Everest Industries Ltd Result Update: Q4 FY 12

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1 Everest Industries Ltd Result Update: Q4 FY 12 C.M.P: Rs Target Price: Rs Date: June 28 th 2012 BUY Stock Data: Sector: Cement Face Value Rs wk. High/Low (Rs.) / Volume (2 wk. Avg.) BSE Code Market Cap (Rs in mn) Share Holding Pattern SYNOPSIS Everest Industries Ltd is one of India s fastest growing building solutions company. During the quarter ended, the robust growth of Net Profit is increased by % to Rs million. Everest Industries Ltd has recommended a dividend 70 % (Rs per equity share) for the financial year The Everest brand of products are produced at state-of-the-art ISO:9000 certified manufacturing facilities. 1 Year Comparative Graph Everest offers roofing, ceiling, wall, flooring, cladding, door and preengineered steel buildings for the industrial, commercial and residential sectors. BSE SENSEX EVEREST INDUSTRIES Operating Profit and PAT of the company are expected to grow at a CAGR of 17% and 19% over 2011 to 2014E respectively. Years Net sales EBITDA Net Profit EPS P/E FY FY 13E FY 14E

2 Peer Group Comparison Name of the company CMP(Rs.) Market Cap. (Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%) Everest Industries Ltd Hyderabad I Industries Visaka Industries Ltd Sagar Cements Ltd Investment Highlights Q4 FY12 Results Update Everest Industries Ltd has reported net profit of Rs million for the quarter ended on March 31, 2012 as against million in the same quarter last year, an increase of 24.39%. It has reported net sales of Rs million for the quarter ended on March 31, 2012 as against Rs million in the same quarter last year, a rise of 24.62%. Total income grew by 25.63% to Rs million from Rs million in the same quarter last year. During the quarter, it reported earnings of Rs 8.74 a share. Quarterly Results - Standalone (Rs in mn) As At Mar-12 Mar-11 %change Net sales PAT Basic EPS

3 Break up of Expenditure Segment Revenue Recommended dividend Everest Industries Ltd has recommended a dividend 70 % (Rs per equity share) for the financial year

4 Allotment of Equity Shares Everest Industries Ltd has allotted the Equity Shares to the Employees of the Company under the Employees Stock Option Schemes in the following manner: 690 Equity Shares allotted to the Employees under ESOS Equity Shares allotted to the Employees under ESOS Equity Shares allotted to the Employees under ESOS Equity Shares allotted to the Employees under ES0S Company Profile Everest Industries Ltd is one of India s fastest growing building solutions company. Founded in 1934, Everest is one of the most respected and renowned business entities in India, and has dominated the market ever since. It has continuously introduced innovative and modern building products with a promise of strength, speed and safety. Everest offers a complete range of world-class building solutions: roofing, ceiling, wall, flooring, cladding, door and pre-engineered steel buildings for the industrial, commercial and residential sectors. Historically, Everest has provided rural shelters, by making corrugated roofing sheets available to farmers at a competitive price. The company is poised to capitalize on the opportunities in rural India, where various housing and infrastructure initiatives are envisaged by the Government. The Everest brand of products are produced at state-of-the-art ISO:9000 certified manufacturing facilities located at Kymore, Nashik, Coimbatore, Kolkata and Roorkee. With over 6000 retail points spread across the nation, together with the strength of over 1285 highly qualified and experienced engineers, designers and technicians, Everest provides building solutions that successfully meet the highest standards of quality and durability. 4

5 After successfully catering to the Indian market, Everest has widened its horizons in the international arena. With consistent exports to Europe, Africa, Australia and Asia, Everest is all set to scale new heights and establish a strong foundation in the global market. Banking on 76 years of experience and highly sophisticated technology, Everest assures customers that all its products live up to the promise of strength, speed and safety. Products Roofing Ceiling Wall Flooring Cladding Door and pre-engineered steel buildings 5

6 Financial Results 12 Months Ended Profit & Loss Account (Standalone) Value(Rs.in.mn) FY11 FY12 FY13E FY14E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Reserves Face value EPS

7 Quarterly Ended Profit & Loss Account (Standalone) Value(Rs.in.mn) 30-Sep Dec Mar Jun-12E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Face value EPS

8 Key Ratios Particulars FY11 FY12 FY13E FY14E No. of Shares(in mn) EBITDA Margin (%) 10.71% 11.11% 11.00% 10.97% PBT Margin (%) 7.35% 8.35% 8.46% 8.57% PAT Margin (%) 5.63% 5.95% 5.88% 5.95% P/E Ratio (x) ROE (%) 19.52% 21.15% 19.51% 18.12% ROCE (%) 30.18% 32.43% 31.12% 29.39% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts: Netsales & PAT 8

9 P/E Ratio Debt Equity Ratio 9

10 EV/EBITDA Ratio P/BV Ratio 10

11 Outlook and Conclusion At the current market price of Rs , the stock is trading at 4.90 x FY13E and 4.32 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 19% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 2.62 x for FY13E and 2.34 x for FY14E. Price to Book Value of the stock is expected to be at 0.96 x and 0.78 x respectively for FY13E and FY14E. We expect that the company will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. Industry Overview India is the second largest producer of quality cement in the world. Cement is one of the core industries which plays a vital role in the growth and expansion of a nation. The industry occupies an important place in the Indian economy because of its strong linkages to other sectors such as construction, transportation, coal and power. The cement industry is also one of the major contributors to the exchequer by way of indirect taxes. Indian Cement Industry is engaged in the production of several varieties of cement such as Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland Cement, White Cement, etc. They are produced 11

12 strictly as per the Bureau of Indian Standards (BIS) specifications and their quality is comparable with the best in the world. The cement industry in India comprises 139 large cement plants and over 365 mini cement plants. The initiatives provided by the Government of India to various infrastructure projects, road network and housing activities will provide required stimulus towards growth of cement industry in India. Currently, the top players-ultratech, ACC, Ambuja Cements, Jaiprakash Associates, India Cements-and Shree Cement, collectively control more than half of the cement market in the country. There are 40 players in the industry across the country. The cement industry in India is experiencing a boom on account of overall growth in the economy. The demand for cement, being a derived one, depends mainly on the industrial activities, real estate business, construction activities and investment in the infrastructure sector. India is experiencing growth in all these areas and hence the cement market is moving ahead in spite of the world-wide economic recession. Market Size India's cement industry has performed better in (FY12), on back of robust demand revival in the second half of the financial year. The 330 MT industry grew by 6.4 per cent in as against less than 5 per cent in The industry sold MT of the building material, compared with MT in FY11. The cement production, too, rose to MT against MT in FY11. The cement production increased from million tonnes (MT) in April January 2011 to in April January While cement despatches increased from MT in April January 2011 to MT in April January 2012, according to data provided by the Cement Manufacturers' Association (CMA). In addition, the eight key infrastructure industries posted a seven-month high growth of 6.8 per cent in February 2012, largely driven by robust performance in cement, electricity and coal. Cement output continued to post double-digit growth for the 12

13 fourth consecutive month at 10.8 per cent. This was much higher than the 6.5 per cent growth seen in the same month last year. The cumulative cement output growth during April-February 2012 stood at 6.4 per cent (as against 4.3 per cent). Investments The Cement and Gypsum products sector attracted foreign direct investments (FDI) worth US$ 2, million between April 2000 to March 2012, according to the data published by Department of Industrial Policy and Promotion (DIPP). Shriram Group, a Rs 50,000 crore (US$ 8.96 billion) diversified Chennaiheadquartered conglomerate, is firming up a strategic plan to consolidate its presence in the cement sector. Shriram EPC, a publicly held company of Shriram Group, has recently entered the cement sector by acquiring majority stake in Andhra Pradesh-based cement manufacturer, Sree Jayajothi Cements Ltd Karnataka's State High Level Clearance Committee (SHLCC) has cleared a total of 31 projects worth over Rs 146,656 crore (US$ billion). Among the projects cleared, Kalyani Steel received approval for its Rs 12,000 crore (US$ 2.15 billion) carbon alloy steel project and JK Cement's Ltd for its Rs 2,327 crore (US$ million) new cement plant ACC, owned by Switzerland-based Holcim Group, will invest Rs 3,300 crore (US$ million) over three years to increase its capacity by 16 per cent, to 35 million tonnes per annum (MTPA) from 30 MTPA. ACC will set up cement production facility of four MTPA and a 2.79 MTPA clinker production facility at Jamul in Chattisgarh. Two grinding facilities will also come up at Sindri in Jharkhand and Kharagpur in West Bengal The India Cements Ltd, one of the country's leading companies in the sector, plans to invest around Rs 750 crore (US$ million) in one of its factories in Tamil Nadu (TN). The proposed investment is to expand the annual capacity of this plant to 2 MT Swiss cement major, Holcim's India arm has beaten domestic giant UltraTech, during Holcim's reported a growth of 8.3 per cent in , while UltraTech Cement showed a growth of 3.5 per cent in its sales 13

14 Aditya Birla Group's UltraTech Cement, India's largest cement maker, is in talks to acquire a large limestone mine in Mozambique for about Rs 1,500 crore (US$ million) Kajaria Ceramics has agreed to form a joint venture (JV) with Vennar Ceramics, a wholly- owned subsidiary of Anjani Portland Cement, to manufacture wall tiles. The venture will set up a unit at Kaikalur in Andhra Pradesh. The JV referred as Vennar Ceramics Ltd, will mark the entry of Kajarias into South India with a manufacturing facility Government Initiatives According to the latest report from the working group on the industry for the 12th Five Year Plan ( ), India would require overall cement capacity of around 480 MT. This would mean the industry will have to add another 150 MT of capacity during the period. The Union Budget for was announced by Mr Pranab Mukherjee, the Union Finance Minister. Highlights of Union Budget : Excise duty rationalized for packaged cement, whether manufactured by mini cement plants or others. Packaged cement, whether manufactured by mini-cement plants or others, attracts differential excise duty depending on the Retail Sale Price per bag. It is proposed to prescribe a unified rate of 12 per cent + Rs 120 (US$ 2.15) PMT for non-mini cement plants and 6 per cent + Rs 120 (US$ 2.15) PMT for mini-cement plants. It is proposed to charge this duty on the Retail Sale Price less abatement of 30 per cent. India's construction sector is expected to grow at about 35 per cent between and The private sector is expected to contribute 44 per cent of the total projected spend of US$ 100 billion on roads and highways over the Twelfth Five Year Plan ( ) period The Union Budget is a pragmatic and growth-oriented one. "Infrastructure sector has been given due thrust in the budget. Doubling the 14

15 infrastructure tax-free bond amount to Rs 60,000 crore (US$ billion), 8,800 km highway coverage target, " according to C S Verma, Chairman, SAIL Road Ahead The demand for cement depends primarily on the pace of activities in the business, financial, real estate and infrastructure sectors of the economy. Cement is considered preferred building material and is used worldwide for all construction works such as housing and industrial construction, as well as for creation of infrastructures like ports, roads, power plants, etc. Indian cement industry is globally competitive because the industry has witnessed healthy trends such as cost control and continuous technology upgradation. It is anticipated that the cement industry players will continue to increase their annual cement output in coming years and the country's cement production will grow at a compound annual growth rate (CAGR) of around 12 per cent during to reach 303 MMT, according to a report titled 'Indian Cement Industry Forecast to 2012', by research firm RNCOS. Going forward, industry officials are optimistic and project growth at eight to nine per cent. The Holcim Group of companies-acc and Ambuja Cements-have chalked out expansion plans worth Rs 5,000 crore (US$ million), while Aditya Birla Group's UltraTech Cement has plans to add 25 MT of capacity in the next few years. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. 15

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