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INSTITUTIONAL EQUITY RESEARCH
Page | 1 | PHILLIPCAPITAL INDIA RESEARCH
Dixon Technologies Ltd
Piggybacking on the consumer durable story
INDIA | MID- CAP | IPO Note
6 September 2017
Dixon Technologies (Dixon) is the largest home-grown design-focused and solutions company engaged in manufacturing of consumer durables, lighting and mobile phones. It also provides solutions in reverse logistics i.e. repair and refurbishment. The company is leading manufacturer of lighting products (CFL & LED), FPD TVs and semi-automatic washing machines with market share of 39%, 50% and 43% respectively in India. Dixon is one of the most profitable companies in the domestic consumer durable manufacturing industry. In FY17, its revenues/EBITDA/PAT was Rs 24.5bn/922mn/504mn, with strong balance sheet (D/E 0.2x) and cash flow – having ROCE and ROE of 32% /26% with FCF generation of Rs 170mn.
About company Incorporated in January 15, 1993, Dixon – is fully integrated end to end product and solution. Its services range from global sourcing, manufacturing, quality testing and packaging. The company has six state-of-the-art manufacturing units in Noida and Dehradun. It has in-house capability for panel assembly, PCB assembly, wound components, sheet metal and plastic moulding. IPO rationale: Raising funds for offer for sale & capex Dixon is raising Rs 6.0bn through this IPO offer from sale by Strategic investors & promoter (Rs 5.4bn), to meet part of its capex requirement (Rs 271mn) and repayment of debt (Rs 220mn). At the IPO price band of Rs 1760‐1766, the stock trades at 40x FY17 PE. Key strengths:
Market leader in key product verticals
Healthy relationship with top-tier customers
One Stop Shop - End to End solution provider
Improving margins through 1) New product addition 2) focussing more on ODM
Increasing reverse logistics - Higher potential & healthy return ratios
Improving Product base with existing and new customers
Strong balance Sheet and Cash flows Key risks 1) Dependency on few customers (Top two customers contribute ~59% of revenue –
Panasonic~38% & Philips~20%) 2) Low entry barriers and lower bargaining power from customer 3) Volatility in commodity prices Our view: The company has a strong business model with healthy balance sheet and cash flow. It has reported revenue and earning CAGR of 34% and 78% over FY13 to FY17. With increasing product portfolio and services (Camera, reverse logistics) and margin improvement (backward integration in mobile phone, increasing ODM share), we expect a revenue and PAT CAGR of 16%/33% over next 2 years (FY17 to FY19). At upper band of the price Rs 1,766 stock is at PE of 26x/23x/ discounting FY18 and FY19 numbers and generating FCF of ~ Rs 950mn (over next 2 year) with the strong ROCE and ROE of 30%/21% in FY19e. We like the business model (lower working capital, higher return ratios) as well as the company is well placed to capitalize the growing consumption pattern in consumer durables and appliances. We recommend “Subscribe”.
SUBSCRIBE COMPANY DATA ISSUE OPENS 06-September-2017 ISSUE CLOSES 08-September-2017 PRE- ISSUE EQUITY SHARES 11.0mn - LOWER BAND Rs 1760 - UPPER BAND Rs 1766 PRICE BAND Rs 1760 - 1766 - FRESH ISSUE 0.34mn - OFS 3.1mn NO OF SHARES TO BE ISSUED 3.4mn RETAIL AND EMPL SHARE (%) 35% ISSUE SIZE Rs 5.97-6bn POST- ISSUE EQUITY SHARES 11.3mn MKT CAP Rs 19.9-20bn
Consolidated Financials Y/E Mar, Rs mn FY14 FY15 FY16 FY17
Net Sales 10,937 12,013 13,894 24,568 Operating Profit 260 322 588 907 PAT 136 119 427 504 RoCE(%) 13.7 15.4 24.8 32.1 ROE(%) 18.4 14.0 34.7 25.5 P/E@Rs 1,766 147.2 168.7 46.9 39.7
Deepak Agarwal (+ 9122 6246 4112) [email protected]
Page | 2 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
About the IPO Issue size of Rs 5.9 – 6.0bn with 3.4mn shares at a price band of Rs 1760‐1766
per share.
Issue includes 3.1mn shares offered for sale by strategic investors, promoter & management and fresh issue of 0.3mn shares.
Market capitalisation at price band: Rs 19.9‐20.0bn.
Dixon - Issue details
ISSUE OPENS 06-September-2017
ISSUE CLOSES 08-September-2017
PRE- ISSUE EQUITY SHARES 11.0mn
- LOWER BAND Rs 1760
1 - UPPER BAND Rs 1766
PRICE BAND Rs 1760 - 1766
- FRESH ISSUE 0.34mn
- OFS 3.1mn
NO OF SHARES TO BE ISSUED 3.4mn
RETAIL AND EMPLOYEE SHARE (%) 35%
ISSUE SIZE Rs 5.97-6bn
POST- ISSUE EQUITY SHARES 11.3mn
MKT CAP Rs 19.9-20bn
Source: RHP, PhillipCapital India Research
Share holding pattern Pre-issue Share holding pattern post-issue
Source: RHP, PhillipCapital India Research
Of the Rs 600mn proceeds from the fresh issue, Rs 220mn will be utilised for debt payment, Rs 76mn for setting up LED facility at Tirupati and Rs 106mn for upgrading IT infra.
Net proceeds will be used for
Rs mn FY18 FY19 Total
Repayment of borrowings 220 - 220
Manufacturing facility of LED TVs at the Tirupati 76 - 76
Enhancement lighting products at Dehradun 89 - 89
Upgrading IT infra. 53 53 106
General corporate purposes * 109 - 109
Total 547 53 600
Source: RHP, PhillipCapital India Research, Note: On Upper band of Rs 1766, * Balancing Amount
Promoters 46%
Strategic invetors
29%
Management & others
25% Promoters 39%
Strategic invetors
11%
Management & others
18%
Other public 32%
Page | 3 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
About - Dixon Technologies Ltd Company incorporated in 1993, in 1994, commenced manufacturing of consumer electronics such as colour televisions. In 2007, commenced manufacturing of LCD TVs and subsequently progressed into manufacturing of LED TVs in 2010. Dixon entered the lighting products in 2008 with the manufacturing of CFL products and gradually increased its product portfolio to LED products in 2016. In 2010, started manufacturing of semi-automatic washing machines. Company also started providing reverse logistics services in 2008. Recently entered into manufacturing of mobile phones through a JV. Company has continuously diversified its product portfolio to keep pace with changing consumer trends and development in technology. Company’s diversified product portfolio includes (i) consumer electronics (like LED TVs); (ii) home appliances (like washing machines); (iii) lighting products (like LED bulbs and tubelights, downlighters and CFL bulbs); and (iv) mobile phones. Key customers include Panasonic India P Ltd, Philips Lighting I Ltd, Haier Appliance (I) Pvt. Ltd., Gionee, Surya Roshni Limited, Reliance Retail Limited, Intex Technologies (I) Ltd., Mitashi Edutainment Pvt. Ltd., Dish Infra Services Private Limited. Dixon majorly operates under 2 business model: 1. OEM – Original Equipment Manufacturers 2. ODM – Original Design Manufacturer In OEM, the company is fully integrated end-to-end product and solution provider. Ranging from global sourcing, manufacturing, quality testing, assembling and packaging to logistics. This segment contributes to ~78% of revenue and has an EBITDA margin of ~2%. Dixon is a leading (ODM) for lighting products, LED TVs and semi-automatic washing machines in India. As an ODM, Company develop & design products in-house (has strong R&D team of 27 employees), manufacture and supply these products to well-known companies in India who in turn distribute these products under their own brands. This segment has a revenue of Rs 5.4bn (22% of sales) and has healthy EBITDA margin of 9%.
OEM - Revenue Share ODM – Revenue Share
Source: RHP, PhillipCapital India Research
In line with focus to provide end to end product solutions, Company has backward integrated its major manufacturing processes by developing in-house capabilities in plastic moulding products, sheet metal products, wound components and LED panel assembly. With this company has improved its cost efficiency, reduces dependency
3,981 6,382 7,428 7,000 7,449
2,614
2,969 2,632 2,568
3,010 200
8,107
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
FY13 FY14 FY15 FY16 FY17
Consumer electronics Lighting products
Mobile phones
534 601 327 701 996 108 374
1,727
2,498
516 849 1,067
1,306
1,880
0
1,000
2,000
3,000
4,000
5,000
6,000
FY13 FY14 FY15 FY16 FY17
Home appliances Lighting products
Consumer electronics
Indian EMS/ODM Market
0
100
200
300
400
500
600
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8e
FY1
9e
FY2
0e
FY2
1e
EMS/ODM (Rs bn)
Dixon – has highest market share in Indian EMS:
Source: RHP, PhillipCapital India Research Note:
EMS - Electronic Manufacturing Services
Others 66%
Jabil 13%
Dixon 9%
SFO 7%
Elin 3%
PG Electrop
last 2%
Page | 4 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
on third party suppliers and gives better control on production time and quality of critical components used in the manufacturing of products.
Dixon – Product Wise detail break up: (Home Appliances & Reverse logistics has higher profitability) Products Consumer Electronic HOME APPLIANCES LIGHTING PRODUCTS MOBILE PHONES* REVERSE LOGISTICS
Installed Capacity (Units) 1,200,000 550,000 260,400,000 10,080,000 3,660,000
Sales (Units- FY17) 747,383 376,842 120,592,760 3,476,423 1,408,474
Revenue (Rs mn) 8,445 1,880 5,508 8,107 627
EBITDA (Rs mn) 250 306 179 50 123
OPM (%) 3% 16.3% 3.2% 0.6% 19.6%
ODM & OEM (%) 12% /88% 100%/0% 45%/55% 0%/100% 0%/100%
Products LED TVs:
19” to 65”
4K2K
Home Theatres:
2.1 channel
4.1 channel
Semi-automatic
washing machine:
6.2
kg to 8.0 kg
LED Products:
LED bulbs 0.5W to 20 W
Down lighters 5W to
15W
Battens
T- LEDs 20W to 24W
CFL Lamps:
CFL Lamps 5W to 27W
Lamp Drivers:
Indoor LED drivers 5W
to 20W
Outdoor LED drivers
20W to 150W
Electronics lamp driver
10W to 40W
feature phones and
smart phones
(2G, 3G, 4G/LTE,
VoLTE and CDMA).
Repair &
Refurbishment:
Set top boxes
Repair:
Mobile phones
LCD &
LED TVs
LED panel
Home theatres
(2.1 channel
and 4.1
channel)
Computer
peripherals and
other devices such
as printers, CCTVs
and speakers
Customers & Revenue Share
FY17 (%)
Panasonic I P LTD
(65.2% )
Reliance Retail Ltd
(9.54%)
Intex Technologies (I)
Ltd. (9.23%)
Haier Appliance (I)
Pvt. Ltd (3.15%)
Others:
Vijay Sales,
Mitashi, Abaj
Panasonic India
Private Limited
(21.0%)
Haier Appliance (I)
Pvt. Ltd. (16.16%)
Intex Technologies (I)
Ltd (16.17%)
Philips Lighting India
Limited (90.1%)
Surya Roshni Limited
Bajaj Electricals
Panasonic India
Private Limited
(43.72%)
Gionee (50.21%)
Jaina Marketing and
Associates (6.05%)
Intex Technologies (I) Ltd.
Dish Infra Services Private
Limited
Airtel – setupbox
Sony – LEDs
Manufacturing Facility LED TVs at Dehradun washing machines at
Dehradun
Dehradun & Nodia Nodia Noida + 17 service centers in
major cities in
India
Source: RHP, PhillipCapital India Research
Market leadership in key product verticals
Dixon’s experience in manufacturing, successful backward integration and design capabilities, strong relationships with global suppliers and anchor customers has resulted in achieving leading position in key verticals:
Dixon
Product Industry Size (mn units)
Expected Industry CARG
over next 5 years Production (FY17) OPM (%) Market Share (%)
FPD TVs 1.2 50% 0.6 ~3% 50%
Washing machines 0.6 41% 0.3 ~16% 43%
LED & CFL Lights* 227 43% 88.4 ~3% 39%
Source: RHP, PhillipCapital India Research Note: FPD - Flat Panel Display
Page | 5 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
Consumer Electrical – Television Market: Growing trust and confidence in EMS and ODM players, leading to outsourced manufacturing. Dixon is leader in the FPD TV with share of ~50% in Indian Market.
FPD TV market to grow @ CAGR of 16% OEP data segmented by OEM and EMS production ratio, FY16
Domestics manufacturing FY16 Production by EMS/ODM FY16 (mn units)
Lighting Market: Currently Lighting is a small part of EMS, However EESL (led 7W/9W) LED bulb demand has seen capacity addition among EMS companies. Dixon is leader players with 39% market share.
LED lighting taking the lead in the lighting sector OEP data segmented by OEM and EMS production ratio, FY16
Domestics manufacturing FY16 Production by EMS/ODM FY16 (mn units)
Source: RHP, PhillipCapital India Research
Washing Machines Market: In this segment semi-automatic WM product having limited scope for design & innovation, support increasing dependence on EMS companies. Dixon has a leadership with 43% market share.
Washing machine market to grow @ CAGR of 15% OEP data segmented by OEM and EMS production ratio, FY16
Domestics manufacturing FY16 Production by EMS/ODM FY16 (mn units)
Source: RHP, PhillipCapital India Research
0
5
10
15
20
25
30
0
100
200
300
400
500
600
700
800
900
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Revenue (Rs bn)
Volume (mn)
CAGR: FY16-FY21 Vol: 16.9%
0
50
100
150
200
250
300
350
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Others CFL LED
CAGR: FY16-FY21 Total Mkt 16.6% LED: 59.2%
0
2
4
6
8
10
12
0
20
40
60
80
100
120
140
160
180
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Revenue (Rs bn)
Volume (mn)
CAGR: FY16-FY21 Vol: 14.6%
OEP by EMS, 85%
OEP by OEM, 15%
50%
9%8%
8%
8%
17%
Dixon
MEPL
SVL
Videotex
Noble
Others
Tier 1, 48%
Tier II, 30%
EMS, 22%
39%
30%
28%
3%
Dixon
NTL
Compact Lamps
Others
OEP by EMS, 87%
OEP by OEM, 13%
43%
28%
29%
Dixon
Noble
Others
Page | 6 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
Strong revenue visibility
The company has reported revenue CAGR of 34% over FY13 to FY17. 1) New product addition 2) New customer addition 3) Increasing geography, gives company a strong growth visibility. Adding New products: Company is planning to increase its offerings in existing product as well as diversify into new verticals. Over last 6 years, Company has added LED lighting, washing machines, mobile phones and reverse logistics. In 2017 company will be entering into a manufacture of “security systems” including “CCTVs” & “Digital video recorders” (DVRs), Company will be putting up this facility in Tirupati. Going forward Company will be adding products in home appliances & lighting segments. In Lighting, Company will also be exploring export opportunities with existing customers or establishing relationships with new customers.(As In past, has exported CFL bulbs & LED bulbs - Thailand, Egypt, France, UK, Poland, Tanzania and Kenya and continues to export CFL and LED bulbs) Expansion of industrial footprint into new geographies Expand geographical footprint by enhancing current manufacturing capacities & setting up of new manufacturing facilities, in South India. Company also seeks to further enhance manufacturing capacity across product verticals as well as CCTVs and DVRs. This will help in strengthening relationships with existing customers and gaining new customers as able to penetrate in South India. Tirupati Facility being closer to the Krishnapatnam & Chennai ports would provide easier access to the exports market and will be well placed to offer export quality products for South East Asia market. Increasing focus on Reverse logistic (RL): In RL company offer repair & refurbishment services for STBs and repair of mobile phones, LCD and LED TVs, LED panels, home theatres, printers etc. Company is planning to further expand RL portfolio with support R&D team. RL has high potential and enjoys higher margins & return ratios. Dixon is focusing only on B2B RL and do not have consumer facing service centres which is in line with strategy of building relationships with brand owners and OEMs.( recently company has started giving RL service to “Sonay”). Company Operates with 17 centre spreads Pan India (Majorly in Metros cities).
Increasing RL revenue share (Rs mn) RL – has strong operating margin of ~20%
Source: RHP, PhillipCapital India Research
24 28
184
391
627
0
100
200
300
400
500
600
700
FY13 FY14 FY15 FY16 FY17
5 6
35
71
123
0%
5%
10%
15%
20%
25%
0
20
40
60
80
100
120
140
FY13 FY14 FY15 FY16 FY17
EBITDA
OPM (%) (RHS)
Dixon – Product Portfolio
Year Products
1994 Colour TV
2007 LCD TV
2008 CFL Lighting, Reverse logistics
2010 LED TV, Washing Machines
2016 Phones
2017 CCTV, Digital Video Recorder Source: RHP, PhillipCapital India Research
Page | 7 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
Cost effective model and Focus on High Margin business
Dixon has reported a margin of 3.7% in FY17. If adjusted to actual sales (value addition revenue) company has a margin of ~13%. Dixon is most cost-efficient player in each of the product verticals. The company has achieved cost leadership through backward integration & large manufacturing capacities.
EBITDA Break up: (ODM contributes ~ 50% in EBITDA) Dixon - EBITDA & OPM trend
Source: RHP, PhillipCapital India Research
Dixon has 2 high margin businesses, 1) ODM and 2) Reverse Logistic (RL). These business contribution have increased from 15%/1.5% in FY15 to 22%/3%/ in FY17. Company is planning to gradually expand its ODM & RL share. As an ODM, company control the entire manufacturing cycle of a product. This model requires additional investment in 1) R&D 2) working capital but provides higher margins as compared to the OEM model.
Continuously increased its share form ODM - Revenue Home Appliance – 100% from ODM, Enjoys Higher Margins
Source: RHP, PhillipCapital India Research
The company is moving towards the ODM model to service all major consumer requirements across the industry and product verticals. This also helps in improving overall profitability. Gradually, trend in certain product verticals wherein regional and private labels have been gaining market share and the ODM model allows servicing market as well.
Consumer electronics
27%
Lighting products
20%
Home appliances
34%
Mobile phones
5%
Reverse logistics
14%
201 260
322
588
907
0%
1%
1%
2%
2%
3%
3%
4%
4%
5%
0
100
200
300
400
500
600
700
800
900
1,000
FY13 FY14 FY15 FY16 FY17
EBITDA (Rs mn)
OPM (%) (RHS)
1,050
1,558 1,768
3,734
5,374
0%
5%
10%
15%
20%
25%
30%
0
1000
2000
3000
4000
5000
6000
FY13 FY14 FY15 FY16 FY17
Rev. (Rs mn)
As % of Rev. (RHS)
516
849
1,067
1,306
1,880
0%
3%
6%
9%
12%
15%
18%
0
400
800
1200
1600
2000
FY13 FY14 FY15 FY16 FY17
Revenue OPM (%)
Page | 8 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
Dixon - Strong Financial Performance
Revenue CAGR of 34% over FY13 to FY17 PAT & PAT margin (%)
Debt/Equity at 0.2x in FY17 Lower working capital cycle – days @ 16 in FY17*
Source: RHP, PhillipCapital India Research, Note: * Include - loans & advances
Lower Working Capital requirement & asset light mode (flexibility in manufacturing lines, higher utilisation), result in higher return ratios.
Higher Return Ratios Positive FCF from last 5 years
Source: RHP, PhillipCapital India Research
7,669
10,937 12,013
13,894
24,568
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
5,000
10,000
15,000
20,000
25,000
30,000
FY13 FY14 FY15 FY16 FY17
Revenue (Rs mn)
Growth (%) (RHS)
50
136 119
427
504
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0
100
200
300
400
500
600
FY13 FY14 FY15 FY16 FY17
PAT (Rs mn)
Margin (%) (RHS)
943 936
823 796
466
0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
0
100
200
300
400
500
600
700
800
900
1,000
1 2 3 4 5
Debt Debt/Equity 29
28
21 23
16
-
5
10
15
20
25
30
35
FY13 FY14 FY15 FY16 FY17
0
5
10
15
20
25
30
35
40
FY13 FY14 FY15 FY16 FY17
ROCE (%) ROE (%)
0
100
200
300
400
500
600
FY13 FY14 FY15 FY16 FY17
FCO FCF
Page | 9 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
Indian – Consumer Electrical & Appliance Industry at a cusp of growth
Indian Consumer Electricals & Appliance (CEA) market (Rs bn)
Source: RHP, Frost & Sullivan analysis, CEAMA
Indian Consumer Electricals break up: Higher contribution from Mobile
FY13 – Rs2,364 bn FY21e – Rs 5,236 bn
Source: RHP, Frost & Sullivan analysis, CEAMA
Mobile phones market to grow @ CAGR of 20% OEP data segmented by OEM and EMS production ratio
Domestics manufacturing Production by EMS/ODM FY16
Apr 17-Dec 17 (mn) Apr 17-Dec 17 (mn)
Source: RHP, Frost & Sullivan analysis, CEAMA
1,6
21
1,7
91
2,1
65
2,3
64
2,7
18
3,0
55
3,6
15
4,3
26
5,2
36
306 338 370
407 450
504
563
628
703
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e FY21e
Appliances Consumer Electronics
Mobiles 67.0%
TV 15.8%
Set top Boxes (STB) 7.1%
Digital Cameras
5.5%
Washing Machines
3.3%
Others 1.3%
Mobiles 75.4%
TV 14.8%
Set top Boxes (STB) 3.3%
Digital Cameras
2.7%
Washing Machines
3.1% Others 0.7%
0
1000
2000
3000
4000
5000
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
The demand for mobile phones is expected to grow from 282.2mn units in FY16 to 509mn …
Indian CEA Market: CAGR FY13 to FY17 FY17 to FY21e
CE 14% 18% Appliances 10% 12% Total 13% 17%
OEP by EMS, 40%
OEP by OEM, 60%
8%
35%
22%
15%
20%
Dixon
Foxconn
Flextronics
BGM
Others
Page | 10 | PHILLIPCAPITAL INDIA RESEARCH
DIXON TECHNOLOGIES IPO NOTE
Financials Income Statement Y/E Mar, Rs mn FY14 FY15 FY16 FY17
Net Sales 10,937 12,013 13,894 24,568
Growth (%) 42.6% 9.8% 15.7% 76.8%
Expenditure 10,677 11,691 13,306 23,660
Inc/dec. 7 -109 -161 -255
Cost of Material Consumed 9,955 10,953 12,284 22,056
Personnel Cost 323 369 550 640
Other Op. Costs 393 479 634 1,219
Operating Profit 260 322 588 907
OPM (%) 2.4% 2.7% 4.2% 3.7%
Growth (%) 29.2% 23.9% 82.5% 54.4%
(+) Other income 34 18 18 15
EBDIT 294 340 605 922
( - ) Depreciation 53 69 84 106
EBIT 240 271 521 816
( - ) Interest & Finance charges 112 98 131 128
PBT & exceptional items 128 173 390 688
( - ) Taxes 34 42 80 185
Net Profit 148 130 427 504
Share of Associates 2 3 0 0
Minority Interest 10 9 0 0
PAT 136 119 427 504
Growth (%) 172.8 -12.8 259.8 18.1
Balance Sheet Y/E Mar, Rs mn FY14 FY15 FY16 FY17
Equity Share Capital 31 31 31 110
Stock Option Outstanding 19 19 20
Reserves & Surplus 687 799 1,179 1,867
Net worth 737 849 1,230 1,977
Total Debt: 936 823 796 466
Deferred Tax Liability 60 62 72 98
Minority Interest 21 30 0 0
Capital Employed 1,753 1,764 2,097 2,542
Gross Block 1,175 1,339 1,562 1,891
Less : Accumulated Depn 332 369 437 520
Net Block 842 970 1,125 1,371
Capital WIP
0 20
Fixed Assets 842 970 1,125 1,391
Goodwill on Consolidation - - 111
Current Assets 2,008 2,214 2,937 6,599
Cash & Bank Balances 46 69 75 153
Receivables 481 562 900 2,802
Inventories 933 1,130 1,363 2,822
Loans, Adv & Deposits: 529 442 594 810
Other Current Assets 19 10 6 12
Current Liabilities & provisions 1,160 1,481 2,077 5,449
Sundry Creditors & other liab 1,100 1,420 1,955 5,229
Provisions: 60 61 122 219
Net Current Assets 848 733 860 1,151
Investments 63 60 1 -
TOTAL ASSETS 1,753 1,764 2,097 2,542
Source: Company, PhillipCapital India Research Estimates
Cash Flow Y/E Mar, Rs mn FY14 FY15 FY16 FY17
PBT 182 173 507 688
Operating Profit before W.Cap 275 341 617 935
(Increase)/Decrease in W Cap -196 145 -108 -235
Trade & Other Receivables -55 -85 -337 -1,925
Inventories -47 -197 -232 -1,459
Loans & Advances -65 103 -87 -152
Trade & Other Payables & Provisions -29 324 549 3,302
Net Cash from Op Activities (I) 104 445 423 546
Net addition to Fixed Assets 4 -213 -263 -379
(Purchase)/Sales of Investments 1 -18 36 -67
Other Income 8 9 11 15
Net Cash from Inv Activities (II) 13 -223 -216 -431
Increase in Share Capital
61
Interest Paid -113 -99 -131 -127
Dividend Paid & Other Adjustments -7 -11 -42 -84
Increase in Borrowings -8 -113 -27 46
Net Cash used in Fin Activities (III) -128 -223 -201 -104
Net Increase/ Decrease in
Cash & Cash Equivalents (I+II+III) -11 -0 6 10
Cash & Cash Equivalents (Op Bal) 58 46 69 75
Other Balance -1 23 68
Cash & Cash Equivalents (Cl Bal) 46 69 75 153
Valuation Ratios
FY14 FY15 FY16 FY17
OPM (%) 2.4 2.7 4.2 3.7
RoCE(%) 13.7 15.4 24.8 32.1
ROE(%) 18.4 14.0 34.7 25.5
Return on Assets (%) 7.8 6.7 20.3 19.8
Sales/Total Assets (x) 6.2 6.8 6.6 9.7
Sales/Gross Block (x) 9.3 9.0 8.9 13.0
Debt: Equity (x) 1.3 1.0 0.6 0.2
Current Ratio (x) 1.7 1.5 1.4 1.2
Quick ratio (x) 0.9 0.7 0.8 0.7
Working capital/Sales (x) 0.1 0.1 0.1 0.0
Interest Cover (x) 2.7 2.9 4.9 5.8
Debtors (days) 33.2 30.1 38.7 52.9
Inventory (days) 31.5 34.8 36.9 42.9
Loans & Advances (days) 17.4 13.3 15.4 11.9
Creditors (days) 37.1 43.7 52.9 79.6
Working Capital (days) 10.2 7.9 7.3 4.4
EV/Sales (x) 0.6 0.5 0.4 0.8
EV/EBIDT (x) 21.7 18.3 10.2 21.4
EV/EBIT (x) 26.5 23.0 11.9 24.2
P/E (x) 147.2 168.7 46.9 39.7
P/BV (x) 27.1 23.5 16.3 10.1
Page | 11 | PHILLIPCAPITAL INDIA RESEARCH
COMPANY NAME COMPANY UPDATE
Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.
Rating Criteria Definition
BUY >= +15% Target price is equal to or more than 15% of current market price
NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%
SELL <= -15% Target price is less than or equal to -15%.
Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919
Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6246 4101
Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735
Research
Automobiles
Engineering, Capital Goods
Pharma & Specialty Chem
Dhawal Doshi (9122) 6246 4128
Jonas Bhutta (9122) 6246 4119
Surya Patra (9122) 6246 4121
Nitesh Sharma, CFA (9122) 6246 4126
Vikram Rawat (9122) 6246 4120
Mehul Sheth (9122) 6246 4123
Banking, NBFCs
IT Services & Infrastructure
Strategy
Manish Agarwalla (9122) 6246 4125
Vibhor Singhal (9122) 6246 4109
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Pradeep Agrawal (9122) 6246 4113
Shyamal Dhruve (9122) 6246 4110
Neeraj Chadawar (9122) 6667 9764
Paresh Jain (9122) 6246 4114
Logistics, Transportation & Midcap
Telecom
Consumer & Retail
Vikram Suryavanshi (9122) 6246 4111
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Media
Manoj Behera (9122) 6246 4118
Preeyam Tolia (9122) 6246 4129
Manoj Behera (9122) 6246 4118
Technicals
Metals
Subodh Gupta, CMT (9122) 6246 4136
Cement
Dhawal Doshi (9122) 6246 4128
Production Manager
Vaibhav Agarwal (9122) 6246 4124
Ganesh Deorukhkar (9122) 6667 9966
Economics
Mid-Caps & Database Manager
Editor
Anjali Verma (9122) 6246 4115
Deepak Agarwal (9122) 6246 4112
Roshan Sony 98199 72726
Shruti Bajpai (9122) 6246 4135
Oil & Gas
Sr. Manager – Equities Support
Sabri Hazarika (9122) 6667 9756
Rosie Ferns (9122) 6667 9971
Sales & Distribution
Corporate Communications
Ashvin Patil (9122) 6246 4105
Sales Trader
Zarine Damania (9122) 6667 9976
Shubhangi Agrawal (9122) 6246 4103
Dilesh Doshi (9122) 6667 9747
Kishor Binwal (9122) 6246 4106
Suniil Pandit (9122) 6667 9745
Bhavin Shah (9122) 6246 4102
Ashka Mehta Gulati (9122) 6246 4108
Execution
Archan Vyas (9122) 6246 4107
Mayur Shah (9122) 6667 9945
Contact Information (Regional Member Companies)
SINGAPORE: Phillip Securities Pte Ltd
250 North Bridge Road, #06-00 RafflesCityTower,
Singapore 179101
Tel : (65) 6533 6001 Fax: (65) 6535 3834
www.phillip.com.sg
MALAYSIA: Phillip Capital Management Sdn Bhd
B-3-6 Block B Level 3, Megan Avenue II,
No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur
Tel (60) 3 2162 8841 Fax (60) 3 2166 5099
www.poems.com.my
HONG KONG: Phillip Securities (HK) Ltd
11/F United Centre 95 Queensway Hong Kong
Tel (852) 2277 6600 Fax: (852) 2868 5307
www.phillip.com.hk
JAPAN: Phillip Securities Japan, Ltd
4-2 Nihonbashi Kabutocho, Chuo-ku
Tokyo 103-0026
Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141
www.phillip.co.jp
INDONESIA: PT Phillip Securities Indonesia
ANZTower Level 23B, Jl Jend Sudirman Kav 33A,
Jakarta 10220, Indonesia
Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809
www.phillip.co.id
CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd.
No 550 Yan An East Road, OceanTower Unit 2318
Shanghai 200 001
Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940
www.phillip.com.cn
THAILAND: Phillip Securities (Thailand) Public Co. Ltd.
15th Floor, VorawatBuilding, 849 Silom Road,
Silom, Bangrak, Bangkok 10500 Thailand
Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921
www.phillip.co.th
FRANCE: King & Shaxson Capital Ltd.
3rd Floor, 35 Rue de la Bienfaisance
75008 Paris France
Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017
www.kingandshaxson.com
UNITED KINGDOM: King & Shaxson Ltd.
6th Floor, Candlewick House, 120 Cannon Street
London, EC4N 6AS
Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835
www.kingandshaxson.com
UNITED STATES: Phillip Futures Inc.
141 W Jackson Blvd Ste 3050
The Chicago Board of TradeBuilding
Chicago, IL 60604 USA
Tel (1) 312 356 9000 Fax: (1) 312 356 9005
AUSTRALIA: PhillipCapital Australia
Level 10, 330 Collins Street
Melbourne, VIC 3000, Australia
Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899
www.phillipcapital.com.au
SRI LANKA: Asha Phillip Securities Limited
Level 4, Millennium House, 46/58 Navam Mawatha,
Colombo 2, Sri Lanka
Tel: (94) 11 2429 100 Fax: (94) 11 2429 199
www.ashaphillip.net/home.htm
INDIA
PhillipCapital (India) Private Limited
No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in
Page | 12 | PHILLIPCAPITAL INDIA RESEARCH
COMPANY NAME COMPANY UPDATE
Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.
This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.
This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.
Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.
Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.
Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in
this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the
company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this
research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for
any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for
the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in
connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:
Sr. no. Particulars Yes/No
1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL
No
2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report
No
3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No
4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report
No
5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months
No
Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.
Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.
Page | 13 | PHILLIPCAPITAL INDIA RESEARCH
COMPANY NAME COMPANY UPDATE
Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.
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Kindly note that past performance is not necessarily a guide to future performance.
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For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.-regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.
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PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013