Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Transcription

1 BUY CMP Target Price BS LIMITED Result Update: Q2 FY13 Dec 27 th, 2012 ISIN: INE043K01011 Stock Data Sector Infrastructure BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg ) Market Cap ( Rs in mn ) Annual Estimated Results (A*: Actual / E*: Estimated) Years FY12A FY13E FY14E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) 1 Year Comparative Graph SYNOPSIS We initiated coverage of BS Ltd and set a target price of Rs for Medium term Investment. BS Limited is a leading Infrastructure provider of Power Transmission & distribution and Passive Telecom infrastructure & has expedited its presence in Renewable Energy & Mineral Resources. BS Ltd has demonstrated the robust growth in the Net Profit of the company and it is rose by 25.49% to Rs millions. BS Ltd has bagged orders of Rs.117 crores. These orders to supply of 765/400 KV transmission line towers for Powergrid and State Power Utilities. Net Sales and operating profit of the company are expected to grow at a CAGR of 24% and 18% over 2011 to 2014E respectively. BS Ltd has recommended a Dividend of Rs.1/- per Share on 21,878,660 Equity Shares on Face Value of Rs.10/- each for the Financial Year BSE SENSEX BS LTD The Company has made an investment of Rs. 68,32,650/- in the Raichur Sholapur Transmission Company Ltd. Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) BS Ltd Gayatri Projects L & T Supreme Infra

2 Investment Highlights Standalone Results updates- Q2 FY13, BS Limited is a leading Infrastructure provider augmenting its core business in Power Transmission & distribution and Passive Telecom infrastructure and has expedited its presence in Renewable Energy and Mineral Resources, reported its financial results for the quarter ended 30 Sep, The Second quarter witnesses a healthy increase in overall sales as well as profitability on account, bagging the orders and expanding the manufacturing capacities along with the investments in other companies. Months Sep-12 Sep-11 % Change Net Sales % PAT % EPS % EBITDA % The company s net profit springs up to Rs million against Rs million in the corresponding quarter ending of previous year, an increase of 25.49%. Revenue for the quarter stands up by 52.71% to Rs million from Rs million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.6.85 a share during the quarter, registering at 25.49% increase over previous year period. Profit before interest, depreciation and tax is Rs millions as against Rs millions in the corresponding period of the previous year. Expenditure : During the quarter the total expenditure grown up by 56 percent mainly on account of increased in Administrative Expenses along with consideration of depreciation in the rupee impact and witnessed. Total expenditure in Q2 FY13 was at Rs million as against Rs million in Q2 FY12. Administrative expenses cost Rs against Rs millions in the corresponding period of the previous year. Other Expenditure was at Rs.0.53 million and Consumption of Raw Materials is Rs million in Q2 FY13 are the primarily attributable to growth of expenditure.

3 Segment Revenue Latest Updates BS Ltd has bagged orders amounting to Rs.117 crores. These orders are for supply of 765/400 KV transmission line towers for Powergrid and State Power Utilities. The company gained traction in the tower supply business owing to the added capacity of 1, 20,000 MTPA. BS Ltd has recommended a Dividend of Rs.1/- per Share on 21,878,660 Equity Shares on Face Value of Rs.10/- each for the Financial Year The Company has made an investment of Rs. 68,32,650/- in the Ralchur Sholapur Transmission Company Ltd. New Projects, Initiatives and Joint Ventures The Company has obtained orders from Chhattisgarh State Power Transmission Limited for setting up of two substations of 132/33KV in Raipur. The scope of works includes Design, Supply, Erection, and Testing & Commissioning on a turnkey basis and the completion period for both the projects in twelve months. The Company also bagged an order from Power Grid in a domestic competitive bidding with a joint venture for supply of tower package for 765KV S/C Jaipur M Lakha ka Nangal Transmission line spanning 126kms which is associated with the Phase I Generation project in Orissa. The combined value of the orders amounted to Rs.244 Crores. The Company has bagged an order for supply, erection, testing and commissioning of new 11KV & LT Lines and construction of 11/0.4KV distribution Substation in Madhya Pradesh.

4 The Company was the lowest bidder (L1) for tenders from MPMKVVCL, Bhopal under the RGGVY project in Rewa, Bhindi & Panna District in Madhya Pradesh. The total cumulative value of all the orders was Rs.168 Crores. The Company has started trading in Coal and other natural resources through its Wholly Owned Subsidiary (WOS) BS Global Resources Pvt. Limited of Singapore. The business is at the nascent stage and is showing lot of potential. Credit Rating CARE has revised the rating of the Company from CARE BBB- to CARE BBB% assigned to the long-term bank facilities of the Company. The rating assigned to the Short Term bank facilities of the Company has been revised from CARE A3% to CARE A3+%. Outlook for Expansion in tower manufacturing capacity The Company has increased the manufacturing capacity to 2,40,000 MTPA with a backward integrated structural steel plant supporting the raw material required for tower manufacturing. With a reputed Companies of Power Transmission Sector in consortium to become a transmission service provider on a BOOM basis. Of M/s. Raichur Sholapur Transmission Company Ltd (RSTCL) is one such SPV. Company Profile BS Limited is a leading Infrastructure provider augmenting its core business in Power Transmission & distribution and Passive Telecom infrastructure and has expedited its presence in Renewable Energy and Mineral Resources. The companies journey Started from 2004 as Tower manufacturer, the company diversified into Turnkey Service, EPC, Managed Services, Technology Solutions, Renewable Energy and Mineral Resources. The company got listed in October 2010 through its Initial Public Offering and had raised Rs.1900 million to fund its expansion plans. The plant started commercial production in March It has garnered its competitive edge as a preferred EPC provider with its integrated business model, expansion, innovation and commitment to quality. The company is poised to grow substantially with its ambitious organic and inorganic growth plans in its business verticals.

5 The company has an Integrated Business model in its core business, Power & Telecom, with nationwide EPC strength for executing turnkey projects. It has ventured into new geographies and business verticals with value added service offerings and caters to diverse clientele. The company forayed into BOOM projects in 2010 and bagged its maiden BOOM project in a consortium with Patel Engineering Ltd and Simplex Infrastructure Ltd for establishing a 765 KV transmission system from Raichur to Sholapur. Realizing the potential in Coal assets, the company made a strategic move to trade in mineral resources to leverage the potential foray in power generation in the future. BS Limited has Headquartered in Hyderabad and 8 regional offices to service all the 23 telecom circles in India and 6 project offices to service the customers of power sector with more than 1000 employees. The two Plants are located in Medak District with an annual installed capacity of 2,40,000 MTPA and is equipped with modern machineries besides its own state-of-the-art Testing Station BS Limited is Integrated Management System Certified which affirms the compliance with international standards in quality management (ISO 9001:2008), environmental management (ISO 14001:2004) and occupational health and safety (BS OHSAS 18001:2007). Business Power Telecom Mineral Resources Subsidiaries M/s BS Infratel Ltd (BSIL) M/s BS Global Resources Pvt Ltd (BSGRPL) M/s Sugan Automatics Pvt Ltd (SAPL) Awards & Certification The company has certified as ISO 9001, ISO 14001, BS OHSAS and the prestigious Integrated Management Systems (IMS) Certificate from TUV NORD. This certification affirms the Company s compliance with international standards in quality management (ISO 9001:2008), environmental management (ISO 14001:2004) and occupational health and safety (OHSAS 18001:2007).

6 Performance highlights in various division Power division The new capacity of 2,40,000 MTPA offer substantial benefits arising out of economies of scale while at the same time strengthening the competitive strength empowering to bid for a large volume orders. Transmission projects were awarded in the second half of FY13. Telecom Services The expansion of operations in the western and the northern region to offer managed services and other value added solutions. The challenging time still persisting, the onus of the telecom infrastructure provider to provide 99.99% uptime of the telecom cell site. The company focused towards creating innovative solutions using renewable energy and also with climate control technologies to reduce the operating expenditure of the site. Mineral Resources India & China are besieged by severe coal shortage and are relying on imported coal from Indonesia, South Africa and Australia. The subsidiary company incorporated in last year has started generating revenues and has been profitable. The company has established close partnerships with leading miners and traders in Indonesia and has supplied to independent power consumers and other forms.

7 Financial Highlight Balance sheet as at March31st, 2012 (A*- Actuals, E* -Estimations & Rs. In Millions) Particulars March Rs in Millions 2012A 2013E 2014E EQUITY AND LIABILITIES: Shareholders Funds: Share Capital Reserves and Surplus Net worth (a) Non-Current Liabilities: long-term borrowings Deferred Tax Liabilities [Net] Long Term Provisions Long term liabilities (b) Current Liabilities: Short-term borrowings Trade Payables Other Current Liabilities Short Term Provisions Current Liabilities ASSETS: Non-Current Assets: Fixed Assets: Total (a+b+c) Tangible Assets Intangible Assets Capital work-in-progress Total (d) other non-current assets Non Current Investments Long Term Loans and Advances Current Assets: Total (e) Inventories Trade Receivables Cash and Bank Balances Short Term Loans and Advances Other Current Assets Total (f) Total (d+e+f)

8 Annual Profit & Loss Statement for the period of 2011 to 2014E Value(Rs.in.mn) FY11 FY12 FY13E FY14E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 st Mar, 2012 to 31 st Dec, 12E Value(Rs.in.mn) 31-Mar Jun Sep Dec-12E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS

9 Ratio Analysis Particulars FY11 FY12 FY13E FY14E EPS (Rs.) EBITDA Margin (%) 14.22% 12.42% 12.13% 12.20% PBT Margin (%) 8.78% 6.64% 6.05% 5.71% PAT Margin (%) 5.85% 4.48% 4.07% 3.87% P/E Ratio (x) ROE (%) 15.70% 13.72% 13.50% 12.94% ROCE (%) 25.89% 23.78% 25.73% 26.82% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

10 Outlook and Conclusion At the current market price of Rs , the stock P/E ratio is at 7.71 x FY13E and 7.00 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 operating profit of the company are expected to grow at a CAGR of 24% and 18% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 4.24 x for FY13E and 3.74 x for FY14E. Price to Book Value of the stock is expected to be at 1.04 x and 0.91 x respectively for FY13E and FY14E. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. Industry Overview Infrastructural development mirrors the overall health of a nation s economy. Infrastructure can be defined as major components, such as basic buildings, institutions and facilities or other essential elements, that are necessary to sustain and enable economic growth. Physical infrastructure is directly proportionate to the growth and development of a country. The Government has initiated several policies to promote and garner investments in the power sector. To accelerate capacity addition, several policy initiatives have been undertaken by the Ministry of Power. The National Electricity Policy (NEP) in fact, stipulates power for all and annual per capita consumption of electricity to rise to 1,000 units by 2012.

11 Power State-run power company West Bengal State Electricity Distribution Company Ltd has directed IL&FS Engineering & Construction Company to set-up three rural power projects, which would involve supply and delivery of equipment and build the infrastructure for rural electrification, worth Rs 331 crore (US$ 61 million) in the state. The West Bengal Government intends to use the Centre s Backward Region Grant Fund to acknowledge the entailing costs. Goldman Sachs supported ReNew Power's Jath project in Maharashtra has appointed Gamesa India for supplying wind turbines totalling megawatts (MW). The order would be executed by March 2013 from Gamesa s end. Bharat Heavy Electricals Ltd (BHEL) has commissioned a 5 MW grid-connected solar power plant at Shivasamudram near Mandya. This is the single largest solar photovoltaic (PV) power plant in Karnataka which has been established for the state-owned power producer, Karnataka Power Corporation Limited (KPCL), at a cost of Rs 62 crore (US$ million). Larsen and Turbo (L&T) has bagged orders totaling over Rs 2, 008 crore (US$ 370 million) across various infrastructural business segments like power transmission and distribution (from Chamundeshwari Electricity Supply Corporation Ltd) and construction (from Greater Mohali Area Development Authority for the construction of roads, water supply, electrical services and parks; construction of an IT campus in Hyderabad; from the Kolkata Metropolitan Development Authority for design and construction of a four-lane flyover, rail overbridge and viaduct). Telecommunication India is one of the fastest growing telecom markets in the world wherein the telecommunications sector has emerged as a key propeller of social-economic development in an intensive, knowledge-driven global landscape. The sector's significant contribution to the economic development is clearly reflected in the unprecedented increase in tele-density and sharp decline in tariffs in the Indian telecom sector which accounts for almost 3 per cent of the gross domestic product (GDP). The telecom tower provider industry has been recently granted the 'infrastructure' status, a move that will make tower providers eligible for viability gap funding, higher limit on external commercial borrowings (ECBs), lower import duties and exemptions on excise duty on telecom infrastructure equipment. Tower providers will also get advantage of lower lending rates at 3-4 per cent on loan terms of years as against the market borrowing rates of per cent. Along with other multiple benefits, the companies will also

12 be given a tax holiday under section 80-IA of the Income Tax Act. Industry body Tower and Infrastructure Provider's Association (TAIPA) will coordinate with the implementation committee to bring in commonality of interest to ensure rapid progression of the new development. The Department of Telecommunications (DoT) has issued new guidelines according to which foreign entities can participate in the upcoming 2G auctions directly and obtain a licence. The initiative is expected to make the upcoming auctions more attractive to certain foreign players such as Telenor, which wanted to bid directly without an Indian partner in the auctions. The notice inviting applications (NIA) for the same have stated that the debut companies will have to pay Rs 1 crore (US$ 184, ) for unified licence in a service area where they wish to operate. There will be a lock-in period of three 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.

13 Firstcall India Equity Research: C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods A.Nagaraju Cement, Reality & Infra, Oil & Gas Ashish.Kushwaha IT, Consumer Durable & Banking K. Jagadhishwari Devi Diversified Abdul Khabeer Diversified Anil Kumar Diversified A.Ravi Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO s, QIP s, F.P.O s,takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai Tel. : / / Telefax : info@firstcallindiaequity.com