EXCEL INDUSTRIES LTD Overweight ISIN… · bromide, homidium chloride, isometamidium chloride hydrochloride, nitroxynil, toldimphos sodium and triclabendazole among others. The Company,

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EXCEL INDUSTRIES LTDResult Update (PARENT BASIS): Q3 FY18

CMP: 874.00 MAR 24th, 2018

Overweight ISIN:INE369A01029

Index DetailsSYNOPSIS

Excel Industries Limited is an India-based chemicalmanufacturer. The Company operates through fourdivisions that include Chemicals, Veterinary,Environ-Biotech, and Pharma.

During Q3 FY18, net sales of the company stood atRs.1467.67 million from Rs.998.09 million, whencompared with the prior year period.

EBITDA of the company stood at Rs.317.37 millionduring Q3 FY18 as against Rs.69.80 million in thecorresponding period of the previous year.

During Q3 FY18, PBT of the company stood atRs.264.68 million from Rs.16.44 million, whencompared with the prior previous year period.

During Q3 FY18, the company’s net profit stood atRs.187.66 million as against Rs.10.66 million inQ3FY17.

EPS of the company stood at Rs. 14.93 a shareduring the quarter, as against Rs. 0.85 per share overprevious year period.

During the quarter, EBITDA and PAT margins arestood at 21.62% and 12.79% respectively,

Net Sales and PAT of the company are expected togrow at a CAGR of 13% and 33% over 2017 to2019E respectively.

Stock DataSector Specialty ChemicalsBSE Code 500650Face Value 5.0052wk. High / Low (Rs.) 968.60/343.30Volume (2wk. Avg.) 5084Market Cap (Rs. in mn.) 10986.70

Annual Estimated Results(A*: Actual / E*: Estimated)Years(Rs. in mn) FY17A FY18E FY19ENet Sales 4449.94 5417.68 6230.33EBITDA 497.66 966.68 1116.65Net Profit 449.52 518.73 603.56EPS 35.76 41.27 48.01P/E 24.44 21.18 18.20

Shareholding Pattern (%)

As on Dec 2017 As on Sep 2017

Promoter 52.38 52.38

Public 47.62 47.62

Others -- --

1 Year Comparative Graph

EXCEL INDUSTRIES LTD S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)Excel Industries Ltd 874.00 10986.70 34.01 24.37 4.54 120.00Alkyl Amines Chemicals Ltd 598.00 12197.00 25.62 23.34 4.98 100.00DIC India Ltd 461.25 4233.80 - - 1.46 40.00Sudarshan Chemical Industries Ltd 419.00 29006.20 12.22 34.29 7.33 175.00


QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q3 FY18,

(Rs. in million) Dec-17 Dec-16 % Change

Revenue 1467.67 998.09 47.05%

Net Profit 187.66 10.66 1659.89%

EPS 14.93 0.85 1659.89%

EBIDTA 317.37 69.80 354.67%

The company achieved a turnover of Rs. 1467.67 million for the 3rd quarter of the FY 2017-18 as against Rs. 998.09

million in the corresponding quarter of the previous year. During the quarter, net profit stood at Rs. 187.66 million from

Rs. 10.66 million in the corresponding quarter ending of previous year. Reported earnings per share of the company stood

at Rs. 14.93 in Q3 FY18 as against Rs. 0.85 in the corresponding quarter of the previous year. Profit before interest,

depreciation and tax stood at Rs. 317.37 million as against Rs. 69.80 million in the corresponding period of the previous

year.

Break up of Expenditure

Break up ofExpenditure

Value in Rs. Million

Q3 FY18 Q3 FY17 %Change

Cost of MaterialsConsumed 643.94 450.19 43%

Excise duty 0.00 81.40 --

Employee BenefitsExpenses 165.88 133.58 24%

Depreciation &Amortization Expense 37.19 35.65 4%

Other Expenses 306.28 241.03 27%


COMPANY PROFILE

Excel Industries Limited is an India-based chemical manufacturer. The Company operates through four divisions that

include Chemicals, Veterinary, Environ-Biotech, and Pharma.

The Company, through its chemical division offers flame retardants, light stabilizers, clarifiers for polypropylene,

specialty monomers and trifunctional (B3) monomer. Its veterinary products include butaphosphan, clorsulon, homidium

bromide, homidium chloride, isometamidium chloride hydrochloride, nitroxynil, toldimphos sodium and triclabendazole

among others.

The Company, through its Environ-Biotech division, offers organic waste convertor (OWC), in-vessel composter and

sanitizing products. Through its Pharma segment, the Company provides Active Pharmaceutical Ingredients (API) and

intermediates. The Company's offers its products under brands, such as EXFLAR, EXHALS and EXCLAR among others.


FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as of March 31, 2016 -2019E

FY16A FY17A FY18E FY19E

SOURCES OF FUNDSShareholder's Funds

Share Capital 64.53 62.85 62.85 62.85Reserves and Surplus 2006.10 2359.58 2878.31 3396.40

1. Sub Total - Net worth 2070.63 2422.43 2941.16 3459.25Non Current Liabilities

Long term Borrowings 101.04 91.48 85.99 81.69Deferred Tax Liabilities 186.95 209.14 218.55 226.20Long term Provisions 102.26 112.76 121.78 129.08

2. Sub Total - Non Current Liabilities 390.24 413.38 426.32 436.97Current Liabilities

Short term Borrowings 676.22 504.33 408.51 343.15Trade Payables 713.36 634.94 533.35 469.34Other Current Liabilities 189.68 167.01 156.15 148.35Short Term Provisions 137.04 73.57 61.43 53.45

3. Sub Total - Current Liabilities 1716.30 1379.85 1159.44 1014.28Total Liabilities (1+2+3) 4177.17 4215.65 4526.92 4910.51APPLICATION OF FUNDSNon-Current AssetsFixed Assets

Tangible assets 1625.43 1827.36 1946.14 2101.83Intangible assets 10.18 5.05 5.46 5.73Capital Work in Progress 31.16 84.83 128.27 169.32Intangible assets under development 0.77 0.00 0.00 0.00a) Sub Total-Fixed Assets 1667.53 1917.24 2079.87 2276.88b) Non Current Investments 140.30 103.68 110.93 118.70c) Long Term Loans and Advances 259.98 233.75 223.23 214.30d) Other non-current assets 7.30 17.19 24.93 31.16

1. Sub Total - Non Current Assets 2075.11 2271.86 2438.96 2641.04Current Assets

Inventories 628.94 551.11 584.18 625.07Trade receivables 1268.93 1203.39 1281.61 1391.88Cash and Bank Balances 40.08 40.21 46.84 53.87Short-terms loans & advances 154.09 119.29 137.18 153.64Other current assets 10.03 29.80 38.15 45.02

2. Sub Total - Current Assets 2102.06 1943.79 2087.96 2269.47Total Assets (1+2) 4177.17 4215.65 4526.92 4910.51


Annual Profit & Loss Statement for the period of 2016 to 2019E

Value(Rs.in.mn) FY16A FY17A FY18E FY19E

Description 12m 12m 12m 12mNet Sales 4345.75 4449.94 5417.68 6230.33Other Income 28.22 80.71 48.56 54.38Total Income 4373.97 4530.65 5466.24 6284.72Expenditure -3730.47 -4032.99 -4499.56 -5168.06Operating Profit 643.50 497.66 966.68 1116.65Interest -125.42 -139.18 -65.15 -69.39Gross profit 518.07 358.48 901.52 1047.27Depreciation -148.75 -113.81 -147.69 -166.15Exceptional items 0.00 266.88 0.00 0.00Profit Before Tax 369.32 511.56 753.83 881.11Tax -114.89 -62.04 -235.10 -277.55Net Profit 254.44 449.52 518.73 603.56Equity capital 64.53 62.85 62.85 62.85Reserves 2006.10 2359.58 2878.31 3396.40Face value 5.00 5.00 5.00 5.00EPS 19.72 35.76 41.27 48.01

Quarterly Profit & Loss Statement for the period of 30th Jun, 2017 to 31st Mar, 2018E

Value(Rs.in.mn) 30-Jun-17 30-Sep-17 31-Dec-17 31-Mar-18E

Description 3m 3m 3m 3mNet sales 1343.57 1300.22 1467.67 1306.22

Other income 43.20 2.41 1.16 1.79

Total Income 1386.77 1302.64 1468.82 1308.01

Expenditure -1219.11 -1082.71 -1151.46 -1046.28

Operating profit 167.65 219.93 317.37 261.73

Interest -18.82 -16.11 -15.50 -14.72

Gross profit 148.83 203.82 301.87 247.01

Depreciation -36.63 -35.39 -37.19 -38.49

Profit Before Tax 112.20 168.43 264.68 208.52

Tax -34.44 -56.91 -77.03 -66.73

Net Profit 77.76 111.52 187.66 141.79

Equity capital 62.85 62.85 62.85 62.85

Face value 5.00 5.00 5.00 5.00

EPS 6.19 8.87 14.93 11.28


Ratio Analysis

Particulars FY16A FY17A FY18E FY19E

EPS (Rs.) 19.72 35.76 41.27 48.01

EBITDA Margin (%) 14.81% 11.18% 17.84% 17.92%

PBT Margin (%) 8.50% 11.50% 13.91% 14.14%

PAT Margin (%) 5.85% 10.10% 9.57% 9.69%

P/E Ratio (x) 44.33 24.44 21.18 18.20

ROE (%) 12.29% 18.56% 17.64% 17.45%

ROCE (%) 27.82% 20.26% 32.44% 33.03%

Debt Equity Ratio 0.38 0.25 0.17 0.12

EV/EBITDA (x) 18.67 23.19 11.83 10.17

Book Value (Rs.) 160.44 192.71 233.97 275.19

P/BV 5.45 4.54 3.74 3.18

Charts


OUTLOOK AND CONCLUSION

At the current market price of Rs. 874.00, the stock P/E ratio is at 21.18 x FY18E and 18.20 x FY19E respectively.

Earning per share (EPS) of the company for the earnings for FY18E and FY19E is seen at Rs. 41.27 and Rs. 48.01

respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 33% over 2017 to 2019E,

respectively.

On the basis of EV/EBITDA, the stock trades at 11.83 x for FY18E and 10.17 x for FY19E.

Price to Book Value of the stock is expected to be at 3.74 x and 3.18 x for FY18E and FY19E respectively.

Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

Intermediates for Agrochemicals

Excel Industries Ltd is a leading supplier of specialty intermediates to agrochemical producers.

The Agrochemicals Sector has an important role to play in food security and improvement of agricultural productivity. In

recent years, India has emerged as a hub for the production of generic agrochemicals. India is the fourth largest producer

of agrochemicals (after USA, China and Japan). The size of the Indian agrochemical Industry is estimated at US $ 5

billion. This sector is a major foreign exchange earner with exports of ~ US $ 2.5 billion. The Agrochemicals Industry

Companies in India can be classified into two categories viz manufacturing companies who produce the actives from

imported/locally sourced intermediates and importers who prepare the final formulations from imported/locally sourced

actives. The formulators are heavily dependent on imported actives from China. The manufacturers of active (technical)

products also have significant dependence on China for the upstream intermediates/raw materials.


Government Policies like “The Make in India” initiative and the changes in Chinese policies like strict implementation of

environmental control norms are likely to cause structural shifts in the Indian Agrochemical Industry. The likely fallout of

these changes in terms of opportunities and threats for the industry and the Company will be discussed in the following

paragraphs.

Outlook for the Industry

As part of the “Make in India” initiative, the Government has taken major steps to encourage indigenous production of

agrochemical actives. This is expected to give a major boost to the Indian manufacturing companies.

At the same time, Sourcing of Intermediates/Raw Materials required for the production of actives is becoming extremely

challenging. The Indian Agrochemicals Industry is heavily dependent on China for the upstream intermediates/raw

materials. The Chinese Government has started tightening the pollution control norms. This is going hand in hand with

strict implementation. Non-Compliant factories are being asked to shut down and in some cases, heavy penalties have

been imposed. This is causing problem of availability of some key intermediates. The limited availability also has an

adverse impact on the prices of these intermediates. The technical manufacturers have to develop alternative vendors

outside China to mitigate the supply chain risk. This is favourable for Indian producers of Intermediates who are the

obvious choice to complement/replace China for the supply of key intermediates.

Speciality Chemicals

The Company is a major producer of a wide range of Specialty and Performance Chemicals like Organophosphonates,

Biocides, Pharmaceutical intermediates and floatation reagents.

Industry Structure

Organophosphates and related products account for a major portion of the turnover of the Speciality Chemicals Product

Segment. These products are characterised by excess supply, commoditisation and intense price competition. The

Company produces a biocide which gives good performance and is highly cost effective. The Company is the major

producer of this biocide in the country.

Polymer Inputs

Industry Structure

Polymer Inputs/Additives are a class of functional chemicals which are used to impart special properties/functional

characteristics to Polymers. These include Catalysts, Flame Retardants, Clarifying Agents, Branching and Cross-Linking

Agents, Plasticizers etc. With the increasing use of Polymers in various applications like automobiles, electronics,

construction industry, power equipment, aerospace etc. there is a good potential for Polymer Inputs and Additives In

recent years, the Company has been able to establish itself as a leader in the range of polymer inputs produced by it. The

Company has been able to attain market leadership for the products produced by it.


PHARMACEUTICAL INTERMEDIATES AND ACTIVES

The Indian pharmaceuticals market increased at a CAGR of 17.46 per cent during 2005-16 with the market increasing

from US$ 6 billion in 2005 to US$ 36.7 billion in 2016 and is expected to expand at a CAGR of 15.92 per cent to US$ 55

billion by 2020. India’s cost of production is significantly lower than that of the US and almost half of that of Europe. It

gives a competitive edge to India over others.

The Indian API industry and its latest trends

For the Rs 112,000 crore Indian pharma market, in 2012-13, API constitutes over Rs 55,000 crore. The Indian

pharmaceutical industry is fragmented with more than 10,000 manufacturers in the organized and unorganized segments.

While 77 per cent of these are engaged in production of formulations, the remaining 23 per cent are in the active

pharmaceutical ingredient space. API manufacturers are likely to benefit as market dynamics have undergone a major

change. The patent expiry provides a significant opportunity for supply of APIs to manufacturers of generic drugs. There

are also increased opportunities in outsourcing of bulk drugs by multinational pharmaceutical companies. These

opportunities have led the Indian API industry to focus on core competencies and access to novel technologies.

The role of Indian API manufacturers in the global pharmaceutical supply chain is gradually evolving with increasing

presence in synthesis and manufacture of late stage intermediates and APIs. Traditionally, innovators have frequently

opted to perform final stages of API synthesis in-house or partner with specialized European suppliers while outsourcing

early stage intermediates to Indian manufacturers. However, in recent times, the reputed track record of Indian companies

in supplying quality products coupled with complex synthesis capabilities has enabled increasing participation in supply

of late stage intermediates to innovator companies.


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The following analysts hereby state that their views about the companies and sectors are on best effort basis to the best oftheir knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Theanalyst qualifications, sectors covered and their exposure if any are tabulated hereunder:

Name of the Analyst Qualifications SectorsCovered

Exposure/Interest tocompany/sector UnderCoverage in the CurrentReport

Dr.C.V.S.L. Kameswari M.Sc, PGDCA,M.B.A,Ph.D (Finance)

Pharma &Diversified

No Interest/ Exposure

U. Janaki Rao M.B.A CapitalGoods


B. Anil Kumar M.B.A Auto, IT &FMCG


M. Vijay M.B.A Diversified No Interest/ ExposureV. Harini Priya M.B.A Diversified No Interest/ ExposureMD. Naveed M.B.A Diversified No Interest/ ExposureA. Bhikshapathi M.B.A Diversified No Interest/ Exposure

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Documents

EXCEL INDUSTRIES LTD Overweight ISIN… · bromide, homidium chloride, isometamidium chloride hydrochloride, nitroxynil, toldimphos sodium and triclabendazole among others. The Company,