Consumer Staples-Household Products Bloomberg Code: HMN IN India Research - Stock Broking Market Leader of Cooling Hair Oil, Beating the Heat High Margin Products in the Portfolio are expected to drive EBITDA growth ahead of Sales growth: Recent acquisition of Kesh King Brand, accounts for around 75% gross margin and 45% EBITDA margin as compared to the other products in the portfolio. Kesh King Brand is expected to drive the top line growth by around 8% to 10% additionally. This will enable Emami to record higher margins in FY17E and FY18E. Marching ahead in the league of Herbal Products: Zandu accounts for ~25% of the total revenue of Emami, with over 200 products in the portfolio under the Zandu Brand. The company is also expected to extend the brand with couple of new products; with the most recent launch of Zandu Honey, Emami is currently test marketing these new products and it is expected to launch these products by the end of FY17E. Market Leader of Cooling Hair oil is beating the Heat: The best seller of all times, Emami s Navratna cooling oil enjoys around 60% of the total market share. The rising temperature across India is expected to give robust growth to its Navratna cooling oil, Navratna Cool Talc and to Boroplus prickly heat powder. Historically, cooling oil has recorded 16% to 17% growth during moderate summer, so considering the current weather condition it is expected to grow at good pace. Valuation and Outlook At CMP of Rs.1007, the stock is trading at P/E of 29.5x for FY18E. With the anticipated increase in top line due to high margin products in the portfolio, rising temperature across India, strong brand positioning, innovation and new product launches which were favourably received by the market, with strong balance sheet & financial ratios, we expect that the consumer expenditure will further increase as the economy revives and hence there will be growth in Emami s top line and bottom line as well. Based on P/E of 38.5x, we initiate the coverage with a BUY rating for a Target Price of Rs.1313 representing an upside of for a period of 12-15 months. Key Risks ycompetition. yvolatility in raw material prices. Exhibit 1: Valuation Summary YE Mar (Rs. Mn) FY14 FY15 FY16E FY17E FY18E Net Sales 18208 22172 25334 29473 34504 EBITDA 5023 5401 5784 6992 8634 EBITDA Margin (%) 27.6 24.4 22.8 23.7 25.0 Adj. Net Profit 4025 4856 5240 6309 7743 EPS (Rs.) 17.7 21.4 23.1 27.8 34.1 RoE (%) 47.1 44.9 38.3 37.9 38.1 P/E (x) 24.5 46.8 40.4 36.2 29.5, *Represents multiples for FY14 & FY15 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.) Apr 30, 2016 BUY CMP (as on Apr 29, 2016) 1007 Target Price 1313 Upside (%) 30 Stock Information Mkt Cap (Rs.mn/US$ mn) 228500 / 3440 52-wk High/Low (Rs.) 1368 / 870 3M Avg. daily volume (mn) 0.2 Beta (x) 0.7 Sensex/Nifty 25607 / 7850 O/S Shares(mn) 227.0 Face Value (Rs.) 1.0 Shareholding Pattern (%) Promoters 72.7 FIIs 16.3 DIIs 1.2 Others 9.8 Stock Performance (%) 1M 3M 6M 12M Absolute 10 (0) (4) 7 Relative to Sensex 7 (3) 1 14 Source: Bloomberg Relative Performance* 150 130 110 90 70 Apr-15 May-15 Jun-15 Source: Bloomberg; *Index 100 Analyst Contact Kunal Jagda Jul-15 040-3321 6277 Aug-15 Emami Sep-15 Oct-15 Nov-15 Dec-15 kunalnarendra.jagda@karvy.com Jan-16 Feb-16 Sensex Mar-16 Apr-16 1
Company Financial Snapshot (Y/E Mar) Profit & Loss (Rs. Mn) FY15 FY16E FY17E FY18E Net sales 22172 25334 29473 34504 Optg. Exp (Adj for OI) 16772 19550 22480 25870 EBITDA 5401 5784 6992 8634 Depreciation 343 383 428 476 Interest 51 51 51 51 Other Income 918 1197 1371 1570 PBT 5924 6547 7884 9676 Tax 1070 1309 1577 1935 Adj. PAT 4856 5240 6309 7743 Profit & Loss Ratios EBITDA margin (%) 24.4 22.8 23.7 25.0 Net margin (%) 21.9 20.7 21.4 22.4 P/E (x) 46.8 40.4 36.2 29.5 EV/EBITDA (x) 41.5 35.7 31.7 25.4 Dividend yield (%) 0.8 1.0 1.1 1.4 Balance sheet (Rs. Mn) FY15 FY16E FY17E FY18E Total Assets 16763 20273 24278 29197 Net Fixed assets 4776 4917 5359 5797 Current assets 5834 7693 10009 13155 Other assets 6153 7663 8910 10245 Total Liabilities 16763 20273 24278 29197 Networth 12306 15023 18293 22307 Debt 194 194 194 194 Current Liabilities 3688 4451 5147 6002 Other Liabilities 574 605 645 694 Balance Sheet Ratios RoE (%) 44.9 38.3 37.9 38.1 RoCE (%) 43.1 37.0 36.7 37.1 Net Debt/Equity (x) (0.3) (0.3) (0.4) (0.4) Equity/Total Assets (%) 73.4 74.1 75.3 76.4 P/BV (x) 18.5 14.1 12.5 10.2 Exhibit 2: Shareholding Pattern (%) Company Background Emami Group established in early 1970s, has grown in India, with its presence in major sectors like FMCG, Real Estate, Hospitals, Retail, Newsprint Manufacturing, Pharmacy chain, Contemporary art, Edible oil and biodiesel. Founded by two friends Mr. R.S. Agarwal and Mr. R.S. Goenka, today Emami is a trusted brand of the nation with over 25,000 employees and with a group turnover of about Rs.100 Bn. is one of the leading and fastest growing personal and healthcare businesses in India, with an enviable portfolio of household brand names such as Boroplus, Navratna, Fair and Handsome, Zandu balm, Mentho Plus balm and Fast Relief. With seven manufacturing locations in India and one in Bangladesh supported by a widespread distribution network, the company is positioned to make its products available in every corner of the country. Emami has received countless accolades for its innovative and clutter-breaking products, which have carved out whole new segments from scratch in the Indian FMCG space and positioned the company as one of the fastest growing and most profitable companies in the sector. Cash Flow (Rs. Mn) FY15 FY16E FY17E FY18E PBT* 5924 6547 7884 9676 Depreciation 343 383 428 476 Tax (956) (1309) (1577) (1935) Changes in WC 734 (282) 15 8 Others (705) (1092) (1265) (1464) CF from Operations 5340 4247 5484 6761 Capex (1098) (500) (844) (887) Investments (18111) (1000) (1000) (1000) Others 16871 1139 1313 1512 CF from Investing (2337) (361) (531) (375) Change in Debt 19 0 0 0 Interest Paid (52) (51) (51) (51) Dividends & Others (2120) (2523) (3038) (3729) CF from Financing (2154) (2575) (3090) (3780) Change in Cash 814 1311 1863 2605, * Before Exceptional Item Exhibit 3: Geography-wise Revenue Segmentation - FY15 (%) Promoters 72.7% FIIs 16.3% DIIs 1.2% Others 9.8% Domestic 85.7% International 14.3% Source: BSE, Karvy Research 2
High Margin Products in the Portfolio are expected to drive EBITDA growth ahead of Sales growth: Exhibit 4: Revenue & EBITDA Growth (%) 25% 15% 10% 5% 0% 16.6% 16.9% 7.2% Apr 30, 2016 Marching ahead in the league of Herbal Products: Zandu accounts for ~25% of the total revenue of Emami, with over 200 products in the portfolio under the Zandu Brand. The company is also expected to extend the brand with couple of new products; with the most recent launch of Zandu Honey, Emami is currently test marketing these new products and it is expected to launch these products by the end of FY17E. The company has also launched new products in diabetes space, heart care and also related to stress. These products are under test marketing in South India. The company foresees huge potential in this segment as there is no organized market and can create market for these brands. Balms and pain relief segment: Pain relief is a segment of focus for Emami. The company owns home-grown brands like Mentho Plus Balm, Fast Relief and category leader Zandu Balm. The pain relief category accounted for 21% of Emami s consolidated sales in FY15. Ayurvedic positioning and widening rural presence made it possible for these brands to capture the largest market share in these categories. Market Leader of Cooling Hair oil is beating the Heat: The best seller of all times, Emami s Navratna cooling oil enjoys around 60% of the total market share. The rising temperature across India is expected to give robust growth to its Navratna cooling oil, Navratna Cool Talc and to Boroplus prickly heat powder. Historically, cooling oil has recorded 16% to 17% growth during moderate summer, so considering the current weather condition, it is expected to grow at good pace. Hair oils: Emami plugged a gap in its portfolio through the introduction of Emami 7 Oils in One, a unique oil formula combining seven Ayurvedic ingredients which are effective for strong and healthy hair growth targeting young girls and women. Cool oil: Emami catalysed the cool oil category in India through Navratna Oil, enjoying ~60% market share by volume and 65.5% share by value. The company is an undisputed leader in the cooling oil category. Exhibit 5: Key Brands & Presence 8000 6000 4000 2000 0 12.2% 12.7% 11.8% 21.8% 14.3% 7.5% 7.1% 20.9% 23.5% 16.3% 17.1% FY12 FY13 FY14 FY15 FY16E FY17E FY18E Revenue Growth (%) EBITDA Growth (%) 60.5% 7520 77.7% 4390 56.2% 7370 62.6% 3800 17.0% 11.0% 13.0% 15.0% Navratna Boroplus Zandu Fair & Handsome 80% 60% 40% Market Size (Rs. Mn) CAGR (5yrs) (RHS) Market Share (%) (RHS) 0% Recent acquisition of Kesh King Brand, accounts for around 75% gross margin and 45% EBITDA margin as compared to the other products in the portfolio. Kesh King Brand is expected to drive the top line growth by around 8% to 10% additionally. This will enable Emami to record higher margins in FY17E and FY18E. Emami has also launched new Stock Keeping Units (SKUs) to increase the rural penetration targeting middle age women. Exhibit 6: Penetration Level (%) 80% 60% 40% 0% 17.0% 26.0% 32.0% 70.0% Navratna Boroplus Zandu Fair & Penetration (%) Handsome It is observed that Emami enjoys market leadership position across all the brands. The fastest growing category amongst all is the Navratna Brand growing at 17% CAGR in last 5 years. However, Navratna has very low penetration across India. The major market for Navratna cooling oil is North India. With low penetration of Navratna and being the market leader, it is expected to grow at high pace. 3
Skin care: Skin care accounted for around of Emami s revenues and a higher share of profits. Emami is the leader in the antiseptic cream category and in the men s fairness cream segment which it pioneered. Its Navratna Cool Talc (niche cooling positioning) has substantially increased market share in the cool talc category. Strong Balance Sheet: With very moderate level of capital expenditure required in the business, Emami has very strong balance sheet, earning an average RoE of 42.9% & RoCE of 40.7% in last 4 years. Emami enjoys negative working capital for FY15 and expects to maintain at same level, which is healthy sign for any business. Its average net debt to equity is -0.3x for last 4 years on consolidated basis. International Business: Exhibit 7: International Market Share (%) 100% 80% 93.0% 91.0% 60% 40% 47.0% 45.0% 37.0% 30.0% 0% Navratna Fair & Handsome UAE Saudi Arabia Bangladesh The international business of Emami contributes around 17% of the total revenue; the international business has recorded 16% CAGR from FY11 to FY15, during Q3FY16 international business grew by 11% and by 14% in 9MFY16. Emami also enjoys leadership position in international markets; the Navratna cooling oil and Fair & Handsome dominate the markets across UAE, Saudi Arabia and Bangladesh. The company expects robust growth in top line from international business going forward. Exhibit 8: Geography-wise Revenue Segmentation - Q3FY16 (%) Exhibit 9: International Revenue Segmentation (%) MENAP 35.0% Domestic 83.0% International 17.0% SAARC & SEA 44.0% CISEE 12.0% Others 9.0%, MENAP: Middle East, North Africa & Pakistan SAARC & SEA: South Asian Association for Regional Cooperation & South East Asia CISEE: Commonwealth of Independent States & Eastern Europe Summary: Emami has been an interesting growth story in the Indian FMCG sector with a net profit CAGR of more than in the last five years. We expect that Emami is better positioned for faster growth; driven by (1) its entry into new categories, (2) scale up of the Zandu Health Care Division (HCD) and (3) growth in international business. Emami looks well placed with strategy of innovation and creation of strong portfolio of niche products, many of which are based on traditional ayurvedic formulations. Most of these products have high gross margins - highest among domestic peers, along with the low penetration of most of its categories, gives the opportunity for strong growth in the years ahead. We expect Emami s top line to grow at 17% CAGR over FY17E-FY18E assisted along with new launches like She feminine hygiene, HE deodorants, etc. to contribute to additional revenue growth. 4
Exhibit 10: Business Assumptions Y/E Mar (Rs. Mn) FY15 FY16E FY17E FY18E Comments Revenue 22172 25334 29473 34504 Revenue Growth (%) 21.8 14.3 16.3 17.1 EBITDA 5401 5784 6992 8634 EBITDA Margins (%) 24.4 22.8 23.7 25.0 PAT (normalized) 4856 5240 6309 7743 Fully Diluted EPS (Rs.) 21.4 23.1 27.8 34.1 Fully Diluted EPS Growth (%) 20.7 7.9 20.4 22.7 Capex (ex. Acquisition) - cash capex (1098) (500) (844) (887) Net CFO 5340 4247 5484 6761 Net Debt (3347) (4852) (6716) (9321) Free Cash Flow 4243 3747 4640 5874 We expect that Emami is better positioned for faster growth; driven by (1) its entry into new categories, (2) scale up of the Zandu Health Care Division (HCD) and (3) growth in international business, along with the low penetration of most of its categories, give the opportunity for strong growth in the years ahead. We expect Emami s top line to grow at 17% CAGR over FY17E-FY18E assisted along with new launches like She feminine hygiene, HE deodorants, etc. to contribute to additional revenue growth. Most of the products of Emami have high gross margins - highest among domestic peers, the recent acquisition of Kesh King, which has around 75% gross margin, is expected to drive the EBITDA growth ahead of Sales growth. Emami has been an interesting growth story in the Indian FMCG sector with a net profit CAGR of more than in the last five years. With high gross margin products in the portfolio and better product mix, Emami has earned more than PAT and it is expected to grow at ~22% CAGR from FY17E-FY18E. Emami s EPS has registered CAGR of 9.1% from FY11 to FY15 and it is expected to register double digit growth during FY17E and FY18E. Emami has very strong balance sheet, earning an average RoE of 42.9% & RoCE of 40.7% in last 4 years, it is expected to maintain its RoE and RoCE at same level going forward. Exhibit 11: Karvy vs Consensus Revenues (Rs. Mn) Karvy Consensus Divergence (%) Comments FY16E 25334 26476 (4.3) We have moderate outlook on volume and realizations growth. Revenue is expected to grow at CAGR of 16.7% during FY17E 29473 31691 (7.0) FY16E-18E. PAT (Rs. Mn) FY16E 5240 4905 6.8 FY17E 6309 5979 5.5 EPS (Rs.) With a net profit CAGR of more than in the last five years and with high gross margin products in the portfolio and better product mix, Emami has earned more than PAT and it is expected to grow at ~22% CAGR from FY17E-FY18E. FY16E 23.1 21.7 6.2 Emami s EPS has registered CAGR of 9.1% from FY11-FY15 and it is expected to register double digit growth during FY17E FY17E 27.8 26.8 3.8 and FY18E. 5
Exhibit 12: Revenue (Rs. Mn), Revenue Growth (%) 35000 25000 15000 5000 16.3% 17.1% 21.8% 16.9% 14.3% 7.2% 16991 18208 22172 25334 29473 34504 FY13 FY14 FY15 FY16E FY17E FY18E 10% 0% Revenue (Rs. Mn) YoY Growth (%) We expect that Emami is better positioned for faster growth driven by (1) its entry into new categories, (2) scale up of the Zandu Health Care Division (HCD) and (3) growth in international business, along with the low penetration of most of its categories, give the opportunity for strong growth in the years ahead. We expect Emami s top line to grow at 17% CAGR over FY17E-FY18E assisted along with new launches like She feminine hygiene, HE deodorants, etc. to contribute to additional revenue growth. Most of the products of Emami have high gross margins - highest among domestic peers, the recent acquisition of Kesh King, which has around 75% gross margin, is expected to drive the EBITDA growth ahead of sales growth. Exhibit 13: EBITDA (Rs. Mn), EBITDA Margin (%) 10000 8000 6000 4000 2000 27.6% 25.0% 26.4% 24.4% 23.7% 22.8% 4494 5023 5401 5784 6992 8634 28% 26% 24% 22% 0 FY13 FY14 FY15 FY16E FY17E FY18E EBITDA (Rs. Mn) EBITDA Margin (%) Exhibit 14: EBIT (Rs. Mn), EBIT Margin (%) 12000 9000 6000 3000 28.2% 22.1% 25.9% 27.0% 26.0% 26.9% 3753 4714 5976 6599 7935 9728 0 FY13 FY14 FY15 FY16E FY17E FY18E EBIT (Rs. Mn) EBIT Margin (%) 35% 25% Exhibit 15: PAT (Rs. Mn), PAT Margin (%) 9000 6000 3000 0 22.4% 22.1% 21.9% 21.4% 20.7% 18.5% 3147 4025 4856 5240 6309 7743 FY13 FY14 FY15 FY16E FY17E FY18E 25% 23% 18% 15% PAT (Rs. Mn) PAT Margin (%) Emami has been an interesting growth story in the Indian FMCG sector with a net profit CAGR of more than in the last five years. With high gross margin products in the portfolio and better product mix, Emami has earned PAT margin more than and it is expected to grow at ~22% CAGR from FY17E to FY18E. Exhibit 16: EPS (Rs.), RoE & RoCE (%) 40 30 20 10 0 47.1% 44.9% 42.4% 39.5% 20.8 45.6% 43.1% 17.7 21.4 38.3% 37.9% 38.1% 37.0% 23.1 36.7% 37.1% 27.8 34.1 FY13 FY14 FY15 FY16E FY17E FY18E EPS (Rs.) (LHS) RoE (%) RoCE (%) 50% 45% 40% 35% 25% Emami s EPS has registered CAGR of 9.1% from FY11 to FY15 and it is expected to register double digit growth during FY17E and FY18E. Emami has very strong balance sheet, earning an average RoE of 42.9% & RoCE of 40.7% in last 4 years, it is expected to maintain its RoE and RoCE at same level going forward. 6
Exhibit 17: 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 7
Valuation & Outlook At CMP of Rs.1007, the stock is trading at P/E of 29.5x for FY18E. With the anticipated increase in top line due to high margin products in the portfolio, rising temperature across India, strong brand positioning, innovation and new product launches which were favourably received by the market, with strong balance sheet & financial ratios, we expect that the consumer expenditure will further increase as the economy revives and hence there will be growth in Emami s top line and bottom line as well. Based on P/E of 38.5x, we initiate the coverage with a BUY rating for a Target Price of Rs.1313 representing an upside of for a period of 12-15 months. Exhibit 18: PE Band 70 60 50 40 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 P/E Average 1SD 2SD -1SD -2SD Exhibit 19 (a): Comparative Valuation Summary CMP (Rs.) Mcap EV/EBITDA (x) P/E (x) EPS (Rs.) (Rs. Mn) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E 1007 228500 41.5 35.7 31.7 46.8 40.4 36.2 21.4 23.1 27.8 GCPL 1381 470209 26.9 33.3 28.3 39.1 41.6 34.4 26.6 33.2 39.6 Marico Ltd 254 32853 28.1 30.1 25.9 46.4 30.2 25.3 4.5 5.8 6.8 Exhibit 19 (b): Comparative Operational Metrics Summary CAGR % (FY15-17E) RoE (%) Price Perf (%) Net Sales (Rs. Mn) Sales EBITDA EPS FY15 FY16E FY17E 3m 6m 12m FY15 FY16E FY17E 15.3 13.8 14.0 44.9 38.3 37.9 (0.1) (4.0) 7.4 22172 25334 29473 GCPL 12.7 18.5 22.0 22.1 24.1 24.1 7.9 2.2 22.3 82422 90408 104638 Marico Ltd 10.3 18.6 22.2 36.1 35.1 34.1 16.9 32.2 29.6 57203 61879 69564 8
Peer Comparison Exhibit 20: Revenue Growth (%) Exhibit 21: EBITDA Margin (%) 25% 21.8% 27.6% 15% 10% 7.2% 14.3% 16.3% 25% 24.4% 22.8% 23.7% 5% 15% 0% FY14 FY15 FY16E FY17E Emami GCPL Marico 10% FY14 FY15 FY16E FY17E Emami GCPL Marico Exhibit 22: RoE (%) Exhibit 23: Dividend Payout Ratio (%) 50% 47.1% 44.9% 60% 54.4% 40% 38.3% 37.9% 50% 40% 45.0% 46.2% 38.7% 27.0% FY14 FY15 FY16E FY17E Emami GCPL Marico 10% FY11 FY12 FY13 FY14 FY15 Emami GCPL Marico Key Risks ycompetition. yvolatility in raw material prices. 9
Financials Exhibit 24: Income Statement YE Mar (Rs. Mn) FY14 FY15 FY16E FY17E FY18E Revenues 18208 22172 25334 29473 34504 Growth (%) 7.2 21.8 14.3 16.3 17.1 Operating Expenses 13185 16772 19550 22480 25870 EBITDA 5023 5401 5784 6992 8634 Growth (%) 11.8 7.5 7.1 20.9 23.5 Depreciation & Amortization 961 343 383 428 476 Other Income 653 918 1197 1371 1570 EBIT 4714 5976 6599 7935 9728 Interest Expenses 54 51 51 51 51 PBT 4571 5924 6547 7884 9676 Tax 547 1070 1309 1577 1935 Adjusted PAT 4025 4856 5240 6309 7743 Growth (%) 27.9 20.7 7.9 20.4 22.7 Exhibit 25: Balance Sheet YE Mar (Rs. Mn) FY14 FY15 FY16E FY17E FY18E Cash & Cash Equivalents 2700 3541 5046 6910 9515 Trade Receivables 793 1027 1057 1232 1443 Inventories 1411 1267 1589 1867 2198 Loans & Advances & Others 1149 1206 1716 1963 2298 Investments 2892 4946 5946 6946 7946 Net Block 4078 4776 4917 5359 5797 Total Assets 13023 16763 20273 24278 29197 Current Liabilities & Provisions 3146 3688 4451 5147 6002 Debt 218 194 194 194 194 Other Liabilities 338 574 605 645 694 Total Liabilities 3702 4457 5250 5985 6890 Shareholders Equity 227 227 227 227 227 Reserves & Surplus 9094 12079 14796 18066 22080 Total Networth 9321 12306 15023 18293 22307 Total Networth & Liabilities 13023 16763 20273 24278 29197 10
Exhibit 26: Cash Flow Statement YE Mar (Rs. Mn) FY14 FY15 FY16E FY17E FY18E PBT (Before Exceptional Item) 4660 5924 6547 7884 9676 Depreciation 352 343 383 428 476 Tax Paid (766) (956) (1309) (1577) (1935) Inc/dec in Net WC 596 734 (282) 15 8 Other Income (586) (1491) (1093) (1267) (1466) Other non cash items 69 786 2 2 2 Cash flow from operating activities 4325 5340 4247 5484 6761 Inc/dec in capital expenditure (654) (1098) (500) (844) (887) Inc/dec in investments (13052) (18111) (1000) (1000) (1000) Others 12287 16871 1139 1313 1512 Cash flow from investing activities (1419) (2337) (361) (531) (375) Changes in Debt (751) 19 0 0 0 Dividend paid (2211) (2120) (2523) (3038) (3729) Interest paid (51) (52) (51) (51) (51) Effect of Forex Fluctuation 21 (35) 0 0 0 Cash flow from financing activities (3013) (2154) (2575) (3090) (3780) Net change in cash (128) 814 1311 1863 2605 Exhibit 27: Key Ratios YE Mar FY14 FY15 FY16E FY17E FY18E EBITDA Margin (%) 27.6 24.4 22.8 23.7 25.0 EBIT Margin (%) 25.9 27.0 26.0 26.9 28.2 Net Profit Margin (%) 22.1 21.9 20.7 21.4 22.4 Dividend Payout Ratio (%) 46.2 38.7 40.0 40.0 40.0 Net Debt/Equity (x) (0.3) (0.3) (0.3) (0.4) (0.4) RoE (%) 47.1 44.9 38.3 37.9 38.1 RoCE (%) 45.6 43.1 37.0 36.7 37.1 Exhibit 28: Valuation Parameters YE Mar FY14 FY15 FY16E FY17E FY18E EPS (Rs.) 17.7 21.4 23.1 27.8 34.1 DPS (Rs.) 8.2 8.3 9.2 11.1 13.6 BV (Rs.) 41.1 54.2 66.2 80.6 98.3 PE (x) 24.5 46.8 40.4 36.2 29.5 P/BV (x) 10.6 18.5 14.1 12.5 10.2 EV/EBITDA (x) 19.2 41.5 35.7 31.7 25.4 EV/Sales (x) 5.3 10.1 8.2 7.5 6.4 ; *Represents multiples for FY14 & FY15 are based on historic market price 11
Stock Ratings Absolute Returns Buy : > 15% Hold : 5-15% Sell : <5% Connect & Discuss More at 1800 425 8283 (Toll Free) research@karvy.com Live Chat f in You Tube Disclaimer Analyst certification: The following analyst(s), Kunal Jagda, 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. 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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 Kunal Jagda, 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. 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