Larsen & Toubro (LARTOU) 1420

Transcription

1 es Result Update Rating matrix Rating : Buy Target : 1655 Target Period : 12 months Potential Upside : 17% What s Changed? Target Changed from 1475 to 1655 EPS FY17E Changed from 56.3 to 61.6 EPS FY18E Changed from 63.6 to 72 Rating Unchanged Quarterly Performance Q4FY16 Q4FY15 YoY (%) Q3FY16 QoQ (%) Revenue 21, , , EBITDA 3, , EBITDA (%) bps bps PAT 2, , Key Financials Crore FY15 FY16 FY17E FY18E Net Sales 57, , , ,172.4 EBITDA 6, , , ,31.4 Net Profit 4, , , ,674.9 EPS ( ) Valuation summary FY15 FY16 FY17E FY18E P/E Target P/E EV / EBITDA P/BV RoNW (%) RoCE (%) Stock data Particular Amount Market Capitalization Crore Total Debt (FY16) Crore Cash and Investments (FY16) 5823 Crore EV Crore 52 week H/L 1893/ 169 Equity capital 185 Crore Face value 2 Price performance (%) 1M 3M 6M 12M Larsen & Toubro Ltd 4.8 (4.9) BHEL Thermax Ltd Crompton Greaves (14.7) (13.5) (16.) 37.1 Research Analyst Chirag Shah shah.chirag@icicisecurities.com Performance uproots pessimism May 26, 216 Larsen & Toubro (LARTOU) 142 Standalone revenues grew 11% YoY to 2161 crore (I-direct estimate: 2478 crore) and were above our estimates. Infrastructure segment revenues grew to crore, up 12% YoY while power segment revenues grew 33% YoY to 19 crore. However, a subdued performance was witnessed in the metallurgy & heavy engineering segment (revenues down 2% to 95 crore) and electrical & automation segment (revenues down 6% YoY to 1236 crore). Consolidated revenues were at crore, up 18% YoY Order inflows for the quarter were at 433 crore vs. 476 crore in Q4FY15. For full year, FY16 order inflow was at 1369 crore, down 12%YoY. Total order backlog as of Q4FY16 was at 25 crore. The book to bill ratio as of FY16 was at 2.4x. Order inflows came in muted in FY16 due to loss of bids in the power sector and continued slowdown in the metals & heavy engineering segment. As of FY16, international orders constituted 28% Standalone EBITDA margins came in robust at 15.2%, up 21 bps YoY (I-direct estimate of 12.4%). EBITDA margins in the standalone business were the highest in the last 12 quarters mainly on account of robust profitability being witnessed in the infrastructure segment Proxy play on India Infrastructure story L&T is the most diversified engineering & infrastructure developer in India with a presence across all segments of infrastructure i.e. power, roads, hydrocarbons & process industries. The company is also planning to scale up in niche areas like defence, nuclear power and shipbuilding, which have potential to add significantly to overall revenues in the next three to five years (for instance, opening of defence FDI and ordering can help L&T achieve scale of 5x in terms of defence segment revenues from current 1 crore run rate). Over the last couple of years, L&T has added capacity to meet increasing volumes. For instance, the company had added 5 MW of power equipment facility, the heavy engineering facility in Oman (FY1) and recently added complex shipbuilding facility. Hence, we expect L&T to register revenue CAGR of ~11% in FY15-18E as it commands a strong order backlog of crore, thereby providing visibility of over three years. Infrastructure hydrocarbon, defence orders to lead; power to revive As per the management, L&T is favourably placed in power generation orders to the tune of 6 crore. On the defence and nuclear side, it expects to bag order inflows in excess of 17 crore. On the hydrocarbon side, it is favourably placed in orders worth 8 crore, which may get placed in Q1FY17-Q2FY17. In the roads sector, L&T is expecting inflows to the tune of 15 crore. The management also sees strong prospect in the hydrocarbon segment in the Middle East. Strong outlook to re-rate stock; reiterate BUY with TP of 1655 Strong performance across all variables, strong guidance for FY17E in terms of order inflows, revenue growth will lead to a re-rating of the stock. Management focus on reducing capital intensity by selling noncore subsidiaries (Nabha Power, general insurance & restructuring L&T IDPL) will ease cash flow pressure on parent s B/S and impact RoEs positively (we factor in 6 bps improvement in RoEs to 14.4% by FY18E). On the financials front, we expect revenue, PAT to grow at a CAGR of 15.8%, 12.5% YoY, respectively in FY16-18E. We highlight that from a two to three year perspective, L&T remains the best play on capex cycle recovery in India and top large cap pick in capital goods sector. ICICI Securities Ltd Retail Equity Research

2 Variance analysis Q4FY16 Q4FY16E Q4FY15YoY (Chg %) Q3FY16oQ (Chg %) Comments Revenue 21,61.3 2, , , Revenues were ahead of estimates. Infrastructure segment and power segment revenues grew better than estimates while moderation of decline in HE and MMH segment also aided in beat Other Income Other income was ahead of expectations on account of better treasury income Employee Expenses 1,37.2 1, , , Raw Material Expenses 14, , , , Other Operating Expenses EBITDA 3, , , EBITDA Margin (%) bps bps Margins were significantly higher than estimates on the back of robust execution, lower other expenditure Depreciation Interest Higher working capital led to higher finance costs PBT 3,278. 2, , Total Tax PAT 2, , , PAT was ahead of estimates on account of higher-than-expected execution and EBITDA margins Key Metrics Order inflows 33, ,1. 41, , Order intake was lower due to weak macro condition Order backlog 235,. 273,. 218, , Backlog provides strong visibility for next two to three years Change in estimates FY17E FY18E ( Crore) Old New % Change Old New % Change Comments Revenue 68, , ,216. 8, We have revised upwards the execution rates in FY17E and FY18E EBITDA 7,713. 7, ,778. 9, EBITDA Margin (%) bps bps Operating leverage and higher execution will lead to margin expansion PAT 5,29.4 5, ,884. 6, EPS ( ) Revision in revenues coupled with high other income and 26% effective tax rate will lead t Assumptions Current Earlier Comments FY15 FY16 FY17E FY18E FY17E FY18E Order Inflow growth In term of order inflows infrastructure segment (both domestic and international) will dominate intake while hydrocarbon and defence are also expected to contribute significantly Order Backlog growth Revenue growth Execution will pick up in FY17E on a low base EBITDA Margins ICICI Securities Ltd Retail Equity Research Page 2

3 Key results and analyst meet highlights Order inflows were at 154 crore for FY16 while for Q4FY16 the same was at 3342 crore. The order backlog as of Q4FY16 was at 235 crore. The company has set out robust 15% YoY order inflow growth guidance for FY17E, albeit on a low base of FY16. On the segmental front, in FY16, infrastructure segment secured orders worth crore whereas power segment, owing to stiff pricing competition lost out on many bids and reported order inflows of 272 crore. The MMH segment secured orders worth 3661 crore registering a decline of 4% while heavy engineering segment witnessed a decline of 54% YoY. Restoration of the hydrocarbon segment is in sight as it was able to report flattish inflow of 1447 crore in FY16 EBITDA margins increased 21 bps YoY to 15.2% (I-direct estimate of 12.4%) mainly on account of strong execution in both domestic and international business, job mix in the infrastructure segment and lower EBIT losses in heavy engineering segment and turnaround in EBITDA of MMH division In terms of segmental performance, infrastructure segment revenues grew 2% YoY to 18 crore while the power segment also reported 2% YoY growth on back of execution of orders from Bangladesh (gas-based power plant). MMH and heavy engineering, on the back of lower order carry, faced 3% YoY decline in revenues. The hydrocarbon segment, on the positive side, reported 12% YoY growth in revenues. In terms of guidance, L&T has guided strong 12-15% YoY growth in revenues and 15% YoY growth in order inflows. The margins at the consolidated level are expected to improve 5 bps YoY in FY17E Net working capital for the consolidated business remained flattish QoQ at 24%. On a full year basis, it marginally improved from 25% in FY15 to 24% in FY16 The management indicated that execution in the domestic infrastructure segment remains steady both in the international and domestic markets. The company expects to post 15 crore of PAT in the hydrocarbon segment with a good pipeline in FY17. In the shipbuilding business, it is expected to post a decline in losses at 1 crore As per the management, L&T is favourably placed in power generation orders to the tune of 6 crore. On the defence and nuclear side, it expects to bag order inflows in excess of 17 crore. On the hydrocarbon side, it is favourably placed in orders worth 8 crore, which may get placed in Q1FY17-Q2FY17. In the roads sector, L&T is expecting inflows to the tune of 15 crore The company indicated that its projects in Middle East like Riyadh Metro, Doha Metro, expressways, etc, are all on schedule. It does not face any slowdown concerns. Total 45% of the work on Riyadh Metro is complete while in Doha Metro they have completed critical task of civil work of tunnelling ICICI Securities Ltd Retail Equity Research Page 3

4 Company Analysis Macro sensitivity does impact L&T s prospects but intensity moderating L&T s order inflows have scaled up by ~8x in FY4-15, representing a robust CAGR of 23% over the same period. In absolute terms, L&T s order inflows were at 13,2 crore in FY4, which have eventually scaled up to 1265 crore by FY15 (excluding hydrocarbon business). This outsized growth in order flows is attributable to a high quality management, superior and timely execution track record, capability to execute mega sized projects across segments, stringent risk management techniques, timely diversification across sectors/geographies and credible reputation among private sector clients. Revenue growth as percentage of GDP growth has averaged at 1.4x while order inflow growth as a percentage of GDP growth has averaged at 1.7x in FY5-14. Going ahead, even though capital formation is weak, we expect L&T to maintain a ratio of 1.2x and 1.5x with respect to revenues and order inflows vis-à-vis GDP growth. We expect L&T to report revenue CAGR of 15.8% in FY16-18E, on a high base. Exhibit 1: How L&T stacks up vis-à-vis macros (%) FY5 FY6 FY7 FY8 Nominal GDP growth L&T's Revenue Growth FY9 Source: Company, ICICIdirect.com, Research FY1 FY11 FY12 FY13 FY14 FY15E L&T's Order inflow growth FY16E Exhibit 2: Trend in order inflows for L&T ,259 1, ( Bn) Inflow Achieved Inflow Achieved Management Guidence 1,54 Our Expectation 1,189 Our Expectation 1,35 Our Expectation FY14 FY15 FY16 FY17E FY18E Source: Company, ICICIdirect.com, Research Exhibit 3: Trend in revenue growth ( billion) FY9 FY1 FY11 Over the next three to five years, we expect L&T s revenue growth to be propelled by the infrastructure division as over 75-8% of the backlog and 5% of new order wins are coming from these segments. We have also noted that L&T has been able to meet most its yearly guidance across order inflow growth, revenue growth and margins. Over FY5-15, L&T has been successful in seven to eight years in meeting its promises albeit the nature of economic cycles. Exhibit 4: How has L&T fared vis-à-vis its cycles across business cycles Inflow Growth (%) Revenue Growth (%) Guidance Achievement Guidance Achievement FY FY FY FY FY FY FY FY FY Revenue YoY Growth FY FY FY FY17E Source: Company, ICICIdirect.com, Research FY12 FY13 Source: Company, ICICIdirect.com, Research FY14 FY15 FY16 FY17E FY18E (%) ICICI Securities Ltd Retail Equity Research Page 4

5 Diversity: L&T s biggest USP both during up/down turns in capex cycle L&T s current order backlog of 235 crore (Q4FY16, excluding hydrocarbon & services) is highly diversified across segments and geographies. Out of the current backlog, the infrastructure segment (roads, buildings & factories, urban infra, airports) comprises 75% of the backlog whereas power (generation & T&D) and process (metals & material handling) segment s share is at 8% and 5%, respectively. Others (defence, shipbuilding and electronic products), on the other hand, constitute 7% of the backlog. However, with the focus of the government on reforming the power sector, opening of the defence sector and L&T s vigorous efforts to scale up international hydrocarbon business (vision of $5 billion in revenues), share of these segments can rise sharply in the next five years. Exhibit 5: Break-up of backlog Q4FY16 Q3FY16 Q4FY15 Q3FY15 Q2FY15 Q1FY15 Q4FY14* Q3FY14 Q2FY14 Q1FY14 FY13 FY12 FY11 FY1 FY9 FY8 FY7 33% 36%43%49% 36% 41% 39% 68% 71% 71% 75% 75% 7% 67% 69% 7% 78% 28% 32% 3% 22% 16% 16% 28% 11% 1% 1% 8% 8% 6% 5% 6% 7% 7% 5% 5% 4% 9% 7% 4% 5%5% 1% 9% 8% 1% 6% 6% 6% 7% 6% 8% 23% 14% 15% 12%1% 19% 12% 14%16% 9% 9% 16% 16% 15% 1% % 1% 2% 3% 4% 5% 6% 7% 8% 9% 1% Infrastructure Power Hydrocarbons Process Others *: Does not include Hydrocarbon segment orders as the division was hived off into separate subsidiary. Even in terms of geography, L&T has witnessed strong ordering momentum from the international markets. This was a management strategy set earlier in FY11-12 to diversify as the ordering outlook was muted in domestic markets. From a share of 9% in FY11, the share of international order has gone up to 25% in FY15 and over 3% in FY16. The management vision of ramping up this share to 25-3% till FY17E seems quite achievable, going ahead. Margins to improve gradually from FY17E onwards EBITDA margins have averaged 11.4% in FY8-16. EBITDA margin, primarily, is a function of the order book mix and commodity prices. The E&C segment (8-85% share in total EBITDA) and E&E segment (5-7% share in total EBITDA), carries a margin of nearly 11% while segments like M&IP and others carries heftier margins averaging 15-2%. However, going ahead, higher execution of international orders and infrastructure segment margins will see a structural shift. We believe that a decline in margins is getting played out currently as margins in FY15 and FY16 were at 11.4% and 1.3% (excluding hydrocarbon), respectively, and which were also hit by weak execution in the heavy engineering and MMH division owing to weak outlook of those segments. Going ahead, we expect margins to be back at 11.3% levels in FY17E and FY18E assuming domestic ordering picks up while the magnitude of order from international continues will exhibit steady state of execution mainly in the area of roads, water, power T&D and metro. ICICI Securities Ltd Retail Equity Research Page 5

6 Exhibit 6: Trend in EBITDA margins (%) FY7 FY8 FY9 FY1 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E From FY14 onwards, L&T has started reporting segmental margins and to the Street s surprise, infrastructure segments margins have ranged at 11-13% while the main disappointment came in from the hydrocarbon segment, which ranges at 7-8% as execution has been lumpy while lower orders and high operating leverage (commissioning of new BTG facility) has led to low single digit margins in the power segment. Exhibit 7: Trend in segmental EBITDA margins Q4FY16 Q4FY15 FY16 FY15 Infrastructure Power Heavy Engineering MMH Hydrocarbon E&A Others PAT CAGR of 12.5% in FY16-18E owing to pick-up in execution cycle, gradual uptick in EBITDA margins We expect revenue CAGR of 15.8% in FY16-18E with EBITDA CAGR over the same period expected at 2.9%. Our PAT CAGR in FY16-18E is at ~12.5% as we have assumed a moderate rise in other income component in FY16E-18E over FY15 with depreciation exhibiting a CAGR of ~7%. Hence, we expect PAT at 6675 crore in FY18E vs crore in FY16. ICICI Securities Ltd Retail Equity Research Page 6

7 Exhibit 8: Trend in profitability ( crore) (%) FY8 FY9 FY1 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E PAT YoY growth RoEs: Key for shareholder value creation by monetising subsidiaries RoEs of the standalone base business used to average between 24% and 27% in FY8-1 but the same has declined to 16-17% in FY11-13 as L&T s investments in BOT assets (road, power, urban infra) rose from 574 crore in FY1 to crore in FY14. Investments in subsidiaries have grown at a CAGR of 22% (low base) in FY1-13. The management s decision of significantly slowing down new BOT assets investment coupled with divesture of non strategic subsidiary, JVs and possible monetisation of L&T IDPL will reduce pressure on standalone RoEs. Exhibit 9: Rising commitment to BOT assets have negative impact of base business RoEs ( crore) FY1 FY11 FY12 FY13 FY14 FY15 FY16 Investments YoY Growth (%) ICICI Securities Ltd Retail Equity Research Page 7

8 Exhibit 1: Trend in RoEs FY1 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E The key impediment in the medium term would be the low utilisation of facilities at the shipbuilding business and the NPCIL JV, which are making losses at this juncture. Going ahead, as per the management, the shipbuilding business would be limited to 1 crore. Out of the above, a few service oriented subsidiaries are cash flow generators (L&T Infotech and L&T Finance Holdings) and will not burden the parent s balance sheet for growth. Going ahead, the management expects to hive off Nabha Power and restructure L&T IDPL in FY17E, to ease pressure on the parent s cash flows and meet funding requirements in developmental assets. Going ahead, L&T s management has clearly shifted its focus on reducing the equity funding stress on the base business balance sheet and simultaneously monetising non-strategic subsidiaries to raise future equity requirement for the subsidiary. Going ahead, we expect L&T to report RoEs in the range of % for the standalone business in FY16-18E. However, the scenario may drastically change in FY19-2, as 1) L&T has already divested its entire stake in Dhamra port, which will free up equity required in developmental portfolio, 2) L&T has signalled a possible stake sale of 2-25% in IDPL wherein it has already roped in a strategic investor to the tune of 2 crore of equity, 3) losses of shipbuilding business ( 335 crore in FY14) will reduce significantly to 1 crore in FY17E and if the capex cycle recovers on time with opening up of defence sector, these subsidiaries will turn into black by FY18E and 4) the company is close to selling its Nabha Power plant, general insurance business and also restructuring L&T IDPL. We believe these actions will be RoE accretive from FY18E onwards. Value unlocking adds to shareholder wealth creation Before L&T Finance Holdings was listed on the bourses, the Street assigned a valuation of 2x the book, implying a market capitalisation of around 4,3 crore. However, when the shares where offered for IPO, the new discovered price for the company was 52/share, translating to a total market capitalisation of 8,9 crore, almost double its pre-listing value. Going ahead, we expect value unlocking in strategic subsidiaries like L&T Infotech and L&T IDPL to further add to shareholder wealth in the long run. The company has already filed a DRHP for the upcoming listing of its subsidiary L&T Infotech. ICICI Securities Ltd Retail Equity Research Page 8

9 Outlook and Valuation Strong performance across all variables and strong guidance for FY17E in terms of order inflows and revenue growth will lead to re-rating of the stock. The management focus on reducing capital intensity by selling non-core subsidiaries (Nabha Power, general insurance and restructuring of L&T IDPL) will ease cash flow pressure on the parent s balance sheet and impact RoEs positively (we factor in 6 bps improvement in RoEs to 14.4% by FY18E). On the financials front, we expect revenue, PAT to grow at a CAGR of 15.8%, 12.5% YoY, respectively, in FY16-18E. We highlight that from a two to three year perspective, L&T remains the best play on a capex cycle recovery in India and top large cap pick in the capital goods sector. We upgrade the target price of the stock from 1475/share to 1655/share with a BUY recommendation. Exhibit 11: SOTP valuation for L&T Company ( per share) Bull case % of total Base Case % of total Bear Case % of total Base Business L&T Finance Holdings L&T Infotech L&T Power Development L&T MHI JV L&T IDPL Other E&C, MIP & E&E Subs Hydrocarbon Total ICICI Securities Ltd Retail Equity Research Page 9

10 Company snapshot 2,2 1,65 Target Price ,1 55 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Sep-1 L&T files DHRP for IPO of finance subsidairy L&T Finance Holdings Ltd. The IPO size was to the tune of 15 crore Apr-11 L&T Metro Rail (Hyderabad) Ltd, the SPV incorporated to implement the Hyderabad Metro Project achieves financial closure for the project. The financial closure was achieved in a record time of six months Dec-11 Mitsubishi Heavy Industries (MHI), Japan plans to sign a technological collaboration agreement with L&T Shipbuilding (LTSB) to provide a broad range of technological support for the construction of commercial vessels Mar-12 L&T and Samsung Techwin Co, Ltd (STW) of South Korea announce they would be cooperating with the Indian Army s Tracked Self Propelled Artillery Programme. Mar-13 LT anoounces bonus issue in the ratio of 1:2. This means 1 bonus share for every 2 share held Jul-13 L&T wins its biggest ever civil construction order worth 825 crore to build a metro rail project in Saudi Arabia Dec-13 L&T applies with FIPB for induction of strategic equity partner. The investor will invest equity of 1 crore each in two tranches. Mar-14 L&T ends FY14 with another strong set of financial performance with revneues and order inflows up 19% and 15% YoY, respectively. Coupled with L&T sets strong set of guidance for FY15E performance Sep-14 Weak execution mars L&T's perfromace in Q2FY15 even though L&T reported 17% YoY order inflows to the tune of crore. The ghost of hydrocarbon bsuiness is gradullay receding back as L&T managed to post marginla EBIT loss of 54 crore as against 9 crore loss in Q1FY15. Top 1 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 1 Life Insurance Corporation of India 31-Mar Promoter L&T Employees Welfare Foundation 31-Mar FII UTI Asset Management Co. Ltd. 31-Mar DII HDFC Asset Management Co., Ltd. 31-Mar Others General Insurance Corporation of India 31-Mar ICICI Prudential Asset Management Co. Ltd. 31-Mar GIC Private Limited 31-Mar ICICI Prudential Life Insurance Company Ltd. 31-Dec Reliance Capital Asset Management Ltd. 31-Mar BlackRock Institutional Trust Company, N.A. 3-Apr Source: Reuters, ICICIdirect.com Research Recent Activity Buys Sells Investor Name Value Shares Investor Name Value Shares L&T Employees Welfare Foundation M +3.15M Carmignac Gestion -87.7M -4.78M ICICI Prudential Asset Management Co. Ltd M +1.46M William Blair Investment Management, LLC M -2.7M Norges Bank Investment Management (NBIM) M +1.19M Waddell & Reed Investment Management Company M -1.85M GIC Private Limited +9.8M +.53M Schroder Investment Management Ltd. (SIM) M -1.43M Invesco Hong Kong Limited +8.61M +.47M JM Financial Asset Management Pvt. Ltd M -1.18M Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 1

11 Financial summary Profit and loss statement Crore (Year-end March) FY15 FY16 FY17E FY18E Total operating Income 57, , , ,172.4 Growth (%) Raw Material Expenses 6, , , ,384.7 Employee Expenses 4,153. 4, ,26.2 6,117.1 Other Operating Expenses 33, , ,11. 46,358.6 Sales, administration & Other Exp 1, , , ,95.3 Other Manufacturing Expenses 4,32.2 4,66.8 5, ,375.4 Total Operating Expenditure 5, , , ,141.1 EBITDA 6, , , ,31.4 Growth (%) Depreciation ,35.8 1,11.9 1,186. Interest 1,419. 1,449. 1, ,425.3 Other Income 2, , ,45. 2,6. PBT 6, , , ,2.1 Others.... Total Tax 1, , ,.3 2,345.2 PAT 4, , , ,674.9 Growth (%) EPS ( ) Cash flow statement Crore (Year-end March) FY15 FY16 FY17E FY18E Profit after Tax 4, , , ,674.9 Add: Depreciation ,35.8 1,11.9 1,186. (Inc)/dec in Current Assets -3, ,35.4-9, ,783.5 Inc/(dec) in CL and Provisions 1, , , ,51.5 Others CF from operating activities 3,512. 6,486. 3, ,587.9 (Inc)/dec in Investments -1, ,. -1,. (Inc)/dec in Fixed Assets -1,5. -1,5. -1,5. -1,55. Others.... CF from investing activities -2,. -1,45. -1,95. -2,55. Issue/(Buy back) of Equity.... Inc/(dec) in loan funds.... Dividend paid & dividend tax -1, , ,9.3-2,299.3 Inc/(dec) in Sec. premium.... Others CF from financing activities ,299.3 Net Cash flow 1, ,12.5 1, ,738.6 Opening Cash 3, , , ,369.9 Closing Cash 4, , , ,18.5 Balance sheet Crore (Year-end March) FY15 FY16 FY17E FY18E Liabilities Equity Capital Reserve and Surplus 34, , , ,19.1 Total Shareholders funds 34, , , ,313.2 Total Debt 11, , , ,836.2 Deferred Tax Liability Minority Interest / Others.... Total Liabilities 46, , , ,691.7 Assets Gross Block 13, , , ,52.9 Less: Acc Depreciation 5,95.4 6,24.7 7,19.8 8,8.9 Net Block 8, ,55.2 8,51.1 8,44. Capital WIP ,. Total Fixed Assets 8, , ,1.1 9,44. Investments 22, , , ,767.6 Inventory 1,932. 1, ,58.5 2,763.1 Debtors 2, , , ,358.1 Loans and Advances 7, , ,1.3 9,627.7 Other Current Assets 1, , ,9.2 12,151.5 Cash 4, , , ,18.5 Total Current Assets 44, , , ,8.8 Creditors 15, , , ,866.8 Provisions 1,484. 2, , ,712.7 Total Current Liabilities 29, , , ,494.9 Net Current Assets 15, , , ,513.9 Others Assets.... Application of Funds 46, , , ,691.7 Key ratios (Year-end March) FY15 FY16 FY17E FY18E Per share data ( ) EPS Cash EPS BV DPS Cash Per Share Operating Ratios (%) EBITDA Margin PBT / Total Operating income PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio ICICI Securities Ltd Retail Equity Research Page 11

12 ICICIdirect.com coverage universe (Capital Goods) CMP M Cap EPS ( ) P/E (x) RoCE (%) ( ) TP( ) Rating ( Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E AIA Engineering Hold Thermax (THERMA) Hold KEC International (KECIN) Buy Kalpataru Power(KPP) Buy L&T (LARTOU) Buy Greaves Cotton (GREAVE) Buy SKF Hold VaTech Wabag Buy NRB Bearing Hold Timken India Buy Grindwell Norton Buy RoE (%) ICICI Securities Ltd Retail Equity Research Page 12

13 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 13

14 ANALYST CERTIFICATION We /I, Chirag Shah PGDBM, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH99. ICICI Securities is full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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