Institutional Equities Jamna Auto Industries · Key beneficiary of CV industry growth: We see multiple demand drivers that will propel double-digit volume growth for domestic CV industry

Please refer to the disclaimer towards the end of the document.

Institutional Equities

Reuters: JMNA.NS; Bloomberg: JMNA IN

Jamna Auto Industries

Initi

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Multiple Growth Drivers Ahead We initiate coverage on Jamna Auto Industries (JAI) with a Buy rating and a 12-month target price of Rs99 (18x September 2020E earnings), up 33% from the current market price, as we expect it to report a strong 21% earnings CAGR over FY18-FY21E backed by: 1) Broad-based growth in domestic commercial vehicle (CV) industry over FY19-FY20E, which will directly impact demand for the company’s products. 2) JAI’s first-mover advantage in introducing non-conventional (parabolic) springs which will improve its margin profile in the coming two years. 3) Rising proportion of revenues from the replacement market and new products such as lift axle and air suspension helping in diversifying its sales mix. JAI is among the largest leaf spring manufacturers globally with a production capacity of 240,000tn/year. It enjoys ~70% OEM market share and will be a key beneficiary of the sustained strong performance of the commercial vehicle (CV) industry. Premium product mix and improved revenue mix in the high-margin after-market segment coupled with better operating leverage will result in ~70bps margin expansion, driving a strong 21% earnings CAGR over FY18-FY21E. With return ratios of >30% and strong free cash flow generation, JAI is a quality play on the domestic CV industry. We have assigned Buy rating to JAI with a target price of Rs99 (18x Sept. 2020E

EPS). We expect it to register FY18-FY21E revenue/EBITDA/PAT CAGR of 19%/21%/21%, respectively.

Key beneficiary of CV industry growth: We see multiple demand drivers that will propel double-digit volume growth for domestic CV industry in the next two years, including pre-purchases on account of migration to BS-VI emission norms, shift towards high-tonnage vehicles, and rising government spending on infrastructure projects. We note that FY18 witnessed a strong uptick in industry-wide sales following a subdued operating environment in FY17 with JAI being a key beneficiary of the same, registering 34% YoY sales growth. We foresee an uptrend in CV demand over FY19/FY20 and believe that JAI is structurally well placed to reap the benefits of the same. We also note that JAI has significantly outperformed the MHCV industry growth rate because of a changing product mix and increased content per vehicle in the CV category. The medium and heavy commercial vehicle (MHCV) industry is witnessing a shift towards rising share of higher tonnage commercial vehicles (> 25tn) as it is more profitable for fleet owners. Increased demand for higher tonnage CVs will result in robust demand for parabolic springs and lift axles in the near future.

Rising share of high-margin products to drive growth: JAI’s volume sales largely comprise spring leaves which accounted for ~90% of total sales in FY18, of which the share of the more profitable parabolic leaves was ~25% (~17% in FY15). Apart from these, it has also introduced lift axle and air suspension products which now contribute ~10% to revenues, up from low single digit contribution in FY15. Going forward, the management is targeting to increase its revenue contribution from new products like parabolic leaves and lift axles.

De-risking revenue mix to reduce OEM dependence: JAI has been focusing on the high-margin replacement and export markets to reduce its exposure to the cyclical CV business. It has a large after-market presence for leaf springs in India where margins are higher when compared to sales to OEMs. The after-market business, post Goods and Services Tax (GST) implementation, is projected to be a big demand driver for the company and we accordingly factor in a 29% CAGR in after-market revenue over FY18-FY21E, resulting in its revenue share rising to 19% in FY21E from ~15% currently.

Valuation: JAI’s stock price has outperformed the broader indices over the past few months on the back of strong volume and earnings growth and also healthy double-digit margins. The stock has been a strong performer over the past one year because of improved demand. With its leadership position in the OEM segment already established, JAI aspires to capture a larger share of replacement demand and exports, which are high-margin, earnings-accretive avenues. We forecast revenue/EBITDA/PAT CAGR of 19%/21%/21%, respectively, over FY18-FY21E and assign Buy rating to JAI with a target price of Rs99.

BUY

Sector: Automobile Ancillaries

CMP: Rs74

Target Price: Rs99

Upside: 33%

Gaurant Dadwal Research Analyst [email protected] +91 22 6273 8145 Vivek Sarin Research Associate [email protected] +91 22 6273 8176

Key Data

Current Shares O/S (mn) 398.5

Mkt Cap (Rsbn/US$mn) 29.2/396.1

52 Wk H / L (Rs) 103/52

Daily Vol. (3M NSE Avg.) 1,394,465

Share holding (%) 3QFY18 4QFY18 1QFY19

Promoter 47.9 47.9 47.9

DII 11.7 12.8 14.5

Others 40.4 39.3 37.6

One -Year Indexed Stock Performance

50

70

90

110

130

150

170

190

210

Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18

JAMNA AUTO INDS Nifty 50

Price Performance (%)

1 M 6 M 1 Yr

Jamna Auto (7.3) (16.2) 35.2

Nifty Index (8.1) 4.5 6.8

Source: Bloomberg

Y/E March (Rsmn) FY17 FY18 FY19E FY20E FY21E

Revenues 12,924 17,381 22,144 27,163 29,528 YoY (%) 2.9 34.5 27.4 22.7 8.7 EBITDA 2,001 2,378 3,099 3,905 4,245 % of sales 15.5 13.7 14.0 14.4 14.4 PAT 1,050 1,253 1,667 2,123 2,244 YoY (%) 46.8 19.4 33.0 27.4 5.7 EPS (Rs) 2.6 3.1 4.2 5.3 5.6 RoE (%) 36.5 33.1 35.6 36.1 30.8 RoCE (%) 34.0 30.6 34.2 35.0 30.2 P/E (x) 28.1 23.6 17.7 13.9 13.2 EV/EBITDA (x) 15.0 12.6 9.6 7.6 7.0 P/BV (x) 8.9 7.0 5.8 4.5 3.7

Source: Company, Nirmal Bang Institutional Equities Research

4 October 2018


Jamna Auto Industries 2

Valuation/stock price performance

JAI’s stock price has outperformed the broader indices over the past few months on the back of strong volume and earnings growth and also healthy double-digit margins. The stock has been a strong performer over the past one year because of improved demand. We believe the improving macro-sentiment surrounding the CV industry will place JAI in a sweet spot as it will reap the benefits from: 1) Large foothold in OEM space. 2) Heightened focus on domestic/export after-markets. The stock currently trades at 13.5x September 2020E EPS, compared to its five-year mean of 13.1x. Given its leadership position and superior return ratios, we believe it deserves a higher multiple. We believe the company will continue to outperform the commercial vehicle industry’s growth and report strong 21% EBITDA/PAT CAGR, each over FY18-FY21E, led by 19% sales CAGR and ~70bps margin expansion. We have assigned Buy rating to JAI with a target price of Rs99, up 33% from the current market price (20x September 2020 EPS).

Exhibit 1: P/E band

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Price 14x 18x 22x 26x Source: Bloomberg, Nirmal Bang Institutional Equities Research

Exhibit 2: Top 5 institutional shareholders of JAI

Name Holding (%)

L&T Mutual Fund 2.2

Aditya Birla Sun Life AMC 1.9

DSP Investment Managers 1.6

Alquity Investment Managers 1.5

Daiwa Securities Group Inc. 1.1

Source: Bloomberg



Company background

JAI is a manufacturer of multi-leaf and parabolic springs and holds ~70% share in domestic OEM industry. Globally, JAI is the second-largest leaf spring manufacturer with annual production capacity of 240,000mtpa spread across nine locations in India. It also has a strong distribution network comprising over 300 dealers that has helped it capture a large portion of sales in the domestic after-market for spring leaves. It has a tie-up with Ridewell Corporation with whom it collaborates in the design and manufacture of air suspensions and lift axles. The company has signed a technology transfer agreement with the UK-based Tinsley Bridge (TBL) for exclusive transfer of TBL's extralite spring and special steel technologies.

Exhibit 3: JAI’s product mix

FY18P Product Mix

Leaf Spring (90%)

Conventional Leaf Spring

(75%)

Parabolic Leaf Spring (25%)

Lift Axle (10%)


Exhibit 4: JAI is the second -largest manufacturer of leaf springs in the world

Leaf spring manufacturer Base country Capacity( mt)

Rassini Mexico 250,000

Jamna Auto Industries India 240,000

Hendrickson Canada & Mexico 216,000

NHK Springs Co. Japan & Thailand 150,000

Dong Feng China 105,000

FAW China 100,000

MBHA Spain 60,000

Olgen Turkey 40,000

LPDN Europe 26,500

Source: Company



Exhibit 5: Annual market share trend of JAI

60 60 57

64 67

70 72

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60

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80

FY12 FY13 FY14 FY15 FY16 FY17 FY18

(%)


Investment Rationale

Key beneficiary of CV industry’s growth

We believe JAI has multiple levers in its favour which will drive growth over FY19-FY21. On the macro front, the growth momentum experienced by domestic commercial vehicle industry in FY18 is poised to continue over FY19-FY20, buoyed by policy changes at the macro level and shifting demand preference at the buyer level (towards higher tonnage vehicles). Likely trigger points for industry-led demand are the truck overloading ban, pre-purchases on account of the shift to BS-VI emission norms, old vehicle scrappage policy implementation and the government’s infrastructure investment push. Further, two consecutive years of normal monsoon have revived rural demand and taking a cue from these visible tailwinds, CV industry’s growth is expected to be in the range 15% – 16% over FY19E/FY20E.

Exhibit 6: Domestic MHCV industry volume growth

-40

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1,00,000

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(%)(units)

MHCV-Domestic YoY (%)

Source: SIAM, Nirmal Bang Institutional Equities Research



Exhibit 7: Share of OEM and after-market segments in total revenue mix

OEM85%

Replacement15%


JAI outperforms CV industry’s growth, expects strong double-digit volume growth in FY19/FY20

We have factored in double-digit volume growth estimates for FY19/FY20, considering the strong correlation between industry vehicle demand and the entailing OEM order inflow for automotive components. JAI, as a dedicated supplier to CVs, has strengthened its presence in India over the years and is increasingly reaping the benefits of cyclical recovery that is underway in the automobile space. Further, its growing focus on the non-cyclical aftermarket space, both in local and overseas markets, will mitigate the impact of any future cyclical downturn. We also note that JAI has outperformed the CV industry because of rising content per vehicle as the share of higher tonnage vehicles has been on rise. JAI’s parabolic spring leafs are used by OEMs for higher tonnage vehicles which drives better ASP and margins for the company.

Exhibit 8: Outperforming industry growth-annual comparison Exhibit 9: Share of after-market segment in total revenue mix

31.9

8.1

(23.1) (25.3)

15.6

30.4

0.0

12.5

47.3

24.0

(12.5) (15.0)

31.4

14.7

2.9

34.5

(30)

(20)

(10)

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60

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

(%)

MHCV industry growth JAL sales growth

85 85 83 81

15 15 17 19

0

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60

70

80

90

100

FY18 FY19E FY20E FY21E

(%)

OEM Aftermarket

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 10: Outperforms industry growth-Quarterly comparison Exhibit 11: Outperforms industry growth-quarter comparison (YoY)

8.0

3.2

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(11

.9)

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(15

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MHCV-YoY JAL sales-YoY Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research



Shift in MHCV towards higher tonnage augurs well for JAI

JAI is one of the largest manufacturers of multi-leaf and parabolic springs and the market leader in domestic automobile OEM market. The MHCV industry has witnessed a strong shift towards higher tonnage vehicles because of higher profitability of fleet operators in higher tonnage vehicles. Higher tonnage vehicles contain more springs compared to low tonnage vehicles, which combined with rising demand for non-conventional products like parabolic and lift axles augur well for JAI’s growth in future. We note that most OEMs focus on reducing the weight of a vehicle and parabolic spring is one solution compared to a traditional spring as it is much lighter in weight compared to a traditional spring.

Exhibit 12: MHCV segment’s mix shift towards higher tonnage

0%

20%

40%

60%

80%

100%

FY14 FY15 FY16 FY17 FY18 YTDFY19

7.5-12T 12-16T 16-25T (Rigid) 25-40T (Rigid)

26.4-35.2T (Haulage) 35.2-40.2T (Haulage) 40.2-49T (Haulage) >49T (Haulage)

Source: SIAM, Nirmal Bang Institutional Equities Research

Rising share of new products to drive growth

In India, OEMs in CV segment have begun to prefer using the more modern parabolic leaf spring, which JAI was among the first to introduce. This technology, wherein leaf springs that are tapered into a parabolic curve, allows for improved ride quality, while at the same time reducing the weight of the vehicle owing to fewer number of leaf layers. The company also has an alliance with Ridewell Corporation with whom it collaborates in the design and manufacture of air suspension and lift axle. These products, which are used more widely in western countries, are finding arising acceptance in India and JAI is witnessing an increase in its share of revenues. Going forward, the company aims to achieve revenue contribution of 33% from its new products in the medium term.

Exhibit 13: FY18P product mix Exhibit 14: FY21E product mix

Parabolic Leaf Spring25%

Conventional Leaf Spring65%

Lift Axle10%

Parabolic Leaf Spring30%

Conventional Leaf Spring56%

Lift Axle14%


As the OEMs adopt new technologies, JAI is witnessing increased penetration in parabolic springs which are much profitable than traditional springs. The company is also witnessing increased offtake in lift axles and is in process of coming out with new products like stabiliser bars, U-bolts and trailer suspension. The company has signed a technology transfer agreement with the UK-based Tinsley Bridge (TBL) for exclusive transfer of TBL's extralite spring and special steel technologies. The company has lined up a capex of Rs6bn over the next three to four years to double its parabolic spring production capacity and enhance the capacity for lift axle and air suspension among others.

https://auto.economictimes.indiatimes.com/tag/technologies



Exhibit 15: Existing products

Product – Multi-leaf springs Description

Multi-leaf springs are the conventional type spring steel leaves that are held together by a centre bolt, with the number of leaves in a stack directly affecting the spring capacity or load rate.

Product – Parabolic springs Description

Non-conventional or parabolic springs are leaf springs that are tapered into a parabolic curve, allowing for improved ride quality, while at the same time reducing the weight of the vehicle owing to fewer number of leaf layers.

Product – Lift axles Description

Product

Lift axles deploy air bags to carry weight. They can be mounted on trucks and trailers and are commonly found in tanker-style as well as vehicles used to haul oversized loads. Description

Product – Air suspension Description

Air suspension is used in place of conventional steel springs, mostly in heavy vehicles like trucks and buses.

Source: Company



Exhibit 16: New products

Product – Stabiliser bars Description

Stabiliser bars reduce body roll of vehicles during fast cornering and over road irregularities. These connect opposite wheels together by a torsion spring.

Product – U-bolts Description

U-bolts are used to clamp the spring leaves and related components firmly together.

Source: Company

De-risking revenue mix to reduce OEM dependence

JAI currently derives close to 15% of its revenues from the after-market segment as it has a strong after-market network of 300 plus distributors who supply ~5,000 parts through 6,000 plus retailers in India. The company now plans to expand its base of products in the after-market segment through sales of spring allied products, lift axle and air suspension parts from its existing range. In order to promote the ease of doing business, the company has integrated a new supply chain system for the after-market segment. The company plans to take its overall share in the after-market segment from 15% to 30% in the next three to four years, aiding margins and profitability as the mix improves.

Shift in after-market segment towards organised players to help JAI gain market share

JAI already has a large after-market presence in leaf springs in India with ~15% market share in an estimated Rs30bn industry, which is among the largest in the organised market with the balance being held by unorganised players. In the aftermath of GST roll-out, the organised segment will see a demand pull as smaller vendors in the fragmented unorganised market and without a GST registration number will face hindrance in getting the buyers to purchase their products as the buyers will not be eligible to claim GST credit and will have to bear the full tax load. This will cause a dent in competitiveness of many small suppliers and result in the demand shifting towards established players in the organised sector. The periodicity of tax compliance is another impediment as many entities lack the necessary manpower to manage the monthly tax filing requirement.

Exhibit 17: JAI’s presence in after-market segment

11

Depots

300+

Distributors

10000+

Mechanics

6000+

Retailers

~5000

Parts

Source: Company



Strong pedigree of clients and a pan-India presence

JAI has long-standing customer relations with prominent Indian OEMs like Tata Motors, Ashok Leyland, Mahindra & Mahindra etc. JAI derives bulk of its domestic revenues from Tata Motors and Ashok Leyland. While it is also servicing other major CV players, it is doing so in a limited manner and thus has scope to diversify its client base. We note that the company’s design and engineering capabilities have positioned it as a reliable automobile component supplier to OEMs. Its R&D centre in Pune, the only one of its kind in India, is equipped with design capability for conventional and parabolic springs as well as air suspensions and lift axles and we believe this gives it an edge over competitors, most of who lack the wherewithal to dedicate funds to a full-time research centre. JAI enjoys ~70% OEM market share.

Exhibit 18: JAI’s customer profile

Source: Company presentation

In FY18, JAI completed its brownfield expansion at Hosur, taking its total production capacity to 240,000mtpa. It now only trails behind Mexico-based Rassini Sab’s installed capacity of 250,000mpta which is the largest globally. Its nine manufacturing plants across India are co-located alongside those of its customers, resulting in quick turnaround time and operating efficiency. The company is in the process of setting up additional two plants in Indore and Jamshedpur.



Exhibit19: JAI’s manufacturing facilities

Source: Company presentation



Strong 1QFY19 performance

During the quarter, JAI benefitted from the improvement in product mix and strong YoY growth in CV sales (low base). The company reported a strong 107% YoY growth in new sales to Rs5.6 bn. Strong growth in CV industry and higher sales of parabolic springs drove such a strong growth, outperforming the industry growth rate. Following strong sales, margins expanded by 214bps YoY despite a sharp increase in raw material costs. Absolute EBITDA at Rs753mn grew by a strong 146% YoY, while PAT at Rs400mn grew by a strong 129% YoY. Going forward, higher contribution from the after-market segment and parabolic springs is expected to help EBITDA margin.

Exhibit 20: JAI’s quarterly financials

Y/E March (Rsmn) 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 QoQ (%) YoY (%) FY17 FY18 YoY (%)

Net revenues 2,714 3,850 4,703 5,967 5,622 (5.8) 107.2 12,924 17,381 34.5

Raw material costs 1,649 2,408 3,004 3,850 3,574 (7.2) 116.8 7,712 10,911 41.5

Staff costs 266 307 301 401 402 0.3 51.1 1,076 1,275 18.5

Other expenses 494 632 783 822 893 8.7 80.9 2,135 2,817 31.9

Total expenditure 2,409 3,347 4,088 5,072 4,869 (4.0) 102.2 10,923 15,003 37.4

EBITDA 305 503 614 894 753 (15.8) 146.6 2,001 2,378 18.8

EBITDAM (%) 11.2 13.1 13.1 15.0 13.4 (160bps) 214bps 15.5 13.7 (180bps)

Depreciation 84 85 101 145 116 (19.9) 38.0 477 414 (13.3)

Interest costs 25 43 60 67 57 (19.3) 129.2 122 182 49.0

Other income 59 61 17 14 34 81.2 (43.6) 51 79 54.4

PBT 256 437 471 697 613 (12.0) 139.8 1,453 1,861 28.1

Tax 82 142 154 230 213 (7.4) 161.0 403 608 50.8

Reported net profit 174 294 317 467 400 (14.3) 129.8 1,050 1,253 19.4

NPM (%) 6.4 7.6 6.7 7.8 7.1 (71bps) 70bps 8.1 7.2 (91bps)

EPS (Rs) 0.4 0.7 0.8 1.2 1.0 (17) 129.8 2.6 3.1 19.4

Metrics

RM as % sales 60.8 62.5 63.9 60.8 (95bps) 282bps 59.7 62.8 310bps

EC as % sales 9.8 8.0 6.4 9.8 44bps (265bps) 8.3 7.3 (99bps)

OE as % sales 18.2 16.4 16.6 18.2 211bps (231bps) 16.5 16.2 (31bps)

Depreciation as % sales 3.1 2.2 2.1 3.1 (36bps) (103bps) 3.7 2.4 (131bps)

Gross margin 39.2 37.5 36.1 39.2 95bps (282bps) 40.3 37.2 (310bps)

EBITDA margin 11.2 13.1 13.1 11.2 (160bps) 214bps 15.5 13.7 (180bps)

Net margin 6.4 7.6 6.7 6.4 (71bps) 70bps 8.1 7.2 (91bps)

Tax rate (% of EBT) 31.9 32.6 32.7 31.9 175bps 283bps 27.8 32.7 491bps


Exhibit 21: Net sales and sales growth Exhibit 22: Gross margin

3,332

2,734 3,036

3,828

2,714

3,850

4,703

5,967

5,622

14.9

(13.9)

7.8 4.5 (18.5)

40.8 54.9

55.9

107.2

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Sales YoY growth (RHS)

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Exhibit 23: EBITDA margin Exhibit 24: EBITDA & EBITDA growth

17.3

14.5

13.7

15.6

11.2

13.1 13.1

15.0

13.4

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FY

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1Q

FY

19

(%)

576

397 417

598

305

503 614

894

753

17.3

14.5 13.7

15.6

11.2 13.1 13.1

15.0 13.4

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Exhibit 25: PAT margin Exhibit 26: PAT & PAT growth

8.27.9

7.0

9.1

6.4

7.6

6.7

7.8

7.1

5

6

6

7

7

8

8

9

9

10

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

(%)

272

216 211

350

174

294 317

467

400

111.9

41.4 36.5

25.5

(35.9)

36.1 50.1

33.5

129.8

(60)

(40)

(20)

0

20

40

60

80

100

120

140

-

50

100

150

200

250

300

350

400

450

500

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

(%)(Rsmn)

PAT YoY growth (RHS)


Exhibit 27: Quarterly market share trend Exhibit 28: Annual market share trend

70 72 7370

73 73 7269

0

10

20

30

40

50

60

70

80

90

100

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

(%)

60 60 57

64 67

70 72

-

10

20

30

40

50

60

70

80

FY12 FY13 FY14 FY15 FY16 FY17 FY18

(%)




Earnings expected to post double-digit growth

We expect JAI to post strong earnings CAGR of 21% over FY18-FY21E on the back of strong sales growth driven by volume and product mix, with domestic MHCV sales playing a dominant role in its product portfolio. Domestic growth will be driven by higher truck sales and improvement in mix from recent new product launches and after-market sales. We forecast sales to grow 27%/23%/9% in FY19E/FY20E/FY21E respectively.

The company’s EBITDA margin has recovered over FY16/FY17 because of economies of scale and a more favourable product mix. We forecast rising cost pressure to restrict significant operating margin improvement. However, following the improvement in product mix from OEM to after-market and a rising share of new product launches, we expect a 70bps improvement in margins over FY18-FY21E. We expect margins to improve marginally to 14.4% in FY20E/FY21E from 13.7% in FY18. As regards PAT, we expect it to post a strong 21% CAGR over FY18-FY21E.

Exhibit 29: Annual revenue and revenue growth Exhibit 30: Annual EBITDA and EBITDA growth

10,951 12,558 12,924

17,381

22,144 27,163

29,528 31.4

14.7

2.9

34.5

27.4

22.7

8.7

0

5

10

15

20

25

30

35

40

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

FY15 FY16 FY17 FY18 FY19E FY20E FY21E

(%)(Rsmn)

Sales YoY growth (RHS)

945

1,632

2,001

2,378

3,099

3,905

4,245

100.6

72.7

22.6 18.8

30.3

26.0

8.7 0

20

40

60

80

100

120

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500


(%)(Rsmn)

EBITDA YoY growth (RHS)


Exhibit 31: Annual PAT and PAT growth Exhibit 32: EBITDA and PAT margin

294

715

1,050

1,253

1,667

2,123 2,244

112.3

143.4

46.8

19.4 33.0

27.4

5.7 0

20

40

60

80

100

120

140

160

-

500

1,000

1,500

2,000

2,500


(%)(Rsmn)

PAT YoY growth (RHS)

2.7

5.7

8.1 7.2 7.5 7.8 7.6

8.6

13.0

15.5

13.7 14.0 14.4 14.4

0

2

4

6

8

10

12

14

16

18


(%)

PAT margin EBITDA margin




Financials

Exhibit 33: Income statement


Net sales 12,924 17,381 22,144 27,163 29,528

% growth 2.9 34.5 27.4 22.7 8.7

Raw material costs 7,712 10,911 13,876 16,972 18,449

Staff costs 1,076 1,275 1,602 1,938 2,107

Other expenses 2,135 2,817 3,567 4,348 4,727

Total expenditure 10,923 15,003 19,045 23,258 25,283

EBITDA 2,001 2,378 3,099 3,905 4,245

% growth 22.6 18.8 30.3 26.0 8.7

EBITDA margin (%) 15.5 13.7 14.0 14.4 14.4

Other income 51 79 52 57 62

Interest costs 122 182 190 196 199

Gross profit 5,212 6,470 8,268 10,191 11,079

% growth 12.5 24.1 27.8 23.3 8.7

Depreciation 477 414 474 597 759

Profit before tax 1,453 1,861 2,488 3,169 3,349

% growth 38.4 28.1 33.7 27.4 5.7

Tax 403 608 821 1,046 1,105

Effective tax rate (%) 27.8 32.7 33.0 33.0 33.0

Net profit 1,050 1,253 1,667 2,123 2,244

% growth 46.8 19.4 33.0 27.4 5.7

EPS (Rs) 2.6 3.1 4.2 5.3 5.6

% growth 46.8 19.4 33.0 27.4 5.7

DPS (Rs) 0.8 0.9 1.1 1.5 1.5

Payout (%) 32.2 27.0 27.0 27.2 27.3


Exhibit 35: Balance sheet


Equity 398 398 398 398 398

Reserves 2,929 3,840 4,714 6,142 7,647

Net worth 3,327 4,239 5,113 6,540 8,045

Net deferred tax liab. (52) (74) (74) (74) (74)

LT liabilities/provisions 234 264 264 264 264

Total loans 622 472 462 442 433

Liabilities 4,130 4,901 5,764 7,172 8,668

Gross block 3,209 3,735 4,935 6,635 8,435

Depreciation 396 720 1,194 1,791 2,550

Net block 2,813 3,014 3,740 4,843 5,884

Capital work-in-progress 199 309 309 309 309

LT investments 5 5 - - -

Other long-term assets 586 334 349 349 349

Inventories 1,128 1,585 1,849 2,268 2,466

Debtors 342 1,912 1,497 1,836 1,996

Cash 145 123 108 112 475

Cash equivalents 92 72 56 61 424

Other bank balance 54 51 51 51 51

ST investments - - - - -

Other current assets 340 539 579 579 579

Total current assets 1,954 4,159 4,033 4,796 5,515

Trade payables 773 2,037 1,783 2,242 2,506

Other current liabilities/provisions

654 882 882 882 882

Total current liabilities 1,427 2,920 2,666 3,124 3,389

Miscellaneous expenses 0 - - - -

Net current assets 527 1,240 1,367 1,672 2,127

Total assets 4,130 4,901 5,764 7,172 8,668


Exhibit 34: Cash flow


PBT 1,453 1,861 2,488 3,169 3,349

(Inc.)/dec. in working capital (632) (494) (142) (300) (93)

Cash flow from operations 820 1,367 2,345 2,869 3,256

Other income (10) (8) - - -

Other expenses 96 105 190 196 199

Depreciation 477 414 474 597 759

Tax/interest paid (577) (616) (1,011) (1,242) (1,304)

Net cash from operations 808 1,262 1,998 2,420 2,910

Capital expenditure (882) (762) (1,200) (1,700) (1,800)

Net cash after capex (74) 500 798 720 1,110

Other investment activities 55 47 5 - -

Cash from financial activities 61 (566) (818) (716) (747)

Opening cash balance 50 92 72 56 61

Closing cash balance* 92 72 56 61 424

Change in cash balance 42 (20) (16) 5 363

*Note: Excluding other bank balances


Exhibit 36: Key ratios

Y/E March FY17 FY18 FY19E FY20E FY21E

Profitability & return ratios

EBITDA margin (%) 15.5 13.7 14.0 14.4 14.4

EBIT margin (%) 11.8 11.3 11.9 12.2 11.8

Net profit margin (%) 8.1 7.2 7.5 7.8 7.6

RoE (%) 36.5 33.1 35.6 36.4 30.8

RoCE (%) 34.0 30.6 34.2 35.3 30.2

Working capital & liquidity ratios

Receivables (days) 10 24 25 25 25

Inventory (days) 31 28 30 30 30

Payables (days) 35 34 34 35 36

Cash conversion cycle (WC days) 6 18 21 20 19

Net WC-ex cash (days) (11) 8 16 16 17

Current ratio (x) 1.4 1.4 1.5 1.6 1.6

Quick ratio (x) 0.6 0.9 0.8 0.8 0.9

Valuation ratios

EV/Sales (x) 2.3 1.7 1.4 1.1 1.0

EV/EBITDA (x) 15.0 12.6 9.6 7.7 7.0

P/E (x) 28.1 23.6 17.7 13.9 13.2

P/BV (x) 8.9 7.0 5.8 4.5 3.7




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