Savera Industries Ltd - PDF Free Download

Explanation of CRISIL Fundamental and Valuation (CFV) matrix The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP). CRISIL Fundamental Grade Assessment CRISIL Valuation Grade Assessment 5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP) 4/5 Superior fundamentals 4/5 Upside (1-25% from CMP) 3/5 Good fundamentals 3/5 Align (+-1% from CMP) 2/5 Moderate fundamentals 2/5 Downside (- 1-25% from CMP) 1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP) Analyst Disclosure Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company. Additional Disclosure This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer: This Exchange-commissioned Report (Report) is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. The Data / Report are subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information only of the authorized recipient in India only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose. CRISIL Limited. All Rights Reserved.

Stable growth as expected Fundamental Grade Valuation Grade Industry 2/5 (Moderate fundamentals) 5/5 (CMP has strong upside) Hotels, Restaurant & Leisure Savera Industries Ltd s (Savera s) Q2FY12 results were in line with CRISIL Research s expectations. Revenue grew by 7.5% y-o-y, which is in line with our expectation. However, higher employee cost offset revenue growth which has resulted in lower EBITDA margin of 26.8%, (declined by 448 bps y-o-y), though it was in line with our expectations. Given the higher interest and depreciation costs, PAT declined by 19% y-o-y to Rs 15 mn. We maintain our fundamental grade of 2/5. Q2FY12 result analysis Revenue grew by 7.5% y-o-y to Rs 131 mn, which is in line with our expectation. For H1FY12, revenue grew by 12.8% y-o-y to Rs 256. We understand that occupancy rate (OR) and average room rate (ARR) during the quarter were stable compared to last quarter though we do not have the exact number as we have not been able to interact with the management. The OR and ARR in Q2FY11 stood at 73% and Rs 3,182 EBITDA margin decreased by 448 bps y-o-y to 26.8% due to higher employee and operating costs which increased by 36.5% and 14.8% y-o-y, respectively. For H1FY12, EBITDA margin was 29.5%, down by 138 bps y-o-y Increased interest cost and depreciation impacted profitability during the quarter. PAT declined by 19.% y-o-y to Rs 15 mn and was slightly below our estimates. For H1FY12, PAT declined by 5.4% y-o-y to Rs 33 mn. Key development Mrs Neena Reddy, one of the promoter has increased her stake in the company by.54% to 9.5% via open market purchase. Also, one of the promoter group companies, Amaravathi Restaurant Pvt Ltd, increased stake in the company by.38% to.68% via open market purchase Valuations: Current market price has strong upside We continue to use the EV/adjusted room basis to value Savera. We have assigned a multiple of Rs 4.5 mn on EV/adjusted room, which translates into a fair value of Rs 73 per share. Based on the current market price, our valuation grade is 5/5. KEY FORECAST (Rs mn) FY9 FY1 FY11# FY12E FY13E Operating income 397 352 48 56 538 EBITDA 117 95 14 148 16 Adj PAT 5 25 53 7 83 Adj EPS-Rs.4 2.1 4.5 5.9 6.9 EPS growth (%) (91.6) 435.4 19.3 31.7 18.1 Dividend yield (%) 1.6 1.7 3.3 3.6 4.3 RoCE (%) 17.4 16.4 25.4 26.7 29.1 RoE (%) 2.1 1.7 19.9 22.6 22.6 PE (x) 9.3 16.9 8.1 6.1 5.2 P/BV (x) 1.8 1.8 1.5 1.3 1.1 EV/EBITDA (x) 5.6 6.4 4.3 3.6 2.8 #FY11 numbers are based on abridged financials NM: Not meaningful; CMP: Current market price Source: Company, CRISIL Research estimate November 29, 211 Fair Value Rs 73 CMP Rs 36 CFV MATRIX KEY STOCK STATISTICS NIFTY 4851 NSE ticker SAVERA Face value (Rs per share) 1 Shares outstanding (mn) 11.9 Market cap (Rs mn)/(us$ mn) 429/8 Enterprise value (Rs mn) /(US$ mn) 66/12 52-week range (Rs) (H/L) 52/29 Beta.9 Free float (%) 4.5% Avg daily volumes (3-days) 2,925 Avg daily value (3-days) (Rs mn).1 SHAREHOLDING PATTERN 1% Excellent Fundamentals Fundamental Grade PERFORMANCE VIS-À-VIS MARKET Returns 1-m 3-m 6-m 12-m SAVERA -5% -1% -2% -21% NIFTY -1% 2% -11% -16% ANALYTICAL CONTACT Chetan Majithia (Head) Sandeep Panchal Bhaskar Bukrediwala 5 4 3 2 1 Poor Fundamentals 9% 8% 7% 6% 5% 4% 3% 2% 1% % Strong Downside 47.8% 47.8% 52.3% 52.3% 1 2 3 4 5 Valuation Grade 4.8% 4.5% 59.2% 59.5% Dec-1 Mar-11 Jun-11 Promoter Others Strong Upside chetanmajithia@crisil.com sapanchal@crisil.com bsbukrediwala@crisil.com Client servicing desk +91 22 3342 3561 clientservicing@crisil.com CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 1

Q2FY12 Result Summary (Rs mn) Q2FY12 Q1FY12 Q2FY11 q-o-q (%) y-o-y (%) H1FY12 H1FY11 y-o-y (%) Net sales 131 127 122 3.4 7.5 256 227 12.8 Raw materials cost 28 18 29 56. (3.5) 55 53 3.1 Raw materials cost (% of net sales) 21.% 13.9% 23.4% 71bps -241bps 21.5% 23.5% -23bps Employees cost 31 24 23 29.6 36.5 55 43 27.6 Other expenses 37 44 32 (16.3) 14.8 7 6 16.7 EBITDA 35 41 38 (13.8) (7.9) 75 7 7.8 EBITDA margin 26.8% 32.1% 31.3% -534bps -448bps 29.5% 3.9% -138bps Depreciation 6 7 5 (8.2) 16.8 12 1 21.5 EBIT 29 34 33 (14.9) (11.7) 63 6 5.5 Interest and finance charges 8 7 6 7.8 29.8 15 12 22.5 Operating PBT 21 27 27 (2.8) (2.6) 49 48 1.3 Other Income - - - - - - - Exceptional items - - - - - - (4). PBT 21 27 27 (21.6) (2.6) 49 52-6.1 Tax 7 9 9 (29.9) (24.1) 16 17-7.6 PAT 15 18 18 (17.3) (19.) 32.9 35-5.4 Adj PAT 15 18 18 (17.3) (19.) 33 35-5.4 Adj PAT margin 11.4% 14.3% 15.2% -286bps -375bps 12.9% 15.3% -247bps No of equity shares (mn) 11.9 11.9 11.9 - - 11.9 11.9. Adj EPS (Rs) 1.3 1.5 1.6 (17.3) (19.) 2.8 2.9-5.4 Source: Company, CRISIL Research Moderate revenue growth EBITDA margin declines (Rs mn) 14 14.6% 12 11.1% 1.4% 1 6.4% 8 3.4% 3.4% 6-2.3% 4-3.5% 2 9 1 16 122 119 131 127 131 2% 15% 1% 5% % -5% -1% (Rs mn) 45 28.8% 3.2% 31.3% 32.1% 4 27.8% 26.7% 26.8% 35 24.4% 3 25 2 15 1 5 22 29 32 38 33 35 41 35 35% 3% 25% 2% 15% 1% 5% % Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Net Sales Sales Growth (RHS) Source: Company, CRISIL Research Savera underperformed NIFTY 25 2 15 1 5 EBITDA EBITDA Margin(RHS) Source: Company, CRISIL Research Fair value movement since initiation (Rs) 8 7 6 5 4 3 2 1 (') 12 1 8 6 4 2 Jun-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-11 Mar-11 May-11 Jun-11 Aug-11 Oct-11 Nov-1 Dec-1 Jan-11 Mar-11 May-11 Jun-11 Aug-11 Oct-11 Savera -indexed to 1 NIFTY Total Traded Quantity (RHS) CRISIL Fair Value Savera CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 2

VALUATION We continue to value Savera on the EV/adjusted room basis. We have assigned a multiple of Rs 4.5 mn on EV/adjusted room. Given the inherent value of its 23-room hotel in Chennai and the strong outlook for the hospitality sector, we maintain our fair value of Rs 73. Based on the current market price, our valuation grade is 5/5. One-year forward P/E band (Rs) 9 8 7 6 5 4 3 2 1 One-year forward EV/EBITDA band (Rs mn) 1, 9 8 7 6 5 4 3 2 1 Apr-8 Jun-8 Aug-8 Oct-8 Jan-9 Mar-9 May-9 Aug-9 Oct-9 Dec-9 Mar-1 May-1 Jul-1 Sep-1 Dec-1 Apr-8 Jun-8 Aug-8 Oct-8 Jan-9 Mar-9 May-9 Aug-9 Oct-9 Dec-9 Mar-1 May-1 Jul-1 Sep-1 Dec-1 Savera 4x 6x 8x 1x 12x P/E premium/discount to NIFTY P/E movement EV 3x 4x 5x 6x 4% 35% 3% 25% 2% 15% 1% 5% % -5% -1% (Times) 12 1 8 6 4 2-2 +1 std dev -1 std dev Apr-8 Jun-8 Aug-8 Oct-8 Jan-9 Mar-9 May-9 Aug-9 Oct-9 Dec-9 Mar-1 May-1 Jul-1 Sep-1 Dec-1 Apr-8 Jun-8 Aug-8 Oct-8 Jan-9 Mar-9 May-9 Aug-9 Oct-9 Dec-9 Mar-1 May-1 Jul-1 Sep-1 Dec-1 Premium/Discount to NIFTY Median premium/discount to NIFTY 1yr Fwd PE (x) Median PE CRISIL IER reports released on Savera Industries Ltd Fundamental Valuation CMP Date Nature of report grade Fair value grade (on the date of report) 11-Nov-1 Initiating coverage* 2/5 Rs 73 5/5 Rs 55 16- Q3FY11 result update 2/5 Rs 73 5/5 Rs 38 7-June-11 Q4FY11 result update 2/5 Rs 73 5/5 Rs 38 26-Aug-11 Q1FY12 result update 2/5 Rs 73 5/5 Rs 37 29- Q2FY12 result update 2/5 Rs 73 5/5 Rs 36 * For detailed initiating coverage report please visit: www.ier.co.in CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters. CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 3

FINANCIALS Income statement Balance Sheet (Rs mn) FY9 FY1 FY11# FY12E FY13E (Rs mn) FY9 FY1 FY11# FY12E FY13E Operating income 397 352 48 56 538 Liabilities EBITDA 117 95 14 148 16 Equity share capital 6 6 119 119 119 EBITDA margin 29.5% 26.9% 29.1% 29.2% 29.7% Reserves 173 185 166 217 277 Depreciation 3 21 23 22 23 Minorities - - - - - EBIT 88 73 117 126 137 Net worth 232 245 285 336 397 Interest 51 25 24 19 13 C onvertible debt - - - - - Operating PBT 37 48 93 16 124 Other debt 231 186 186 132 78 Other income (8) (3) - 2 2 Total debt 231 186 186 132 78 Exceptional inc/(exp) - - (4) - - Deferred tax liability (net) 4 4 4 4 4 PBT 29 45 89 18 127 Total liabilities 468 435 475 472 479 Tax provision 24 19 32 38 44 Assets Minority interest - - - - - Net fixed assets 44 431 434 422 49 PAT (Reported) 5 25 57 7 83 Capital WIP - - - - - Less: Exceptionals - - (4) - - Total fixed assets 44 431 434 422 49 Adjusted PAT 5 25 53 7 83 Investments 4 2 2 2 Current assets Ratios Inventory 8 9 12 13 14 FY9 FY1 FY11# FY12E FY13E Sundry debtors 17 13 17 18 19 Growth Loans and advances 36 27 36 39 39 Operating income (%) (13.3) (11.3) 36.5 5.4 6.3 C ash & bank balance 7 9 25 31 52 EBITDA (%) (25.1) (19.) 47.6 5.8 8.1 Marketable securities - - - - - Adj PAT (%) (91.6) 435.4 126. 31.6 18.1 Total current assets 69 58 9 11 124 Adj EPS (%) (91.6) 435.4 19.3 31.7 18.1 Total current liabilities 52 65 51 53 56 Net current assets 17 (7) 39 48 67 Profitability Intangibles/Misc. expenditure 11 7 - - - EBITDA margin (%) 29.5 26.9 29.1 29.2 29.7 Total assets 468 435 475 472 479 Adj PAT Margin (%) 1.2 7.2 11.2 13.8 15.4 RoE (%) 2.1 1.7 19.9 22.6 22.6 Cash flow RoCE (%) 17.4 16.4 25.4 26.7 29.1 (Rs mn) FY9 FY1 FY11# FY12E FY13E RoIC (%) 9.6 1.9 19. 2.7 22.9 Pre-tax profit 29 45 93 18 127 Total tax paid (24) (19) (34) (38) (44) Valuations Depreciation 3 21 22 22 23 Price-earnings (x) 9.3 16.9 8.1 6.1 5.2 Working capital changes (13) 26 (31) (3) 1 Price-book (x) 1.8 1.8 1.5 1.3 1.1 Net cash from operations 22 73 5 9 17 EV/EBITDA (x) 5.6 6.4 4.3 3.6 2.8 Cash from investments EV/Sales (x) 1.7 1.8 1.3 1.1.9 C apital expenditure 6 (9) (18) (1) (1) Dividend payout ratio (%) 146.9 28.1 26.6 22.3 22.1 Investments and others - (4) 2 - - Dividend yield (%) 1.6 1.7 3.3 3.6 4.3 Net cash from investments 6 (13) (16) (1) (1) Cash from financing B/S ratios Equity raised/(repaid) - - 6 - - Inventory days 12 14 14 14 14.5 Debt raised/(repaid) (84) (45) () (54) (54) Creditors days 36 64 26 25 25.3 Dividend (incl. tax) (7) (7) (16) (18) (21) Debtor days 18 15 15 15 14.8 Others (incl extraordinaries) 1 (6) (56) (1) (1) Working capital days 3 (4) (1) 11 11.1 Net cash from financing (81) (58) (12) (73) (76) Gross asset turnover (x).6.5.7.7.8 C hange in cash position 1 1 22 6 2 Net asset turnover (x).8.8 1.1 1.2 1.3 C losing cash 7 9 25 31 52 Sales/operating assets (x).8.8 1.1 1.2 1.3 Current ratio (x) 1.3.9 1.8 1.9 2.2 Quarterly financials Debt-equity (x) 1..8.7.4.2 (Rs mn) Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Net debt/equity (x) 1..7.6.3.1 Net Sales 122 119 131 127 131 Interest coverage 1.7 2.9 5.1 6.5 1.7 C hange (q-o-q) 15% -2% 1% -4% 3% EBITDA 38 33 35 41 35 Per share C hange (q-o-q) 19% -13% 6% 16% -14% FY9 FY1 FY11# FY12E FY13E EBITDA margin 31.3% 27.8% 26.7% 32.1% 26.8% Adj EPS (Rs).4 2.1 4.5 5.9 6.9 PAT 18 18 11 18 15 CEPS 2.9 3.9 6.3 7.8 8.8 Adj PAT 18 18 11 18 15 Book value 19.5 2.5 23.9 28.2 33.3 C hange (q-o-q) 19% -2% -39% 65% -17% Dividend (Rs).6.6 1.2 1.3 1.5 Adj PAT margin 15.2% 15.2% 8.3% 14.3% 11.4% Actual o/s shares (mn) 11.9 11.9 11.9 11.9 11.9 Adj EPS 1.6 1.5.9 1.5 1.3 Note: All ratios are computed on Adj PAT Source: Company, CRISIL Research estimate CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 4

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