CRISIL Research Ier Report Dhunseri 2013

8/13/2019 CRISIL Research Ier Report Dhunseri 2013

1/32

CRISILIERIndependentEquityResearch

Enhancing investment decisions

Dhunseri Petrochemand Tea Ltd

Reinitiating Coverage


2/32


Explanation of CRISIL Fundamental and Valuation (CFV) matrix

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

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

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

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

CRISILFundamental Grade Assessment

CRISILValuation Grade Assessment

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

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

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

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

1/5 Poor fundamentals 1/5 Strong downside (


3/32

Dhunseri Petrochem and Tea LtdCapacity-based expansion to drive growth

Fundamental Grade 3/5 (Good fundamentals)

Valuation Grade 5/5 (CMP has strong upside)

Industry Chemicals

1

December 17, 2013

Fair Value 187

CMP 110

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

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

Dhunseri Petrochem and Tea Ltd (Dhunseri), a dominant PET (polyethylene terephthalate)

player in India, is well prepared to cater to the growing demand for PET following doubling ofits capacity. Its upcoming greenfield plant in Egypt would offer locational advantage due to

proximity to end markets and raw material sources; it derives similar benefits from its Haldia

plant. Dhunseri stands to gain from the increase in demand for PET due to varied

applications of PET and strong growth in the end-user industries. However, the current over-

supply scenario and pressure on PET spreads are likely to continue over the next few years.

We reassign the fundamental grade of 3/5.

Locational advantage in Haldia gives edge; Egypt plant to strengthen its size and scaleDhunseris plant in Haldia (West Bengal) is located in proximity to raw material sources,

lowering logistic and inventory holding costs and, thereby, overall production costs. Further,

Dhunseris capacity will double with the commissioning of a 420,000 TPA (tonnes per annum)

plant in Egypt (to meet the increasing global demand for PET). Sales to Europe and America

from Egypt, Dhunseris key markets, are expected in half the time resulting in savings in

freight costs and efficient working capital management. The unit will also benefit from

proximity to raw material sources, availability of power at a cheaper rate and tax-free status.

Stands to gain from healthy growth in demand for PETDhunseri, being a dominant domestic player, is expected to benefit from strong demand from

end-user industries such as FMCG, beverages and pharma. Also, preference for PET as a

packaging material has increased due to its unique qualities eco-friendly, cost-effective and

recyclable. Domestic PET demand clocked ~30% CAGR during FY07-12. Global PET

demand is expected to grow at a CAGR of 5-6% over the next five years. PET spreads have

been weak due to over-supply; spreads are currently in the range of US$120-160 per tonne

compared to the five-year average of US$180-200 per tonne. We expect an improvement in

the long run with supply rationalisation of PET and PTA globally and pick-up in demand.

Key risks: Cyclical spreads, forex risk and political instability in EgyptThe spreads of PET resins are cyclical as is with all commodity businesses. The companys

imports and foreign loan transactions are un-hedged; any adverse movement in exchange

rates could adversely impact its profitability since its exposure is not entirely hedged byexports. Further, continuous social unrest and political instability in Egypt have delayed

project completion; continuous instability may pose a threat to the smooth functioning of

Dhunseris operations.

Revenues estimated to grow to 67.5 bn, EBITDA margin to improve in FY15We expect revenues to grow at a two-year CAGR of 66% to 67.5 bn in FY15, of which

29 bn is estimated to be contributed by the Egypt plant. EBITDA margin is estimated to

improve in FY15 driven by improvement in the PET spreads. Gearing is expected to be 2.0x

in FY15.

Valuations: Current market price has strong upsideWe have used the discounted cash flow method to value Dhunseri and arrived at a fair value

of 187 per share; at the CMP of 110, the valuation grade is 5/5.

KEY FORECAST

(mn) FY11 FY12 FY13 FY14E FY15E

Operating income 16,593 19,820 24,411 40,818 67,552

EBITDA 2,679 1,467 1,547 3,054 4,906

Adj net income 1,829 310 629 1,239 1,758

Adj EPS () 52.2 8.8 18.0 35.4 50.2

EPS growth (%) 63.8 (80.0) 323.0 23.3 41.9

Dividend yield (%) 3.5 5.2 5.2 7.1 9.0

RoCE (%) 22.5 8.2 5.1 7.8 11.6

RoE (%) 28.2 4.24 7.9 13.9 17.3

PE (x) 2.9 11.3 5.6 2.8 2.0

P/BV (x) 0.7 0.5 0.4 0.4 0.3

EV/EBITDA (x) 2.4 5.3 14.1 8.0 5.0

NM: Not meaningful; CMP: Current market price

Source: Company, CRISIL Research estimates

CFV MATRIX

KEY STOCK STATISTICSNIFTY/SENSEX 6155/20660

NSE/BSE ticker DPTL

Face value (per share) 10

Shares outstanding (mn) 35

Market cap (mn)/(US$ mn) 3,864/63

Enterprise value (mn)/(US$ mn) 21,840/354

52-week range ()/(H/L) 127/72

Beta 0.7

Free float (%) 32.7%

Avg daily volumes (30-days) 10414

Avg daily value (30-days) (mn) 1.0

SHAREHOLDING PATTERN

PERFORMANCE VIS--VIS MARKET

Returns

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

Dhunseri 13% 37% 18.3% -4%

CNX500 2% 7% 5% 1%

ANALYTICAL CONTACTMohit Modi (Director) [email protected]

Gaurav Samota [email protected]

Vishal Rampuria [email protected]

Client servicing desk

+91 22 3342 3561 [email protected]

1 2 3 4 5

1

2

3

4

5

Valuation Grade

FundamentalGrade

PoorFundamentals

ExcellentFundamentals

Strong

Dow

nside

Str

ong

Upside

67.1% 67.2% 67.2% 67.3%

8.7% 8.7% 8.7% 8.7%

24.2% 24.1% 24.1% 24.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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

Promoter FII DII Others


4/32


2

Table 1: Dhunseri - Business environment

Parameter

PET and tea

PET (India plant) PET (Egypt plant) Tea business

Revenue contribution(FY13)92% - 8%

Revenue contribution

(FY15E)54% 42% 4%

Product offering Bottle grade PET resin Bottle grade PET resin The company mainly grows/processes

CTC (crush, tear and curl) tea, packet tea

and a small percentage of orthodox tea

Geographic presence Domestic market and 50 countries

across the globe

Mainly exports to Europe and America

Exports accounted for 45% of sales

revenues in FY13

Domestic market (Egypt)

Exports to Europe,America, the Middle-East

and Africa

The Indian tea business caters only to the

domestic market. The Malawi tea business

will cater largely to export markets

Market position Became the largest domestic player following capacity expansion in Haldia.

Will be one of the top global PET manufacturers after commissioning of

Egypt capacity

Currently produces 1% of the overall

tea produced in India, which is a

highly fragmented market

Cater to the international markets

through two Malawi acquisitions

Is the market leader in Rajasthan

Industry growth

expectations

Domestic demand is expected to grow

at 15-18% over the next three years

Global PET demand is expected topost a CAGR of 5-6% over the next

five years

Global PET demand isexpected to log a CAGR of

5-6% over the next five

years

Tea consumption is expected to growmoderately at 2.2% over the next five

years

Production is expected to be at the

same level

Sales growth

(FY11-FY13 2-yr CAGR)24% - 16%

Sales forecast(FY13-FY15E 2-yr CAGR)

28% Revenues of 29 bn estimatedin FY15

21%*

Demand drivers Growing packaging industry and increasing applications

Superior product characteristics of PET

Rising population and growing

preference for tea

Affordability, increasing healthawareness associated with tea

consumption and emergence of new

variants

Margin drivers Robust demand growth, shift from fueloil to coal-based plant

Close proximity to ports leading tolower logistics cost

Cyclicality in industry being a

commodity business

Over-supply of PET globally to put

pressure on margins

Proximity to end-usermarkets and raw materials.

Power available at cheaper

rates

Tax-free zone

Focus on improving efficiencies,increase in yield per hectare by

replacing old plants

Key competitors Reliance Industries Ltd and JBF Industries

Ltd

Indorama Ventures, M&G,

DAK and other global players

Assam Tea, McLeod Russell, Jayshree

Tea, Goodricke Group and Warren Tea

Key risks Continuous social unrest and political instability in Egypt

Foreign exchange fluctuation

Dependent on a single supplier for its key raw material supply in the PET business

Tea business is labour sensitive; labour cost accounts for about 25% of net sales

*FY13 figures include Malawi acquisition number for four months.

Source: Company, CRISIL Research


5/32

Dhunseri Petrochem and Tea Ltd

3

Grading Rationale

Dominant domestic player in PET resins based on capacity

Dhunseri became a dominant domestic PET resin manufacturer with the capacity to produce

410,000 TPA following the capacity expansion in Haldia in November 2012, thereby enjoying

economies of scale which are key to any commodity business. Plant I reported capacity

utilisation of 107% whereas plant II, commissioned in November 2012, achieved 100%

utilisation in the last quarter of FY13. The companys PET resin sales increased by 23% from

17.86 bn in FY12 to 21.92 bn in FY13 largely driven by volume growth, which increased by

21.8% on account of commissioning of plant II in Haldia. Domest ic sales volume accounted for

55% of total PET sales and the rest was exported to around 50 countries.

Figure 1: Collective domestic PET capacity = 9,62,000 TPA in FY13

Source: Industry, CRISIL Research

Table 2: Project expansion details

India (plant II) Egypt

Location Haldia Ain Sukhna

Capacity in TPA 210,000 420,000

Technology Oerlikon Barmag, Germany Oerlikon Barmag, Germany

Company Parent Subsidiary

Holding (%) 100 70

Capex 4.7 bn US$169 mn (8.9 bn)

Capex/tonne 22,380 21,200

Debt (%) 66.7 70

Construction started November 2010 June 2011

Commissioned\expected commissioning Commissioned in November 2012 Plant I January 2014

Plant II March 2014 (six-month delay)

Note:Exchange rate 1US$ = 53


Dhunseri43%

RelianceIndustries35%

JBF Industries15%

Futura

7%

Became dominant domesticplayer in PET resins with

commissioning of plant II in

Haldia


6/32


4

Capacity expansion to put Dhunseri amongst the top 12 players

Dhunseri is also setting up a new PET plant with a capacity of 420,000 TPA through a

subsidiary company in Egypt in a joint venture (JV) with Egyptian Petrochemicals Holding

Company (ECHEM - a nodal agency for the development of the petrochemical industry in

Egypt) and Engineering for Petroleum & Process Industries (ENPPI - another Egyptian

government agency). Dhunseri holds 70% stake in the project. Plant I of the project is

expected to be completed by January 2014 and the plant II by March 2014. Post

commissioning of the plant, Dhunseris total capacity would be 8,30,000 TPA, making it one of

the largest producers of PET globally.

Table 3: Global PET players capacity

S.No. Company Capacity (KTPA) Remarks

1 Indorama Ventures 3,596 Including capacity expansion plan of 490 KTPA

2 China Resources 2,200 Including capacity expansion plan of 900 KTPA

3 DAK 2,059 -

4 SFX 2,050 Including capacity expansion plan of 400 KTPA

5 Yisheng Petrochemicals 2,000 Including capacity expansion plan of 1,000 KTPA

6 FENC 2,000 Including capacity expansion plan of 800 KTPA

7 M&G 1,749 -

8 Octal 1,250 Including capacity expansion plan of 500 KTPA

9 Nan Ya 1,060 Including capacity expansion plan of 150 KTPA

10 Lotte Chemical 1,020 Including capacity expansion plan of 200 KTPA

11 Reliance Industries 988 Including capacity expansion plan of 648 KTPA

12 Dhunseri 830 Including capacity expansion plan of 420 KTPA


Locational advantage in Haldia gives competitive edge

Dhunseris plant in Haldia is strategically located in proximity to its raw material source. The

major raw materials for manufacturing PET resins are purified terephthalic acid (PTA powder

form) and mono-ethylene glycol (MEG liquid form). Collectively, they account for about 95%

of the total raw material costs.

Dhunseri sources PTA from the Haldia-based plant of Mitsubishi Chemical Corporation (MCC)

PTA India which is around 7 km from the plant. The strategic location results in lower logistic

and inventory holding costs (the company maintains inventory of five-seven days for PTA)

and, thereby, overall production costs. It has entered into long-term supply agreement with

MCC PTA India for PTA requirements of its newly commissioned plant in Haldia.

The company imports MEG for Indian operations from Mitsui, Singapore. The Haldia PET

facilitys proximity to the port reduces the lead time. The company is in the process of

commissioning underground pipes from the port to the plant, to transfer MEG, to further

reduce cost and time. MEG pipelines are expected to be commissioned by December 2013.

Dhunseris existing plant is

strategically located near the

raw material source


7/32


5

Egypt plant to strengthen its size and scale

With commissioning of the 420,000 TPA plant in Egypt, Dhunseri will become one of the

largest producers of PET resins globally. The plant would double its scale of operations in

terms of capacity and revenues. Being located at Ain-El-Sokhana (a deep sea port in the Red

sea) with proximity to end markets (mainly Europe and the US) and also to the raw material

source i.e. MEG from the Middle-East, Dhunseri would have tremendous competitive

advantage (lower freight cost). As per the management, the plant would be the first PET plant

in Egypt, giving Dhunseri a first-mover advantage as well in the region, which currently imports

its annual requirement of ~1,60,000 TPA from Korea and China. The plant will cater to Egypt

and also export to Europe, the US and the Middle-East. We expect it to contribute 42% to total

revenues in FY15.

Proximity to end-markets and raw material sourc es

With the commissioning of the PET manufacturing facility at Ain-El-Sokhana in Egypt,

Dhunseris shipment time to its key markets of Europe and the US would reduce considerably

-- it would be able to ship to any European market within two-three days and to the US within

seven days compared to seven days and 20-25 days for shipments from India to Europe and

America, respectively. This gives it a competitive edge over exporters from China and Korea

(Asia). Proximity to rapidly growing PET resin markets in Africa (Algeria, Morocco, Libya and

Tunisia), Israel, the US and the European Union is expected to strengthen the companys

global footprint.

PET, PTA and MEG logistics movement market

Source: CRISIL Research

Europe

USA

Middle East

SouthKorea

Egypt

PETMarket

PTAsource

China

MEG

Egypt plant is close to end-markets and raw material

sources


8/32


6

Dhunseri plans to import PTA, a key raw material, from Korea and China (the largest

producers of PTA globally) for its Egypt facility. Of the total greenfield capacities added in

2012, about 70% are located in China, the world's largest consumer of PTA. In 2013,China is estimated to add another 10 mn tonnes; thereby, further increasing the supply in

the global market. Egypts plant being located on the deep sea port in the Red sea would

reduce the logistics cost for transportation of PTA from the port to the plant.

Traditionally, MEG capacities were concentrated in America, accounting for 36% of the

global capacities in 2002. However, over the years, the capacities have shifted to Asia

Pacific and Europe/Middle-East/Africa due to increased availability of raw materials at

lower costs. In 2011, America accounted for around 17%, while Asia Pacific accounted

for 44% and the Middle-East, Africa and Europe together accounted for 39% of the total

global capacities. The shift in capacities from America has made the Middle-East (Asia) a

major MEG producer and exporter. Egypt plants proximity to high MEG-producing

regions in the Middle-East, especially Saudi Arabia, is expected to reduce procurement

costs.

Tax and other incentives

The Egypt plant, being located in a private free zone, is exempt from corporate income tax

and is also entitled to receive duty-waiver benefits on the import of capital goods and raw

materials as well as finished goods. Dhunseri is also expected to benefit from lower power,

fuel (power and fuel cost in Egypt is around one-third of that in India) and overhead costs and

also good infrastructure/ port facilities, thus lowering its overall cost of production and

improving the profitability. Dividend distributed by the Egyptian companies to non-

resident/foreign companies is also tax-exempt. Moreover, Egypt enjoys free trade status with

many African/Middle-East countries. However, the political instability and unrest in the country,

which has already led to delay of more than six months in the commissioning of the plant,

continues to be a concern. GDP growth of Egypt is expected to come down to 1.5-2% in 2013

from 4-7% in the previous years. The overall slowdown in the economy due to political

instability and unrest may have an impact on Dhunseris operations and profitability. Moreover,

there is no definite tax holiday period and in case it is withdrawn, there could be significant risk

to our earnings estimates for the Egypt plant.

Large geographical footprint

Dhunseri has widened its international presence from 40 countries to 50. Exports increased to

9.4 bn (43% of total PET revenues in FY13) from 5.6 bn in FY12. Following the expansion,

the company has created an international sales team to market the products. The company

has started a Dubai marketing branch office to cater to the European and American markets.

It has also carved out a greater market share in Bangladesh, Sri Lanka and Nepal. The

company believes that by leveraging on its strong and widely distributed clientele across the

globe and also with aggressive marketing strategy to tap other markets, selling products from

Egypt would be easy.

Proximity to rapidly growing African

markets and raw material supplying

nations are some of the key

advantages of the Egypt plant

Withdrawal of tax holiday in Egypt

to have an impact


9/32


7

Figure 2: Country-wise exports in FY13

Source: Company

Stands to gain from healthy growth in domestic industry

The ~US$24 bn Indian packaging industry is expected to record 12-13% CAGR over 2012-16

as per Packaging Industry Association of India faster than the global average of 5-6% on

account of increase in incomes, brand consumption and preference based on decisions of

affordability, convenience and hygiene. Owing to strong growth in the domestic packaging

industry and preference for PET as a packaging material, demand for PET grew by 30%

during FY07-12. All three leading players Dhunseri, Reliance and JBF recorded a strong

rise in domestic sales volume.

Figure 3: PET demand driven by growth in packaging

industry Figure 4: Market segments for PET chips in India (FY13)

Source: Industry, CRISIL Research Source: Industry, CRISIL Research

PET is a preferred packaging material

PET is a polyester resin widely used for non-industrial usage - packaging foods and

beverages, especially in convenience-sized soft drinks, juices and mineral water bottles. Due

to varied applications, PET is preferred to other packaging materials such as aluminum, glass,

paper etc. PET has become the worlds preferred packaging material due to its unique

Italy19%

Bangladesh16%

United States ofAmerica

12%

Romania10%

Belgium9%

Nepal4%

Germany4%

France3%

Peru3%

Others20%

148 177 244 309 409 500

49%

20%

37%

27%32%

22%

0%

10%

20%

30%

40%

50%

60%

0

100

200

300

400

500

600

FY07 FY08 FY09 FY10 FY11 FY12

('000 tonnes)

Domestic demand Growth (y-o-y) (RHS)

CSD30%

Mineral water& Jars 21%

Liquor8%

Edible oil10%

Juices &sauces

7%

Pharma10%

Confectionary12%

Others2%

Dhunseris focus is on

enhancing prospects in the local

markets


10/32


8

properties eco-friendly and 100% recyclability. The other significant properties of PET are

rigidity, transparency, hygiene, strength, lightness, durability, inertness, cost-effectiveness,

attractiveness and freshness-retention capability among others.

Table 4: PET bottles vs glass bottles

PET bottles Glass bottles

Low one-time cost Difficulty in recovery of bottles

Convenience of usage Chances of breakages are high

Light weight Heavy weight

Easy disposal Cannot be disposed easily

Cost 4-5 per bottle Cost 8 per bottle


Indias PET consumption is low

India accounts for 2-3% of the global packaging market; though it has 16% of the global

population, the per capita consumption of PET is only 0.4 kg compared with the global

average of 2 kg. Thus, there is tremendous growth potential considering the growth in various

packaging applications, strong demand from end-user industries such as FMCG and newer

applications (pharma and beverages). Growing middle-class population, rising per capita

income and an organised retail sector are expected to drive growth in the packaging segment.

CRISIL Research expects demand for PET to grow at a three-year CAGR of 15-18% to

10,42,000 TPA by FY16.

Table 5: Indias PET consumption lowest in the world

Regions Total demand '000 tonnesIncrease on 2012

Proportion of world total Per capita consumption (in Kg)'000 Tonnes %

North America 4,066 73 1.8 21.4 7.7

South America 1,599 125 8.5 8.4 4.2

Middle East/Africa 2,256 188 9.1 11.9 1.7

Europe 4,113 111 2.8 21.6 5.9

China 4,026 416 11.5 21.2 2.8

India 605 95 23.2 2.7 0.4

Rest of Asia 2,351 112 4.8 12.9 1.7

Total 19,016 1120 6.3 100 2.4

Source: Company, Industry, CRISIL Research


11/32


9

Figure 5: PET sales volume growing strong


New capacities in global PET market to put pressure onmargins

At a f ive-year ~5% CAGR, PET is one of the fastest growing polyester inputs globally. Based

on widening applications and replacement of container/glass bottles, the PET industry is

expected to grow at a fast pace. Growth in the global PET resin market is being fuelled by the

rapid growth coming out of the Asia-Pacific market. However, the global PET industry has

been experiencing a surplus situation over the past two years, which has reduced operating

rates from more than 85% to 80% in 2011 and 2012. Moreover, massive new capacity is

scheduled during 2013-15 led by China. Total world capacity is estimated to reach 34 mn

tonnes in FY15; this is not only in China, which is expected to add 4.75 mn tonnes by 2014,

but across the world. This may lead to oversupply, thus lowering utilisation rates and putting

pressure on PET spreads and, thereby, margins of all players.

Figure 6: Operating rates low due to capacity additions Table 6: Major capacity addition over next two years

MMT: Million metric tonnes

Chinese players Nameplate capacity (KTPA)

Yisheng Petrochemical 1,000

China Resources 900

FENC 800Zhejiang Wankai 500

Guangdong Indorama 300

Other players globally Nameplate capacity (KTPA)

OCTAL Oman 500

Reliance India 648

Polyplex Turkey 300

PQS Brazil 450

Ibn Rushd KSA 420


4,649

6,087 9,01512,207

12,435

6,464

4,016 5,1755,648

9,485

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY09 FY10 FY11 FY12 FY13

(mn)

Domestic Export

18 18 19 21 23 25

82%

87%

85%

81%80%

78%

72%

74%

76%

78%

80%

82%

84%

86%

88%

0

5

10

15

20

25

30

2008 2009 2010 2011 2012 2013

(MMT)

Capacity Global operating rate (RHS)


12/32


10

Figure 7: Dhunseris realisations higher than its peers Figure 8: Utilisation rate has been higher than its peers

*JBFs capacity inclusive of its UAE plant capacity of 4,32,000 TPA


Figure 9: Delta trends (PET-PTA-MEG) Figure 10: EBITDA per tonne


58,73470,709

86,318 87,009

55,67465,272

79,970 82,728

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,00090,000

100,000

FY10 FY11 FY12 FY13

(/ton ne)

Dhunseri JBF

200 200 410 998 1,040 1,040 1,402 2,886 3,261

100%104% 107%

83%77%

73%

93%

80% 78%

0%

20%

40%

60%

80%

100%

120%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

FY11

FY12

FY13

FY11

FY12

FY13

FY11

FY12

FY13

Dhunseri JBF Indorama

(mn)

Capacity Utilisation rate (RHS)

-

50

100

150

200

250

300

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

(US$/tonne)Delta (PET-PTA-MEG)

Delta (PET-PTA-MEG)

79

150 137

91

162

181

123

77

-

20

40

60

80

100

120

140

160

180

200

FY10 FY11 FY12 FY13

(US$/tonne)

Dhunseri Indorama


13/32


11

Table 7: Competitive landscape

Dhunseri JBF Industries*

FY10 FY11 FY12 FY13 FY10 FY11 FY12 FY13

Revenues (mn) 11,582 16,593 19,820 24,411 49,369 64,658 71,772 74,558EBITDA (mn) 1,154 2,679 1,467 1,547 4,721 9,629 7,141 7,140

EBITDA margin (%) 10.0% 16.1% 7.4% 6.3% 9.6% 14.9% 10.0% 9.6%

Capacity (TPA) 200,000 200,000 200,000 410,000 910,800 998,000 1,040,000 1,040,000**

Utilisation rate (%) 84% 100% 104% 107% 87% 83% 77% 73%

Sales volume (TPA) 172,023 200,681 206,857 251,923 607,425 554,732 529,512 522,720

Sales value (mn) 10,104 14,190 17,855 21,920 33,818 36,209 42,345 43,244

Realisations per kg () 59 71 86 87 56 65 80 83

Debt service ratios

Debt equity ratio times (x) 0.7 0.6 1.2 2.4 1.1 1.3 1.8 2.4

Interest coverage ratio (x) 42.2 12.2 1.2 2.4 3.1 5.1 2.7 2.2

Working capital ratio

Debtor days 45 38 44 77 33 39 37 48Creditor days 81 97 102 52 64 73 57 75

Inventory days 29 52 48 83 44 51 46 54

Gross asset turnover (x) 1.9 2.2 2.5 2.3 2.2 2.5 2.3 1.8

*JBFs numbers Include bottle grade, textile grade and film grade chips.

**Including 4,32,000 MT capacity of the UAE plant


Table 8: Capex cost comparison

Dhunseri

Haldia

Dhunseri

Egypt JBF RAK JBF Belgium

Project cost (mn) 4,700 169* 7110** 200*

Capacity (tonnes) 210,000 420,000 390 390,000

Cost per tonne () 22,381 402* 18,231 513*

*Cost in US$

** Capacities added in phases from 2007 to 2012.


One of the top tea cultivators in India

Dhunseri is among the top 10 tea growing companies in India and a market leader in the

packet tea segment in Rajasthan. It mainly grows and processes CTC tea and a small amount

of orthodox tea. The company has 10 tea estates in Assam with production capacity of 12 mn

kgs. It produces around 1% of the overall tea produced in India. In 2012-13, overall tea

production decreased from 13.48 mn kg in 2011-12 to 10.91 mn kg in 2012-13 due to sale of

leaf factories and one tea estate. Tea revenues increased by15% y-o-y to 1,871 mn in FY13

mainly due to increase in average tea realisations, which went up from 113 per kg to 153

per kg, and Malawian tea estate acquisitions.


14/32


12

Figure 11: Dhunseri is among the top 10 Indian tea producers


During 2012-13, it sold its Namsang tea estate and three leaf factories to partially finance the

acquisition of two tea estates in Malawi with the capacity of 9.5 mn kgs. The acquisition offset

the loss of production due to sale of tea factories. Further, it has commenced operations from

its new factory in Hatijan Estate (Assam) with an annual capacity of 1.5 mn kg. The acquisition

and new factory in Hatijan have taken the total capacity to 22 mn kg from 10.5 mn kg.

Malawi acquisi t ions op en doors to global tea market

Dhunseri has entered the international tea market via the acquisition of two tea estates in

Malawi, Africa at a consideration of 1,220 mn (US$22 mn) through its subsidiary in

Singapore.The acquisition is funded through debt of US$12 mn and balance out of internal

accruals and sale of a tea estate in India. The two estate- Makandi and Kawalazi have the

capacity to produce 9.5 mn kg of tea, 0.4 mn kg of macadamia and 0.1 mn kg of coffee beans.

The Malawi gardens produce tea of a middling quality, being preferred by tea bag

manufacturers across the globe, it is a fast growing global tea segment. Besides, the Malawi

acquisitions have widened the companys offerings across the premium and middling

segments and created a consistent international presence with a growing geographic footprint.

It has also de-risked the concentration of the tea business in a single tea-growing area since

all its estates are in Assam. Following the acquisitions, the companys annual production is

estimated to be around 22 mn kg. We expect it to contribute 36% to total tea revenues inFY15.

Continu es to be a market leader in Rajasthan

Dhunseris strong marketing presence through its well-established brands Lal Ghora and Kala

Ghora has helped it to maintain the number 1 position in Rajasthan in the packet tea sales

segment. Packet tea sales accounted for 33.81% of total sales in FY13. Leveraging on the

existing distribution network in Rajasthan, Dhunseri has now introduced a premium variant

called Bahipookri in 1kg packets. The company has ramped up its advertising campaign with

Ms. Hema Malini as the brand ambassador for packet tea brands Lal Ghora and Kala Ghora

to boost the companys brand visibility. However, the company has no plans to foray into the

packet tea business on a national basis.

9.9 10.5 10.3

13.5

10.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

FY09 FY10 FY11 FY12 FY13

(Mn Kg)

Tea Production

Malawi acquisitions give

international presence in the tea

segment.


15/32


13

Figure 12: Tea revenue regional break-up as of FY13

Source: Company

Focus on eff iciency impr oved the operating prof i tabi l ity of tea business

Dhunseris tea business witnessed improvement in operating profitability with EBITDA margin

increasing from 11.9% in FY12 to 24.5% in FY13. The company is taking various measures

such as plant automation to enhance labour productivity, upgradation of factories with new

drying machines, replacement of old tea plants to increase yields to enhance the efficiency

resulting in lower production cost and, thereby, improve the profitability. Factory productivity in

2012-13 at 55.19 kg was also higher compared to the industry average of 40.2 kg. Its average

tea yield per hectare of 2,090 kgs per hectare in the past three years is better than the district

average ranging between 1,800 and 1,860 kgs per hectare. The company plans to

replant/extend planting of 30 lakh saplings each year which will result in increase in yield per

hectare and, thereby, profitability.

IT SEZ park on hold due to weak demand

Dhunseri ventured into setting up an IT complex in the IT and IT-enabled services (ITeS) SEZ

at Bantala on the south-eastern fringes of Kolkata with the objective of earning stable annuity

income. The IT park is being developed on six acres of land and is mapped to consist of a

twin tower with a total built-up area of about 750,000 sq ft at a total cost of 1,300 mn. The

project is being executed in two phases of equal magnitude.

Construction work in phase I (370,000 sq ft) has been completed and it is ready for

mechanical, electrical and plumbing (MEP) and other exterior works. Piling work has been

completed for phase II. The company has spent around 450 mn on the project as of FY13.

Though the project was progressing well and the first phase was expected to be completed by

February 2013, due to the poor industry scenario, Dhunseri has put the project on hold until

the situation improves and accordingly has revised the commencement of phase I and phase

II to June 2014 and December 2015, respectively. Hence, we have factored lease rentals f rom

FY16 onwards in our projections.

East13%

Rajasthan(North)

47%

South23%

West17%

Profitability of tea business has

improved over the years

IT SEZ park put on hold due to

the poor industry scenario


16/32


14

Key Risks

Social unrest and political instability: key risk for Egypt plant

Dhunseri is in the process of setting up a greenfield PET plant with capacity of 420,000 MTPA

in Egypt. The project is expected to get commissioned in January 2014. The timely execution

of this large project is a challenge for the company since political instability and uncertainty

have already led to a delay of more than six months in the commissioning of the plant.

Continuous social unrest and political instability may pose a threat to smooth functioning of its

operations.

Profitability vulnerable to forex fluctuations

Though Dhunseri follows a prudent hedging policy for its export sales, it does not hedge for

MEG imports. Further, the company had foreign currency loan of 18 bn in FY13 in its book,

which is un-hedged, and the quantum of external commercial borrowings (ECBs) is set to

increase to fund the expansion plan. Therefore, the company is exposed to forex risk. It has

reported forex losses of 380 mn on term loan and other monetary items in FY13 due to rupee

depreciation.

Dependent on single supplier for key raw material

Dhunseri is highly dependent on MCC for PTA. Consequently, when MCCs operations were

adversely affected in FY10 due to its expansion, Dhunseris PET production declined owing to

lack of PTA supply. Production declined by almost 11% from 190,000 tonnes in FY09 to

170,000 tonnes in FY10. Post commissioning of plant II (210,000 TPA), Dhunseris PTA

requirement has doubled to 0.35 mn tonnes, which will be ~25% of MCCs production.

Volatility in crude oil prices

PTA and MEG, the key raw materials for PET, account for 83% of total operating costs for the

segment. Historically, prices of PTA and MEG (both crude oil derivatives) have been volatile

and are currently on an upward trend at the heels of rising crude oil prices. PTA prices are

directly linked to naphtha prices while MEG prices are linked to ethylene prices, both of which

are volatile in nature. Hence, the companys spreads/EBITDA margins are sensitive to the

movement in raw material prices, more so in a downcycle.

Political instability and social

unrest in Egypt, volatility in crude

oil prices and forex fluctuations

are key risks


17/32


18/32


19/32


17

EBITDA margin to improv e from c urrent levels

Dhunseris EBITDA is expected to grow at a two-year CAGR of 78% to 4,906 mn in FY15.

EBITDA margin is expected to improve to 7.3% in FY15 from 6.3% in FY13 mainly driven by

improvement in PET spreads. We expect an improvement in PET spreads in the long run with

supply rationalisation of PET and PTA globally and pick-up in demand. Spreads are expected

to improve from the current levels over the next two years. Further various cost reduction

measures and high capacity utilisation rates will reduce the overhead cost thereby lowering

cost of production and improving operating profitability.

Figure 18: EBITDA margin to improve from FY13 levels


PAT margin to remain at FY13 levels

We expect Dhunseris PAT margins to remain at the FY13 level, i.e. 2.6%, in FY15. We expect

improvement in operating profitability but higher depreciation and finance cost (on account of

capitalisation of the Egypt plant) are expected to keep PAT margin at FY13 levels. We expect

PAT to grow at a CAGR of 32% to 1,758 mn in FY15.

Figure 19: PAT margin to remain at FY13 levels


2,679 1,467 1,547 3,054 4,906

16.1%

7.4%

6.3%7.5%

7.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-

1,000

2,000

3,000

4,000

5,000

6,000

FY11 FY12 FY13 FY14 E FY15E

(mn)

EBITDA EBITDA margins (RHS)

1,187 238 1,005 1,239 1,758

7.2%

1.2%

2.6%3.0%

2.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000


(mn)

PAT PAT margins (RHS)

Operating margin to improve to

7.3% in FY15 driven byimprovements in PET spreads


20/32


18

We estimate Dhunseris EPS at 35.4 for FY14 and 50.2 for FY15. EPS is expected to more

than double in FY15 with the commissioning of the Egypt facility and higher utilisation at the

Haldia plant.

We expect its RoE to improve to 17.3% in FY15 from 7.9% in FY13. RoE of the Egypt plant is

expected to be significantly higher as it enjoys 100% tax exemptions. Dhunseris gearing

increased to 2.4x in FY13 from 1.2x in FY12 on account of debt-funded acquisition of Malawi

tea estates and debt funded capex. However, it is expected to be 2.0x in FY15 with

improvement in profitability and repayment of debt.

Figure 20: EPS and RoE to improve significantly Figure 21: Gearing to moderate to 2.0x in FY15

Source: CRISIL Research Estimates Source: CRISIL Research Estimates

Wor king capital cyc le increased sharp ly in FY13

Dhunseris working capital days increased from 25 days in FY12 to 78 days in FY13. This was

mainly due to increase in debtor and inventory days. Debtor days went up from 44 days to

77 days in FY13 as the company has extended the credit period to its customers against letter

of credits (LCs). Moreover, the company follows the accounting policy of classifying LCs of

customers discounted with the bank as bills receivable until the maturity of LCs, thereby

resulting in higher debtor days. Inventory days increased from 48 to 83 days as there was

inventory pile-up - of raw materials as well as finished goods - from Haldia plant II which

achieved optimum utilisation rate last quarter. Moreover, raw materials and finished goods

worth 1,150 mn in transit also pushed up inventory days. Creditor days decreased from

102 days to 52 days in FY13.

33.9 8.8 18. 0 35.4 50.2

18%

4.2%

7.9%

13.9%

17.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%18%

20%

0

10

20

30

40

50

60


()

EPS RoE (RHS)

0.6

1.2

2.42.4

2.0

-

0.5

1.0

1.5

2.0

2.5

3.0


(x)

Gearing


21/32


19

Management Overview

CRISIL Researchs fundamental grading methodology includes a broad assessment of

management quality apart from other key factors such as industry, business prospects and

financial performance. Overall, we believe the management is good.

Experienced management

Dhunseri has a strong and experienced top management headed by promoter directors,

Mr Chandra Kumar Dhanuka (executive chairman) and Mr Mrigank Dhanuka (vice chairman

and managing director). They are ably supported by Mr Biswanath Chattopadhyay (managing

director and CEO) and Mr Rajiv Kumar Sharma (executive director - finance).

The Dhanuka family has been in the tea business for over five decades and in the

petrochemicals business for around a decade. The top management is well experienced in

both the businesses and well versed with the dynamics of these segments.

Despite being a promoter-driven company, we believe that Dhunseris management has a

professional approach towards managing the company.

Second line of management

Based on our interactions, we believe that the companys second line is reasonably

experienced. Key managerial personnel have several years of experience in their respective

fields.

Top management has strong

domain expertise


22/32


20

Corporate Governance

CRISILs fundamental grading methodology includes a broad assessment of corporate

governance as well apart from other key factors such as industry, business prospects,

financial performance and management quality. In this context, CRISIL Research analyses

shareholding structure, board composition, typical board processes, disclosure standards and

related-party transactions. Any qualifications by regulators or auditors also serve as useful

inputs while assessing a companys corporate governance.

Overall, corporate governance at Dhunseri reflects good practices supported by a fairly

experienced board. We feel that the company's corporate governance practices are adequate

and meet the statutory requirement supported by reasonably good board practices and

involvement of an independent board.

Board compositionDhunseris board comprises 12 members, of whom six are independent, which is in

accordance with the stipulated SEBI guidelines relating to the Clause 49 of the listing

agreement. Given the background of the directors, we believe that the board is fairly

experienced and diversified. The independent directors have a fairly good understanding of

the companys business and its processes.

Table 9: Profile of independent directors

NameAge

Year of

appointment Qualification/background

Mr Joginder Pal

Kundra83 2010

He is a Bachelor of Arts and a Bachelor of Law. He is the former managing director of the State

Bank of India and has also been the chairman of the Banking Service Recruitment Board. He

has around 53 years of experience in the field of finance and banking

Dr Basudeb Sen 65 2010

He is a Master in Economics and has a PhD from the Indian Statistical Institute. He has over

three decades of executive experience in commercial and development banking and investment

management organisations

Mr Raj Narain

Bhardwaj68 2010

He was the former managing director/chairman of Life insurance Corporation of India. He was

also a member of the Securities Appellate Tribunal (SAT)

Mr Bharat Bajoria 60 2008

He has more than 35 years of experience in the tea industry. He is the managing director of

Teesta Valley Tea Co. Ltd and Bormahan Tea Co (1936) Ltd and holds directorship in other

companies. He was the chairman of the Indian Tea Association and Consultative Committee of

Plantation Association in the past

Mr Anurag Bagaria 37 2010 He is qualified as a chemical engineer and has a MBA. He has over 13 years of experience in avariety of companies

Mr Dharam Pal Jindal 63 2012He is a graduate from St. Xaviers College. He is the chairman of Jindal Pipes Ltd, Maharashtra

Seamless Ltd, Jindal Drilling & Industries Ltd and other allied companies

Boards processes

The companys quality of disclosure can be considered good judged by the level of

information and details furnished in the annual report, websites and other publicly available

data. The company has all the necessary committees audit, remuneration, nomination and

investor grievance in place to support corporate governance practices. The audit committee

is chaired by an independent director, Mr Joginder Pal Kundra.

Dhunseris corporate governance

practices are adequate and meet

the minimum required standards


23/32


21

Valuation Grade: 5/5

We have used the discounted cash flow method (DCF) method to value Dhunseri and arrived

at fair value of 187 per share. This fair value implies P/E multiple of 3.7x FY15E EPS and

P/B multiple of 0.6x FY15E book value. The stock is currently trading at 110 per share.

Consequently, we assign Dhunseri a valuation grade of 5/5, indicating that the market price

has strong upside from the current levels.

One-year forward P/E band One-year forward EV/EBITDA band

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

P/E premium / discount to CNX 500 P/E movement

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

Terminal growth rate

TerminalWACC

1.0% 2.0% 3.0% 4.0% 5.0%

11.2% 224 267 320 388 477

12.2% 173 206 246 297 361

13.2% 131 157 187 227 275

14.2% 97 118 143 173 209

15.2% 68 85 105 129 157

0

100

200

300

400

500

600

Jan-08

May-08

Sep-08

Jan-09

Jun-09

Oct-09

Feb-10

Jun-10

Oct-10

Feb-11

Jul-11

Nov-11

Mar-12

Jul-12

Nov-12

Mar-13

Aug-13

Dec-13

()

Dhunseri 1x 3x

6x 9x 12x

0

5,000

10,000

15,000

20,000

25,000

Jan-09

May-09

Sep-09

Jan-10

Jun-10

Oct-10

Feb-11

Jun-11

Oct-11

Mar-12

Jul-12

Nov-12

Mar-13

Aug-13

Dec-13

(mn)

EV 2x 3x 4x 5x

-100%

-80%

-60%

-40%

-20%

0%

20%

Jan-09

May-09

Sep-09

Jan-10

Jun-10

Oct-10

Feb-11

Jun-11

Oct-11

Mar-12

Jul-12

Nov-12

Mar-13

Aug-13

Dec-13

Premium/Discount to CNX 500

Median premium/discount t o CNX 500

0

2

4

6

8

10

12

14

16

1820

Jan-09

May-09

Sep-09

Jan-10

Jun-10

Oct-10

Feb-11

Jun-11

Oct-11

Mar-12

Jul-12

Nov-12

Mar-13

Aug-13

Dec-13

(Times)

1yr Fwd PE (x) Median PE

+1 std dev

-1 std dev


24/32


25/32


23

Company Overview

Dhunseri manufactures PET resin and grows/processes tea. It is also setting up an IT SEZ at

Bantala in Kolkata with the objective of earning stable annuity income. It has become a

dominant PET resin manufacturer in India following expansion in Haldia with a total capacity

of 4,10,000 TPA. The company is also setting up a PET resin plant in Egypt with a capacity of

4,20,000 TPA. Its PET resins for bottle/sheet/jar are marketed under the ASPET brand. The

company has six gardens in Upper Assam and four gardens in Lower Assam. Its packet tea is

marketed under the Lal Ghora and Kala Ghora brands. Following the acquisition of two tea

estates in Malawi, the companys total production capacity is 22 mn kgs as of FY13.

Products (capacity) Indian operations Overseas subsidiary

PET resin (TPA) 4,10,000 4,20,000*

Tea (mn kgs) 12 10

*Proposed Egypt plant

Milestones

1916 Incorporated as Dhunseri Tea Company

1955 S L Dhanuka Group took over management of the company from James Finlay &

Company

1970 Changed name to Dhunseri Tea & Industries

1980 Acquired the Namsang and Dilli Gardens in Assam

1991 Took over Bahadur Tea Company and amalgamated with Dhunseri Tea

1992 Came out with a public issue

1994 Acquired Santi, Khetojan and Khagorijan tea estates

1996 Promoted South Asian Petrochem Ltd to manufacture PET resins under technical and

financial collaboration with Lurgi Zimmer AG of Germany

2009 Dhunseri Tea & Industries and South Asian Petrochem merged together to form


2010 Construction work started at the Haldia plant

2011 Construction work started at the Egypt plant; acquired four tea factories

Acquired 100% shareholding of Dowamara Tea Company Private Ltd (DTCPL)

2012 Two acquisitions in Malawi, Africa

Commissioning of second PET plant in Haldia


26/32


24

Annexure: Financials (Consolidated)


Income statement Balance Sheet

(mn) FY11 FY12 FY13 FY14E FY15E (mn) FY11 FY12 FY13 FY14E FY15E

Operating income 16,593 19,820 24,411 40,818 67,552 Liabilities

EBITDA 2,679 1,467 1,547 3,054 4,906 Equity share capital 350 350 350 350 350

EBITDA margin 16.1% 7.4% 6.3% 7.5% 7.3% Reserves 6,785 7,130 7,411 8,403 9,844

Depreciation 312 333 401 702 1,129 Minorities - - 726 561 860

EBIT 2,368 1,134 1,146 2,352 3,777 Net worth 7,135 7,481 8,487 9,314 11,054

Interest 194 916 475 1,184 1,438 Convertible debt - - -

Operating PBT 2,174 218 670 1,168 2,338 Other debt 4,098 8,997 20,160 22,660 22,090

Other income 323 217 319 175 233 Total debt 4,098 8,997 20,160 22,660 22,090

Exceptional inc/(exp) (642) (72) 376 - - Deferred tax liability (net) 671 724 901 1,008 1,214

PBT 1,854 362 1,365 1,343 2,572 Total liabilities 11,904 17,201 29,548 32,982 34,358

Tax provision 667 125 228 269 514 Assets

Minority interest - - 132 (165) 299 Net fixed assets 5,857 5,954 9,935 17,993 18,372

PAT (Reported) 1,187 238 1,005 1,239 1,758 Capital WIP 483 5,447 7,000 1,079 754

Less: Exceptionals (642) (72) 376 - - Total fixed assets 6,339 11,401 16,935 19,072 19,126

Adjusted PAT 1,829 310 629 1,239 1,758 Investments 612 339 211 211 211

Current assets

Ratios Inventory 1,824 2,276 4,772 6,710 8,328FY11 FY12 FY13 FY14E FY15E Sundry debtors 1,722 2,517 5,324 8,387 12,955

Growth Loans and advances 2,454 1,419 3,149 4,082 4,729

Operating income (%) 43.3 19.4 23.2 67.2 65.5 Cash & bank balance 2,905 4,064 2,184 1,943 1,609

EBITDA (%) 132.1 (45.2) 5.4 97.5 60.6 Marketable securities - 590 330 330 330

Adj PAT (%) 152.8 (83.1) 103.0 96.9 41.9 Total current assets 8,905 10,867 15,759 21,452 27,951

Adj EPS (%) 152.8 (83.1) 103.0 96.9 41.9 Total current liabilities 4,001 5,444 3,556 7,932 13,089

Net current assets 4,904 5,424 12,203 13,519 14,862

Profitability Intangibles/Misc. expenditure 49 37 199 179 159

EBITDA margin (%) 16.1 7.4 6.3 7.5 7.3 Total assets 11,904 17,201 29,548 32,982 34,358

Adj PAT Margin (%) 11.0 1.6 2.6 3.0 2.6

RoE (%) 28.2 4.2 7.9 13.9 17.3 Cash flow

RoCE (%) 22.5 8.2 5.1 7.8 11.6 (mn) FY11 FY12 FY13 FY14E FY15E

RoIC (%) 32.8 14.6 8.1 8.7 12.2 Pre-tax profit 2,497 435 989 1,343 2,572

Total tax paid (379) (72) (51) (161) (309)

Valuations Depreciation 312 333 401 702 1,129Price-earnings (x) 3.0 12.3 4.9 3.1 2.2 Working capital changes (846) 1,230 (8,919) (1,558) (1,676)

Price-book (x) 0.8 0.5 0.4 0.4 0.3 Net cash from operations 1,584 1,926 (7,580) 326 1,716

EV/EBITDA (x) 2.5 5.6 13.9 8.1 5.1 Cash from investm ents

EV/Sales (x) 0.4 0.4 0.9 0.6 0.4 Capital expenditure (894) (5,384) (6,097) (2,820) (1,163)

Dividend payout ratio (%) 15.5 77.1 18.2 20.0 18.0 Investments and others 203 (317) 389 - -

Dividend yield (%) 3.4 4.8 5.9 6.4 8.2 Net cas h from inves tme nts (690) (5,701) (5,708) (2,820) (1,163)

Cash from financing

B/S ratios Equity raised/(repaid) 233 - (148) 0 -

Inventory days 52 48 83 65 50 Debt raised/(repaid) 123 4,899 11,163 2,500 (570)

Creditors days 97 102 52 70 69 Dividend (incl. tax) (184) (183) (183) (248) (316)

Debtor days 38 44 77 71 68 Others (incl extraordinaries) (590) 219 576 0 -

Working capital days 35 25 78 94 65 Net cash from financing (418) 4,934 11,408 2,252 (886)

Gross asset turnover (x) 2.2 2.5 2.3 2.4 3.0 Change in cash position 476 1,159 (1,880) (241) (334)

Net asset turnover (x) 3.0 3.4 3.1 2.9 3.7 Closing cash 2,905 4,064 2,184 1,943 1,609

Sales/operating as sets (x) 2.7 2.2 1.7 2.3 3.5

Current ratio (x) 2.2 2.0 4.4 2.7 2.1

Debt-equity (x) 0.6 1.2 2.4 2.4 2.0 (m n) Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14

Net debt/equity (x) 0.2 0.6 2.1 2.2 1.8 Operating Income 4,738 5,924 8,524 9,241 10558

Interest coverage 12.2 1.2 2.4 2.0 2.6 Change (q-o-q) -3% 25% 44% 8% 14%

EBITDA 380 534 616 856 1141

Per share Change (q-o-q) 0% 40% 15% 39% 33%

FY11 FY12 FY13 FY14E FY15E EBITDA margin 8.0% 9.0% 7.2% 9.3% 10.8%

Adj EPS () 52.2 8.8 18.0 35.4 50.2 Reported PAT 476 67 293 101 402

CEPS 61.1 18.4 29.4 55.4 82.4 Adjusted PAT 253 319 272 645 756

Book value 203.7 213.5 242.3 265.9 315.5 Change (q-o-q) -804% -86% 336% -66% 17%

Dividend () 5.2 5.2 5.2 7.1 9.0 Reported PAT margin 10.1% 1.1% 3.4% 1.1% 3.8%

Actual o/s shares (mn) 35.0 35.0 35.0 35.0 35.0 Reported EPS 13.6 1.9 8.4 2.9 11.5

Quarterly financials (standalone)


27/32


25

Focus Charts

Revenue and revenue growth trend EBITDA and EBITDA margin trend

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

EPS and RoE trend PAT and PAT margin trend


Dhunseri has underperformed CNX500 Fair value movement since initiation

-Indexed to 100


16,593 19,820 24,411 40,818 67,552

43%

19% 23%

67% 65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000


(mn)

Revenue Growth (RHS)

2,679 1,467 1,547 3,054 4,906

16.1%

7.4%6.3% 7.5%

7.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-

1,000

2,000

3,000

4,000

5,000

6,000


(mn)

EBITDA EBITDA margins (RHS)

33.9 8.8 18. 0 35.4 50.2

18%

4.2%

7.9%

13.9%

17.3%

0%

2%

4%6%

8%

10%

12%

14%

16%

18%

20%

0

10

20

30

40

50

60


()

EPS RoE (RHS)

1,187 238 1,005 1,239 1,758

7.2%

1.2%

2.6%3.0%

2.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

-

200

400600

800

1,000

1,200

1,400

1,600

1,800

2,000


(mn)

PAT PAT margins (RHS)

0

50

100

150

200

250

300

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-13

Dhunseri CNX500

0

200

400

600

800

1,000

1,200

1,400

1,600

0

50

100

150

200

250

300

Oct-09

Jan-10

Mar-10

Jun-10

Aug-10

Oct-10

Dec-10

Mar-11

May-11

Jul-11

Oct-11

Dec-11

Mar-12

May-12

Jul-12

Oct-12

Dec-12

Feb-13

May-13

Jul-13

Sep-13

Dec-13

('000)()

Traded Quantity (RHS) CRISIL Fair Value Dhunseri


28/32


This page is intention ally left blank


29/32

This page is intention ally left blank


30/32


CRISIL Research Team

President

Mukesh Agarwal CRISIL Research +91 22 3342 3035 [email protected]

Analytical Contacts

Sandeep Sabharwal Senior Director, Capital Markets +91 22 4097 8052 [email protected]

Prasad Koparkar Senior Director, Industry & Customised Research +91 22 3342 3137 [email protected]

Binaifer Jehani Director, Customised Research +91 22 3342 4091 [email protected]

Manoj Mohta Director, Customised Research +91 22 3342 3554 [email protected]

Sudhir Nair Director, Customised Research +91 22 3342 3526 [email protected]

Mohit Modi Director, Equity Research +91 22 4254 2860 [email protected]

Jiju Vidyadharan Director, Funds & Fixed Income Research +91 22 3342 8091 [email protected]

Ajay D'Souza Director, Industry Research +91 22 3342 3567 [email protected]

Ajay Srinivasan Director, Industry Research +91 22 3342 3530 [email protected]

Rahul Prithiani Director, Industry Research +91 22 3342 3574 [email protected]

Business Development

Hani Jalan Director, Capital Markets +91 22 3342 3077 [email protected]

Prosenjit Ghosh Director, Industry & Customised Research +91 22 3342 8008 [email protected]

Business Development Equity Research

Vishal Shah Regional Manager

Email : [email protected]

Phone : +91 9820598908

Shweta Adukia Regional Manager


Phone : +91 9987855771

Priyanka Murarka Regional Manager


Phone : +91 9903060685

Ankur Nehra Regional Manager


Phone : +91 9999575639


31/32

Our Capabilities

Making Markets Function Better

Economy and Industry Research

Largest team of economy and industry research analysts in India

Coverage on 70 industries and 139 sub-sectors; provide growth forecasts, profitability analysis, emerging trends,expected investments, industry structure and regulatory frameworks

90 per cent of Indias commercial banks use our industry research for credit decisions

Special coverage on key growth sectors including real estate, infrastructure, logistics, and financial services

Inputs to Indias leading corporates in market sizing, demand forecasting, and project feasibility Published the first India-focused report on Ultra High Net-worth Individuals

All opinions and forecasts reviewed by a highly qualified panel with over 200 years of cumulative experience

Funds and Fixed Income Research

Largest and most comprehensive database on Indias debt market, covering more than 15,000 securities

Largest provider of fixed income valuations in India

Value more than 53 trillion (USD 960 billion) of Indian debt securities, comprising outstanding securities

Sole provider of fixed income and hybrid indices to mutual funds and insurance companies; we maintain 12standard indices and over 100 customised indices

Ranking of Indian mutual fund schemes covering 70 per cent of assets under management and 4.7 trillion(USD 85 billion) by value

Retained by Indias Employees Provident Fund Organisation, the worlds largest retirement scheme coveringover 60 million individuals, for selecting fund managers and monitoring their performance

Equity and Company Research

Largest independent equity research house in India, focusing on small and mid-cap companies; coverageexceeds 125 companies

Released company reports on 1,442 companies listed and traded on the National Stock Exchange; a global firstfor any stock exchange

First research house to release exchange-commissioned equity research reports in India Assigned the first IPO grade in India


32/32

Our OfficeAhmedabad

706, Venus Atlantis

Nr. Reliance Petrol Pump

Prahladnagar, Ahmedabad, India

Phone: +91 79 4024 4500

Fax: +91 79 2755 9863

Hyderabad

3rd Floor, Uma Chambers

Plot No. 9&10, Nagarjuna Hills,

(Near Punjagutta Cross Road)

Hyderabad - 500 482, India

Phone: +91 40 2335 8103/05

Fax: +91 40 2335 7507

Bengaluru

W-101, Sunrise Chambers,22, Ulsoor Road,

Bengaluru - 560 042, India

Phone: +91 80 2558 0899

+91 80 2559 4802

Fax: +91 80 2559 4801

Kolkata

Horizon, Block 'B', 4th Floor57 Chowringhee Road

Kolkata - 700 071, India

Phone: +91 33 2289 1949/50

Fax: +91 33 2283 0597

Chennai

Thapar House,

43/44, Montieth Road, Egmore,

Chennai - 600 008, India

Phone: +91 44 2854 6205/06

+91 44 2854 6093Fax: +91 44 2854 7531

Pune

1187/17, Ghole Road,

Shivaji Nagar,

Pune - 411 005, India

Phone: +91 20 2553 9064/67

Fax: +91 20 4018 1930

Gurgaon

Plot No. 46

Sector 44

Opp. PF Office

Gurgaon - 122 003, India

Phone: +91 124 6722 000

Stay Connected | CRISIL Website |

Twitter |

LinkedIn | YouTube | Facebook

CRISIL Limited

CRISIL House, Central Avenue,

Hiranandani Business Park, Powai, Mumbai 400076. India

Phone: +91 22 3342 3000 | Fax: +91 22 3342 8088

www crisil com

Documents

CRISIL Research Ier Report Dhunseri 2013