filters: 21490000, Nozzle:
9724000, Fuel Injection
pump: 2250000, Spark
Plugs: 18824000
Markets
Domestic &
Foreign
Avg. Revenue
per unit (FY04)
Filters Rs. 62,
Nozzle Rs. 577,
Fuel Injectionpump Rs. 4632,
Spark Plugs Rs.
28
Exports:
Rs.3,992 mn: 17% of totalrevenues
Below Operating
Line
Domestic Customers:
Tata Motors, Ashok Leyland,
M&M, Bajaj auto, Hero Honda,
Global Customers:
General Motors, Mercedes Benz
Market Share:
Fuel Injection
Pumps: 85%,
Spark Plugs:
65%
RM: 10300
(44%)
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The StoryMotor Industries Co. Ltd. (MICO) has seen its growth and stock price flying off their respective
charts during the last few years. The boom in the domestic 4-wheeler segment and exports has driven
the growth at MICO, which is a leader in
the diesel fuel injection equipment
industry with a market share of 85%. The
stock has taken off like a shot in response
and has outperformed the market by 566%
percentage points and appreciated by an
eye-popping 726% over the last three
years. The run up in the stock price has
been due to MICOs strong export growthprospects, coupled with the companys
strong position in the domestic market.
Given MICOs excellent performance and
the stocks dream run on the bourses, the
question now for investors is whether the
stock still represents a growth opportunity.
A changing product mix towards
distributor pumps, increased investments
towards the diesel segment to meet the
expected higher growth in that segment,
robust growth in the companys non-automotive segment and higher export growth driven by theincreased transfer of product lines by its parent company make the long-term prospects appear bright
for MICO. However, we do not expect the
company to post good growth numbers in the
near-term, due to temporary hiccups related to
the meeting of Euro norms, its expansion
programs and the expected slow down in the
commercial vehicles segment. MICO is also
facing stiff competition in the replacement
segment in the form of cheaper imports from
Thailand. In view of the companys long-term
earnings visibility, as a result of its leadershipposition in the diesel fuel injection equipment
industry, coupled with its exports growth, we
initiate our coverage on MICO with a rating of
Long-term Outperform.
MICOs topline grew at a CAGR of 11.3%
during the last 5 years, while the EBIDTA margin grew at a CAGR of 21.4%. The domestic
commercial vehicles and tractor industry together contribute over 74% of its total revenues. Since the
year 2001, exports have been driving the growth at MICO and have grown at a CAGR of 17.5%
during the last 5 years. Due to the companys low cost manufacturing capability, several product
lines have been transferred to India by its parent company Robert Bosch.
Motor Industries Co. Ltd. (MICO) has seen itsgrowth and stock price flying off their respectivecharts during the last few years. The boom in the
domestic 4-wheeler segment and exports hasdriven the growth at MICO, which is a leader in
the diesel fuel injection equipment industry with amarket share of 85%
a changing product mix towards distributorpumps, increased investments towards the diesel
segment to meet the expected higher growth in thatsegment, robust growth in the companys non-automotive segment and higher export growth
driven by the increased transfer of product lines byits parent company make the long-term prospects
appear bright for MICO
We do not expect the company to post goodgrowth numbers in the near-term, due to
temporary hiccups related to the meeting ofEuro norms, its expansion programs and the
expected slow down in the commercialvehicles segment
in view of the companys long-term
earnings visibility, as a result of its leadershipposition in the diesel fuel injection equipmentindustry, coupled with its exports growth, weinitiate our coverage on MICO with a rating
of Long-term Outperform
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In order to further strengthen its position, MICO has entered into a JV with Mann Hummel GmbH to
develop and produce fuel filter systems, as well as oil, fuel, air and cabin filters. The JV will also be
used an export base and will become operational in mid-2006. The company has undertaken
expansion plans with a total capex of Rs. 10 bn during 2005-07, out of which Rs. 5.5 bn will be
allocated towards diesel fuel injection equipment (CRS).
The non-automotive businesses contributed 8% of revenues in FY04. In H1 FY05, sales from thenon-automotive business rose by 56% to Rs. 715.5 mn and the profit margin rose from 8.9% to
13.1%. The robust growth in this segment is expected to continue in the future.
After recording an increasing trend in margins for the last 5 years, the margins have declined in H1
FY05. The operating profit margin (OPM) increased by 800 bps during the last 3 years to 17% in
FY04, although it declined by 340 basis points to 20.4% in HI FY05. The decline in the OPM was on
account of the rise in raw material prices, which could not be fully passed on to the customers. In H1
FY05, the PAT declined by 10% to Rs. 1897 mn. The dip in the margins has been factored in the
stock price, which has been stagnating during the last 3 months and has witnessed a nominal dip of
0.31%. Also, due to the changes in infrastructure for manufacturing Euro emission compliant
components, there were some hiccups in the companys production schedule, which impacted
margins. MICO expects these issues to be resolved by CY05.
We expect revenues and the proforma EPS to be Rs. 5.19 bn and Rs. 111.7 respectively for FY05.
The stock is currently trading at a P/E of 24.2 FY05E. We expect MICO to resume posting strong
numbers once its expansion program is completed. Over the next three years, we expect the
companys revenues and proforma EPS to grow at a CAGR of 21.5% and 15.4% respectively.
Considering the long-term earnings visibility as a result of its leadership position in the diesel fuel
injection equipment space and the companys exports growth, we rate MICO as Long-term
Outperform.
Indian comparative Valuations
OPM ROE ROCE
Company P/E P/S P/BV EV/EBITDA EV/Sales % % %
AnnualEPS
Growth%
AnnualSales
Growth%
FY06E FY07E FY06E FY07E FY06E FY07E FY06E FY07E FY06E FY07E FY06E FY06E FY06E FY07E %FY07E %
Bharat Forge 44.51 33.2 5.59 4.3 9.24 7.8 24.81 18.0 6.17 4.73 24.8% 31.0% 16.6% 35.1% 30.0%
Omax Auto 15.26 13.5 0.51 0.4 2.65 2.3 7.19 6.1 0.67 0.57 9% 19% 10% 13% 17%
MICO 24.17 19.3 2.89 2.4 5.51 4.8 12.70 10.1 2.77 2.3 21.8% 25.3% 20.2% 24.9% 19.8%
Sundaram Fasteners 22.18 17.6 1.50 1.3 4.89 4.0 12.86 10.6 1.80 1.55 19.6% 21.3% 10.5% 25.8% 20.4%
Note: Standalone estimates, MICO Year Ending CY05Sources: FG Estimates, Bloomberg Estimates
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Current valuations at above their 10-year average
The companys margins have remained steady within a narrow range of 20-25% for the EBIDTA
and 5-8% for the PAT. The margins declined in FY00-01, resulting from the slump in the Indian
automotive industry, particularly commercial vehicles, which contributes a lions share of MICOs
sales. However, the margins bounced back after the company ventured into the non-automotive
segment and also due to the increased share of exports. Margins during the recent fiscal year (FY04)as well as our estimates for FY05 took a hit due to cost pressure and heavy depreciation expenses.
We expect the cost pressure to ease and the EBIDTA and PAT to rise in FY06 to 23.0% and 12.5%
respectively.
MICO is heavily dependent on the commercial vehicles segment for its sales. Its valuations havebeen following the same trend as that of the commercial vehicle companies. Be it the slump inFY00-01 or the rise in FY02-03, the trend has been similar. Our estimated valuations for FY05 arebelow the 15-year averages, although they are certainly above the 10-year averages, thus indicating
that the stock is available at a premium due to the diversifying factor (increasing share of exports,
coupled with the companys entry into the non-auto businesses).
Valuation Ratios
0
10
20
30
40
50
60
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05E
Years
Ratios
P/E P/BV P/CEPS EV/EBIDTA P/S
EBIDTA and PAT Margins
0%
5%
10%
15%
20%
25%
30%
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05E
Years
EBIDTA&PATMargin
EBIDTA Margin PAT Margin
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Investment Thesis
Changing product mix holds significant growth potential for the future
MICO manufactures spark plugs for petrol engines, and fuel injection equipment for diesel engines,
and a wide range of auto components, which includes delivery valve nozzles, nozzle holders, filters,
filter inserts, glow plugs, glow indicators, glow resistors, starter motors, etc.
MICO is the market leader in fuel injection equipment,
with a market share of 85%, and the only other player in
the segment is Delphi-TVS. The segments market share
is expected to grow to 60% from the present 51% in the
next 8-10 years. Thus, the segment holds promising
growth potential in the years to come.
With the phasing in of Euro II norms, the companys
product mix is shifting towards distributor pumps from
single cylinder pumps (satisfies Euro I norms, used for
low HP tractors, Three-wheelers, agricultural equipments
and industrial applications) and multi cylinder pumps
(satisfies Euro I norms, used for tractors, commercial vehicles, utility vehicles). This change in the
product mix has led to increased cost of inputs. For the nine months ended September 2005, the
topline and raw material costs grew by 25% and 45% respectively, this leading to pressure on
margins.
Investments in diesel segment to drive future growth
In line with the expected growth in the diesel segment, 60% of MICOs investments are targeted at
this segment. In 2005, MICO will invest approximately Rs. 5 bn, which will be almost 5 times the
companys total investment made in 2004. The total investment planned during the period 2005-07 is
Rs. 18 bn, out of which Rs. 5.5 bn will be towards the diesel fuel injection segment. The company
has also planned an investment of Rs. 850 mn to enhance the capacity at the Jaipur plant (the plant
manufactures E pumps for automobiles), which will supply pumps to help implement the Bharat
State II stage emission norms.
Europe has witnessed a rise in the number of diesel vehicles during the last decade and the sameincrease will be witnessed in India, thereby taking the share of
the diesel segment higher to 37% (from the present 29%)
during the next 8-10 years. In 2005, the company delivered
around 40,000 common-rail systems in India and this is likely
to go up to 600,000 in 2010. The targeting of investments
towards developing areas, like the diesel segment, and the
expansion of export oriented product lines will help drive the
future growth at MICO.
MICO is the market leader in fuelinjection equipment, with a marketshare of 85%, and the only other
layer in the segment is Delphi-TVS.The segments market share is
expected to grow to 60% from the
present 51% in the next 8-10 years.Thus, the segment holds promisingrowth potential in the years to come
The targeting of investmentstowards developing areas, like
the diesel segment, and theexpansion of export oriented
product lines will help drive thefuture growth at MICO
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0
0.5
1
1.5
2
2.5
Revenue(bn)
FY00 FY01 FY02 FY03 FY04
Years
Trend of non-automotive businesses
Hydraulic Equipment Power Tools Others
Higher growth in the non-automotive segment
MICOs non-automotive businesses include power tools, security systems, Blaupunkt car packaging
machinery, etc. The non-automotive business now forms a sizeable part of the revenues for MICOand has grown at a CAGR of 11.2% during the last 4 years. Sales stood at Rs. 2.05 bn in FY04,
contributing to 8% of the total revenues. In H1 FY05, revenues from the non-automotive business
rose by 56% to Rs. 715.5 mn, whereas revenues from the automotive segment rose by 22%. The
profit margin of the non-automotive business rose from 8.9% to 13.1%. The robust growth in this
segment is expected to continue in the future.
Trend of non-automotive businesses
Transfer of product lines to augment exports
MICOs low cost manufacturing capabilities has led to product line transfers to India by its parent
company Robert Bosch. The product line transfers include single cylinder pumps from the Czech
Republic, multi-pumps from Austria, and KCA injectors from France to MICO's Bangalore plant.
Also, injectors and nozzles from Europe have been relocated to Nasik, regulators from the UK to the
Nagnathapura plant, and Cylinder VE distributor pumps from Germany to the Jaipur plant.
In order to further strengthen its position in fuel filter systems as well as oil, fuel, air and cabin
filters, MICO has entered into a JV with Mann Hummel GmbH for the Indian market and forfulfilling the export demand. The JV will commence production of filters by mid-2006 with some
350 associates. An investment of about Rs. 6 mn will be made towards this and MICO will now
become a worldwide supply base for these products.
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Export revenues and growth
Exports grew at a CAGR of 18% during the last 5 years. The share of exports improved to 23% in
H1 FY05 from 17% in FY04. Exports stood at Rs. 4 bn in FY05, up from Rs. 1.9 bn in FY01. The
management expects the export contribution to rise by 500 bps to 20% of revenues by FY08.
Continued transfers from its parent company will lead to increased exports, better margins and
increased profitability for MICO.
Robust domestic sales growth to continue
MICO is the undisputed leader in the diesel fuel injection equipment market, contributing to around
8-9 units out of every 10 units sold. The share of the diesel segment is expected to increase to 60%
from the present 51% in the next 8-10 years. We expect the growth in the automotive segment to
translate into a CAGR of 22% over FY04-06 for MICO.
The year-to-date sales growth and our estimates for FY06 in the automotive segment are as follows:
Segment
Year to Date (Apr
Dec) Domestic
Sales
Year to Date
(Apr Dec)
Domestic Sales
Growth
FG Estimated
CAGR Sales
Growth for
FY05-07
Commercial
Vehicles
266,227 9.5% 9-10%
Passenger Vehicles 809,294 5.9% 8-10%
Two Wheelers 5,200,247 12.7% 14-16%
Tractors* 161,155 15% 10-12%
* Tractor Sales from April to August
Sources: SIAM, TMA
Exports and Revenue Grow th
-20%
-10%
0%
10%
20%
30%
40%
50%
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04
Years
Exportsgrowth
0
500
1000
1500
2000
2500
3000
3500
40004500
Exports
Exports Exports Growth
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Thailand FTA impacts replacement market sales
The opening up of the trade routes with Thailand has done more bad than good for MICO. The FTA
includes six categories of auto components that can be traded. This is good news for Thailand autocomponent makers who are reported to have excess
capacities to the extent of 20-25% and are ready to
service fresh demands from their existing capacities.
Thailands cost of production is much cheaper than
that of India, due to lower import duties on steel,
which, coupled with the current duty reductions under
the FTA, will make their components cheaper. These
cheaper imports are impacting MICOs sales in the
replacement market. These cheap Thailand imports
may also find their way to OEMs in the future.
Auto components falling under Early Harvest scheme of Indo-Thai FTA
Auto Components
Helical Springs
Parts Suitable for use solely/principally with spark-ignition internal
combustion piston engines other than parts for aircraft engines
Other pumps
Ball bearings
Other lighting/ visual signalling equipment
Gear boxes
Source: ACMA
Thailands cost of production is muchcheaper than that of India, due to lowerimport duties on steel, which, coupledwith the current duty reductions underthe FTA, will make their componentscheaper. These cheaper imports are
impacting MICOs sales in thereplacement market. These cheap
Thailand imports may also find their
way to OEMs in the future
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Financials
Performance Highlights of Q3 FY05
In Rs. Mn Q3FY05 Q3FY04 Q2FY05 Y-o-Y %
Seq. Q-o-Q
%
Net Sales 7,946 6,043 7,632 31.5% 4.1%
Less: Total Expenditure
Net Raw Material consumed 4,042 2,652 3,845 52.4% 5.1%
Other Expenses 1,278 1,113 1,092 14.8% 17.0%
Staff Cost 890 803 1,036 10.7% -14.1%
Total Expenditure 6,210 4,568 5,973 35.9% 4.0%
EBIDTA 1,736 1,475 1,659 17.7% 4.7%
Less: Depreciation 600 215 302 178.4% 98.4%
EBIT 1,137 1,259 1,357 -9.8% -16.2%Add: Other income 63 110 93 -42.2% -31.6%
Less: Interest -132 -97 -115 36.7% 15.5%
Profit Before Extraordinary items and Tax 1,332 1,466 1,564 -9.1% -14.8%
Less: Extraordinary Expense (net) 11 36 43 NM NM
Profit Before Tax 1,321 1,430 1,521 -7.6% -13.1%
Less: Total Tax 473 494 541 -4.2% -12.5%
Profit After Tax 848 936 980 -9.5% -13.5%
Proforma Net Profit 836 900 937 -7.1% -10.7%
Shares Outstanding (mn) 32 32 32
EPS (Non-Annualised) (Rs.) 26.4 29.2 30.6 -9.5% -13.5%RM/Net Sales 50.87% 43.88% 50.38%
Other Expenses/Net Sales 16.08% 18.42% 14.31%
Staff Cost/Net Sales 11.20% 13.30% 13.57%
EBIDTA Margin 21.85% 24.41% 21.74%
Proforma NPM 10.53% 14.90% 12.27%
Effective Tax Rate 35.53% 33.69% 34.58%
For Q3 FY05, MICO posted a 31% rise in sales to Rs. 763.2 mn. A change in the product-mix, with
revenues shifting more towards distributor pumps, was one of the reasons for the growth in raw
material expenditure.
The increase in raw material expenses appears huge in comparison to that in Q3 FY04 (up from
43.9% to 50.9% as a percentage of sales), although it grew sequentially to 50.9% as a percentage of
sales from 50.4%. This stabilisation in raw material costs, coupled with the decline in personnel
expenditure, led to the EBIDTA margin rising sequentially to 21.9%. Revenues from the automotive
segment accounted for 90% of total sales and were higher by 30% at Rs. 7061.6 mn. The non-
automotive segments revenues grew by 48% to Rs. 746.5 mn.
Ironically, this failed to translate into a bottomline growth, despite a decent topline growth. Cost
pressures and increased depreciation had the highest impact on profitability. The company follows a
written-down value approach, resulting in higher depreciation during periods of high capex. The
PAT margin declined to 10.5% from 14.90% in Q3 FY04. The PAT declined by 14% sequentiallyand by 9.5% Y-o-Y.
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Sensitivity Analysis: DCF Fair value range is3000 to 3100
Sensitivity Analysis
Given below are the DCF Fair Value Sensitivity Analysis tables for MICO. Our analysis gives amost likely Fair Value estimate of Rs. 3000-3100 per sharebut you can read off your value
depending on your terminal assumptions.
gA Growth rates in NOPLAT for FY11 to FY15
gB Growth rates in NOPLAT beyond FY15
WACC Weighted Average Cost of Capital
ROICb Return on Incremental capital beyond FY15
Explicit Period Sensitivity of gA against WACC for computing the Fair Value
g(a)
14.5% 15.0% 15.5% 16.0% 16.5% 17.0% 17.5% 18.0% 18.5% 19.0% 19.5% 20.0%
9.9% 4255 4312 4370 4429 4488 4549 4610 4673 4736 4801 4866 4932
10.1% 4042 4094 4148 4202 4257 4313 4369 4427 4485 4545 4605 4666
10.3% 3849 3897 3947 3997 4048 4099 4152 4205 4259 4314 4369 4426
10.5% 3673 3718 3764 3810 3857 3905 3953 4003 4053 4103 4155 4207
10.7% 3513 3555 3597 3640 3684 3728 3773 3819 3865 3912 3960 4008
10.9% 3366 3405 3444 3484 3525 3566 3607 3650 3693 3737 3781 3826
11.1% 3231 3267 3304 3341 3378 3417 3456 3495 3535 3576 3617 3658
11.3% 3106 3140 3174 3209 3244 3279 3315 3352 3389 3427 3465 3504
11.5% 2991 3022 3054 3086 3119 3152 3186 3220 3255 3290 3326 336211.7% 2884 2913 2943 2973 3004 3035 3066 3098 3130 3163 3196 3230
11.9% 2785 2812 2840 2868 2896 2925 2955 2984 3015 3045 3076 3108
12.1% 2692 2717 2743 2770 2796 2823 2851 2879 2907 2935 2964 2994
12.3% 2605 2629 2653 2678 2703 2728 2754 2780 2806 2833 2860 2888
WACC
12.5% 2524 2547 2569 2592 2616 2639 2663 2688 2712 2737 2763 2788
Shaded area represents First Globals most likely estimates
Implicit Period Sensitivity of gB against ROICb for computing the Fair Value
g(b)
3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0%
14.7% 2830 2865 2905 2951 3004 3067 3142 3232 3344 3486 3673 3929
14.8% 2835 2871 2912 2959 3013 3077 3154 3247 3362 3508 3699 3962
14.9% 2839 2876 2918 2966 3022 3088 3166 3261 3379 3529 3726 3995
15.0% 2843 2881 2924 2973 3031 3098 3178 3276 3397 3550 3751 4027
15.1% 2847 2886 2930 2980 3039 3108 3190 3290 3414 3571 3777 4059
15.2% 2851 2891 2936 2987 3047 3118 3202 3304 3431 3591 3802 4091
15.3% 2855 2895 2941 2994 3056 3128 3214 3318 3447 3611 3827 4122
15.4% 2859 2900 2947 3001 3064 3137 3225 3332 3464 3631 3851 4152
15.5% 2863 2905 2953 3008 3072 3147 3237 3345 3480 3651 3875 4183
15.6% 2867 2910 2958 3015 3080 3156 3248 3359 3496 3670 3899 4212
ROIC(b)
15.7% 2870 2914 2964 3021 3088 3166 3259 3372 3512 3689 3922 4242
Shaded area represents First Globals most likely estimates
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Financials
Earnings Model of MICO.IN (MICO.BO) - Standalone(Year Ending Dec 31st) (Rs. Mn) Q1FY04 Q2FY04 Q3FY04 Q4FY04 FY04 Q1FY05 Q2FY05 Q3FY05 Q4FY06E FY06E FY07E
Net Revenue 5730 6031 6043 6365 23991 6593 7632 7946 7790 29961 35886
Less: Operating Expenditure 4245 4469 4568 5070 18084 5072 5973 6210 6170 23424 27628
EBIDTA 1485 1562 1475 1295 5907 1522 1659 1736 1620 6537 8258
Depreciation 216 183 215 374 989 302 302 600 600 1804 2316
EBIT 1269 1378 1259 921 4918 1219 1357 1137 1021 4733 5941
Add: Other income 244 78 110 51 106 32 93 63 63 251 312
Less: Interest -76 -84 -97 -69 -325 -184 -115 -132 -132 -563 -556
Profit Before Extraordinary items and
Tax 1589 1541 1466 1040 5350 1435 1564 1332 1216 5548 6810
Add: Extraordinaries (net) 0 19 36 -122 -286 0 43 11 0 0 0
Profit Before Tax 1589 1522 1430 1162 5635 1435 1521 1321 1216 5548 6810
Less: Total Tax 465 497 494 432 1888 518 541 473 437 1969 2338
Profit After Tax 1124 1024 936 730 3748 917 980 848 780 3579 4471
Proforma Net Profit 1124 1037 960 654 3558 917 1023 859 780 3579 4471
Shares Outstanding (mn) 32 32 32 32 32 32 32 32 32 32 32
Reported EPS (Rs.) 35 32 29 23 117 29 31 26 24 110 140
Proforma EPS (Rs.) 35 32 30 20 111 29 32 27 24 112 140
EBIDTA Margin 25.91% 25.89% 24.41% 20.35% 24.62% 23.08% 21.74% 21.85% 20.80% 21.82% 23.01%
EBIDT Margin 22.14% 22.86% 20.84% 14.47% 20.50% 18.49% 17.78% 14.30% 13.10% 15.80% 16.56%
Proforma NPM 19.61% 17.20% 15.88% 10.27% 14.83% 13.91% 13.41% 10.81% 10.01% 11.95% 12.46%
Effective Tax Rate 29.26% 32.69% 34.54% 37.15% 33.50% 36.08% 35.56% 35.83% 35.91% 35.49% 34.34%
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Profit & Loss A/c - Standalone Basis
(Year ended Dec.31) (In Rs. Mn) 2001 2002 2003 2004 2005E 2006E
Gross Sales 16063 17130 21013 25833 32735 39283
Less: Excise Duty 1550 1623 2035 2553 3236 3883
Net Sales 14513 15507 18979 23279 29500 35400
Add: Operating Income 155 254 533 711 461 486
Total Revenue 14668 15761 19511 23991 29961 35886
Less:
Raw Material 6259 6425 7759 10300 14884 17592
Manufacturing Expenses 1306 1410 1681 1954 2010 2354
Personnel 3074 3112 3226 3382 3809 4496
Selling and Administration 1995 2084 2289 2654 2720 3186
Less: Exps Capitalised 231 87 83 207 0 0
Total Operating Expenditure 12403 12944 14872 18084 23424 27628
EBIDTA 2266 2817 4639 5907 6537 8258
Less: Depreciation 1334 1072 1016 989 1804 2316
EBIT 932 1744 3623 4918 4733 5941
Non-Operating Income 252 78 -22 106 251 312
Extraordinary Income 56 43 10 286 0 0
Extraordinary Expense 0 0 0 0 55 0
Interest -51 -147 -225 -325 -563 -556
Profit before tax 1290 2013 3836 5635 5493 6810
Total Tax 473 664 1486 1888 1969 2338
Profit after Tax 817 1348 2350 3748 3524 4471
Proforma Net Profit 782 1320 2345 3558 3579 4471
Source: Company Reports, FG Estimates
Balance Sheet - Standalone Basis
(Year ended Dec.31) (In Rs. Mn) 2001 2002 2003 2004 2005E 2006E
LIABILITIES
Equity Capital 341 321 321 321 321 321
Preference Share Capital 0 0 0 0 0 0
Reserves & Surplus 6002 6734 8833 12219 15381 17650
Net Worth 6342 7055 9154 12539 15701 17971
Net Deferred tax liability/(Asset) -1279 -1411 -1483 -1696 -1481 -1266
Total Loans 496 748 975 1479 6479 8979
Capital Employed 5559 6392 8646 12322 20699 25684
ASSETS
Gross Block 13699 14263 14392 14894 19037 22287
Less: Depreciation 11236 11973 12465 12947 16562 19390
Net Block 2463 2290 1927 1947 2475 2897Capital WIP 249 165 144 644 1500 750
Investments 1017 1667 2915 5541 9418 9418
Current Assets
Inventories 1660 1520 2213 2841 3744 4554
Sundry Debtors 2236 1795 2004 2142 2829 3394
Normal Cash and Bank Balance 1400 3351 4892 4958 7468 12137
Loans and Advances 750 1067 878 1994 2233 2629
Less:Current Liab. and Provisions
Sundry Creditors 1465 2083 1981 2768 3594 4239
Provisions 1856 2057 2353 2783 2831 2981
Others 895 1324 1993 2194 2542 2875
Total current liabilities & provisions 4216 5464 6327 7745 8967 10095Capital Employed 5559 6392 8646 12322 20699 25684
Source: Company Reports, FG Estimates
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Commonsized Profit & Loss A/c - Standalone Basis
(Year ended Dec.31) 2001 2002 2003 2004 2005E 2006E
Gross Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Less: Excise Duty 9.6% 9.5% 9.7% 9.9% 9.9% 9.9%
Net Sales 90.4% 90.5% 90.3% 90.1% 90.1% 90.1%
Add: Operating Income 1.0% 1.5% 2.5% 2.8% 1.4% 1.2%
Total Revenue 91.3% 92.0% 92.9% 92.9% 91.5% 91.4%
Less:
Raw Material 39.0% 37.5% 36.9% 39.9% 45.5% 44.8%
Manufacturing Expenses 8.1% 8.2% 8.0% 7.6% 6.1% 6.0%
Personnel 19.1% 18.2% 15.4% 13.1% 11.6% 11.4%
Selling and Administration 12.4% 12.2% 10.9% 10.3% 8.3% 8.1%
Less: Exps Capitalised 1.4% 0.5% 0.4% 0.8% 0.0% 0.0%
Total Operating Expenditure 77.2% 75.6% 70.8% 70.0% 71.6% 70.3%
EBIDTA 14.1% 16.4% 22.1% 22.9% 20.0% 21.0%
Less: Depreciation 8.3% 6.3% 4.8% 3.8% 5.5% 5.9%
EBIT 5.8% 10.2% 17.2% 19.0% 14.5% 15.1%
Non-Operating Income 1.6% 0.5% -0.1% 0.4% 0.8% 0.8%
Extraordinary Income 0.3% 0.3% 0.0% 1.1% 0.0% 0.0%
Extraordinary Expense 0.0% 0.0% 0.0% 0.0% 0.2% 0.0%
Interest -0.3% -0.9% -1.1% -1.3% -1.7% -1.4%
Profit before tax 8.0% 11.7% 18.3% 21.8% 16.8% 17.3%
Total Tax 2.9% 3.9% 7.1% 7.3% 6.0% 6.0%
Profit after Tax 5.1% 7.9% 11.2% 14.5% 10.8% 11.4%
Proforma Net Profit 4.9% 7.7% 11.2% 13.8% 10.9% 11.4%
Source: Company Reports, FG Estimates
Commonsized Balance Sheet - Standalone Basis
(Year ended Dec.31) 2001 2002 2003 2004 2005E 2006E
LIABILITIES
Equity Capital 6.1% 5.0% 3.7% 2.6% 1.5% 1.2%
Preference Share Capital 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Reserves & Surplus 108.0% 105.4% 102.2% 99.2% 74.3% 68.7%
Net Worth 114.1% 110.4% 105.9% 101.8% 75.9% 70.0%
Net Deferred tax liability/(Asset) -23.0% -22.1% -17.2% -13.8% -7.2% -4.9%
Total Loans 8.9% 11.7% 11.3% 12.0% 31.3% 35.0%
Capital Employed 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
ASSETS
Gross Block 246.4% 223.1% 166.5% 120.9% 92.0% 86.8%
Less: Depreciation 202.1% 187.3% 144.2% 105.1% 80.0% 75.5%
Net Block 44.3% 35.8% 22.3% 15.8% 12.0% 11.3%Capital WIP 4.5% 2.6% 1.7% 5.2% 7.2% 2.9%
Investments 18.3% 26.1% 33.7% 45.0% 45.5% 36.7%
Current Assets
Inventories 29.9% 23.8% 25.6% 23.1% 18.1% 17.7%
Sundry Debtors 40.2% 28.1% 23.2% 17.4% 13.7% 13.2%
Normal Cash and Bank Balance 25.2% 52.4% 56.6% 40.2% 36.1% 47.3%
Loans and Advances 13.5% 16.7% 10.2% 16.2% 10.8% 10.2%
Less: Current Liab. and Provisions
Sundry Creditors 26.3% 32.6% 22.9% 22.5% 17.4% 16.5%
Provisions 33.4% 32.2% 27.2% 22.6% 13.7% 11.6%
Others 16.1% 20.7% 23.0% 17.8% 12.3% 11.2%
Total current liabilities & provisions 75.8% 85.5% 73.2% 62.9% 43.3% 39.3%Capital Employed 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Company Reports, FG Estimates
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Cash Flow Statement - Standalone Basis
(Year ended Dec.31) (In Rs. Mn) 2001 2002 2003 2004 2005E 2006E
From Operations
Profit Before Tax 1234.2 3826.4 5349.8 5547.6 6809.7 8211.5
Depreciation 1333.8 1016.0 988.8 1803.8 2316.3 2638.6
Less:
Dividend payout 99.4 208.3 320.5 320.5 320.5 320.5
Tax paid 472.9 1485.5 1887.7 1968.7 2338.4 2722.9
Dividend Tax 10.1 43.1 41.9 41.9 41.9 41.9
Operating cashflow 1985.7 3105.4 4088.5 5020.3 6425.2 7764.7
Changes in Capital Structure
Increase In Equity Share Capital 340.5 0.0 0.0 0.0 0.0 0.0
Increase in Share Premium 8.1 0.0 0.0 0.0 0.0 0.0
Increase in Other Reserves 5341.6 9.6 285.6 -54.5 -1839.2 -1408.9
Increase in Preferance share capital 0.0 0.0 0.0 0.0 0.0 0.0
Increase in Net Deferred tax liability -1279.0 -72.0 -213.0 215.0 215.0 215.0
Inc/(Dec) in Loans 496.4 226.8 504.2 5000.0 2500.0 2500.0
Inc/(Dec) in Equity/Loans 4907.6 164.3 576.8 5160.5 875.8 1306.1
Adjustments
Prior Period Adj.
Diff. in Depreciation 9902.4 -523.9 -507.0 1811.8 511.2 -463.6
Total Inflows 16795.7 2745.8 4158.2 11992.6 7812.3 8607.2
CASH OUTFLOWS
Working Capital Changes
Inc/(Dec) In Creditors 1464.6 -101.1 786.8 825.6 645.0 847.8
Inc/(Dec) In Provisions 1855.8 295.5 430.2 48.5 150.0 150.0
Inc/(Dec) In Other Current Liabilities 895.3 668.5 201.0 348.3 333.3 333.3Less:
Inc/(Dec) in Inventory 1660.1 693.0 627.9 902.7 809.9 910.7
Inc in Debtors 2236.2 208.8 138.3 686.9 565.7 678.9
Inc/(Dec) in Loans & adv 746.9 -185.7 1095.2 238.5 396.0 443.2
Inc/(Dec) In Other Current Assets 3.1 -3.3 20.7 0.0 0.0 0.0
Inc/(Dec) In Working Capital 430.5 -150.1 464.1 605.6 643.3 701.7
Capex/Investments
Inc/(Dec) in Invst 1017.0 1247.9 2626.2 3876.8 0.0 0.0
Addition to Gross Block 13699.4 129.2 501.3 4143.6 3250.0 2500.0
Inc/(Dec) in Capital WIP 248.8 -21.3 499.9 856.4 -750.0 0.0
Inc in Miscellaneous 0.0 0.0 0.0 0.0 0.0 0.0
Inc/(Dec) In Fixed Assets/Investments 14965.3 1355.9 3627.4 8876.8 2500.0 2500.0
Inc in Cash / Bank bal 1399.9 1540.1 66.7 2510.2 4669.0 5405.5
Total Outflows 16795.7 2745.8 4158.2 11992.6 7812.3 8607.2
Source: Company Reports, FG Estimates
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Common SizeCash Flow Statement - Standalone Basis
(Year ended Dec.31) 2001 2002 2003 2004 2005E 2006E
From Operations
Profit Before Tax 7.3% 139.4% 128.7% 46.3% 87.2% 95.4%
Depreciation 7.9% 37.0% 23.8% 15.0% 29.6% 30.7%Less:
Dividend payout 0.6% 7.6% 7.7% 2.7% 4.1% 3.7%
Tax paid 2.8% 54.1% 45.4% 16.4% 29.9% 31.6%
Dividend Tax 0.1% 1.6% 1.0% 0.3% 0.5% 0.5%
Operating cashflow 11.8% 113.1% 98.3% 41.9% 82.2% 90.2%
Changes in Capital Structure
Increase In Equity Share Capital 2.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Increase in Share Premium 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Increase in Other Reserves 31.8% 0.3% 6.9% -0.5% -23.5% -16.4%
Increase in Preference share capital 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Increase in Net Deferred tax liability -7.6% -2.6% -5.1% 1.8% 2.8% 2.5%
Inc/(Dec) in Loans 3.0% 8.3% 12.1% 41.7% 32.0% 29.0%
Inc/(Dec) in Equity/Loans 29.2% 6.0% 13.9% 43.0% 11.2% 15.2%
Adjustments 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Prior Period Adj. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Diff. in Depreciation 59.0% -19.1% -12.2% 15.1% 6.5% -5.4%
Total Inflows 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
CASH OUTFLOWS
Working Capital Changes
Inc/(Dec) In Creditors 8.7% -3.7% 18.9% 6.9% 8.3% 9.8%
Inc/(Dec) In Provisions 11.0% 10.8% 10.3% 0.4% 1.9% 1.7%Inc/(Dec) In Other Current Liabilities 5.3% 24.3% 4.8% 2.9% 4.3% 3.9%
Less:
Inc/(Dec) in Inventory 9.9% 25.2% 15.1% 7.5% 10.4% 10.6%
Inc in Debtors 13.3% 7.6% 3.3% 5.7% 7.2% 7.9%
Inc/(Dec) in Loans & advances 4.4% -6.8% 26.3% 2.0% 5.1% 5.1%
Inc/(Dec) In Other Current Assets 0.0% -0.1% 0.5% 0.0% 0.0% 0.0%
Inc/(Dec) In Working Capital 2.6% -5.5% 11.2% 5.1% 8.2% 8.2%
Capex/Investments
Inc/(Dec) in Invst 6.1% 45.4% 63.2% 32.3% 0.0% 0.0%
Addition to Gross Block 81.6% 4.7% 12.1% 34.6% 41.6% 29.0%
Inc/(Dec) in Capital WIP 1.5% -0.8% 12.0% 7.1% -9.6% 0.0%Inc in Miscellaneous 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Inc/(Dec) In Fixed Assets/Investments 89.1% 49.4% 87.2% 74.0% 32.0% 29.0%
Inc in Cash / Bank balance 8.3% 56.1% 1.6% 20.9% 59.8% 62.8%
Total Outflows 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Company Reports, FG Estimates
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Free Cash Flow Statement - Standalone Basis
(Year ended Dec.31) 2001 2002 2003 2004 2005E 2006E
EBITA 932 1744 3623 4918 4733 5941
Less: Adjusted Taxes 341.5 575.5 1403.1 1647.4 1699.0 2040.2
NOPLAT 590.1 1168.7 2220.1 3270.7 3034.1 3901.1
Depreciation 1333.8 1072.4 1016.0 988.8 1803.8 2316.3
Gross Cashflow 1924.0 2241.1 3236.1 4259.5 4837.9 6217.5
Increase in Working Capital 3907.3 -832.3 987.5 1310.4 1313.5 1421.6
Operating Cashflow -1983.3 3073.4 2248.6 2949.1 3524.4 4795.8
Net Capex 4045.8 815.5 631.9 1508.2 3188.2 1988.8
Increase in Net Other Assets -1472.1 -498.0 -892.0 -418.2 -611.8 -698.3
FCF From Operation -4557.0 2755.9 2508.8 1859.1 948.1 3505.4
Less: Inc./(Dec.) in Investment 1691.3 2551.6 2614.4 2477.8 6076.0 4374.0
FCF after Investment -6248.3 204.3 -105.6 -618.7 -5127.9 -868.6
Plus: Gain/(loss) on Extraordinary Items 35.4 28.7 5.9 189.9 -35.2 0.0
Plus: Foreign currency Translation Effect 0.0 0.0 0.0 0.0 0.0 0.0
Total FCF -6212.9 233.0 -99.8 -428.8 -5163.1 -868.6
Financing Cash Flow
Interest Exp/(inc) After Tax, Net -191.7 -151.0 -124.5 -287.0 -525.5 -570.2
Inc/(dec) in Excess Cash and Marketable
Securities 0.0 0.0 0.0 0.0 0.0 0.0
Dec/(Inc) in Debt -496.4 -251.5 -226.8 -504.2 -5000.0 -2500.0
Dividends 109.5 128.2 251.5 362.4 362.4 362.4
Share Repurchase/(Issues) -5634.4 507.4 0.0 0.0 0.0 1839.2
Total financing flow -6212.9 233.0 -99.8 -428.8 -5163.1 -868.6
Source: Company Reports, FG Estimates
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IMPORTANT DISCLOSURES
Price Target
Price targets (if any) are derived from a subjective and/or quantitative analysis of financial and non-
financial data of the concerned company using a combination of P/E, P/Sales, earnings growth,
discounted cash flow (DCF) and its stock price history.
The risks that may impede achievement of the price target/investment thesis are -
! Any adverse movement in oil and gas prices due to political disturbances, abnormal weather
conditions, global economic problems, supply disruptions etc. will affect the performance ofthe company.
! Changes in the regulatory environment may adversely impact the performance of the
company.
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Rating system of First GlobalOur rating system consists of three categories of ratings: Positive, Neutral and Negative. Within each
of these categories, the rating may be absolute or relative. When assigning an absolute rating, the
price target, if any, and the time period for the achievement of this price target, are given in the
report. Similarly when assigning a relative rating, it will be with respect to certain market/sector
index and for a certain period of time, both of which are specified in the report.
Rating in this report is relative to: S&P CNX Nifty Index
Positive Ratings
(i) Buy (B) This rating means that we expect the stock price to move up and achieve our specifiedprice target, if any, over the specified time period.
(ii) Buy at Declines (BD) This rating means that we expect the stock to provide a better (lower)entry price and then move up and achieve our specified price target, if any, over the specified time
period.
(ii) Outperform (OP) This is a relative rating, which means that we expect the stock price tooutperform the specified market/sector index over the specified time period.
Neutral Ratings(i) Hold (H) This rating means that we expect no substantial move in the stock price over thespecified time period.
(ii) Marketperform (MP) This is a relative rating, which means that we expect the stock price toperform in line with the performance of the specified market/sector index over the specified time
period.
Negative Ratings(i) Sell (S) This rating means that we expect the stock price to go down and achieve our specifiedprice target, if any, over the specified time period.
(ii)Sell into Strength (SS) This rating means that we expect the stock to provide a better (higher)exit price in the short term, by going up. Thereafter, we expect it to move down and achieve our
specified price target, if any, over the specified time period.
(iii) Underperform (UP) This is a relative rating, which means that we expect the stock price tounderperform the specified market/sector index over the specified time period.
(iv) Avoid (A) This rating means that the valuation concerns and/or the risks and uncertaintiesrelated to the stock are such that we do not recommend considering the stock for investment
8/7/2019 mico initiating coverage
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