date: 10th february 2020 - hdfc securities

Date: 10th February 2020

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Equity Research Pick of the Week – Retail Research

Huge opportunity for high growth in QSR segment

(McDonald Franchisee)

Changing demographics driving increasing spends on fast

foods

Same store sales growth (SSSG) starting to pick up

Westlife Development Ltd

INDUSTRY

CMP

RECOMMEND ed

ADD ON DIPS TO

SEQUENTIAL TARGETS

TIME HORIZON ed

Restaurants

Rs 462.05

Buy at CMP and add on declines

Rs 418-424

Rs 515-545 Rs 393

3-4 quarters

Investors may sell 60-65% of their holdings on first target being achieved and later keep a stop loss of first target for the balance holdings, in case the second target takes time to be achieved.

Investors may also maintain Rs 393 as level below which investment position needs to be reviewed, including the possibility to exit

Brand extension to expand addressable market

Building long-term sustainability through captive supply

chain

Encouraging progress under ROP 2.0

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HDFC Scrip Code WESDEVEQNR

BSE Code 505533

NSE Code WESTLIFE

Bloomberg WLDL IN

CMP (Feb 7, 2020) 462.05

Equity Capital (cr) 31.1

Face Value (Rs) 2

Eq- Share O/S(cr) 15.6

Market Cap(Rs cr) 7192.1

Book Value (Rs) 30.94

Avg.52 Wk Volume 2,00,000

52 Week High 499.40

52 Week Low 261.45

Shareholding Pattern % (Dec 31, 2019)

Promoters 62.1

Institutions 26.5

Non Institutions 11.3

Total 100.0

Investment rationale: • Huge opportunity for high growth in QSR segment • Changing demographics driving increasing spends on fast foods • Same store sales growth (SSSG) starting to pick up • Brand extension to expand addressable market • Building long-term sustainability through captive supply chain • Encouraging progress under ROP 2.0

Concerns: • Slowdown in the economy • Changing consumer preferences • Competition in the industry • Increase in royalty • Higher penetration of food aggregators

Company profile: Westlife Development Ltd. (WDL) is one of the fastest growing players in India’s quick service restaurant (QSR) sector. It operates a chain of McDonald’s restaurants in west and south India through its subsidiary Hardcastle Restaurants Pvt. Ltd. (HRPL). WDL

through its subsidiary HRPL operates McDonald’s through 315 restaurants (as of Dec-2019) across 42 cities and 218 company-owned McCafes. McDonald’s operates through various formats and brand extensions including standalone restaurants, drive-thru’s, 24/7 restaurants, McDelivery, dessert Kiosks. Jatia family is the main promoter of WDL. View and valuation: HRPL (owned by WDL) is one of the largest players in the quick service restaurant industry and has been the custodian of the McDonald’s brand in western and southern India since 1996. The Indian food service industry is expected to grow at 9% CAGR with WFF chains which represent just 2-3% of the total IEO market growing at ~2.5x. Increase in literacy, high disposable income, exposure to media, greater and easier availability is driving the IEO sales. HRPL has been expanding its network alongwith strong organic growth. Its focus on innovation, premiumisation and diversification into segments of the future, while simultaneously providing for affordable meals for its core consumers, are the key drivers of its success. It has built a robust supply chain through partnerships and sources more than 95% of its products locally, thereby having a strong control on costs. The company also enters into long-term real estate deals (typically for over 20 years) with favourable exit clauses, reducing the uncertainties of continuation of an outlet. FY20 has shown signs of sustained profit growth for the company. Margins could grow well over FY20-FY21 due to better product mix and cost control measures. We feel investors could buy the stock at the CMP and add on dips to Rs 418-424 band (19.5x FY22E EV/EBITDA and 2.9x EV/Sales) for sequential targets of Rs 515 (24x FY22E EV/EBITDA and 3.6x EV/Sales) and Rs 545 (25.5x FY22E EV/EBITDA and 3.8x EV/Sales) in 3-4 quarters. At CMP of Rs 462.05 the stock quotes at 21.5x FY22E EV/EBITDA and 3.2x EV/Sales.

FUNDAMENTAL ANALYST

Atul Karwa [email protected]

mailto:[email protected]

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Financial Summary

YE March (Rs cr) Q3FY20 Q3FY19 YoY (%) Q2FY20 QoQ (%) FY19 FY20E FY21E FY22E

Net Sales 432.9 370.8 16.8 396.5 9.2 1401.6 1604.8 1856.8 2170.6

EBITDA 70.9 33.3 112.9 58.0 22.2 120.6 240.7 276.7 325.6

APAT 14.4 6.9 107.7 4.7 207.4 40.3 28.0 56.2 93.0

Diluted EPS (Rs) 0.9 0.4 0.3 2.6 1.8 3.6 6.0

P/E (x) 179.4 258.0 128.6 77.7

EV / EBITDA (x) 60.9 30.2 25.9 21.6

RoE (%) 7.2 4.7 8.8 13.0

Key Highlights

WFF chains such as McDonald’s, Burger King, Domino’s Pizza, etc. represent just about 2-3% of the total IEO market, they are growing ~2.5x faster

Changing demographics, higher exposure to media, greater and easy availability of WFF is driving higher consumption

Brand extension like McCafé, McBreakfast and McDelivery has helped WDL create a portfolio that builds brand differentiation and yields long-term results

Menu innovations have resulted in higher footfalls and SSSG have started to pick-up

(Source: Company, HDFC sec)

Company profile:

Westlife Development Ltd. (WDL) is one of the fastest growing players in India’s quick service restaurant (QSR) sector. It operates a chain of McDonald’s restaurants in west and south India through its subsidiary Hardcastle Restaurants Pvt. Ltd. (HRPL). WDL through its subsidiary HRPL operates McDonald’s through 315 restaurants (as of Dec-2019) across 42 cities, and provides direct employment to over 10,000 employees. McDonald’s operates through various formats and brand extensions including standalone restaurants, drive-thru’s, 24/7 restaurants, McDelivery, dessert Kiosks. Established in 1995, HRPL was a 50:50 JV between the BL Jatia family and McDonald's Corporation, USA. HRPL owns and operates McDonald's Corp’s restaurants in western and southern India. In 2010, HRPL acquired the status of a development licensee under the master franchise agreement with McDonald's. HRPL acquired McDonald’s stake in the JV in Sep-2012 and post organisational restructuring in FY13, HRPL became a direct 100% subsidiary of WDL, a listed entity with promoters holding 62.14% stake as of Dec-2019. Promoters sold ~3% stake in WDL on Feb 05, 2020. WDL, through its subsidiary HRPL, serves over 200mn customers annually at 315 company-owned McDonald’s restaurants and 218 company-owned McCafes located in Southern and Western India. McDonald’s provides various formats and brand extensions that comprise standalone restaurants, Drive-thrus, and mall and food court restaurants. The brand extensions include McCafe, the Company’s in-house coffee chain, McDelivery that facilitates website and the app-based ordering of food delivery, and McBreakfast, an exclusive wholesome and nutritious breakfast menu. The company started as a burger place and is primarily known for it. It has expanded its food offering and now serves food items like wraps, rice, pizza puffs, coffee, coolers and desserts.

(Figures for FY20 are not comparable to previous year due to implementation of IND-AS)

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Investment Rationale

Huge opportunity for higher growth in QSR segment The increasing western influence and urbanisation provide a huge opportunity for western fast food (WFF) chains like McDonalds. As per NRAI IFSR 2019 reports, the Indian food service industry has grown at a CAGR of 11% from 2016, with the current market size being Rs 4.23 lakh crore in 2018-19. The report estimates the industry’s growth at a CAGR of 9% to reach Rs 5.9 lakh crore by 2022-23. Quick service restaurants (QSR) currently constitute ~20% of the total spends on eating out in the organised food market in the country. Although, WFF chains such as McDonald’s, Burger King, Domino’s Pizza, etc. represent just about 2-3% of the total informal eating out (IEO) market, they are growing ~2.5x faster despite the poor macro-environment overall. Eating out itself seems to be a highly under-penetrated space, with the average monthly eat-out frequency in a metropolitan cities being merely 6.6x as per NRAI IFSR 2019 report. While the eat-out frequency has grown from the last decade, the recent economic slowdown has led to slower growth in discretionary spending.

Food ordering or eating out frequency of millennials across India in 2018

(Source: Statista, HDFC Sec)

Changing demographics driving increasing spends on fast foods Increase in literacy, high disposable income, exposure to media, greater availability and penetration of a variety of consumer goods into the interiors of the country, have all resulted in creating lifestyle and aspiration levels on a par with other fast-moving metropolitan cities. The growth in nuclear families, particularly in urban India, exposure to global media and Western cuisine and an increasing number of women joining the workforce have had an impact on eating out trends.

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Once a week

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once in 2-3 months

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Equity Research Pick of the Week – Retail Research Growing need of consumer for convenience, increased appetite and insatiable hunger for international food and exposure to global media and cuisine, the annual spending of each middle class household on food is increasing. According to a Nielsen survey middle-income urban millennials spend roughly 10% of their total food expenditure, or Rs 7,914 annually, on dining out—purchasing cooked meals from restaurants, caterers, and canteens. On average, urban Indians households spend Rs 6,500 per year on dining out. However, urban Indians lag dramatically behind other countries on the per capita expenditure on dining out.

Per capita expenditure on eating out ($)

(Source: NRAI, HDFC Sec)

Brand extension to expand addressable market Over the last few years McDonald’s has expanded from just being a dine-out quick service restaurant. It launched McCafé in Mumbai in 2013 tapping into the Rs 2,570cr (2018) organised Indian café market, representing a brand extension that serves specialty coffees and desserts, typically located in a separate area. It also extended its McDelivery (launched in 2005) platform to web and mobile apps which has proved to be a success as now more than 50% of the delivery orders come from mobile and web ordering. McDonald's is a pioneer and the only food retailer to offer dedicated branded breakfast menu in the country between 7 am – 11 am. It introduced McBreakfast in 2017, the first ever branded breakfast category. Strategic investments in formats such as drive-thrus and brand extensions like McCafé, McDelivery and breakfast platforms, dessert kiosks helped WDL create a portfolio that builds brand differentiation and yields long-term results. HRPL continued to strengthen brand extensions like breakfast service, McDelivery, dessert kiosks and McCafé to enhance day-part utilisation and unit economics. As a result, overall gross margin improved by ~560bps in the last 3 years.

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China

Brazil

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McCafe and McDelivery expanding fast

(Source: Company, HDFC Sec)

Same store sales growth (SSSG) starting to pick up Menu innovations like Happy Price combos, Flavour without borders, etc. have resulted in strong footfalls driving SSSG in the past few quarters. SSSG had dipped to a low of 5.6% in Q4FY19 on account of economic slowdown hitting discretionary spending and a high base of the previous year. Management has pointed to a pick-up in consumer sentiment driving an improved demand environment for QSR players. Brand extensions have increased ticket sizes and aided product mix driving a 138bps increase in gross margins in FY19.

SSSG has been positive for the 18th straight quarter


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Building long-term sustainability through captive supply chain WDL, along with its partners, have invested over Rs 1,000cr in building a robust supply chain. This backbone represents the most effective insurance against evolving consumer preferences, food inflation and climactic vagaries. The supply chain ensures that there is consistent menu quality across restaurants, geographies and time. This has made it possible to enhance product availability and quality on the one hand and reduce costs and delivery tenure on the other. WDL’s supply chain also provides relationship stability. The Company possesses years of experience in working with specialised pan-India food suppliers, who, in turn, work with competent farmers specialising in growing crops – the best quality of an adequate volume grown in the most hygienic conditions using globally validated processes. WDL sources more than 95% of the produce used in its food locally and directly – from seed to spoon.

Encouraging progress under ROP 2.0 Amidst the slowdown and inflationary pressure McDonald’s India management conceptualised Restaurant Operating Platform (ROP) 2.0 in 2013, which got launched in 2016. ROP 1.0 set the foundation for restaurant growth in 2003, focussing on SSSG and margin improvement. Under ROP 2.0, the management focused on reducing capex and opex per store through higher localisation, restaurant design changes, utilities and kitchen processes. Through furniture and equipment localisation and restaurant design changes, it has reduced capex by 20-25%. Initiatives like LED lightening, solar power heaters, redesigned HVAC for lower unit consumption and labour productivity improvements have aided operating efficiency (20-25% reduction in operating costs). ROP 2.0 has delivered encouraging results with (a) savings of ~20% in capex per store, (b) cash break even period reduced to 12-18 months from 24 months earlier and (c) continuous improvement in restaurant operating margin (210bps in FY18 and 150bps in FY19 to 14.6%). WDL plans to add around ~25 restaurants per annum over the next few years and revamp another 20-25 restaurants which will drive further improvement in margins.

WDL launched Experience of the Future (EOTF) format stores in Q4FY17 and at the end of FY19 operated 25 EOTF format stores. The focus was to make the stores more modern, exciting and engaging for the customers by redefining customer experience touch-points. EOTF leveraged technologies to enhance in-restaurant capabilities, accelerating service, quality, convenience and value. These restaurants are equipped with amenities such as air chargers, gaming tables and self-ordering kiosks and have generated excellent customer reviews. With ROP 2.0, WDL has significantly reduced the incremental cost for an EOTF restaurant to 15% over a basic restaurant. This should allow faster expansion of the EOTF format going forward. It intends to increase EOTF format to 60 restaurants by the end of FY20.

Gross margins and ROM have been on an uptrend


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FY14 FY15 FY16 FY17 FY18 FY19

Gross Margins Restaurant Op. Margin (RHS)

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Equity Research Pick of the Week – Retail Research Enhancing value offerings to drive higher throughput WDL has taken various measures to localise its menu and provide more options in the value offering to drive higher throughput across stores. Given that India is pre-dominantly value conscious economy, McDonalds has launched McSaver combos wherein you can select one snack and one dessert, starting at an affordable price of Rs 59.

McSaver combos start at Rs 59


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Equity Research Pick of the Week – Retail Research It has innovated in the breakfast category as well for an increasing share of all-day part meals. McBreakfast gives customers a range of wholesome and easy to consume breakfast options

Breakfast combos available at Rs 99


Brand extensions to capture more day parts McCafé provides a range of premium, specialty hand-crafted coffees and a range of fruit and dairy based beverages at an outstanding value. Launched in 2013 McCafé has become the second largest coffee player in India in terms of number of units sold. McCafé sales have increased 8x in the last 4 years and average sales per day has more than doubled. In FY20, McCafé achieved an important milestone of 10mn cups sold in the last 5 years. The company has introduced McCafé Rewards program to encourage frequency.

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McCafé - Building a coffee destination


McDelivery gives customers an easy and convenient way to order and consume McDonald’s food in the comfort of their homes and offices. McDelivery sales have increased over 7x in last 4 years and the company has expanded delivery network to 258 hubs in Q3FY20.

McDelivery – A Strong Growth Driver


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Equity Research Pick of the Week – Retail Research McDonald’s App launched in Jan-2019 and has seen over 3mn downloads since its launch. Number of active users have increased ~35% qoq in Q3FY20. It Launched an engagement activity, where users have to play a simple memory game to unlock an exclusive offer

Building loyalty through McDonald’s App


These complements have increased the utilisation of different day-parts, emerged as revenue drivers, increased cross-sale and generated incremental revenues for the company with minimal cost increase, enhancing organisational value. Additionally the popularity of food ordering apps like Swiggy and Zomato is adding to the topline of the company. Franchisee for North and East selected US fast food chain McDonald's has selected MMG Group chairman Sanjeev Agrawal as its new partner to operate its outlets in north and east India. The development comes almost nine months after McDonald's bought estranged partner Vikram Bakshi's 50% stake in Connaught Plaza Restaurants Ltd (CPRL), a joint venture, which has the licence to run its restaurants in north and east India. Due to the delay in selecting the partner it was being speculated that WDL is a front runner to become the franchisee for the entire country. With this announcement the management can now focus on growing its business in South and West.

Q3FY20 Results Review WDL reported a healthy topline growth of 16.8% yoy to Rs 432.9cr driven by healthy customer footfalls on the back of the launch of McSavers combos along with continued traction across brand extensions. SSSG accelerated to 9.2% from 7% in Q2FY20 as the company launched several value and occasion led campaigns. Gross margins improved by 248bps yoy to 66% on the back of store-level operating efficiencies and better mix, and the management believes the current margins are sustainable. The company added 11 stores in Q3 and 19stores in 9MFY20 and expects to make 27-28 additions in FY20. 218 of the total 315 stores currently have McCafes, while 199 serve McBreakfast (up from 155 last year). The company intends to maintain its strategy of taking a 3-4% price hike each year and is confident of sustaining 7-9% SSS growth going forward.

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Particulars (Rs Cr) Q3FY20 Q3FY19 YoY (%) Q2FY20 QoQ (%) 9MFY20 9MFY19 YoY (%)

Operating Income 432.9 370.8 16.8 396.5 9.2 1211.4 1062.7 14.0

Material consumed 147.2 135.2 8.9 137.6 7.0 422.4 387.7 9.0

Employee expenses 58.2 50.2 16.0 58.1 0.2 166.5 145.4 14.5

Other expenses 156.7 152.1 3.0 142.8 9.7 444.8 436.2 2.0

Total expenses 362.1 337.5 7.3 338.5 7.0 1033.7 969.3 6.6

EBITDA 70.9 33.3 112.9 58.0 22.2 177.7 93.3 90.4

Depreciation 35.5 20.4 74.1 34.4 3.2 103.0 58.7 75.4

Other Income 4.6 2.0 131.9 3.8 20.2 11.3 11.6 -2.5

Finance cost 20.2 4.7 333.3 20.0 0.6 60.5 12.8 372.4

PBT 19.8 10.2 93.5 7.4 167.4 25.6 33.4 -23.5

Tax expenses 6.8 -0.9 -879.9 2.6 156.6 11.7 0.0 40219.2

PAT 14.4 6.9 107.7 4.7 207.4 17.9 20.0 -10.4

EPS (Rs) 0.9 0.4 107.7 0.3 207.4 1.2 1.3 -10.4

EBITDA (%) 16.4% 9.0% 739 bps 14.6% 174 bps 14.7% 8.8% 589 bps

PAT (%) 3.3% 1.9% 145 bps 1.2% 214 bps 1.5% 1.9% -40 bps (Source: Company, HDFC sec)

Concerns

Slowdown in the economy A slowdown in the economy would severely impact the growth of WDL as discretionary spending on eating out is among the first casualty. Changing consumer preferences Off late we have been witnessing a shift in consumer preferences towards healthy food options. WFF is generally seen as junk food in India and unless QSRs evolve their food menu, their business could be impacted over the medium term. Competition in the industry The potential size of the Indian industry has attracted other players in the WFF segment who have entered/looking to enter the Indian market. These players would be vying for the same wallet share thereby cannibalising revenues. Burger King – a direct competitor of HRPL is contemplating coming out with an IPO. Other competitors such as Subway, KFC are also expanding. Increase in royalty Westlife currently pays a royalty of ~4% to McDonalds until FY21. This royalty fee will increase to 4.5% in FY22 and FY23. Any unexpected increase in the royalty fee to McDonald’s could negatively impact the profitability.

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Equity Research Pick of the Week – Retail Research Higher penetration of food aggregators Food aggregators such as Swiggy and Zomato have promoted Cloud Kitchen Platforms where one does not need to invest in dine-in space. Though such platforms are small currently they could have an impact on traditional restaurants in the future. Poor return ratios Over the last few years the return ratios of the company have been poor due to low PAT margins and leverage. In FY19 The company posted RoNW of 7.2% and RoCE of 7.4%. Under utilisation of assets Asset utilisation of the company has some scope of improvement. In FY19 Asset turnover ratio stood at just 1.4x.

Peer Comparison

FY19 CMP (Rs)

Net Sales (Rs cr)

EBITDA (%)

PAT (%)

EPS (Rs)

RoE (%)

P/E (x)

EV/Sales (x)

EV/EBITDA (x)

Westlife Development 462 1401.6 8.6% 2.9% 2.6 7.2% 178.4 5.2 60.9

Jubilant Foodworks 1902 3563.1 16.8% 9.0% 24.2 28.7% 78.5 6.9 40.8

View and valuation HRPL (owned by WDL) is one of the largest players in the quick service restaurant industry and has been the custodian of the McDonald’s brand in western and southern India since 1996. The Indian food service industry is expected to grow at 9% CAGR with WFF chains which represent just 2-3% of the total IEO market growing at ~2.5x. Increase in literacy, high disposable income, exposure to media, greater and easier availability is driving the IEO sales. HRPL has been expanding its network alongwith strong organic growth. Its focus on innovation, premiumisation and diversification into segments of the future, while simultaneously providing for affordable meals for its core consumers, are the key drivers of its success. It has built a robust supply chain through partnerships and sources more than 95% of its products locally, thereby having a strong control on costs. The company also enters into long-term real estate deals (typically for over 20 years) with favourable exit clauses, reducing the uncertainties of continuation of an outlet. FY20 has shown signs of sustained profit growth for the company. Margins could grow well over FY20-FY21 due to better product mix and cost control measures. We feel investors could buy the stock at the CMP and add on dips to Rs 418-424 band (19.5x FY22E EV/EBITDA and 2.9x EV/Sales) for sequential targets of Rs 515 (24x FY22E EV/EBITDA and 3.6x EV/Sales) and Rs 545 (25.5x FY22E EV/EBITDA and 3.8x EV/Sales) in 3-4 quarters. At CMP of Rs 462.05 the stock quotes at 21.5x FY22E EV/EBITDA and 3.2x EV/Sales.

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Particulars, Rs in Cr FY18 FY19 FY20E FY21E FY22E

Income from operations 1134.9 1401.6 1604.8 1856.8 2170.6

Material Cost 425.0 505.5 552.1 636.9 742.3

Employee Cost 171.6 197.1 219.9 256.2 301.7

Other expenses 461.0 578.3 592.2 687.0 800.9

Total expenses 1057.5 1281.0 1364.1 1580.1 1845.0

EBITDA 77.4 120.6 240.7 276.7 325.6

Depreciation 67.3 79.7 139.8 147.6 155.1

EBIT 27.9 57.0 117.0 149.5 196.5

Other Income 17.8 16.1 16.0 20.4 26.0

Interest 15.0 17.7 79.1 73.5 70.8

Profit before tax 12.9 39.3 37.9 76.0 125.7

Tax Expenses 0.0 -1.0 9.8 19.8 32.7

Profit After Tax 12.9 40.3 28.0 56.2 93.0

Adj. PAT 12.9 40.3 28.0 56.2 93.0

EPS 0.8 2.6 1.8 3.6 6.0

Particulars, Rs in Cr FY18 FY19 FY20E FY21E FY22E

Profit Before Tax 12.9 39.3 37.9 76.0 125.7

Depreciation 67.3 79.7 139.8 147.6 155.1

Others 8.5 9.5 57.0 51.4 43.1

Change in working capital 50.8 -11.0 50.7 26.2 24.6

Tax expenses -2.3 -2.6 -9.8 -19.8 -32.7

CF from Operating activities 137.1 114.8 275.6 281.5 315.9

Net Capex -106.4 -142.7 -120.0 -105.0 -115.0

Other investing activities -0.2 -2.9 0.0 -25.0 -40.0

CF from Investing activities -111.4 -149.7 -120.0 -130.0 -155.0

Proceeds from Eq Cap 0.2 0.3 0.0 0.0 0.0

Borrowings / (Repayments) -7.4 50.4 -75.0 -70.0 -65.0

Dividends paid 0.0 0.0 0.0 0.0 0.0

Interest paid -15.1 -17.7 -79.1 -73.5 -70.8

CF from Financing activities -22.3 32.9 -154.1 -143.5 -135.8

Net Cash Flow 3.4 -1.9 1.4 8.0 25.1

Financials: Income Statement

Cash Flow

(Source: Company, HDFC sec)

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Particulars, Rs in Cr FY18 FY19 FY20E FY21E FY22E EQUITY AND LIABILITIES Share Capital 31.1 31.1 31.1 31.1 31.1 Reserves and Surplus 511.1 551.9 579.9 636.2 729.2 Shareholders' Funds 542.2 583.0 611.0 667.3 760.3 Long Term borrowings 0.0 0.0 0.0 0.0 0.0 Deferred Tax Liabilities (Net) 0.0 -1.7 -1.7 -1.7 -1.7 Other Long Term Liabilities 0.3 0.7 726.6 726.9 727.2 Long Term Provisions 1.5 2.4 2.9 3.3 3.8 Non-current Liabilities 1.8 1.4 727.8 728.4 729.3 Short Term Borrowings 183.5 233.9 158.9 88.9 23.9 Trade Payables 108.4 117.8 141.1 165.5 188.9 Other Current Liabilities 87.4 79.9 116.1 127.8 143.4 Short Term Provisions 5.7 6.4 7.8 8.7 10.2 Current. Liabilities 385.0 438.1 423.9 390.9 366.5 TOTAL 929.1 1022.6 1762.8 1786.7 1856.1 ASSETS Net Block 553.9 595.2 1300.4 1257.8 1217.7 Capital work-in-progress 19.7 28.4 28.4 28.4 28.4 Non current Investments 126.6 95.9 95.9 95.9 95.9 Long-Term Loans and Advances 105.0 111.0 136.4 157.8 184.5 Other Non-current Assets 0.2 4.2 1.7 2.6 4.0 Non-current Assets 231.7 211.1 234.1 256.4 284.4 Current Investments 57.7 106.5 106.5 131.5 171.5 Inventories 33.7 41.0 48.9 55.3 64.8 Trade Receivables 6.4 9.8 9.6 11.5 13.8 Cash and Bank Balances 10.9 9.2 10.7 18.7 43.8 Short-Term Loans and Advances 11.1 16.8 17.6 20.3 23.8 Other Current Assets 3.9 4.6 6.6 6.7 8.0 Current Assets 123.7 187.9 199.9 244.1 325.7 TOTAL 929.1 1022.6 1762.8 1786.7 1856.1

Balance Sheet

(Source: Company, HDFC sec) (Figures for FY20 onwards are not comparable to previous year due to implementation of IND-AS)

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Particulars FY18 FY19 FY20E FY21E FY22E

EPS (Rs) 0.8 2.6 1.8 3.6 6.0

Cash EPS (Rs) 5.1 7.7 10.8 13.1 15.9

BVPS (Rs) 34.9 37.5 39.3 42.9 48.9

PE (x) 562.2 179.4 258.0 128.6 77.7

P/BV (x) 13.3 12.4 11.8 10.8 9.5

Mcap/Sales (x) 6.4 5.2 4.5 3.9 3.3

EV/EBITDA (x) 95.0 60.9 30.2 25.9 21.6

EBITDAM (%) 6.8 8.6 15.0 14.9 15.0

EBITM (%) 2.5 4.1 7.3 8.1 9.1

PATM (%) 1.1 2.9 1.7 3.0 4.3

ROCE (%) 3.9 7.4 14.7 19.6 25.5

RONW (%) 2.4 7.2 4.7 8.8 13.0

Current Ratio (x) 0.3 0.4 0.5 0.6 0.9

Quick Ratio (x) 0.2 0.3 0.4 0.5 0.7

Debt-Equity (x) 0.3 0.4 0.3 0.1 0.0

Debtor days 1.8 2.1 2.2 2.1 2.1

Inventory days 10.3 9.7 10.2 10.2 10.1

Creditor days 30.0 29.5 29.4 30.1 29.8

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WDL BSE Midcap (RHS)

Key Ratios

Daily Closing Price Chart

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Fundamental Research Analyst: Atul Karwa ([email protected])

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date: 10th february 2020 - hdfc securities

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