Quess Corp Ltd. Absolute :ADD ), PT ( Good on margins but low …bsmedia.business-standard.com/_media/bs/data/market... · 2018. 1. 31. · Quess Corp Ltd. Absolute – ADD Relative

January 25, 2018 Analyst: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 1 of 22

Before reading this report, you must refer to the disclaimer on the last page.

Quess Corp Ltd. Absolute :ADD

Relative : Overweight

3QFY18 Result: Est. (), PT (), Rating () Regular Coverage 5% ATR in 14 months

Good on margins but low on revenue: Retain ADD Staffing Services

© 2018EquirusAll rights reserved

Rating Information

Price (Rs) 1,110

Target Price (Rs) 1,174

Target Date 31st Mar 19

Target Set On 24th Jan '18

Implied yrs of growth (DCF) 12

Fair Value (DCF) 419

Fair Value (DDM) 318

Ind Benchmark BSE IT

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 163,015

Free Float (%) 28.33 %

52 Wk H/L (Rs) 1198.9/630

Avg Daily Volume (1yr) 138,490

Avg Daily Value (Rs Mn) 118

Equity Cap (Rs Mn) 1,455

Face Value (Rs) 10

Bloomberg Code QUESS IN

Ownership Recent 3M 12M

Promoters 71.7 % -9.8 % -17.3 %

DII 4.5 % 2.1 % 2.2 %

FII 7.3 % 1.9 % 3.0 %

Public 16.6 % 5.8 % 12.0 %

Price % 1M 3M 12M

Absolute 1.5 % 26.6 % 54.5 %

Vs Industry 3.3 % 7.0 % 54.2 %

TeamLease -5.3 % 36.8 % 151.7 %

SIS 1.4 % 57.9 % -

Consolidated Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) 1.7 2.1 2.3 1.9

EPS (18E) 2.2 10.2 4.7 6.4

Quess Crop’s (Quess) 3Q earnings were ahead on margins but missed our revenue

estimate. Variance relative to EE was largely due to Manipal contribution relative to

our estimates. That said, margin beat was encouraging while discussions suggest we

are good on FY18e estimates. Consequently, we continue to expect (1) a 31% revenue

CAGR over FY17-FY20E led by structural demand trends in general staffing, facilities

management (FM), industrials (IAM) businesses, and inorganic contribution, and (2) a

65% PAT CAGR over FY17-FY20E. Change in tax assumption leads to a modest increase

in FY19e EPS and in our DCF-based Mar’19 TP to Rs 1,174, which discounts our Mar’19

TTM EPS by 41x. Retain ADD. Healthy yoy growth but marginally below EE: Revenues grew 48% yoy to Rs.15,840

mn but were below EE of Rs. 17,128mn. Segregating further, People and services

(P&S) revenues grew 25% yoy to Rs. 7,355.7mn (Rs. 7,222 mn EE) and now contribute

46.5% of revenues while Global Technology Services (GTS, 30.3% contribution)

revenues grew 71% yoy to Rs 4803.2mn (EE: Rs. 4,298mn/53.1% yoy growth).

Integrated facility management (IFM) business revenues grew 86% yoy to Rs.

2,634.4mn along with 16.6% contribution, while Industrials revenues grew 83% yoy to

Rs. 1,046mn. Variance relative to EE was restricted to Manipal contribution. We are

maintaining our pre-3q estimates as discussion post 3Q suggests we are good on

estimates. EBIT up 33.2%/50% qoq/yoy, -4.1% below EE: Consolidated EBIT increased 50% yoy

while margins expanded 5bps yoy and 33bps qoq. Segmentally, P&S EBIT grew 26%

yoy along with ~4 bps yoy improvement in margins. GTS EBIT grew 60% yoy but

margins declined by 47bps. IFM EBIT grew 145% yoy along with 190bps improvement

in margins while industrial EBIT grew 18% yoy (EBITM declined ~200bps yoy to 3.7%).

Modest 3q beat helps retain our margin estimates. Announces Greenpiece Landscapes acquisition and leadership changes:

Greenpiece Landscapes (revenues of Rs 333mn, EBITDAM 9.8%) acquisition could

close before 4Q end and could add adjacency services to IFM business. Quess has

also announced leadership changes with existing CFO being elevated to the position

of CEO while Mr. Isaac would lead as the chairman of board and MD. PE/G (adjusted for one-time benefit) valuations continue to be reasonable:

Though valuations appear rich on the PE metric, QUESS trades at 0.8x PE/G based on

historical (FY12-17) PAT growth. Modelled 65% PAT growth over FY17-FY20E (driven

by revenue visibility) coupled with improving FCF and return ratios (RoE/RoIC:

~23%/29% in FY18E) could help sustain multiples.

Revised Estimates % Change over Prev.

FY18E FY19E FY18E FY19E

Sales (Rs mn) 62,790 81,325 0.0% 0.0%

EBITDA 3,763 5,290 0.0% 0.0%

EBIT 3,406 4,878 -1.0% 0.0%

Recurring PAT 3,444 4,145 0.0% 2.0%

EPS 23.7 28.5 0.0% 2.0%

Change in EPS due to one time tax benefit.

Consolidated Financials

Rs. Mn YE Mar FY17A FY18E FY19E FY20E

Sales 41,574 62,790 81,325 93,534

EBITDA 2,228 3,763 5,290 6,479

Depreciation 264 357 412 478

Interest Expense 465 669 629 591

Other Income 153 530 114 249

Reported PAT 1,133 3,444 4,145 5,093

Recurring PAT 1,133 3,432 4,145 5,093

Total Equity 8,362 20,305 24,450 29,543

Gross Debt 7,304 -105 -531 -733

Cash 4,596 14,635 16,282 18,963

Rs Per Share FY17A FY18E FY19E FY20E

Earnings 7.8 23.6 28.5 35.0

Book Value 66 140 168 203

Dividends 0.0 0.0 0.0 0.0

FCFF -39.6 83.0 18.9 23.6

P/E (x) 142.5 47.1 39.0 31.7

P/B (x) 16.8 8.0 6.6 5.5

EV/EBITDA (x) 75.1 39.4 27.6 22.1

ROE (%) 19 % 24 % 19 % 19 %

Core ROIC (%) 15 % 49 % 89 % 40 %

EBITDA Margin (%) 5 % 6 % 7 % 7 %

Net Margin (%) 3 % 5 % 5 % 5 %

Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months

January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 2 of 12

Exhibit 1: Overall revenue growth (yoy) trend

Source: Company, Equirus Securities

Exhibit 2: Overall EBIT margin trend


Exhibit 3: P&S revenue growth trend


Exhibit 4: P&S EBIT margin trend


57.2%

0.5%

155.2%

33.8% 35.7% 26.9%

17.7% 12.6% 21.0% 19.9%

37.1% 48.5%

0.0%

40.0%

80.0%

120.0%

160.0%

200.0%

FY13

9M

FY14

15M

FY15

FY16

1Q

17

2Q

17

3Q

17

4Q

17

FY17

1Q

18

2Q

18

3Q

18

Revenue Growth (yoy)

3.9%

3.5%

4.7%

4.0%

4.7% 4.7% 4.9%

4.6% 4.7% 4.8%

5.0%

3.0%

3.5%

4.0%

4.5%

5.0%

FY13

9M

FY14

15M

FY15

FY16

1Q

17

2Q

17

3Q

17

4Q

17

FY17

1Q

18

2Q

18

3Q

18

EBIT Margin

71.6%

-0.5%

126.8%

38.9% 48.7%

29.4%

8.1% 5.8% 20.3%

1.9% 10.3% 7.7%

-30.0%

0.0%

30.0%

60.0%

90.0%

120.0%

150.0%

FY13

9M

FY14

15M

FY15

FY16

1Q

17

2Q

17

3Q

17

4Q

17

FY17

1Q

18

2Q

18

3Q

18

P&S revenue growth (yoy)

3.9%

4.3% 4.2%

2.7%

4.4% 4.5%

4.7% 4.9% 5.0%

4.8% 4.8%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

P&S EBIT Margin



Exhibit 5: GTS revenue growth trend


Exhibit 6: GTS EBIT margin trend


Exhibit 7: IFM revenue growth trend


Exhibit 8: IFM EBIT margin trend


31.1%

-2.4%

180.5%

25.2% 25.1% 27.4% 31.2% 29.8% 28.4% 11.5%

0.1%

23.2%

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

FY13

9M

FY14

15M

FY15

FY16

1Q

17

2Q

17

3Q

17

4Q

17

FY17

1Q

18

2Q

18

3Q

18

GTS revenue growth (yoy)

7.2%

6.1%

5.4%

7.3% 7.1% 7.1% 7.5%

6.6% 6.7% 7.2% 7.0%

0.0%

2.0%

4.0%

6.0%

8.0%

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

GTS EBIT Margin

57.4%

12.0%

140.2%

23.1% 10.9% 10.4%

4.4% 9.8% 8.8% 10.1%

108.4%

6.7%

0.0%

40.0%

80.0%

120.0%

160.0%

FY13

9M

FY14

15M

FY15

FY16

1Q

17

2Q

17

3Q

17

4Q

17

FY17

1Q

18

2Q

18

3Q

18

IFM revenue growth (yoy)

3.5%

4.6% 4.8% 5.5%

3.6%

5.0% 5.3% 6.0% 6.2%

7.7% 7.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

IFM EBIT Margin



Exhibit 9: IAM Revenue growth trend


Exhibit 10: IAM EBIT Margin trend


0.0% 0.0% 0.0%

50.9%

24.7%

32.7%

9.9% 4.5%

16.8%

6.4%

24.1%

39.4%

0.0%

12.0%

24.0%

36.0%

48.0%

60.0%

FY13

9M

FY14

15M

FY15

FY16

1Q

17

2Q

17

3Q

17

4Q

17

FY17

1Q

18

2Q

18

3Q

18

IAM revenue growth (yoy)

10.2%

4.9%

9.5% 10.4% 10.4%

9.8%

5.7% 4.8% 4.5% 4.7%

3.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

IAM EBIT Margin



Quarterly performance (Consolidated)

Q3FY18 Q3FY18E Q2FY18 Q3FY17 % Change

Comments Q3FY18E Q2FY18 Q3FY17

Net Sales 15,840 17,128 13,953 10,668 -7.5% 13.5% 48.5%

Raw Materials Consumed 396 137 328 114 189.1% 20.9% 248.0%

Employee Costs 13,084 14,718 11,692 9,065 -11.1% 11.9% 44.3%

Other Expenses 1,450 1,370 1,144 892 5.8% 26.8% 62.6%

Total Expenditures 14930 16226 13164 10071 -8.0% 13.4% 48.3%

EBITDA 909 903 789 597 0.7% 15.3% 52.3%

Depreciation 122 83 83 72 48.3% 47.0% 69.0%

EBIT 787 820 706 525 -4.1% 11.5% 50.0%

Interest 171 170 155 123 0.0% 10.0% 38.9%

Other Income 126 100 168 60 25.6% -25.1% 108.2%

PBT 742 750 719 462 -1.0% 3.3% 60.6%

Tax 53 0 -764 130 #DIV/0! -106.9% -59.5%

PAT before MI & Associates 690 750 1483 332 -8.0% -53.5% 107.5%

Minority Interest 0 0 0 0

Profit from Assoc. 0 0 0 5

Recurring PAT 690 750 1,483 337 -8.0% -53.5% 104.8%

Extraordinaries -9 0 2 -5 - -481.3% 89.5%

Reported PAT 699 750 1,481 341 -6.8% -52.8% 104.6%

EPS (Rs) 4.7 5.4 10.2 2.3 -12.5% -53.5% 104.8%

EBITDA Margin 5.7% 5.3% 5.7% 5.6% 47 9 14

EBIT Margin 5.0% 4.8% 5.1% 4.9% 18 -9 5

PBT Margin 4.7% 4.4% 5.2% 4.3% 31 -47 35

PAT Margin 4.4% 4.4% 10.6% 3.2% 3 -620 121

Tax Rate 7.1% 0.0% -106.3% 28.1% 708 11,336 -2,101



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY18E 23.6 21.7 9 % Consensus before earnings.

FY19E 28.5 29.0 -2 %

Sales FY18E 62,790 59,885 5 %

FY19E 81,325 77,644 5 %

PAT FY18E 3,444 3,049 13 %

FY19E 4,145 4,111 1 %

Our Key Investment arguments:

Large and fragmented market

Growth in formal workforce

Shift from unorganized to organized driven by macro tailwinds and regulatory

changes

M&A remains a strategic and scale driver

Sticky client relationships aid revenue visibility

Better client mining driven by value added services

EBITDAM expansion led by recovery in MFX/Brainhunter margins, mix change

Risk to Our View

Growth largely driven by the inorganic route

Increased macroeconomic volatility

Limited management bandwidth given large breadth of operations

Key parameters FY17A FY18E FY19E FY20E

Overall Revenue (Rs Mn) 41,574 62,790 81,325 93,534

P&S revenue (Rs Mn) 23,454 28,145 33,211 39,189

GTS Revenue (Rs Mn) 11,830 17,007 18,367 19,837

IFM Revenue (Rs Mn) 4,046 10,105 12,929 15,257

IAM Revenue (Rs Mn) 2,244 2,603 3,019 3,502

EBIT Margin(%) 4.7% 5.4% 6.0% 6.4%

PBT Margin(%) 4.0% 5.2% 5.4% 6.0%

PAT Margin(%) 2.7% 5.5% 5.1% 5.4%

Key Triggers

Increasing contribution of T&D segment revenue (with 25% EBITDA margins)

MFX and Brainhunter margin expansion

Sensitivity to Key Variables % Change % Impact on EPS

P&S Segment 1 % 6 %

GTS Segment 1 % 3 %

- - -

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.9 % 0.9 12.6 % 3.0 % -8.2 %

- FY18E FY19E FY20-22E FY23-27E FY28-32E

Sales Growth 51 % 30 % 13 % 14 % 12 %

NOPAT Margin 6 % 6 % 6 % 8 % 8 %

IC Turnover 15.77 12.62 4.82 4.90 4.96

RoIC 49.3 % 88.9 % 36.2 % 41.3 % 41.3 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 183 226 152 323 424

Valuation as of Mar '19 210 260 175 371 487

Based on DCF, assuming 10 years of 14% CAGR growth and 41.3% average ROIC, we derive

our current fair value of Rs 323 and a 31 Mar’19 fair value of Rs 371.

Company Description:

Quess Corp is one of India’s leading integrated business services providers handling end-

to-end business functions. They offer comprehensive solutions including recruitment,

temporary staffing, technology staffing, IT products and solutions, payroll, compliance

management, integrated facility management and industrial asset management services.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E

QuessCorp ADD 1,110 163,015 1,174 31st Mar 19 7.8 23.6 28.5 142.5 47.1 39.0 65.9 8.0 19 % 24 % 19 % 0.0 % 0.0 %

TeamLease ADD 2,199 37,814 1,986 31st Mar 19 32.9 40.2 52.3 67.9 55.6 42.8 222.9 8.5 16 % 17 % 18 % 0.0 % 0.0 %

SIS - 1,221 87,892 - - - - - - - - - - - - - - -



Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18A 2Q18A 3Q18A 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E

Revenue 9,910 10,177 10,668 11,221 11,881 13,953 15,840 21,117 18,358 19,906 20,973 22,088 41,574 62,790 81,325 93,534 Raw Materials Consumed 124 194 114 98 111 328 396 528 165 175 180 186 469 1,363 706 786

Employee Costs 8,545 8,714 9,065 9,567 10,179 11,692 13,084 17,422 15,678 16,960 17,932 18,908 35,435 52,378 69,478 79,871

Other Expenses 712 717 892 970 955 1,144 1,450 1,737 1,340 1,453 1,489 1,568 3,442 5,287 5,851 6,398

- - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - EBITDA 527 551 597 586 635 789 909 1,430 1,175 1,318 1,372 1,426 2,228 3,763 5,290 6,479 Depreciation 60 69 72 65 67 83 122 84 92 100 107 114 264 357 412 478 EBIT 467 482 525 521 568 706 787 1,345 1,083 1,218 1,265 1,312 1,964 3,406 4,878 6,000 Interest 92 98 123 153 161 155 171 183 160 157 157 154 465 669 629 591 Other Income 7 57 60 29 34 168 126 202 27 28 29 29 153 530 114 249 PBT 382 441 462 396 441 719 742 1,364 950 1,089 1,136 1,187 1,651 3,267 4,363 5,658 Tax 135 139 130 116 115 -764 53 431 48 54 57 59 518 -165 218 566 PAT bef. MI & Assoc. 247 301 332 280 326 1,483 690 933 903 1,035 1,079 1,128 1,133 3,432 4,145 5,093 Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Profit from Assoc. 0 0 5 -3 0 0 0 0 0 0 0 0 0 0 0 0 Recurring PAT 247 301 337 276 326 1,483 690 933 903 1,035 1,079 1,128 1,133 3,432 4,145 5,093 Extraordinaries 0 13 -5 38 -6 2 -9 0 0 0 0 0 0 -12 0 0 Reported PAT 247 288 341 239 331 1,481 699 933 903 1,035 1,079 1,128 1,133 3,444 4,145 5,093

EPS (Rs) 1.70 2.07 2.32 1.90 2.24 10.19 4.74 6.42 6.21 7.11 7.42 7.75 7.79 23.59 28.49 35.00

Key Drivers

P&S Revenues - - - - - - - - - - - - 23,454 28,145 33,211 39,189 GTS Revenues - - - - - - - - - - - - 11,830 17,007 18,367 19,837 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -1 % 3 % 5 % 5 % 6 % 17 % 14 % 33 % -13 % 8 % 5 % 5 % - - - - Raw Materials Consumed 0 % 56 % -41 % -14 % 14 % 194 % 21 % 33 % -69 % 6 % 3 % 3 % - - - - EBITDA 31 % 5 % 8 % -2 % 8 % 24 % 15 % 57 % -18 % 12 % 4 % 4 % - - - - EBIT 38 % 3 % 9 % -1 % 9 % 24 % 12 % 71 % -19 % 12 % 4 % 4 % - - - - Recurring PAT -11 % 22 % 12 % -18 % 18 % 355 % -53 % 35 % -3 % 15 % 4 % 4 % - - - -

EPS -11 % 22 % 12 % -18 % 18 % 355 % -53 % 35 % -3 % 15 % 4 % 4 % - - - -

Yearly Growth (%)

Revenue 36 % 27 % 18 % 13 % 20 % 37 % 48 % 88 % 55 % 43 % 32 % 5 % 21 % 51 % 30 % 15 % EBITDA 60 % 45 % 49 % 46 % 20 % 43 % 52 % 144 % 85 % 67 % 51 % 0 % 47 % 69 % 41 % 22 % EBIT 50 % 40 % 41 % 54 % 21 % 46 % 50 % 158 % 91 % 73 % 61 % -2 % 44 % 73 % 43 % 23 % Recurring PAT 37 % 66 % 95 % 0 % 32 % 392 % 105 % 238 % 177 % -30 % 56 % 21 % 40 % 203 % 21 % 23 %

EPS 37 % 66 % 95 % 0 % 32 % 392 % 105 % 238 % 177 % -30 % 56 % 21 % 40 % 203 % 21 % 23 %

Margin (%)

EBITDA 5 % 5 % 6 % 5 % 5 % 6 % 6 % 7 % 6 % 7 % 7 % 6 % 5 % 6 % 7 % 7 % EBIT 5 % 5 % 5 % 5 % 5 % 5 % 5 % 6 % 6 % 6 % 6 % 6 % 5 % 5 % 6 % 6 % PBT 4 % 4 % 4 % 4 % 4 % 5 % 5 % 6 % 5 % 5 % 5 % 5 % 4 % 5 % 5 % 6 %

PAT 2 % 3 % 3 % 2 % 3 % 11 % 4 % 4 % 5 % 5 % 5 % 5 % 3 % 5 % 5 % 5 %



Consolidated Financials

P&L (Rs Mn) FY17A FY18E FY19E FY20E

Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E

Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E

Revenue 41,574 62,790 81,325 93,534 Equity Capital 1,268 1,455 1,455 1,455 PBT 1,652 3,267 4,363 5,658

Op. Expenditure 39,346 59,028 76,035 87,055 Reserve 7,094 18,850 22,996 28,088 Depreciation 264 357 412 478

EBITDA 2,228 3,763 5,290 6,479 Networth 8,362 20,305 24,450 29,543 Others 380 12 0 0

Depreciation 264 357 412 478 Long Term Debt 7,304 -105 -531 -733 Taxes Paid 802 -165 218 566

EBIT 1,964 3,406 4,878 6,000 Def Tax Liability 1,553 -20 -94 -119 Change in WC -759 -1,942 -611 -463

Interest Expense 465 669 629 591 Minority Interest 9 0 0 0 Operating C/F 736 1,859 3,946 5,108

Other Income 153 530 114 249 Account Payables 631 809 937 1,073 Capex -379 8,673 -1,800 -2,200

PBT 1,651 3,267 4,363 5,658 Other Curr Liabi 4,944 5,460 7,072 8,133 Change in Invest -3,865 0 0 0

Tax 518 -165 218 566 Total Liabilities & Equity 22,803 26,449 31,835 37,897 Others -1,562 0 0 0

PAT bef. MI & Assoc. 1,133 3,432 4,145 5,093 Net Fixed Assets 583 576 554 536 Investing C/F -5,806 8,673 -1,800 -2,200

Minority Interest 0 0 0 0 Capital WIP 77 0 0 0 Change in Debt 3,700 -7,409 -426 -202

Profit from Assoc. 0 0 0 0 Others 8,635 -311 1,099 2,839 Change in Equity 3,712 8,500 0 0

Recurring PAT 1,133 3,432 4,145 5,093

Inventory 57 60 71 82 Others -404 -1,582 -74 -26

Extraordinaires 0 -12 0 0 Account Receivables 4,468 6,021 7,353 7,944 Financing C/F 7,008 -492 -500 -227

Reported PAT 1,133 3,444 4,145 5,093 Other Current Assets 4,386 5,467 6,475 7,533 Net change in cash 1,938 10,039 1,646 2,681

FDEPS (Rs) 7.8 23.6 28.5 35.0 Cash 4,596 14,635 16,282 18,963 RoE (%) 19 % 24 % 19 % 19 %

DPS (Rs) 0.0 0.0 0.0 0.0 Total Assets 22,803 26,449 31,835 37,897

RoIC (%) 12 % 22 % 22 % 21 %

CEPS (Rs) 11.6 28.0 31.3 38.3 Non-cash Working Capital 3,337 5,279 5,890 6,353

Core RoIC (%) 15 % 49 % 89 % 40 %

FCFPS (Rs) -39.6 83.0 18.9 23.6 Cash Conv Cycle 29.3 30.7 26.4 24.8 Div Payout (%) 0 % 0 % 0 % 0 %

BVPS (Rs) 65.9 139.6 168.1 203.1 WC Turnover 12.5 11.9 13.8 14.7 P/E 142.5 47.1 39.0 31.7

EBITDAM (%) 5 % 6 % 7 % 7 % FA Turnover 62.9 108.9 146.7 174.5 P/B 16.8 8.0 6.6 5.5

PATM (%) 3 % 5 % 5 % 5 % Net D/E 0.3 -0.7 -0.7 -0.7 P/FCFF -28.1 13.4 58.9 46.9

Tax Rate (%) 31 % -5 % 5 % 10 % Revenue/Capital Employed 6.5 5.0 4.3 4.3 EV/EBITDA 75.1 39.4 27.6 22.1

Sales Growth (%) 21 % 51 % 30 % 15 %

Capital Employed/Equity 2.0 2.1 1.3 1.0

EV/Sales 4.0 2.4 1.8 1.5

FDEPS Growth (%) 40 % 203 % 21 % 23 %

Dividend Yield (%) 0.0 % 0.0 % 0.0 % 0.0 %

TTM P/E vs. 2 yr forward EPS growth TTM P/B vs. 2 yr forward RoE

10x

20x

40x

60x

80x

0%

20%

40%

60%

80%

100%

120%

140%

0

500

1000

1500

2000

2500

3000

3500

Jul/

16

Sep/16

Nov/

16

Jan/17

Mar/

17

May/

17

Jul/

17

Sep/17

Nov/

17

Jan/18

Mar/

18

May/

18

Jul/

18

Sep/18

Nov/

18

Jan/19

Mar/

19

EPS Growth

0%

5%

10%

15%

20%

25%

30%

35%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Jul/

16

Sep/

16

Nov

/16

Jan/

17

Mar

/17

May

/17

Jul/

17

Sep/

17

Nov

/17

Jan/

18

Mar

/18

May

/18

Jul/

18

Sep/

18

Nov

/18

Jan/

19

Mar

/19

RoE

5x

8x

10x

15x

20x



Historical Consolidated Financials

P&L (Rs Mn) FY14A FY15A FY16A FY17A

Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A

Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A

Revenue 10,060 25,671 34,350 41,574 Equity Capital 962 258 1,133 1,268 PBT 289 1,042 1,147 1,652

Op. Expenditure 9,662 24,366 32,839 39,346 Reserve 884 2,433 2,433 7,094 Depreciation 42 101 144 264

EBITDA 398 1,305 1,511 2,228 Networth 1,845 2,691 3,566 8,362 Others 123 235 318 380

Depreciation 42 101 144 264 Long Term Debt 675 2,204 3,783 7,304 Taxes Paid 249 412 482 802

EBIT 356 1,203 1,367 1,964 Def Tax Liability 23 92 434 1,553 Change in WC -52 -942 -1,622 -759

Interest Expense 88 218 310 465 Minority Interest 0 0 0 9 Operating C/F 153 24 -495 736

Other Income 21 57 91 153 Account Payables 48 417 674 631 Capex -92 -145 -226 -379

PBT 289 1,042 1,147 1,651 Other Curr Liabi 1,390 1,958 4,043 4,944 Change in Invest -657 -525 114 -3,865

Tax 97 370 335 518 Total Liabilities & Equity 3,982 7,362 12,500 22,803 Others 89 -23 22 -1,562

PAT bef. MI & Assoc. 192 672 812 1,133 Net Fixed Assets 852 174 502 583 Investing C/F -660 -692 -89 -5,806

Minority Interest 13 0 0 0 Capital WIP 0 0 24 77 Change in Debt 163 1,015 1,080 3,700

Profit from Assoc. 0 0 0 0 Others 677 2,310 3,525 8,635 Change in Equity 965 0 26 3,712

Recurring PAT 179 672 812 1,133 Inventory 4 5 18 57 Others -490 -217 -247 -404

Extraordinaires 0 0 0 0 Account Receivables 1,245 2,380 4,053 4,468 Financing C/F 638 798 858 7,008

Reported PAT 179 672 812 1,133 Other Current Assets 912 1,674 3,285 4,386 Net change in cash 132 130 274 1,938

EPS (Rs) 1.2 4.6 5.6 7.8 Cash 291 818 1,094 4,596

RoE (%) 14 % 30 % 26 % 19 %

DPS (Rs) 0.0 0.0 0.0 0.0

Total Assets 3,982 7,362 12,500 22,803

RoIC (%) 11 % 22 % 16 % 12 %

CEPS (Rs) 7.4 8.0 20.1 11.6 Non-cash Working Capital 723 1,684 2,639 3,337 Core RoIC (%) 14 % 23 % 16 % 15 %

FCFPS (Rs) -14.9 -5.5 -7.6 -39.6 Cash Conv Cycle 26.2 23.9 28.0 29.3 Div Payout (%) 0 % 0 % 0 % 0 %

BVPS (Rs) 19.2 104.4 31.5 65.9 WC Turnover 13.9 15.2 13.0 12.5

P/E 904.0 240.3 198.9 142.5

EBITDAM (%) 4 % 5 % 4 % 5 % FA Turnover 11.8 147.3 65.3 62.9 P/B 57.9 10.6 35.3 16.8

PATM (%) 2 % 3 % 2 % 3 % Net D/E 0.2 0.5 0.8 0.3 P/FCFF -74.3 -202.6 -145.2 -28.1

Tax Rate (%) 34 % 35 % 29 % 31 % Revenue/Capital Employed 6.7 11.9 9.1 6.5 EV/EBITDA 410.2 126.1 110.3 0.0

Sales growth (%) 0 % 155 % 34 % 21 %

Capital Employed/Equity 2.5 1.7 1.7 2.0

EV/Sales 16.2 6.4 4.8 0.0

FDEPS growth (%) 48 % 276 % 21 % 40 %

Dividend Yield (%) 0.0 % 0.0 % 0.0 % 0.0 %

*FY14 is 9 months fiscal and FY15 is 15 months fiscal.



Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 VishadTurakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 SwetaSheth [email protected] 91-22-43320634

Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Dealing Room E-mail

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Ashish Shah [email protected] 91-22-43320662

Maulik Patel Oil and Gas [email protected] 91-79-61909519 IleshSavla [email protected] 91-22-43320666

Praful Bohra Pharmaceuticals [email protected] 91-79-61909532 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

Associates E-mail Sandip Amrutiya [email protected] 91-22-43320660

Ankit Choudhary [email protected] 91-79-61909533 Compliance Officer E-mail

Bharat Celly [email protected] 91-79-61909524 Jay Soni [email protected] 91-79-61909561

Harshit Patel [email protected] 91-79-61909522 Corporate Communications E-mail

Meet Chande [email protected] 91-79-61909513 MahdokhtBharda [email protected] 91-22-43320647 ParvaSoni [email protected] 91-79-61909521

Pranav Mehta [email protected] 91-79-61909514

Ronak Soni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

Shreepal Doshi [email protected] 91-79-61909541

Varun Baxi [email protected] 91-79-61909527

Vikas Jain [email protected] 91-79-61909531

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

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Analyst Certification

I, Abhishek Shindadkar, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I

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Disclosures

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Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers

Regulations, 1993 (Reg. No. INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No. IN-DP-324-2017). There are no disciplinary actions taken by any regulatory

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merchant banking services, private equity, mergers & acquisitions and structured finance.

As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for

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The Research Analyst engaged in preparation of this Report:-

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Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst’ or Relatives’ financial interest No

Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No

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ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules.

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