Security and Intelligence Services (India) Ltd.Omkar Tanksale –Manager ... ♦ MSS provides security services to clients across industries like airports, ports, government, manufacturing

13 JAN 2020

Security and Intelligence Services (India) Ltd.

Initiating Coverage

Y/EMarch

Net Sales(Rs Cr)

PAT (Rs Cr)

EPS (Rs)

Change (%)

P/E(x)

RoE(%)

RoCE(%)

DPS(Rs)

2018 5,833 163 23.7 81.0 - 20% 20% 2.1

2019 7,093 215 31.2 32.0 28.1 18% 14% 1.6

2020E 8,848 299 43.6 39.5 22.1 21% 13% 3.3

2021E 10,798 390 56.8 30.3 17.0 22% 16% 4.3

2022E 12,168 454 66.1 16.4 14.6 21% 17% 5.0

Guarding wealth with minimal risk

Sector: Consumer Services

Price performance

Target Price:

CMPPotential Upside

MARKET DATA

No. of Shares

Market Cap

Avg. daily vol. (6mth)

52-w High / Low

Bloomberg

Promoter holding

FII

13 JAN 2020 Company Report

BUYRs 1,190

Rs. 983::

: 7.33 Cr.

: Rs. 7,210 Cr.

: 21,199

: SECIS IN

: 10.8%

Security and Intelligence Services (India) Ltd.

Shareholding patternFinancial Summary

Source: Company, Axis Securities, CMP as on Jan 10, 2020.

Sep.-19Q-o-Q

Chg (%)

Promoters 74.3% -

FPIs 10.8% 22

MFs / UTI 6.1% (6)

Banks / FIs 0.1% -

Others 8.8% (15)

21%

Omkar Tanksale – Manager – Research - | [email protected] | (+91 22 4267 1737)

: Rs. 996/702

: 74%

40

80

120

160

Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20

BSE Sensex Security & Intel

3

Investment Rationale

We initiate coverage with BUY rating and a target price of Rs. 1,190 i.e. 21% upside.

Security and Intelligence Services (India) Ltd (SIS), is a leading security services company in India and Australia with

leadership positions in cash logistics and facility management services. The SIS group has expanded its footprint not just

across 29 Indian states, but also across a widespread network in Australia and Singapore with an unremitting spirit of

innovation and a dynamic and multifaceted portfolio of services that offers clients enduring value. SIS operates mainly into

four segment areas viz. Security Services – India, Security Services – International, Facility management and Cash Logistics

services. It also provides Electronic Security Solutions, Alarm Monitoring and Response and Pest Control services as a part

of its various business verticals.

Company Report

Security and Intelligence Services (India) Ltd


13 JAN 2020

Expanding India Security

Services

A Leading player in the security services, Facility Managements and Cash logistics

Strong foot prints of Facility Management

Services

Rising demand for Cash Logistics services

Increasing demand for

security services in Australia

Robust Infrastructure and Superior technology

driven process

4

Robust Business Structure

Company Report13 JAN 2020

Source: Company, Axis Securities



Company Services

Security Solutions - India

Security Solutions- International

Facility Management Services

Cash Logistics Business

170 branches

More than 23% market Share

59 branches

68 branches

1,54,700

9,000

58,300

1,512 + Vans

No of BranchesNo of

employeesCompany Logo

SIS has successfully diversified its business to facility management and cash logistics to reduce dependency on security services.

Diversifications will help SIS to retain the clients for longer term and also will help to strengthen the relationship among them.

SIS is also in a pole position in security services in domestic market which is one of the fastest growing segment in India with ~20%CAGR

rate. Its international business MSS security services also has largest market share in Australia private security services market.

SIS has established a wide network, a wide range of services, an understanding of each service line, strong brand, and capabilities to

successfully render services across a broad spectrum of customer segments. All of these are assets for the company in its quest for growth.

They have helped SIS enhance its credibility with customers, thereby strengthening its market position.

5

65%

8%12%

15%

Manned GuardingSecurity SystemsCash SolutionsOthers

65% 35%

Unorganised Organised



Increasing global market share Increasing Indian Market Share



Source: Company, FICCI & Axis Securities

Security services in India is growing with robust momentum

♦ The security services market in India is witnessing high growth mainly aided by improved economic environment, increasing concerns about crime and terrorism, inadequate

public safety measures, and growing industrial zones.

♦ Indian security market has grown more than 20% CAGR over last decade. Many new players were added and their operational capabilities enhanced.

♦ The security services in India is likely to grow at a rate higher than the current growth rate of 20% on account of growing concerns for security, exponential rise in number of

banks and expanding ATM network, technological advancement and higher penetration of foreign players through FDI.

♦ As per the statistics published by Bureau of Police (Research and Development India) actual police personnel to population ratio was 1:712 as against the sanctioned

strength of 1 police officer for 547 people. A large workforce in the private security space can be utilized to make up for the low police to citizen ratio, with careful policy

interventions to identify non-core areas of police and security functions that could be outsourced to such agencies—for example, senior citizen monitoring, outer periphery

guarding of prisons and other government establishments, event security and police verification etc.

0

150

300

450

2002 2011 2019 2023E

(In

US $

bn)

North America Western Europe

Asia Pacific Others

2019 2023E

50%

50%

Organised Unorganised

6

0

50,000

100,000

150,000

200,000

250,000

FY18 FY19 FY20E FY21E FY22E0

1,000

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FY18 FY19 FY20E FY21E FY22E

(Rs

Cr)


Increasing Revenue Stable Operating Margins Consistent Employee Addition


Expanding India Security Services

♦ SIS is one of the leading security services provider in India, with 177 branches and 1,54,700 employees across India. The company is covering more than 14,800 sites in

29 states of India. SIS has highest penetration in terms of Indian demographics.

♦ SIS India business is growing rapidly and consistently with CAGR of 25% over the last two years. The India security business contributed around 40% to the top line. In FY19

the segment contributed around Rs.2,696 crs and Rs. 879 crs. in Q2 FY20 and is likely to continue the growth momentum of 23% CAGR over next two years, aided by

growing demand for security guards across industries, commercial centers and offices.

♦ The company also has definitive inorganic strategy to attain higher growth and to increase the market share. The recent acquisitions SLV and Uniq businesses have reported

healthy contribution to revenue and EBITDA (6.4% EBITDA margin in Q2 FY20).

♦ The India security services segment employed more than 1,54,700 security guards as at the end of Q2FY20 (grew more than 19% CAGR in last two years).We believe

increasing top line contribution from Indian security business will help to generate more operating efficiency.

13 JAN 2020


Company Report

0%

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8%

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(%)

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)

EBITDA EBITDA Margin


Revenues (Rs Cr) - India No of Employees - India

7



Increasing market size of security market in Australia


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Market Size

18%

18%

7%6% 6% 3%2%

40%

MSS Wilson SNP

Secure Corp ISS Southern CrossProtection

Spotless Others

Market Share in Australia

Increasing demand for security services in Australia

♦ The Australian market for security services has grown at a CAGR of 5.8% over 2010-15 and is projected to grow at a CAGR of 5.4% from 2015-20.

♦ The commercial and industrial segments have largest demand and they are growing steadily. This segment comprises customers from the mining, retail, office, financial

institutions and commercial buildings sectors, and accounted for 48% of security services revenue in FY19.

♦ SIS’s wholly own subsidiary MSS security services is one of the leading private security provider in Australia providing services across different verticals such as Aviation,

Commercial property, Energy & Resources, Government, Industrial Logistics etc.

♦ Overall growth in the sectors like Healthcare, Industrial growth is likely to be by more than 3.4% in next two years. Australian security services demand is likely to outpace

the growth in the other sectors.



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Leading Security services provider in Australia

♦ Managed Security Services (MSS) is the largest private security services provider in Australia with market share of 16% in organized security market in Australia. The

company also provides mobile patrol services through SXP (Southern cross Protection) which is also Australia’s largest mobile patrol services provider.

♦ Australian security services constituted around 43% revenue to the SIS top line. The revenue from MSS grew 24% CAGR in past two years. EBITDA margins also remained

steady at 6% in the previous period and likely to continue in the forth coming period. MSS also consistently added its employees to meet client demand.

♦ MSS provides security services to clients across industries like airports, ports, government, manufacturing industry, financial institutions etc. Client concentration is typically

higher in Australia with the top-10 consumers constituting 40-45% of segment revenues though client churn is very low. Demand for security services from Aviation likely to

remain strong given rise in air traffic and passenger movement as well as rising demand for guards at airport terminal.

♦ MSS provides security services for various leading events like Australian Open and F1 Grand Prix and the commonwealth games held in Australia.

MSS Revenue growth Operating Efficiency Consistent Employee Addition in Australia



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Revenues (Rs Cr) - International No of Employees - International

9

37%

34%

24%

5%

Facility Owners

Service Providers

Procecurers

Facility Management Associations





Facility management structure in India Indian Facility Management Market Size


11%

26%

24%

22%

17%

Central West North East South

Facility management Industry growing exponentially

♦ The Indian Facilities Management services market is one of the fastest growing sector aided mainly by initiatives taken by Central government like ‘Swach

Bharat’, rising number of business parks, IT parks and SEZ etc. Facilities Management services is estimated at Rs 5,00,000 crore and is slated to grow at a

CAGR of 20% to 25% over FY20E to FY23E. Organized facility market is valued at Rs. 75,000 crs. and expected to grow at Rs. 1.5 lakh crs by 2023E.

♦ Key customers within Facilities Management include businesses in the Industrial and Manufacturing, IT/ITeS, Retail, Commercial Space, Hospital, Hotel,

Government, Railways and Educational sectors.

♦ Aviation and Energy along with other sectors are also two areas where we will see growing demand of the facility management. With schemes like Udaan,

there are many airports coming in smaller cities and that is going to be key drivers.

♦ Cleaning services contribute around 50% of the total facility management services market, followed by pest control and other facility management services

(such as office support, gardening and landscaping, laundry & guest house management, food and pantry services) at 20% and 30% share respectively. The

cleaning services are also likely to grow at higher momentum aided by strong demand.

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(Rs

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r)

Property Cleaning Security Catering Support Others

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FY18 FY19 FY20E FY21E FY22E0

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Source: Company, Axis Securities.

Revenue growth Operating Efficiency Employee Addition

Strong foot prints of Facility Management Services

♦ SIS’s Facility management vertical comprises of cleaning and janitorial services for its clients; for commercial property offices, the services include repair

services like electrical services, air conditioning maintenance, plumbing, water management etc. These services are one of the highest growing business

vertical with rising demands across business verticals and different parts of the country.

♦ SIS also has a small Pest and Termite control business within facilities management called SIS Terminix, which was set up as a joint venture between an

affiliate of Terminix, SVM Services (Singapore) Pte Limited (SVM Services) in August 2011. Terminix has licensed various operating materials, processes,

recipes, information, hardware, methods mechanisms and knowhow to SIS Terminix.

♦ Revenues from Facility management has grown at a CAGR of 35% in last two years and have reached revenue of Rs314 crs in Q2 FY20. Facility

management vertical operating margins are expected to be remain around 6% in the medium term.

♦ Facility management is one of the fastest growing vertical because of the growing demand for rising offices, commercial properties, IT parks etc.

13 JAN 2020



Company Report

0%

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FY18 FY19 FY20EFY21EFY22E

(%)

(In

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EBITDA EBITDA MarginRevenues (Rs Cr) – Facility Mgmt. No of Employees - Facility Mgmt.

11



Global Cash logistics market (By services) Increasing number of ATMs in India




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2017 2023E

(In

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Growing Cash Logistics services- High Entry Barriers

♦ SIS is India’s second largest cash logistics services provider in terms of revenue and market share. SIS has pan India presence, while its domestic peers

have regional presence.

♦ The banking inclusion initiative, growth in banking infrastructure, and increasing ATM installations in the country are major drivers for the cash logistics

services market, which for FY19 was valued at Rs 3,500 crs, growing at a CAGR of 19.3% since last four years.

♦ Cash logistics services comprise three functions: ATM replenishment, cash-in-transit (CIT), and cash pickup and delivery (CPD). Cash logistics service

providers also provide other services such as bullion transit and cash processing and cash vaulting services.

♦ Private cash logistics companies are estimated to carry Rs 15,000 crs. every day in more than 8,000 cash vans. They are also estimated to hold more than

Rs 4,000 crs. at any point in time in their vaults on behalf of banks and other financial institutions.

♦ With high risks and low error tolerance, competition is highly restricted and involves a small number of companies that have proven credibility. The top five

to six companies dominate more than 80% of the market.

# Cash Management is projected as the most lucrative segments.

Cash Management

Cash - intransit

ATMServices

2017 2025

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n)

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Demand scenario across business verticals in India Demand scenarios of services in India

29%

4%

38%

29%

Government Residential

Industrial Comercial

55%

35%

10%

Private Security Companies

System Integrators

OEM'S

Rising demand for electronic security services in India

♦ SIS has a strong focus on technology enhancement in terms of providing upgraded security services like turnkey services, surveillance solutions etc.

♦ SIS has built various technology solutions to improve its productivity and operational efficiency. Sales force productivity is managed through “SalesMaxx” a

tablet based productivity tool which helps keep track of deal pipeline and funnel as well as quote generation.

♦ The electronic security services market in India recorded growth at CAGR of 25% from FY16 to FY19. The segment is projected to grow at a CAGR of 34%

between CY18 and CY20, to reach Rs 17,000 crs (approx.) by FY23E.

♦ We believe that SIS to be the largest beneficiary of this strong growth as it is the market leader in providing electronic services in India and has a record to

invest in new products.

25%

3%

42%

30%

GovernmentResidentialIndustrial

45%

42%

13%

Private Security Companies

System Integrators

OEM'S

2019 20192023E 2023E

13

Extensive training infrastructure spread across India

SIS has 19 training institutes in India, comprising state-of-the-artinfrastructure and providing up to-date courses that make it possible totrain more than 25,000 guards a year securing SIS’s personnel pipelineand ensuring prompt deployment.

Largest trained manpower supply chain in India with integratedcapabilities in sourcing, training and deploying a large manpower base.

Graduate Trainee officer Programme (GTO)

Average experience for top 400 employees at SIS is over 9 years.

Approximately 47% of the 170 security services branches are headedby GTO graduates.

Benefits of Integrated Supply chain

It gives edge over its competitors as there is no formal training for securityguard in India.

SIS also gets better control over both service quality and service supplychain which will help retain the existing clients and acquire new clientsacross industries and verticals.





14

26 superior technology enabled processes

Recruitment Training & Development Operations Performance Measurement

Strong Technological linkages from…

SIS is continuously investing in superior technology to stay ahead of its competitors along with investing in technology to increase productivity and operating efficiency.

Investing in Technological upgrades to achieve its strategic objectives and to remain competitive in the private security field.

Deployments of technology initiatives on a cost effective and timely basis with constant introduction of new and enhanced solutions for its clients.

SIS has strong feedback and development program for its employees to increase the efficiency and thereby increase the clients retention for the longer term. This process also help to provide services as per their requirement across industries.

SIS has strong and unique systems that provide scalable business and helps in boosting operating leverage over longer term.





15

Superior technology enabled processes

Operating System Purpose

♦ Service Quality Assurance and Operations Productivity platform

♦ Workflow automation, data analytics, real time customer reporting and PMP linkage

♦ Employee performance score, peer group ranking and transparent, quantitative pay review system.

♦ Basis for talent development, promotions, transfers and separations

♦ It is ERP generated monthly balanced scorecard

♦ Version of the balanced scorecard, through which we measure KPIs and review those on a monthly basis for all our branches

♦ Automated Recruitment Kiosk -Product Quality and Consistency

♦ Enables enforcement of quality standards and detailed product quality metrics

♦ Sales force Productivity and Margin Control

♦ Targeted at enhancing sales productivity; real time margin validation pre quote generation, incentive linkage

PMP

Seven Finger Model iOPS

Sales Maxx

Automated Recruitment Kiosk

Operational & Reporting Systems Tied in to the ERP System





16

Superior technology enabled processes – Pilferage locking system

Oil tanker is digitally lockedwith pass code and marked oillevels.Drivers are unable to open thelock in transit.

Customer directly receives theOTP based authorization codeto open the digitally locked oiltanker.

The Oil marketing Companyand client can track the tankermovements on real time basis.

Only client can unlock thetanker lock by using the uniqueOTP received on his mobile.

Customer receives all thedetails like track no, Invoiceno. on his mobile.




Source: Company.

SIS has developed pilferage locking system for oil marketing companies which is currently on testing mode and has great potential ahead.

17

Business Structure




Security ServicesIndia

Security ServicesAustralia

Facility Management Services

Cash logistics

Services Offered Security SolutionsRange of Services from

guarding Cleaning and repair Services

Cash management

AirportsFacility operation and maintenance Services

ATM related services

Specialized Security Services

Pest control Services

Branches 170 - 77 -

Employees 1,54,700 9,000 58,300 1,512 vans

Market Share 20% 14%

CompetitorsPremier Shield,

TOPS, G4SWilson Security, ISS,Secure Corp

Bharat Vikas, ISS, Quess Corp

Secure value, CMS, Writer Safeguard

Revenue contribution 39.1% 43.2% 15.0% 2.7%

Operating Profitability 6.1% 5.5% 6.60% 9.50%

Share of consolidated EBITDA 35.5% 40.1% 16.9% 7.0%


18

Strong footprints in geographies and robust business network

The company has presence in almost all the districts and states in Indiamaking it one of the leading security service provider in India.

The company has robust domestic network with 312+ branches in 29 statesand towns which cater to 630 district. The company has more than 20regional offices and 20 training academics.

Its Australia business has also very strong presence and has highest marketshare in organized security market with more than 20% market share.

In Australia, SIS has 9,000 employees with 1,057 customer base and 9,700+ mobile patrol customers.

The recent acquisitions in Singapore and New Zealand will enable SIS todeepen footprint across the new and emerging markets in the Asia Pacific(APAC) region, with a larger suite of security solutions.





312+

branches17,800+

Sites

7,335+ Customers

2,25,000+ Employees

19

Porter’s 5 Forces Analysis

Threat of New Entrants (Medium)

Lot of local players are entering thesecurity business.

In house services may grab outsourcingopportunities.

Competitive rivalry (Medium)

Higher entry barriers in the Securityindustry have led to high concentrationin the industry.

Threat of Substitutes (Increasing)

Emerging local players which providesecurity services taking away SISadvantage to a certain extent.

Bargaining power of Suppliers (High)

Intense competition and higher attritionrates in the security staff may putpressure on employee expenses.

The multiple players are available andthis could put pressure on billing rates.

Bargaining power of Buyers (Increasing)



Long term relationship withmarquee clients helps SIS togenerate business.

Adapting new technologies asper the demand across verticalsand trained staff put SIS inleadership position.

SIS has adopted newtechnologies keeping serviceportfolio different from otherplayers.

New technology transitions willkeep bargaining power intactfor the company.

SIS invests periodically in newtechnologies and trains its staffto keep them ahead in themarket.

SIS has come up with gratuitybonuses so that it can reduce theattrition rate



20

Strong domain focus

Diversification of business ( from services to technology, facility

management)

Presence across 29 states in India, with a strong foothold in Australia

and Singapore.

Strengths

Threats

Weaknesses

Opportunities

SIS is focusing more on

acquiring new client base

across industry and across

India.

Acquiring newer technology to

transform itself to a complete

solution providing company.

Threat from local players

Unorganized sector may

eat market share

High competency from

limited partners

Further penetration in security domain and in verticals

Increasing awareness about security services.

High brand value will help generate faith among clients

for longer run.

SWOT

SWOT Analysis



Single domain

dependence.

Higher attrition rate

Lower contract tenure.

Higher dependency on

clients

Increasing brand value

will help to get more faith

among clients.

Strong client addition will

help diversify across

verticals.

Reducing client specific

dependency



21

Niche Business segment makes business model sustainable

Among business security services it provides services to wide rangeof industries including Automobiles, IT&ITeS, Healthcare, BFSI, SteelIndustries etc. The diversified business structure reduces thedependency over one particular customer base, reduces thevulnerability to economic shocks from business vertical and makesbusiness structure more robust.

The company has also developed the capabilities to providecustomized services across business verticals which help them tostrengthen the long term relationship with the client.

SIS has Diversified customer base across government organizations,business entities and household services.

SIS has a strong employee base which ensures its commitmenttowards clients for services provided.

No of Employees

Consistent growth across segments

De-risking Client concentration risks





10%9%

10%

14%

9%5% 5% 5% 6%

27%

Government Automobile IT/ITeSBFSI Steel Industry FMCGHealthcare Hospitality UtilitiesOthers

0

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(Rs

Cr)

Security Solution- India Security Solution- International

Facility Management Cash Management

0

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Facility Management

22

36%

47%

13%

4%

Broad based revenue growth

SIS has reported robust revenue growth in last few years, owing to a

differentiated business model. The growth has been broad based across

all the verticals, geographies, and set of clients.

Revenue has grown sequentially at CQGR of 4.6% in last eight quarters

and CAGR of 22% in FY16 to FY19.

It grew over 15% in Security Solutions -India , Security Solutions –

International, Facility Management, Transportation, Utilities & Geospatial

segments. The momentum continued during Q2 FY20 and the same is

likely to continue for FY20E and FY21E. Among these verticals Security

solution in India and Facility management has seen good traction backed

by strong customer base, high efficiency and customized services to its

clients across industries.

This industry leading growth was due to its focus on select sub-verticals

where it specializes in terms of domain knowledge and capabilities.

Management is confident of being at the top quartile of revenue growth

at 15% - 20% for FY20 backed by strong client base, robust demand

momentum and strategic acquisition of new technologies.

Rising contribution from Security Services – India and Facility

Management likely to boost the operating margins as they are

considered high profit business as compared to Australian security

services.

Consistently delivering double digit YoY growthRevenue growth

Increasing revenue contribution from profitable business segments





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Facility Management Cash Management

2019 2022E

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Stable operating margins

Improving return ratios Better margin Stability and Sustainability

Du-pont AnalysisStable operating margins

13 JAN 2020




Company Report

SIS has been successful in delivering operating margins due tobetter service mix and better client acquisition. The company hasfocused on increasing India Security business which is highmargin business and also increasing facility managementbusiness.

Higher services standards , efficient use of resources help SIS toretain the clients across industries. SIS is also leveragingsignificant scale and pan India foot print.

SIS is also investing in the newer technologies, which helps toimprove the productivity and enhance customer satisfaction.

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NPAT ROE ROCE

DuPont Analysis FY18 FY19 FY20E FY21E FY22E

Net Margins (%) 2.79% 2.91% 3.38% 3.61% 3.7%

Asset turnover (x) 4.04 3.09 2.90 3.12 3.16

RoA (%) 11.3% 9.0% 9.8% 11.3% 11.8%

Leverage (x) 1.76 2.00 2.16 1.99 1.81

Return on Equity (%) 19.9% 18.1% 21.3% 22.5% 21.4%

24

Valuation Charts

Company Report

Key Risks Rise of local players could gain the substantial market share and thus

put the pricing pressure on SIS. Security services industry is very competitive in nature higher

competitiveness could put pressure on pricing and thus ultimatelyoperating margins may get affected.

Higher employee cost led to the higher operating expenses. Thesewage hikes can affect the operating margins negatively.

Currency volatilities especially US$-INR and GBP-INR and GBP-US$,could impact revenues.

Electronic surveillance systems could reduce the demand for humanguarding and may impact the business demand.

Slowdown in the domestic economy led to a slowdown in thebusiness as it is largely depending on these economies.

13 JAN 2020

12mth forward P/E band

Valuation Security and Intelligence Services (India) Ltd is well positioned in the

security services industry owing to its well established brand withsubstantial market share and growth in demand for the services across allthe segments.

We estimate the company to grow at a CAGR of 19% and earnings atCAGR of 28% over FY19-FY22E.

The company has announced sub division of equity shares from Rs. 10/share to Rs. 5/share which would be effective from 16th Jan 2020 (RD).

We value Security and Intelligence Services (India) Ltd at 18x FY22E toarrive at price target of Rs 1,190 (pre sub-division price) giving anupside of 21%.

One year forward P/E chart




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-19

Price 5x 10x 15x 20x

25

Financials

YE March FY18 FY19 FY20E FY21E FY22E

Net sales 5,833 7,093 8,848 10,798 12,168

Cost of goods sold 4,802 5,820 7,328 8,904 10,033

Contribution (%) 17.7% 18.0% 17.2% 17.5% 17.6%

Advt/Sales/Distrn O/H 719.1 908.4 991.2 1,209.4 1,362.9

Operating Profit 312 365 529 684 773

Other income 35 18 8 22 24

PBIDT 347 383 536 706 797

Depreciation 56 66 127 146 162

Interest & Fin Chg. 92 94 152 149 147

E/o income / (Expense) 1 0 (2) 0 0

Pre-tax profit 199 223 256 411 488

Tax provision 24 (5) (44) 21 34

Associates (12) (14) 0 0 0

Profit after Tax 163 215 299 390 454

Other Comprehensive Income 0.0 (7.9) 0.0 0.0 0.0

PAT after Comprehensive Income 163 207 299 390 454


Total assets 1,790 2,796 3,297 3,632 4,064

Net Block 248 346 287 208 114

CWIP 5.3 8.5 7.5 7.5 7.5

Investments 847 1,757 1,731 1,714 1,696

Wkg. cap. (excl cash) 147 264 353 638 872

Cash / Bank balance 543 420 919 1,065 1,374

Capital employed 1,790 2,796 3,297 3,632 4,064

Equity capital 73.2 73.3 73.3 73.3 73.3

Reserves 956 1,178 1,468 1,825 2,239

Minority Interests 1.4 0.3 6.0 7.8 9.1

Borrowings 737 1,510 1,692 1,683 1,675

Def tax Liabilities 22.4 35.1 57.2 42.6 67.5

Profit & Loss (Rs Cr) Balance Sheet (Rs Cr)





26

Financials


Sources 720 1,154 618 476 589

Cash profit 311 374 578 685 763

(-) Dividends 18 11 26 34 40

Retained earnings 294 363 552 651 723

Issue of Equity 4.5 0.1 0.0 0.0 0.0

Change in Oth. Reserves 322.2 142.3 30.1 (3.1) (3.7)

Borrowings 212 744 166 (8) (8)

Others (113) (96) (130) (164) (122)

Applications 720 1,154 618 476 589

Capital expenditure 450.1 1,042.6 39.6 50.0 50.0

Investments (29.4) 146.4 0.6 0.0 0.0

Net current assets 184.3 94.4 79.0 279.7 229.2

Change in cash 114.9 (129.5) 498.9 145.9 309.9

Closing Cash 543 420 919 1,065 1,374


Sales growth (%) 27.7 21.6 24.7 22.0 12.7

OPM 5.3 5.1 6.0 6.3 6.3

Oper. profit growth (%) 41.4 17.1 44.8 29.4 12.9

COGS / Net sales 82.3 82.0 82.8 82.5 82.5

Overheads/Net sales 12.3 12.8 11.2 11.2 11.2

Depreciation / G. block 165.1 67.2 (213.7) (186.1) (171.3)

Effective interest rate NA 12.9 17.3 16.7 16.5

Net wkg.cap / Net sales 0.05 0.06 0.06 0.07 0.08

Net sales / Gr block (x) 18.0 15.0 16.4 17.8 18.0

RoCE 20% 14% 13% 16% 17%

Debt / equity (x) 0.39 0.52 0.46 0.36 0.30

Effective tax rate (%) 13.0 (2.5) (17.1) 5.0 7.0

RoE 20% 18% 21% 22% 21%

Payout ratio (Div/NP) 9.0 5.1 7.5 7.5 7.5

EPS (Rs.) 23.7 31.2 43.6 56.8 66.1

EPS Growth (%) 81.0 32.0 39.5 30.3 16.4

CEPS (Rs.) 31.8 39.7 62.0 78.0 89.7

DPS (Rs.) 2.1 1.6 3.3 4.3 5.0

Cash Flow (Rs Cr) Ratio Analysis (%)





27

Disclaimer


Instead of a company visit, we have done a conference call with the company’s management.



Disclosures:

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE) as defined in the Regulations, is engaged in the business ofproviding Stock broking services, Depository participant services & distribution of various financial products. ASL is a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed publiccompany and one of India’s largest private sector bank and has its various subsidiaries engaged in businesses of Asset management, NBFC, Merchant Banking, Trusteeship, Venture Capital,Stock Broking, the details in respect of which are available on www.axisbank.com.

2. ASL is registered with the Securities & Exchange Board of India (SEBI) for its stock broking & Depository participant business activities and with the Association of Mutual Funds of India (AMFI) fordistribution of financial products and also registered with IRDA as a corporate agent for insurance business activity.

3. ASL has no material adverse disciplinary history as on the date of publication of this report.

4. I/We, Omkar Tanksale– Manager - Research, MBA (Finance), author/s and the name/s subscribed to this report, hereby certify that all of the views expressed in this research report accuratelyreflect my/our views about the subject issuer(s) or securities. I/We (Research Analyst) also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specificrecommendation(s) or view(s) in this report. I/we or my/our relative or ASL does not have any financial interest in the subject company. Also I/we or my/our relative or ASL or its Associates mayhave beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Since associates of ASL areengaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in thisreport. I/we or my/our relative or ASL or its associate does not have any material conflict of interest. I/we have not served as director / officer, etc. in the subject company in the last 12-monthperiod.

Any holding in stock – NO

5. ASL has not received any compensation from the subject company in the past twelve months. ASL has not been engaged in market making activity for the subject company.

6. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report, ASL or any of its associates may have:

i. Received compensation for investment banking, merchant banking or stock broking services or for any other services from the subject company of this research report and / or;ii. Managed or co-managed public offering of the securities from the subject company of this research report and / or;iii. Received compensation for products or services other than investment banking, merchant banking or stock broking services from the subject company of this research report;

ASL or any of its associates have not received compensation or other benefits from the subject company of this research report or any other third-party in connection with this report.

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28

Disclaimer


DEFINITION OF RATINGS

Ratings Expected absolute returns over 12-18 months

BUY More than 10%

HOLD Between 10% and -10%

SELL Less than -10%

NOT RATED We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NO STANCE We do not have any forward looking estimates, valuation or recommendation for the stock

Disclaimer:

Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to the recipient’s specific circumstances. The securities and strategies

discussed and opinions expressed, if any, in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific

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This report may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this report should make such investigations as it deems necessary to arrive at an independent evaluation of

an investment in the securities of companies referred to in this report (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. Certain transactions,

including those involving futures, options and other derivatives as well as non-investment grade securities involve substantial risk and are not suitable for all investors. ASL, its directors, analysts or employees do not take any

responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds,

changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. Past performance is not necessarily a guide to future performance. Investors are advice necessarily a guide to future performance.

Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements

are not predictions and may be subject to change without notice.

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investors.

The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The Company reserves the right

to make modifications and alternations to this document as may be required from time to time without any prior notice. The views expressed are those of the analyst(s) and the Company may or may not subscribe to all the views

expressed therein.

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