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January 28, 2013
Everest Industries Ltd
Complete Building Solutions provider …
CMP: Rs.247 Target: Rs. 354 Initiating Coverage - Buy
SKP Securities Ltd www.skpmoneywise.com Page 1 of 13
Company Profile
Everest Industries Ltd (EIL), Incorporated in 1934, offers complete range of
building solutions like roofing, ceiling, wall, flooring, cladding, door and the pre
engineered steel buildings for the industrial, commercial & residential sector. It
enjoys 13% market share of FC roofing industry in India. The company has a
pan India presence with a large distribution network and state-of-art
manufacturing facilities at Kymore, Nashik, Coimbatore, Kolkata and Roorkee.
Investment Rationale
Transforming into a complete building solutions provider:
EIL, in the recent past, has forayed into various value- added allied
segments like cladding solutions, ceiling solutions, wall solutions, and floor
solutions etc. to provide end to end solutions in building construction.
EIL has reduced its reliance on FC roofing sheets which now constitute
around 60% of the company’s revenues as against ~75% earlier. The Steel
Buildings segment constitutes around 25%, while other products like boards
and panels constitute the balance of the company’s turnover.
Evolution of Pre Engineered Buildings in the India:
Currently PEBs are in a very nascent stage in India. In the last five years,
the demand and awareness about PEBs has grown multifold. Given the
infrastructural requirement of India over the next two decades, the demand
for PEBs will increase by 6 times.
Manufacturing industries like automobile, engineering goods and services
like logistics, warehousing and infrastructure are large users of PEBs and
they are now applying modern PEB structures. The recent move of allowing
FDI in multi-brand retail sector is a big positive for PEB business.
EIL’s PEB segment revenue grew at a CAGR of 34% during FY09-12.
Going ahead, we believe that PEB top-line would continue to grow at 17%
and 24% during FY13 and FY14 respectively.
Government thrust on rural housing – boosting demand:
Government thrust on developing backward areas has led to an increase in
construction of schools, housing and hospitals.
Under IAY around 11 million houses were build in 11th five year plan. The
proposed budget for rural housing for the 12th plan is Rs. 1,500 billion.
FC sheet industry is mainly driven by rural households moving up the value
chain from kuccha to pucca housing, helped by improving labour market
and government welfare schemes like NREGS, NRLM, etc.
Healthy financial and consistent dividend payout:
EIL’s revenue grew at a CAGR of 24% during FY07-12. Going ahead, we
believe that top-line would continue to grow at 20% and 17% during FY13
and FY14 respectively. EIL to deliver an EBITDA margin more than 10%
and PAT margin more than 6% during FY13-14E.
EIL follows a consistent dividend policy with a minimum payout of ~20%.
We expect, EIL will pay dividend of Rs.9/sh and Rs.10/sh in FY13E and
FY14E respectively.
Outlook & Recommendation
At CMP, the stock trades 5.6x its FY13E earning of Rs.43.9 and 4.9x its
FY14E earnings of Rs.50.5
EIL has among the best diversified businesses compared with rivals such as
HIL, Visaka and Ramco which makes for an attractive valuation. Hence, we
initiate coverage on the stock with „BUY‟ recommendation and a target
price of Rs.354 (7x FY14E EPS), at 43% upside over the period of 15
month.
Key Share Data
Face Value (Rs.) 10
Equity Capital (Rs. in Mn.) 151.1
M.Cap (Rs. in Mn.) 3754.1
52-wk High/Low 282.7/119.0
One Year Avg. Daily Vol (In Qty) 14570
BSE Code 508906
NSE Code EVERESTIND
Reuters Code EVRI.BO
Bloomberg Code EVI:IN
Shareholding Pattern (as on 31st Dec, 2012)
Source: BSE
Key Financials (Rs. In Mn.)
Particulars FY11 FY12 FY13E FY14E
Net Sales 7231.0 8868.6 10660.1 12464.6
growth (%) 10.8% 22.6% 20.2% 16.9%
EBITDA 658.2 807.6 1119.3 1283.9
PAT 407.0 527.6 664.9 763.7
growth (%) 35.6% 29.6% 26.0% 14.9%
EPS (Rs.) 27.0 34.9 43.9 50.5
BVPS (Rs.) 138.3 165.1 198.3 237.1
Key Financials Ratio
Particulars FY11 FY12 FY13E FY14E
P/E (x) 9.2 7.1 5.6 4.9
P/BVPS (x) 1.8 1.5 1.3 1.0
Mcap/Sales (x) 0.5 0.4 0.4 0.3
EV/EBITDA (x) 7.1 5.2 3.7 2.9
ROACE (%) 17.2% 21.6% 23.7% 24.7%
ROAE (%) 21.3% 23.0% 24.2% 23.2%
EBITDA Mar(%) 9.1% 9.1% 10.5% 10.3%
PAT Mar (%) 5.6% 5.9% 6.2% 6.1%
D/E (x) 0.5 0.3 0.4 0.2 Source: Company, SKP Research
Price Performance EIL vs. BSE Small Cap
Analyst: Chirag K. Gothi
Tel No.: +91 22 2281 9012; Mobile: +91 9870895720
Email: [email protected]
DII8.4%FII
0.4%
Public41.5%
100
150
200
250
Jan
-12
Feb
-12
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
No
v-1
2
Dec
-12
Jan
-13
BSE Small Cap EIL
Promoter 49.7%
SKP Securities Ltd www.skpmoneywise.com Page 2 of 13
Everest Industries Ltd.
Industry Overview
Oligopoly structure of the FC sheet industry
The fibre cement industry in India has a capacity in excess of 5.5 million MT. There
are 17 players and over 60% market share controlled by 4 major players, EIL is one of
the leading player, who controls 13.2% of FC sheet roofing industry and expected to
increase his market share through capacity expansion. Other prominent players being
HIL, Visaka and Ramco Industries.
These players have similar strengths and weaknesses in the FC sheet segment and also
have similar strategy to pass on increasing material cost to customers to maintain
margin. The high concentration in the industry limits the bargaining power of buyers.
Products are competitively priced with little brand premium and the buyer is usually a
price taker.
FC Roofing Industry Size (Million MT) Market Share (Volume)
Source: ACPMA Source: ACPMA
Capacity of Players – Product wise
Capacity HIL Ltd Everest Ind Visaka Ind Ramco Ind
FC Sheet (MT pa.) 940,000 674,000 752,000 654,000
Allied Products
Building Panels & Boards (MT pa.) 460,000* 136,000 48,000 48,000
AAC Blocks (CuM.) 340,000
Cement Clinker Grinding (MT pa.)
216,000
Non - Allied Products Thermal
Insulation (Tns) Steel Building
(Tns) Textile Yarn (Spindles)
Cotton Yarn (Spindles)
Capacity 6,000 30,000 1,816 43,296 Source: Company, SKP Research Note: * figure in no.
Raw Material: Chrysotile asbestos fibre, cement, Fly ash and wood pulp are the key
raw material used in FC roofing sheets. Chrysotile fibre is completely imported from
countries like Brazil, Canada, Zimbabwe, Kazakhstan etc.
Cement Fibre Sheet Composition (Volume) Cement Fibre Sheet Composition (Value)
Source: Company, SKP Research Source: Company, SKP Research
3.29
3.52
3.69 3.75
4.07
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
FY08 FY09 FY10 FY11 FY12
18.9%
15.9%
13.6%13.2%
10.6%
27.8%
8%
45%47%
53%30%
17%
OPC Cement
Fly ash and others
Chrysotile fibre
Chrysotile fibre
OPC Cement
Fly ash and others
Vishaka / Shakti
Charminar
Utkal
Ramco Everest
Others
SKP Securities Ltd www.skpmoneywise.com Page 3 of 13
Everest Industries Ltd.
Pre- Engineered Steel Building Industry
"Pre-engineered steel buildings" are those which are fully fabricated in the factory after
designing, shipped to site in CKD (completely knocked down) condition; and all
components are assembled and erected at site with nut-bolts, thereby reducing the time
of completion.
PEB systems are extensively used in industrial and many other non-residential
constructions worldwide, it is relatively a new concept in India. These concepts were
introduced to the Indian markets in the late 1990's with the opening up of the economy;
and a number of multi–nationals setting up their projects.
The market potential of PEB’s is 1.5 million MT per annum. The current pre
engineered steel building manufacturing capacity is 0.6 million MT per annum. The
industry is growing at the compound rate of 25 to 30%.
Notable players in this segment are Kirby, Tata Bluescope, Interarch, Zamil (Saudi
Arabia), Multicolor Projects, Cold Steel, Tiger Steel and Everest Industries.
The Company: A Snap Shot
Everest Industries Limited, a pioneer building solutions company, has been a trusted name
for 76 years. Over the years, its strategic investments in technology have allowed it to
continually introduce innovative products in the market.
Currently company run under dynamic Chairman Mr Aditya Vikram Somani and his team.
Key management personnel include Mr M.L. Gupta (Vice Chairman), Mr Manish Sanghi
(MD), Mr Rakesh Gupta (CFO) and Mr Y. Srinivasan Rao (ED-Operations).
Products manufactured by EIL are distinguished for their high performance, durability and
architectural versatility. EIL offers complete range of building solutions like roofing,
ceiling, wall, flooring, cladding, door and PEB for the industrial, commercial & residential
sector. Its product range has gained wide acceptance in Asia, Africa, South Pacific and
Europe. It enjoys ~13% market share of Indian FC sheet roofing solution industry.
EIL is expanding their product portfolio in such away to become-
“Complete Building Solutions provider”
Segment Product Portfolio Demand drivers
Bu
ild
ing P
rod
uct
Fibre Cement Sheet Revenue contribution: 60%
Market position: 13% of market share
(Installed capacity – 5,74,000 MT)
Fibre Cement Roofing,
Hi-Tech - Non Asbestos
Modern Roofing
Industrial sheds,
Agricultural buildings,
Warehouses, Poultry farms,
Garage, Verandahs etc.
Boards & Panels Revenue contribution: 15%
(Installed capacity – 1,36,000 MT)
Ceiling solution,
Flooring solution,
Walling solution,
Cladding solution,
Solid wall - Sandwich panel
Residential apartments,
Commercial complex,
Industrial complex, mall etc.
Pre fabricated Shelter - Internal /
External Walls
Steel Building Revenue contribution: 25%
Market position: 5% of market share of India
(Installed capacity – 30,000 MT)
Pre-Engineered Buildings
Factory and Warehouses
Institutional buildings
Recreational facilities
Smart Steel Buildings
Commercial and office buildings
Industrial utility buildings
Site offices and residences
Malls and Restaurants
Source: Company, SKP Research
SKP Securities Ltd www.skpmoneywise.com Page 4 of 13
Everest Industries Ltd.
Investment Rationale
Transforming into a complete building solutions provider
EIL, in the recent past, has forayed into various value- added allied segments like
cladding solutions, ceiling solutions, wall solutions, and floor solutions etc. to provide
end to end solutions in building construction. EIL has hence successfully transformed
itself into a building solution player from a roofing company.
Boards and panels are primarily urban products, used largely in commercial applications
as an alternative to wood-based products. Not only are they cheaper, they’re also
available in a variety of finishes and sizes and thus find favor with architects and
designers.
In FY 2009, EIL entered into pre engineered steel buildings (PEB) business caters to the
industrial clients by providing customized end to end solutions (right from consultation,
designing, manufacturing to installation).
EIL has reduced its reliance on FC roofing sheets which now constitute around 60% of
the company’s revenues as against ~75% earlier. The Steel Buildings segment
constitutes around 25% of EIL’s sales, while other products like boards and panels
constitute the balance of the company’s turnover.
Source: Company, SKP Research
EIL’s Complete Building Solutions
Source: Company
0%
20%
40%
60%
80%
100%
Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13E Mar-14E
FC Sheet Boards & Panels PEB
SKP Securities Ltd www.skpmoneywise.com Page 5 of 13
Everest Industries Ltd.
Government thrust on rural housing – boosting demand
Government thrust on developing backward areas has led to an increase in construction
of schools, housing and hospitals.
Total houses to be build under IAY is to be around 11 million in 11th Five Year Plan.
The proposed budget for rural housing for the 12th Five Year plan is Rs 1,500 billion.
Rising disposable income by increasing minimum support price (MPS) of primary
product and different government initiatives to provide dwelling and employment to
give more pricing power in the hands of rural people.
FC sheet industry is mainly driven by rural households moving up the value chain from
kuccha to pucca housing, helped by improving labour market and government welfare
schemes which are given below:
Initiatives Allocation (Rs bn.)
Impact on Roofing Market 11th Plan 12th Plan
National Rural Employment Scheme
(NREGS) 1,165 3,220
Enhances the livelihood security of people from rural areas providing
employment and increasing purchasing power
Indira Aavas Yojana (IAY) 596 1,500 To replace all kuccha houses from Indian villages by 2017
National Rural Livelihood Mission
(NRLM ) 290 527
To build linkages with mainstream institutions, including Banks, and Govt
departments to address the various dimensions of poverty
Pradhan Mantri Gram Sadak Yojana
(PMGSY) 812 2,000
To provide farm to market access and new connectivity may involve
‘new construction’ where the link to the habitation is missing
Rashtriya Krishi Vikas Yojana
(RKVY) 250 630 Plans for agricultural development, increasing income of farmers
Source: Planning Commission, SKP Research
According to Census; In India, there were 249 million houses in 2001 which were
increased to 306 million in 2011. In 2001, FC cement and metal roofing contributed to
12%. Above government initiative, it increased to 15.9%.
Census 2001 (249 million homes) Census 2011 (306million homes)
Source: Census, SKP Research
Clay Tiles – 30% Grass, Thatch, Wood, Mud – 22% Plastic, Tarpaulin & Others – 2%
RCC – 21% RCC – 29.4%
Bricks – 6.6% Stone – 8.6%
Fibre Cement & Metal Roofing–15.9%
Clay Tiles – 23.8% Grass, Thatch, Wood, Mud – 15.1% Plastic, Tarpaulin & Others – 0.6%
Clay Tiles – 30% Grass, Thatch, Wood, Mud – 22% Plastic, Tarpaulin & Others – 2%
RCC – 21% RCC – 21%
Bricks - 6% Stone – 7%
Fibre Cement & Metal Roofing - 12%
Clay Tiles – 30% Grass, Thatch, Wood, Mud – 22% Plastic, Tarpaulin & Others – 2%
SKP Securities Ltd www.skpmoneywise.com Page 6 of 13
Everest Industries Ltd.
Evolution of Pre Engineered Buildings in the India
Currently PEBs are in a very nascent stage in India. Architects and consultants in India
are gradually becoming aware of the benefits of using PEBs in their design.
Diagram below shows advantages of PEBs
Source: Company, SKP Research
Another vital aspect which works in PEBs’ favour is the growing and much needed
thrust towards eco-friendly construction. The "Green" benefits of a PEB are as follows:
PEBs use steel and don’t require cutting down valuable forests.
Modern steel manufacturers employ energy efficient methods in steel production
that help to substantially reduce greenhouse gas emissions.
PEBs are manufactured with a high proportion of recycled content, i.e. steel. So,
manufacturer or builder can get up to 30 LEED points for using steel in the
construction of the building.
PEBs provide healthy indoor environment.
PEBs are durable, cost-effective, energy efficient and green.
PEBs, after demolition doesn’t accumulate wastage like asphalt shingles, concrete,
brick and wood.
Steel building roofs used in PEB's reflect light and heat keeping the buildings
cooler in hot weather and thus reducing cooling costs and helps in saving the
environment.
The market for PEB in India is estimated at Rs.45 billion with a 25-30% growth rate.
In India, at present, only 27% of all industrial and institutional buildings use pre-
engineered buildings, while in United States, more than 70% of all construction in
industrial and institutional segments is done using pre- engineered buildings.
In the last five years, the demand and awareness about PEBs has grown multifold. Given
the infrastructural requirement of India over the next two decades, the demand for PEBs
will increase by 6 times.
Manufacturing industries like automobile, power, textiles, engineering goods and
services like logistics, warehousing and infrastructure are large users of PEBs and they
are now applying modern PEB structures. The recent move of allowing FDI in multi-
brand retail sector is a big positive for PEB business.
PEB
Advantage
Tumkey Solution
Consistent & superior quality
Saving in construction time
Reduction in project cost
Single source responsibility
Flexibility in expansion
Low maintenance
Energy efficiency
Architectural versatility
Seismic resistant
SKP Securities Ltd www.skpmoneywise.com Page 7 of 13
Everest Industries Ltd.
EIL scaling up with pre-engineered buildings
EIL has undertaken more than 500 projects in 25 States covering more than 30 million
sq ft of built-up area from FY09. The projects include a canteen of 10,000 sq ft to a
gigantic factory of over 300,000 sq ft.
EIL has done some interesting projects such as Blow Past Ltd factory that has a vaulted
structure at ends and is one of the first LEED certified Green PEBs and a factory for
NSSL at Nagpur which is a wave shape building. Logistics Agri Warehouses located at
Deesa and Ramganjmandi are the first cold storage units to use PEB.
From last two years, EIL strongly focus on inventory management with raw material
purchase to be done only post receiving ~30% of the project cost, the utilisation levels
will improve while cost pressures will also be minimal. However, margin of this
segment is a matter of concern for few quarters till the segment achieves critical mass.
EIL’s PEB segment revenue grew at a CAGR of 34% during FY09-12. Going ahead,
we believe that PEB sales growth would continue to grow at 20% CAGR during FY12-
14E. We expect, volumes grow with CAGR of 18.7% during FY12-14E.
Source: Company, SKP Research
Strong brand and wide distribution network
EIL has strengthened its presence across India with an extensive manufacturing and
distribution network spread across the country backed by strong brand ‘Everest’.
EIL has a wide distribution network all across India with 38 sales depots and more than
6,000 retail sales points together with the strength of over 1,600 highly qualified and
experienced engineers, designers and technicians, EIL provides building solutions to
over 100,000 villages and 600 cities.
After successfully catering to the Indian market, EIL has widened its horizons in the
international arena. With consistent exports to Europe, Africa, Australia and Asia; EIL is
all set to scale new heights and establish a strong foundation in the global market.
Current Facilities and Business Segments
Plant Product Capacity
Bhagwanpur, Roorkee, Uttarakhand FC Sheet 100,000 MT
Boards and Panels 50,000 MT
Lakhmapur, Nasik, Maharashtra FC Sheet 90,000 MT
Boards and Panels 86,000 MT
Kymore, Katni, Madhya Pradesh FC Sheet 94,000 MT
Kolkata, West Bengal FC Sheet 94,000 MT
Podanur, Coimbatore, Tamil Nadu FC Sheet 196,000 MT
Total 710,000 MT
Bhagwanpur, Roorkee, Uttarakhand Steel building products 30,000 MT
Greenfield capacity by Q1FY14
Balasore, Orissa FC Sheet 100,000 MT
Ranchi, Jharkhand Metal roofing 7,000 MT
Source: Company, SKP Research
12
19
0
18
02
4
19
32
0
23
43
1
27
96
8
32
99
875901 69180
8345094396 92508 97134
0
20000
40000
60000
80000
100000
120000
0
10000
20000
30000
40000
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13E Mar-14E
PEB Volume MT Realisation per MT in Rs. MT.
SKP Securities Ltd www.skpmoneywise.com Page 8 of 13
Everest Industries Ltd.
Concerns
Fluctuation in the prices of key raw materials: The main raw material for fibre
cement sheets are cement, pulp, fly ash and imported fibre. Any hike in prices of
cement, fly ash or fibre may have adverse impact on the margin of the company.
Average Cement Price in India
Source: Bloomberg, SKP Research
Steel is the major raw material of PEB segment, hence volatility in global steel prices
will also affect margin accordingly.
Steel Price (HRSheets-10G)
Source: Bloomberg, SKP Research
Government spending: Rural schemes like NREGS, IAY, NRLM etc. play an vital
role for the business of EIL. Any changes or decrease in spending by the government
on these schemes could reduce the purchasing power of rural people.
Monsoon effect: Rural income is largely dependent on agriculture, which is a
function of monsoon. A poor monsoon could have adverse effect on the demand for
roofing in rural India.
More pressure on India to ban chrysotile fibre Use:
India is facing mounting pressure to ban the use of asbestos. The Chrysotile fibre
is still widely used in the country despite being banned in 52 other nations,
including those in the European Union, because of known health risks.
Mining of asbestos is banned in India, but its usage is not. Thus, the industry
depends on 100 per cent import from Canada, Brazil, Russia, Zimbabwe &
Kazakhstan.
Over the last few years, EIL’s management has taken steps to diversify into
related products and reduce its dependence on asbestos. It has introduced
products such as polyvinyl alcohol fibre sheets (non-asbestos roofing sheet),
pulp-based boards (E boards) which are non-asbestos products and also entered
into PEB.
100
150
200
250
300
350
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Rs./50 KG.
28000
32000
36000
40000
44000
48000
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
Rs./MT
SKP Securities Ltd www.skpmoneywise.com Page 9 of 13
Everest Industries Ltd.
Financial Outlook
Healthy top-line growth in both divisions:
EIL witnessed healthy growth in both divisions (Building Products and PEB), with
increasing in top-line at a CAGR of 24% from Rs.3038 million in FY07 to Rs.8869
million in FY12.
EIL has been declaring excellent set of numbers over the last few years on the back of
strong thrust of government on rural housing, diversified product segment, and constantly
increasing production capacity.
Going ahead, we believe that EIL‟s top-line would continue to grow at 20.2% and
16.9% during FY13E and FY14E respectively with resolved labour issue at Nasik plant
and commencement of 100,000MTPA Greenfield facility in Q1FY14E and.
Source: Company, SKP Research Source: Company, SKP Research
Looking at improving EBITDA margins:
Over the last three years, EIL maintained EBITDA margin above 9% and PAT margin
around 4.6-5.9% but in FY09 PAT margin was low due to high debt burden.
Going ahead, we expect company to deliver an EBITDA margin more than 10% and
PAT margin more than 6% during FY13E-14E respectively with continually introduce
innovative products in the market.
Source: Company, SKP Research Source: Company, SKP Research
43
07
51
90
54
89
65
11
79
03
90
59
98
8
13
36
17
42
23
58
27
57
34
05
20.5%
5.8%
18.6%
21.4%
14.6%
35.3%
30.4%
35.4%
16.9%
23.5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13E Mar-14E
Building Product (BP) PEB BP growth PEB growth
48
9 60
4 65
8 80
8 11
19
12
849.2% 9.3%
9.1% 9.1%
10.5% 10.3%
5%
6%
7%
8%
9%
10%
11%
0
200
400
600
800
1000
1200
1400
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13E Mar-14E
EBITDA EBITDA Margin
14
5 30
0
40
7
52
8
66
5
76
4
2.7%
4.6%
5.6%
5.9%6.2% 6.1%
0%
1%
2%
3%
4%
5%
6%
7%
0
100
200
300
400
500
600
700
800
900
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13E Mar-14E
PAT PAT MarginRs. in million Rs. in million
Rs. in million
52
95
65
25
72
31
88
69
10
66
0
12
46
5
23.2%
10.8%
22.6%20.2%
16.9%
0%
5%
10%
15%
20%
25%
0
2000
4000
6000
8000
10000
12000
14000
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13E Mar-14E
Revenue GrowthRs. in million
SKP Securities Ltd www.skpmoneywise.com Page 10 of 13
Everest Industries Ltd.
Healthy Return Ratios & Consistently Dividend Payout:
EIL is consistently improving return ratios with ROAE & ROACE from ~10% in FY09
to ~22% in FY12 due to lower leverage, improvement in fixed asset turnover ratio and
improving EBIDTA margins. We expect to maintain at around 24% going forward
amid better working capital management and optimal utilization of assets.
EIL follows a consistent dividend policy with an average payout of ~20% which reflects
its attitude towards minority shareholders.
Source: Company, SKP Research Source: Company, SKP Research
Peer Group Analysis on TTM Basis
Company FV CMP Revenue EBITDA Margin PAT Margin EPS P/E P/BV EV/EBITDA ROE ROCE D/E MCap/Sales
HIL Ltd 10 465 10174 1250 12.3 681 6.7 91.3 5.1 0.88 3.80 17.35 19.29 0.35 0.34
Everest 10 247 10193 1088 10.7 617 6.1 40.8 6.1 1.25 3.92 20.70 24.00 0.42 0.37
Visaka 10 125 8658 1096 12.7 557 6.4 35.1 3.5 0.61 3.00 17.26 18.86 0.51 0.23
Ramco 1 66 7975 1237 15.5 647 8.1 7.5 8.8 1.25 6.18 14.16 20.57 0.45 0.72
Source: Company, Bloomberg, SKP Research
9.9
18.5
21.3
23.0 24.2
23.2
11.615.4
17.2
21.623.7
24.7
5.0
10.0
15.0
20.0
25.0
30.0
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13E Mar-14E
ROAE ROACE
2.5
4.5 4.5
7.0
9.0
10.025.6%
22.2%
16.7%
20.1%20.5%
19.8%
15%
17%
19%
21%
23%
25%
27%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13E Mar-14E
Dividend Dividend Payout Ratioin Rs.
Rs. in million
%
SKP Securities Ltd www.skpmoneywise.com Page 11 of 13
Everest Industries Ltd.
Valuation:
EIL has shown a strong performance in FY12 and 9mFY13 with increasing revenue mix
towards PEB and boards & panels. EIL has among the best diversified businesses
compared with rivals such as HIL, Visaka and Ramco. While some of them, such as HIL,
are larger than Everest in the roofing business, the overall quality of Everest’s revenue mix
sets higher valuation.
At CMP, the stock trades 5.6x its FY13E earning of Rs.43.9 and 4.9x its FY14E earnings of
Rs.50.5. Hence, we initiate coverage on the stock with „BUY‟ recommendation and a
target price of Rs.354 (7x FY14E EPS), at 43% upside over the period of 12 month.
1 year forward P/E Band
Source: SKP Research
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12
Price 4X 5X 6X 7X 8X 9X
SKP Securities Ltd www.skpmoneywise.com Page 12 of 13
Everest Industries Ltd.
Financial Performance:
Income Statement Figures: Rs. in million
Particulars Mar-11 Mar-12 Mar-13E Mar-14E
Net Sales 7231.0 8868.6 10660.1 12464.6
growth (%) 10.8% 22.6% 20.2% 16.9%
Expenditure 6572.8 8061.0 9540.7 11180.8
(Inc)/Dec in Stocks (139.8) 11.8 (255.8) (124.6)
Raw materials 3944.1 4750.5 5948.3 6805.7
Purchase of Traded Goods 57.8 136.2 149.2 174.5
Power & Fuel Exp 693.7 797.5 938.1 1121.8
Employees Expenses 283.6 318.9 383.8 448.7
Packing & Freight Exp 638.8 794.0 906.1 1059.5
Other Expenses 1094.6 1252.2 1471.1 1695.2
EBIDTA 658.2 807.6 1119.3 1283.9
EBIDTA Margin (%) 9.1% 9.1% 10.5% 10.3%
Depreciation 189.0 200.8 215.4 240.2
EBIT 469.2 606.8 903.9 1043.6
Other Income 116.49 177.90 85.28 124.65
Interest Expenses 53.9 44.4 55.8 53.4
Profit Before Tax 531.8 740.3 933.4 1114.9
Tax 124.8 212.7 268.5 351.2
Profit After Tax 407.0 527.6 664.9 763.7
growth (%) 35.6% 29.6% 26.0% 14.9%
PAT Margin (%) 5.6% 5.9% 6.2% 6.1%
O/S of Shares 15.1 15.1 15.1 15.1
EPS 27.0 34.9 43.9 50.5
DPS 4.5 7.0 9.0 10.0
Dividend payout ratio (%) 16.7 20.1 20.5 19.8
Balance Sheet Figures: Rs. in million Particulars Mar-11 Mar-12 Mar-13E Mar-14E
Share Capital 150.8 151.1 151.4 151.4
Reserves 1934.2 2344.0 2850.2 3437.5
Net Worth 2085.4 2495.5 3002.0 3589.3
Total Debt 1107.9 810.4 1181.1 760.9
Stockists Deposit (Unsec) 119.0 166.2 217.0 255.7
Deferred Tax Liability (Net) 240.8 239.0 234.0 234.0
Total Liabilities 3553.1 3711.0 4634.0 4839.9
Net Block 2149.4 2202.6 1987.1 2246.9
Capital work-in-progress 79.4 82.6 450.0 100.0
Total Fixed Assets 2228.8 2285.2 2437.1 2346.9
Investments 0.2 0.2 0.2 0.2
Inventories 1535.5 1579.8 1960.4 2297.4
Sundry Debtors 202.4 417.0 496.5 580.5
Cash and Bank Balances 186.6 351.3 750.0 800.0
Loans & Advances 515.8 576.4 641.6 749.9
Current Assets 2559.3 2924.5 3848.5 4427.8
Current Liab & Prov 1235.2 1498.9 1651.9 1935.1
Net Current Assets 1324.1 1425.6 2196.7 2492.7
Miscellaneous 0.0 0.0 0.0 0.0
Total Assets 3553.1 3711.0 4634.0 4839.9
Source: Company Data, SKP Research
Ratio Analysis Particulars Mar-11 Mar-12 Mar-13E Mar-14E
Earnings Ratios (%)
EBDITA Margin 9.1 9.1 10.5 10.3
Net Profit Margin 5.6 5.9 6.2 6.1
ROACE 17.2 21.6 23.7 24.7
ROANW 21.3 23.0 24.2 23.2
ROAA 11.9 14.5 15.9 16.1
Valuation Ratio
P/E (x) 9.2 7.1 5.6 4.9
Price/BVPS (x) 1.8 1.5 1.3 1.0
EV / EBITDA (x) 7.1 5.2 3.7 2.9
EV / Net Sales (x) 0.6 0.5 0.4 0.3
Balance Sheet Ratio
D/E Ratio 0.5 0.3 0.4 0.2
Current Ratio 2.1 2.0 2.3 2.3
Interest Coverage 10.9 17.7 17.7 21.9
FA Turnover Ratio 3.4 4.0 5.4 5.5
Inventory Days 85 72 75 75
Debtors Days 16 17 17 17
Creditors Days 57 53 53 53
DuPont Analysis
PAT / PBT 0.8 0.7 0.7 0.7
PBT / EBIT 0.9 0.9 0.9 1.0
EBIT / Net Sales 0.1 0.1 0.1 0.1
Net Sales / Total Assets 2.0 2.4 2.3 2.6
Total Assets / Equity 1.7 1.5 1.5 1.3
ROE 19.5% 21.1% 22.1% 21.3%
Cash Flow Statement Figures: Rs. in million Particulars Mar-11 Mar-12 Mar-13E Mar-14E
PBT 531.8 740.3 933.4 1114.9
Depreciation 189.0 200.8 215.4 240.2
Interest expense 53.9 44.4 55.8 53.4
Other (income)/Loss (116.5) (177.9) (85.3) (124.6)
(Inc)/Dec in WC (332.8) 63.1 (372.3) (246.1)
Taxes paid (124.8) (212.7) (268.5) (351.2)
Operating Cash Flows 200.7 658.0 478.5 686.6
Capital expenditure (151.7) (257.2) (367.4) (150.0)
(Inc)/Dec in Investment 0.3 0.0 0.0 0.0
Other income 116.5 177.9 85.3 124.6
Investing Cash Flows (35.0) (79.3) (282.1) (25.4)
Inc/(Dec) in debt (55.0) (250.3) 421.5 (381.5)
Dividend Paid Incl. Tax (79.6) (123.0) (158.7) (176.4)
Inc/(Dec) in Capital 3.1 0.3 0.2 0.0
Interest paid (53.9) (44.4) (55.8) (53.4)
Other Adjustments 14.3 3.3 (5.0) 0.0
Financing Cash Flows (171.1) (414.1) 202.3 (611.3)
Chg. in Cash & Equ (5.4) 164.6 398.7 50.0
Opening Cash Balance 192.1 186.6 351.3 750.0
Closing Cash Balance 186.6 351.3 750.0 800.0
SKP Securities Ltd www.skpmoneywise.com Page 13 of 13
Everest Industries Ltd.
Notes:
The above analysis and data are based on last available prices and not official closing rates. SKP Research is also available on Bloomberg, Thomson
First Call & Investext Myiris, Moneycontrol, Ticker plant and ISI Securities
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INB/INF: 230707532, BSE INB: 010707538, CDSL IN-DP-CDSL-132-2000, DPID: 021800, NSDL IN-DP-NSDL: 222-2001, DP ID: IN302646, ARN: 0006, NCDEX: 00715, MCX: 31705, MCX-SX: INE 260707532