8/4/2019 Confidence Petroleum India Ltd_IER_QuarterlyUpdate

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CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 1

Confidence Petroleum India LtdProfitability under watch

Fundamental Grade 3/5 (Good fundamentals)Valuation Grade 5/5 (CMP has strong upside)

Industry Oil, Gas and Consumable Fuels

Fair Value Rs 20CMP Rs 12

September 05, 2011

Confidence Petroleum India Ltds (Confidences) Q1FY12 revenues were in line

with CRISIL Researchs estimates. Net profit however was lower than expected

due to lower operating profitability and higher interest, and minority interest.In line with the historical trend, we expect better performance in the

subsequent quarters. While we have retained our earnings estimates for

FY12-13 for now, we will keep a close watch on the coming quarters

profitability given the lower-than-expected profitability in Q1FY12. We do

remain positive on the companys overall business prospects, given its

established presence in the LPG value chain and its successful foray in to Auto

LPG Dispensing Stations (ALDS) and, hence, we maintain its fundamental

grade of3/5.

Q1FY12 result analysis

Revenues grew 30% y-o-y to Rs 2,499 mn supported primarily by its

cylinder divisions revenues (~14% of FY11 revenues - involves production

and marketing operations of LPG/CNG cylinders), which grew by 126%

y-o-y. The LPG divisions revenues (~86% of FY11 revenues - involves LPGmarketing and bottling business) grew by 21% y-o-y. Q1FY12 revenues

declined 22% q-o-q as Q1 is typically the companys most subdued

quarter. We expect performance to improve over subsequent quarters.

High top-line growth led to EBITDA growth of 29% y-o-y (down 17%

q-o-q) to Rs 279 mn. EBITDA margin remained flat at ~11% y-o-y due to

higher raw material costs, especially in its LPG division.

Higher operating profit was partially offset by higher interest cost and

minority interest, resulting in an adjusted PAT growth of 22.5% y-o-y

(decline of 28.4% q-o-q) to Rs 123 mn. PAT margin declined by 31 bps

y-o-y to 4.9%. EPS was Rs 0.5 compared to Rs 0.7 in Q4FY11. In line with

higher sales, we expect EPS also to improve in the subsequent quarters.

Valuations: Current market price has strong upsideWe continue to use the discounted cash flow method to value Confidence at

Rs 20. At the current market price of Rs 12, the stock merits a valuation grade

of5/5.

KEY FORECAST

(Rs mn) FY09 FY10 FY11# FY12E FY13E

Operating income 2,482 5,529 11,532 13,140 14,512

EBITDA 206 620 1,207 1,638 1,998

Adj PAT 154 295 629 847 977

Adj EPS-Rs 0.6 1.1 2.4 3.3 3.8

EPS growth (%) (27.9) 91.3 113.5 34.6 15.4

Dividend yield (%) - - - 1.6 1.6

RoCE(%) 8.6 19.6 25.8 24.1 24.8

RoE(%) 11.0 18.2 30.1 29.9 26.4

PE (x) 20.5 10.7 5.0 3.7 3.2

P/BV (x) 2.1 1.8 1.3 1.0 0.8

EV/EBITDA (x) 17.4 6.7 4.2 3.6 3.0

#FY11 numbers are based on abridged financials

CMP: Current market price

Source: Company, CRISIL Research estimate

CFV MATRIX

KEY STOCK STATISTICSNIFTY / SENSEX 16713/5017BSE ticker CONFIPET

Face value (Rs per share) 1

Shares outstanding (mn) 258.8

Market cap (Rs mn)/(US$ mn) 3,163/69

Enterprise value (Rs mn) /(US$ mn) 4,977/108

52-week range (Rs) (H/L) 27/9

Beta 1.24

Free float (%) 53.7%

Avg daily volumes (30-days) 316,466

Avg daily value (30-days) (Rs mn) 3.7

SHAREHOLDING PATTERN

PERFORMANCE VIS--VIS MARKETReturns

1-m 3-m 6-m 12-mConfidence -21% -21% -31% -18%

NIFTY 1% 1% 0% 1%

ANALYTICAL CONTACTSudhir Nair (Head) snair@crisil.com

Niyati Dave ndave@crisil.com

Arun Vasu avasu@crisil.com

Client servicing desk

+91 22 3342 3561 clientservicing@crisil.com

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Valuation Grade

FundamentalGrade

Poor

Fundamentals

Excellent

Fundamentals

Strong

Downside

Strong

Upside

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2.9% 2.5% 2.6% 4.7%

50.8% 51.2% 51.2% 49.0%

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Sep-10 Dec-10 Mar-11 Jun-11

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