Uphill Battle Continues - Downgrade to Reduce€¦ · rent out CNG station land and earn 31% EBITDA. (See Exhibit 4). MAHGL has 244 CNG stations in Mumbai, Thane & Raigad region,

Mahanagar Gas Oil & Gas | India

Institutional Equity Research

Comapny Update | December 20, 2019

1

Target Price: Rs956

REDUCECMP* (Rs) 1064

Upside/ (Downside) (%) (10)

Bloomberg Ticker MAHGL IN

Market Cap. (Rs bn) 105

Free Float (%) 37.5

Shares O/S (mn) 99

Uphill Battle Continues - Downgrade to Reduce

A series of development could affect Mahanagar Gas (MAHGL) earnings: (1) Private CNG pump owners have refused to sign new agreement with MAHGL of 40% lower commission, mainly due to operating income is 31% higher if the same CNG station plot rent out; (2) Slowdown in monthly CNG conversion to 5K from 7K in FY19 led to only 1.5% CNG volume growth in 1HFY20. Further, majority of new CNG vehicles additions are Auto Rikshaws which are the lowest daily CNG consumers, we continue to believe CNG volume growth 3.5%in FY20E/FY21E/FY22E below than company guidance of 6%; (3) MAHGL has secured 0.3mmscmd gas from R- cluster field at 8.4% slope to Brent price, we believe this is not cheaper gas for PNG industrials customers in soft spot LNG price outlook and (4) In 3QFY20, We expect fall in MAHGL’s EBITDA/scm to ~Rs9/scm from Rs 9.9/scm in 2QFY20. Hence, this implies limited CNG volume growth potential. We downgrade our recommendation on the stock to REDUCE from HOLD with an unrevised DCF-based Target Price of Rs956.

Rent out a CNG Station More Profitable than CNG BZ at 40% Lower Commissions34 Private CNG pump owners have refused to sign new agreement with MAHGL of 40% reduced commission. MAHGL is deciding to reduce CNG commissions of 34 private CNG stations, likely to face closure by March 2020 if no new agreement (News). Our calculation suggests, instead of continuing with lower trade commissions on CNG sale business, private pump owner can rent out CNG station land and earn 31% EBITDA. (See Exhibit 4). MAHGL has 244 CNG stations in Mumbai, Thane & Raigad region, selling CNG at rate of 2.2 mmscmd. If 34 stations stop operations could impact 14% of total CNG volume on temporary basis. Any strike/closure of CNG pumps could hit overall volume growth. Scenario (1) 5 days strike of private CNG pump owners can drag maximum CNG volume sales by 0.54% and EPS by 0.64% in 4QFY20, (2) If no agreement between private CNG pump owners and MAHGL then impact of 10% on CNG sales volume & 12% on EPS for 3 months (4QFY20).

CNG Vehicle Addition @ of 5K/month; Majority of Auto Rikshaws onlyA mere 1.5% CNG volume growth in 1HFY20 is mostly due to overall slowdown in monthly CNG vehicle addition to 5k from 7K in FY19. While the composition of CNG vehicle addition is been changed in last 6 months, our calculation suggest, monthly Auto Rikshaws addition continued to remain same (~4k – which consume lowest volume on daily basis) while the zero registration of Kaali-peelis at Mumbai RTO, other heavy CNG vehicle number is contracted and share of App cab and private cars are falling in overall CNG vehicle composition. Slowdown in overall auto sales numbers have also impacted to CNG volume growth. We maintain our CNG volume growth 3.5%/3.5% for FY20E/FY21E based 1) Delay in BEST CNG bus addition 2) No sign of improvement in share of CNG App cabs/taxi additions (which consume higher CNG on daily basis).

Gas Sourcing at 8.4% Slope not Cheap Compared to Soft Spot LNG PriceMAHGL has bagged gas of 0.3mmscmd in latest auction, new gas production to start from R- cluster field in April 2020. Gas supply from R- cluster field is priced at ~8.4% slope to last 3 months Avg. Brent prices. Mahanagar gas is oblique to take 80% of bagged quantity in a quarter on a “take or pay” clause. Based on our calculations for 2QFY20, R -cluster gas price at (~$5.1/mmbtu) ~8.4% slope to crude price is not cheaper compared to spot LNG price of $4.7/mmbtu (7.2% slope to crude). Brent Crude forward prices are in backwardation from $67/bbl to $63/bbl (See exhibit xx) for period of CY2020, even at price of crude $63/bbl, R-cluster gas price would be $5.3/mmbtu is not cheaper compared to forward spot LNG prices are below $5/mmbtu (see Exhibit 14&15). Further, MAHGL has to incur higher gas transmission cost of ~ $1/mmbtu (Rs71.6/mmbtu) on East -West pipeline compared to ~$0.5/mmbtu (Rs37.7/mmbtu) on Dahej -Panvel pipeline. On net basis, cost of gas (R- cluster) will be higher for PNG industrials and less competitive with alternate fuels. We believe it would be opportunity loss for MAHGL’s gross margin improvement. If cost of gas is cheaper by $1/mmbtu then overall EBITDA/scm likely to improve by Rs0.3/scm. In long term, cheap source of gas/LNG supply will be the major deciding factor to expand PNG industrial segment.

Yogesh Patil

Research Analyst

Contact: (022) 4303 4632

Email: [email protected]

Share price (%) 1 mth 3 mth 12 mth

Absolute performance 1.6 28.1 18.2

Relative to Nifty (1.0) 13.7 6.5

Shareholding Pattern (%) Sep-19 Jun-19

Promoter 32.5 32.5

Public 67.5 67.5

1 Year Stock Price Performance

Note: * CMP as on Dec. 19, 2019

Financials (mn) FY20E FY21E FY22E

Net Sales 30,825 32,621 34,975

EBITDA 10,226 10,831 10,835

Net Profit 7,821 7,793 7,977

EPS 79.2 78.9 79.9

P/E (x) 13.6 13.6 13.4

EV/EBITDA (X) 9.3 8.4 8.1

ROE (%) 30 25 23

Our Estimate vs. Concernses(Rs mn) FY20E FY21E FY22E

Fin in Rs mn FY20E FY21E FY21E

Net Sales - R-Sec 30,825 32,621 34,975

Net Sales - Cons 31,418 33,393 35,571

% change Vs cons -1.9% -2.3% -1.7%

EBITDA -R Sec 10,226 10,831 10,835

EBITDA - Cons 10,521 10,865 11,628

% change Vs cons -2.8% -0.3% -6.8%

PAT 7,821 7,793 7,977

PAT - Cons 7,717 7,643 8,011

% change Vs cons 1.3% 2.0% -0.4%

660

760

860

960

1060

1160

1260

Dec-

18

Jan-

19

Jan-

19

Feb-

19

Mar

-19

Apr-1

9

Apr-1

9

May

-19

Jun-

19

Jun-

19

Jul-1

9

Aug-

19

Aug-

19

Sep-

19

Oct-1

9

Oct-1

9

Nov-

19

Dec-

19

https://timesofindia.indiatimes.com/city/mumbai/mumbai-private-cng-pump-owners-refuse-to-sign-fresh-deals/articleshow/72470033.cms

Mahanagar Gas Institutional Equity Research

2

Target Price: Rs956Oil & Gas | India

CMP* (Rs) 1064



REDUCE

Exhibit 2: MAHGL’s 1 year forward P/E valuation Exhibit 3: MAHGL’s 1 year forward EV/EBITDA valuation

Source: Bloomberg, RSec Research Estimates

Outlook & ValuationIn 1HFY20, MAHGL reported total gas sales volume growth of mere 2% YoY vs. Company guidance of 6%. To perform 6% total volume growth in FY20, our calculation suggests, MAHGL need to report 10% total volume growth in 2HFY20, which is unlikely. Further, no new GA won by company, no scope of expansion and volume growth from new area. Fall in run rate of vehicle conversion and worst car density in Mumbai (news) will lead to mere 3.0% CNG volume growth in FY19-FY22E. We expect, MAHGL’s FY20E to FY22E EPS CAGR of 1% only. As we envisage fall in EBITDA margin and limited growth potential, which may warrant a de-rating and reduction in PE multiples from the current levels. MAHGL is trading as a consumer play (FY20 P/E of 14x) despite its matured business profile and EBITDA margin reduction, after rise in crude prices and crude linked gas cost. Further, we expect MAHGL’s RoCE/RoE to fall from 24%/24% in FY19 to 22%/22% in FY22E, as the Company is unlikely to sustain consistent growth in EBITDA and PAT over the next 3 years volume growth over FY19-FY22E.We downgrade our recommendation on the stock to REDUCE from HOLD with an unrevised DCF-based Target Price of Rs956.

Exhibit 1: DCF Valuation of MAHGL

(Rs mn) FY20E FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E

PAT 7,821 7,793 7,977 7,754 8,091 8,791 9,529 10,199 10,900 11,632 (+) Depreciation 1,370 1,485 1,559 1,584 1,609 1,631 1,653 1,673 1,692 1,710 (-) Capex (2,201) (2,201) (2,000) (1,500) (1,500) (1,500) (1,500) (1,500) (1,500) (1,500)(-) Change in WC (134) 46 130 121 69 32 32 35 36 36 FCFE 6,856 7,124 7,666 7,960 8,268 8,955 9,715 10,408 11,128 11,878 Year 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5

Disc FCFE 6,536 6,171 6,034 5,694 5,374 5,289 5,214 5,076 4,932 4,784

Rs mn (per sh)

NPV - Continuing Business 64,634 654 NPV - Terminal Value 29,768 301

NPV (consolidated) = Target Price 956

CMP 1,064Downside 10%

Recommendation REDUCE

Source: Rsec Research Estimates

12

13

14

15

16

17

18

19

20

Sep1

8

Oct

18

Nov

18

Dec1

8

Jan1

9

Feb1

9

Mar

19

Apr1

9

May

19

Jun1

9

Jul19

Aug1

9

Sep1

9

Oct

19

Nov

19

Dec1

9

1 Yr Forward PE Avg +1 STD -1 STD

6.00

7.00

8.00

9.00

10.00

11.00

12.00

Sep1

8

Oct

18

Nov

18

Dec

18

Jan1

9

Feb1

9

Mar

19

Apr

19

May

19

Jun1

9

Jul1

9

Aug

19

Sep1

9

Oct

19

Nov

19

Dec

19

1 Yr Forward EV/EBITDA Avg +1 STD -1 STD

https://timesofindia.indiatimes.com/city/mumbai/Worst-car-density-in-India-worsens-Mumbai-now-has-530-per-km/articleshow/72117782.cms


3


CMP* (Rs) 1064



REDUCE

Exhibit 5: Trade commission on CNG sales to private CNG pump owners

Source: Company RHP, R-Sec Research

Rent out a CNG Station More Profitable than CNG BZ at 40% Lower CommissionsPrivate CNG pump owners have refused to sign new agreement with MAHGL with reduced commission (Rs 2.50/kg vs existing Rs 4.10/kg on CNG sale). MAHGL is deciding to reduce CNG commissions of 34 private CNG stations, likely to face closure by March 2020 if no new agreement. While 2 stations have already shut in the ongoing tussle over contracts and agreements between dealers and MAHGL, four more may face closure by December 31.(News) MAHGL was paying commission of Rs 2.74/kg till March 2018 and has been revised to Rs 4.10/kg for dealers and OMC owned CNG pumps. Now based on new agreement, 40% lower commissions on CNG sales is forcing to go out of business to private pump owners. Our calculation suggests, instead of continuing with lower commission on CNG sale business, private pump owner can rent out space and earn 31% operating income (EBITDA). (See Exhibit 4). A land/plot of size ~7,500sq.ft at prime location and road touch can easily fetch rent of Rs ~ Rs 0.3mn/month where he can also get assurance of minimum 5% hike in rentals every year. While the operating income of private CNG pump owner would be ~ 0.28mn/month on new commissions. We believe, new commissions are not tenable.

Exhibit 4: CNG private pump owner financials, Rent out CNG station land to earn 31% higher EBITDA vs. new agreement

Till Mar’18 Now New Rent out

Benefits/Trade discounts (Rs/kg) 2.7 4.1 2.5

Daily CNG sales (kg) 5,000 5,000 5,000

Annual Income (Rs mn) 5.0 7.5 4.6 3.6

Security Deposits (5 day sales) 1.5 1.5 1.5 1.5

Operating Expense

Adminstrative cost & Employee cost 1.8 1.8 1.8 0

Power cost +Telephone & Other 0.12 0.18 0.18 0

AMC (excluding CNG Dispenser and compressor) 0.15 0.15 0.15 0

losses on deposit 0.1 0.1 0.1 0

Income on Security deposit 0.0 0.0 0.0 0.1

EBITDA 2.8 5.3 2.3 3.7

Source: Industry data, 99Acers, R-sec Research

2.74

4.1

2.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Till Mar'18 Now New Agreemnt

Rs/kg

https://timesofindia.indiatimes.com/city/mumbai/mumbai-private-cng-pump-owners-refuse-to-sign-fresh-deals/articleshow/72470033.cms


4


CMP* (Rs) 1064



REDUCE

Temporary Loss of CNG Volume if No Continuation of Private Pump OwnerMAHGL has 244 CNG stations in Mumbai, Thane & Raigad region, selling CNG at rate of 2.2 mmscmd. If 34 stations stop operations could impact 14% of total CNG volume on temporary basis, till alternative station starts and closure of CNG stations will likely increase waiting period. Any strike/closure of CNG pumps could hit overall volume growth. Scenario 1) 5 days strike of private CNG pump owners can drag maximum CNG volume sales by 0.54% and EPS by 0.64% in 4QFY20, 2) If no agreement between private CNG pump owners and MAHGL then impact of 10% on CNG sales volume & 12% on EPS for 3 months (4QFY20) till alternative CNG stations starts. As we expect MAHGL to face challenges to sustain CNG volume growth >6%, while we maintained volume growth assumption at 3.5% for FY20/FY21E.

Exhibit 6: MAHGL’s CNG station break up; CNG private owners 21% Exhibit 7: MAHGL’s CNG sales volume

Source: Company, RSec Research estimates

6%

73%

21%

Owned OMC Franchisees

646 659 694 724791 817 843 871

0

100

200

300

400

500

600

700

800

900

1,000

FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22

MMSCM

Lower CNG Volume Growth on a Change in Composition of CNG Vehicle Addition with Slowing down CNG Vehicle dditionA mere 1.5% CNG volume growth in 1HFY20 is mostly due to overall slowdown in monthly CNG vehicle addition to 5k from 7K in FY19. While the composition of CNG vehicle addition is been changed in last 6 months, our calculation suggest, monthly Auto Rikshaws addition continued to remain same (~4k – which consume lowest volume on daily basis) while the zero registration of Kaali-peelis at Mumbai RTO, other heavy CNG vehicle number is contracted and share of App cab and private cars are falling in overall CNG vehicle composition. Slowdown in overall auto sales numbers have also impacted to CNG volume growth. We maintain our CNG volume growth 3.5%/3.5% for FY20E/FY21E based (1) Delay in BEST CNG bus addition (2) No sign of improvement in share of CNG App cabs/taxi additions ( which consume higher CNG on daily basis).

Exhibit 8: CNG vehicle conversion rate dropped to 5K in 1HFY20 Exhibit 9: Share of Auto Rikshaw are increasing which are lowest CNG consumer on daily basis

Source: Company, RSec Research, Google

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

FY17 FY18 FY19 FY20TD

CNG Vehicle No.

Auto Rikshaws Taxis Cars Other Vehicle

42.8% 43.6% 46.5% 47.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

FY17 FY18 FY19 FY20TD

Auto Rikshaws Taxis Cars Other Vehicle


5


CMP* (Rs) 1064



REDUCE

468

10121416182022

Jul-1

0Ja

n-11

Jul-1

1Ja

n-12

Jul-1

2Ja

n-13

Jul-1

3Ja

n-14

Jul-1

4Ja

n-15

Jul -1

5Ja

n -16

Jul-1

6Ja

n-17

Jul -1

7Ja

n-18

Jul-1

8Ja

n-19

Jul -1

9

$/mmbtu

Gas sourcing at 8.4% slope not cheap compared to soft spot LNG priceMAHGL has bagged gas of 0.3mmscmd in latest auction, new gas production to start from R- cluster field in April 2020. Gas supply from R- cluster field is priced at ~8.4% slope to last 3 months Avg. Brent prices. Mahanagar gas is oblique to take 80% of bagged quantity in a quarter on a “take or pay” clause. Based on our calculations for 2QFY20, R -cluster gas price at (~$5.1/mmbtu) ~8.4% slope to crude price is not cheaper compared to spot LNG price of $4.7/mmbtu (7.2% slope to crude). Brent Crude forward prices are in backwardation from $67/bbl to $63/bbl (See exhibit xx) for period of CY2020, even at price of crude $63/bbl, R-cluster gas price would be $5.3/mmbtu is not cheaper compared to forward spot LNG prices are below $5/mmbtu (see Exhibit 14&15). Further, MAHGL has to incur higher gas transmission cost of ~ $1/mmbtu (Rs71.6/mmbtu) on East -West pipeline compared to ~$0.5/mmbtu (Rs37.7/mmbtu) on Dahej -Panvel pipeline. On net basis, cost of gas (R- cluster) will be higher for PNG industrials and less competitive with alternate fuels. We believe it would be opportunity loss for MAHGL’s gross margin improvement. If cost of gas is cheaper by $1/mmbtu then overall EBITDA/scm likely to improve by Rs0.3/scm. In long term, cheap source of gas/LNG supply will be the major deciding factor to expand PNG industrial segment.

.

Exhibit 10: A direct co-relation between CNG vehicle addition (monthly) and volume growth on YoY

Exhibit 11: Auto Rikshaws consume lowest CNG volume on daily basis

Source: Company, RSec Research Estimates

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0

1000

2000

3000

4000

5000

6000

7000

8000

FY16 FY17 FY18 FY19 FY20TD

CNG vehicle addition run rate (LHS) CNG volume growth rate (RHS)

55

107 5

0

10

20

30

40

50

60

BEST BUSES App Cab Private Cars Auto Rikshaws

Kg/day

Exhibit 12: Spot LNG price slope to 3Months Brent Avg price Exhibit 13: Spot LNG price - Softer on a Global LNG glut

Source: Industry data, RSec Research estimates, Bloomberg, Reuters

12.6%

10.5%11.5%

15.0%

13.5%

11.4%

13.8% 14.0%

10.0%

6.7%7.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

1QFY

20

2QFY

20


6


CMP* (Rs) 1064



REDUCE

Exhibit 14: Forward spot LNG prices < $5/mmbtu for CY2020 Exhibit 15: Brent forward price; Backwardation range $67-$63/bl

Source: Industry data, RSec Research estimates, Bloomberg, Reuters

Exhibit 16: MAHGL’s total gas cost and EBITDA per scm Exhibit 17: MAHGL’s price realisation

Source: Company, RSec Research estimates, Industry data

3QFY20 outlook - EBITDA/scm likely to drop to Rs9/scmMAHGL reduced CNG/PNG household prices by Rs2.04/Rs1.19 in Oct’19 on the back of Government announced a 12.5% reduction in APM gas prices to $3.23/mmbtu from $3.69/mmbtu. Reduction in APM gas prices suggest MAHGL’s gas cost should fall by Rs 0.84/scm (based on 65% APM sourcing) and CNG/ PNG price reduction should drag MAHGL’s overall price realisation by Rs 1.66/scm. This implies CNG/PNG household price cut is higher than required. Rise in spot LNG prices to $5.8/mmbtu, likely to put pressure on PNG industrial product realisation. In 3QFY20, We expect MAHGL’s EBITDA/scm of ~Rs9/scm compared to Rs 9.9/scm in 2QFY20.

PNG industrial volume growth to slow down and price realisation to remain under pressure Taloja MIDC is likely to curtail 50% water supply to industrial units after the industries failed to abide by the Supreme Court (SC) deadline of November 30 to pay Rs180mn towards the setting-up of an upgraded five-star Common Effluent Treatment Plant (CETP) in the area. Water supply cut likely to impact on production from industrial units which consumes PNG industrial product. Further, in 2QFY20, few industrial units have changed the PNG consumption pattern (source: 2QFY20- Concall) and addition of any water supply cut will likely impact on PNG industrial sales volume growth. Fall in HSFO prices are likely to pressurise on PNG industrial price realisation in 3Q & 4QFY20.

10.8 11.3 10.3 11.1

9.9 9.5 10.7

11.6 11.2 13.1

14.1 13.6 12.9 13.7 13.0

6.7 6.8 7.1 6.9 8.7 8.0 8.0

7.0 8.1 8.1 8.8

7.9

10.3 9.9 8.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Q1F

Y17

Q2F

Y17

Q3F

Y17

Q4F

Y17

Q1F

Y18

Q2F

Y18

Q3F

Y18

Q4F

Y18

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

Y19

1QFY

20

2QFY

20

3QFY

20E

Rs/scm

Gas cost/SCM EBITDA/SCM

21.3 21.8 21.4 22.3 22.7 21.523.1 23.3 23.7

25.627.6 26.7 28.0 28.4

26.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Q1F

Y17

Q2F

Y17

Q3F

Y17

Q4F

Y17

Q1F

Y18

Q2F

Y18

Q3F

Y18

Q4F

Y18

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

Y19

1QFY

20

2QFY

20

3QFY

20E

Rs/scm

Price Realisation


7


CMP* (Rs) 1064



REDUCE

Profit & Loss account

Y/E March (Rs mn) FY19 FY20E FY21E FY22E

Net Sale of Natural Gas 30,568 30,825 32,621 34,975

Total Operating Income 30,568 30,825 32,621 34,975

Cost of natural gas and traded items

13,992 15,687 16,710 18,881

Excise Duty on Sale of CNG 2,657 - - -

Other expenses 5,065 4,911 5,080 5,259

Total expenses 21,713 20,599 21,790 24,140

EBITDA 8,855 10,226 10,831 10,835

EBITDA Margins (%) 29% 33% 33% 31%

Other income 777 956 1084 1360

Finance costs 3 37 39 0

Depreciation 1259 1370 1485 1559

PBT 8,369 9,776 10,391 10,636

Total Tax Expense 2,905 1,955 2,598 2,659

PAT 5,464 7,821 7,793 7,977

PAT/scm 5.1 7.0 6.8 6.7

Net Profit margins (%) 18% 25% 24% 23%

EPS (Rs) 55.3 79.2 78.9 79.9

DPS (Rs) 20.0 28.6 28.5 28.9

Shares outstanding (mn) 98.8 98.8 98.8 99.8


8


CMP* (Rs) 1064



REDUCE

Balance sheet


Share capital 988 988 988 988

Reserves and surplus 23,001 27,516 32,016 36,621

Share holders fund 23,989 28,504 33,003 37,609

Other non current liabilities 2,210 2,210 2,210 2,210

Total Non current liabilities 2,210 2,210 2,210 2,210

Trade payable 1,524 1,677 1,786 2,019

Security deposits 5,179 5,179 5,179 5,179

Other current liabilities 1,508 1,558 1,587 1,624

Total current liabilities 8,212 8,415 8,552 8,822

Total Liabilities 34,410 39,128 43,765 48,640

Fixed assets 21,331 22,162 22,878 23,319

Other non current asset 1,321 1,321 1,321 1,321

Total Non current asset 22,652 23,483 24,199 24,640

Current investments 6,540 6,540 6,540 6,540

Inventories 191 366 390 440

Trade Receivables 995 1,157 1,225 1,313

Cash and bank balances 2,988 6,539 10,369 14,663

Other current asset 1,044 1,044 1,044 1,044

Total current asset 11,759 15,646 19,567 24,000

Total Assets 34,410 39,128 43,765 48,640


9


CMP* (Rs) 1064



REDUCE

Cash Flow Statement


PBT 8,369 9,776 10,391 10,636

Depreciation 1,259 1,370 1,485 1,559

Others (495) (920) (1,045) (1,360)

Cash flow from operating activities 9,134 10,226 10,831 10,835

Changes in inventories 49 (175) (24) (51)

Change in receivable (115) (162) (67) (88)

Change in payable 432 153 109 232

Change in other current liabilities 748 50 28 37

others (695) - - -

Net Cash flow from operating activities after WC

9,552 10,093 10,877 10,965

income taxes paid (2,708) (1,955) (2,598) (2,659)

Net Cash flow from operating activities 6,844 8,137 8,280 8,306

Cash flow from investing activities (4,383) (1,245) (1,117) (640)

Cash flow from financing activities (2,346) (3,342) (3,333) (3,372)

Net change in cash 115 3,550 3,830 4,294

Key Ratio

Y/E March FY19 FY20E FY21E FY22E

Valuation Ratio (x)P/E 19.4 13.6 13.6 13.4

P/CEPS 16.9 11.9 11.9 11.6

P/BV 4.4 3.7 3.2 2.8

Dividend yield (%) 2% 3% 3% 3%

EV/EBITDA 11.1 9.3 8.4 8.1

BVPS 243 289 334 377

Per Share Data (Rs)EPS 55.3 79.2 78.9 79.9

Cash EPS 63.6 90.3 90.2 92.6

DPS 20.0 28.6 28.5 28.9

Returns (%)RoCE 23.6 28.8 24.6 21.7

RoE 24.3 29.8 25.3 22.6

Turnover ratios (x)Asset Turnover (Gross Block) 1.2 1.1 1.3 1.3

Inventory (days) 5.0 8.5 8.5 8.5

Receivables (days) 11.9 13.7 13.7 13.7

Payables (days) 39.8 39.0 39.0 39.0


10


CMP* (Rs) 1064



REDUCE

Reliance Securities Limited (RSL), the broking arm of Reliance Capital is one of the India’s leading retail broking houses. Reliance Capital is amongst India’s leading and most valuable financial services

companies in the private sector. Reliance Capital has interests in asset management and mutual funds, life and general insurance, commercial finance, equities and commodities broking, wealth

management services, distribution of financial products, private equity, asset reconstruction, proprietary investments and other activities in financial services. The list of associates of RSL is available on

the website www.reliancecapital.co.in. RSL is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014

General Disclaimers: This Research Report (hereinafter called ‘Report’) is prepared and distributed by RSL for information purposes only. The recommendations, if any, made herein are expression of

views and/or opinions and should not be deemed or construed to be neither advice for the purpose of purchase or sale of any security, derivatives or any other security through RSL nor any solicitation

or offering of any investment /trading opportunity on behalf of the issuer(s) of the respective security(ies) referred to herein. These information / opinions / views are not meant to serve as a professional

investment guide for the readers. No action is solicited based upon the information provided herein. Recipients of this Report should rely on information/data arising out of their own investigations.

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assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information / opinions / views. While due care has been taken to ensure that the disclosures and

opinions given are fair and reasonable, none of the directors, employees, affiliates or representatives of RSL shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary

damages, including lost profits arising in any way whatsoever from the information / opinions / views contained in this Report.

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Disclosure of Interest: The research analysts who have prepared this Report hereby certify that the views /opinions expressed in this Report are their personal independent views/opinions in respect of

the securities and their respective issuers. None of RSL, research analysts, or their relatives had any known direct /indirect material conflict of interest including any long/short position(s) in any specific

security on which views/opinions have been made in this Report, during its preparation. RSL’s Associates may have other potential/material conflict of interest with respect to any recommendation and

related information and opinions at the time of publication of research report. RSL, its Associates, the research analysts, or their relatives might have financial interest in the issuer company(ies) of the

said securities. RSL or its Associates may have received a compensation from the said issuer company(ies) in last 12 months for the brokerage or non brokerage services.RSL, its Associates, the research

analysts or their relatives have not received any compensation or other benefits directly or indirectly from the said issuer company(ies) or any third party in last 12 months in any respect whatsoever for

preparation of this report.

The research analysts has served as an officer, director or employee of the said issuer company(ies)?: No

RSL, its Associates, the research analysts or their relatives holds ownership of 1% or more, in respect of the said issuer company(ies).?: No

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Report in any manner whatsoever, in whole or in part, is permitted without the prior express written consent of RSL.

RSL’s activities were neither suspended nor have defaulted with any stock exchange with whom RSL is registered. Further, there does not exist any material adverse order/judgments/strictures assessed

by any regulatory, government or public authority or agency or any law enforcing agency in last three years. Further, there does not exist any material enquiry of whatsoever nature instituted or pending

against RSL as on the date of this Report.

Important These disclaimers, risks and other disclosures must be read in conjunction with the information / opinions / views of which they form part of.

RSL CIN: U65990MH2005PLC154052. SEBI registration no. ( Stock Brokers: NSE - INB / INF / INE 231234833; BSE - INB / INF / INE 011234839, Depository Participants: CDSL IN-DP-257-2016 IN-DP-

NSDL-363-2013, Research Analyst: INH000002384); AMFI ARN No.29889.

Rating GuidesRating Expected absolute returns (%) over 12 monthsBUY >10%

HOLD -5% to 10%

REDUCE >-5%

PLEASE CLICK HERE FOR PREVIOUS REPORTS

Rating History

Date Reco CMP TP

13-Nov-19 HOLD 1003 956

12-Aug-19 HOLD 785 761

12-July-19 REDUCE 807 761

11-Jun-19 REDUCE 887 803

10-May-19 REDUCE 889 803

26-Apr-19 REDUCE 967 805

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