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Real estate July 22, 2014
Oberoi Realty
Bloomberg: OBER IN Reuters: OEBO.BO
BUY
Institutional Equities
India Research
RESULT REVIEW
Recommendation
CMP: Rs245
Target Price: Rs296
Previous Target Price: Rs296
Upside (%) 21%
Stock Information Market Cap. (Rs bn / US$ mn) 81/1,336
52-week High/Low (Rs) 276/153
3m ADV (Rs mn /US$ mn) 165/2.7
Beta 1.0
Sensex/ Nifty 25,715/7,684
Share outstanding (mn) 328
Stock Performance (%) 1M 3M 12M YTD
Absolute (3.7) 9.7 26.4 4.8
Rel. to Sensex (6) (2.9) (0.9) (13.7)
Performance
Source: Bloomberg
Analysts Contact Parikshit Kandpal
022 6184 4311
parikshit.kandpal@karvy.com
150
200
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300
15,000 17,000 19,000 21,000 23,000 25,000 27,000
Jul-
13
Sep
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No
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3
Dec
-13
Feb
-14
Mar
-14
Ap
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Jun
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Jul-
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Sensex (LHS) Oberoi (RHS)
Visible triggers
Oberoi Realty Ltd. (ORL) 1QFY15 Revenue, EBIDTA and Profit was 24.5%,
24.4% and 17.5% below our estimate, largely on account of Exquisite being
the only project contributing this quarter. Goregaon pre-sales has picked
up 42.1% QoQ signaling bottoming out of premium segment. With ~7mn
sqft of new launches planned for FY15E (Mulund ~3.2mn sqft, Borivali
~3.2mn, Worli – ~0.6mn sqft), ORL has visible triggers in place. We
maintain our BUY on ORL’s with NAV target of Rs296/share.
1QFY15 performance muted, pre-sales recovery strong
ORL 1QFY15 Consolidated Net revenue, EBIDTA & PAT de-grew 19.7%,
27.4% & 36.8% YoY respectively, below our estimates by 24.5%, 24.4% &
17.5% respectively. EBIDTA margin contracted by 587bps YoY to 55.3% on
account of lower revenue traction. The customer advances remains stable at
Rs6,740.6mn. Balance sheet remains strong with D/E at 0.19x. Pre-sales
momentum saw sharp pick up with 42.1% QoQ growth to 67,730sqft.
New launches of ~7mn sqft during FY15E ORL shall be launching the Worli project during 2QFY15E. Besides this ORL
is planning to launch Mulund (pending decision on review petition in
Supreme Court) & Borivali projects during 2HFY15E, with affordable luxury
theme. The ticket size for Borivali shall be Rs20mn/unit whilst for Mulund
Rs30mn/unit. These new launches shall provide much needed visibility on
pre-sales and launch success remain key re-rating trigger.
Best placed v/s Western peers ORL stands out as a leader in our competitive business mapping of the
Western developers. High land bank quality, superior brand recall and
relatively healthy access to finance are the key contributing factors. We
expect ORL to capture incremental market share outside home location and
deliver above industry average growth.
Maintain BUY: NAV target of Rs296/share We maintain BUY stance with a SOTP-based target price of Rs296/share. We
believe that the near-term catalysts are: (i) Mulund & Worli launch; (ii)
successful foray outside Mumbai & (iii) new land acquisitions.
Key risks: (i) Unaffordability may lead to a 8-10% real estate price; (ii)
Delays in new land acquisitions remains key de-rating trigger. Key Financial - Consolidated
Y/E Mar (Rs mn) FY12 FY13 FY14 FY15E FY16E
Operating income 8,247 10,476 7,985 17,177 28,428
EBITDA 4,835 6,121 4,348 10,296 16,428
Net profit 4,633 5,049 3,111 6,475 10,724
EPS (Rs) 14.1 15.4 9.2 19.7 32.7
RoCE (%) 17.3 17.3 10.8 19.8 26.0
P/E (x) 17.4 15.9 26.7 12.4 7.5
Source: Company, Karvy Institutional Research
2
Decceleration in sales – impact performance
ORL 1QFY15 Consolidated Net revenue, EBIDTA & PAT de-grew 19.7%,
27.4% & 36.8% YoY respectively, below our estimates by 24.5%, 24.4% & 17.5%
respectively.
EBIDTA margin contracted by 587bps YoY to 55.3% (in line with our
expectations) resulting in EBIDTA de-growth of 27.4% YoY, higher than
Revenue de-growth. Lower material expenses de-growth of 12.1% YoY and
higher employee expenses 20.8% YoY growth impacted negatively.
PBT de-grew 36.7% YoY, higher de-growth vs EBIDTA, owing to 69.2% YoY
de-growth in other income on lower cash balance.
ORL reported net profit of Rs643mn vs our expectation of Rs780mn, largely
attributable to lower than expected revenue growth.
Oberoi Realty recorded new sales of 67,730sqft (an improvement vs 4QFY14 –
47,675sqft) owing to (i) pick-up in sales in mid-cycle project viz. Exquisite which is
nearing completion (sold 13 units - 23,660sqft vs 8units - 14,560 sqft during
4QFY14) (ii) back ended CC & IOD in Esquire (sold 20 units - 44,070sqft vs 12
units - 26,595sqft during 4QFY14). ORL results were lower than our and
consensus estimates on account of slower recovery in Exquisite which is currently
under revenue recognition. The pre-sales momentum (growth of 42.1% QoQ)
indicates bottoming out of luxury segment sales which is a huge positive. Besides
newer launches in Mulund and Borivali are targeted at affordable luxury segment.
Exhibit 1: Quarterly Performance consolidated
Particulars 1QFY15 1QFY14 YoY (%) 4QFY14 QoQ (%)
Net Sales 1,754 2,184 (19.7) 2,206 (20.5)
Material Expenses (606) (689) (12.1) (758) (20.0)
Employee Expenses (117) (97) 20.8 (119) (1.8)
Other Operating Expenses (62) (63) (1.9) (75) (17.1)
EBITDA 969 1,335 (27.4) 1,254 (22.7)
Interest Cost (0) (1) (50.0) (1) (50.0)
Depreciation (100) (69) 44.6 (67) 48.5
Other Income 65 210 (69.2) 79 (18.3)
PBT 934 1,476 (36.7) 1,266 (26.2)
Tax (291) (457) (36.4) (496) (41.3)
Net Profit 643 1,018 (36.8) 770 (16.5)
Source: Company, Karvy Institutional Research
Exhibit 2: Margin Analysis
as % Sales 1QFY15 1QFY14 YoY (bps) 4QFY14 QoQ (bps)
Material Expenses 34.5 31.5 299 34.3 19
Employee Expenses 6.7 4.4 223 5.4 127
Other Operating Expenses 3.5 2.9 64 3.4 15
EBITDA 55.3 61.1 (587) 56.9 (160)
Tax Rate 31.1 31.0 13 39.1 (802)
Net Margin 36.7 46.6 (994) 34.9 176
Source: Company, Karvy Institutional Research
3
Pre-Sales momentum – sharp recovery 42.1% QoQ, 43.7% YoY
ORL has recorded sharp improvement in pre-sales volume with 1QFY15 new pre-
sales at 67,730sqft vs 47,675sqft during 4QFY14, a growth of 42.1% QoQ and 43.7%
YoY. The management sounded upbeat on change in sentiment post elections with
(i) Stable Government & (ii) expectations of economic recovery. As of now ORL is
holding on to prices and focusing on completing Exquisite (215 units in inventory,
current quarterly sales runrate 13 units). The projects is expected to be delivered
by Dec-13 and may see increased buying interest recovery post completion.
Esquire has witnessed increased momentum during 1QFY15 which is expected to
build onto 2HFY15E. Oasis Worli may get launched during 2QFY15E whilst
Mulund & Borivali projects may get launched end FY15E-1QFY16E.
Exhibit 3: 1QFY15 – new sales momentum indicates initial recovery in premium real estate
Pre-sales - msf 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15
Oberoi Esquire 0.13 0.07 0.07 0.06 0.07 0.05 0.05 0.03 0.02 0.02 0.03 0.04
Oberoi Exquisite 0.02 0.01 0.03 0.03 0.03 0.04 0.04 0.02 0.02 0.01 0.01 0.02
Oberoi Oasis - 0.11 - - -
Oberoi Priviera
0.00 -
Total 0.18 0.12 0.17 0.12 0.13 0.12 0.12 0.05 0.15 0.03 0.05 0.07
Pre-Sales - Rs mn
Oberoi Esquire 1,486 852 1,036 927 1,100 784 780 411 433 349 435 795
Oberoi Exquisite 276 229 442 495 488 781 740 478 385 226 352 564
Oberoi Splendor
Grande 413 403 651 374 345 311 202 36 - - 42
Oberoi Splendor 65 297 456 190 287 199 505 - 3,179 - -
Oberoi Oasis - - -
Oberoi Priviera
292
Total 2,239 1,780 2,585 1,986 2,220 2,074 2,227 925 3,997 575 1,122 1,359
Source: Company, Karvy Institutional Research
Oberoi Esquire will hit revenue recognition during early 2HFY15E whilst Worli
project shall hit P&L during FY15E. ORL has done 23 units pre-sales in Worli
project and recorded 13 units as of 1QFY15. Unrecognized revenue in books stand
at Rs17,995mn besides Rs10bn of additional inventory in nearing completion
Exquisite project. ORL expects to sell out Exquisite over 18-24 months.
Exhibit 4: Cumulative sales trend
Project Area (msf)
Area sold as
of 1QFY15
(mnsf)
Sales Value
(Rs mn)
Average
realisation
(Rs/sqft)
PoCM (%)
Balance
Revenues to be
recognised (Rs
mn)
Cash to be
received (Rs
mn)
Oberoi Esquire 1.5 1.0 13,924 13,246 <20% 13,924 8,034
Oberoi Exquisite 1.5 1.1 14,712 13,431 96% 537 1,020
Oberoi Splendor Grande 0.3 0.3 4,187 14,599 100% - (123)
Oberoi Splendor 1.3 1.3 15,714 12,304 100% - 111
Oberoi Oasis 1.8 0.1 3,534 27,704 <20% 3,534 2,532
Oberoi Priviera 0.0 0.0 292 62,064 43% 0 0
Total 6.4 3.8 52,363 13,775 17,995 11,574
Source: Company, Karvy Institutional Research
4
Updates on key projects Mulund Project – ORL management highlighted that with the Maharashtra
Government filing in review petition against the Supreme Court judgment dated
30th January 2014 providing relief to the developers on the forest land issue, the
Mulund project launch may get delayed by 2-3 Months to early 2HFY15E. Mulund
will have all phases launched at one go and ORL expects to complete the project in
3yrs. Currently the project is undergoing design changes to incorporate (i) EWS
housing & (ii) Supreme Court RG clause of providing 25% open space. The project
already has EC status (which is currently under routine revalidation) & IOD. EWS
will not impact Esquire & Exquisite as CC has already come for these project. ORL
is targeting the launch in the Rs30mn+ budget with 1500-1800sqft flat size.
Worli Project – ORL has already signed definitive agreement with Ritz Carlton,
and spend Rs9bn on the Residential portion (which is 50% of the total Residential
segment estimated cost) and Rs1bn on the Hotel. ORL has recorded sales of 13
units encompassing a saleable area of 0.12mn sqft with a revenue potential of
Rs3,533mn and average realization of Rs28,425/sqft. The last sale price was
Rs43,027/sqft. ORL expects Worli project to move into revenue recognition during
FY15E. ORL won’t be sharing any royalty fees on the branded residencies and Ritz
Carlton will be directly charging buyers for the services.
Commerz II – no pick up in leasing, though the building is ready to be leased out.
ORL expects leasing to start during next 6months.
Oberoi Esquire – The projects is expected to hit the revenue recognition threshold
during FY15E. There has been pick up in the sales with 20units sold during
1QFY15E vs 12 units sold during 4QFY14.
Balance continues to remain healthy ORL balance sheet remains healthy with 1QFY15 strong customer advances of
Rs6,740.6mn. During 1QFY15, ORL has availed debt financing of Rs6920.6mn for
part funding Rs11,550mn Borivali land acquisition. This has resulted in D/E
increasing to 0.19x, end 1QFY15. ORL needs to repay the NCD over 4yrs and
average cost would be about 11.25%. Loans and advances has increase by
Rs11,514mn largely attributable to Borivali land payment to Tata’s. Post
completion of all formalities the land will move into inventory.
Exhibit 5: Consolidated – Balance sheet
Rs mn 1QFY14 4QFY14 1QFY15 QoQ Change
Total fixed assets 10,713 10,995 10,986
Goodwill 2,654 2,654 2,654
Investments 3,481 496 788 292
Inventories 14,060 16,491 17,435 944
Sundry debtors 370 862 520
Cash and equivalents 5,255 4,997 1,574 (3,424)
Loans and advances 17,091 18,321 29,835 11,514
Other current assets 53 54 46
Total current assets 36,829 40,725 49,408
Sundry creditors/others 10,083 9,138 11,300 2,162
Provisions 782 789 788
Total current liabilities 10,865 9,926 12,088
Total Assets 42,811 44,944 51,748
Source of Funds 42,811 44,944 51,748
Source: Company
5
Investment Rationale
Strong balance sheet lends scope for locational diversification
outside home location
Regional to Top 8 cities aspiration is driving domestic realty players to diversify
outside their core regions. Whilst we believe that pan India theme has its own
challenges we expect ORL’s competitive position to change in markets outside its
core. NCR now contributes 15% to Sobha’s sales volume and we expect similar
numbers to pan out for Oberoi on back of strong brand recall replication in other
markets. Moreover, a relatively debt free balance sheet augurs well for any
acquisition opportunity in newer markets though ORL remains focused on JDA
(Joint development agreement) model of diversification.
Exhibit 6: Strategy to move out of home markets
Mumbai Pune NCR Bangalore Chennai Hyderabad Overall Comments
DLF
Broad based presence across markets, strong
competitive positioning, though Mumbai exit
remains key dampener
Oberoi
Diversification outside Mumbai remains key re-
rating trigger; we see strong change in competitive
positioning over next 2-3yrs with NCR, Bangalore
markets as new additions. We estimate new
markets to contribute 10-15% to volumes
Sobha
Successful NCR foray sets tone for a stronger
growth outside home turf Bangalore. We rate
Sobha as a mid-quartile
Prestige
Middling in most regions. Competitive positioning
in Bangalore remains strong, Chennai
consolidating
Puravankara
Middling on most locations. Bangalore & Chennai
remain dominant regions. Looking to diversify
outside the home markets
Godrej
We rate Godrej as a mid-quartile for diversification
outside Mumbai. Launches have met with strong
success. Brand leveraging will help further
consolidation in the competitive positioning
Kolte
Middling on most locations. Kolte is a dominant
Pune player with emerging presence in Bangalore
where it is looking to further consolidate and
improve market share, whilst in Mumbai the
company is looking towards its first launch.
Source: Karvy Institutional Research; Note: Strong; Relatively Strong; Average; Relatively Weak Weak
Gaining market share in newer location offers an option value and should a
developer exercise this option successfully the growth can be ahead of industry. It
remains as a long term option to be exercised and a potential re-rating trigger for
ORL.
6
Dominant Western markets positioning
As highlighted in the thematic section of the note, ORL is best placed amongst the
Western peers on account of its superior land bank quality, access to finance,
healthy balance sheet and high potential for successful foray in newer markets.
The micro factors are well supported by strong execution, quality construction &
management bandwidth. We highlight our finding in exhibit 7 to arrive at overall
competitive positioning.
Exhibit 7: Overall competitive positioning of real estate developers
Macro
Competitive
- 30% weight
Business
Competitive -
25% weight
Land bank
& Pricing -
20% weight
Balance
Sheet
positioning
- 25%
weight
Overall Comments
Oberoi
Top quartile with no debt, higher return ratios and strong
cash-flows
Godrej
A top quartile on macro competitive whilst mid-quartile
on all other parameter. High leverage is the key overhang.
We rate it a mid-quartile
HDIL
Middling in all parameter
Hiranandani
Raheja
Middling in all parameter
Sunteck
Overall a Mid -quartile on back of low leverage, high
return ratios
Wadhwa
Middling in all parameter
Kolte Patil
A Mid -quartile on all parameters
Source: Karvy Institutional Research; Note: Strong; Relatively Strong; Average; Relatively Weak Weak
On overall competitive positioning, we find that the top real estate players
include Oberoi, Godrej, Hirandandani & Sunteck in Western markets. ORL with
the right mix of branding, execution capability, balance sheet strength and
underlying business fundamentals remains best poised amongst the peers.
Notwithstanding their scores differ on these factors we see limited differentiation
on an overall basis.
7
Valuation – Maintain NAV of Rs296/share
SOTP Valuation We have adopted DCF methodology to arrive at ORL’s NAV/share. We value the
residential real estate business at Rs161/share, hotels at Rs21/share, commercial
annuity assets at Rs90/share, social infrastructure at Rs10/share, other assets at
Rs15/share and net debt (Rs1) to arrive at total SOTP valuation of Rs296/share for
the Company. We don’t ascribe any NAV discount to ORL as we have only valued
the projects which have visibility over the next 5years. For land bank beyond 5
years we ascribe 1x P/BV for invested equity.
Exhibit 8: Sum of the Parts
Rs mn Rs/share Comments
Gross NAV Residential 52,887 161 NAV based on the methodology discussed below
Gross NAV Hotels 6,961 21 8x FY15E EV/EBIDTA
Gross NAV Commercial 29,599 90 NAV based on the methodology discussed
Social Infra 3,134 10 discounting at 12% cap rate viz. school, hospital etc
Other Assets 4,911 15 investments in other projects at 1x P/BV,viz. Sangam city, Juhu hotel etc
Less: Net Debt 258 (1) Increase in debt to Rs8bn has resulted in ORL being a Net debt company
NAV 97,235 296
Source: Karvy Institutional Research
Real estate development – NAV calculation methodology
We have divided ORL’s entire land bank into residential projects (based on the
information given by the company)
We have arrived at the sale price/sq ft. and the anticipated sales volumes for
each project based on our discussions with industry experts
We have deducted the cost of construction based on our assumed cost
estimates which have been arrived at after discussions with industry experts
We have further deducted marketing and other costs which have been
assumed at 5% of the sales revenue
We have then deducted income tax based on the tax applicable for the project
The resultant cash inflows at the project level have been discounted based on
WACC of 14% (cost of equity 14% based on beta of 1x & debt/equity ratio of
0x). All the project level NAVs have then been summed up to arrive at the
NAV of the company
For commercial office we have discounted rentals using 14% WACC for the
forecasted period and terminal value using the cap rate of 11%
Social infrastructure created by ORL viz. School, Hospital etc has been
discounted using cap rate of 12%
Other assets have been valued at 1x P/BV of invested equity
From the NAV, we have deducted the net debt as of FY15E to arrive at the
final valuation of the company.
Location Gross NAV
(Rs mn)
Rs/
Share
Residential
Goregaon 13,716 42
JVLR 6,943 21
Worli - Residential 8,132 25
Mulund 11,421 35
Borivali 12,675 39
Total Residential 52,887 161
Hotels
Westin Hotel 4,085 12
Worli Hotel 2,876 9
Total Hotel 6,961 21
Commercial
Commerz-All Phases 20,712 63
Oberoi Mall 6,274 19
Worli Commercial 2,613 8
Total Commercial 29,599 90
Grand Total 89,448 273
Source: Karvy Institutional Research
8
Key valuation assumptions
In exhibit 9 we highlight our sales and cost inflation forecasts. We expect property
price appreciation in line with WPI inflation i.e. 5%. We forecast other costs
including marketing, SGA and employees’ costs at 5% of sales.
Exhibit 9: Base case assumptions
Discount rate 14%
Annual rate of inflation-sales price 5%
Annual rate of inflation-cost of construction 5%
Other costs – marketing, SGA, employee cost (as % of sales) 5%
Tax rate (%) 33%
Source: Karvy Institutional Research
In the exhibit 10 we highlight our sale price and construction cost forecasts. Our
pricing assumptions are moderate and at a 0-10% premium to the current
prevailing prices on account of ORL 15-20% brand premium vs peers.
Exhibit 10: Base property price and construction cost assumptions
Location Prices Cost
Rs/sq ft Rs/sq ft
Goregaon 14,000 5,500
Worli 35,000 7,500
Mulund 11,500 4,000
Borivali 12,000 5,000
JVLR 13,500 5,000
Source: Karvy Institutional Research
9
Key catalysts
Worli & Mulund launches
ORL has unsold inventory of ~12.2mn sqft as of end FY14 and has planned 7mn sq
ft of new launches over FY15E (Mulund-3.2mn sqft, Borivali – 3.2mn sqft, Worli
gross profit share 0.6mnsqft). Whilst FY14 has been dismal in new sales (total area
sold 277,144sqft a de-growth of ~43% YoY) owing to delay in launches, we build in
strong recovery for FY15E on back of Mulund, Borivali and Worli launches. ORL
has set priority with Worli launch by 1HFY15E, Mulund launch – by 3QFY15E,
Borivali launch FY15E end. Besides Oberoi Exquisite & Oberoi Esquire has unsold
inventory of ~1mn sqft. Hence sales velocity will be key re-rating trigger.
Change in product mix can impact margin on upside
Whilst historically ORL margins have been in 55-60% range owing to low
historical land bank cost and increasing contribution from annuity assets. With the
Worli revenues hitting P&L the margins may expand as the project revenue will be
booked post deduction of construction costs hence the margins will be above
ORL’s EBIDTA margins resulting in positive earnings surprise.
Successful foray outside Mumbai
ORL is looking to enter NCR and has signed a MOU for a ~5mn sqft of joint
development. Any success in signing a definitive agreement remain key trigger for
the stock re-rating.
Key risks to our BUY stance
Correction in property prices
Western markets have 37months of unsold inventory and current property prices
have crossed previous highs making market unaffordable. Whilst ORL is focused
on premium residential developments and has been sticky on holding prices any
correction may be detrimental to our valuation assumptions. For every 1%
correction in base residential prices, our NAV estimate for ORL will be negatively
impacted by 3%.
Liquidity tightening may result in cash flow pressures
The tightened liquidity scenario has led to developers evaluating current
repayment needs versus new launches. Hence cash flows from existing projects
may be utilized for retiring debt rather than reinvestment in new project launches.
The sustained liquidity tightening may impact new launches and thereby the
momentum in cash flows. Whilst this is a generic risk for the sector, ORL is
relatively unimpacted owing to relatively strong balance sheet.
10
Financials - Consolidated
Exhibit 11: Profit & Loss
Y/E Mar (Rs mn) FY12 FY13 FY14 FY15E FY16E
Net sales 8,247 10,476 7,985 17,177 28,428
Growth (%) (17.2) 27.0 (23.8) 115.1 65.5
EBITDA 4,835 6,121 4,348 10,296 16,428
EBITDA margin (%) 58.6 58.4 54.5 59.9 57.8
Growth (%) 1 (0) (7) 10 (4)
Depreciation 269 285 272 348 558
EBIT 4,565 5,836 4,076 9,949 15,870
Net Interest 3 4 3 630 512
Other income 1,501 999 571 310 490
PBT 6,063 6,831 4,644 9,628 15,848
Taxes 1,430 1,783 1,533 3,154 5,124
Net profit 4,633 5,049 3,111 6,475 10,724
Margin (%) 56.2 48.2 39.0 37.7 37.7
EPS (Rs) 14.1 15.4 9.2 19.7 32.7
Source: Company, Karvy Institutional Research
Exhibit 12: Balance Sheet
Y/E Mar (Rs mn) FY12 FY13 FY14E FY15E FY16E
Share capital 3,282 3,282 3,282 3,282 3,282
Reserves & surplus 34,059 38,339 41,207 47,303 57,400
Networth 37,341 41,621 44,489 50,585 60,682
Debt - - - 8,000 6,500
Deferred tax liability 78 147 147 147 147
Sources of funds 37,420 41,769 44,637 58,733 67,329
Net block 7,009 6,867 10,147 10,249 14,684
CWIP 2,841 3,848 1,194 1,413 -
Goodwill 2,654 2,654 2,654 2,654 2,654
Current assets 35,338 39,522 42,970 58,808 69,294
Inventory 10,196 12,448 16,956 20,515 25,744
Sundry debtors 679 522 437 1,018 1,664
Cash & bank balance 12,934 10,725 8,698 7,742 12,252
Loans & advances 11,529 15,827 16,878 29,534 29,634
Current liabilities &
provisions 10,423 11,121 12,327 14,393 19,303
Net current assets 24,916 28,401 30,643 44,416 49,990
Application of funds 37,420 41,769 44,637 58,733 67,329
Source: Company, Karvy Institutional Research
11
Exhibit 13: Cash flow statement
Y/E Mar (Rs mn) FY12 FY13 FY14E FY15E FY16E
PBT before minority 6,063 6,831 4,361 9,628 15,848
Depreciation/amortisation 269 285 287 348 558
Interest 1 0 4 630 512
Non oper. Income (1,481) (984) (565) (311) 823
Change in NWC -268 -3,016 -4,268 -14,730 -964
Tax (1,321) (1,698) (1,352) (3,154) (5,124)
Net cash from operations (a) 3,263 1,419 -1,534 -7,588 11,653
(Inc)/dec in investments -2,441 0 0 0 0
Capex -985 -1,181 -913 -670 -4,993
Others (2,399) (7,145) 600 310 490
Cash flow from inv. (b) -5,826 -8,325 -313 -360 -4,503
FCF (a+b) -2,563 -6,906 -1,847 -7,948 7,150
Inc/dec in loans - - - 8,000 (1,500)
Dividend/Others (382) (763) (180) (1,009) (1,139)
Financial cash flow ( c ) -382 -763 -180 6,991 -2,639
Net inc/dec in cash (a+b+c) -2,945 -7,669 -2,026 -957 4,511
Source: Company, Karvy Institutional Research
Exhibit 14: Key Ratio
Y/E Mar (%) FY12 FY13 FY14E FY15E FY16E
EBIDTA margin 58.6 58.4 54.5 59.9 57.8
EBIT margin 55.4 55.7 51.1 57.9 55.8
Net profit margin 56.2 48.2 39.0 37.7 37.7
Return on capital employed 17.3 17.3 10.8 19.8 26.0
Return on equity 13.1 12.8 7.2 13.6 19.3
Dividend payout ratio 0.0 0.0 0.0 0.0 0.0
Current ratio (x) 3.4 3.6 3.5 4.1 3.6
Net debt/ Equity (x) (0.3) (0.3) (0.2) 0.01 (0.1)
Source: Company, Karvy Institutional Research
Exhibit 15: Valuation Parameters
Y/E Mar FY12 FY13 FY14E FY15E FY16E
EPS (Rs) 14.1 15.4 9.2 19.7 32.7
Diluted EPS (Rs) 14.1 15.4 9.2 19.7 32.7
Book value per share 113.8 126.8 135.5 154.1 184.9
P/E (x) 17.4 15.9 26.7 12.4 7.5
P/BV (x) 2.2 1.9 1.8 1.6 1.3
EV/EBITDA (x) 14.0 11.4 16.5 7.8 4.5
EV/Sales (x) 8.2 6.7 9.0 4.7 2.6
Turnover ratios (no.)
Debtor days 86 90 70 70 70
Creditor days 196 127 127 283 283
Source: Company, Karvy Institutional Research
Institutional Equities Team Rahul Sharma
Head – Institutional Equities /
Research / Pharma +91-22 61844310 rahul.sharma@karvy.com
Gurdarshan Singh Kharbanda Head - Sales-Trading +91-22 61844368/69 gurdarshansingh.k@karvy.com
INSTITUTIONAL RESEARCH
Analysts Industry / Sector Desk Phone Email ID
Mitul Shah Automobiles/Auto Ancillary +91-22 61844312 mitul.shah@karvy.com
Parikshit Kandpal Infra / Real Estate / Strategy/Consumer +91-22 61844311 parikshit.kandpal@karvy.com
Rajesh Kumar Ravi Cement/ Logistics/ Paints +91-22 61844313 rajesh.ravi@karvy.com
Rupesh Sankhe Power/Capital Goods +91-22 61844315 rupesh.sankhe@karvy.com
Varun Chakri Research Associate +91 22 61844326 varun.chakri@karvy.com
Vinesh Vala Research Associate +91 22 61844325 vinesh.vala@karvy.com
INSTITUTIONAL SALES
Celine Dsouza Sales +91 22 61844341 celine.dsouza@karvy.com
Edelbert Dcosta Sales +91 22 61844344 edelbert.dcosta@karvy.com
INSTITUTIONAL SALES TRADING & DEALING
Aashish Parekh Institutional Sales/Trading/ Dealing +91-22 61844361
Prashant Oza Institutional Sales/Trading/ Dealing +91-22 61844370 /71 prashant.oza@karvy.com
Pratik Sanghvi Institutional Dealing +91-22 61844366 /67 pratik.sanghvi@karvy.com
For further enquiries please contact:
research@karvy.com
Tel: +91-22-6184 4300
Disclosures Appendix
Analyst certification
The following analyst(s), who is (are) primarily responsible for this report, certify (ies) that the views expressed
herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of
his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views
contained in this research report.
Disclaimer
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contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for
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Stock Ratings Absolute Returns Buy : > 15% Hold : 5 - 15% Sell : < 5%
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