BUY CMP 493.10 Target Price 542.00 RELIANCE INDUSTRIAL INFRASTRUCTURE LTD Result Update(PARENT BASIS): Q2 FY15 OCTOBER 16 th 2014 ISIN: INE046A01015 Index Details Stock Data Sector Construction & Engineering BSE Code 523445 Face Value 10.00 52wk. High / Low (Rs.) 659.00/304.00 Volume (2wk. Avg.) 76000 Market Cap (Rs. in mn.) 7445.81 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales 848.32 950.12 1045.13 EBITDA 438.40 407.72 466.01 Net Profit 241.40 252.57 292.99 EPS 15.99 16.73 19.40 P/E 30.84 29.48 25.41 Shareholding Pattern (%) 1 Year Comparative Graph RELIANCE INDUSTRIAL INFRASTRUCTURE BSE SENSEX SYNOPSIS Reliance Industrial Infrastructure Ltd (RIIL) engaged in business of setting up operating Industrial Infrastructure & providing services connected with computer software and data processing. Revenue for the 2 nd quarter rose by 14.96% to Rs. 237.95 million from Rs. 206.98 million, when compared with the prior year period. During 2 nd quarter of FY15, Net profit decrease to Rs. 54.26 million from Rs. 58.98 million, when compared with the prior year period. Profit before interest, depreciation and tax for the quarter stood at Rs. 89.37 million compared to Rs. 97.95 million over the corresponding quarter of the previous year. During H1 FY15, Total Revenue of Rs. 492.50 million an increase of 9.8% as compared to Rs. 448.40 million in the corresponding period of the previous year. Income from product transportation services increased by 38.3% from Rs. 88.90 million to Rs. 122.90 million on YoY basis. Income from hiring of construction machineries increased by 2.7% from Rs. 163.80 million to Rs. 168.20 million on Y-o-Y basis. Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 6% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Reliance Industrial Infrastructure Ltd 493.10 7445.81 15.99 30.84 3.20 35.00 SPML Infra Ltd 85.30 3126.30 7.11 12.00 0.69 0.00 Gayatri Projects Ltd 162.00 4896.80 13.47 12.03 0.74 20.00 Simplex Infrastructures Ltd 274.90 13599.90 12.23 22.48 0.97 25.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY15, Reliance Industrial Infrastructure Ltd engaged in business of setting up operating Industrial Infrastructure & providing services connected with computer software and data processing, reported its financial results for the 2 nd quarter ended 30 Sep, 2014. Months Sep-14 Sep-13 % Change Net Sales 237.95 206.98 14.96 PAT 54.26 58.98 (8.00) EPS 3.59 3.91 (8.00) EBITDA 89.37 97.95 (8.76) Revenue for the quarter grew by 14.96% to Rs. 237.95 million from Rs. 206.98 million, when compared with the prior year period. EBITDA is Rs. 89.37 million in Q2 FY15 and decline of 8.76% over the prior period of previous year. In Q2 FY15, net profit of Rs. 54.26 million against Rs. 58.98 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 3.59 for the 2 nd quarter as against an EPS of Rs. 3.91 in the corresponding quarter of the previous year. Break up of Expenditure Break up of Expenditure Rs in Million Q2 FY15 Q2 FY14 Employee Cost 43.77 38.51 Stores & Spares Consumed 4.23 2.89 Operating Expenses 51.89 31.91 Depreciation 27.94 24.63 Other Expenditure 70.24 48.01
Latest Updates During H1 FY15, Total Revenue of Rs. 492.50 million an increase of 9.8% as compared to Rs. 448.40 million in the corresponding period of the previous year. This increase due to the increase in income from product through pipeline. Net profit during H1 FY15 was Rs. 110.30 million from Rs. 113.50 million, a decline of 2.8% due to the increase in operating and maintenance expenses on construction machinery and other operating assets. Income from product transportation services increased by 38.3% from Rs. 88.90 million to Rs. 122.90 million on YoY basis. Income from hiring of construction machineries increased by 2.7% from Rs. 163.80 million to Rs. 168.20 million on Y-o-Y basis. Income from IT support services increased by 1.4% from Rs. 88.80 million to Rs. 90.00 million on Y-o-Y basis. Income from other services decreased by 1.6% from Rs. 70.30 million to Rs. 69.20 million on Y-o-Y basis. COMPANY PROFILE Reliance Industrial Infrastructure Limited is Reliance Group Company was incorporated in September 1988 as a Public Limited Company in the name of "Chembur Patalganga Pipelines Limited". The Company commenced its commercial operation in March 1992 ant the name of the Company was subsequently changed to "CPPL Limited" in September 1992 and thereafter to its present name viz., "Reliance Industrial Infrastructure Limited" in March 1994. Business Reliance Industrial Infrastructure Limited is mainly engaged in the business of setting up / operating Industrial Infrastructure. The Company is also engaged in related activities involving leasing and providing services connected with computer software and data processing. The Company has set up a 200-millimetre dia twin pipeline system from the Refinery of Bharat Petroleum Corporation at Mahul, Mumbai, for transporting petroleum products like Naphtha and Kerosene to the Petrochemical Complex of Reliance Industries Limited at Patalganga. Reliance Industrial Infrastructure Limited has acquired & deployed the various construction machinery on hire for use at various construction sites all over India. The Company has its operations in the Mumbai and the Rasayani regions of Maharashtra, Surat and Jamnagar belts of Gujarat as also at other places in India.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2013-2016E FY-13A FY-14A FY-15E FY-16E I EQUITY AND LIABILITIES A) Shareholder's Funds: a) Share Capital 151.00 151.00 151.00 151.00 b) Reserves and Surplus 2168.66 2345.52 2430.06 2723.04 Sub-Total Net worth 2319.66 2496.52 2581.06 2874.04 B) Non Current Liabilities: a) Deferred Tax Liabilities 261.92 293.13 281.40 267.33 Sub Total - Non Current Liabilities 261.92 293.13 281.40 267.33 C) Current Liabilities: a) Trade payables 125.50 161.92 142.49 136.79 b) Other Current liabilities 232.08 103.81 126.65 144.38 c) Short term Provisions 78.38 73.48 68.33 65.60 Sub-Total Current Liabilities 435.96 339.21 337.47 346.77 TOTAL EQUITY AND LIABILITIES (A + B + C) 3017.53 3128.86 3199.93 3488.15 II ASSETS D) Non-Current Assets: Fixed Assets i. Tangible assets 528.19 756.18 780.87 819.91 ii. Intangible Assets 423.71 465.62 474.93 493.93 iii. Capital Work in Progress 91.29 30.54 32.07 34.63 a) Sub-Total-Total Fixed Assets 1043.19 1252.34 1287.87 1348.48 b) Non Current Investments 67.74 871.74 958.92 1120.74 c) Long Term loans and advances 1137.34 258.43 193.82 211.26 Sub-Total Non-Current Assets 2248.27 2382.51 2440.61 2680.48 E) Current Assets: a) Current Investments 287.50 331.00 383.96 437.71 b) Inventories 11.26 10.43 10.95 11.28 c) Trade receivables 193.97 181.14 170.27 181.08 d) Cash and Bank Balances 26.95 10.31 11.96 13.64 e) Short-terms loans & advances 249.58 213.47 182.18 163.96 Sub-Total Current Assets 769.26 746.35 759.32 807.67 TOTAL ASSETS (D + E) 3017.53 3128.86 3199.93 3488.15
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 802.65 848.32 950.12 1045.13 Other Income 89.54 71.16 84.68 89.76 Total Income 892.19 919.48 1034.80 1134.89 Expenditure -436.76-481.08-627.08-668.88 Operating Profit 455.43 438.40 407.72 466.01 Interest 0.00 0.00 0.00 0.00 Gross profit 455.43 438.40 407.72 466.01 Depreciation -101.51-102.39-110.58-117.22 Profit Before Tax 353.92 336.01 297.14 348.79 Tax -110.11-94.61-44.57-55.81 Net Profit 243.81 241.40 252.57 292.99 Equity capital 151.00 151.00 151.00 151.00 Reserves 1997.93 2177.49 2430.06 2723.04 Face value 10.00 10.00 10.00 10.00 EPS 16.15 15.99 16.73 19.40 Quarterly Profit & Loss Statement for the period of 31 st Mar, 2014 to 31 st Dec, 2014E Value(Rs.in.mn) 31-Mar-14 30-Jun-14 30-Sep-14 31-Dec-14E Description 3m 3m 3m 3m Net sales 228.07 212.40 237.95 242.71 Other income 16.54 20.54 21.56 21.99 Total Income 244.61 232.94 259.51 264.70 Expenditure -111.73-145.03-170.14-154.85 Operating profit 132.88 87.91 89.37 109.85 Interest 0.00 0.00 0.00 0.00 Gross profit 132.88 87.91 89.37 109.85 Depreciation -28.30-27.65-27.94-29.90 Profit Before Tax 104.58 60.26 61.43 79.96 Tax -37.60-4.23-7.17-17.59 Net Profit 66.98 56.03 54.26 62.37 Equity capital 151.00 151.00 151.00 151.00 Face value 10.00 10.00 10.00 10.00 EPS 4.44 3.71 3.59 4.13
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 16.15 15.99 16.73 19.40 EBITDA Margin (%) 56.74 51.68 42.91 44.59 PBT Margin (%) 44.09 39.61 31.27 33.37 PAT Margin (%) 30.38 28.46 26.58 28.03 P/E Ratio (x) 30.54 30.84 29.48 25.41 ROE (%) 11.35 10.37 9.79 10.19 ROCE (%) 25.92 23.22 20.08 20.29 EV/EBITDA (x) 15.66 16.21 17.29 15.01 Book Value (Rs.) 142.31 154.20 170.93 190.33 P/BV 3.46 3.20 2.88 2.59 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs.493.10, the stock P/E ratio is at 29.48 x FY15E and 25.41 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.16.73 and Rs.19.40 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 6% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 17.29 x for FY15E and 15.01 x for FY16E Price to Book Value of the stock is expected to be at 2.88 x and 2.59 x respectively for FY15E and FY16E. We recommend BUY in this particular scrip with a target price of Rs.542.00 for Medium to Long term investment. INDUSTRY OVERVIEW Engineering is a diverse industry with various segments. It is also the largest of all industrial sectors in India. A company in this sector can be a power equipment manufacturer, execution specialist for engineering, procurement and construction (EPC) or even a niche player. The engineering sector has observed tremendous growth in recent years owing to significant investments in power generation projects and the infrastructure sector. The power sector itself contributes about 70-75 per cent of the engineering companies' revenues. India on its quest to become a global superpower has made significant strides towards the development of its engineering sector. The Indian government has appointed the Engineering Export Promotion Council (EEPC) to be the apex body in charge of promotion of engineering goods, products and services from India. India exports transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners to various countries of the world. Coupled with favourable regulatory policies and growth in the manufacturing sector, many foreign players have started to invest in the country. India recently became a permanent member of the Washington Accord (WA) on June 13, 2014. The country now joins an exclusive group of 17 countries who are permanent signatories of the WA, an elite international agreement on engineering studies and mobility of engineers. Market size Driven by strong demand for engineering gods, exports from India registered a double digit growth at 10.22 per cent to touch US$ 26.4 billion in June 2014 from US$ 24.02 billion in the corresponding month last year. This
growth can be credited to the robust expansion in shipments of aircraft, spacecraft parts and automobiles. The second best performing sector was non-ferrous metals and metal products. Engineering exports from India are expected to cross US$ 70 billion in FY 15 registering a growth of 15 per cent over the previous fiscal, as demand in key markets such as the US and the UAE is on the rise. Apart from these traditional markets, markets in Eastern and Central European countries such as Poland also hold huge promise. India exports its engineering goods mostly to the US and Europe, which accounts for over 60 per cent of the total exports. Recently, India's engineering exports to Japan and South Korea have also increased with shipments to these two countries rising by 16 and 60 per cent respectively. Government Initiatives The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100 per cent FDI. With the aim to boost the manufacturing sector, the government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles. It has also reduced the basic customs duty from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind operated electricity generators. The Government of India in its Union Budget 2014-15, has provided investment allowance at the rate of 15 per cent to a manufacturing company that invests more than US$ 4.17 million in any year in new plant and machinery. The government has also taken steps to improve the quality of technical education in the engineering sector by allocating a sum of Rs 5000 million (US$ 81.69 million) for setting up five more IITs in the states of Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala. Steps have also been taken to encourage companies to perform and grow better. For instance, EIL was recently conferred the Navaratna status after it fulfilled the criteria set by the Department of Public Enterprises, Ministry of Heavy Industries and Public Enterprises, Government of India. The conferred status would give the stateowned firm more financial and operational autonomy. Road Ahead The engineering sector is a growing market. Current spending on engineering services is projected to increase to US$ 1.1 trillion by 2020. With development in associated sectors such as automotive, industrial goods and infrastructure, coupled with a well-developed technical human resources pool, engineering exports are expected to touch US$ 120 billion by 2015. Also, the Union Budget 2014-15 has allocated funds for several infrastructure projects which are further expected to provide a boost to the engineering sector. The industry can also look forward to deriving revenues from newer services and from newer geographies with Big Data, Cloud, M2M and Internet of Things becoming a reality.
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.
Firstcall India Equity Research: Email info@firstcallindia.com C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods B. Anil Kumar Auto, IT & FMCG M. Vinayak Rao Diversified C. Bhagya Lakshmi Diversified B. Vasanthi Diversified G. Amarender 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 400 071 Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089 E-mail: info@firstcallindiaequity.com www.firstcallindiaequity.com