gujarat-industries research report
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Emkay Global Financial Services Ltd. January 06, 2010 |1
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Contents
Equity Advisory May 29, 2014
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Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY13A 54,911 4,987 9.1 3,075 25.8 -22.1 17.6 34.6 20.6 5.7
FY14E 50,998 4,120 8.1 2,749 23.1 -10.6 14.1 38.7 24.8 5.2
FY15E 55,344 4,807 8.7 3,177 26.7 15.6 14.9 33.5 21.1 4.8
FY16E 67,454 6,408 9.5 4,278 35.9 34.6 18.0 24.9 15.4 4.2
Thermax
Concerns persist, Retain Reduce
May 29, 2014
Rating
Reduce
Previous Reco
Reduce
CMP
Rs893
Target Price
Rs720
EPS Chg FY15E/FY16E (%) -15/--
Target Price change (%) 35
Nifty 7,330
Sensex 24,566
Price Performance
(%) 1M 3M 6M 12M
Absolute 21 28 38 53
Rel. to Nifty 12 10 15 26
Source:Bloomberg
Relative price chart
500
585
670
755
840
925
May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Rs
0
8
16
24
32
40%
Thermax (LHS) Rel to Nifty (RHS) Source: Bloomberg
Stock DetailsSector Engineering & Capital Goods
Bloomberg TMX IB
Equity Capital (Rs mn) 238
Face Value(Rs) 2
No of shares o/s (mn) 119
52 Week H/L 945/ 526
Market Cap (Rs bn/USD mn) 106/ 1,807
Daily Avg Volume (No of sh) 95,287
Daily Avg Turnover (US$mn) 1.2
Shareholding Pattern (%)Mar'14 Dec'13 Sep'13
Promoters 62.0 62.0 62.0
FII/NRI 16.6 16.2 15.3
Institutions 6.8 7.2 8.3
Private Corp 2.9 2.8 2.4
Public 11.8 11.9 12.1
Source: Bloomberg
n Revenues decline by 6% YoY to Rs13.8bn Energy -4%,
Environment -15%. EBITDAM down by 170bps YoY to 9.7%,
APAT down by 8% YoY to Rs1bn
n EBITM in Environment segment down by 920bps to 2.6% led
by losses in water & waste solutions and margin decline in
the air pollution control products
n Order inflows (consolidated) at Rs14bn. Order backlog at
Rs61bn up 25% YoY
n Strong balance sheet but expensive valuations factors in the
same. Maintain Reduce with target price of Rs720/share
Earnings continue to decline
Thermax reported disappointing numbers for the eight consecutive quarter in a row.
Revenues declined by 6% YoY to Rs13.8bn led by Energy (-4% yoy) and Environment(-15% yoy). EBITDA fell by 20% yoy to Rs1.33bn as EBITDAM eroded by 170 bps to
9.7%, impacted by losses in water & waste solutions and the margin decline in air
pollution control products. As a result, the PBT fell by 15% yoy to Rs1.5bn while the
decline in PAT was limited to 8% yoy to Rs1bn, helped by lower tax rates. For FY14,
revenues dipped by 8% to Rs43bn with the energy and environment segment declining
by 9.8% and 6.3% respectively. While the EBITM in the energy segment improved by
89bps to 11.3%, the environment segment reported 491bps decline to 5.6%. EBITDA
and PAT declined by 19% and 28% to Rs4bn and Rs2.5bn respectively.
Sustains order flow momentum
Order intake during the quarter remained flat at Rs11bn while the backlog at the end of
the quarter stood at Rs54bn. While no orders have been finalized in the EPC segment,
other businesses of cooling, chemicals, services, water and air pollution recorded strong
order flows. The company closed FY14 with order inflow of Rs54bn (+11%). Order
intake (consol) for 4QFY14 and FY14 was Rs14bn and Rs65bn (+14%) respectively,
while the backlog (consol) stood at Rs61bn (+25%).
Cut earnings by 15% for FY15E
Management expects the losses attributable to the water and waste treatment to spill
over into the next quarter and taper off by H1FY15E as bulk of the pending orders
achieve completion. Aggressive competition coupled with paucity of orders in energy
segment is impacting margins on incremental orders. The scope for enhancing margins
by continuously improving manufacturing efficiencies is also limited. We have revised
down our FY15E earnings estimates by 15% to Rs27 and introduce FY16E earnings
with an EPS of Rs36.
Concerns persist, Retain Reduce
Although Thermax has been able to sustain order inflow momentum, concerns persist
on operating margins and operational losses in the super-critical venture impacting
group profits. Thermax has a strong balance sheet, but its expensive valuations (34X
FY15E and 25X FY16E earnings) factors in the same. We maintain REDUCE with
revised target price of Rs720.
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Thermax Result Update
Emkay Research May 29, 2014 2
Exhibit 1: Quarterly financial (Standalone)
Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%)
Revenue 14,682 8,628 10,433 10,138 13,825 -5.8 36.4
Expenditure 13,009 7,814 9,496 9,229 12,486 -4.0 35.3
Consumption of RM 10,027 5,026 6,717 6,803 9,102 -9.2 33.8
as % of sales 68.3 58.3 64.4 67.1 65.8
Employee Cost 1,078 991 1,008 1,039 1,189 10.3 14.4
as % of sales 7.3 11.5 9.7 10.2 8.6
Other expenditure 1,905 1,797 1,772 1,387 2,196 15.3 58.3
as % of sales 13.0 20.8 17.0 13.7 15.9
EBITDA 1,672 814 937 908 1,339 -20.0 47.4
Depreciation 145 142 140 147 148 2.1 0.7
EBIT 1,527 672 797 761 1,191 -22.0 56.4
Other Income 244 81 75 229 351 43.8 53.3
Interest 5 8 19 23 39 723.9 70.5
PBT 1,767 745 853 968 1,503 -14.9 55.3
Total Tax 614 243 261 301 444 -27.7 47.4
Adjusted PAT 1,153 503 592 666 1,059 -8.2 58.9Extra ordinary items 0 0 -290 0 0 NA NA
Reported PAT 1,153 503 302 666 1,059 -8.2 58.9
Adjusted EPS (Rs) 9.7 4.2 5.0 5.6 8.9 -8.2 58.9
Margins (%) (bps) (bps)
EBIDTA 11.4 9.4 9.0 9.0 9.7 -170 70
EBIT 10.4 7.8 7.6 7.5 8.6 -180 110
EBT 12.0 8.6 8.2 9.5 10.9 -120 130
PAT 7.9 5.8 5.7 6.6 7.7 -20 110
Effective Tax rate 34.7 32.6 30.6 31.1 29.5 -520 -160
Source: Company, Emkay Research
Exhibit 2: Quarterly Snapshot (Consolidated)
Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%)
Consolidated Results
Revenues 16,800 10,517 12,331 12,175 15,976 -4.9 31.2
Net Profit 1,040 529 353 623 955 -8.2 53.3
Subsidiaries Results
Revenues 2,118 1,888 1,898 2,037 2,152 1.6 5.7
Net Profit -113 27 51 -44 -105 -7.5 140.7
Source: Company, Emkay Research
Exhibit 3: Order Backlog Details (Consolidated)
Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%)Order Inflows 13,660 26,110 9,710 15,140 13,590 -0.5 -10.2
Order Backlog 48,780 63,220 61,280 64,450 61,210 25.5 -5.0
Order Book Cover 0.90 0.89 0.00 0.00 0.00
Source: Company, Emkay Research
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Thermax Result Update
Emkay Research May 29, 2014 3
Exhibit 4: Segmental Performance (Standalone)
Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%)
Segment Revenues
Energy 11,391 6,339 7,851 7,671 10,968 -3.7 43.0
Environment 3,500 2,397 2,684 2,538 2,978 -14.9 17.3
Less: Intersegment Revenues 209 107 103 71 121 - -
Total 14,682 8,628 10,433 10,138 13,825 -5.8 36.4
Segment Results
Energy 1,191 732 922 832 1,232 3.5 48.0
Environment 413 215 242 59 78 -81.2 32.5
Total 1,603 947 1,164 891 1,310 -18.3 47.0
Add- Unall Income / (Exp) 168 -193 -292 100 232 38.0 133.4
Less- Interest Exp 5 8 19 23 39 723.9 70.5
PBT 1,767 745 853 968 1,503 -14.9 55.3
Segment Capital Employed
Energy 5,338 6,032 3,389 1,780 2,927 -45.2 64.5
Environment 2,789 2,823 2,954 3,403 3,434 23.1 0.9
Unallocated 10,566 10,082 13,086 14,766 13,888 31.4 -5.9Total 18,693 18,937 19,429 19,949 20,250 8.3 1.5
Segment Margins (%) (bps) (bps)
Energy 10.5 11.5 11.7 10.9 11.2 80 40
Environment 11.8 9.0 9.0 2.3 2.6 -920 30
Average 10.8 10.8 11.0 8.7 9.4 -140 70
Source: Company, Emkay Research
Exhibit 5: Revision in Earning Estimates
Y/E, Mar FY15E FY16E
Rs Mn Earlier Revised % Change Introduce
Revenues 58,909 55,344 -6.1 67,454
EBITDA 5,964 4,807 -19.4 6,408EBITDA Margin (%) 10.1 8.7 -140 bps 9.5
APAT 3,726 3,177 -14.7 4,278
EPS (Rs) 31.3 26.7 -14.7 35.9
Order Inflows 63,000 63,000 0.0 75,600
Order Backlog 58,624 62,712 7.0 70,858
Source: Company, Emkay Research
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Thermax Result Update
Emkay Research May 29, 2014 4
Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E
Net Sales 54,331 50,998 55,344 67,454
Growth (%) -9.9 -6.1 8.5 21.9
Expenditure 49,924 46,878 50,537 61,046Employee Cost 6,122 6,484 7,291 8,699
Other Exp 2,440 2,359 2,581 2,965
SG&A 3,624 4,081 4,338 4,864
EBITDA 4,987 4,120 4,807 6,408
Growth (%) -16.0 -17.4 16.7 33.3
EBITDA marg in (%) 9.1 8.1 8.7 9.5
Depreciation 771 800 887 987
EBIT 4,217 3,320 3,919 5,421
EBIT marg in (%) 7.7 6.5 7.1 8.0
Other Income 636 731 838 967
Interest expenses 165 157 157 157
PBT 4,687 3,893 4,600 6,230Tax 1,773 1,167 1,445 1,976
Effective tax rate (%) 37.8 30.0 31.4 31.7
Adjusted PAT 2,914 2,727 3,155 4,255
Growth (%) -24.0 -6.4 15.7 34.9
Net Margin (%) 5.3 5.3 5.7 6.3
(Profit)/loss from JVs/Ass/MI 161 23 23 23
Adj. PAT After JVs/Ass/MI 3,075 2,749 3,177 4,278
E/O items 127 -290 0 0
Reported PAT 3,201 2,459 3,177 4,278
PAT after MI 3,075 2,749 3,177 4,278
Growth (%) -22.1 -10.6 15.6 34.6
Balance Sheet
Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E
Equity share capital 238 238 238 238
Reserves & surplus 18,449 20,060 22,130 24,965
Net worth 18,687 20,298 22,368 25,203Minority Interest 1,103 1,080 1,057 1,034
Secured Loans 4,170 4,170 4,170 4,170
Unsecured Loans 40 40 40 40
Loan Funds 4,210 4,210 4,210 4,210
Net deferred tax liability 383 383 383 383
Total Liabilities 24,382 25,970 28,018 30,830
Gross Block 12,962 13,722 14,722 15,722
Less: Depreciation 4,236 5,035 5,923 6,910
Net block 8,727 8,687 8,800 8,812
Capital work in progress 5,175 5,175 5,175 5,175
Investment 4,430 6,430 6,430 6,430
Current Assets 31,319 31,051 34,138 42,155Inventories 3,240 4,929 5,228 6,202
Sundry debtors 15,467 14,173 15,381 18,746
Cash & bank balance 3,211 1,794 2,474 5,676
Loans & advances 1,625 2,380 3,279 3,754
Other current assets 7,776 7,776 7,776 7,776
Current lia & Prov 25,268 25,372 26,525 31,742
Current liabilities 22,456 23,350 24,336 28,984
Provisions 2,812 2,022 2,189 2,758
Net current assets 6,051 5,679 7,614 10,413
Misc. exp 0 0 0 0
Total Assets 24,382 25,970 28,018 30,830
Cash Flow
Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E
PBT (Ex-Other income) 4,051 3,163 3,762 5,264
Depreciation 771 800 887 987
Interest Provided 165 157 157 157
Other Non-Cash items 203 -290 0 0
Chg in working cap -2,627 -1,045 -1,255 403
Tax paid -2,206 -1,167 -1,445 -1,976
Operating Cashflow 1,022 1,618 2,107 4,835
Capital expenditure -3,765 -760 -1,000 -1,000
Free Cash Flow -2,743 858 1,107 3,835
Other income 636 731 838 967Investments -2,035 -2,000 0 0
Investing Cashflow -5,164 -2,029 -162 -33
Equity Capital Raised 0 0 0 0
Loans Taken / (Repaid) 1,506 0 0 0
Interest Paid -165 -157 -157 -157
Dividend paid (incl tax) -969 -848 -1,107 -1,443
Income from investments 0 0 0 0
Others 0 0 0 0
Financing Cashflow 371 -1,006 -1,265 -1,600
Net chg in cash -3,771 -1,417 680 3,202
Opening cash position 6,983 3,211 1,794 2,474
Closing cash position 3,211 1,794 2,474 5,676
Key Ratios
Y/E Mar FY13A FY14A FY15E FY16E
Profitability (%)
EBITDA Margin 9.1 8.1 8.7 9.5
Net Margin 5.3 5.3 5.7 6.3
ROCE 21.6 16.1 17.6 21.7
ROE 17.6 14.1 14.9 18.0
RoIC 41.7 27.5 29.6 39.4
Per Share Data (Rs)
EPS 25.8 23.1 26.7 35.9
CEPS 32.3 29.8 34.1 44.2
BVPS 156.8 170.4 187.7 211.5DPS 9.0 7.0 7.0 6.0
Valuations (x)
PER 34.6 38.7 33.5 24.9
P/CEPS 27.7 30.0 26.2 20.2
P/BV 5.7 5.2 4.8 4.2
EV / Sales 1.9 2.0 1.8 1.5
EV / EBITDA 20.6 24.8 21.1 15.4
Dividend Yield (%) 1.0 0.8 0.8 0.7
Gearing Ratio (x)
Net Debt/ Equity -0.2 -0.2 -0.2 -0.3
Net Debt/EBIDTA -0.7 -1.0 -1.0 -1.2
Working Cap Cycle (days) 18.9 27.8 33.9 25.6
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Your success is our success
Emkay
Res
ultUpdate
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Standalone) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY13A 33,678 7,589 22.5 3,542 25.3 15.3 26.3 12.6 5.4 3.0
FY14E 39,009 7,913 20.3 3,610 25.8 1.9 22.9 12.3 4.9 2.6
FY15E 42,834 8,236 19.2 3,730 26.6 3.3 20.9 11.9 4.5 2.4
FY16E 49,776 8,357 16.8 3,810 27.2 2.2 19.1 11.7 4.1 2.1
Indraprastha Gas
Muted volume growth
May 29, 2014
Rating
Hold
Previous Reco
UR
CMP
Rs313
Target Price
Rs327
EPS Chg FY15E/FY16E (%) NA
Target Price change (%) NA
Nifty 7,330
Sensex 24,566
Price Performance
(%) 1M 3M 6M 12M
Absolute 10 24 14 11
Rel. to Nifty 1 6 -5 -9
Source:Bloomberg
Relative price chart
200
230
260
290
320
350
May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Rs
-20
-12
-4
4
12
20%
Indraprastha Gas (LHS) Rel to Nifty (RHS) Source: Bloomberg
Stock DetailsSector Oil & Gas
Bloomberg IGL IB
Equity Capital (Rs mn) 1,400
Face Value(Rs) 10
No of shares o/s (mn) 140
52 Week H/L 345/ 235
Market Cap (Rs bn/USD mn) 37/ 596
Daily Avg Volume (No of sh) 517,734
Daily Avg Turnover (US$mn) 1.8
Shareholding Pattern (%)Mar'14 Dec'13 Sep'13
Promoters 45.0 45.0 45.0
FII/NRI 15.5 19.6 18.9
Institutions 23.1 18.7 19.9
Private Corp 9.4 9.4 8.9
Public 6.9 7.3 7.3
Source: Bloomberg
Results were inline with our expectations at sales & PAT
level. Sales at Rs9.7bn, down 7% qoq, while PAT at Rs.0.90bn,
marginally up by 1.2% qoq.
Volume remains flat qoq, to 3.82mmscmd. Sequentially, CNG
declined by 1% to 191mnkg, while PNG volumes up by 3.1% to
92mmscm respectively
Gross margin declined by 15% qoq to Rs8.5/scm, mainly on
the back of change in CGD guideline, resulting into lower APM
gas supply for 8-10days, which replaced with costly LNG
Going ahead, volume growth in across the segment
determines the stock performance. Moreover, regulatory
uncertainty still persists in the stock. We recommended Hold
rating (Under Review earlier) with the target of Rs327
Highlights of the results
Revenue for the quarter was at Rs.9.7bn, (our estimates at Rs.9.6bn) decline of 7% qoq.
Sequential decline in revenue is mainly due to change in CGD guideline where company
has cut CNG and PNG price on 100% APM gas allocation and pass through benefit to
the consumers of lower gas cost. However, EBITDA declined on qoq by 1.5% to
Rs.1.9bn on the back of lower APM gas supply for 8-10days due to change in CGD
guideline which replaced with costly LNG. EBITDA/Scm remains flat qoq to Rs.5.5/scm.
PAT came at Rs.0.90bn, (our estimates at Rs.0.9bn) marginally up by 1.2% qoq.
CNG realisation declined from Rs50/kg to Rs41/kg on change in CGDguideline
During the quarter CNG volumes declined by 1% qoq to 191mnkgs. However, recentchange in CGD guideline (100% APM gas allocation to CNG and Domestic (PNG)
users) CNG prices came down to Rs.40.9/kg from Rs.50/kg earlier.
Sequentially, PNG volumes improved; while realisation remains flat
During the quarter, PNG volume improved by 3.2% qoq to 92mmscm mainly due to
recovery in industrial customers demand on the back of favorable pricing in LNG price
vs. FO, which declined from $19/mmbtu to $16/mmbu currently. PNG realization for the
quarter stood at Rs30.8/scm, growth of 12.8% yoy and flat qoq.
Outlook and Valuations
During the quarter gross margins declined on change in CGD guideline where company
has not received APM supply for ~8-10 days, which replaced with costly LNG. Webelieve the company would maintain its margin in the forthcoming quarters, on the back
of the recent change in CGD guideline (100% APM gas allocation to CNG and Domestic
users (PNG).
Going ahead, volume growth in across the segment determines the stock price
performance. Moreover regulatory uncertainty still persists in the stock. We
recommended Hold (Under Review earlier) rating with the target of Rs327. At CMP of
Rs313, stock trades at 11.7x FY16EPS and 2.1x P/BV.
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Indraprastha Gas Result Update
Emkay Research May 29, 2014 2
Exhibit 1: Quarterly Financials
Rs mn Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 YoY (%) QoQ (%) FY14 FY13 YoY (%)
Revenue 8824.0 9027.0 10100.3 10413.9 9680.5 9.7 -7.0 39222 33677 16.5
Expenditure 6969.5 7087.8 8089.0 8462.4 7758.6 11.3 -8.3 31398 26088 20.4
as % of sales 79.0 78.5 80.1 81.3 80.1 80 77
Consumption of RM 5850.1 5954.7 6925.6 7152.1 6780.3 15.9 -5.2 26813 21970 22.0
as % of sales 66.3 66.0 68.6 68.7 70.0 68 65
Employee Cost 178.2 146.8 147.6 156.4 144.8 -18.7 -7.4 596 567 5.0
as % of sales 2.0 1.6 1.5 1.5 1.5 2 2
Other expenditure 941.2 986.3 1015.8 1153.9 833.5 -11.4 -27.8 3990 3551 12.4
as % of sales 10.7 10.9 10.1 11.1 8.6 10 11
EBITDA 1854.5 1939.2 2011.3 1951.5 1921.9 3.6 -1.5 7824 7589 3.1
Depreciation 488.6 531.5 547.9 558.3 557.6 14.1 -0.1 2195 1866
EBIT 1365.9 1407.7 1463.4 1393.2 1364.3 -0.1 -2.1 5629 5723 -1.6
Other Income 31.3 38.1 38.4 70.2 64.2 105.3 -8.5 211 122
Interest 125.2 128.0 98.1 118.9 96.3 -23.1 -19.0 441 562
PBT 1272.0 1317.8 1403.7 1344.5 1332.2 4.7 -0.9 5398 5282 2.2
Total Tax 436.8 442.0 476.2 449.9 427.3 -2.2 -5.0 1795 1741Adjusted PAT 835.2 875.8 927.5 894.6 904.9 8.3 1.2 3603 3542 1.7
(Profit)/loss from JV's/Ass/MI 0 0 0 0 0 0 0
APAT after MI 835.2 875.8 927.5 894.6 904.9 8.3 1.2 3603 3542
Extra ordinary items 0 0 0 0 0 0
Reported PAT 835.2 875.8 927.5 894.6 904.9 8.3 1.2 3603 3542
Reported EPS 5.97 6.26 6.62 6.39 6.46 8.2 1.1 26 25 1.7
Margins (%) (bps) (bps) (bps)
EBIDTA 21.0 21.5 19.9 18.7 19.9 -116.3 111.4 19.9 22.5 -258.7
EBIT 15.5 15.6 14.5 13.4 14.1 -138.6 71.5 14.4 17.0 -264.2
EBT 14.4 14.6 13.9 12.9 13.8 -65.4 85.1 13.8 15.7 -192.2
PAT 9.5 9.7 9.2 8.6 9.3 -11.7 75.7 9.2 10.5 -133.1
Effective Tax rate 34.3 33.5 33.9 33.5 32.1 -226.6 -138.7 33.3 33.0 30.9
Source: Emkay Research
Exhibit 2: Key operating matrix
Particular Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14
CNG volume (in Mn Kg) 193.6 193.5 187.0 191.0 198.7 193.0 191.0
% Growth, YoY 9.2 7.6 3.9 4.4 2.6 -0.3 2.1
% Growth, QoQ 5.8 -0.1 -3.4 2.1 4.0 -2.9 -1.0
PNG volume (mmscm) 81.4 83.5 88.0 86.0 89.5 89.2 92.0
% Growth, YoY 19.4 17.4 12.8 7.5 10.0 6.9 4.5
% Growth, QoQ 1.8 2.6 5.4 -2.3 4.1 -0.3 3.1Total Volume (mmscm) 338.9 340.9 336.7 338.1 351.8 344.0 344.1
% Change YoY 10.5 8.9 5.2 4.6 3.8 0.9 2.2
% Change QoQ 4.8 0.6 -1.2 0.4 4.0 -2.2 0.0
Unit realisation/scm 25.2 25.5 26.2 26.7 28.7 30.2 28.1
% Growth, YoY 29.6 20.2 16.4 13.3 13.8 18.8 7.2
% Growth, QoQ 7.2 1.0 2.8 1.8 7.6 5.5 -7.1
Cost/scm 16.1 16.9 17.4 17.6 19.6 20.2 19.6
% Growth, YoY 38.2 24.8 21.4 16.2 21.5 19.9 12.8
% Growth, QoQ 6.4 4.6 2.9 1.5 11.2 3.3 -3.2
EBIDTA/scm 6.1 5.5 5.5 5.7 5.7 5.5 5.5
% Growth, YoY 18.1 14.0 3.6 2.7 -6.9 0.2 0.4
% Growth, QoQ 9.5 -9.8 0.0 3.9 -0.7 -3.0 0.3
Source: Emkay Research, Company
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Indraprastha Gas Result Update
Emkay Research May 29, 2014 3
Exhibit 3: CNG volume growth
0
40
80
120
160
200
240
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
mnKg
-4
0
4
8
12
16
20
(%)
CNG Volume (Mn Kg) % Growth, YoY Source: Company, Emkay Research
Exhibit 4: PNG volume growth
020
40
60
80
100
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
mmscm
0
40
80
120
(%)
PNG volume (mmscm) % Grow th, YoY
Source: Company, Emkay Research
Exhibit 5: Sales Realization/ scm trend
0
2000
4000
6000
8000
10000
12000
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Rsinmn
0
10
20
30
40
Rs/Scm
Sales Unit realisation/scm Source: Company, Emkay Research
Exhibit 6: EBIDTA/scm trend
0.0
2.0
4.0
6.0
8.0
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Rs/scm
-20
-10
0
10
20
%c
hang
e
EBIDTA/scm % change, QoQ % change, YoY
Source: Company, Emkay Research
Exhibit 7: CNG price realization trend
0
10
20
30
40
50
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Rs/Kg
-20
-10
0
10
20
30
%C
hange
CNG Price Realization % Change, YoY % Change, QoQ
Source: Company, Emkay Research
Exhibit 8: PNG price realization trend
0
10
20
30
40
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Rs/scm
-20
0
20
40
60
%C
hange
PNG Price Realization % Change, YoY % Change, QoQ
Source: Company, Emkay Research
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8/12/2019 Gujarat-Industries Research Report
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Indraprastha Gas Result Update
Emkay Research May 29, 2014 4
Key Financials (Standalone)
Income Statement
Y/E Mar (Rsmn) FY13A FY14E FY15E FY16E
Net Sales 33,678 39,009 42,834 49,776
Growth (%) 33.7 15.8 9.8 16.2
Expenditure 26,089 31,095 34,597 41,419Employee Cost 567 611 674 730
Other Exp 0 0 0 0
SG&A 0 0 0 0
EBITDA 7,589 7,913 8,236 8,357
Growth (%) 19.3 4.3 4.1 1.5
EBITDA marg in (%) 22.5 20.3 19.2 16.8
Depreciation 1,867 2,208 2,352 2,392
EBIT 5,723 5,706 5,884 5,965
EBIT mar gin (%) 17.0 14.6 13.7 12.0
Other Income 122 192 197 201
Interest expenses 562 479 555 522
PBT 5,283 5,418 5,525 5,645Tax 1,741 1,808 1,796 1,834
Effective tax rate (%) 32.9 33.4 32.5 32.5
Adjusted PAT 3,542 3,610 3,730 3,810
Growth (%) 15.3 1.9 3.3 2.2
Net Marg in (%) 10.5 9.3 8.7 7.7
(Profit)/loss from JVs/Ass/MI 0 0 0 0
Adj. PAT After JVs/Ass/MI 3,542 3,610 3,730 3,810
E/O items 0 0 0 0
Reported PAT 3,542 3,610 3,730 3,810
PAT after MI 3,542 3,610 3,730 3,810
Growth (%) 15.3 1.9 3.3 2.2
Balance Sheet
Y/E Mar (Rsmn) FY13A FY14E FY15E FY16E
Equity share capital 1,400 1,400 1,400 1,400
Reserves & surplus 13,285 15,421 17,512 19,684
Net worth 14,685 16,821 18,912 21,084Minority Interest 0 0 0 0
Secured Loans 5,675 4,625 4,625 3,725
Unsecured Loans 0 0 0 0
Loan Funds 5,675 4,625 4,625 3,725
Net deferred tax liability 2,555 2,555 2,555 2,555
Total Liabilities 22,929 24,014 26,106 27,378
Gross Block 27,673 30,173 32,673 35,173
Less: Depreciation 8,743 10,951 13,303 15,695
Net block 18,929 19,222 19,369 19,478
Capital work in progress 2,951 2,951 2,951 2,451
Investment 984 984 984 984
Current Assets 3,485 4,869 7,172 9,597Inventories 428 434 471 509
Sundry debtors 1,684 1,950 2,142 2,489
Cash & bank balance 404 1,363 3,327 5,168
Loans & advances 830 962 1,056 1,227
Other current assets 138 160 176 205
Current lia & Prov 3,434 4,025 4,384 5,145
Current liabilities 2,368 2,762 3,048 3,551
Provisions 1,066 1,263 1,336 1,594
Net current assets 51 844 2,788 4,452
Misc. exp 0 0 0 0
Total Assets 22,929 24,014 26,106 27,378
Cash Flow
Y/E Mar (Rsmn) FY13A FY14E FY15E FY16E
PBT (Ex-Other income) 5,283 5,418 5,525 5,645
Depreciation 1,867 2,208 2,352 2,392
Interest Provided 562 479 555 522
Other Non-Cash items 0 0 0 0
Chg in working cap -263 165 20 177
Tax paid -1,741 -1,808 -1,796 -1,834
Operating Cashflow 5,708 6,462 6,657 6,900
Capital expenditure -4,200 -2,500 -2,500 -2,000
Free Cash Flow 1,508 3,962 4,157 4,900
Other income 0 0 0 0Investments 0 0 0 0
Investing Cashflow -4,200 -2,500 -2,500 -2,000
Equity Capital Raised 0 0 0 0
Loans Taken / (Repaid) 285 -1,050 0 -900
Interest Paid -562 -479 -555 -522
Dividend paid (incl tax) -1,147 -1,474 -1,638 -1,638
Income from investments 0 0 0 0
Others 0 0 0 0
Financing Cashflow -1,424 -3,003 -2,193 -3,060
Net chg in cash 84 959 1,964 1,840
Opening cash position 320 404 1,363 3,327
Closing cash position 404 1,363 3,327 5,168
Key Ratios
Y/E Mar FY13A FY14E FY15E FY16E
Profitability (%)
EBITDA Margin 22.5 20.3 19.2 16.8
Net Margin 10.5 9.3 8.7 7.7
ROCE 27.1 25.1 24.3 23.1
ROE 26.3 22.9 20.9 19.1
RoIC 33.9 30.6 31.4 31.7
Per Share Data (Rs)
EPS 25.3 25.8 26.6 27.2
CEPS 38.6 41.6 43.4 44.3
BVPS 104.9 120.1 135.1 150.6DPS 7.0 9.0 10.0 10.0
Valuations (x)
PER 12.6 12.3 11.9 11.7
P/CEPS 8.2 7.7 7.3 7.2
P/BV 3.0 2.6 2.4 2.1
EV / Sales 1.2 1.0 0.9 0.7
EV / EBITDA 5.4 4.9 4.5 4.1
Dividend Yield (%) 2.2 2.8 3.1 3.1
Gearing Ratio (x)
Net Debt/ Equity 0.3 0.1 0.0 -0.1
Net Debt/EBIDTA 0.6 0.3 0.0 -0.3
Working Cap Cycle (days) -2.8 -3.5 -3.7 -4.1
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Emkay
Res
ultUpdate
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY13A 14,070 5,360 38.1 2,053 13.6 63.1 13.4 6.2 3.4 0.8
FY14A 13,710 4,672 34.1 1,859 12.3 -9.4 11.0 6.8 3.6 0.7
FY15E 13,768 4,643 33.7 2,051 13.6 10.4 11.2 6.2 4.7 0.7
FY16E 14,181 4,636 32.7 2,090 13.8 1.9 10.5 6.0 4.0 0.6
Gujarat Industries Power
Posts good numbers; maintain Buy
May 28, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs83
Target Price
Rs138
EPS Chg FY15E/FY16E (%) NA
Target Price change (%) 37
Nifty 7,330
Sensex 24,566
Price Performance
(%) 1M 3M 6M 12M
Absolute 19 47 40 10
Rel. to Nifty 9 27 17 -10
Source: Bloomberg
Relative price chart
50
60
70
80
90
100
May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Rs
-30
-22
-14
-6
2
10%
Gujarat Industries Power ( LHS) Rel to Nifty (RHS) Source: Bloomberg
Stock DetailsSector Power
Bloomberg GIP IB
Equity Capital (Rs mn) 1,513
Face Value(Rs) 10
No of shares o/s (mn) 151
52 Week H/L 95/ 53
Market Cap (Rs bn/USD mn) 13/ 214
Daily Avg Volume (No of sh) 118,879
Daily Avg Turnover (US$mn) 0.2
Shareholding Pattern (%)Mar'14 Dec'13 Sep'13
Promoters 58.2 58.2 58.2
FII/NRI 1.7 1.7 2.1
Institutions 27.4 27.3 27.3
Private Corp 1.0 1.0 0.9
Public 11.7 11.9 11.5
Source: Bloomberg
GIPCL posted good numbers on the back of high availability
(PAF) across plants (94.8% avg.). In Q4 the company
reported a PAT of Rs757mn vs our expectation of Rs644mn
GIPCLs Surat plants continued to report high PAF at 92%+
during 4Q14. Overall company-level PAF at ~90% for FY14
Reiterate Buy on attractive valuations (6.2xFY15E EPS and
0.7xFY15E book) given the low earnings risks and core RoEs
of 16-17%
We revise our PT to Rs138/sh from Rs101/sh, on roll forward
of our valuations to FY16 and increase in book value multiple
to 1.0x from 0.8x earlier. Key risks: lower gas availability for
captive plant and operational issues at Surat plant
Good performance backed by high plant availability
For Q4FY14 GICPL reported a PAT of Rs757mn which was better than our estimate of
Rs644mn led by high availability across plant with PAF at 94.8% (96.6% YoY and 93.8%
QoQ), and also high commercial availability. The PLF for the quarter improved to 67.1%
vs 61.8% YoY and 58.3% QoQ. The fuel cost stood at Rs1.6/unit against Rs1.3/unit in
Q4FY13 and Rs1.8/unit in Q3FY14. The realizations for the quarter stood at Rs3.1/unit
vs. Rs2.8/unit in Q4FY13 and Rs3.3/unit in Q3FY14.
Slight disappointment on Rs2.5/sh dividend for FY14
Despite the company deferring its lignite expansion plan, the dividend for FY14 has
been kept constant at Rs2.5/sh (same as for FY13, though the payout was higher). We
have assumed constant dividend for FY15-16 as well. The company has deferred its
plan for lignite expansion (600MW) by 1-2 years, however it now plans to set-up 300MW
of wind based capacity. We have assumed only 150MW of the 300MW planned wind
based capacity. The bids invited are on cost of generation basis, and PPA for the same
will be tied with GUVNL (tariff of ~Rs4.15/unit and incentives of ~Rs0.5/unit). The
company expects to earn a RoE of 15-17% from this project, which will be in line with
the core RoEs it currently earns.
Valuations attractive; reiterate Buy with a revised target price of Rs138
Despite a 20% run-up in the stock price over the past one month, GIPCL at its current
market price of Rs83, trades at 6.2x its FY15E earnings and 0.7x its FY15E book value,
which we feel is attractive given; 1) low earnings risk, and 2) core ROE of 16-17%. Wereiterate our Buy rating on GIPCL with a revised target price of Rs138/sh (Rs101/sh
earlier) on roll forward of our valuations to FY16 and increase in book value multiple to
1.0x (0.8x earlier) on general re-rating of the sector. Lower gas availability for captive
plant and operational issues at Surat plant are key risks.
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Gujarat Industries Power Result Update
Emkay Research May 28, 2014 2
Exhibit 1: Result snapshot
Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY13 FY14 YoY (%)
Revenue 3,290 3,111 3,237 3,480 3,882 18.0 11.5 14,070 13,710 -2.6
Expenditure -1,917 -1,948 -2,273 -2,341 -2,376 24.0 1.5 -8,710 -8,938 2.6
as % of sales -58.3% -62.6% -70.2% -67.3% -61.2% -61.9% -65.2%
Fuel -1,442 -1,450 -1,789 -1,893 -1,892 31.3 0.0 -6,931 -7,023
as % of sales -43.8% -46.6% -55.3% -54.4% -48.7% -49.3% -51.2%
Employee Cost -160 -145 -148 -162 -147 -8.3 -9.0 -562 -602 7.1
as % of sales -4.9% -4.7% -4.6% -4.6% -3.8% -4.0% -4.4%
Other expenditure -315 -353 -337 -287 -337 7.0 17.3 -1,217 -1,314 7.9
as % of sales -9.6% -11.4% -10.4% -8.2% -8.7% -8.6% -9.6%
EBITDA 1,374 1,163 964 1,139 1,506 9.7 32.2 5,361 4,772 -11.0
Depreciation -390 -394 -398 -398 -391 0.2 -1.8 -1,608 -1,581 -1.7
EBIT 983 769 566 741 1,115 13.4 50.5 3,753 3,192 -14.9
Other Income 70 93 67 105 100 42.6 -4.7 231 364 58.0
Interest -254 -230 -223 -219 -210 -17.2 -4.1 -1,051 -883 -16.0
PBT 799 632 411 626 1,005 25.7 60.4 2,932 2,673 -8.8
Total Tax -183 -188 -98 -201 -248 -618 -735 19.0
Adjusted PAT 616 444 313 426 757 22.8 77.8 2315 1938 -16.3
Extra ordinary items 0 -80 0 0 0 -127 -80
Reported PAT 616 364 313 426 757 22.8 77.8 2187 1858 -15.0
Adjusted EPS 4.1 2.9 2.1 2.8 5.0 22.8 77.8 15.3 12.8 -16.3
Margins (%) (bps) (bps) (bps)
EBIDTA 41.7 37.4 29.8 32.7 38.8 -295 607 38.1 34.8 -329
EBIT 29.9 24.7 17.5 21.3 28.7 -116 744 26.7 23.3 -339
EBT 24.3 15.1 12.7 18.0 25.9 159 788 20.8 19.5 -134
PAT 18.7 14.3 9.7 12.2 19.5 76 727 16.5 14.1 -231
Effective Tax rate 22.9 22.6 23.9 32.1 24.7 179 -739 21.1 27.5 643
Source: Company, Emkay Research
Note: Annual numbers in the above table have been arrived on the basis of sum total of four quarters
Exhibit 2: Operational data
Particulars Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY13 FY14 YoY (%)
Generation (Mn Units)
Vadodara-I 193 198 203 235 245 27.0 4.2 745 881 18.2
Vadodara-II 25 55 69 27 8 -66.6 -69.2 378 159 -57.8
Surat-I 450 342 313 380 454 0.9 19.6 1,837 1,488 -19.0
Surat-II 422 424 260 385 460 9.0 19.3 1,771 1,529 -13.7
Total Generation 1090 1018 845 1027 1167 7.1 13.6 4732 4057 -14.3
PAF 96.6 86.4 83.8 93.8 94.8 92.4 89.7Vadodara-I 97.0 98.4 95.0 95.8 99.7 93.4 97.2
Vadodara-II 99.6 100.0 100.0 100.0 98.5 94.3 99.6
Surat-I 95.9 68.4 84.0 91.2 92.2 92.3 83.9
Surat-II 95.2 89.0 66.8 91.2 92.3 90.8 84.8
PLF 61.8 57.7 47.9 58.3 67.1 67.1 57.5
Vadodara-I 61.8 62.4 63.4 73.4 78.2 58.7 69.4
Vadodara-II 7.0 15.1 19.0 7.7 2.4 26.0 11.1
Surat-I 83.3 62.7 56.7 68.8 84.1 83.9 68.0
Surat-II 78.0 77.6 47.1 69.8 85.2 80.9 69.9
Realisations (Rs/unit) 3.0 3.1 3.8 3.4 3.3 10.2 -1.8 3.0 3.4 40.6
Fuel cost (Rs/unit) 1.3 1.4 2.1 1.8 1.6 22.6 -12.0 1.5 1.7 26.6
Source: Company, Emkay Research
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Emkay Research May 28, 2014 3
Gujarat Industries Power: Investment summary
Earnings forecast - Emkay vs. Consensus
(Rs mn) Emkay Consensus Variance
FY15E 2,051 1,974 +3.9%FY16E 2,090 2,159 -3.2%
Source: Bloomberg
Company description
Gujarat Industries Power Company Ltd was promoted and
incorporated by Gujarat government in 1985. It currently owns andoperates 815MW of thermal power plants with another 300MW wind
based capacity under development. It came up with an IPO in 2005 at
Rs68/share.
Focus Table - Plant Availability Factor (PAF)
(%) 4Q13 1Q14 2Q14 3Q14 4Q14
Overall 96.6 86.4 83.8 93.8 94.8
Vadodara-I 97.0 98.4 95.0 95.8 99.7
Vadodara-II 99.6 100.0 100.0 100.0 98.5
Surat-I 95.9 68.4 84.0 91.2 92.2
Surat-II 95.2 89.0 66.8 91.2 92.3
Recent update
Invites bids for setting up 300MW wind based capacity in Nov-13 Cancelled LoI issed to Lanco Infra. for implementation of
2X300MW Surat Lignite Expansion project on EPC basis in Oct-
13, due to non furnishing of 10% bank guarantee.
Promoters background
GIPCL was promoted by Gujarat Urja Vikas Nigam Ltd, Gujarat State Fertilizers & Chemicals Ltd, Gujarat Alkalies & Chemicals Ltdand Petrofils Co-Operative Ltd. The first three promoters are promoted by Gujarat government whereas Petrofils Cooperative Ltd is a
joint venture of the Government of India and Weavers' Co-operative Societies
Investment rationale
Installed capacity at 0.8GW with 100% offtake tied up under regulated tariff regime (except one project of 140MW - which is groupcaptive) - Guaranteed RoE and fuel cost completely pass through. Fuel secured with captive coal mines in lignite plant (500MW) and
for gas based projects (305MW) tied up with GAIL for 20 year period. GIPCLs Surat showing continues improvement in plant availability factor (PAF); taking core ROE to 20%+. The stock is currently trading at valuations of 6.2xFY15E EPS and 0.7xFY15E book which looks attractive given- 1) low earnings risk
and 2) core ROE of 16-17%.
Maintain Buy with a target price of Rs138/sh
Investment risk
(1) Lower supply of gas to captive power plants may result into loss of profit and (2) any operational issues at Surat.
Top 5 Institutional holdings
Name Holding %
ICICI Prudential Life Insurance 5.0
LIC 3.5
ICICI Prudential AMC 2.9
UTI 2.6
Bajaj Allianz Life Insurance 2.6
Source: Bloomberg
Shares pledge
Period
Promoters
holding
Pledge % of
Prom. holding
Pledge % of
total holdings
Mar-13 58.2% 0.0% 0.0%
Jun-13 58.2% 0.0% 0.0%
Sep-13 58.2% 0.0% 0.0%
Dec-13 58.2% 0.0% 0.0%
Mar-14 58.2% 0.0% 0.0%
Source: BSE
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Gujarat Industries Power Result Update
Emkay Research May 28, 2014 4
Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E
Net Sales 14,070 13,710 13,768 14,181
Growth (%) 9.0 -2.6 0.4 3.0
Expenditure 8,710 9,038 9,125 9,545Employee Cost 562 602 651 703
Other Exp 1,217 1,414 438 451
SG&A 0 0 133 137
EBITDA 5,360 4,672 4,643 4,636
Growth (%) 26.0 -12.8 -0.6 -0.1
EBITDA margin (%) 38.1 34.1 33.7 32.7
Depreciation 1,608 1,581 1,638 1,638
EBIT 3,752 3,092 3,005 2,998
EBIT margin (%) 26.7 22.6 21.8 21.1
Other Income 233 365 369 425
Interest expenses 1,052 883 810 810
PBT 2,934 2,574 2,564 2,613Tax 881 715 513 523
Effective tax rate (%) 30.0 27.8 20.0 20.0
Adjusted PAT 2,053 1,859 2,051 2,090
Growth (%) 63.1 -9.4 10.4 1.9
Net Margin (%) 14.6 13.6 14.9 14.7
(Profit)/loss from JVs/Ass/MI 0 0 0 0
Adj. PAT After JVs/Ass/MI 2,053 1,859 2,051 2,090
E/O items 136 0 0 0
Reported PAT 2,189 1,859 2,051 2,090
PAT after MI 2,053 1,859 2,051 2,090
Growth (%) 63.1 -9.4 10.4 1.9
Balance Sheet
Y/E Mar (Rsmn) FY13A FY14E FY15E FY16E
Equity share capital 1,513 1,513 1,513 1,513
Reserves & surplus 14,629 16,045 17,657 19,308
Net worth 16,141 17,558 19,169 20,820Minority Interest 0 0 0 0
Secured Loans 8,551 7,155 12,571 11,811
Unsecured Loans 0 0 0 0
Loan Funds 8,551 7,155 12,571 11,811
Net deferred tax liability 1,208 1,422 1,422 1,422
Total Liabilities 25,901 26,135 33,162 34,053
Gross Block 38,697 38,758 38,758 38,758
Less: Depreciation 16,606 18,187 19,825 21,463
Net block 22,091 20,571 18,933 17,295
Capital work in progress 75 208 9,208 9,258
Investment 727 1,618 1,618 1,618
Current Assets 6,577 7,526 6,983 9,617Inventories 1,208 1,201 1,182 1,217
Sundry debtors 1,715 2,226 1,678 1,728
Cash & bank balance 2,754 3,155 3,242 5,763
Loans & advances 901 944 881 908
Other current assets 0 0 0 0
Current lia & Prov 3,569 3,788 3,580 3,735
Current liabilities 2,848 3,025 2,874 3,008
Provisions 721 763 705 727
Net current assets 3,008 3,738 3,403 5,882
Misc. exp 0 0 0 0
Total Assets 25,901 26,135 33,162 34,053
Cash Flow
Y/E Mar (Rsmn) FY13A FY14E FY15E FY16E
PBT (Ex-Other income) 2,701 2,209 2,195 2,188
Depreciation 1,608 1,581 1,638 1,638
Interest Provided 1,052 883 810 810
Other Non-Cash items 795 0 0 0
Chg in working cap -1,439 -329 422 43
Tax paid -1,347 -715 -513 -523
Operating Cashflow 3,370 3,629 4,552 4,156
Capital expenditure -85 -194 -9,000 -50
Free Cash Flow 3,285 3,435 -4,448 4,106
Other income 233 365 369 425Investments -274 -891 0 0
Investing Cashflow 668 -510 -8,631 375
Equity Capital Raised 0 0 0 0
Loans Taken / (Repaid) -892 -1,396 5,416 -761
Interest Paid -1,052 -883 -810 -810
Dividend paid (incl tax) -442 -440 -440 -440
Income from investments 0 0 0 0
Others 601 0 0 0
Financing Cashflow -1,785 -2,719 4,167 -2,010
Net chg in cash 2,253 401 87 2,521
Opening cash position 505 2,754 3,155 3,242
Closing cash position 2,758 3,154 3,242 5,763
Note:FY14 Annual report not yet available
Key Ratios
Y/E Mar FY13A FY14E FY15E FY16E
Profitability (%)
EBITDA Margin 38.1 34.1 33.7 32.7
Net Margin 14.6 13.6 14.9 14.7
ROCE 15.9 13.3 11.4 10.2
ROE 13.4 11.0 11.2 10.5
RoIC 16.5 14.2 14.9 16.4
Per Share Data (Rs)
EPS 13.6 12.3 13.6 13.8
CEPS 24.2 22.7 24.4 24.6
BVPS 106.7 116.0 126.7 137.6DPS 2.5 2.5 2.5 2.5
Valuations (x)
PER 6.2 6.8 6.2 6.0
P/CEPS 3.4 3.7 3.4 3.4
P/BV 0.8 0.7 0.7 0.6
EV / Sales 1.3 1.2 1.6 1.3
EV / EBITDA 3.4 3.6 4.7 4.0
Dividend Yield (%) 3.0 3.0 3.0 3.0
Gearing Ratio (x)
Net Debt/ Equity 0.4 0.2 0.5 0.3
Net Debt/EBIDTA 1.1 0.9 2.0 1.3
Working Cap Cycle (days) 6.6 15.5 4.3 3.0
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Emkay
Res
ultUpdate
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY13A 36,727 20,079 54.7 2,031 46.7 -31.0 7.3 15.3 8.5 1.0
FY14A 39,363 22,039 56.0 3,509 80.6 72.8 10.2 8.9 8.2 0.8
FY15E 42,692 23,258 54.5 4,759 100.1 24.2 11.6 7.1 7.4 0.8
FY16E 44,139 24,342 55.1 5,880 123.7 23.6 12.7 5.8 6.5 0.7
Aban Offshore
Margin surprise
May 28, 2014
Rating
Accumulate
Previous Reco
Accumulate
CMP
Rs715
Target Price
Rs840
EPS Chg FY15E/FY16E (%) NA
Target Price change (%) 50
Nifty 7,330
Sensex 24,566
Price Performance
(%) 1M 3M 6M 12M
Absolute 40 40 93 131
Rel. to Nifty 29 21 61 90
Source: Bloomberg
Relative price chart
200
305
410
515
620
725
May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Rs
-30
-4
22
48
74
100%
Aban Offshore (LHS) Rel to Nifty ( RHS) Source: Bloomberg
Stock DetailsSector Offshore Oil Field Services
Bloomberg ABAN IB
Equity Capital (Rs mn) 87
Face Value(Rs) 2
No of shares o/s (mn) 44
52 Week H/L 737/ 188
Market Cap (Rs bn/USD mn) 31/ 528
Daily Avg Volume (No of sh) 1,966,089
Daily Avg Turnover (US$mn) 18.6
Shareholding Pattern (%)Mar'14 Dec'13 Sep'13
Promoters 54.0 54.1 54.1
FII/NRI 8.2 7.6 7.8
Institutions 4.0 4.4 3.8
Private Corp 6.5 4.3 3.7
Public 27.4 29.7 30.6
Source: Bloomberg
4Q14 EBIDTA at Rs6.3 bn (+26% yoy & 13% QoQ) 20% higher
than estimate. Higher day rates and lower other expenditure
boost EBIDTA margins to 60.2% vs estimate of 53.1%
Refinances USD60 mn (INR debt) at Libor+5% taking FY15
annualised interest saving to ~USD26. Repays ~USD80 mn in
FY14, debt stands at USD2.43 bn, leverage at 3.8x
Recent renewals at higher day rates and debt refinance to
drive 29% EPS CAGR over FY14-16e. Looking at USD400 mn
EBIDTA in FY16e
Positive outlook on global E&P spending & firm rig rates to
help Aban get cyclical uplift for renewal in FY16. Valuation
at P/B of 0.7x & 6.4x EV/E remains attractive considering
strong revenue at 71% for FY15. ACCUMULATE -TP Rs840
Higher day rates drive margins surprise
Abans delivered solid 4Q performance with EBIDTA at Rs6.3 bn +13.2% qoq (USD105
+12.5% yoy & qoq) significantly ahead of estimate of Rs5.26 bn led by margin surprise.
Higher day rates (Aban ice at higher day rates of USD165k vs USD120k earlier) and
lower other expenditure (-9% qoq) boost EBIDTA margins to 60.2% vs estimate of
53.1%. Company indicates sustainable margins at 56-60% range. Though INR revenues
at Rs10.5 bn grew by 9.6% yoy, 5.8% qoq, $ revenues at USD174 grew 7.5% and 6%
qoq, helped by higher utilization and day rates (particularly for Aban Ice)
Refinance of USD60 drive further reduction in interest cost
After refinancing of high cost rupee term loan of ~USD290mn with ECB @ LIBOR +6%,
(saving of ~800 bps) earlier during FY14, Aban has further refinanced USD60 mn at
Libor+5% (saving of ~900 bps) taking FY15 annualised interest saving to ~USD26.Consequently interest cost declined 8.2% yoy and 3.7% qoq to USD 47.4 mn. However
because of INR depreciation, rupee term interest cost increased 3% yoy (down 3% qoq).
Strong beat on operational numbers helped net profit growth of 162% yoy and 103% qoq
to Rs1.6 bn against our estimate of Rs659 mn
Aban ICE fully operational in Q4FY14, DD5 starts operation
Aban ice which had bagged a 3 year contract from ONGC at very attractive day rates
(USD168k/day vs earlier day rate of USD121k) was fully operational during the quarter
which helped strong 4Q performance. DD-5 started operation at Offshore Vietnam, for a
firm period of 1 year and an optional period of 1 year.
Earnings momentum to sustain, trigger still intact retain ACCUMULATE
The much awaited impact of positive triggers for Aban did play out with the stockdelivering handsome return. Recent renewals at higher day rates and debt refinance are
likely to drive 29% EPS over FY14-16e. Positive outlook on global E&P spending and
firm rig rates to help Aban get cyclical uplift for renewal in FY16. Moreover positive
outcome on US sanction on Iran to further increase ease of operations. Valuation at P/B
of 0.7x & 6.4x EV/EBITDA remains attractive considering high revenue visibility (71% for
FY15). Retain ACCUMULATE with a revise target price of Rs840 ass we roll over target
to FY16 number as compared to FY15 earlier.
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Aban Offshore Result Update
Emkay Research May 28, 2014 2
Exhibit 1: Quarterly Financials
Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY14 FY13 YoY (%)
Revenue 9,597 8,885 10,016 9,944 10,518 9.6 5.8 39,363 36,727 7.2
Expenditure 4,567 4,096 4,698 4,347 4,182 -8.4 -3.8 17,324 16,648 4.1
as % of sales 47.6 46.1 46.9 43.7 39.8 44.0 45.3
Consumption of RM 562 544 589 785 535 -4.9 -31.9 2,453 1,911 28.4
As % of Sales 5.9 6.1 5.9 7.9 5.1 6.2 5.2
Employee Cost 1,180 1,070 1,158 1,244 1,487 26.1 19.6 4,958 4,480 10.7
As % of Sales 12.3 12.0 11.6 12.5 14.1 12.6 12.2
Other expenditure 2,825 2,483 2,951 2,319 2,160 -23.6 -6.9 9,912 10,257 -3.4
As % of Sales 29.4 27.9 29.5 23.3 20.5 25.2 27.9
EBITDA 5,030 4,789 5,318 5,596 6,336 26.0 13.2 22,039 20,079 9.8
Depreciation 1,192 1,270 1,407 1,422 1,384 16.0 -2.7 5,484 4,909 11.7
EBIT 3,837 3,518 3,910 4,174 4,952 29.1 18.6 16,555 15,170 9.1
Other Income 60 80 87 125 17 -71.0 -86.1 309 267 15.7
Interest 2788 2695 2887 2957 2867 2.8 -3.1 11,406 11,724 -2.7
PBT 1,109 903 1,110 1,342 2,103 89.6 56.7 5,458 3,712 47.0
Total Tax 500 170 316 555 504 0.8 -9.1 1,545 1,318 17.2Adjusted PAT 609 733 794 787 1,599 162.4 103.1 3,912 2,394 63.4
(Profit)/loss from JV's/Ass/MI -2 15 -17 16 5 18 -2
APAT after MI 607 747 777 803 1,604 164.2 99.7 3,931 2,391 64.4
Extra ordinary items 0 0 0 0 0 0 -480 -100.0
Reported PAT 607 747 777 803 1,604 164.2 99.7 3,931 1,911 105.6
Adjusted EPS 14.0 17.2 17.9 18.5 36.9 164.2 99.7 90.35 54.97 64.4
Margins (%) (bps) (bps) (bps)
EBIDTA 52.4 53.9 53.1 56.3 60.2 783 396 56.0 54.7 132
EBIT 40.0 39.6 39.0 42.0 47.1 710 511 42.1 41.3 75
EBT 11.6 10.2 11.1 13.5 20.0 844 650 13.9 10.1 376
PAT 6.3 8.2 7.9 7.9 15.2 885 729 9.9 6.5 342
Effective Tax rate 45.1 18.9 28.5 41.3 24.0 -2110 -1737 28.3 35.5 -720
Source: Company, Emkay Research
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Your success is our success
Emkay
Res
ultUpdate
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY13A 382,097 65,039 17.0 13,325 59.7 -1.7 7.9 20.6 7.1 1.6
FY14A 512,196 91,655 17.9 21,583 89.3 49.5 12.5 13.8 7.0 1.7
FY15E 525,887 98,461 18.7 24,711 102.2 14.5 13.3 12.0 6.5 1.5
FY16E 569,583 116,565 20.5 35,446 146.7 43.4 16.7 8.4 5.4 1.3
JSW Steel
Strong performance; Growth process continues
May 28, 2014
Rating
Buy
Previous Reco
Accumulate
CMP
Rs1,230
Target Price
Rs1,328
EPS Chg FY15E/FY16E (%) 17/46
Target Price change (%) 17
Nifty 7,318
Sensex 24,550
Price Performance
(%) 1M 3M 6M 12M
Absolute 10 43 34 71
Rel. to Nifty 2 23 11 40
Source:Bloomberg
Relative price chart
450
615
780
945
1110
1275
May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Rs
-30
-14
2
18
34
50%
JSW Steel (LHS) Rel to Nif ty (RHS) Source: Bloomberg
Stock DetailsSector Metals & Mining
Bloomberg JSTL IB
Equity Capital (Rs mn) 2,417
Face Value(Rs) 10
No of shares o/s (mn) 242
52 Week H/L 1,295/ 452
Market Cap (Rs bn/USD mn) 297/ 5,040
Daily Avg Volume (No of sh) 763,908
Daily Avg Turnover (US$mn) 13.4
Shareholding Pattern (%)Mar'14 Dec'13 Sep'13
Promoters 38.5 37.3 36.3
FII/NRI 19.2 18.6 17.2
Institutions 4.1 4.9 6.3
Private Corp 6.3 7.1 7.3
Public 31.9 32.1 33.0
Source: Bloomberg
n Headline nos broadly in line; Operational performance much
stronger though with standalone EBITDA/ tonne at Rs 8053
($130) as against Rs 7478 ($121) in Q3
n Sales volume stood at 3.1 mt, slightly lower than expected;
Steel realizations rose 2% QoQ to Rs 40885/ tonne; These
along with improvement in Dolvi helped better EBITDA/ tonne
n Expanding Dolvi capacity from 3.3 mtpa to 5 mtpa in H2
FY16 with a capex of Rs 33 bn. Total capex for next two
years remain Rs 120 bn with FY15 capex at Rs 75 bn
n Though continuous capex is a concern, believe, timely
execution and low cost to help better cash generation; Buy
with a revised target price of Rs 1328
Strong operating performance continues despite higher iron ore pricesSince Q1FY14, the company has been consistently delivering better operational
performances. EBITDA/ tonne during this period went up by Rs 1200/ tonne despite
simultaneous rise in iron ore costs and amid continuous uncertainty on iron ore sourcing
in Karnataka. This can be attributed to improvement in grade of iron ore that helped in
better yield and reduction in costs, improvement in operating efficiency and most
importantly significant rise in underlying profitability of Dolvi unit. Though, EBITDA/ tonne
for Dolvi unit is not available separately, its evident from the gradual increase overall
number. During this quarter the company had got the partial benefit of pellet and coke
oven batteries commissioned in Dolvi and believe, in the coming period the company is
likely to get full benefit from these.
FY15 volume guidance at 12.4 mtpa; iron ore imports on the card
Believe, FY15 volume guidance of 12.4 mt is on the conservative side factoring in the
ongoing iron ore sourcing problem in Karnataka. After achieving sales volume of 11.86
mt in FY14, this number for FY15 seems achievable with expected improvement in iron
ore supply in Karnataka. The company plans to source 13.5 mt iron ore including 4.5 mt
lump from Karnataka and 6 mt iron ore from Odisha and Chhattisgarh. Rest ~1.5 mt is
likely to be imported. The company has already finalized imports for its Dolvi plant and is
hopeful that better grade should almost nullify higher costs.
Dolvi capacity to be expanded to 5 mtpa in FY16 with a capex of Rs 33 bn
To position itself better in FY16, JSTL has announced brownfield expansion in Dolvi
from 3.3 mtpa to 5 mtpa with a capex of Rs 33 bn including upgradation of blast furnace
and sinter plant. The entire expansion would be in long products to capture the Western
region markets. Including this, total capex for next two years is set at Rs 120 bn out of
which Rs 75 bn would be spent in FY15 and Rs 45 bn is earmarked for FY16.
Valuation
At the CMP of Rs 1230, the stock trades at 5.4xFY16 EV/EBITDA. We continue to
believe, that internal improvement would the key driver for the better performance going
ahead. We continue to value the company at 5.5xFY16 EV/ EBITDA and including JSW
Energy stake we upgrade the stock to Buy with a revised target price of Rs 1328/share.
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JSW Steel Result Update
Emkay Research May 28, 2014 2
Exhibit 1: Quarterly financials: Consolidated
Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY14 FY13 YoY (%)
Revenue 98,982 102,707 129,838 136,228 143,424 44.9 5.3 512,196 382,097 34.0
Expenditure (81,650) (83,912) (106,358) (112,134) (118,138) 44.7 5.4 (420,541) (317,057) 32.6
as % of sales 82.5 81.7 81.9 82.3 82.1 83.0
Consumption of RM (61,830) (58,521) (78,212) (80,965) (85,538) 38.3 5.6 (303,236) (241,685) 25.5
as % of sales 62.5 57.0 60.2 59.4 59.6 59.2 63.3
Employee Cost (2,210) (3,346) (3,143) (3,228) (3,266) 47.8 1.2 (12,982) (9,803) 32.4
as % of sales 2.2 3.3 2.4 2.4 2.3 2.5 2.6
Other expenditure (17,610) (22,045) (25,003) (27,941) (29,334) 66.6 5.0 (104,323) (65,570) 59.1
as % of sales 17.8 21.5 19.3 20.5 20.5 20.4 17.2
EBITDA 17,332 18,795 23,480 24,094 25,286 45.9 4.9 91,655 65,039 40.9
Depreciation (5,947) (7,504) (8,025) (8,058) (8,239) 38.6 2.2 (31,826) (22,375) 42.2
EBIT 11,385 11,291 15,455 16,036 17,047 49.7 6.3 59,829 42,664 40.2
Other Income 28 191 511 144 11 (60.4) (92.2) 858 697 23.1
Interest (5,074) (7,179) (7,564) (7,893) (7,842) 54.6 (0.6) (30,479) (19,675) 54.9
PBT 6,340 4,304 8,402 8,287 9,216 45.4 11.2 30,208 23,687 27.5
Total Tax (3,761) 321 (1,190) (3,737) (4,595) 22.2 23.0 (9,201) (8,453) 8.9Adjusted PAT 2,579 4,625 7,212 4,550 4,621 79.2 1.6 21,007 15,235 37.9
(Profit)/loss from JV's/Ass/MI (321) 174 143 115 207 (164.6) 80.7 640 (1,910) -
Adj.PAT after MI 2,258 4,799 7,355 4,665 4,828 113.9 3.5 21,647 13,325 62.5
Extra ordinary items 702 (8,617) (8,510) - - (100.0) NA (17,128) (3,694) -
Reported PAT 2,959 (3,819) (1,155) 4,665 4,828 63.2 3.5 4,520 9,631 (53.1)
Reported EPS 12.9 (16.1) (5.1) 19.0 19.6 51.9 3.4 17 42 (58.5)
Margins (%) (bps) (bps) (bps)
EBIDTA 17.5 18.3 18.1 17.7 17.6 12 (6) 17.9 17.0 87
EBIT 11.5 11.0 11.9 11.8 11.9 38 11 11.7 11.2 51
EBT 6.4 4.2 6.5 6.1 6.4 2 34 5.9 6.2 (30)
PAT 2.6 4.5 5.6 3.3 3.2 62 (12) 4.1 4.0 11
Effective Tax rate 59.3 (7.5) 14.2 45.1 49.9 (946) 476 30.5 35.7 (523)
Source: Company, Emkay Research
Exhibit 2: US Plate and Pipe Mill operational performance
Q4FY14 Q3FY14 Q4FY13
Production (NT)
Plate Mill 1,10,407 97,290 82,177
Pipe Mill 15,782 12,031 11,907
Sales (NT)
Plate Mill 94,680 85,774 72,994
Pipe Mill 15,672 19,409 11,114Financials ( US$ mn)
Turnover 106.23 92.75 76.94
EBITDA+ Other income (4.00) (1.73) 0.47
Profit After Tax (18.69) (15.22) (16.43)
Source: Company, Emkay Research
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JSW Steel Result Update
Emkay Research May 28, 2014 3
Exhibit 3: Quarterly financials: Standalone
(Rs mn) Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY14 FY13 YoY (%)
Revenue 92,909 93,582 114,857 119,645 124,894 34.4 4.4 452,977 354,918 27.6
Expenditure (75,936) (76,090) (92,517) (96,613) (99,931) 31.6 3.4 (365,151) (291,836) 25.1
as % of sales 81.7 81.3 80.6 80.7 80.0 80.6 82.2
Consumption of RM (58,136) (54,928) (69,604) (70,936) (73,994) 27.3 4.3 (269,462) (224,279) 20.1
as % of sales 62.6 58.7 60.6 59.3 59.2 59.5 63.2
Employee Cost (1,606) (2,093) (1,951) (1,981) (1,971) 22.8 (0.5) (7,996) (6,709) 19.2
as % of sales 1.7 2.2 1.7 1.7 1.6 1.8 1.9
Other expenditure (16,194) (19,070) (20,962) (23,697) (23,966) 48.0 1.1 (87,694) (60,841) 44.1
as % of sales 17.4 20.4 18.3 19.8 19.2 19.4 17.1
EBITDA 16,973 17,491 22,340 23,032 24,963 47.1 8.4 87,826 63,089 39.2
Depreciation (5,274) (6,439) (6,852) (6,904) (7,064) 33.9 2.3 (27,259) (19,739) 38.1
EBIT 11,698 11,052 15,488 16,128 17,899 53.0 11.0 60,567 43,350 39.7
Other Income 537 723 1,208 607 773 43.9 27.5 3,311 2,609 26.9
Interest (4,425) (6,418) (6,890) (7,192) (6,902) 56.0 (4.0) (27,401) (17,245) 58.9
PBT 7,811 5,357 9,806 9,543 11,771 50.7 23.3 36,476 28,713 27.0
Total Tax (3,377) 965 (400) (3,021) (3,752) 11.1 24.2 (6,208) (7,029) (11.7)
Adjusted PAT 4,434 6,322 9,406 6,521 8,019 80.9 23.0 30,268 21,684 39.6
Adj.PAT after MI 4,434 6,322 9,406 6,521 8,019 80.9 23.0 30,268 21,684 -
Extra ordinary items 1,299 (8,529) (8,394) - - (100.0) NA (16,923) (3,672) -
Reported PAT 5,732 (2,208) 1,012 6,521 8,019 39.9 23.0 13,345 18,012 (25.9)
Reported EPS 25.3 -9.5 3.9 26.6 32.8 29.6 23.3 53.9 79.3 (32.1)
Margins (%) (bps) (bps) (bps)
EBIDTA 18.3 18.7 19.4 19.3 20.0 172 74 19.4 17.8 161
EBIT 12.6 11.8 13.5 13.5 14.3 174 85 13.4 12.2 116
EBT 8.4 5.7 8.5 8.0 9.4 102 145 8.1 8.1 (4)
PAT 4.8 6.8 8.2 5.5 6.4 165 97 6.7 6.1 57
Effective Tax rate 43.2 (18.0) 4.1 31.7 31.9 (1,136) 21 17.0 24.5 (746)
Source: Company, Emkay Research
Exhibit 4: Chile operational performance
Q4FY14 Q3FY14 Q4FY13
Production (tonne) 226,440 243,171 197,389
Sales (tonne) 149,443 231,000 226,288
Financials (USD mn)
Revenue 16.77 27.3 30.99
EBITDA 1.32 5.23 6.62
PAT (0.25) 2.79 3.84
Realization/ tonne (US$) 112.2 118.2 136.9
EBITDA/ tonne (US$) 8.8 22.6 29.3
Source: Company, Emkay Research
Exhibit 5: JSW Steel Coated Products operational performance
Q4FY14 Q3FY14
Production volume (mt) 0.43 0.41
Sales Volume (mt) 0.44 0.42
Financial (INR mn)
Net Sales 27,350 24,450
EBITDA 940 793
EBITDA Margin (%) 0%
PAT 350 124.6
Realization (Rs/tonne) 62,159 58,214
EBITDA/tonne (Rs) 2,1236 1,888
Source: Company, Emkay Research
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JSW Steel Result Update
Emkay Research May 28, 2014 4
Key highlights of the analyst meet
The company expects steel demand to grow beyond 3.3% as predicted by theWorld Steel Association in calendar year 2014
Against 3.1 mt export volume, the company plans to export 2.8 mt in FY15 focusingmore on the domestic market
Value added product mix to improve from 24% in FY14 to 33% in FY15 The company has been finalized iron ore imports for Dolvi and believes better grade
(65%) of ore would help it to offset the higher prices to a great extent
The decision on iron ore import is backed by appreciation in INR coupled with fall inglobal prices and also scarcity of iron ore in domestic market especially uncertainty
arising after ban on mines in Odisha
Vijaynagar expansion of 2 mtpa is subject to some necessary approval onenvironment issues
Average iron ore price stood at Rs 3800/ tonne as against Rs 3300/ tonne in theprevious quarter
The company plans to bring US Coking coal in H2FY15 and plans to spend Rs 7.5bn on this
In Chile too the company will be spending Rs 7.5 bn in development works andbeneficiation
Total capex of Rs 120 bn includes Rs 40 bn carry forward capex, Rs 40 bn Dolviexpansion and Vijaynagar expansion (Rs 7.2 bn) and another Rs 40 bn on normal
capex, mine development in Jharkhand and backward integration
The current consolidated D/E stands at 1.54x and company expects to keep it below1.5x. current net debt stands at Rs 340 bn and the company has a repayment target
of Rs 30- 35 bn per annum for next three years
Out of the total debt 60% is INR denominated and the company plans to partlyrefinance this with foreign currency by choosing among various instruments so that
the proportion becomes 50%
Revision in estimates
Based on the strong and consistent operational performance further possible benefits we
have upgraded our estimates for both FY15 and FY16. Our revised EBITDA/ tonne
estimates for FY15 and FY16 stands at Rs 7989 and Rs 8714. Significant jump in FY16
estimates can be attributed to higher volume in FY16 from Dolvi. Speedier solution of iron
ore situation in Karnataka and Odisha would be further positive for the company and thus,
our FY16 volume estimates of 13.2 mt has an upside risk.
Exhibit 6: Revised Estimates
FY15E FY16E
Earlier Revised Earlier Revised
Revenue 517,246 525,887 546,571 569,583
EBITDA 93,814 98,461 100,007 116,565
APAT 21,017 24,711 24,300 35,464
EPS (Rs) 87.0 102.2 100.5 146.7
Source: Emkay Research
Valuation
At the CMP of Rs 1230, the stock trades at 5.4xFY16 EV/EBITDA. We continue to believe,
that internal improvement would the key driver for the better performance going ahead.
With sentiments improving in the domestic markets and having already going through
various challenges we expect things should change for better. We continue to value the
company at 5.5xFY16 EV/ EBITDA and including JSW Energy stake we upgrade the stock
to Buy with a revised target price of Rs 1328/share. In a blue- sky scenario with 14 mtpa
volume and Rs 10000/ tonne of EBITDA, keeping the EV/ EBITDA multiple at 5.5 and net
debt at Rs 340 bn, the fair value of the stock works to be Rs 1780.
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JSW Steel Result Update
Emkay Research May 28, 2014 5
Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E
Net Sales 382,097 512,196 525,887 569,583
Growth (%) 12.0 30.2 2.7 8.4
Expenditure 317,057 420,542 427,427 453,018Raw Materials 241,685 303,236 291,234 308,559
Employee Cost 9,803 12,982 11,832 12,816
Other Exp 45,160 65,791 91,814 96,400
EBITDA 65,039 91,655 98,461 116,565
Growth (%) 7.8 40.9 7.4 18.4
EBITDA marg in (%) 17.0 17.9 18.7 20.5
Depreciation 22,375 31,890 32,523 33,476
EBIT 42,664 59,765 65,937 83,090
EBIT mar gin (%) 11.2 11.7 12.5 14.6
Other Income 697 858 2,629 2,848
Interest expenses 19,675 30,479 32,371 33,721
PBT 23,687 30,144 36,196 52,217Tax 8,453 9,201 11,945 17,232
Effective tax rate (%) 35.7 30.5 33.0 33.0
Adjusted PAT 15,235 20,943 24,251 34,986
Growth (%) -34.1 37.5 15.8 44.3
Net Margin (%) 4.0 4.1 4.6 6.1
(Profit)/loss from JVs/Ass/MI -343 -504 -360 -360
Adj. PAT After JVs/Ass/MI 13,325 21,583 24,711 35,446
E/O items -3,694 -17,128 0 0
Reported PAT 9,631 4,456 24,711 35,446
PAT after MI 13,325 21,583 24,711 35,446
Growth (%) -1.7 62.0 14.5 43.4
Balance Sheet
Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E
Equity share capital 2,842 7,882 7,882 7,882
Reserves & surplus 167,806 166,565 188,145 220,461
Net worth 170,647 174,447 196,027 228,342Minority Interest 1,972 1,972 1,972 1,972
Secured Loans 148,864 296,131 299,131 304,131
Unsecured Loans 57,273 57,273 57,273 57,273
Loan Funds 206,136 353,403 356,403 361,403
Net deferred tax liability 32,720 32,720 32,720 32,719
Total Liabilities 411,475 562,542 587,122 624,436
Gross Block 459,111 665,316 700,316 720,366
Less: Depreciation 111,508 193,398 225,921 259,397
Net block 347,602 471,918 474,395 460,969
Capital work in progress 58,544 93,544 108,544 133,544
Investment 17,500 6,627 6,627 6,627
Current Assets 151,482 205,365 215,106 249,115Inventories 54,952 81,551 81,712 87,814
Sundry debtors 21,063 22,924 24,493 28,089
Cash & bank balance 16,534 6,680 12,178 28,483
Loans & advances 58,772 94,034 96,548 104,554
Other current assets 160 175 175 175
Current lia & Prov 163,653 214,913 217,551 225,819
Current liabilities 119,043 165,864 168,502 176,771
Provisions 2,649 2,649 2,649 2,649
Net current assets -12,171 -9,548 -2,445 23,295
Misc. exp 0 0 0 0
Total Assets 411,475 562,542 587,122 624,436
Cash Flow
Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E
PBT (Ex-Other income) 19,993 13,017 36,196 52,217
Depreciation 22,375 81,890 32,523 33,476
Interest Provided 14,598 30,479 32,371 33,721
Other Non-Cash items 694 640 460 460
Chg in working cap 5,888 -49,257 -2,106 -9,935
Tax paid -5,105 -9,201 -11,945 -17,232
Operating Cashflow 48,307 67,567 87,500 92,707
Capital expenditure -56,180 -238,730 -50,000 -45,050
Free Cash Flow -7,873 -171,163 37,500 47,657
Other income 533 0 0 0Investments 1,312 10,872 0 0
Investing Cashflow -54,334 -227,858 -50,000 -45,050
Equity Capital Raised 0 0 0 0
Loans Taken / (Repaid) 9,546 177,330 3,500 5,500
Interest Paid -15,186 -30,479 -32,371 -33,721
Dividend paid (incl tax) -2,269 -3,131 -3,131 -3,131
Income from investments 0 0 0 0
Others 0 2,278 0 0
Financing Cashflow -7,909 145,998 -32,002 -31,352
Net chg in cash -13,936 -14,292 5,498 16,305
Opening cash position 30,470 16,534 6,680 12,178
Closing cash position 16,534 2,241 12,178 28,483* Capex for FY14 stands at Rs 55 bn
Key Ratios
Y/E Mar FY13A FY14A FY15E FY16E
Profitability (%)
EBITDA Margin 17.0 17.9 18.7 20.5
Net Margin 4.0 4.1 4.6 6.1
ROCE 10.9 12.4 11.9 14.2
ROE 7.9 12.5 13.3 16.7
RoIC 13.6 15.4 14.4 18.2
Per Share Data (Rs)
EPS 59.7 89.3 102.2 146.7
CEPS 160.0 221.2 236.8 285.2
BVPS 764.8 721.7 811.0 944.7DPS 10.0 10.0 10.0 10.0
Valuations (x)
PER 20.6 13.8 12.0 8.4
P/CEPS 7.7 5.6 5.2 4.3
P/BV 1.6 1.7 1.5 1.3
EV / Sales 1.2 1.3 1.2 1.1
EV / EBITDA 7.1 7.0 6.5 5.4
Dividend Yield (%) 0.8 0.8 0.8 0.8
Gearing Ratio (x)
Net Debt/ Equity 1.1 2.0 1.8 1.5
Net Debt/EBIDTA 2.9 3.8 3.5 2.9
Working Cap Cycle (days) -27.4 -11.6 -10.1 -3.3
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8/12/2019 Gujarat-Industries Research Report
22/22
JSW Steel Result Update
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