cd equisearchpv pvt ltd · • according to ey, indian cv industry is expected to witness double...

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Equities Derivatives Commoditie

*adjusted for 1:1 bonus

M M Forgings Ltd. (MMFL)

No. of shares (m) 24.14

Mkt cap (Rs crs/$m) 1496/217.5

Current price (Rs/$) 620/9.0

Price target (Rs/$) 777/11.3

52 W H/L (Rs.) 742/276

Book Value (Rs/$) 153/2.2

Beta 0.5

Daily NSE volume (avg. monthly) 9380

P/BV (FY19e/20e) 3.4/2.8

EV/EBITDA (FY19e/20e) 9.3/7.2

P/E (FY19e/20e) 17.3/13.6

EPS growth (FY18/19e/20e) 57.5/26.6/27.5

OPM (FY18/19e/20e) 20.1/21.5/22.2

ROE (FY18/19e/20e) 20.0/21.4/22.7

ROCE (FY18/19e/20e) 12.3/11.8/11.7

D/E ratio (FY18/19e/20e) 1.0/1.4/1.4

BSE Code 522241

NSE Code MMFL

Bloomberg MMFG IN

Reuters MMFO.NS

Shareholding Pattern* %

Promoters 56.3

MFs / Banks /FIs 19.9

Foreign Portfolio Investors 1.2

Govt. Holding -

Public & Others 22.6

Total 100.0

As on July 19, 2018; *post bonus issue

Recommendation

BUY

Phone: + 91 (33) 4488 0055

E- mail: [email protected]

Standalone figures in Rs crs

Income from operations

Other Income

EBITDA (other income included)

PAT after EO

EPS(Rs)*

EPS growth (%)

Pvt Ltd

ities Distribution of Mutual Funds Dist

FY16

FY17 FY18

502.26 478.40 620.62

5.41 11.27 12.29

113.43 104.02 136.73

50.08 43.42 68.39

20.75 17.99 28.33

-0.9 -13.3 57.5

Quarterly Highlights

• According to EY, Indian CV Industry is expected to witness double

digit growth in FY19, slightly moderating from its current level

experienced an upswing of 51.6% in Q1FY19 with M&HCV up by

83.6% and LCV up by 36.5%- as the low base effect will wear off in the

remaining quarters. Last year in anticipation of GST, m

makers had shut down their production and

purchases leading to significant drop in sales during May

• Spurred by sturdy off-take in domestic CV industry (up by 31.0% yoy

during Jan-March 2018), robust growth in US Class 8 truck market

introduction of new products, MM Forging

Q4FY18 rose at the highest rate (65.6% yoy) to Rs 199.55 crs

recent times. Yet, operating margins contracted slightly by 26 bps to

19.3% due to higher raw material cost. Nonetheless, 2x growth in EBIT

to Rs 32.26 crs ($5.0m) helped it post 107.1% (yoy) surge in PBT and

113.5% (yoy) surge in PAT.

• It acquired DVS Industries, a leading crank shafts

enhance synergies between its wide ranging capability in forgings &

machining and DVS’s long standing expertise in machining of

crankshafts. With this acquisition, the company hopes of an easier entry

into new segments like tractors and LCVs.

been ramped up from 5,000 crankshafts a month to 12,000 now, and i

will be increased to 15,000 by December 2018.

• The stock currently trades at 17.3x FY19e EP

FY20e EPS of Rs 45.72. MM Forgings is well positioned to cater to the

growing demand of its key-user industry and global markets. Its

substantial expansion plan (capacity to be increased to more than 1.2

lacs from current level of 65,000 MT) entailing high capex

should help it record revenue growth at a CAGR of 28.0%

ending FY20. In view of its improved earnings in FY18 (up by 57.5

yoy), its current fiscal’s earnings has been revised upwards

Improved earnings are thus expected to buoy return

projected at 21.4% in FY19 and 22.7% in FY20. Yet, risk of fluctuation in

steel prices and queasy client concentration (top 5 clients cont

65% to its revenue despite having a diversified product offering)

demand scrutiny. On balance, we retain ‘buy

target price of Rs 777 (previous target Rs 701

on 17x FY20e EPS of Rs 45.72 over a period of 9

0.6).

July 31, 2018

istribution of Life Insurance

FY19e FY20e

794.13 1015.96

12.79 13.45

183.83 238.56

86.55 110.37

35.85 45.72

26.6 27.5

EY, Indian CV Industry is expected to witness double

digit growth in FY19, slightly moderating from its current level – it

experienced an upswing of 51.6% in Q1FY19 with M&HCV up by

as the low base effect will wear off in the

Last year in anticipation of GST, many vehicle

and consumers delayed their

purchases leading to significant drop in sales during May-June 2017.

c CV industry (up by 31.0% yoy

robust growth in US Class 8 truck market and

introduction of new products, MM Forgings’ revenue growth in

(65.6% yoy) to Rs 199.55 crs ($31.0m) in

erating margins contracted slightly by 26 bps to

19.3% due to higher raw material cost. Nonetheless, 2x growth in EBIT

helped it post 107.1% (yoy) surge in PBT and

ank shafts machining unit, to

wide ranging capability in forgings &

machining and DVS’s long standing expertise in machining of

crankshafts. With this acquisition, the company hopes of an easier entry

actors and LCVs. The capacity of DVS has

been ramped up from 5,000 crankshafts a month to 12,000 now, and it

,000 by December 2018.

x FY19e EPS of Rs 35.85 and 13.6x

MM Forgings is well positioned to cater to the

user industry and global markets. Its

to be increased to more than 1.2

entailing high capex of ~Rs 600 crs

a CAGR of 28.0% in two years

In view of its improved earnings in FY18 (up by 57.5%

has been revised upwards by 33.0%.

Improved earnings are thus expected to buoy return on capital- ROE

% in FY20. Yet, risk of fluctuation in

client concentration (top 5 clients contributing

iversified product offering)

e, we retain ‘buy’ rating on the stock with

f Rs 777 (previous target Rs 701; adjusted for bonus) based

over a period of 9-12 months (PEG ratio

CD EquisearchPvt Ltd


Outlook & Recommendation

Indian Forging Industry

According to industry reports, development in infrastructure, advancement in automotive and construction industries in

emerging economies and recognition of India as the manufacturing hub is propelling growth of forging market in Asia Pacific

region, which is projected to be the dominant region in the global forging market with largest market share in the world

followed by North America. Increasing demand for rolled ring forging has supported burgeoning growth of North America

the global forging market. Europe is expected to witness significant growth in the global forging market. Euroforge reckons

Germany to be one of the major players in this i

government regulations have given significant pace

Prodded by bright prospects of the auto sector,

reckons the forging industry to report a growth of ~10%

and tractors, the industry has opened on a robust note and has witnessed higher demand

to usual trend of low production during April

auto-component manufacturing and a major contributor to the government's 'Make in India'

fiscal can be attributed to the surge in sales of vehicles," Muralishankar said.

prices were the barriers for the domestic players to grow their exports.

impact the forging industry.

Auto Industry Prospects

Riding on a strong economic revival, ICRA, an Indian credit rating agency, expects Indian CV industry to post growth of 9

in current fiscal, driven by higher off take in infrastructure projects and pick up in industrial activity. Healthy demand from

consumption-led sectors and rural market should also b

Sector Head - Corporate Ratings, ICRA said, "Demand for trucks continues to remain strong, driven by pickup in construction

activity and overall healthy cargo demand." Yet, higher diesel prices and relaxation of overloading norms

increase the maximum axle load of heavy vehicles by 20

levels. While the move should lead to substantial gains for M&HCV segment, demand shift to heavier machinery might impact

the LCV segment. Dewan said that over the med

implementation of BS-VI emission norms from April 2020 onwards."With significant changes to be implemented to meet the

tightening norms, CV prices are expected to increase by 8

he added.

The Automotive Mission Plan 2016-26 (AMP 2026)

in engineering, manufacture and export of vehicles and components,

GDP and generate additional 65 million jobs. Global car majors have been ramping up investments in India and setting up

manufacturing plants to boost the domestic demand, thanks to GOI’s ‘Make in Ind

recently announced plans to invest around €1 bn in the country over the next few years to develop six new models. By 2021,

South Korea’s second-largest automobile manufacturer, Kia Motors also intends to increas

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recognition of India as the manufacturing hub is propelling growth of forging market in Asia Pacific

is projected to be the dominant region in the global forging market with largest market share in the world

Increasing demand for rolled ring forging has supported burgeoning growth of North America

Europe is expected to witness significant growth in the global forging market. Euroforge reckons

Germany to be one of the major players in this industry accounting for 48% of Europe’s forging production.

government regulations have given significant pace to global forging market in European region.

Prodded by bright prospects of the auto sector, S Muralishankar, President, Association of Indian Forging Industry (AIFI)

to report a growth of ~10% during the current fiscal. Thanks to surge in auto sales, especially CVs

and tractors, the industry has opened on a robust note and has witnessed higher demand in the first quarter of FY19, compared

w production during April-May in a fiscal year. “Indian forging industry is one of the key players in the

component manufacturing and a major contributor to the government's 'Make in India' initiative. The growth in the new

the surge in sales of vehicles," Muralishankar said. Yet, inadequate supply of steel and its higher

prices were the barriers for the domestic players to grow their exports. Boost to electric vehicles too are expected to adversely

Riding on a strong economic revival, ICRA, an Indian credit rating agency, expects Indian CV industry to post growth of 9

al, driven by higher off take in infrastructure projects and pick up in industrial activity. Healthy demand from

led sectors and rural market should also buttress growth of the industry. Shamsher Dewan, Vice President &

Ratings, ICRA said, "Demand for trucks continues to remain strong, driven by pickup in construction

Yet, higher diesel prices and relaxation of overloading norms

d of heavy vehicles by 20-25% - may lead to some moderation in growth from previous year


Dewan said that over the medium term, growth in the industry will be supported by impending

VI emission norms from April 2020 onwards."With significant changes to be implemented to meet the

tightening norms, CV prices are expected to increase by 8-10%, which will trigger pre-buying and augment CV sales in FY

26 (AMP 2026) envisages that the Indian auto industry will be among the top three in

in engineering, manufacture and export of vehicles and components, making the industry grow in value to over 12% of India’s


manufacturing plants to boost the domestic demand, thanks to GOI’s ‘Make in India’ initiative. For instance, Volkswagen has

€1 bn in the country over the next few years to develop six new models. By 2021,

largest automobile manufacturer, Kia Motors also intends to increase investments in the region to $2 bn

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recognition of India as the manufacturing hub is propelling growth of forging market in Asia Pacific

is projected to be the dominant region in the global forging market with largest market share in the world,

Increasing demand for rolled ring forging has supported burgeoning growth of North America in

Europe is expected to witness significant growth in the global forging market. Euroforge reckons

forging production. Environmental and

Indian Forging Industry (AIFI)

Thanks to surge in auto sales, especially CVs

in the first quarter of FY19, compared

Indian forging industry is one of the key players in the

initiative. The growth in the new

Yet, inadequate supply of steel and its higher

Boost to electric vehicles too are expected to adversely

Riding on a strong economic revival, ICRA, an Indian credit rating agency, expects Indian CV industry to post growth of 9-11%

al, driven by higher off take in infrastructure projects and pick up in industrial activity. Healthy demand from

Shamsher Dewan, Vice President &

Ratings, ICRA said, "Demand for trucks continues to remain strong, driven by pickup in construction

Yet, higher diesel prices and relaxation of overloading norms – GOI is planning to

may lead to some moderation in growth from previous year


ium term, growth in the industry will be supported by impending

VI emission norms from April 2020 onwards."With significant changes to be implemented to meet the

ing and augment CV sales in FY20,"

y will be among the top three in world

making the industry grow in value to over 12% of India’s


For instance, Volkswagen has

€1 bn in the country over the next few years to develop six new models. By 2021,

e investments in the region to $2 bn



[

from the present $ 1.1 bn. Lately, Suzuki Motor Corp has also announced investments of about $3 bn

maintain its position in the Indian passenger vehicle market.

advantage to set up export-oriented production hubs

Renault (which exports its ‘Kwid’ cars to Mauritius

(Vento to Mexico), have set up shops in the country.

According to Research and Markets, the North

below) and a buoyant economy along with positive developments in e

double digit growth in CY 2018. However, electrification of tru

World’s top two largest truck manufacturers, Volvo and Daimler, are

take on recent industry incumbents and commence full scale

face headwinds due to rising crude oil prices coupled with higher input costs in a tightening monetary policy environment wit

a trade war on going forward.

It also contends that the truck market in Europe also remained strong in CY 2017

fleets and good customer profitability. The market is expected to stay robust in the current year as well, as fleets continue to add

capacity in support of the dynamic freight growth.

the environmental uncertainty in Europe and creating weakness in manufacturing sentiment across key markets with instability

on the policy front.

Capex

Gauging rising demand in the Indian CV industry

boost its capacity by some 55000 MT by next fiscal with capital com

majority of which is expected to be spent in FY19. It is also looking at expanding its business in tractors and two

it currently has negligible presence. Over the past years, its production capacity has increased

MT in FY18. With improved demand for forgings

and 27.9% in current and next fiscal respectively.

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from the present $ 1.1 bn. Lately, Suzuki Motor Corp has also announced investments of about $3 bn

passenger vehicle market. Many companies are planning to leverage India’s competitive

oriented production hubs- according to the ‘Make in India’ website; major auto behemoths

which exports its ‘Kwid’ cars to Mauritius), Suzuki (Baleno to Japan), Honda (Jazz to South Africa

(Vento to Mexico), have set up shops in the country.

According to Research and Markets, the North American Class 6-8 truck market witnessed good growth in CY 2017 (see chart

positive developments in e-commerce and construction activity should help in

double digit growth in CY 2018. However, electrification of trucking industry is expected to transform the landscape of industry.

World’s top two largest truck manufacturers, Volvo and Daimler, are lining up electric versions of their flagship truck models to

take on recent industry incumbents and commence full scale production of electric trucks 2021 onwards.

face headwinds due to rising crude oil prices coupled with higher input costs in a tightening monetary policy environment wit

truck market in Europe also remained strong in CY 2017 on account of high capacity utilization in truck

The market is expected to stay robust in the current year as well, as fleets continue to add

of the dynamic freight growth. However, continued lack of clarity over a definitive Brexit deal is adding to

Europe and creating weakness in manufacturing sentiment across key markets with instability

industry - volumes up by 19.9% in FY18; source SIAM

fiscal with capital commitment of ~ Rs 600 crs- 2/3rd

majority of which is expected to be spent in FY19. It is also looking at expanding its business in tractors and two

Over the past years, its production capacity has increased from 35,000 MT in FY08

forgings, particularly from CV industry, we expect its production to increase by 28.0%

% in current and next fiscal respectively.

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from the present $ 1.1 bn. Lately, Suzuki Motor Corp has also announced investments of about $3 bn over the next three years to

Many companies are planning to leverage India’s competitive

major auto behemoths such as

Jazz to South Africa) and Volkswagen

8 truck market witnessed good growth in CY 2017 (see chart

commerce and construction activity should help in

cking industry is expected to transform the landscape of industry.

lining up electric versions of their flagship truck models to

production of electric trucks 2021 onwards. Yet, the industry might

face headwinds due to rising crude oil prices coupled with higher input costs in a tightening monetary policy environment with

on account of high capacity utilization in truck

The market is expected to stay robust in the current year as well, as fleets continue to add

However, continued lack of clarity over a definitive Brexit deal is adding to

Europe and creating weakness in manufacturing sentiment across key markets with instability

y 19.9% in FY18; source SIAM - MM Forgings is planning to

funded through borrowings -

majority of which is expected to be spent in FY19. It is also looking at expanding its business in tractors and two-wheelers where

from 35,000 MT in FY08 to 65,000

s production to increase by 28.0%



Financials & Valuations

Powered by strong auto-sector growth last fiscal (production up by 14.8% yoy; source:

an impressive revenue growth of 29.7% in FY18, highest witnessed in last seven fiscals.

declined by 13.1% (yoy) in FY17 due to dismal

29.4% in CY16) too improved by 21.3%, though not without fall in its share of total revenue to 59.2% from 63.7% a year

Going forward, given stable outlook of the CV industry

fiscal and next, we expect revenue to grow by an average of

Owing to labor shortage at the shop floor operational level due to exponential growth in auto manufacturing hub of Oragadam,

a part of its machining process has been relocated to tier

is more stable and of better quality. In the next few months, it plans to shift 10

controlled operating expenditure, OPM improved marginally by 66.9 bps (yoy) to 20.1% last fiscal. Spurt in earnings improved

NPM to 11.0% in FY18 from 9.1% a year before.

Despite being poised for robust growth during current fiscal, domestic forging business is facing threat due to GOI’s push fo

electric vehicles (EVs). It is expected to adversely impact the forging industry in the

parts in 'internal combustion engines' in automobiles, EVs only have 20 parts

forging units are into manufacturing of auto components, particularly engine and

comprise steering components, suspensions and axles out of the forged auto components.

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sector growth last fiscal (production up by 14.8% yoy; source: SIAM), MM Forgings managed to post

growth of 29.7% in FY18, highest witnessed in last seven fiscals. Exports reve

declined by 13.1% (yoy) in FY17 due to dismal demand contraction for US Class 8 trucks (production down by an abysmal

29.4% in CY16) too improved by 21.3%, though not without fall in its share of total revenue to 59.2% from 63.7% a year

Going forward, given stable outlook of the CV industry (constituting 77% of its revenue in FY18)

an average of 28.0% over the next two years.


a part of its machining process has been relocated to tier-II cities of Tamil Nadu such as Viralimalai and Madurai, where labor

In the next few months, it plans to shift 10-20% of its processes from Chennai.


% in FY18 from 9.1% a year before.

Despite being poised for robust growth during current fiscal, domestic forging business is facing threat due to GOI’s push fo

electric vehicles (EVs). It is expected to adversely impact the forging industry in the long run because compared to 2000 moving

parts in 'internal combustion engines' in automobiles, EVs only have 20 parts, according to S Muralishankar

forging units are into manufacturing of auto components, particularly engine and transmission related application. EVs

comprise steering components, suspensions and axles out of the forged auto components.

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MM Forgings managed to post

Exports revenue booking, which

demand contraction for US Class 8 trucks (production down by an abysmal

29.4% in CY16) too improved by 21.3%, though not without fall in its share of total revenue to 59.2% from 63.7% a year ago.

(constituting 77% of its revenue in FY18) and ramp up of capex this


Viralimalai and Madurai, where labor

20% of its processes from Chennai. With


Despite being poised for robust growth during current fiscal, domestic forging business is facing threat due to GOI’s push for

long run because compared to 2000 moving

according to S Muralishankar; 60 percent of

transmission related application. EVs only



The stock currently trades at 17.3x FY19e EPS of Rs 35.85 and 13.6x FY20e EPS of Rs 45.72. Upswing in forging and

industry bodes well for the company. Focus on margin accretive press forging coupled with cost reduction should in

its margins – OPM of 21.5% and 22.2% in current and next fiscal respectively.

more orders from domestic clients, thereby increasing domestic contribution to total revenue (40.8% in FY18). Plethora of

government initiatives towards higher infrastructure spend and focus on manufacturing indus

industry. New vehicle scrappage policy to phase out vehicles more than 20 years old should result in demand for CVs.

However, ICRA reckons the new policy is unlikely to perk up demand significantly as most of these older vehicl

used in rural areas and smaller towns by small fleet operators who operate used vehicles and have limited financial

resources to purchase new vehicles. Company’s over

overlooked. It is also vulnerable to any economic crisis in developed economies, especially North America and Europe

which constitutes a substantial portion of its sales.

Rs 777 (previous target Rs 701; adjusted for bonus) based on 17x FY20e EPS of Rs 45.72 over a period of 9

ratio 0.6). For more information, refer to our January report.

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The stock currently trades at 17.3x FY19e EPS of Rs 35.85 and 13.6x FY20e EPS of Rs 45.72. Upswing in forging and

Focus on margin accretive press forging coupled with cost reduction should in

% and 22.2% in current and next fiscal respectively. Ramp up of capacities would help procure


government initiatives towards higher infrastructure spend and focus on manufacturing industry will further help the CV


However, ICRA reckons the new policy is unlikely to perk up demand significantly as most of these older vehicl


Company’s over-exposure to CV industry (77% of its revenue in FY18) cannot be

lso vulnerable to any economic crisis in developed economies, especially North America and Europe

which constitutes a substantial portion of its sales. Weighing odds, we retain ‘buy’ rating on the stock with target price of

adjusted for bonus) based on 17x FY20e EPS of Rs 45.72 over a period of 9

. For more information, refer to our January report.

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The stock currently trades at 17.3x FY19e EPS of Rs 35.85 and 13.6x FY20e EPS of Rs 45.72. Upswing in forging and auto

Focus on margin accretive press forging coupled with cost reduction should increase

Ramp up of capacities would help procure


try will further help the CV


However, ICRA reckons the new policy is unlikely to perk up demand significantly as most of these older vehicles are


exposure to CV industry (77% of its revenue in FY18) cannot be

lso vulnerable to any economic crisis in developed economies, especially North America and Europe

Weighing odds, we retain ‘buy’ rating on the stock with target price of

adjusted for bonus) based on 17x FY20e EPS of Rs 45.72 over a period of 9-12 months (PEG



Cross Sectional Analysis

Company Equity* CMP Mcap*

Ramkrishna Forgings 33 656 2138

Kalyani Forge 4 351 128

Mahindra CIE 379 259 9820

M M Forgings 24 620 1496

*figures in crores; calculations on ttm basis; standalone data as available on July 31, 2018.

Ramkrishna Forgings posted topline growth of 59.0% (yoy) last quarter led by 97.7% (yoy) growth in domestic operating

revenues which constituted 74.5% of revenue from operations.

among its peers (see table). Over the next 3-4 years, it aims to double its revenue and increase sales contribution from segments

like railway, LCV, PV, defense and 2-wheelers.

CV OEM which is expected to generate annual revenue of EUR 4 mn.

Kalyani Forge ensured maximum utilization of its forging capacity which resulted in an improved top line (

well as bottom line (up by 2.8x yoy) last quarter. Its decision to implement a number of cost control measures mainl

areas of manpower, transportation and outsourcing helped OPM to improve significantly to 10.6% in Q1FY19 vs 6.8%

same period last year. Also by going for more and more automation in the plant, it expects reduction in rejections and relate

costs. Initiatives in the area of new product development for both domestic and export markets should drive its growth go

forward.

Mahindra CIE posted an impressive performance last quarter with 44.6

to sales to 55.2% from 51.2% in Q2CY17, its OPM improved by 304 bps (yoy) to 12.5%, thanks to fall in ‘other expen

to 21.2% from 26.8% in the same period a yea

received orders for gears from TBK India, for stampings from Ashok Leyland and for crankshafts from Hyundai

company has also won new orders from Hyundai and Kia Motor

Mexico and receipt of new orders, Mahindra CIE has

which would start from Jan 2019. The company

Note: Graphs on standalone or consolidated data as applicable; Mahindra CIE

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Mcap* Sales* Profit* OPM (%)

NPM (%)

Int cov.

ROE (%)

2138 1588 113 20.2 7.1 3.4 18.0

128 272 7 9.2 2.7 2.5 7.2

9820 2309 122 11.5 5.3 29.0 3.5

1496 621 68 20.1 11.0 7.5 20.0

ores; calculations on ttm basis; standalone data as available on July 31, 2018.


revenue from operations. Controlled operating expenditure helped it record highest OPM

4 years, it aims to double its revenue and increase sales contribution from segments

eelers. It has entered into a multiyear long-term agreement with a leading European

CV OEM which is expected to generate annual revenue of EUR 4 mn.

ensured maximum utilization of its forging capacity which resulted in an improved top line (

.8x yoy) last quarter. Its decision to implement a number of cost control measures mainl

, transportation and outsourcing helped OPM to improve significantly to 10.6% in Q1FY19 vs 6.8%

same period last year. Also by going for more and more automation in the plant, it expects reduction in rejections and relate

Initiatives in the area of new product development for both domestic and export markets should drive its growth go

rformance last quarter with 44.6% (yoy) growth in revenue. Despite rise in raw material

to sales to 55.2% from 51.2% in Q2CY17, its OPM improved by 304 bps (yoy) to 12.5%, thanks to fall in ‘other expen

% in the same period a year ago. It plans to infuse more funds across all segments going ahead

received orders for gears from TBK India, for stampings from Ashok Leyland and for crankshafts from Hyundai

pany has also won new orders from Hyundai and Kia Motors, which would aid revenues.

Mexico and receipt of new orders, Mahindra CIE has added a second press line to cater to a new client, the production for

he company also plans to add third press line in Mexico by the end of CY2018.

applicable; Mahindra CIE changed its financial year to calendar year in 2015.

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ROE (%)

Mcap/ sales

P/BV P/E

18.0 1.3 2.7 18.9

7.2 0.5 1.2 17.1

3.5 4.3 2.8 80.8

20.0 2.4 4.1 21.9


Controlled operating expenditure helped it record highest OPM

4 years, it aims to double its revenue and increase sales contribution from segments

term agreement with a leading European

ensured maximum utilization of its forging capacity which resulted in an improved top line (up by 1.2x yoy) as

.8x yoy) last quarter. Its decision to implement a number of cost control measures mainly in the

, transportation and outsourcing helped OPM to improve significantly to 10.6% in Q1FY19 vs 6.8% in the

same period last year. Also by going for more and more automation in the plant, it expects reduction in rejections and related

Initiatives in the area of new product development for both domestic and export markets should drive its growth going

% (yoy) growth in revenue. Despite rise in raw material

to sales to 55.2% from 51.2% in Q2CY17, its OPM improved by 304 bps (yoy) to 12.5%, thanks to fall in ‘other expenses’ to sales

cross all segments going ahead. It has

received orders for gears from TBK India, for stampings from Ashok Leyland and for crankshafts from Hyundai recently. The

. Owing to strong demand in

added a second press line to cater to a new client, the production for

plans to add third press line in Mexico by the end of CY2018.



Financials Standalone Quarterly Results

Q4FY18

Income From Operations 199.55

Other Income 4.32

Total Income 203.87

Total Expenditure 160.94

EBITDA (other income included) 42.93

Interest 3.78

Depreciation 10.50

PBT 28.65

Tax 1.28

PAT 27.37

Extraordinary Item 0.16

Adjusted Net Profit 27.21

EPS(Rs)* 11.27

Income Statement

FY16

Income From Operations 502.26

Growth (%) -0.1

Other Income 5.41

Total Income 507.67

Total Expenditure 394.24

EBITDA (other income included) 113.43

Interest 8.32

Depreciation 35.81

PBT 69.29

Tax 19.21

PAT 50.09

Extraordinary Item 0.00

Adjusted Net Profit 50.08

EPS (Rs)* 20.75 *adjusted for 1:1 bonus

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Standalone Quarterly Results Figures in Rs crs

Q4FY17 % chg FY18 FY17 % chg

120.50 65.6 620.62 478.40 29.7

2.52 71.5 12.29 11.27 9.1

123.02 65.7 632.91 489.66 29.3

96.87 66.1 496.18 385.65 28.7

26.15 64.2 136.73 104.02 31.5

2.64 43.4 12.65 9.95 27.2

9.68 8.4 42.00 38.93 7.9

13.84 107.1 82.09 55.14 48.9

1.09 17.1 13.58 11.72 15.8

12.75 114.8 68.51 43.42 57.8

0.00 - 0.11 0.00 -

12.75 113.5 68.39 43.42 57.5

5.28 113.5 28.33 17.99 57.5

Figures in Rs crs

FY17 FY18 FY19e FY20e

478.40 620.62 794.13 1015.96

-4.8 29.7 28.0 27.9

11.27 12.29 12.79 13.45

489.66 632.91 806.92 1029.42

385.65 496.18 623.09 790.86

104.02 136.73 183.83 238.56

9.95 12.65 24.44 33.84

38.93 42.00 53.83 70.12

55.14 82.09 105.55 134.59

11.72 13.58 19.00 24.23

43.42 68.51 86.55 110.37

0.00 0.11 - -

43.42 68.39 86.55 110.37

17.99 28.33 35.85 45.72

7

EquisearchPvt Ltd


Figures in Rs crs



Balance Sheet

Sources of Funds

Share Capital

Reserves & Surplus

Total Shareholders' Funds

Long Term Debt

Total Liabilities

Application of Funds

Gross Block

Less: Accumulated Depreciation

Net Block

Capital Work in Progress

Investments

Current Assets, Loans & Advances

Inventory

Trade Receivables

Cash and Bank

Short term loans & advances (incl.other CA)

Total CA & LA

Current Liabilities

Provisions-Short term

Total Current Liabilities

Net Current Assets

Net Deferred Tax

Net long term assets

Total Assets

8

EquisearchPvt Ltd


Figures in Rs crs

FY16 FY17 FY18 FY19e FY20e

12.07 12.07 12.07 24.14

267.52 302.53 357.01 414.65 508.18

279.59 314.60 369.08 438.79 532.33

98.50 108.41 168.27 390.13 542.70

378.09 423.01 537.34 828.92 1075.02

571.58 667.91 754.96 1082.33 1327.33

309.16 347.98 389.84 443.67 513.80

262.42 319.94 365.12 638.65 813.53

29.61 13.72 27.37 50.00

0.17 0.17 4.30 4.30

73.31 65.96 128.54 147.82 169.99

14.98 17.24 56.57 65.05

120.80 133.84 163.98 136.27 173.67

other CA) 27.54 21.38 30.11 44.58

236.63 238.43 379.20 393.73 473.09

145.46 144.50 277.90 293.16 303.61

0.00 1.40 7.01 8.42

145.46 145.91 284.91 301.58 312.02

91.16 92.52 94.29 92.15 161.07

-13.72 -16.66 -13.42 -17.32

8.45 13.31 59.69 61.14

378.09 423.01 537.34 828.92 1075.02

8

EquisearchPvt Ltd


Figures in Rs crs FY20e

24.14

508.18

532.33

542.70

1075.02

1327.33

513.80

813.53

55.00

4.30

169.99

74.81

173.67

54.61

473.09

303.61

8.42

312.02

161.07

-21.24

62.36

1075.02



Cash Flow Statement

Net Profit after tax (a)

Non Cash exp & others (b)

Depreciation

Interest Income

Dividend Income (Profit)/Loss on Sale of Fixed Assets

Deferred Tax (Asset)/Liability

(Inc.)/Dec. in WC & others (c )

Trade Receivables

Inventories

Trade Payables

Other assets (net of liabilities)

Operating cash flow (a+b+c)

Purchase of Fixed Assets

Proceeds from sale of Fixed Assets

Purchase/Sale of Investments

Interest Income

Dividend Income

Investing Cash flow (d)

Net debt

Dividend paid including CDT

Financing Cash flow (e)

Net change (a+b+c+d+e)

9

EquisearchPvt Ltd


Figures in Rs crs

FY16 FY17 FY18 FY19e FY20e

50.09 43.42 68.51 86.55 110.37

31.85 30.76 26.99 45.61 61.33

35.81 38.93 42.00 53.83 70.12

-0.22 -0.29 -1.03 -0.85 -1.08

-5.18 -10.81 -10.61 -11.26 -11.63

-0.01 0.00 -0.14 - -

1.43 2.93 -3.23 3.90 3.92

25.39 2.52 -118.66 -37.25 -36.10

14.15 -2.27 -39.32 -8.49 -9.76

5.35 7.35 -62.58 -19.28 -22.17

2.44 -1.05 35.53 6.44 7.09

3.45 -1.52 -52.29 -15.92 -11.25

107.33 76.70 -23.17 94.92 135.60

-91.83 -77.74 -103.72 -350.00 -250.00

0.15 0.00 0.21 - -

-0.03 - -4.13 - -

0.22 0.29 1.03 0.85 1.08

5.18 10.81 10.61 11.26 11.63

-86.31 -66.65 -96.00 -337.88 -237.29

23.22 10.05 157.72 230.68 155.93

-12.47 -7.06 -8.42 -15.43 -16.83

10.75 2.99 149.30 215.25 139.09

31.76 13.05 30.13 -27.71 37.40

9

EquisearchPvt Ltd


Figures in Rs crs FY20e

110.37

61.33

70.12

1.08

11.63

-

3.92

36.10

9.76

22.17

7.09

11.25

135.60

250.00

-

-

1.08

11.63

237.29

155.93

16.83

139.09

37.40



Key Financial Ratios FY16

Growth Ratios(%)

Revenue -0.1

EBITDA 0.2

Net Profit -0.9

EPS -0.9

Margins (%)

Operating Profit Margin 21.5

Gross profit Margin 20.9

Net Profit Margin 10.0

Return (%)

ROCE 12.2

ROE 19.4

Valuations

Market Cap/ Sales 1.1

EV/EBITDA 5.5

P/E 10.7

P/BV 1.9

Other Ratios

Interest Coverage 9.3

Debt Equity 0.8

Current Ratio 1.6

Turnover Ratios

Fixed Asset Turnover 2.1

Total Asset Turnover 1.4

Debtors Turnover 22.8

Inventory Turnover 5.2

Creditor Turnover 13.7

WC Ratios

Debtor Days 16.0

Inventory Days 70.3

Creditor Days 26.6

Cash Conversion Cycle 59.8

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EquisearchPvt Ltd


FY17 FY18 FY19e FY20e

-4.8 29.7 28.0 27.9

-8.3 31.3 34.6 29.8

-13.3 57.5 26.6 27.5

-13.3 57.5 26.6 27.5

19.4 20.1 21.5 22.2

19.7 20.0 20.1 20.1

9.1 11.0 10.9 10.9

9.9 12.3 11.8 11.7

14.6 20.0 21.4 22.7

1.4 2.0 1.9 1.5

7.1 10.8 9.3 7.2

15.0 18.4 17.3 13.6

2.1 3.4 3.4 2.8

6.5 7.5 5.3 5.0

0.7 1.0 1.4 1.4

1.6 1.3 1.3 1.5

1.6 1.8 1.6 1.4

1.2 1.3 1.2 1.1

29.7 16.8 13.1 14.5

5.5 5.1 4.5 5.0

13.1 10.6 9.2 10.6

12.3 21.7 28.0 25.1

65.9 71.5 80.9 73.3

27.8 34.3 39.6 34.3

50.4 58.9 69.3 64.1

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EquisearchPvt Ltd




Cumulative Financial Data Rs crs FY09-12 FY13

Income from operations 988 1777

Operating profit 169 356

EBIT 112 237

PBT 85 205

PAT 64 153

Dividends 13 27

Sales growth (%) 42.9 80.0

PAT growth (%) - 139.2

OPM (%) 17.1 20.0

GPM (%) 15.8 18.7

NPM (%) 6.5 8.6

Interest coverage 4.1 7.3

ROE (%) 13.4 17.8

ROCE (%) 8.5 11.1

Debt-Equity ratio* 1.0 0.8

Fixed asset turnover 1.7 2.0

Total asset turnover 1.4 1.5

Debtors turnover 11.9 23.2

Creditors turnover 13.0 14.9

Inventory turnover 3.2 4.5

Debtor days 30.7 15.7

Creditor days 28.2 24.4

Inventory days 114.0 81.4

Cash conversion cycle 116.5 72.7

Dividend payout ratio (%) 16.4 17.3 FY 09-12 implies four year period ending fiscal 12;*as on terminal year

Development of new product lines and strong off

consequence of its focus on cost reduction and robust revenue recognition,

period (see table). Improved earnings coupled with modest increase in interest cost expl

coverage ratio to 7.3 during four year period ending FY16. Improvement in debtor days and inventory days due to better

working capital management explains reduction in cash conversion cycle by ~44 days during FY13

Strong underlying market demand supported by unprecedented

FY17-20e period (see table). Debt amassment to fund its expansion plans would incre

OPM would be little stymied by higher raw material prices (see table)

profitability should rise 2.0x from previous four year period ending FY16. Buoyancy in earnings would help return on

capital expansion- ROE estimated to increase to 19.0% in FY17

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EquisearchPvt Ltd


FY13-16 FY17-20e

1777 2909

356 613

237 458

205 377

153 309

27 56

80.0 63.7

139.2 101.5

20.0 21.1

18.7 20.0

8.6 10.6

7.3 5.7

17.8 19.0

11.1 10.5

0.8 1.4

2.0 1.4

1.5 1.0

23.2 16.2

14.9 10.6

4.5 4.7

15.7 22.5

24.4 34.3

81.4 77.4

72.7 65.6

17.3 18.2

terminal year

Development of new product lines and strong off-take in global demand aided topline growth

and robust revenue recognition, OPMs expanded by ~292 bps

coupled with modest increase in interest cost explain the significant rise in interest


working capital management explains reduction in cash conversion cycle by ~44 days during FY13

Strong underlying market demand supported by unprecedented capacity building should galvan

. Debt amassment to fund its expansion plans would increase its debt equity ratio to 1.4

OPM would be little stymied by higher raw material prices (see table) and improve moderately by

from previous four year period ending FY16. Buoyancy in earnings would help return on

ROE estimated to increase to 19.0% in FY17-20e period from FY13-16 period.

11

EquisearchPvt Ltd


topline growth (80%) in FY14-16. As a

by ~292 bps during the same

the significant rise in interest


working capital management explains reduction in cash conversion cycle by ~44 days during FY13-16 period.

should galvanize revenue by 63.7% in

ase its debt equity ratio to 1.4 in FY20.

and improve moderately by 108 bps, but overall

from previous four year period ending FY16. Buoyancy in earnings would help return on



Financial Summary- US Dollar denominated million $ FY16

Equity capital 1.8

Shareholders funds 42.1

Total debt 32.2

Net fixed assets (including CWIP) 44.0

Investments 0.0

Net current assets 13.7

Total assets 57.0

Revenues 76.7

EBITDA 17.3

EBDT 16.1

PBT 10.6

PAT 7.7

EPS($) 0.32

Book value ($) 1.75

Income statement figures translated at average rates; balance sheet All dollar denominated figures are adjusted for extraordinary items.

12

EquisearchPvt Ltd


US Dollar denominated FY17 FY18 FY19e FY20e

1.9 1.9 3.5 3.5

48.5 56.7 63.8 77.4

34.5 58.6 89.0 111.7

51.5 60.3 100.2 126.3

0.0 0.7 0.6 0.6

14.3 14.5 13.4 23.4

65.2 82.6 120.6 156.4

71.3 96.3 115.5 147.8

15.5 21.2 26.7 34.7

14.0 19.2 23.2 29.8

8.2 12.7 15.4 19.6

6.5 10.6 12.6 16.1

0.27 0.44 0.52 0.66

2.01 2.35 2.64 3.21

tes; balance sheet at year end rates; projections at current rates (Rs 68.75/$).All dollar denominated figures are adjusted for extraordinary items.

12

EquisearchPvt Ltd


; projections at current rates (Rs 68.75/$).



Disclosure & Disclaimer CD Equisearch Private Limited (hereinafter referred to as

Limited, Bombay Stock Exchange Limited and Metropolitan Stock Exchange of India Limited (Formerly known as MCX Stock Exchange

Limited). CD Equi is also registered as Depository Participant with CDSL and AMFI registered Mutual Fund Advisor. The associ

CD Equi are engaged in activities relating to NBFC-ND

CD Equi is registered under SEBI (Research Analysts) Regulations, 2014 with SEBI Registration no INH300002274. Further, CD Eq

hereby declares that –

• No disciplinary action has been taken against CD Equi by any of the regulatory authorities.

• CD Equi/its associates/research analysts do not have any financial interest/beneficial interest of more than one percent/material

conflict of interest in the subject company(s)

• CD Equi/its associates/research analysts have not received

months.

• CD Equi/its research analysts has not served as an officer, director or employee of company covered by analysts and has not b

engaged in market making activity of the company

This document is solely for the personal information of the recipient and must not be singularly used as the basis of any inv

decision. Nothing in this document should be construed as investment or financial advice. Each recipi

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the c

referred to in this document (including the merits and risks involved) and should consult

risks of such an investment.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positio

trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other rel

believed to be true but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for

general guidance only. CD Equi or any of its affiliates/group companies shall not be in any way responsible for any loss or d

may arise to any person from any inadvertent error in the information contained in this report. CD Equi has not independently ver

the information contained within this document. Accordingly, we cannot testify nor make any representation or warranty,

implied, to the accuracy, contents or data contained within this document.

While, CD Equi endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory

or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information and its contents, information or data may not be reproduce

redistributed or passed on, directly or indirectly. Neither, CD Equi nor its directors, employees or affiliates

damage that may arise from or in connection with the use of this information.

CD Equisearch Private Limited (CIN: U67120WB1995PTC071521)

Registered Office: 37, Shakespeare Sarani, 3rd Floor, Kolkata

10, Vasawani Mansion, 5th Floor, Dinshaw Wachha Road, Churchgate, Mumbai

2283, 2276 Website: www.cdequi.com; Email: [email protected]

buy: >20% accumulate: >10% to ≤20% hold:

Exchange Rates Used- Indicative

Rs/$ FY15 FY16

Average 61.15 65.46

Year end 62.59 66.33

All $ values mentioned in the write-up translated at the average rate of the respective quarter/ year as applicable. Projections converted at

current exchange rate. Cumulative dollar figure is the sum of respective yearly dollar value

13

EquisearchPvt Ltd


CD Equisearch Private Limited (hereinafter referred to as ‘CD Equi’) is a Member registered with National Stock Exchange of India


Limited). CD Equi is also registered as Depository Participant with CDSL and AMFI registered Mutual Fund Advisor. The associ

ND - Financing and Investment, Commodity Broking, Real Estate, etc.

CD Equi is registered under SEBI (Research Analysts) Regulations, 2014 with SEBI Registration no INH300002274. Further, CD Eq

No disciplinary action has been taken against CD Equi by any of the regulatory authorities.

associates/research analysts do not have any financial interest/beneficial interest of more than one percent/material

conflict of interest in the subject company(s) (kindly disclose if otherwise).

CD Equi/its associates/research analysts have not received any compensation from the subject company(s) during the past twelve

CD Equi/its research analysts has not served as an officer, director or employee of company covered by analysts and has not b

engaged in market making activity of the company covered by analysts.

This document is solely for the personal information of the recipient and must not be singularly used as the basis of any inv

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the c

referred to in this document (including the merits and risks involved) and should consult their own advisors to determine the merits and

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positio

ompany's fundamentals and as such, may not match with a report on a company's

The information in this document has been printed on the basis of publicly available information, internal data and other rel

we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for

general guidance only. CD Equi or any of its affiliates/group companies shall not be in any way responsible for any loss or d

arise to any person from any inadvertent error in the information contained in this report. CD Equi has not independently ver

the information contained within this document. Accordingly, we cannot testify nor make any representation or warranty,

implied, to the accuracy, contents or data contained within this document.

While, CD Equi endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory

This document is being supplied to you solely for your information and its contents, information or data may not be reproduce

redistributed or passed on, directly or indirectly. Neither, CD Equi nor its directors, employees or affiliates shall be liable for any loss or

damage that may arise from or in connection with the use of this information.

CD Equisearch Private Limited (CIN: U67120WB1995PTC071521)

Floor, Kolkata – 700 017; Phone: +91(33) 4488 0000; Fax: +91(33) 2289 2557 Corporate Office:

Floor, Dinshaw Wachha Road, Churchgate, Mumbai – 400 020. Phone: +91(22) 2283 0652/0653; Fax: +91(22)

2283, 2276 Website: www.cdequi.com; Email: [email protected]

hold: ≥-10% to ≤10% reduce: ≥-20% to <-10% sell: <

FY17 FY18

67.09 64.45

64.84 65.04

translated at the average rate of the respective quarter/ year as applicable. Projections converted at

current exchange rate. Cumulative dollar figure is the sum of respective yearly dollar value.

13

EquisearchPvt Ltd


) is a Member registered with National Stock Exchange of India


Limited). CD Equi is also registered as Depository Participant with CDSL and AMFI registered Mutual Fund Advisor. The associates of

Financing and Investment, Commodity Broking, Real Estate, etc.

CD Equi is registered under SEBI (Research Analysts) Regulations, 2014 with SEBI Registration no INH300002274. Further, CD Equi

associates/research analysts do not have any financial interest/beneficial interest of more than one percent/material

any compensation from the subject company(s) during the past twelve

CD Equi/its research analysts has not served as an officer, director or employee of company covered by analysts and has not been

This document is solely for the personal information of the recipient and must not be singularly used as the basis of any investment

ent of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

their own advisors to determine the merits and

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

ompany's fundamentals and as such, may not match with a report on a company's

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources

we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for

general guidance only. CD Equi or any of its affiliates/group companies shall not be in any way responsible for any loss or damage that

arise to any person from any inadvertent error in the information contained in this report. CD Equi has not independently verified all

the information contained within this document. Accordingly, we cannot testify nor make any representation or warranty, express or

While, CD Equi endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory compliance

This document is being supplied to you solely for your information and its contents, information or data may not be reproduced,

shall be liable for any loss or

) 4488 0000; Fax: +91(33) 2289 2557 Corporate Office:

400 020. Phone: +91(22) 2283 0652/0653; Fax: +91(22)

-20%

translated at the average rate of the respective quarter/ year as applicable. Projections converted at

cd equisearchpv pvt ltd · • according to ey, indian cv industry is expected to witness double...

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