heg ltd. - myirisbreport.myiris.com/skpsec/heg_20130603.pdfeps (inr) 14.1 25.1 25.2 36.7 bvps ......

June 3, 2013

HEG Ltd.

Passion to Excel...

CMP INR 172.5 Target INR 214.4 Initiating Coverage - BUY

SKP Securities Ltd www.skpmoneywise.com of 12

Key Share Data

Face Value (INR) 10.0

Equity Capital (INR Mn) 399.6

52 Week High/Low (INR) 262.5 / 159.6

6 months Avg. Daily Volume (NSE) 19,448

BSE Code 509631

NSE Code HEG

Reuters Code HEG IN

Bloomberg Code HEGL.BO

Shareholding Pattern (as on 31st Mar. 2013)

Promoter 58.27%

FII's, 0.92%

Others, 30.14%

DII's, 10.67%

Source: Company

Particulars FY12 FY13P FY14E FY15E

Net Sales 14,239.9 16,226.1 15,263.8 17,291.1

Growth (%) 27.9 13.9 -5.9 13.3

EBITDA 2,418.2 2,931.1 2,503.3 3,051.9

PAT 572.3 1,004.1 1,008.3 1,465.9

Growth (%) -52.8 75.5 0.4 45.4

EPS (INR) 14.1 25.1 25.2 36.7

BVPS (INR) 212.6 236.5 252.4 277.4

Key Financials (INR Million)

Particulars FY12 FY13P FY14E FY15E

P/E (x) 15.3 6.8 6.8 4.7

P/BVPS (x) 1.0 0.7 0.7 0.6

Mcap/Sales (x) 0.6 0.4 0.5 0.4

EV/EBITDA (x) 8.2 6.4 7.4 5.7

ROCE (%) 9.3% 10.7% 8.1% 10.4%

ROE (%) 6.7% 10.6% 10.0% 13.2%

EBITDA Mar (%) 17.0% 18.1% 16.4% 17.7%

PAT Mar (%) 4.0% 6.2% 6.6% 8.5%

Debt - Equity (x) 1.3 1.3 1.2 1.0

Key Financials Ratios

Source: Company, SKP Research

1 Yr price performance HEG vis-à-vis BSE Small Cap

-40%

-20%

0%

20%

40%

May-12 Aug-12 Oct-12 Jan-13 Mar-13 May-13

HEG BSE Small Cap

Company Background

HEG Limited (HEG) incorporated in 1977, is a part of LNJ Bhilwara group. The company is engaged in the manufacturing of graphite electrode having a capacity of 80,000 metric tonnes along with power generation capacity of 77 MW. It has one of the largest integrated graphite electrode plants in South-East Asia, processing the sophisticated UHP (Ultra High Power) Electrodes.

Investment Rationale

Unalleviated demand from the steel industry

� Steel manufacturing companies with electric arc furnace (EAF) are the only consumers of graphite electrodes. To comply with better environment standards (low emission of carbon dioxide) many global steel giants are converting their existing conventional steel production facilities into EAF plants.

� The EAF route for steel production is gaining ground globally, with

the share of steel produced via the EAF process expected to contribute over 50% of global steel production by 2020 from the current level of 31%.

Enhanced capacity to meet the growing demand

� HEG has increased its installed capacity from 24,000 metric tonnes in FY01 to 80,000 metric tonnes in FY12 for a cumulative investment of ~INR 8.25 billion.

� The company currently stands as the world’s largest single-site

manufacturer of graphite electrodes besides being one of the most competitive manufacturers globally. Such a large single-site facility benefits HEG’s significantly, owing to better cost containment, greater quality control and easier operations management.

Intrinsic Value of Investments

� HEG holds 25.8% stake in Bhilwara Energy Limited (BEL), which is the principal holding company for all the power ventures of the Bhilwara group. BEL currently has two hydro projects (278 MW) and one wind power project (34.5 MW) operational and is executing ~1,350 MW of power projects, which are under various stages of implementation, expected to be fully executed by CY17.

� In FY11, BEL had raised INR 2.27 billion through a ~11% equity

dilution to IFC, a member of World Bank Group, and India Clean Energy III Limited, Mauritius. The above said deal values BEL at ~INR 21 billion and HEG’s 25.8% stake valued at ~INR 5.5 billion. The management further plans to raise equity for BEL and is waiting for the better market conditions.

Valuation

We rate a BUY rating on HEG with a price target of INR 214.4/share, implying an upside potential of 24.3% from current levels. Our target price is based on SOTP basis valuing HEG core business at 5.5x FY15E EV/EBITDA and giving a 30% discount to its stake in BEL.

A Analyst: Nikhil Saboo

Ph: +91 33 4007 7027, M: +91 9330186643

Email: [email protected]

HEG Ltd.


Majority of this capacity however, is

currently located in high cost regions

like US, Europe and Japan

The EAF route comprises more than

60% of all steel produced in the US

and over 40% of all steel

manufactured in Western Europe

In India the demand is expected to

grow at 5.9% to 75.8 mt in CY2013

and 7.0% in CY2014 on account of

reform measures by government to

stimulate infrastructure investments

Industry Overview

� Graphite electrodes are used in electric arc furnace (EAF) based

steel mills and is a consumable item for the steel industry. The

graphite electrode industry is highly consolidated with the top five

major global players accounting for 75% of the high end UHP

electrode capacity. The manufacturing process, for the high end

UHP electrodes is technology intensive and is a significant barrier

for the entry of new players.

� The EAF method of manufacturing steel is becoming increasingly

attractive due to its low capital costs, lower breakeven tonnage,

and flexibility in locating plants closer to consumption points and

significantly lower pollution levels than in the blast furnace steel

plants.

� During Q1 CY2013, the global crude steel production increased by

3.0% to 389 mt. CY2012 has been a challenging year for the steel

industry (growth of 1.3%) due to the continued macroeconomic

uncertainty, which has impacted the key sectors of economy

including the automobile, power generation, construction and

infrastructure sectors. Recovery in the US remains on track,

however, industrial activity in the Euro Zone continues to be weak.

� According to the World Steel Association, global steel consumption

is expected to increase by 2.9% to 1,454 mt in CY2013 and by

3.2% to 1,500 mt in CY2014. Steel demand in China is expected to

grow by 3.5% in CY2013 to 668.8 mt and 2.5% in CY2014. In India

the demand is expected to grow at 5.9% to 75.8 mt in CY2013 and

7.0% in CY2014 on account of reform measures by government to

stimulate infrastructure investments.

Exhibit: World Crude Steel Production

Mar-13 Mar-12 Y-o-Y (%) Dec-12 Q-o-Q (%) Mar-13 Mar-12 Y-o-Y (%)

Asia 259.82 241.97 7.38 241.95 7.38 1000.56 955.49 4.72

- China 191.89 174.20 10.16 174.22 10.14 726.48 684.88 6.07

- India 19.83 18.65 6.33 19.60 1.15 77.90 72.85 6.92

South America 11.13 11.81 (5.78) 11.66 (4.55) 46.25 48.43 (4.51)

North America 29.71 31.49 (5.66) 29.18 1.81 120.08 121.21 (0.93)

European Union 41.47 44.06 (5.88) 39.73 4.37 166.84 175.86 (5.13)

Middle East & Others 46.57 48.11 (3.19) 45.84 1.60 187.75 191.25 (1.83)

Total 388.70 377.44 2.98 368.36 5.52 1,521.48 1,492.24 1.96

Source: World Steel Association

CountryQuarter Ended Year Ended

Figs in Million Tons

Note: Above figures includes 63 countries accounting for approximately 98% of total world crude steel production.

HEG Ltd.


Going forward, capacity utilizations

are expected to remain below 80%

until 2014 and to reach 83% by 2015-

16

HEG ltd has the largest graphite

electrode plant in the world at single

location besides being one of the

most competitive manufacturers

globally

The company’s client base is

impressive and spread across more

than 35 countries

� Steel demand in Europe is expected to contract further by 0.5% in

CY2013 and return to growth of 3.3% in CY2014 to reach 144.1 mt.

In US the demand is forecasted to grow by 2.7% in CY2013 and by

2.9% in CY2014 as a result of positive momentum from the

construction sector.

� The average capacity utilization in 2012 was 78.8% compared to

80.7% in 2011. Going forward, capacity utilizations are expected to

remain below 80% until 2014 and to reach 83% by 2015-16.

Margins are expected to remain under pressure in CY2013 as steel

prices are likely to remain flat and costs are expected to remain at

current levels.

� Going ahead, the global economic growth and steel demand will be

significantly dependent on the growth of Europe and China. With

Chinese economic growth expected in single digits against the

double-digit growth clocked in the last decade and the euro zone

debt crisis remaining a key global concern, CY13 projections are

cautiously optimistic. Company Profile

� HEG Limited (HEG), incorporated in 1977, is a part of LNJ Bhilwara

group. The company is engaged in the manufacturing of graphite

electrode and power generation. It has one of the largest integrated

graphite electrode plants in South-East Asia, processing the

sophisticated UHP (Ultra High Power) Electrodes, enjoying ~9% of

industry market share. It was established in technical and financial

collaboration with Societe Des Electrodes Et Refractaires Savoie

(SERS), a subsidiary of Pechiney of France.

� The company has total installed graphite electrode manufacturing

capacity of 80,000 metric tons and power generation capacity of 77

MW. Its graphite electrode plant along with two captive thermal

power plants having rated capacities of 30 MW and 33 MW

respectively is located at Mandideep, near Bhopal. Its hydroelectric

power plant with a rated capacity of 13.5 MW is located at Tawa

near Itarsi, District Hoshangabad (Madhya Pradesh).

� The company is a leading exporter of graphite electrodes with a

marketing footprint across the US, Europe, Russia, the Middle

East, South-east Asia, South America and Africa. Its products are

exported to more than 35 countries, which contribute ~69% of its

revenues.

HEG Ltd.


LNJ Bhilwara Group is a diversified

conglomerate with business interests

in power, graphite electrodes, textiles

and IT services sector


Exhibit: Segment Revenue

36.4%

63.6%

FY2010

Domestic Exports

31.1%

68.9%

FY2012

Domestic Exports

� HEG ltd is a premier company of the INR 50 billion LNJ Bhilwara

Group, which is a diversified conglomerate with business interests

in power, graphite electrodes, textiles and IT services sector having

5 listed companies in the Indian bourses.

Textile

Graphite

Electrodes

&

IT Services

Power

Exhibit: Bhilwara Group of Companies


HEG Ltd.


The demand for graphite electrodes

is sensitive not to steel prices but to

steel production volumes through the

EAF route, which accounts for 31% if

the world’s steel production

The demand for graphite electrodes

used in steel manufacturing via the

EAF route is expected to rise further

in the coming years

Economies of scale and low cost

production are the key points by

which the company benefits

HEG is the largest single-site

graphite electrodes manufacturer in

the world

Investment Rationale

Unalleviated demand from the steel industry

� Graphite electrodes are used in electric arc furnace (EAF) based

steel mills and is a consumable item for the steel industry. The EAF

method of manufacturing steel is becoming increasingly attractive

due to its low capital costs, higher production flexibility, lower

breakeven tonnage and significantly lower pollution levels than in

the blast furnace steel plants. To comply with better environment

standards (low emission of carbon dioxide) many global steel

giants are converting their existing conventional steel production

facilities into EAF plants.

� However, due to ongoing global economic uncertainty, specifically

Europe, the near term global steel demand is expected to remain

subdued, placing pressure on graphite electrode. Thus, short term

outlook for demand of graphite electrode remains bleak, while the

longer term dynamics of the industry remain positive on account of

its various advantages.

� The EAF route for steel production is gaining ground globally, with

the share of steel produced via the EAF process expected to

contribute over 50% of global steel production by 2020 from the

current level of 31%. With the increase in the adoption of EAF

method to produce steel and limited number of graphite electrodes

manufacturing companies, the demand for graphite is expected to

rise in future, thereby ensuring constant growth in revenues and

profitability for the company.

Enhanced capacity to meet the growing demand

� HEG Ltd has increased its installed capacity from 24,000 metric

tonnes in FY01 to 80,000 metric tonnes in FY12 for a cumulative

investment of ~INR 8.25 billion. It added at an average of ~4,650

metric tonnes every year across the last twelve years and

enhanced its capacity by 3.3x, one of the fastest capacity additions

in the sector.

� Last capacity of 14,000 metric tonnes was added in FY12 at a

capex of INR 2.25 billion. With this expansion, the company has

become the world’s largest single-site manufacturer of graphite

electrodes besides being one of the most competitive

manufacturers globally. Such a large single-site facility benefits

HEG’s significantly, owing to better cost containment, greater

quality control and easier operations management.

HEG Ltd.


Three power plants under operation

with a total capacity of around 77

MW provide reliability and self-

sufficiency

Needle coke and Indian coke pricing

expected to be favourable; expect to

benefit from low costing of needle

coke from H2 FY14 onwards

HEG is having an impressive and

diversified client base geographically

spread across more than 35

countries

HEG diverse customers include few

of the most respected and discerning

names in the steel industry

� HEG installed power capacity stands at 77 MW, which is self

sufficient to meet its power requirement. As power is a critical input

for manufacturing graphite electrodes, in-house power generation

provides a huge competitive advantage while surplus power is sold

to SEBs. Exhibit: Graphite Electrodes capacity over years


33

,60

0

52

,00

0

60

,00

0

66

,00

0

80

,00

0

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

FY

05

FY

07

FY

09

FY

11

FY

13

Fig

s. in

Me

tric

T

on

ne

s

� Capacity utilization in FY13 stood at 75% and is expected to remain

at same levels in the near term due to subdued demand from the

steel industry. Though, the situation is likely to get reversed after

H1FY14 in the backdrop of signs of recovery in the global

economy, thereby fuelling demand from the steel industry.

� Given, the bleak scenario there is a short-term downward bias in

prices of graphite electrodes which is down by 12% y-o-y.

However, prices of needle coke, which is the key raw material,

have seen a similar trend (down 15% y-o-y). Thus, benefits of

reduced pricing of needle coke are likely to be largely offset due to

lower pricing of graphite electrodes during FY14E, but going

forward we expect HEG to hold on to a steady level of margins.

Strong clientele base

� The Company is a leading exporter of graphite electrodes with a

marketing footprint across the US, Europe, Russia, the Middle

East, South-east Asia, South America and Africa. HEG is having an

impressive and diversified client base, geographically spread

across more than 35 countries.

� HEG diverse customers include few of the most respected and

discerning names in the steel industry, such as Posco (Korea),

Arcelor Mittal Group, Nucor (US), Megasa (Spain), Evraz, Severstal

(Russia), Ezz group (Egypt), Hyundai Steel (South Korea),

Severstal, Tata Steel, SAIL, Jindal Group among others. HEG

continues to build relations with these clients over last few years,

which has helped the company in increasing its export turnover.

HEG Ltd.


BEL currently has two hydro projects

(278 MW) and one wind power

project (34.5 MW) operational


Exhibit: Exports as a %age on Net Sales

2905

4919

72688324 8073

8543

11286

45.7%

50.3%

66.9%

72.4%

63.6% 65.8%68.9%

30%

40%

50%

60%

70%

80%

2,500

4,500

6,500

8,500

10,500

12,500

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

Fig

s In

IN

R M

illio

n

Exports As a %age of Sales

Intrinsic Value of Investments

� HEG holds 25.8% stake in Bhilwara Energy Limited (BEL), which is

the principal holding company for all the power ventures of the

Bhilwara group. BEL currently has two hydro projects (278 MW)

and one wind power project (34.5 MW) operational.

� Among the key investments of BEL, is a 51% stake in Malana

power hydro project (currently running 86 MW in Himachal

Pradesh), 44.9% stake AD hydro power project through Malana

power (currently running 196 MW in Himachal Pradesh), 100%

stake in Bhilwara Green Energy Ltd (currently running 34.5 MW

wind power in Maharashtra) etc.

Exhibit: BEL Group Structure


Bhilwara Energy Ltd (BEL)

Chango Project

(Himachal Pradesh) 180

MW

Bhilwara Project

(Maharashtra) 49.5 MW

NJC Project (Arunachal

Pradesh) 780 MW

Green Ventures Project (Nepal) 120 MW

Balephi Jalvidyut Project (Nepal) 50 MW

MalanaProject

(Arunachal Pradesh) 286

MW

Indo Canadian

Consultancy Services Limited

AD Hydro Project

(Arunachal Pradesh) 192

MW

100%

10

0%

100%75.71% 51.0%

42.0%

51.0%5

1%

HEG Ltd.


HEG’s 25.8% stake in BEL is valued

at ~INR 5.5 billion

For FY13, the company has paid a

dividend of 80% (INR 8/share),

thereby delivering a current dividend

yield of ~4.5%

� BEL is currently executing ~1,350 MW of power projects, which are

under various stages of implementation, expected to be fully

executed by CY17. In FY11, the company had raised INR 2.27

billion through a ~11% equity dilution to International Finance

Corporation (IFC), a member of World Bank Group, and India

Clean Energy III Limited, Mauritius. The above said deal values

BEL at ~INR 21 billion and HEG’s 25.8% stake valued at ~INR 5.5

billion. The management further plans to raise equity for BEL and is

waiting for the better market conditions.

Delivering value to share holders

� The company has delivered value to its shareholders in the form of

higher dividends. The company has a track record of paying

continuous dividends, despite the cyclical nature of the business.

� For FY13, the company has paid a dividend of 80% (INR 8/share),

thereby delivering a current dividend yield of ~4.5%. Going forward,

we believe the company would continue to pay higher dividends,

which would enhance overall returns of the shareholders


Exhibit: Dividend Yield

0%

1%

2%

3%

4%

5%

6%

7%

0

2

4

6

8

10

12

FY

10

FY

11

FY

12

FY

13

FY

14E

FY

15E

Dividend Per Share Dividend Yield (%)

Key Concerns

� Export contributes ~69% of HEG’s total revenues; there is a

perennial risk of foreign exchange currency fluctuations which

could negatively affect the company's margins going forward.

� The uncertainty in the euro zone due to the sovereign debt crisis

and relative softening in emerging economies could further impact

global steel growth and the demand for graphite electrodes,

thereby impacting HEG’s revenues and margins.

HEG Ltd.


We maintain a BUY rating with a

price target of INR 214.4/share,

reflecting an upside potential of

24.3% from current levels

HEG historically traded in a narrow

band of 6x to 10x on the one year

forward EV/EBITDA basis, despite

the cyclacity of the steel sector

At CMP, HEG is trading at 6.8x and

4.7x its FY14E and FY15E earnings,

respectively

� Other major concern pertains to the supply shortage of basic raw

material i.e. needle coke as it could hamper the growth potential of

the company.

Valuations

At current market price of INR 172.5/share, HEG is trading at an

EV/EBITDA 5.7x FY15E EBITDA and P/E 4.7x FY15E EPS of INR

36.7/share respectively.

We valued HEG on SOTP basis valuing HEG core business at 5.5x

FY15E EV/EBITDA and giving a 30% discount to its stake in BEL.

Thus, we arrived at a price target of INR 214.4/share, implying an

upside potential of 24.3% in 18 months.

One Year Forward EV/EBITDA Band

Exhibit: One Year Forward EV/EBITDA Band


5

10

15

20

25

30

35

Mar-

09

Jul-

09

Oct-

09

Jan-1

0

Apr-

10

Jul-

10

Oct-

10

Jan-1

1

Apr-

11

Jul-

11

Oct-

11

Jan-1

2

Apr-

12

Jul-

12

Oct-

12

Jan-1

3

Apr-

13

Jul-

13

Oct-

13

Jan-1

4

Fig

s. In

IN

R B

illio

n

10x 9x 8x 7x 6x

One Year Forward P/E Band

Exhibit: One Year Forward P/E Band


0

100

200

300

400

500

600

700

Mar-

09

Jul-

09

Oct-

09

Jan-1

0

Apr-

10

Jul-

10

Oct-

10

Jan-1

1

Apr-

11

Jul-

11

Oct-

11

Jan-1

2

Apr-

12

Jul-

12

Oct-

12

Jan-1

3

Apr-

13

Jul-

13

Oct-

13

Jan-1

4

14x 12x 10x 8x 6x

HEG Ltd.


At CMP, HEG is trading at 0.68x and

0.62x its FY14E and FY15E book

value, respectively

PAT Margin to improve by 187 basis

points over FY14E-15E mainly due to

higher sales realization and better

capacity utilization on account of

recovery in the global economy

Debt/Equity ratio to decline over

FY13-15E owing to lower capex

One Year Forward P/Bv Band

Exhibit: One Year Forward P/BV Band


50

100

150

200

250

300

350

400

450

Mar-

09

Jul-

09

Oct-

09

Jan-1

0

Apr-

10

Jul-

10

Oct-

10

Jan-1

1

Apr-

11

Jul-

11

Oct-

11

Jan-1

2

Apr-

12

Jul-

12

Oct-

12

Jan-1

3

Apr-

13

Jul-

13

Oct-

13

Jan-1

4

1.4x 1.2x 1x 0.8x 0.6x

Financial Outlook

EBITDA margins to improve by 125 basis over FY14E-FY15E

Exhibit: EBITDA & PAT Margins


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

FY10 FY11 FY12 FY13 FY14E FY15E

EBITDA Margins PAT Margins

Debt at comfortable levels

Exhibit: CFO & D/E Ratio


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0

500

1,000

1,500

2,000

2,500

3,000

3,500

FY

11

FY

12

FY

13

P

FY

14

E

FY

15

E

Fig

s. in

IN

R m

illio

n

Cash Flow from Operations (CFO) D/E (x)

HEG Ltd.


Exhibit: Balance Sheet

Particulars FY12 FY13P FY14E FY15E Particulars FY12 FY13P FY14E FY15E

Net Sales 14,239.9 16,226.1 15,263.8 17,291.1 Share Capital 399.6 399.6 399.6 399.6

Growth (%) 27.9 13.9 -5.9 13.3 Reserve & Surplus 8,094.2 9,051.1 9,685.4 10,683.8

Expenditure 11,821.7 13,295.0 12,760.6 14,239.2 Shareholders Funds 8,493.8 9,450.7 10,085.0 11,083.4

Material Consumed 6,989.2 7,865.5 7,494.5 8,386.2 Total Debt 11,434.3 12,151.3 11,651.3 10,651.3

Power & Fuel Cost 1,053.5 1,128.3 1,099.0 1,167.2 Deferred Tax (Net) 786.6 813.8 813.8 813.8

Employee Cost 471.6 557.8 549.5 622.5 Total Liabilities 20,714.7 22,415.8 22,550.1 22,548.5

Admin & Other Exp. 3,307.5 3,743.4 3,617.5 4,063.4

EBITDA 2,418.2 2,931.1 2,503.3 3,051.9 Net Block 7453.705 9324.7 9447.9634 9745.3407

EBITDA Margin (%) 17.0 18.1 16.4 17.7 Capital WIP 1,283.5 - - -

Depreciation 579.3 626.4 676.8 702.6 Investments 1,558.3 1,522.1 1,522.1 1,522.1

EBIT 1,838.9 2,304.7 1,826.4 2,349.3 Non-Current Asset 12.6 213.9 213.9 213.9

Other Income 167.9 136.0 139.4 142.9 Current Assets 14,148.0 15,936.6 16,397.7 16,896.9

Interest Expense 406.8 636.0 636.7 591.0 Inventories 6,188.1 6,076.7 6,292.8 6,465.2

Profit Before Tax (PBT) 1,599.9 1,804.7 1,329.1 1,901.1 Sundry Debtors 4,906.8 5,985.6 6,183.6 6,322.8

Exceptional Items 928.5 552.0 0.0 0.0 Cash & Bank Balance 180.2 146.6 143.4 261.6

Income Tax 48.2 194.8 265.8 380.2 Other Non Current Assets 629.6 765.7 725.0 752.2

Reported PAT 623.2 1,057.9 1,063.3 1,520.9 Loans & Advances 2,243.4 2,961.9 3,052.8 3,095.1

Growth (%) -52.8 75.5 0.4 45.4 Current Liabilities & Prov 3,741.4 4,581.5 5,031.5 5,829.7

(+) Share in Asso. Profits -50.9 -53.8 -55.0 -55.0 Current Liabilities 3204.827 4121.8 4573.6001 5310.9955

Adjusted PAT 572.3 1,004.1 1,008.3 1,465.9 Provision 536.6 459.7 457.9 518.7

PAT Margins (%) 4.4 6.5 7.0 8.8 Net Working Capital 10,406.6 11,355.1 11,366.1 11,067.2

Diluted EPS 14.1 25.1 25.2 36.7 Total Assets 20,714.7 22,415.8 22,550.1 22,548.5

Particulars FY12 FY13P FY14E FY15E Particulars FY12 FY13P FY14E FY15E

PBT 671.4 1,252.7 1,329.1 1,901.1 Earning Ratios (%)

Depreciation 579.3 626.4 676.8 702.6 EBITDA Margin (%) 17.0% 18.1% 16.4% 17.7%

Interest Provided 406.8 636.0 636.7 591.0 PAT Margins (%) 4.0% 6.2% 6.6% 8.5%

Chg. in Working Capital (1,326.6) (1,152.9) (14.4) 417.2 ROCE (%) 9.3% 10.7% 8.1% 10.4%

Direct Taxes Paid (48.2) (194.8) (265.8) (380.2) ROE (%) 6.7% 10.6% 10.0% 13.2%

Other Charges (12.1) 471.0 (55.0) (55.0) Per Share Data (INR)

Operating Cash Flows 270.6 1,638.4 2,307.5 3,176.7 Diluted EPS 14.1 25.1 25.2 36.7

Capital Expenditure (2,004.0) (1,213.9) (800.0) (1,000.0) Cash EPS (CEPS) 28.8 40.8 42.2 54.3

Investments 350.3 (165.2) (0.0) (0.0) BVPS 212.6 236.5 252.4 277.4

Others 4.6 - - - Valuation Ratios (x)

Investing Cash Flows (1,649.1) (1,379.0) (800.0) (1,000.0) P/E 15.3 6.8 6.8 4.7

Equity Capital Raised (675.0) - - - Price/BVPS 1.0 0.7 0.68 0.62

Inc / (Dec) in Debt 2,978.8 717.0 (500.0) (1,000.0) EV/Sales 1.4 1.2 1.2 1.0

Dividend Paid (inc tax) (456.5) (374.0) (374.0) (467.5) EV/EBITDA 8.2 6.4 7.4 5.7

Interest Paid (406.8) (636.0) (636.7) (591.0) Dividend Yield (%) 2.3% 4.7% 4.6% 5.8%

Financing Cash Flows 1,440.4 (293.0) (1,510.7) (2,058.5) Balance Sheet Ratios

Chg. in Cash & Cash Eqv 61.9 (33.6) (3.2) 118.2 Debt - Equity 1.3 1.3 1.2 1.0

Opening Cash Balance 118.3 180.2 146.6 143.4 Current Ratio 4.4 3.9 3.6 3.2

Closing Cash Balance 180.2 146.6 143.4 261.6 Fixed Asset Turn. Ratios 2.0 1.9 1.6 1.8

Source: Company Data, SKP Research

Exhibit: Income Statement Figures in INR Million Figures in INR Million

Exhibit: Cash Flow Statement Figures in INR Million Exhibit: Ratio Analysis

HEG Ltd.


Notes:

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Member: NSE BSE NSDL CDSL NCDEX* MCX* MCX-SX FPSB *Group Entities

INB/INF: 230707532, BSE INB: 010707538, CDSL IN-DP-CDSL-132-2000, DPID: 021800, NSDL IN-DP-NSDL: 222-2001, DP ID: IN302646, ARN: 0006, NCDEX: 00715, MCX: 31705, MCX-SX: INE 260707532

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