Upload
truongcong
View
228
Download
0
Embed Size (px)
Citation preview
CMP (Rs) 72.00
Target Price (Rs) 81.00
ISIN: INE224A01026
MAR 6th
, 2013
GREAVES COTTON LIMITED Result Update: Q3 FY13
HOLDHOLDHOLDHOLD
Stock Data
Sector Industrial Machinery
BSE Code 501455
Face Value 2.00
52wk. High / Low (Rs.) 88.50/60.00
Volume (2wk. Avg ) 6888.00
Market Cap ( Rs in mn ) 17582.40
Annual Estimated Results (A*: Actual / E*: Estimated)
Years FY12A FY13E FY14E
Net Sales 17534.40 19139.01 21244.30
EBITDA 2857.90 2546.16 2762.16
Net Profit 1854.90 1502.04 1636.45
EPS 7.60 6.15 6.70
P/E 9.48 11.71 10.74
Shareholding Pattern (%)
1 Year Comparative Graph
BSE SENSEX GREAVES COTTON LTD
SYNOPSIS
Greaves Cotton Limited is one of the leading
engineering companies in India with core
competencies in diesel/petrol engines,
gensets and construction equipment.
Greaves Cotton Ltd reported higher revenue
at Rs 5157.80 mn for the quarter ended 31st
December 2012 as against Rs 4643.50 mn for
the corresponding quarter last year (an
increase of 11.08%).
Greaves Cotton Ltd has declared a Third
Interim Dividend at the rate of Rs 0.40 per
Equity Share of Rs.2 each for the Financial
Year 2012-13.
Profit After Tax (PAT) after exceptional item
of provision for diminution in value of
investment in its subsidiary amounting to Rs
142.00 mn was Rs 344.00 mn as against Rs
342.00 mn, for the same period last year.
During the quarter, Greaves Automotive
Business entered into a Long Term Supply
Agreement with Atul Auto Ltd for supply of
diesel engines for 3 wheeled diesel vehicles,
for a period of seven years.
Net Sales and PAT of the company are
expected to grow at a CAGR of 19% and 9%
over 2011 to 2014E respectively.
Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Greaves Cotton Ltd 72.00 17582.40 7.60 9.48 2.72 110.00
Cummins India Ltd 490.00 135550.80 25.98 18.82 6.63 550.00
Elecon Engineering Ltd 35.35 3282.70 6.49 5.45 0.74 90.00
KEC International Ltd 49.10 12623.00 3.51 13.99 1.26 60.00
Investment Highlights
Results updates- Q3 FY13,
Greaves Cotton Ltd, established in 1859, is one of
India's leading and well-diversified Engg companies
& it manufactures a wide range of industrial
products to meet the requirement of core sectors in
India and abroad, reported its financial results for
the quarter ended 31st DEC, 2012.
Months DEC-12 DEC-11 % Change
Net Sales 5157.80 4643.50 11.08%
PAT 343.60 341.60 0.59%
EPS 1.41 1.40 0.59%
EBITDA 643.70 596.20 7.97%
The company’s net profit decreased to Rs.343.60 million against Rs.341.60 million in the corresponding quarter
ending of previous year, an increase of 0.59%. Revenue for the quarter rose 11.08% to Rs.5157.80 million from
Rs.4643.50 million, when compared with the prior year period. Reported earnings per share of the company
stood at Rs.1.41 a share during the quarter, registering 0.59% increase over previous year period. Profit before
interest, depreciation and tax is Rs.643.70 millions as against Rs.596.20 millions in the corresponding period of
the previous year.
Expenditure :
Break up of Expenditure
Value in Rs. Million
Q3 FY13 Q3 FY12
Cost of Material Consumed 3531.70 3248.20
Employee Benefit Expenses 375.90 343.60
Depreciation 98.60 82.60
Other Expenses 441.00 392.70
Purchase of Stock in Trade 94.00 147.90
Segment Revenue
Latest Updates
• Greaves Cotton Ltd has declared a Third Interim Dividend at the rate of Rs 0.40 per Equity Share of Rs.2 each
for the Financial Year 2012-13. The total Interim Dividend for the Financial Year 2012-13. Including the First
Interim Dividend of Rs 0.30 and the Second Interim Dividend of Rs 0.40, will be Rs 1.10 per Equity Share of
Rs.2 each.
• Greaves Automotive Engine Business was awarded the prestigious "Excellence in Delivery" Award from Tata
Motors for meeting the demand for engines for Ace Zip and Magic Iris.
• According to Annual Report 2011-12, Greaves Cotton plans to expand its footprints into higher KVA segment
and emerge as a one stop-shop for varying customer needs.
Company Profile
Greaves Cotton Limited, established in 1859, is one of India's leading and well-diversified engineering
companies. It manufactures a wide range of industrial products to meet the requirement of core sectors in India
and abroad. The Company's core competencies are in Diesel / Petrol Engines, Gensets, Pumpsets & Construction
Equipment. In the recent years, Greaves has made rapid strides towards globalization. The Company exports
several of its products to various countries.
Greaves has 9 Manufacturing Units located all over India, two overseas offices in U.K. and China and one
subsidiary company in Germany. The Company's manufacturing plants are equipped with state-of-the-art
production a facility, backed by in house R&D. Greaves Cotton Limited is certified by ISO/TS 16949-2002.
Business Divisions:
• Agricultural Equipment
Greaves manufactures lightweight petrol, diesel / kerosene engines in the 1-4 HP range and portable eco-
friendly silent Gensets in the 1.4 KVA range at its ISO 9001 certified Petrol Engines Unit, in Chennai. The
engines are most popular for agriculture applications like power sprayer, pump sets and power reapers.
Greaves is the trusted name across rural India for lightweight, portable pump sets. Greaves has stepped up its
contribution to Indian agriculture with the launch of Greaves Power Tiller, manufactured by a leading
manufacturer in China and customized to suit Indian conditions.
• Automotive Division
Highly fuel efficient, Greaves lightweight diesel engines are ideal for automotive applications like 2-wheelers,
3-wheelers, mini cars etc. These engines with high power-to-weight ratio are also used extensively for
portable agricultural pump sets, gensets, small boats, construction equipment and host of other applications.
Available in a range of 4-11 HP models, Greaves light diesel engines are manufactured at ISO 9001 certified
Units in Aurangabad and Ranipet.
• Auxiliary Power
Greaves leads the field in the manufacture of Diesel Engines (10-1000 HP) used for diesel generating sets,
barges, pilot launches, compressors, construction equipment, cranes, forklifts, etc. Greaves also manufactures
Dual Fuel Engines / Gensets (30 KVA to 400 KVA) and Gas Engines / Gensets (125 KVA to 300 KVA)
operating on natural gas. Manufactured at ISO 9001-2000 certified Unit at Chinchwad, Pune, and quality is
assured. Among the first few foundries with ISO-9001 certificate of approval Greaves Limited Foundry
Unit is one of the pioneers in the manufacture of Quality Castings in India having begun operations in 1955,
to supply ductile iron casting for Greaves Engines.
• Construction Equipment
To meet the challenges of construction industry, Greaves manufactures wide range of Compaction and
Concreting equipment. The complete range of concrete equipment like Transit Mixers, Concrete Pumps,
Batching Plants, etc. are manufactured at the Company’s ISO 9001 certified Plants at Gummidipoondi (Tamil
Nadu). Greaves also manufactures the complete range of compaction equipment like Vibratory Soil
Compactors, Heavy Tandem Rollers, Light tandem Rollers at Gummidipoondi.
Greaves construction equipment is mainly used for construction of roads, bridges, buildings, ready mix
concrete applications, etc. Greaves caters to the service and spare parts requirement of customers through
their large network of qualified and trained service engineers located a various branches and dealerships
• Compaction Equipment
• Concreting Equipment
• Earth Moving Equipment
Industrial Engines
Wherever an engine is required to power equipment that is needed to pump, dig, pull, push, carry or move,
Greaves can tailor a power pack solution exactly to the need. Greaves offers a wide range of versatile, fuel-
efficient engines in the range of 1-700 HP for a host of applications in:
� Marine.
� Agricultural Equipment.
� Fire fighting pump sets.
� Mining & Construction.
� Material Handling (Cranes, Forklifts).
� Rail Cars, Road Sweepers etc.
These engines are manufactured at state of the art manufacturing facilities in Pune, Aurangabad (Maharashtra)
Gummidipoondi and Ranipet (Tamil Nadu).Dual fuel engines also available.
Subsidiary Companies
� Greaves Farymann Diesel GmbH, Lampertheim, Germany (GFD).
� Greaves Co6on Netherlands B.V. (GCN).
� Greaves Leasing Finance Limited (GLFL).
� Dee Greaves Limited (DGL).
� Greaves Auto Limited (GAL).
� Ascot International (AI).
Financial Highlight
Balance sheet as at March31st, 2012
(A*- Actual, E* -Estimations & Rs. In Millions)
FY12 FY13E FY14E
EQUITY AND LIABILITIES:
Shareholders’ Funds:
Share Capital 488.40 488.40 488.40
Reserves and Surplus 6005.30 7466.44 9102.89
Net worth (a) 6493.70 7954.84 9591.29
Non-Current Liabilities:
Long-term borrowings 1.70 1.79 1.87
Deferred Tax Liabilities [Net] 299.60 344.54 389.33
Other Long Term Liabilities 31.50 33.39 35.06
Long Term Provisions 204.70 186.28 176.96
Long term liabilities (b) 537.50 565.99 603.23
Current Liabilities:
Short-term borrowings 200.00 240.00 280.80
Trade Payables 1935.50 1780.66 1673.82
Other Current Liabilities 791.10 656.61 584.39
Short Term Provisions 958.60 1140.73 1346.07
Current Liabilities © 3885.20 3818.01 3885.07
Total (a+b+c) 10916.40 12338.84 14079.59
ASSETS:
Non-Current Assets:
Fixed Assets:
Tangible Assets 3209.40 3851.28 4606.74
Intangible Assets 50.10 46.59 48.92
Capital work-in-progress 167.80 234.92 305.40
Intangible Asset under Development 35.60 39.16 41.51
(d) 3462.90 4171.95 5002.57
Other non-current assets 13.70 13.70 13.70
Non Current Investments 528.80 475.92 452.12
Long Term Loans and Advances 214.80 225.54 232.31
(e) 757.30 715.16 698.13
Current Assets:
Current Investments 585.40 936.64 1404.96
Inventories 1699.70 1750.69 1820.72
Trade Receivables 2559.20 2635.98 2741.42
Cash and Bank Balances 702.50 807.10 906.11
Short Term Loans and Advances 1144.50 1316.18 1500.44
Other Current Assets 4.90 5.15 5.25
(f) 6696.20 7451.73 8378.89
Total (d+e+f) 10916.40 12338.84 14079.59
Annual Profit & Loss Statement for the period of 2011 to 2014E
Value(Rs.in.mn) FY11 FY12 FY13E FY14E
Description 12m 12m 12m 12m
Net Sales 12504.70 17534.40 19139.01 21244.30
Other Income 140.80 59.80 197.08 212.84
Total Income 12645.50 17594.20 19336.09 21457.14
Expenditure -10526.70 -14736.30 -16789.93 -18694.99
Operating Profit 2118.80 2857.90 2546.16 2762.16
Interest -72.20 -34.80 -9.43 -7.83
Gross profit 2046.60 2823.10 2536.73 2754.33
Depreciation -209.80 -317.30 -387.99 -465.59
Profit Before Tax 1836.80 2505.80 2148.74 2288.74
Tax -564.00 -650.90 -646.70 -652.29
Net Profit 1272.80 1854.90 1502.04 1636.45
Equity capital 488.40 488.40 488.40 488.40
Reserves 4730.50 5964.40 7466.44 9102.89
Face value 2.00 2.00 2.00 2.00
EPS 5.21 7.60 6.15 6.70
Quarterly Profit & Loss Statement for the period of 30 June, 2012 to 31st Mar, 2013E
Value(Rs.in.mn) 30-Jun-12 30-Sep-12 31-Dec-12 31-Dec-12E
Description 3m 3m 3m 3m
Net sales 4115.80 4501.30 5157.80 5364.11
Other income 29.40 20.40 68.50 78.78
Total Income 4145.20 4521.70 5226.30 5442.89
Expenditure -3619.00 -3959.10 -4582.60 -4629.23
Operating profit 526.20 562.60 643.70 813.66
Interest -3.10 -1.60 -2.20 -2.53
Gross profit 523.10 561.00 641.50 811.13
Depreciation -88.90 -94.00 -98.60 -106.49
Profit Before Tax 434.20 467.00 542.90 704.64
Tax -118.70 -131.40 -199.30 -197.30
Net Profit 315.50 335.60 343.60 507.34
Equity capital 488.40 488.40 488.40 488.40
Face value 2.00 2.00 2.00 2.00
EPS 1.29 1.37 1.41 2.08
Ratio Analysis
Particulars FY11 FY12 FY13E FY14E
EPS (Rs.) 5.21 7.60 6.15 6.70
EBITDA Margin (%) 16.94% 16.30% 13.30% 13.00%
PBT Margin (%) 14.69% 14.29% 11.23% 10.77%
PAT Margin (%) 10.18% 10.58% 7.85% 7.70%
P/E Ratio (x) 13.81 9.48 11.71 10.74
ROE (%) 24.39% 28.75% 18.88% 17.06%
ROCE (%) 44.15% 47.72% 35.93% 32.89%
EV/EBITDA (x) 8.04 5.98 6.67 6.12
Book Value (Rs.) 21.37 26.42 32.58 39.28
P/BV 3.37 2.72 2.21 1.83
Charts
Outlook and Conclusion
� At the current market price of Rs.72.00, the stock P/E ratio is at 11.71 x FY13E and 10.74 x FY14E
respectively.
� Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.6.15 and Rs.6.70
respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 9% over 2011 to 2014E
respectively.
� On the basis of EV/EBITDA, the stock trades at 6.67 x for FY13E and 6.12 x for FY14E.
� Price to Book Value of the stock is expected to be at 2.21 x and 1.83 x respectively for FY13E and FY14E.
� We recommend ‘HOLD’ in this particular scrip with a target price of Rs.81.00 for Medium to Long term
investment.
Industry Overview
The Indian Industrial Machinery sector is the mainstay of entire Indian industry as manufacturing output
constitutes over 75 per cent of the index of industrial production (IIP). Indian manufacturers have adopted a
global mindset while carefully selecting their product segments. They are continuously working to achieve cost
excellence and marketing capability which has even attracted foreign players to proactively develop India as
their sourcing and manufacturing hub.
India enjoys a competitive advantage on the global canvas owing to key reforms in taxation, infrastructure and
clusters (like special economic zones [SEZs]) implemented by the Government, availability of reasonably-priced
skilled labor workforce and a positive eco-system. Moreover, the global trend to manufacture and source
products in low-cost countries has gained pace in the past decade, particularly in skill-intensive industries, and
India has been able to leverage on the opportunity to its best.
Growth Trend
The HSBC India Manufacturing Purchasing Managers' Index (PMI) - a measure of factory production -was at 56.6
in February 2012. The latest reading indicated a marked expansion of the Indian manufacturing sector which
was spurred by new orders (that touched a 10-month high) and a rise in new export business for the month.
The Indian manufacturing sector also showed moderate overall business sentiment in October-December 2011
quarter, as per the Industrial Outlook Survey conducted by the Reserve Bank of India (RBI) for the quarter. The
business expectation index (BEI), which acts as a barometer of the overall health of the manufacturing sector,
stood at 110.1 for the assessment quarter while RBI expects it at 117.2 for the January-March 2012 quarter.
The IIP for the Mining, Manufacturing and Electricity sectors for the month of December 2011 stood at 136.2,
190.7 and 149.8 respectively wherein manufacturing grew by 1.8 per cent. In terms of industries, 15 out of the
22 industry groups (as per 2-digit NIC-2004) in the manufacturing sector have shown positive growth during the
reported month.
Key Developments and Investments
• Shanghai Electric, China's biggest power equipment company, is all set to establish a manufacturing facility in
India. The company is in advanced stages of negotiations with French power major Alstom for a joint venture
facility that would manufacture boilers for power projects
• Detroit-headquartered automaker Ford Motor Co will make India its manufacturing hub for small, low-cost
cars that would cater to markets in Africa and the Asia-Pacific region. The company will set up a plant in
northwest India in 2014 that would entail an investment of US$ 1 billion and would have an annual capacity
of 2, 40, 000 units. Ford's existing manufacturing unit in Chengalpattu is undergoing enhancements and is
expected to be in full production mode by the end of 2012.
• Germany-based Hummel AG Group's subsidiary Hummel Connector Systems is establishing a manufacturing
facility at Neelambur, near Coimbatore, entailing an investment of €3,00, 000 (US$ 3,94,360.03). Hummel
produces cable glands, circular connectors, industrial enclosures, touch panels and electronics for medical,
measurement and control technology
• In order to price its new offering competitively, Japanese bike-maker Yamaha is planning to manufacture its
soon-to-arrive 250cc sports bike locally in India
• Japan-based electronics and durables giant Toshiba has commenced local manufacturing of selected TV
models in limited numbers at a facility in Dehra Dun. In order to ramp up its volumes across various
categories, the company is conducting a feasibility study to go-in for local manufacturing in a bigger way
Government Initiatives
The Indian Government is laying intense focus on developing the manufacturing sector. It has set itself a target to
ensure that 25 per cent share of gross domestic product (GDP) growth comes from manufacturing by 2022 and
eventually creating 100 million job opportunities to make the growth inclusive.
Mr. Talleen Kumar, Joint Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce and
Industry, Government of India, has stated that there are five more National Manufacturing Investment Zones
(NMIZs) which are being proposed apart from seven of them which are ready for execution in the Delhi Mumbai
Industrial Corridor.
The Indian Government has also invited Italian industry to get involved in the proposed NMIZs. Mr. Anand
Sharma, Commerce, Industry and Textiles Minister, India, has had a meeting with Italy's Foreign Minister Mr.
Guilio Terzi di Sant' Agata recently. India and Italy have Joint Working Groups (JWG) which give their
recommendations about infrastructure, manufacturing, innovation and science, information technology and
pharmaceuticals. More JWGs on tourism, hospitality and agro-processing are being considered.
The Government has also made certain recommendations for the manufacturing policy that would be unveiled
during the announcement of 12th five year plan. The proposed manufacturing policy enlists the following
recommendations:
• Make amendments in duty structure to ensure equal opportunities to local manufacturers. In this regard,
Government has proposed to impose 19 per cent duty on imported equipment for mega power projects. The
cabinet has also agreed to give preference to indigenously manufactured electronic products (step-up value
addition between 25-45 per cent in five years) in Government procurement
• Public sector enterprises (PSEs) should focus on areas that hold national importance, but look commercially
unfeasible to the private sector because of the heavy investments and risks involved. For instance: aircraft
production
• Ensure flexibility for entry and exit of public investment in the process of industrial growth by endorsing a
single holding structure or new PSEs. The model is proposed to be a combination of a sovereign wealth fund,
a single holding structure and the Government acting as a venture capitalist
Road Ahead
According to a joint report titled 'Made in India-the Next Big Manufacturing Export Story', prepared by industry
body CII and McKinsey, manufacturing exports from India could increase from US$ 40 billion in 2002 to about
US$ 300 billion by 2015. This would make India rake-in a share of approximately 3.5 per cent in the world
manufacturing trade.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – [email protected]
C.V.S.L.Kameswari Pharma
U. Janaki Rao Capital Goods
B.Anil Kumar Diversified
A.Nagaraju Cement, Reality & Infra, Oil & Gas
Ashish.Kushwaha IT, Consumer Durable & Banking
Firstcall India also provides
Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s,Takeover
Offers, Offer for Sale and Buy Back Offerings.
Corporate Finance Offerings include Foreign Currency Loan Syndications,
Placement of Equity / Debt with multilateral organizations, Short Term Funds
Management Debt & Equity, Working Capital Limits, Equity & Debt
Syndications and Structured Deals.
Corporate Advisory Offerings include Mergers & Acquisitions(domestic and
cross-border), divestitures, spin-offs, valuation of business, corporate
restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &
Execution, Project Financing, Venture capital, Private Equity and Financial
Joint Ventures
Firstcall India also provides Financial Advisory services with respect to raising
of capital through FCCBs, GDRs, ADRs and listing of the same on International
Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and
other international stock exchanges.
For Further Details Contact:
3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071
Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089
E-mail: [email protected]
www.firstcallindiaequity.com