Institutional Equity Research Key data 3 June 28 Sector Capital Goods Market Cap Rs9bn/US$.2bn 52 Wk H/L (Rs) 337/15.5 BSE Avg. daily vol. (6m) 4,437 BSE Code 5373 NSE Code SANGHVIMOV Bloomberg SGM IN Reuters SNGM.BO Sensex 16,63 Nifty 4,74 Shareholding pattern (%) 31-Dec-7 31-Mar-8 FIIs 38. 37.1 MFs and institutions 4.1 4.2 Promoters 42.8 44. Others 15.1 14.8 Absolute returns (%) 1mth 3mth 12mth Sanghvi Movers (14.9) (16.) 34.7 Sensex (8.7) (8.6) 1.2 Sanghvi Movers Ltd Buy Current Price: Rs222 Target Price: Rs 365 Results above estimates Figure 1: Actual Vs Religare Estimates Q4FY8A Q4FY8E Difference (%) Consensus Net sales 81. 695 16.5% NA EBITDA 571 494 15.6% NA EBITDA margins (%) 71.7 71.1 6bps NA PAT 237 21 17.9% NA PAT margins (%) 29.7 28.9 8bps NA Source: Religare Institutional Equity Research, Bloomberg Financial highlights Q4FY8 Result Review Net sales were up 56% YoY to Rs 8.1 bn. The robust growth in sales was due to the deployment of additional cranes in the quarter and improving yield. EBITDA was up 41% YoY. EBITDA margin reduced by 54 bps. The margins reduced mainly on account of the increase in employee costs by 237% YoY. Adjusted PAT increased 57% YoY. PAT growth was faster than EBITDA growth mainly due to the reduced tax rate YoY. Valuations and Recommendation The stock is trading at 12x its FY9E earnings. We have revised our earnings estimate downwards by 9% and 12% for FY9E and FY1E respectively to factor in lower sales due to the reduced capex guidance by the company in FY9. We maintain our Buy rating on the stock. Kunal Sheth kunal.sheth@religare.in +91 22 6655 141 Figure 2: Quarterly Performance FY7 FY8 FY7 FY8 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Sales 42 473 389 521 53 573 644 811 1,786 2,557 Change % 45.1 37.1 (12.8) 23.6 31.7 2.9 65.4 56 19.8 43 EBITDA 285 343 281 393 46 429 469 571 1,32 1,875 EBITDA margin (%) 7.8 72.5 72.2 75.4 76.6 74.9 72.8 7 72.9 73.3 Change (%) 65. 52.3 (6.) 35.9 42.6 25. 67. 41 32. 44. Depreciation 76 85 88 1 111 114 117 133 348 475 Other Income 6.8 1.5 2.1 5..6 11..7. 15.4 12 Interest exp/(inc) 54.5 61.7 66.6 63.4 73.7 74.8 75.4 83 246 37 PBT 161 198 129 235 222 251 278 355 723 1,15 PBT margin (%) 39.9 41.9 33.1 45.1 41.8 43.9 43.1 43.7 4.5 43.2 PBT growth (%) 143 89-3 65 38 27 115 51 45. 52.9 Extraordinary exp/(inc) 171 () Tax 54.85 67.25 44.91 84.5 76.51 83.98 1.7 117 251.1 378 Effective tax rate (%) 34.17 33.92 34.84 35.74 34.51 33.39 36.4 32.99 34.7 34.2 PAT reported 277 131 84 151 145 168 178 238 472 728 Adjusted PAT * 16 131 84 151 145 168 178 238 472 728 Adj PAT margin (%) 26.3 27.7 21.6 29. 27.4 29.3 27.6 29.3 26.4 28.5 Change (%) 148.3 9.4 (3.84) 7.9 37.4 27.8 111.4 57 46.6 4.9 Equity Capital 82 82 82 82 86 86 86 86 82 86 Adj EPS 2.6 3.2 2.1 3.7 3.4 3.9 4.1 4.8 12.6 16.2 * Excluding extraordinary
Sanghvi Movers Q4FY8 Result Review 3 June 28 Other business highlights The company added 34 cranes during FY8 and incurred a capex of Rs 2.2bn. The company plans to spend Rs 2.5bn in FY9 and FY1 respectively. The company s dependency on the windmill sector has come down substantially from 73% in FY7 to 48% in FY8. The share of the windmill sector in the total revenues is further likely to come down to 35% in FY9. The share of the power sector has increased from 9% in FY7 to 19% in FY8 and is further expected to increase to 3% in FY9. Figure 3 : Sales break Up. 8% 7% 6% 5% 4% 3% 2% 1% % FY7 FY8 73% 48% 17% 13% 9% 6% 3% 2% 3% 5% 1% 3% Windmill Refinery Pow er Chemicals Oil& Gas others Source: Religare Institutional Equity Research, Bloomberg The company s long-term contract with suzlon which was due to expire in March 29 has been extended for two more years. The company has downgraded its capex guidance for FY9 from Rs 3.9bn to Rs 2.5bn. The main reason for the downgrade was that one of the crane suppliers has called off a deal due to non-availability of cranes at his end. We have revised our earnings estimate downwards by 9% and 12% for FY9E and FY1E respectively to factor in lower sales due to the reduced capex guidance by the company in FY9. Figure 4: Table for earnings revision Earlier estimates Revised estimates Upgrade/(downgrade) (%) FY8E FY9E FY1E FY8E FY9E FY1E FY8E FY9E FY1E Net Sales 3,492 4,439 3,91 3,953 (11.47) (1.94) EBITDA 2,556 3,28 2,26 2,888 (11.57) (11.96) EBITDA margin (%) 73.2% 73.9% 73.1 73. PBT 1,435 1,867 1,34 1,648 (9.11) (11.72) Adj PAT 947 1,232 861 1,88 (9.1) (11.71) Adj PAT margin (%) 27.1% 27.8% 27.8 27.5 Adj EPS (Rs) 19.9 25.9 18.1 22.9 (9.) (11.65) Source: Religare Institutional Equity Research, Bloomberg 2
Sanghvi Movers Q4FY8 Result Review 3 June 28 Stock performance Sanghvi Movers Absolute Perf. From Apr 4 35 3 25 2 15 1 5 Apr-4 Apr-5 Apr-6 Apr-7 Apr-8 Relative Perf. From Apr 4 2,85 1,585 1,85 585 85 Apr-4 Apr-5 Apr-6 Apr-7 Apr-8 Relative Perf. From Apr 5 to Mar 6 Relative Perf. From Apr 6 to Mar 7 38 12 33 11 28 23 18 1 9 13 8 8 Apr-5 Jun-5 Sep-5 Dec-5 Mar-6 7 Apr-6 Jun-6 Sep-6 Dec-6 Mar-7 Relative Perf. From Apr 7 to Mar 8 175 165 155 145 135 125 115 15 95 85 Apr-7 Jun-7 Sep-7 Dec-7 Mar-8 Relative Perf. From Apr 8 115 11 15 1 95 9 85 1-Apr 16-Apr 1-May 16-May 31-May Source: Bloomberg, Religare Institutional Equity Research 3
Sanghvi Movers Q4FY8 Result Review 3 June 28 12 month forward rolling band charts Sanghvi Movers P/E Band 4 35 (Rs) 17x 3 25 14x 2 15 1 11x 8x 5x 5 Apr-3 Apr-4 Apr-5 Apr-6 Apr-7 Apr-8 P/BV Band 5 45 4 (Rs) 4x 35 3 3x 25 2 15 1 2x 1x 5 Apr-3 Apr-4 Apr-5 Apr-6 Apr-7 Apr-8 EV/EBITDA Band EV/Sales Band 25, 2, 9x 3, 25, 8x 15, 1, 5, 7x 5x 3x 2, 15, 1, 5, 6x 4x 2x Apr-3 Apr-4 Apr-5 Apr-6 Apr-7 Apr-8 Apr-3 Apr-4 Apr-5 Apr-6 Apr-7 Apr-8 18, 16, 14, 12, 1, 8, 6, Mkt cap/sales Band 4, 2, Apr-3 Apr-4 Apr-5 Apr-6 Apr-7 Apr-8 Source: Bloomberg, Religare Institutional Equity Research 5x 4x 3x 2x 4
Sanghvi Movers Q4FY8 Result Review 3 June 28 Financials Income statement Y/E, 31st March FY6 FY7 FY8E FY9E FY1E Net sales 1,49 1,786 2,568 3,91 3,953 EBITDA 986 1,32 1,887 2,26 2,888 EBITDA margin (%) 66.2 72.9 73.5 73.1 73. Depreciation 356.4 348.3 474.6 613.7 834.2 EBIT 63 954 1,413 1,647 2,54 Other income 6. 15.4 13.5 75.7 1.1 Interest Exp/(Inc) 137.2 246.3 37.2 418. 55.7 PBT (Operating) 499 723 1,119 1,34 1,648 PBT margin (%) 33.4 4.5 43.6 42.2 41.7 Extra ord (inc)/exp - - - - - Taxes 176.7 251.1 377.6 443.4 56.4 Minority interest - - - - PAT( Reported) 322 472 741 861 1,88 Less: Extra ordinary income / Others - - - - - Adj PAT 322 472 741 861 1,88 Adj PAT margin (%) 21.6 26.4 28.9 27.8 27.5 Quarterly Financials Q4FY7 Q1FY8 Q2FY8 Q3FY8 Q4FY8 Net sales 521 53 573 644 811 Changes (%) 23.6 31.7 2.9 65.4 53. EBITDA 393 46 429 469 571 Changes (%) 35.9 42.6 25. 67. 41. Margin (%) 75.4 76.6 74.9 72.8 71. PAT 151 145 168 178 238 PAT adj 151 145 168 178 238 Changes (%) 7.1 37.4 27.8 111.4 57. Margin (%) 29. 27.4 29.3 27.6 29.3 EPS adj (Rs) 3.7 3.4 3.9 4.1 6.3 EPS dil (Rs) 3.7 3.4 3.9 4.1 6.3 Ratios Y/E, 31st March FY6 FY7 FY8E FY9E FY1E Growth Net sales (%) 97.7 19.8 43.8 2.4 27.9 EBITDA (%) 116.6 32. 44.9 19.8 27.8 PAT adjusted (%) 134.9 46.6 57.1 16.1 26.4 EPS adjusted (%) 134.9 3.8 49.4 5. 26.4 EPS diluted (%) 134.9 42.3 4.8 7.6 2.4 EPS Consl & diluted (%) 134.9 24.4 42.2 16.1 26.4 Valuations P/E (x) 25.5 17.9 12.7 11.8 9.8 P/BV (x) 1.2 4.4 3.2 2.2 1.8 EV/EBITDA (x) 1.7 8.4 6.8 6.3 5.2 EV/Sales (x) 7.1 6.1 5. 4.6 3.8 Profitability EBITDA margin (%) 66.2 72.9 73.5 73.1 73. Adj PAT margin (%) 21.6 26.4 28.9 27.8 27.5 RoE (%) 46.8 32.4 28.5 21.6 2. RoCE (%) 26.5 24.1 24.3 2.1 19.6 RoIC (%) 17.2 15.7 16.3 14.3 14.4 B/S ratios Inventory days - - - - - Creditor days 45. 22. 21.8 36.2 36.3 Debtor days 8.2 12.8 89.1 89.3 89.4 Working Capital days 14.4 127.8 114.3 96.5 96.7 Net debt/equity 2.9 1.3 1.2.7.7 * ROIC is calculated on post tax basis. Balance sheet Y/E, 31st March FY6 FY7 FY8E FY9E FY1E Liabilities Equity share capital 73 82 86 95 95 Total Res. & Surplus 735 2,21 2,92 4,854 5,823 Total Shareholders' fund 88 2,13 3,6 4,949 5,919 Convertible Debt Others Debt 2,373 2,751 3,856 5,356 5,756 Total Loans 2,373 2,751 3,856 5,356 5,756 Deferred tax liability (net) 165.1 315.2 378.5 441.8 55.1 Total liabilities 3,346 5,17 7,241 1,747 12,18 Assets Net fixed assets & others 2,858 4,647 6,456 8,342 1,8 Capital WIP & others 124 6 6 6 6 Total non-current assets 2,982 4,653 6,462 8,348 1,14 Total investments - non current..... Current assets Inventories - - - - - Sundry debtors 327 53 627 756 969 Cash & cash equivalents 38 53 188 1,795 1,333 Cash 38 53 188 1,795 1,333 Liquid investments - - - - - Other current assets 282 23 331 368 471 Total current assets 648 786 1,146 2,919 2,773 Total current liabilities 184 18 153 37 393 Total provisions 1 162 162 162 162 Net current assets 364 517 831 2,451 2,218 Misc. expenditure - - - - - Total assets 3,346 5,17 7,291 1,795 12,226 Cash flow Y/E, 31st March FY6 FY7 FY8E FY9E FY1E Cash from operations PBT 499 723 1,119 1,34 1,648 Tax paid (175) (163) (259) (38) (497) Dep & amortization 356 348 475 614 834 Working capital changes (178) (197) (179) (13) (23) Others 4 (11) Net cash from operations 56 71 1,156 1,525 1,755 Cash from investments Capital expenditure (1,794) (1,762) (2,3) (2,5) (2,5) Sale/purchase of inv & others 4 3 Net cash from investments (1,789) (1,759) (2,3) (2,5) (2,5) Cash from financing Issue of shares & share prem 77 293 1,2 Dividend paid (41) (81) (118) (118) (118) Debt change 1,256 391 1,15 1,5 4 Others Net cash from finanacing 1,215 1,8 1,28 2,582 282 Net change in cash (69) 22 136 1,67 (462) Per share data Y/E, 31st March FY6 FY7 FY8E FY9E FY1E EPS adjusted 8.8 11.5 17.2 18.1 22.9 EPS diluted - wtd 8.8 12.6 17.7 19. 22.9 EPS Consl and diluted 8.8 11. 15.6 18.1 22.9 CEPS 18.6 2.1 28.3 31. 4.4 Book value 22.1 51.4 69.9 14.1 124.5 Dividend 1.1 2. 2.7 2.5 2.5 O/s shs.-actual (mn) 36.5 4.9 43. 47.5 47.5 O/s shs.-diluted (mn) 36.5 43. 47.5 47.5 47.5 O/s shs wtd / diluted (mn) 36.5 37.6 41.9 45.3 47.5 5
Sanghvi Movers Q4FY8 Result Review 3 June 28 Rating definition Buy : > 15% returns relative to Sensex Accumulate : +5 to +15% returns relative to Sensex Sell : > (-)15% returns relative to Sensex Reduce : (-) 5 to (-) 15% returns relative to Sensex Hold : Upto + / (-) 5% returns relative to Sensex Religare Securities Ltd. Taj Building, 21, D.N. Road, Mumbai - 41 For inquiries contact: Email: institutionalsales@religare.in Phone: 6655 DISCLAIMER: Religare Securities Limited (Religare) has two independent equity research groups: Institutional Equities (Institutional Equity Research) and Priority Client Group (Religare Research). Religare Institutional Equity Research is aimed to service the institutional clients of Religare Securities Limited including the Portfolio Management Services of Religare whereas Religare Research is published with a view to service all segments of clients including Retail, HNIs and Institutional clients and PMS. 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