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7/24/2019 CRISIL_21st_February_2011.pdf
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Kirloskar Ferrous Industries Ltd
Enhancing investment decisions
Init iating coverage
7/24/2019 CRISIL_21st_February_2011.pdf
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Explanation of CRISIL Fundamental and Valuation (CFV) matrix
The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process
Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental
grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The
valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to
grade 1 (strong downside from the CMP).
CRISIL
Fundamental Grade
Assessment CRISIL
Valuation Grade
Assessment
5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)
4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)
3/5 Good fundamentals 3/5 Align (+-10% from CMP)
2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)
1/5 Poor fundamentals 1/5 Strong downside (
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CRISIL Equities | 1
February 21, 2011
Fair Value Rs 42CMP Rs 25
Fundamental Grade 4/5 (Strong fundamentals)
Valuation Grade 5/5 (CMP has strong upside)
Industry Information technology
Polaris Software LimitedBusiness momentum remains intact
Fundamental Grade 3/5 (Good fundamentals)
Valuation Grade 5/5 (CMP has strong upside)
Industry Auto Components
Kirloskar Ferrous Industries LtdIntegrating backwards to move forward
Kirloskar Ferrous Industries Ltd (KFIL) manufactures pig iron and ferrous
castings (foundry). Castings are primarily used in commercial vehicles, tractors
and diesel engines. CRISIL Equities expects the company to benefit from
growth in the commercial vehicle sector. We assign KFIL a fundamental grade
of 3/5, indicating that its fundamentals are good relative to other listedsecurities in India.
Backward integration to lower costs as well as improve productivityThe planned backward integration of the pig iron manufacturing process by
setting up a sinter plant will lower KFILs iron ore cost by Rs 750-800 per
tonne. Also, the sinter plant is expected to improve productivity on account of
better-sized iron ore lumps (sinter) that will result in better processing of input
materials. CRISIL Equities expects sales volumes of pig iron to grow at a 6%
CAGR during FY10-FY13.
Long-standing relationship with OEMs; castings volume up by 10.2%KFIL enjoys a long-standing relationship with OEMs for supply of castings and
also benefits from pig iron backward integration and a captive power plant in
Hospet. The industry is witnessing increasing demand and lower capacity
addition. KFILs Hospet plant is operating close to its full capacity. However,
the Solapur plant, which added capacity in 2008, is still operating at lower
capacity as casting designs are still in the approval stage from OEMs. We
expect volumes to grow 10.2% during FY10-13 as the operating rate of
Solapur plant improves to 85% from 39.5% in FY10.
In a cyclical industry, exposed to input cost fluctuationsEnd-user industries for both pig iron and castings such as automobiles and
tractors are highly susceptible to economic cycles, changes in interest rates
and varying demand patterns. KFIL is also exposed to fluctuations in prices ofkey input materials such as iron ore and coke. Further, KFILs limited
bargaining power with OEMs restricts its ability to pass on the rise in costs.
Expect three-year revenue CAGR of 18%We expect KFILs revenues to register a three-year CAGR of 18% to Rs 13 bn
in FY13 largely due to the 18% growth in pig iron revenues (which comprise
~54% of overall revenues) and 16.5% growth in casting revenues. PAT is
expected to grow at a three-year CAGR of 9% to Rs 640 mn.
Valuations the current price has strong upsideCRISIL Equities has used the EV/EBITDA method to value KFIL and arrived at a
fair value of Rs 42 per share. Considering the capital intensive nature of the
business, low bargaining power and volatility in raw material prices, we have
assigned EV/EBITDA of 3.5x.
KEY FORECAST(Rs mn) FY09 FY10 FY11E FY12E FY13E
Operating income 6,999 8,083 11,003 11,983 13,302
EBITDA 614 950 920 1,183 1,278
Adj Net income 55 467 392 577 640
EPS-Rs 0.4 3.4 2.9 4.2 4.7
EPS growth (%) (83.8) 517.3 (20.0) 47.1 10.9
PE (x) 27.2 9.8 8.7 5.9 5.4
P/BV (x) 0.5 1.4 1.0 0.9 0.8
RoCE(%) 12.4 21.3 16.2 18.9 18.8
RoE(%) 1.9 15.0 11.5 15.3 15.1
EV/EBITDA (x) 2.6 4.7 3.2 2.4 1.6
CMP: Current Market Price
Source: Company, CRISIL Equit ies estimate
CFV MATRIX
KEY STOCK STATISTICSNIFTY/ SENSEX 5519/18438
BSE ticker KIRLFER
Face value (Rs per share) 5
Shares outstanding (mn) 137.3
Market cap (Rs mn)/(US$ mn) 3432/76
Enterprise value (Rs mn)/(US$ mn) 3,329/74
52-week range (Rs) (H/L) 43/23
Beta 1.45
Free float (%) 41%
Avg daily volumes (30-days) 38077
Avg daily value (30-days) (Rs mn) 1.1
SHAREHOLDING PATTERN
PERFORMANCE VIS--VIS MARKETReturns
1-m 3-m 6-m 12-mKFIL -8% -21% -33% -20%
NIFTY -8% -14% 0% 16%
ANALYTICAL CONTACTChetan Majithia (Head) [email protected]
Nivedita Joshi [email protected]
Vishal Rampuria [email protected]
Client servicing desk
+91 22 3342 3561 [email protected]
1 2 3 4 5
1
2
3
4
5
Valuation Grade
FundamentalGrade
PoorFundamentals
ExcellentFundamentals
S
trong
Do
wnside
S
trong
U
pside
59.1% 59.1% 59.0% 59.0%
6.3% 6.8% 7.5% 7.5%
34.6% 34.1% 33.5% 33.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar-10 Jun-10 Sep-10 Dec-10Promoter FII DII Others
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Kirloskar Ferrous Industries Ltd
Table: 1 Kirloskar Ferrous Industries Ltd: Business environment
Product/ Segment Pig iron Castings
Revenue contribution(FY10)
53.8% 32.5%
Revenue contribution
(FY13)
57.5% 33.3%
Location of manufacturingfacility
Manufacturing facility in Hospet,
Karnataka
Manufacturing facility in Hospet, Karnataka and Solapur,
Maharashtra
Geographic presence Caters to all regions except eastern India
Industry growthexpectations
Tractor industry to grow at CAGR of 9% over five years
Auto industry is expected to grow at CAGR of 15% over the next four to five years
Earth moving material handling industry to report 30% CAGR over next five years
Sales growth
(FY07-FY10 3-yr CAGR)
12.9% 16.5%
Sales forecast
(FY10-FY13 3-yr CAGR)
18.1% 16.5%
Demand drivers The government's increased focus on agricultural sector and infrastructure development
Increasing rural income, increased focus on mechanisation of agriculture and ease in
availability of credit facility to farmers are the factors driving demand for tractors; strong
growth in the medium and heavy commercial vehicles industry
Indias position as a low-cost auto hub will enable India to gain sizeable market share in the
global auto components manufacturing industry
India is Asia's fourth largest exporter and expected to top the world in car volumes by 2050;
by then the number of vehicles on road will be 611 mn
Key competitors Tata Metaliks, Sathavahana Ispat,Visa Steel, Usha Ispat, Sesa Goa,
Neco, Dempo, KISCO
(Kudremukh), SLR Steel
Tata Metaliks, Hinduja Foundries, Nelcast, Carnation
Industries, Simplex Castings, Nelcast, Magna Electro
Castings, Ghatge Patil, Amtek, Ashok Iron works
Key risks
Economic slowdown can affect end-users (auto, tractor manufacturers) capex plans, which in
turn is likely to affect allied manufacturers like KFIL
Subject to volatility in raw material prices and foreign exchange as it imports 60% of its
coke requirements
Client concentration in castings business (M&Ms tractor segment)
Source: Company, CRISIL Equit ies
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Kirloskar Ferrous Industries Ltd
Grading Rationale
Rising demand for pig iron to benefit KFIL
CRISIL Research expects the demand for pig iron to grow at 10% CAGR over the
next two to three years on the back of strong growth in end-user industries such
as steel (CAGR of 11%, FY10-FY12) and auto (including the tractor segment,
which is expected to grow at CAGR of 15% over the next five years). Pig iron is
primarily used to manufacture castings, which are used to manufacture auto
components (engine parts, brakes, etc). KFIL supplies ~90% of its pig iron
produce to local foundries (castings manufacturer) and local steel millers, and
the balance ~10% is consumed in-house (by its castings division).
Figure 1: Pig iron demand grows at 10% CAGR Figure 2: Break-up of pig iron end-user demand
Source: CRISIL Research Source: CRISIL Research
Backward integration to cut costs
KFIL plans to incur a capex of Rs 850 mn to set up a sinter plant to lower pig
iron manufacturing costs. The sinter plant, which is expected to be operational
in 2QFY12, will enable the company to manufacture pig iron by utilising iron ore
fines instead of iron ore lumps which are more expensive. We expect sinter to
meet 60% of its iron ore requirement. The price differential between iron ore
lumps and iron ore fines (after taking into account conversion cost of iron ore
fines to sinter/iron lumps) is Rs 750-800 per tonne. CRISIL Equities expects the
full benefit of the sinter plant in FY13 as the company ramps up its sinter plant
operations.
Iron ore FY11E FY12E FY13E
% of iron ore lumps 100% 54% 38%
Market price of iron ore lumps (Rs per tonne) 3,638 3,720 3,869
Market price of iron ore fines (Rs per tonne) - 2,820 2,969
Blended cost (Rs per tonne) 3,638 3,309 3,315
Cost saving (Rs mn) - 411 554
% saving - 11% 14%
Source: Company, CRISIL Equit ies
4,6324,909
5,2025,722
6,294
500
1,500
2,500
3,500
4,500
5,500
6,500
FY08 FY09 FY10 FY11E FY12E
(in 000 tonnes) Automobile,
21%
Pipes &fittings, 18%
Pumps, 15%
Engines &
compressors,11%
Textiles, 9%
Fans, 6%
Others, 20%
The castings industry
accounts for nearly 65-
70% of pig iron
production, the balance
is consumed by the steel-
making industry
To manufacture a tonne
of pig iron, 1.8-1.9
tonnes of iron ore lumps
are required
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Kirloskar Ferrous Industries Ltd
a n d i m p r o v e p r o d u c t i v i t y
Backward integration is also likely to improve productivity. This is because the
size and shape of sinter creates efficient space in the mini blast furnace (MBF)
and increases production. Utilisation of sinter in the MBF is likely to increase per
day production by nearly 10-15% from 520 tonnes per day. CRISIL Equities
expects volumes to increase at a CAGR of 6% during FY10-13.
Figure 3: Pig iron volumes to grow at CAGR of 6% (FY10-FY13)
Source: CRISIL Equities
The change in process or material mix (usage of sinter) results in creation of
efficient space in the MBF, which increases productivity and leads to additional
cost benefits. This is because of better chemical reaction in the MBF and more
space to blow hot blasts (hot air). Efficient usage of hot blast enables reduction
in consumption of coke which is expensive. Expected reduction in coke
consumption is nine kgs per tonne of pig iron manufactured. CRISIL Equities
expects reduction in coke consumption to lead to cost savings of Rs 80-180 per
tonne.
KFIL has been continuously improving its manufacturing process to reduce
operational costs. Pig iron manufacturing is an energy-intensive process. To
manufacture pig iron from iron ore lumps/fines, coke is burned as a fuel to heat
the furnace along with blasts of hot air. The temperature requirement is 1500
degree celsius. KFIL increased temperate in MBF from 700 degree celsius in
FY07 to 1100 degree celsius in FY10 by replacing metallic gas heaters with
stoves. Additional energy released through stoves enabled the company to
reduce coke input/output ratio from 0.81 (800 kgs) in FY08 to 0.76 (~760 kgs)
in FY10.
Exposed to volatility in raw material costs
KFIL procures iron ore lumps for producing pig iron from the open market, which
exposes it to fluctuations in iron ore prices. The price fluctuation of another key
raw material coke also impacts the companys profitability. KFIL is largely
dependent on imports and, hence, is also exposed to volatility in foreign
213
146
227 234248 270
0
50
100
150
200
250
300
FY08 FY09 FY10 FY11E FY12E FY13E
(in 000 tonnes)
60% of coke consumed
is imported, the balance
is sourced locally from
players like Gujarat NRE
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Kirloskar Ferrous Industries Ltd
exchange. However, timely hedging measures are taken by the company to
minimise exchange fluctuations. Increase in raw material prices is passed on
with a lag of two to three months. In the meantime, the demand-supply
scenario of raw material could change, impacting realisations and, hence,
profitability. This was the scenario in 2QFY11. KFIL was holding a high cost
inventory; however, a decline in input costs impacted realisations and, hence,
profitability.
Figure 4: Coke prices soared... Figure 5: ... so did price of iron ore fines
Source: CRISIL Research Source: CRISIL Research
Quarterly financials
(Rs mn) Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
Net sales 1,769 2,059 2,583 2,246 2,812
Change (q-o-q) 80% 16% 25% -13% 25%
EBITDA margin 15.7% 9.3% 9.3% 11.1% 5.1%
Adj PAT margin 9.1% 6.3% 4.4% 5.6% 1.6%
Source: Company, CRISIL Equit ies
Power from waste heat meets 50% of its needs
KFIL uses waste heat gas generated during the production of pig iron to
generate power. This helps the company to lower the per unit cost of power by
Rs 4.3 as the cost of power generated through waste heat recovery comes to
around Rs 1 per unit, while the state grid power costs Rs 5.3 per unit. The
company has set up three steam turbines with combined cogeneration capacity
of 12 MW of power at its Hospet facility. Post installation of the sinter plant, the
companys power requirements will go up by 2 MW to 18 MW at the Hospet
plant. The Solapur plant will continue to depend on state grid power, which is
expensive at Rs 6.3 per unit.
Power requirements (MW)
Plant-wise Captive generation State grid Total
Hospet 9.0 7.0 16.0
Solapur - 7.0 7.0
Total power consumed 23.0
Source: Company, CRISIL Equit ies
200
220
240
260
280
300
320
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
(US$ per tonne)
Coke prices (China - Spot price)
-
20
4060
80
100
120
140
160
180
200
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
High
5MW power capacity set
up in 2009 is entitled to
carbon credits
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Kirloskar Ferrous Industries Ltd
The captive power capacity can satisfy 75% of the Hospet plants requirements;
however, it is not running at full capacity owing to limited access to waste gas.
Hence, KFIL sources about 44% of its power requirements from the state grid in
Hospet. After the commissioning of the sinter plant, the Hospet plants
dependence on state grid power will come down to 33% as the waste gas
generated in the sinter plant will also be utilised to generate power. Waste heat
utilisation will not only reduce dependence on the high-cost and erratic power
supply from the state grid but also take care of waste disposal. It will also entitle
the company to earn carbon credits whose sales are earnings accretive.
Currently, the company has not earned carbon credits but has registered itself
for carbon credit benefits, which are likely to accrue in the years to come.
CRISIL Equities has not factored in the benefits of the same owing to difficulty of
arriving at the carbon credits earned and realised (earned carbon credits can be
sold within three years, value is realised upon sale).
High LCV and MCV demand to boost casting sales
Castings manufactured by KFIL are mainly used in commercial vehicles (light
and medium), tractors and diesel engines. KFIL derives 30% of its revenues
from the castings business where it supplies its products to OEMs of light
commercial vehicles (LCM) and medium commercial vehicles (MCV). Production
of commercial vehicles (CV) is expected to grow at 17% CAGR from FY10-FY15,
while the tractor industry is expected to grow at 9% CAGR during the same
period. Expanding economic activity and increasing passenger traffic are
expected to keep up sales of CVs. Robust growth in CVs and tractor industry
augurs well for KFILs castings revenue growth.
Figure 6: Strong growth in CV industry... Figure 7: ... boosts KFILs castings volumes
Source: CRISIL Research Source: CRISIL Research
CRISIL Research expects LCV growth to be driven by the non-bulk segment
(includes consumer durables, express cargo, handsets, etc.), which is expected
to register a strong 10-12% growth over the next five years. CRISIL Equities
expects KFILs overall castings sales volumes to grow at CAGR of 10.2% over
the next three years on the back of strong growth in the commercial vehicles
industry and initiatives taken by the company to improve efficiency.
297337
458 468
347
483
565
662
774
906
1,060
-
200
400
600
800
1,000
1,200
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
FY14E
FY15E
(in 000)
27 36
50
39
5058
64 66
0
10
20
30
40
50
60
70
FY06
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
(in 000 tonnes)
CV industry trails economic
growth and handles more
than 50% of freight
movement domestically with
0.98 times correlation to
aggregate GDP
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Kirloskar Ferrous Industries Ltd
Investing further to improve operational efficiency
KFILs castings have faced high rejection rates in the past. To bring down the
rejection rate, KFIL began to focus on improving operational efficiency in this
business by adopting a new technology (such as replacing old moulding lines
with new semi-automated moulding lines). An automated process (less manual
work) reduces error, enhances efficiency and helps maintain consistency in the
product quality. Efforts to streamline the operations have made the business
profitable. To further bring down rejection rates in order to increase sales
volume and thereby earnings, the company is investing Rs 150 mn to set up a
fettling capacity unit (it gives high lustre and an even texture, which are critical
for ensuring that casting parts work properly) in the Hospet plant.
Compared to the Solapur plant, the Hospet plant relies more on manual
operations and relatively old technologies (old moulding lines). The plant (with
60,000 tonnes capacity) is also operating at optimum levels. Thus, to increase
sales volumes in the Hospet plant, KFIL is focused on bringing down rejection
rates.
Figure 8: Increased efficiency reduces total rejection rate
Source: CRISIL Equities
In 2009, a new high pressure moulding line with latest technology was installed
in the Solapur plant. This has resulted in the plant operating with less man
power and overall increase in productivity. Apart from this, KFILs revenues
could get a boost as the Solapur plant has an additional advantage of machine
shop facility for producing machined castings as per customer requirements.
KFIL is further focusing on better management of assets in Solapur to increase
volumes through increased order inflows. Hence, it is increasing the production
of moulds and cores - vital for castings manufacturing. The company plans to
quicken the process of the moulding line, whereby it will be able to process 100
moulds per hour instead of 80. With reduction in cycle time, the Solapur plants
productivity is expected to increase by 10,000 tonnes per annum. The move to
increase volumes by focusing on increasing efficiency will entail an investment of
Rs 250 mn.
11.2%10.5%
7.9%
11.0%
10.3% 10.4%
7.6%
7.8%
8.2%
9.1%
9.3%
11.5%
8.6%
14.6%14.5%
12.6%
13.9%
9.1%
6.8%7.6% 7.3%
6.8%5.2%
4.8%
4.8%
4.5%
2%
4%
6%
8%
10%
12%
14%
16%
FY06
FY07
FY08
FY09
FY10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
(Rejection rate)
Hospet Solapur
Improvement in
manufacturing process to
aid volume growth at the
Hospet plant
Reduced cycle time will
enhance Solapur plants
productivity by 10,000
tonnes per annum
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Kirloskar Ferrous Industries Ltd
Backward integration in castings business
KFIL has an integrated jobbing foundry castings manufactured with linkage to
molten (liquid metal) pig iron. As the company utilises molten metal (pig iron
manufactured in-house), it saves on power cost, which other foundries (who
purchase pig iron lumps and melt them) have to incur. Apart from cost savings,
integrated operations also led to product efficiency. Since the company uses
liquid metal to manufacture castings in the Hospet plant, its products require
less machining work at the customers end, unlike that of other foundry
manufacturers (castings manufactured using pig iron lumps). Machining is done
to give a product the desired efficiency. Minimal machine work indicates
efficiency of the product manufactured by KFIL on account of which it is a
preferred supplier of castings for critical parts like engine.
KFIL is one the few players that manufacture high-end castings (Hinduja
Foundries, Nelcast, DCM Engineering, etc.) used in the auto industry, especially
commercial vehicles light and medium and tractor segments.
Long-standing relationship with OEMs
With its expertise in manufacturing castings, KFIL is continuously working on
developing cost-effective and efficient products. Owing to the companys ability
to customise the product as per clients requirements, it has become a preferred
supplier and is often considered as an integral part of an OEMs value chain.
KFIL enjoys a long-term and healthy relationship with major auto manufacturers
like Mahindra and Mahindra (commercial as well as tractor segments), Tata
Motors, TAFE, Carraro, Toyota Kirloskar Motors Ltd, etc. The company is a single
source supplier to major auto manufacturers providing castings specifically for
engines, tractors and multi-utility vehicles.
Figure 9: Share of Mahindra (a key client of KFIL) in sales
Source: CRISIL Equities
14.1%18.3% 18.0%
36.6%
48.9% 48.8%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
FY08 FY09 FY10
% of overall business % of castings business
KFIL is expected to
benefit from the 17%
CAGR in commercial
vehicle auto industry as
it is a preferred supplier
of castings for engine
critical components
Mahindra and Mahindra
accounts for nearly 15-
20% of the companys
total sales and 50% of
the castings division
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Kirloskar Ferrous Industries Ltd
Auto manufactures on expansion spree: Auto manufacturers have lined up
new launches in the commercial vehicle segment. For example, Mahindra is
going to launch Navistar. Additionally, auto majors such as Daimler and Volvo
are expanding their scale to meet increasing demands for commercial vehicles
following an improvement in economic activity. The new launches and expected
robust growth in the CV industry augur well for KFILs revenue growth,
especially for the castings business, supported by established relationship with
OEMs.
but limited bargaining power
KFIL has established a healthy relationship with OEMs on account of its ability to
cater to clients requirements but has limited bargaining power. This is because
jobbing foundry (castings business) has low entry barriers as technology and
productivity are not thrust areas. Its a highly competitive market dominated by
unorganised players. Design capabilities, mould and core making facilities are
the characteristics that can create entry barriers. However, OEMs develop their
own designs, which are given to casting manufacturers who concentrate on
efficiency of the product manufactured. Since OEMs prefer to have multiple
vendors to reduce the supplier concentration risk, castings manufacturers have
to operate in a competitive environment (pricing as well as order booking).
Limited bargaining power restricts KFIL from entering into back-to-back
contracts and fluctuations in raw material prices are not fully covered. KFIL
receives monthly orders from OEMs to supply castings and pricing is determined
by taking into account the then prevailing raw material prices. However,
castings manufacturers hold inventory of three months in case of imported raw
materials like coke used in pig iron manufacturing. Any sharp movement in raw
material prices during the quarter impacts margins of players like KFIL. During
2QFY11, KFIL reported lower margins on account of a decline in prices of
imported inventory in hand. Castings manufacturers like KFIL are trying to
negotiate pricing contracts with OEMs to include any increase in input costs
which also includes additives, and processing cost of raw materials to get a full
cover against increase in input costs. The move is considered positive and the
company expects to get price increase from auto manufacturers.
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Kirloskar Ferrous Industries Ltd
Key risks
Exposed to cyclicality of end-user industries
End-user industries such as automobiles and tractors are highly susceptible to
economic cycles, changes in interest rates and varying demand patterns. The
first two can hamper the consumers ability to spend or result in postponement
of consumption. This has a negative impact on the business (revenues) of
industries like auto. Lower cash inflows impact the auto manufacturers capex
plans and, hence, demand for components. Poor monsoon could hamper
investment ability of farmers, which in turn will impact tractor sales volumes.
Ex p o s e d t o f l u c t u a t i o n i n i n p u t c o s t s
KFIL procures iron ore from the open market for production of pig iron, which
exposes it to fluctuations in iron ore prices. The upcoming sinter plant will
enable the company to reduce cost of raw materials as the company will be able
to replace high-cost iron ore lumps with iron ore fines. Note, iron ore fine prices
are relatively cheaper but linked to movement in iron ore prices. Thus, KFIL will
be in a position to reduce cost but will remain exposed to volatility in iron ore
prices.
The other key raw material that has a significant bearing on the companys
profitability is coke. Of the total coke required to manufacture pig iron, 60% is
imported and the balance is sourced domestically. Since it imports a key input
material, KFIL is also exposed to volatility in foreign exchange. Increase in
material cost is normally passed on to end-users. Meanwhile, as the demand
outlook changes, realisations get impacted and affect profitability. A similar
scenario was witnessed in 1HFY11. KFIL had procured inventory at a high cost in
the beginning of the year. However, input prices declined and so did realisations
(pricing linked to input costs), which reduced profitability sharply during
1HFY11. The pig iron division is more susceptible to fluctuations in raw material
prices as the demand-supply scenario determines realisations and as there is no
chance to negotiate pricing as in the case of castings.
High rejection rate due to old technology in Hospet
KFILs castings plant in Hospet uses the old moulding technology which involves
more manual work compared to the semi-automated Solapur plant. The
company needs to cut down on manual errors to reduce its current 8-9%
rejection rate and increase volumes. Hence, it is planning to modernise the
Hospet plant with a fettling capacity, the benefits of which are likely to flow in
from FY12 onwards.
The pig iron divisions
produce is largely soldthrough a dealer-
distributor network.
Commission paid is Rs
100-120 per tonne of
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Kirloskar Ferrous Industries Ltd
Financial Outlook
Growth across offerings
On the back of strong growth in the commercial vehicle industry and
productivity improvement, pig iron and castings divisions revenues are expected
to grow at CAGR 18.1% and 16.5%, respectively.
Figure10: Sales grow at two-year CAGR of ~18% Figure 11: Pig iron revenues grow at a faster rate
Source: CRISIL Research Source: CRISIL Research
Figure 12: Pig iron revenue growth trend Figure 13:Volumes drive castings revenues
Source: CRISIL Research Source: CRISIL Research
Sharp movement in input costs to impactprofitability
Realisations or saleable price of pig iron and castings is vulnerable to any sharp
movement in raw material prices. However, there is a lag effect of at least a
quarter. During 1HFY11, KFIL was holding a high-cost coke inventory (about
US$ 510 per tonne) which declined to US$ 450 per tonne at the beginning of
2QFY11 and affected KFILs realisations. Since realisations are linked to spot
coke prices, KFIL witnessed a sharp decline in profits of nearly 50% in 2QFY11.
Coke prices have once again started moving up but this time KFIL is holding a
low-cost inventory and is likely to reap the benefits of the same.
7,285 6,999 8,083 11,003 11,983 13,302
39%
-4%
15%
36%
9%11%
-20%
-10%
0%
10%
20%
30%
40%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
FY08 FY09 FY10 FY11E FY12E FY13E
(Rs mn)
Revenues Y-o-Y growth (RHS)
50.7% 50.5% 53.8% 56.2% 56.0% 57.5%
35.5% 35.3% 32.5%33.2% 34.1% 33.3%
0.7% 0.8% 0.6%0.0% 0.0% 0.0%
13.1% 13.4% 13.2% 10.6% 10.0% 9.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY08 FY09 FY10 FY11E FY12E FY13E
Pig iron Castings Investmen tcastings Others
3,684 3,532
4,342
5,745
6,266
7,158
22.1%
-4.1%
22.9%
32.3%
9.1%
14.2%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
FY08 FY09 FY10 FY11E FY12E FY13E
(Rs mn)
Revenues % growth (RHS)
1,657
2,579 2,4692,620
3,398
3,817
4,14855.6%
-4.3%
6.1%
29.7%
12.3%8.7%
-5%
5%
15%
25%
35%
45%
55%
65%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(Rs mn)
Revenues % growth (RHS)
PAT to grow at CAGR of
9% during FY10-FY13
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Kirloskar Ferrous Industries Ltd
In the recent past, profitability was impacted on account of rising raw material
prices and the economic slowdown that impacted growth in demand from end-
user industries. However, KFIL could withstand the difficult situation on account
of timely measures (check on costs), long-standing relationship with OEMs,
which assured orders, with revival in demand and due to low gearing.
Figure 14: Margins vulnerable to raw material price movement
Source: Company, CRISIL Equities
Figure 15: RoCE and RoE to improve over a period of time
Source: Company, CRISIL Equities
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
FY08 FY09 FY10 FY11E FY12E FY13E
EBITDA margin PAT margin
0%
5%
10%
15%
20%
25%
FY08 FY09 FY10 FY11E FY12E FY13E
ROE ROCE
In FY09, margins
dropped on account of
high-cost inventory
along with rupee
depreciation
Increase in productivity,
check on costs along withexpected improvement in
realisations to result in
higher RoE and RoCE.
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Kirloskar Ferrous Industries Ltd
Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of
management quality, apart from other key factors such as industry and business
prospects, and financial performance.
Experienced management
KFIL has an experienced management headed by Mr R. V. Gumaste, managing
director. Mr Gumaste, B.Tech in metallurgical engineering, joined KFIL in 1993
as chief of pig iron production. He has been associated with the group for nearly
30 years and with the company for more than 15 years. The promoters have
sound business knowledge and the independent directors also have in-depth
experience of more than two decades in similar lines of business. Strong
management set-up with domain expertise and group support enabled the
company turn around its operations in 2003.
Gradual increase in capacity
KFILs management has been quick in identifying new growth avenues and
capitalising on them. The company started operations with an installed capacity
of 120,000 tpa (tonnes per annum) of pig iron in 1994 and gradually increased it
to 360,000 tpa. It also increased its foundry capacity from 37,500 tpa in 1994 to
102,000 tpa today.
Professional set-up and a strong second line
KFILs management has adopted a professional approach towards management.
The company has inducted various professionals from the industry at the senior
and mid-management levels to prepare for the next level of growth. From the
annual reports, we understand that board members Mr Atul Chandrakant
Kirloskar and Mr Sanjay C. Kirloskar are from the promoter family, and are
professionals backed by strong business acumen.
An experienced
management with a
belief in gradual and
steady growth
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Kirloskar Ferrous Industries Ltd
Corporate Governance
CRISILs fundamental grading methodology includes a broad assessment of
corporate governance and management quality, apart from other key factors
such as industry and business prospects, and financial performance. In this
context, CRISIL Equities analyses the shareholding structure, board composition,typical board processes, disclosure standards and related-party transactions.
Any qualifications by regulators or auditors also serve as useful inputs while
assessing a companys corporate governance.
Overall, corporate governance at KFIL meets the regulatory requirements
supported by reasonably good board practices and an independent board.
Board composition
KFILs board consists of eight members, of whom five are independent directors,
which meets the requirement under Clause 49 of SEBIs listing guidelines. The
directors have strong industry experience and are highly qualified. Most of the
directors are formidable names in their business lines. Given their background,
we believe the board is experienced. The independent directors have a fairly
good understanding of the companys business and its processes. The
attendance of directors in the board meetings has been fairly good showing their
interest in the company. The independent directors on the board are:
Mr A. R. Jamenis, who has been associated with Kirloskar Group for about
37 years. Prior to being an independent director, he served as MD of KFIL
(1998-2003).
Mr S. N. Inamdar is a leading advocate of the Bombay High Court and has
38 years of experience as an income tax consultant. He has also served as
the president of the Chamber of Income Tax Consultants.
Mr C. V. Tikekar has been on the companys board since 1993. He joined
the group after retiring from Tata Engineering Company Ltd (38 years
experience in various capacities such as chief metallurgist, in charge of
foundries, etc.) and played a vital role in the planning, installing and
commissioning of the plant in Hospet.
Mr S. G. Chitnis retired as vice chairman of Kirloskar Pneumatic Company
Ltd after turning it around in two years. He has over 38 years of experience
in manufacturing, research and development and marketing.
Mr A. N. Alawani has been associated with the Kirloskar Group for more than 30
years. Before joining KFIL (2006), he was a director-finance of Kirloskar Oil
Engines Ltd. Besides his core expertise in finance and taxation, he is well
experienced in import-export and labour matters.
Boards processes
The companys quality of disclosure can be considered good judged by the level
of information and details furnished in the annual report, websites and other
publicly available data. The company has all the necessary committees audit,
remuneration and investor grievance - in place to support corporate governance
practices. The audit committee is chaired by Mr Inamdar.
Corporate governance
practices conform to
regulatory norms
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Kirloskar Ferrous Industries Ltd
Valuation Grade: 5/5
We have valued KFIL using the EV/EBITDA method and arrived at a fair value of
Rs 42 per share. Consequently, we initiate coverage on KFIL with a valuation
grade of 5/5 indicating that the market price of Rs 25 per share has strong
upside from the current levels.
Considering the capital intensive nature of the business, low bargaining power
and volatility in raw material prices, we have assigned EV/EBITDA of 3.5x.
One-year forward P/E band One-year forward EV/EBITDA band
Source: Company, CRISIL Equities Source: Company, CRISIL Equities
P/E premium / discount to NIFTY P/E movement
Source: Company, CRISIL Equities Source: Company, CRISIL Equities
0
20
40
60
80
100
120
Jun-06
Sep-06
Jan-07
Apr-07
Jul-07
Nov-07
Feb-08
May-08
Aug-08
Dec-08
Mar-09
Jun-09
Oct-09
Jan-10
Apr-10
Jul-10
Nov-10
Feb-11
(Rs)
KFIL 4x 8x 12x 14x 16x
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jun-06
Sep-06
Jan-07
Apr-07
Jul-07
Nov-07
Feb-08
May-08
Aug-08
Dec-08
Mar-09
Jun-09
Oct-09
Jan-10
Apr-10
Jul-10
Nov-10
Feb-11
(Rs mn)
EV 2x 4x 5x 6x
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
350%
400%
J
un-06
S
ep-06
J
an-07
A
pr-07
Jul-07
N
ov-07
F
eb-08
M
ay-08
A
ug-08
D
ec-08
M
ar-09
J
un-09
O
ct-09
J
an-10
A
pr-10
Jul-10
N
ov-10
F
eb-11
Premium/Discount to NIFTY Median
-20
0
20
40
60
80
100
120
Jun-06
Sep-06
Jan-07
Apr-07
Jul-07
Nov-07
Feb-08
May-08
Aug-08
Dec-08
Mar-09
Jun-09
Oct-09
Jan-10
Apr-10
Jul-10
Nov-10
Feb-11
1yr Fwd PE (x) Median PE
+1 std dev
-1 std dev
We assign a fair value of
Rs 42 per share and
initiate coverage with a
valuation grade of 5/5
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Kirloskar Ferrous Industries Ltd
Peer comparison
Mcap (Rs mn) as on Feb 21, 2011
KFIL 3,432
Hinduja Foundries Ltd. 2,460
Carnation Industries Ltd. 60
Magna Electro Castings Ltd. 332
Nelcast Ltd. 1,480
Simplex Castings Ltd. 515
Sathavahana Ispat Ltd. 1,570
EBITDA margin (%) FY08 FY09 FY10 9MFY11
KFIL 10.8% 8.8% 11.8% 8.1%
Hinduja Foundries Ltd 10.6% 7.8% 13.9% 10.7%
Carnation Industries Ltd 3.9% 7.2% 6.7% -8.4%
Magna Electro Castings Ltd 19.9% 13.4% 25.6% 24.2%
Nelcast Ltd 13.3% 10.5% 9.3% 6.3%
Simplex Castings Ltd 11.3% 12.8% 14.4% 15.1%
Sathavahana Ispat Ltd 21.7% 10.6% 16.3% 16.0%
Net margin (%) FY08 FY09 FY10 9MFY11
KFIL 6.7% 1.1% 6.1% 3.4%
Hinduja Foundries Ltd 3.2% -2.9% 0.1% 1.4%
Carnation Industries Ltd 0.0% 0.8% 1.0% -8.3%
Magna Electro Castings Ltd 6.8% 1.8% 7.5% 7.7%
Nelcast Ltd 6.4% 1.2% 2.0% 23.4%
Simplex Castings Ltd 3.9% 4.5% 5.7% 6.4%
Sathavahana Ispat Ltd 8.3% 2.3% 6.2% 8.0%
RoE (%) FY08 FY09 FY10
KFIL 10.8% 8.8% 11.8%
Hinduja Foundries Ltd 11.3% -5.7% -0.3%
Carnation Industries Ltd -2.0% 3.7% -1.1%
Magna Electro Castings Ltd 21.1% 7.5% 15.3%
Nelcast Ltd 26.5% 2.5% 4.4%
Simplex Castings Ltd 19.6% 21.0% 20.5%
Sathavahana Ispat Ltd 27.1% 8.7% 13.3%
EV/EBITDA FY08 FY09 FY10
KFIL 6.7 2.6 4.7
Hinduja Foundries Ltd. 8.8 13.7 10.6
Carnation Industries Ltd. 11.1 6.5 6.5
Magna Electro Castings Ltd. 5.5 3.1 5.4
Nelcast Ltd. 5.5 13.5 18.8
Simplex Castings Ltd. 5.1 2.8 4.7
Sathavahana Ispat Ltd. 3.8 2.5 8.1Source: CRISIL Equit ies
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Kirloskar Ferrous Industries Ltd
Company Overview
Incorporated in 1991, a Kirloskar Group company, KFIL is promoted by Kirloskar
Oil Engines Ltd and Shivaji Works Ltd. It manufactures pig iron and ferrous
castings (foundry). Pig iron is primarily used by automobiles, tractors, textiles,
pump, diesel engine industries and secondary steel mills. Only 10-12% of pig
iron manufactured is used in-house to manufacture castings, which are used in
automobiles, tractors, diesel engines and locomotive industries.
KFIL entered into a one-time settlement with financial institutions for the
repayment of high-cost loans in 2003 as a part of the debt restructuring
programme. A strong management along with domain expertise and group
support enabled the company turn around its operations. The accumulated
losses were completely wiped out in 2007. It declared its maiden dividend in
2008 and since then has been consistently paying dividends.
Business segmentsContribution to revenues
FY08 FY09 FY10
Pig iron 50.7% 50.5% 53.8%
Castings (foundry) 35.5% 35.3% 32.5%
Product details and customer profileBusiness segment Product type Key customers
Castings
(Grey iron, SG iron)
Cylinder blocks Auto:Mahindra & Mahindra Ltd, Tata Motors Ltd, Toyota Kirloskar Auto Parts, EicherMotors LtdCylinder heads
Housings Tractor:Mahindra & Mahindra Ltd, Escorts Ltd, Carraro India Pvt. Ltd, TAFE
Auto parts Engine: Kirloskar Oil Engines Ltd, Simpson & Co. Ltd
Pig iron Foundry grade Electro Steel Castings, Texmo Industries, Rajkot Eng. Association, Laxmi MachineWorks, Punjab Tractors Ltd, Sriram Piston & Rings Ltd, Kapilansh Dhatu Udyog Ltd,
Ghatge Patil Industries Ltd, Prashant Castings Ltd, Indo Shell Mould Ltd
Basic grade
SG grade
Manufacturing facility
The companys manufacturing facilities are located in Hospet, Karnataka and
Solapur, Maharashtra; they have a combined capacity of 360,000 tonnes per
annum (tpa) of pig iron and 102,000 tpa of castings. It also has three steam
turbines with a combined capacity of 12 MW. In FY10, KFIL installed stoves for
mini blast furnace-2 to increase productivity and reduce coke consumption.
During the last fiscal year, the company installed a high pressure moulding line
in order to improve the technology for its castings plant in Solapur. The
operations of the foundry in Solapur (based on old technology) have been
reduced and will be completely phased out in FY11 in line with KFILs plans to
transition to new technology for manufacturing castings. The company has
decided to close down the investment castings division, which contributed
merely 1% to total revenues.
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Kirloskar Ferrous Industries Ltd
Details of installed capacities and utilisation rate
SegmentInstalled capacity (MT) Capacity utilisation rate
2008 2009 2010 2008 2009 2010
Pig iron 240,000 240,000 360,000 108.3% 78.9% 75.9%
Castings 84,000 112,000 102,000 60.9% 37.5% 51.8%
Future plans
KFIL has planned a capital expenditure of Rs 2 bn to increase the high-margin
castings divisions manufacturing capacity by 90,000 tpa by the beginning of
FY13 to cater to rising demand from the automobile and tractor sectors. The
two-phased expansion will be primarily funded through internal accruals and the
company will resort to external funding only if necessary. We have not factored
in the capex plan as the funding is not yet finalised. KFIL is looking to fund its
expansion plans by exercising one of the three options:
Internal accruals: With increase in realisations, cash flows are expected to
increase that could part-fund capex plans.
Warrant conversion: Promoters hold 60% stake in the company and are
willing to pump in more funds through warrant conversions to increase
capacity.
Borrowings: Being near debt-free leaves room to increase the gearing. However,
as a group policy, KFIL prefers to fund capex through internal accruals and
warrant conversion.
Milestones
1991 Incorporated as Kirloskar Ferrous Industries Ltd
1994 Commissioned mini blast furnace-I and 3.5 MW power plant-1, using blast furnace gas
1995 Commissioned foundry and installed mini blast furnace-2
1997 Installed another 3.5 MW power plant
2003 Turnaround year
Entered into one-time settlement with financial institutions for the repayment of high-cost loans
2007
Raised Rs 2.27 bn through rights issue: Equity share of Rs 5 at a premium of Rs 30
Acquisition of Solapur plant from Kirloskar Oil Engines Ltd
Commissioned hot blast stoves project for mini blast furnace -1
2008 Declared maiden dividend of 15%
2009
Awarded certificate of merit by the Ministry of Power
New moulding line was set up at Solapur plant at an investment of ~ Rs 1,095 mn.
2010
Commissioned new turbo blower for increased power generation
Commissioned hot blast stoves for mini blast furnace II
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Kirloskar Ferrous Industries Ltd
Annexure: Financials
Source: CRISIL Equit ies
Income statement Balance Sheet
(Rs mn) FY09 FY10 FY11E FY12E FY13E (Rs mn) FY09 FY10 FY11E FY12E FY13E
Operating income 6,999 8,083 11,003 11,983 13,302 Liabilities
EBITDA 614 950 920 1,183 1,278 Equity share capital 686 686 686 686 686
EBITDA margin 8.8% 11.8% 8.4% 9.9% 9.6% Reserves 2,287 2,579 2,878 3,316 3,803
Depreciation 230 260 301 329 340 Minorities - - - - -
EBIT 383 691 619 855 938 Net worth 2,973 3,266 3,564 4,003 4,489
Interest 222 14 44 81 80 Convertible debt - - - - 1
Operating PBT 162 677 575 773 858 Other debt 189 63 753 743 733
Other income 4 2 20 101 112 Total debt 189 63 753 743 734
Exceptional inc/(exp) 24 23 - - - Deferred tax liability (net) 315 319 319 319 319
PBT 190 703 595 875 970 Total liabilities 3,477 3,648 4,636 5,065 5,542
Tax provision 110 212 202 297 330 Assets
Minority interest - - - - - Net fixed assets 2,633 2,796 3,195 3,467 3,327
PAT (Reported) 79 491 392 577 640 Capital WIP 662 584 584 584 584
Less: Exceptionals 24 23 - - - Total fixed assets 3,295 3,380 3,779 4,051 3,911
Adjusted PAT 55 467 392 577 640 Investments 0 0 0 0 0
Current assets
Ratios Inventory 577 1,427 1,357 1,477 1,640
FY09 FY10 FY11E FY12E FY13E Sundry debtors 692 889 1,245 1,356 1,505
Growth Loans and advances 377 356 549 599 665
Operating income (%) (3.9) 15.5 36.1 8.9 11.0 Cash & bank balance 127 167 1,264 1,394 2,066
EBITDA (%) (21.8) 54.9 (3.2) 28.6 8.0 Marketable securities - - - - -
Adj PAT (%) (88.8) 743.6 (16.0) 47.1 10.9 Total current assets 1,773 2,839 4,414 4,827 5,876
Adj EPS (%) (88.8) 743.6 (16.0) 47.1 10.9 Total current liabilities 1,612 2,582 3,568 3,824 4,257
Net current assets 160 257 846 1,003 1,619
Profitability Intangibles/Misc. expenditure 21 11 11 11 11
EBITDA margin (%) 8.8 11.8 8.4 9.9 9.6 Total assets 3,477 3,648 4,636 5,065 5,541
Adj PAT Margin (%) 0.8 5.8 3.6 4.8 4.8
RoE (%) 1.9 15.0 11.5 15.3 15.1 Cash flow
RoCE (%) 12.4 21.3 16.2 18.9 18.8 (Rs mn) FY09 FY10 FY11E FY12E FY13E
RoIC (%) 10.0 15.6 14.7 23.7 25.6 Pre-tax profit 166 679 595 875 970
Total tax paid (24) (208) (202) (297) (330)
Valuations Depreciation 230 260 301 329 340
Price-earnings (x) 27.2 9.8 8.7 5.9 5.4 Working capital changes 64 (57) 508 (26) 55Price-book (x) 0.5 1.4 1.0 0.9 0.8 Net cash from operations 436 674 1,201 879 1,035
EV/EBITDA (x) 2.6 4.7 3.2 2.4 1.6 Cash from investments
EV/Sales (x) 0.2 0.6 0.3 0.2 0.2 Capital expenditure (809) (334) (700) (600) (200)
Dividend payout ratio (%) 148.5 48.1 20.5 20.5 20.5 Investments and others - - - - -
Dividend yield (%) 7.8 5.2 2.3 3.4 3.8 Net ca sh from investme nts (809) (334) (700) (600) (200)
Cash from financing
B/S ratios Equity raised/(repaid) 10 0 - - -
Inventory days 35 77 51 52 52 Debt raised/(repaid) 149 (126) 690 (10) (10)
Creditors days 82 116 113 113 113 Dividend (incl. tax) (118) (236) (94) (139) (154)
Debtor days 35 41 40 40 40 Others (incl extraordinaries) 24 62 - - -
Working capital days 3 3 (5) (12) (11) Net cash from financing 65 (300) 596 (149) (164)
Gross asset turnover (x) 1.9 1.8 2.2 2.1 2.2 Change in cash position (308) 40 1,097 131 671
Net asset turnover (x) 3.2 3.0 3.7 3.6 3.9 Closing cash 127 167 1,264 1,394 2,066
Sa les/opera ting asse ts (x) 2.3 2.4 3.1 3.1 3.3
Current ratio (x) 1.1 1.1 1.2 1.3 1.4 Quarterly financialsDebt-equity (x) 0.1 0.0 0.2 0.2 0.2 (Rs mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
Net debt/equity (x) 0.0 (0.0) (0.1) (0.2) (0.3) Net Sales 2,059 2,583 2,246 2,812 2,840
Interest coverage 1.7 50.7 14.0 10.5 11.7 Change (q-o-q) 16% 25% -13% 25% 1%
EBITDA 191 241 248 144 248
Per share Change (q-o-q) -31% 26% 3% -42% 72%
FY09 FY10 FY11E FY12E FY13E EBITDA margin 9.3% 9.3% 11.1% 5.1% 8.7%
Adj EPS (Rs) 0.4 3.4 2.9 4.2 4.7 PAT 129 114 126 44 99
CEPS 2.1 5.3 5.0 6.6 7.1 Adj PAT 129 114 126 44 99
Book value 21.7 23.8 26.0 29.2 32.7 Change (q-o-q) -20% -12% 11% -65% 125%
Dividend (Rs) 0.9 1.7 0.6 0.9 1.0 Adj PAT margin 6.3% 4.4% 5.6% 1.6% 3.5%
Actual o/s shares (mn) 137.3 137.3 137.3 137.3 137.3 Adj EPS 0.9 0.8 0.9 0.3 0.7
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Kirloskar Ferrous Industries Ltd
Focus Charts
Changing revenue mix Revenue and growth trend
Source: Company, CRISIL Equities Source: Company, CRISIL Equities
EBITDA and PAT margin trend RoE and RoCE trend
Source: Company, CRISIL Equities Source: Company, CRISIL Equities
Quarterly sales and EBITDA margin trend Shareholding pattern over the quarters
Source: Company, CRISIL Equities Source: Company, CRISIL Equities
50.7% 50.5% 53.8%56.2% 56.0% 57.5%
35.5% 35.3% 32.5%33.2% 34.1% 33.3%
0.7% 0.8% 0.6%0.0% 0.0% 0.0%
13.1% 13.4% 13.2% 10.6% 10.0% 9.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY08 FY09 FY10 FY11E FY12E FY13E
Pig iron Castings Investmen tcastings Others
7,285 6,999 8,083 11,003 11,983 13,302
39%
-4%
15%
36%
9%11%
-20%
-10%
0%
10%
20%
30%
40%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
FY08 FY09 FY10 FY11E FY12E FY13E
(Rs mn)
Revenues Y-o-Y growth (RHS)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
FY08 FY09 FY10 FY11E FY12E FY13E
EBITDA margin PAT margin
0%
5%
10%
15%
20%
25%
FY08 FY09 FY10 FY11E FY12E FY13E
ROE ROCE
1,4
92
1,5
34
1,6
59
1,7
69
2,0
59
2,5
83
2,2
46
2,8
12
2,8
40
-7.1%
12.0%
12.7%
15.7%
9.3%
9.3%
11.1%
5.1%
8.7%
-10%
-5%
0%
5%
10%
15%
20%
-
500
1,000
1,500
2,000
2,500
3,000
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
(Rs mn)
Sales EBITDA margin (RHS)
59.1% 59.1% 59.0% 59.0%
6.3% 6.8% 7.5% 7.5%
34.6% 34.1% 33.5% 33.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar-10 Jun-10 Sep-10 Dec-10
Promoter FII DII Others
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CRISIL Independent Equity Research Team
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CRISILs Equity Offerings
The Equity Group at CRISIL Research provides a wide range of services including:
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