Consumer Staples-Household Products Bloomberg Code: BJCOR IN India Research - Stock Broking In Pursuit of Excellence, with Almond Drops Hair Oil Leading position in Light Hair Oil market and Well established brands to surge revenue growth: Bajaj corp is one of the leading players in FMCG sector in hair care category. Bajaj Almond Drops hair oil is market leader in the light hair oil segment with more than 6% of market share and major revenue contributor for the company. Despite the adverse market condition in the hair oil industry, Bajaj corp managed to register 2.9% growth in the sales volume and 4.1% increase in realisation per case for Almond Drops Hair Oil (ADHO) brand. However, the consumption demand is expected to improve considerably on the back of expected good monsoons in FY17E, after two consecutive years of poor rains. Good monsoons are likely to improve disposable incomes of rural India and hence consumption demand would be boosted. This would help the company to post moderate growth in coming years. Increasing outlets to tap rural markets to push growth: Bajaj corp is continuously focusing towards improving its presence and strengthening its portfolio to drive higher revenue growth. At present, 42.% of Bajaj Almond Drops hair oil sales are from rural areas only and the company managed to capture 63.2% market share in rural areas. Bajaj corp managed to come up with.89mn outlets during FY16, out of which.43mn were opened in urban area and.46mn in rural area. Valuation and Outlook Bajaj corp is market leader in Light Hair oil segment and more than 91% of its revenues are coming from ADHO only. Bajaj corp, with its credentials of debt free, healthy ratios and healthy cash flows, is currently trading at 2.3x FY18E EPS. We value the company at 24.x FY18E EPS and initiate the coverage on the company with BUY rating, for a target price of Rs. 465, representing an upside of 18% for a period of 9-12 months. Key Risks yfluctuations in raw material prices. ydepending on a single product ADHO. ycompetition from existing and new entrants. Exhibit 1: Valuation Summary YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E Net Sales 6717 8256 8764 9643 1188 EBITDA 186 2392 2737 2937 3285 EBITDA Margin (%) 27.7 29. 31.2 3.5 29.6 Net Profit 1489 1727 1964 243 2859 EPS (Rs.) 1.1 11.7 13.3 16.5 19.4 RoE (%) 29.7 34.3 4.5 48.6 51. PE (x) 21.3 39. 23.2 23.9 2.3, *Represents multiples for FY14, FY15 & FY16 are based on historic market price For private circulation only. For important information about Karvy s rating system and other disclosures refer to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>, Thomson Publishers & Reuters Recommendation (Rs.) Jun 2, 216 BUY CMP (as on Jun 1, 216) 394 Target Price 465 Upside (%) 18 Stock Information Mkt Cap (Rs.mn/US$ mn) 5813 / 862 52-wk High/Low (Rs.) 522 / 356 3M Avg. daily volume (mn).1 Beta (x).6 Sensex/Nifty 26714 / 818 O/S Shares(mn) 147.5 Face Value (Rs.) 1. Shareholding Pattern (%) Promoters 66.9 FIIs 23. DIIs 3.9 Others 6.3 Stock Performance (%) 1M 3M 6M 12M Absolute 2 2 (9) (12) Relative to Sensex (3) (8) (12) (11) Source: Bloomberg Relative Performance* 115 15 95 85 75 Jun-15 Jul-15 Aug-15 Sep-15 Source: Bloomberg; *Index 1 Analyst Contact Jagannadham Thunuguntla 4-3321 6296 Oct-15 Bajaj Corp Nov-15 Dec-15 jagannadham.t@karvy.com Jan-16 Feb-16 Mar-16 Apr-16 Sensex May-16 Jun-16 1
Jun 2, 216 Company Financial Snapshot (Y/E Mar) Profit & Loss (Rs. Mn) FY15 FY16 FY17E FY18E Net sales 8256 8764 9643 1188 Optg. Exp 5864 627 675 783 EBITDA 2392 2737 2937 3285 Other & Exceptional Items (154) (184) 116 345 Depreciation 49 49 51 54 Interest 1 2 2 2 PBT 2188 252 3 3574 Tax 462 538 57 715 Adj. PAT 1727 1964 243 2859 Profit & Loss Ratios EBITDA margin (%) 29. 31.2 3.5 29.6 Net margin (%) 2.9 22.4 25.2 25.8 P/E (x) 39. 23.2 23.9 2.3 EV/EBITDA (x) 24.3 2.4 18.8 16.9 Dividend yield (%) 2.9 2.9 2.9 2.9 Balance sheet (Rs. Mn) FY15 FY16 FY17E FY18E Total Assets 5679 5659 6178 694 Net Fixed assets 1424 972 823 868 Current assets 3818 4148 4811 5516 Other assets 437 539 544 556 Total Liabilities 5679 5659 6178 694 Networth 4886 488 5197 615 Short Term Debt 1 1 1 Current Liabilities 788 744 873 816 Other Liabilities 5 7 8 9 Balance Sheet Ratios RoE (%) 34.3 4.5 48.6 51. RoCE (%) 52.7 61.3 63.6 63.7 Debt/Equity.... Equity/Total Assets.9.8.8.9 P/BV (x) 13.7 1.9 11.2 9.7 Exhibit 2: Shareholding Pattern (%) Company Background Bajaj Corp Limited (Bajaj corp), incorporated in the year 26, is a company engaged in the trading and manufacturing of cosmetics, toiletries and other personal care products. Bajaj corp has leadership position in hair care segment. Its brand portfolio consists of Almond Drops hair oil, Amla hair oil, Brahmi hair oil and Nomarks. The company s principal product is Almond Drops hair oil, which is the market leader with over 6% share in the Light hair oil market. Almond Drops is 2nd largest brand in the overall hair oil segment. Bajaj corp is also producing oral care products under the brand name Bajaj Black Tooth powder. Bajaj corp has hair oil manufacturing facilities in Himachal Pradesh, Uttarakhand, Rajasthan and Guwahati. Bajaj corp has registered its brand Bajaj Nomarks in international markets also like Gulf Cooperation Council (GCC), Nepal, Malaysia, Australia, etc. Now the company is delivering its products through 3.71mn retail outlets serviced by 7392 distributors or stockists and more than 15, wholesalers. Cash Flow (Rs. Mn) Exhibit 3: Revenue Segmentation (%) FY15 FY16E FY17E FY18E PBT 2188 252 3 3574 Depreciation 49 49 51 54 Interest (net) 1 2 2 2 Tax (459) (538) (57) (715) Changes in WC 135 (369) 37 (235) Others 153 239 (65) (285) CF from Operations 267 1885 2455 2395 Capex (8) (66) (86) (99) Investments & Others (187) (642) (16) (184) CF from Investing (195) (78) (246) (283) Change in Debt 1 Dividends & Other (235) (241) (241) (241) CF from Financing (235) (1941) (241) (241) Change in Cash (164) (764) 168 7 Soap 1.6% Promoters 66.9% FIIs 23.% DIIs 3.9% Hair Oil 92.5% Facewash 2.3% Cream 3.% Others 6.3% Others.6% Source: BSE, Karvy Research 2
Leading position in Light Hair Oil market and Well established brands to surge revenue growth: Jun 2, 216 Bajaj corp is one of the leading players in FMCG sector in hair care category. At present, the company is operating in three verticals namely Hair care, Skin care and Oral care segments. Its brand portfolio includes ADHO, Amla Hair Oil (AHO), Brahmi Hair Oil (BHO) and Nomarks. Bajaj Almond Drops hair oil is market leader in the light hair oil segment with more than 6% of market share and major revenue contributor for the company. ADHO is 2nd largest brand in the overall hair oil segment and its premium position commands one of the highest unit prices in the industry. ADHO is contributing more than 91% of total revenues on the back of continuous investment in advertising and increasing distribution channels. The investment in advertising and sales promotion has helped the company to gain market share and to remain second largest hair oil brand in the Indian hail oil industry in terms of value. Despite the adverse market condition in the hair oil industry, Bajaj corp managed to register 2.9% growth in the sales volume and 4.1% increase in realisation per case for ADHO brand. However, the consumption demand is expected to improve considerably on the back of expected good monsoons in FY17E, after two consecutive years of poor rains. Good monsoons are likely to improve disposable incomes of rural India and hence consumption demand would be boosted. This would help the company to post moderate growth in coming years. Exhibit 4: Almond Drops Hair Oil sales volumes 6 21.8% 19.9% 5 18.3% 4 3 1% 2 11.4% 2.9% 1 5% 4.% % Sales volumes (No.of cases) Growth (%) 2886237 3459764 4212487 4379529 4879921 521571 25% 2% Exhibit 5: Almond Drops Hair Oil sales value 8 6 4 2 26.1% 3432 4443 29.4% 29.9% 5771 6298 9.1% 7372 79 17.1% 7.2% Sales value (Rs. Mn) Growth (%) 3% 2% 1% % Exhibit 6: Almond Drops Hair Oil Market in India - Volumes 2 16 12 8 4 15.1% 116 26.2% 13895 17.3% 16298 1876 1.9% 17883-1.1% 18716 4.7% Volume (KLtr) Growth (%) 3% 2% 1% % -1% Exhibit 7: Almond Drops Hair Oil Market in India - Value 12 1 8 6 4 2 34.7% 25.6% 22.5% 441 594 746 861 897 964 7.5% 15.4% 4.2% Value (Rs. Mn) Growth (%) 4% 3% 2% 1% % Exhibit 8: Market Share Trends in the Light Hair Oil Category 65% 55% 45% 35% 25% 5% -5% 49.1% 53.% 51.9% 55.% 54.4% 56.9% 56.6% 58.4% 57.7% 59.7% 57.9% 6.2% Volume (%) Value (%) Bajaj corp is continuously improving its market share in the light hair oil category in terms of volume and at the same time in terms of value also. Its market share in terms of volume stood at 38.4% in FY8 and the same increased to 57.9% by FY16 grown at a CAGR of 5.3%. And market share in terms of values stood at 4.3% in FY8 and the same increased to 6.2% by FY16 grown at a CAGR of 5.1%. 3
Jun 2, 216 Increasing outlets to tap rural markets to push growth: Exhibit 9: Rural-Urban break-up of Light Hair Oil market 1 8 6 4 2 Exhibit 1: Number of stockists/distributors 8 66 64 65 64 62 34 36 35 36 38 FY12 FY13 FY14 FY15 FY16 Rural Urban Bajaj corp is continuously focusing towards improving its presence and strengthening its portfolio to drive higher revenue growth. Penetration into rural markets will offer a huge growth opportunity and Bajaj corp is well handling to capture the market share. At present, the brand is presented through more than 7392 distributors and is now available in more than 3.71mn outlets. Bajaj corp also started new initiation called, Rural Van operations to cover more rural areas and to increase its brand reach. At present, Bajaj corp is operating 12 vans to cover 7765 uncovered towns and villages on a monthly basis. Considering the importance of rural market in its strategy, the company is planning to tap the increase in disposable income of rural India and to convert rural consumer from unbranded to branded products. At present, 42.% of Bajaj Almond Drops hair oil sales are from rural areas only and the company managed to capture 63.2% market share in rural areas. Bajaj corp managed to come up with.89mn outlets during FY16, out of which.43mn were opened in urban area and.46mn in rural area. Market share of Light Hair Oil from rural area is 38% and it is 62% from urban areas on the back of relatively high pricing. Exhibit 11: Retail Outlets (in Mn.) 4 6 4 483 528 5514 5739 3 2 1.6 1.6 1.7 2.2 2 1863 1756 177 1637 FY13 FY14 FY15 FY16 Urban Distribution Rural Distribution 1 1.5 1.1 1.1 1.1 FY13 FY14 FY15 FY16 Urban Distribution Rural Distribution Decline in raw material prices to boost EBITDA margins: As a result of sharp decline in the crude oil prices, the prices of Light Liquid Paraffin also declined drastically which is key raw material/input of the product. EBITDA margins are improved on the back of decrease in the cost of material consumed. Cost of raw materials as a percentage of total revenue is decreased by 289 basis points to reach 28.% in FY16 from the levels of 3.9% in FY15. We expect the raw materials prices continue to fall for FY17E and remain constant at those levels in FY18E, which affects EBITDA margins to reach 3.5% for FY17E and 29.6% in FY18E. Bajaj corp is also incurring more than 17% of its total revenues on Advertising and Sales Promotions, which could help the company to create more brand value. Exhibit 12: Rates of Light Liquid Paraffin (LLP) 1 8 6 4 2 49.5% 25.6% 67 84-6.1% 78-3.4% -.2% 76 76-27.2% 55 5% 3% 1% -1% -3% -5% Rates of Light Liquid Paraffin (Rs. Per kg) Growth (%) Exhibit 13: Advertisement and publicity (Rs. Mn) 15 1 5 13.7% 647 14.5% 879 16.9% 1133 17.8% 1468 FY12 FY13 FY14 FY15 Advertisement and Sales Promotion As a % of Total Revenues 19% 16% 13% 1% 4
Jun 2, 216 Exhibit 14: Brandwise Sales Break-Up (%) Almond Drops Hair Oil 95.7 94.1 95.3 93.9 9. 91.2 Nomarks... 2.4 7.1 4.5 Amla Hair Oil.....2 1.9 Brahmi Amla Hair Oil 2.8 2. 1.5 1.1 1.3 1.4 Others 1.5 3.9 3.2 2.6 1.4 1. Exhibit 15: Comparative Prices of Different Brands for 1 ml in the Hair Oil Segment (MRP of 1ml (Rs.)) Own Brands (Rs.) Competitor Brands (Rs.) 65 6 6 65 45 42 45 45 42 5 25 25 33 5 Amla Hair Oil Brahmi Amla Hair Oil Almond Drops Hair Oil Kailash Parbat Hair Oil Parachute Keo Karpin Dabur Vatika Dabur Amla Hair & Care Navratna Almond Drops has created a unique positioning for itself through initiatives like product differentiation (Almond based), focused marketing, unique packaging (glass vs. plastic used by competition etc.) Growth in the FMCG sector will be the key driver: India is one of the largest populated countries in the world with more than 1.2 Bn people. India s population is growing at a rate of 1.41% annually. It is a young country with almost 65% of the population below the age of 3 years. The consumption of goods will therefore be driven by younger and more affluent consumers. Rising incomes, growing youth population and brand consciousness have been key growth drivers of the sector. Low penetration levels in rural market offer room for growth. The overall market size of FMCG in India is estimated to grow at a CAGR of 17% from US$47.3 Bn in 215 to US$13.7 Bn in 22E. The urban segment is the largest contributor to the sector, accounting for more than 6% of total revenue and had a market size of around US$ 28.38 Bn in 215. Semi-urban and rural segments are growing at a rapid pace; they currently account for 4% of revenues. The rural FMCG market expected to increase at a CAGR of 18.1% to US$1 Bn during FY12-FY25E. The overall rural FMCG consumption continues to grow at 12.5% during FY14. Total consumption expenditure to reach nearly US$3.6 Tn by 22 from US$1.3 Tn in 212. India has 7% of its population living in rural areas. With rising urbanization, more people will have exposure to modern products and brands; and thus shift to branded and packaged goods and products. Exhibit 16: FMCG market (US$ Bn) Exhibit 17: Urban/Rural industry break-up (215) 11 88 14 66 Rural 4% 44 22 18 21 24 3 35 37 45 47 FY7 FY8 FY9 FY1 FY11 FY12 FY13 FY15 FY2E Urban 6% Source: India Brand Equity Foundation (IBEF), Karvy Research Source: IBEF, Karvy Research 5
Jun 2, 216 215 22E FMCG market size: US$47.3 Bn Growing demand: 1. Rising incomes and growing youth population have been key growth drivers of the sector. Brand consciousness has also aided demand. 2. Tier II/III cities are witnessing faster growth in modern trade. Attractive opportunities: 1. Low penetration levels in rural market offer room for growth. 2. Disposable income in rural India has increased due to the direct cash transfer scheme. 3. Growing demand for premium products. FMCG market size: US$13.7 Bn Advantage Indian Higher investments: 1. Many players are expanding into new geographies and categories. 2. Organized retail share is expected to double to 14-18% of the overall retail market by 215. Policy support: 1. Investment approval of up to 1% foreign equity in single brand retail and 51% in multi-brand retail. 2. The minimum capitalization for foreign FMCG companies to invest in India is US$1Mn. Source: IBEF, Karvy Research Hair oil market in India: FMCG: Rs. 2581.2 Bn Hair Care: Rs. 19.6 Bn 7% CONTRIBUTION Shampoo Rs. 56.8 Bn (3%)* Perfumed Oil Rs. 64.1 Bn (28%)* Coconut Based Oil Rs. 34.8 Bn (24%)* Hair Conditioners Rs. 4.6 Bn (2%)* Hair Dyes Rs. 3.4 Bn (16%)* Hair Oil Market Coconut based Oils (46.5%)** Amla based Oils ()** Light Hair Oils (16%)** Cooling Oils (9%) ** Others (13.5%)** Perfumed Hair Oil Segment Hair oil market size in India is pegged at around Rs.99133 Mn with coconut-based oils accounting for 46.5% which comes to Rs.4697 Mn. Non-coconut or perfumed oil segment, in which Bajaj corp operates, has a market size of Rs.5336 Mn. Among all, Light Hair Oil is the fastest growing segment and around 38% of the light hair oil sale comes from the rural market. For FY16, volume for Light Hair Oil has witnessed 4.4% growth rate and value has grown at 6.6% to reach Rs.162 Mn. Volume in the case of Overall Hair oil has witnessed.5% growth rate and value has grown at 6.6% to reach the current levels. 6
Jun 2, 216 Exhibit 18: Light Hair Oil Market Volume in India 35 28 21 14 7 19.5% 12.5% 11.9% 6.6% 2246 26768 29958 31949 3969-3.1% 4.4% 32317 25% 2% 1% 5% % -5% Exhibit 19: Light Hair Oil Market Value in India 16 12 8 4 3.% 21.4% 17.% 12.4% 831 18 1311 1474 153 2.% 6.6% 162 35% 25% 5% -5% Volume (KLtr) Growth (%) Value (Rs. Mn) Growth (%) Exhibit 2: Overall Hair Oil Market Volume in India 28 26 24 22 1.1% 3.9% 1.2% 235539 238283 247478 8.7% 26916 25147.5% -6.5% 2 Volume (KLtr) Growth (%) 252761 1% 5% % -5% -1% Exhibit 21: Overall Hair Oil Market Value in India 12 1 8 6 4 2 21.9% 12.7% 13.6% 5728 6981 7867 86756 92777 9886 1.3% 6.9% 6.6% Value (Rs. Mn) Growth (%) 25% 2% 1% 5% % Exhibit 22: Business Assumptions Y/E Mar (Rs. Mn) FY15 FY16E FY17E FY18E Comments Revenue 8256 8764 9643 1188 Revenue Growth (%) 22.9 6.2 1. 15. EBITDA 2392 2737 2937 3285 EBITDA Margins (%) 29. 31.2 3.5 29.6 PAT (normalized) 1727 1964 243 2859 EPS (Rs.) 11.7 13.3 16.5 19.4 Capex (8) (66) (86) (99) Net CFO 267 1885 2455 2395 Net Debt (1342) (478) (646) (717) Free Cash Flow 259 1819 2369 2295 We expect the revenue to grow on the back of good monsoons in FY17E and improved disposable incomes of Rural India. EBITDA is likely to grow from Rs.2392mn in FY15 to Rs.3285mn in FY18E. We expect the EBITDA margins to be stable by FY18E. PAT margins are expected to reach 25.8% in FY18E. 7
Jun 2, 216 Exhibit 23: Revenue Growth 12 9 6 3 28.2% 22.9% 1.7% 667 6717 8256 8764 9643 1188 15.% 6.2% 1.% % FY13 FY14 FY15 FY16 FY17E FY18E 3% 2% 1% Revenue (Rs. Mn) Revenue Growth (%) Bajaj corp registered revenue growth rate of 6.2% in FY16, which is lower than earlier years due to the adverse market condition in the hair oil industry, despite the same they managed to register 2.9% growth in the sales volume and 4.1% increase in realisation per case for ADHO brand. We expect the revenues to grow better on the back of expected good monsoons in FY17E and improved disposable incomes of Rural India. Revenues were grown at a CAGR of 16.7% for FY12-16 and we expect revenues will grow at a CAGR of 12.5% over FY16-18E. Bajaj corp is consistent in maintaining its EBITDA margins and EBIT margins every year. EBITDA margins and EBIT margins were at 31.2% and 33.9% respectively by FY16 and margins were expected to taper a little on the back of fluctuations in raw material prices to reach 29.6% and 32.3% by FY18E. EBITDA and EBIT were stood at Rs.2737 Mn and Rs.2974 Mn respectively in FY16 and were expected to reach Rs.3285 Mn and Rs.3576 Mn respectively by FY18E. Exhibit 24: EBITDA margins 4 3 2 1 27.7% 31.2% 3.5% 29.6% 29.% 186 2392 2737 2937 3285 FY14 FY15 FY16 FY17E FY18E EBITDA (Rs. Mn) EBITDA Margins (%) 32% 3% 28% 26% 24% Exhibit 25: EBIT Margins 35 25 15 5 33.9% 33.% 32.2% 33.% 32.3% 2218 2659 2974 3187 3576 FY14 FY15 FY16 FY17E FY18E EBIT (Rs. Mn) EBIT Margins (%) 36% 34% 32% 3% Exhibit 26: PAT Margins to improve 27 25.2% 22.8% 27% 21 15 9 3 22.2% 2.9% 22.4% 1489 1727 1964 FY14 FY15 FY16 FY17E 243 FY18E 2859 23% 19% PAT for Bajaj corp grew at a CAGR of 13.1% during FY12-16 to reach Rs.1964 Mn by FY16 from Rs.121 Mn in FY12. Profits are likely to jump from Rs.1964 mn in FY16 to Rs.2859 mn in FY18E as amortization of patents/trademarks may complete in FY17E. PAT is expected to grow at a CAGR of 2.7% over FY16-18E. PAT (Rs. Mn) PAT Margins (%) Exhibit 27: Healthy Return Ratios 8 6 4 2 61.3 63.6 63.7 52.7 44.2 48.6 51. 29.7 34.3 4.5 FY14 FY15 FY16 FY17E FY18E RoE (%) RoCE (%) We expect the RoE and RoCE to reach 51.% and 63.7% respectively by FY18E. RoE & RoCE have been healthy for the last 4 years and is expected to grow further in the next couple of years. RoE will be improved on the back of increasing PAT margins. RoE and RoCE were stood at 4.5% and 61.3% respectively in FY16. 8
Jun 2, 216 Exhibit 28: Dividend Payout 11% 98.2% 9% 7% 64.4% 86.4% 69.8% 59.3% At present, the company is paying Rs.11.5/- dividend per share and dividend payout has been more than 5% on an average. The company has good track record of regularly paying dividends and we expect consistency going forward. 5% FY14 FY15 FY16 FY17E FY18E Dividend Payout Ratio (%) Exhibit 29: Healthy operating and Free cash flows 24 14 4-6 1259-28 267 259 1885 1819 2369 2395 2295 FY14 FY15 FY16E FY17E FY18E Operating cash flows (Rs. Mn) Free cash flows (Rs. Mn) Bajaj corp managed to generate better operating cash flows on the back of consistent revenue growth and better margin expansions. Operating cash flows and Free cash flows are likely to be stabilized for the coming years also. Exhibit 3: Company Snapshot (Ratings) Low High 1 2 3 4 5 Quality of Earnings 33 Domestic Sales 33 Exports 33 Net Debt/Equity 33 Working Capital Requirement 33 Quality of Management 33 Depth of Management 33 Promoter 33 Corporate Governance 33 9
Jun 2, 216 Valuation & Outlook Bajaj corp is market leader in Light Hair oil segment and more than 91% of its revenues are coming from ADHO only. Bajaj corp, with its credentials of debt free, healthy ratios and healthy cash flows, is currently trading at 2.3x FY18E EPS. We value the company at 24.x FY18E EPS and initiate the coverage on the company with BUY rating, for a target price of Rs. 465, representing an upside of 18% for a period of 9-12 months. Exhibit 31: PE Band 5 4 3 2 1 Exhibit 32: PB Band 2 15 1 5 Aug-12 Apr-13 Dec-13 Aug-14 Apr-15 Dec-15 PE Average SD1 SD2-1SD Source: Prowess, Karvy Research Aug-12 Apr-13 Dec-13 Aug-14 Apr-15 Dec-15 PB Average SD1 SD2-1SD Source: Prowess, Karvy Research Exhibit 33: EV/EBITDA 35 3 25 2 15 1 5 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 EV/EBITDA Average SD1 SD2 -SD1 Source: Prowess, Karvy Research Key Risks yfluctuations in raw material prices. ydepending on a single product ADHO. ycompetition from existing and new entrants. 1
Jun 2, 216 Financials Exhibit 34: Income Statement YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E Revenues 6717 8256 8764 9643 1188 Growth (%) 1.7 22.9 6.2 1. 15. Operating Expenses 4857 5864 627 675 783 EBITDA 186 2392 2737 2937 3285 Growth (%) 7.8 28.6 14.4 7.3 11.8 Depreciation & Amortization 43 49 49 51 54 Other Income 41 316 286 3 345 EBIT 2218 2659 2974 3187 3576 Exceptional Item 286 47 47 184 Interest Expenses 59 1 2 2 2 PBT 1873 2188 252 3 3574 Tax 384 462 538 57 715 Adjusted PAT 1489 1727 1964 243 2859 Growth (%) (1.4) 15.9 13.7 23.8 17.6 Exhibit 35: Balance Sheet YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E Cash & Bank Balances 1292 1342 578 746 817 Sundry Debtors 84 133 254 275 321 Inventory 395 393 52 555 66 Loans & Advances 45 53 152 161 177 Gross Block 1972 1465 121 874 922 Net Block 1929 1417 972 823 868 CWIP 7 7 Miscellaneous 242 2335 322 3618 497 Total Assets 5793 5679 5659 6178 694 Current Liabilities & Provisions 597 788 744 873 816 Debt 1 1 1 Other Liabilities 4 5 7 8 9 Total Liabilities 6 794 851 981 925 Shareholders Equity 148 148 148 148 148 Reserves & Surplus 545 4738 466 55 5868 Total Networth 5192 4886 488 5197 615 Total Networth & Liabilities 5793 5679 5659 6178 694 11
Jun 2, 216 Exhibit 36: Cash Flow Statement YE Mar (Rs. Mn) FY14 FY15 FY16E FY17E FY18E PBT 2159 2658 2972 3184 3574 Depreciation 43 49 49 51 54 Tax Paid (393) (459) (538) (57) (715) Inc/dec in Net WC (15) 135 (369) 37 (235) Other Income (33) (253) (229) (246) (283) Other non cash items (71) (62) Cash flow from operating activities 1259 267 1885 2455 2395 Inc/dec in capital expenditure (1467) (8) (66) (86) (99) Others 152 (187) (642) (16) (184) Cash flow from investing activities 35 (195) (78) (246) (283) Inc/dec in borrowings 1 Dividend paid (1122) (235) (241) (241) (241) Cash flow from financing activities (1122) (235) (1941) (241) (241) Net change in cash 172 (164) (764) 168 7 Exhibit 37: Key Ratios YE Mar FY14 FY15 FY16 FY17E FY18E EBITDA Margin (%) 27.7 29. 31.2 3.5 29.6 EBIT Margin (%) 33. 32.2 33.9 33. 32.3 Net Profit Margin (%) 22.2 2.9 22.4 25.2 25.8 Dividend Payout Ratio (%) 64.4 98.2 86.4 69.8 59.3 Debt/Equity (x)..... RoE (%) 29.7 34.3 4.5 48.6 51. RoCE (%) 44.2 52.7 61.3 63.6 63.7 Exhibit 38: Valuation Parameters YE Mar FY14 FY15 FY16 FY17E FY18E EPS (Rs.) 1.1 11.7 13.3 16.5 19.4 DPS (Rs.) 6.5 11.5 11.5 11.5 11.5 BV (Rs.) 35.2 33.1 32.6 35.2 4.8 PE (x) 21.3 39. 23.2 23.9 2.3 P/BV (x) 6.1 13.7 1.9 11.2 9.7 EV/EBITDA (x) 13.5 24.3 2.4 18.8 16.9 EV/Sales (x) 4.6 8. 6.3 5.7 5. ; *Represents multiples for FY14, FY15 & FY16 are based on historic market price 12
Jun 2, 216 Stock Ratings Absolute Returns Buy : > Hold : 5- Sell : <5% Connect & Discuss More at 18 425 8283 (Toll Free) research@karvy.com Live Chat f in You Tube Disclaimer Analyst certification: The following analyst(s), Jagannadham Thunuguntla, who is (are) primarily responsible for this report and whose name(s) is/are mentioned therein, certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report. Disclaimer: Karvy Stock Broking Limited [KSBL] is a SEBI registered Stock Broker, Depository Participant, Portfolio Manager and also distributes financial products. KSBL has filed an application with SEBI, seeking registration as a Research Analyst and such application is pending for disposal. The subsidiaries and group companies including associates of KSBL provide services as Registrars and Share Transfer Agents, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory services, insurance repository services, financial consultancy and advisory services, realty services, data management, data analytics, market research, solar power, film distribution and production, profiling and related services. Therefore associates of KSBL are likely to have business relations with most of the companies whose securities are traded on the exchange platform. The information and views presented in this report are prepared by Karvy Stock Broking Limited and are subject to change without any notice. This report is based on information obtained from public sources, the respective corporate under coverage and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of KSBL. While we would endeavor to update the information herein on a reasonable basis, KSBL is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent KSBL from doing so. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. KSBL will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither KSBL nor any associate companies of KSBL accepts any liability arising from the use of information and views mentioned in this report. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Past performance is not necessarily a guide to future performance. Forward-looking statements are not predictions and may be subject to change without notice. Actual results may differ materially from those set forth in projections. y Associates of KSBL might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. y Associates of KSBL might have received compensation from the subject company mentioned in the report during the period preceding twelve months from the date of this report for investment banking or merchant banking or brokerage services from the subject company in the past twelve months or for services rendered as Registrar and Share Transfer Agent, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory services, insurance repository services, consultancy and advisory services, realty services, data processing, profiling and related services or in any other capacity. y KSBL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. y Compensation of KSBL s Research Analyst(s) is not based on any specific merchant banking, investment banking or brokerage service transactions. y KSBL generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. y KSBL or its associates collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. y KSBL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report and have no financial interest in the subject company mentioned in this report. y Accordingly, neither KSBL nor Research Analysts have any material conflict of interest at the time of publication of this report. y It is confirmed that KSBL and Research Analysts, primarily responsible for this report and whose name(s) is/ are mentioned therein of this report have not received any compensation from the subject company mentioned in the report in the preceding twelve months. y It is confirmed that Jagannadham Thunuguntla, Research Analyst did not serve as an officer, director or employee of the companies mentioned in the report. y KSBL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. y Neither the Research Analysts nor KSBL have been engaged in market making activity for the companies mentioned in the report. y We submit that no material disciplinary action has been taken on KSBL by any Regulatory Authority impacting Equity Research Analyst activities. Karvy Stock Broking Limited Plot No.31, 6th Floor, Karvy Millennium Towers, Financial District, Nanakramguda, Hyderabad, 5 32, India Tel: 91-4-2331 2454; Fax: 91-4-2331 1968 For More updates & Stock Research, visit www.karvyonline.com 13